▶ 0:10:48Committee on Financial Services will come to order. Without objection, the chair is authorized to declare a recess of the committee at any time. This hearing is titled American Innovation and the Future of Digital Assets from Blueprint to a functional framework. Without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. I now recognize myself for four minutes for an opening statement.
▶ 0:11:15Good morning uh ladies and gentlemen and to our members on both sides of the aisle. Today's hearing will continue our work on digital assets and examining the market structure framework. I encourage members on both sides of the aisle to use this hearing as an opportunity for productive dialogue. We should aim to identify areas of consensus within the legislation and thoughtfully address provisions that may require further refinement. Digital assets and blockchain technology are driving the next evolution of the internet.
▶ 0:11:46This technology empowers individuals, spurs innovation, and creates economic opportunities. But to fully recognize these benefits, we must ensure that there's a functional regulatory framework in place. Currently, there is no federal framework for digital assets.
▶ 0:12:05The SEC and the CFTC do not have clear jurisdictional boundaries over digital assets, leaving investors, entrepreneurs in a state of uncertainty and often discouraging innovation here in the United States. As a result, American consumers and investors have endured prolonged confusion and limited protections due to the absence of a consistent regulatory framework.
▶ 0:12:31Companies have asked and even sued the Securities and Exchange Commission to provide them with clarity they need to comply with current regulations. Others have even moved their operations out of the US to avoid dealing with the SEC's regulation by enforcement approach.
▶ 0:12:50I've worked diligently on the Clarity Act with House A Committee Chairman GT Thompson and members from across the House of Representatives that have an interest in providing much needed regulatory clarity for market participants and innovation.
▶ 0:13:05Our bill establishes a clear codified exemption pathway for digital commodity projects to raise capital, supports secondary market trading of these assets, enables SEC registered entities to participate in digital commodity markets and much more. Ultimately, this is about protecting American consumers, encouraging innovation at home and ensuring that the US leads in the future of digital assets.
▶ 0:13:33We started this Congress with a joint press conference with Senate chairs Tim Scott in banking, John Boseman in agriculture alongside my partner here in the House, Chairman GT Thompson of House A Committee.
▶ 0:13:47We committed to provide functional rules of the road for the digital asset The discussion here today is a critical part of that journey and I look forward to an informed conversation on how digital asset market structure legislation can deliver meaningful protection and benefits for our constituents and for the innovation technology across our economy. With that, I yield back. The chair recognizes the ranking member of the full committee, Mrs.
▶ 0:14:17Waters, for four minutes for an opening statement. Thank you very much, Mr. Chairman. I too would like to have productive dialogue uh but it's very difficult to do based on what uh the president of the United States is doing. As Americans grow poor under Donald Trump's failed policies, Trump and his family grow richer, $2.9 billion richer. That's how much his net worth has jumped as a result of his crypto schemes.
▶ 0:14:47And that's only a conservative estimate. And now Trump doesn't want Americans to use his to Trump doesn't just want Americans to use his crypto. He wants to put our money in his digital wallet. While he guts our financial regulators, the watchdogs that protect families from financial fraud. To borrow words from Elon Musk, Trump's crypto con is a disgusting abomination.
▶ 0:15:16So, as Trump cashes in, America's families are bearing the cost. They're cutting back on groceries, putting off starting a family, and abandoning the dream of home ownership. As if his reckless tariffs and efforts to gut the federal government weren't enough. Just two weeks ago, Republicans passed a massive tax cut for billionaires while slashing Medicaid, Medicare, food stamps, and student loan assistance.
▶ 0:15:45Trump is not just scamming everyday Americans with his crypto con. He's even grifting his own supporters. 200 people collectively $148 million to attend his shady Mima coin dinner with the promise of an exclusive experience. What did they get?
▶ 0:16:07Walmart State Costco freezer aisle halibet recycle talking points and just 20 minutes of Trump time. I guess you get what you pay for. Congress can't normalize this camp any longer. From his fraudulent meme coin to his deals in Abu Dhabi, Donald Trump is using the White House for personal profit by selling influence to the highest bidder.
▶ 0:16:34And Republicans are ignoring these dangers even as the crypto industry raises concerns. That's why I had to introduce Stop Trump and crypto act of 2025 to prevent the president, vice president, members of Congress, and their immediate families from engaging cryptocrat conflicts of interest.
▶ 0:17:00Sadly, legitimizing Trump's crypto con is far from the only terrible thing about this confusing and reckless legislation. In fact, this bill should actually be called the Complexity Act. This rushed, overly complicated bill will increase investor harm, which already runs rampant in today's crypto market.
▶ 0:17:24Some of the riskiest activities are broadly exempted from the bill, leaving our constituents with no one to turn to when their money vanishes. The bill puts our national security at risk and contains no penalties for crypto criminals. Unsurprisingly, the bill doesn't even deliver the clarity the industry has long sought.
▶ 0:17:47Instead, the bill creates vague new definitions that will result in continued litigation and which the largest players, including big banks, will game at the expense of crypto startups. The only thing clear about this bill is we need to start over.
▶ 0:18:05It's also troubling that the Securities and Exchange Commission has ignored president and refused to share their full technical analysis of the bill with Democrats even as Republicans rush to pass this bill before the SEC chair is even invited to testify. We hear a lot of spin from our Republican colleagues today, but make no mistake, this bill will take us backward. I yield back. The gentleman yields back.
▶ 0:18:35Chair recognizes the chair of the digital assets financial technology and artificial intelligence upcoming Mr. Style Wisconsin for one minute for an open statement. Thank you very much, Chairman Hill. Thank you for your leadership in introducing the Clarity Act and thank you for your leadership in bringing us together in a nonpartisan way. Members on both sides of the aisle uh who've already come to co-sponsor the Clarity Act. The golden age of digital assets is here and today's hearing moves us closer to ensuring that America wins the web 3 race.
▶ 0:19:02The Clarity Act will unleash innovation and ensure US dominance in digital assets while protecting consumers from fraud. At the same time, we must preserve the dynamic and democratic and democratizing nature of this technology. Many of the most transformative projects were born in basements and dorm rooms, not in law firms and boardrooms. They were born in incubators across the country.
▶ 0:19:25And we have an opportunity to make sure that that spirit of creativity and entrepreneurship continues to thrive under a regulatory framework that is modern, supportive of innovation and clear. Mr. Chairman, I thank you for your leadership and look forward to the hearing. I gentlemen yields back. Chair recognizes the ranking member of the digital assets financial technology artificial intelligence subcommittee, Mr. Lynch, for one minute for an opening statement. Thank you, Mr. Chairman, and to the ranking member and to our witnesses for your willingness to help the committee with its work.
▶ 0:19:53Uh, my Republican colleagues, it appears, are eager to continue doing the bidding of the crypto industry while conveniently ignoring President Trump's blatant corruption. The so-called Clarity Act seems to be the latest agreement among largest crypto companies on how they would like to be ineffectually regulated.
▶ 0:20:13President Trump's exploitation of the presidency along with the volatile and risky nature of cryptocurrency products will have a devastating consequence on Americans financial lives and Congress cannot allow it to continue. The president's infamous memecoin dinner held at his luxury resort for which attendees paid $148 million to attend makes it clear that President Trump is auctioning off access to the White House and allowing the highest bidder to write its own rules.
▶ 0:20:41This bill being considered today will only further President Trump's corruption and expose our financial stability, national security, and consumer protections to greater risk. We must stop President Trump from abusing the presidency by using crypto as his latest scam. Thank you, and I yield back. Gentleman yields back. Today, we welcome the testimony of the honorable Elad Royceman, who is a partner at Cvath and a former SEC commissioner. Mr.
▶ 0:21:11Beck Ram Ramdan uh Ramen who is the founder of Etheral Eyes, the Honorable Russ Benham who's a distinguished fellow at the Basaro Center for Financial Markets at Georgetown and a former CFTC chairman.
▶ 0:21:27Miss Katherine Menick, the chief legal officer at Uniswap Labs, and the honorable Tim Mesid, research fellow, director of digital assets policy and project in the center of business and government at Harvard Kennedy School of Government and a former chair of the CFTC. We thank you for taking time to be here. You'll be recognized for five minutes to give an oral presentation of your testimony. Without objection, your written statement will be made part of the record. Mr.
▶ 0:21:55Royceman, you're recognized for 5 minutes. Good morning, Chairman Hill, Ranking Member Waters, and members of the committee. Thank you for inviting me to testify today. My name is Alad Royceman, and I'm a partner at the law firm of Corvass, Swain, and Moore.
▶ 0:22:12And today, I'm presenting my own views and not those of my firm or any clients of the Let me begin by saying that the clarity act is important and reflects thoughtful work by members and staff.
▶ 0:22:27It is a significant step forward to providing the needed clarity to the digital status of many tokens, market participants, the digital asset system, and decentralized finance more broadly under the securities and commodities laws.
▶ 0:22:44My testimony and my views are informed by nearly 20 years of experience in both the public and private sectors working on securities, regulatory and compliance matters affecting public and private companies and other securities market participants in my practice. Among other things, I advise market participants in the traditional financial markets and in DeFi, which includes the digital asset ecosystems.
▶ 0:23:15Prior to joining Kvath, I had the distinct honor and privilege of serving as a commissioner and acting chairman of the SEC. I previously served as chief counsel for the Senate Banking Committee, as a counsel to then SEC Commissioner Daniel Gallagher, as a chief counsel at NYC Urinx, and as a corporate lawyer in New York.
▶ 0:23:38I believe that digital assets, blockchain, and DeFi are some of the most interesting and exciting developments in financial innovation. Unfortunately, both Congress and federal regulators have not kept pace with innovation and as a result, there is significant uncertainty regarding the status and regulation of digital assets.
▶ 0:24:07Particular concern for market participants is the scope of the SEC's remmit authority and jurisdiction over assets. Although the SEC has made attempts to provide regulatory clarity, most notably in recent months, it's primarily known for enforcement actions.
▶ 0:24:29For many in the digital asset industry, the SEC's focus on enforcement without first providing clear guidance has been viewed as regulation by enforcement. But as SEC Chairman Atkins recently remarked, it is a new day at the SEC, explaining that policym will no longer result from ad hoc enforcement actions and that instead the commission will utilize its existing
▶ 0:24:59rulemaking, interpretive, and exemptive authorities to set fitfor-purpose standards for participants. I applaud Chairman Atkins for this approach. In addition to the recent efforts of the SEC and the CFTC, congressional action is needed. The legislation's name sets forth what it's trying to provide, clarity.
▶ 0:25:27The bill will do so by providing statutory definitions to key concepts and terms, as well as delineating what's in the remitt of the SEC and what's in the remitt of the CFTC. Again, I applaud Congress's attention to these matters. Thank you for inviting me and I look forward to your questions. Thank the gentleman. Mr. uh Rubon, you're Rumon, you're welcome. Recognized for five minutes.
▶ 0:25:57Chairman Hill, Ranking Member Waters, and distinguished members of the committee. Thank you for the opportunity to testify. My name is Vive Ramen. I'm the co-founder and CEO of Etherealize. We founded Etherealize to transform US capital markets for the 21st century. Our team is a powerhouse of Wall Street veterans combined with the best technologists across the Ethereum ecosystem. We are ready to push forward new financial innovation in the US.
▶ 0:26:22Previously, I traded credit on Wall Street at Morgan Stanley, UBS, Dosha Bank, and Namira. During my time there, I saw two things. one that the US is the undisputed leader in the global financial system and two much of this system still operates like it's in the stone age today it can take days to send money and weeks to finalize trades hundreds of billions of dollars of value still flow through paper faxes and manual spreadsheets now at last the technology
▶ 0:26:52solution for a one-time upgrade to the US capital markets is sitting right in front of us public blockchains allow for programmable dollars that settle in seconds for global ledgers that allow real time regulatory oversight and for global access that extends opportunity far beyond Wall Street. So what's the problem? Over the last several years, blockchain innovation in the US was unfairly penalized. That greatly undersold the potential of blockchains and pushed innovation offshore.
▶ 0:27:22The Clarity Act can change that trajectory. It gives much needed regulatory certainty including defining investment contract assets and clarifying SEC and CFTC jurisdiction. It provides America a launchpad for the next generation of financial infrastructure and ensures that the payoff stays here with US jobs, US tax revenue and US technological leadership. The private sector already sees this.
▶ 0:27:48BlackRock, Franklin Templeton, Fidelity, Deutsche Bank, UBS, and many more are already building on Ethereum because it is the most secure and most decentralized settlement layer in the world. As a result, $140 billion of stable coins, $10 billion of real useful tokenized assets, and institutional-grade financial applications live on Ethereum. All of this happened despite regulatory uncertainty. With the Clarity Act, we can 100x that innovation.
▶ 0:28:16The Clarity Act provides an excellent framework for responsible digital asset innovation in America. And it does so while preserving the core value of blockchains, decentralization. What does decentralization really mean? It means a network just like the internet that is owned by none and is accessible by all. For Ethereum, it means over a million validators all around the world independently verifying transactions and ensuring trust without a single point of failure. What does decentralization mean in institutional terms?
▶ 0:28:47It means resilience, maximum security, and minimized counterparty risk. We applaud the Clarity Act for valuing decentralization and its control and maturity tests. The Clarity Act also amplifies America's position as the home for innovation. Previous years of regulatory uncertainty and hostility have not been great for America's position in the digital asset space. In 2017, 42% of core blockchain developers were US-based. By 2025, we're barely at 19%.
▶ 0:29:17We need to reverse this brain drain and bring highv value engineering jobs back to the US. We need to keep dollar denominated stable coins rather than digital euros or digital yuan at the center of global commerce. The clarity act benefits more than just financial institutions. It allow it it also allows for value to flow directly to consumers rather than just to intermediaries. Let's take a concrete example. Payroll. Right now, payroll is inefficient. Employees are paid bi-weekly or monthly.
▶ 0:29:46Companies have to wire funds to a payroll provider, and there are multiple intermediaries. Settlement can take multiple days. That this changes with blockchains. Ethereum enables realtime automated payments that traditional systems cannot match. Freelancers and gig workers can now get paid by the second as they work. No delays, no middlemen. This gives people immediate access to their earnings which is powerful for those living paycheck to paycheck.
▶ 0:30:13Multiply this effect across millions of US businesses and the impact is enormous. And that's the power of decentralized programmable finance. In closing, I'd like to emphasize that I could not have started Etherealize until this year because I was waiting for regulatory clarity to build here in the US. My parents came to America because it's the land of opportunity and I want to build in America. We are going to change history by embracing the next phase of the internet and it's really important to get this right. The Clarity Act recognizes this moment in time.
▶ 0:30:44Thank you for your time and for your commitment to thoughtful forward-looking policy. I look forward to your questions. Thank you very much. Chairman Benham, you're now recognized for five minutes for your oral remarks. Chairman Hill, Ranking Member Waters, member of the committee, thank you for the opportunity to testify before you today. Between se 2017 2017 and 2025, I had the privilege of serving first as a commissioner, then the chairman of the CFTC.
▶ 0:31:08During that more than seven-year period, I observed the significant growth and growing adoption of digital assets by US investors, both retail and institutional. While I served at the CFTC, the digital asset market endured multiple periods of dramatic volatility, often significant in size and scale. Throughout this time, I publicly stated one consistent message to Congress. Under current US law, there is a gap in regulation for the nonsecurity digital market.
▶ 0:31:37In 2022, a Financial Stability Oversight Council report highlighted this exact gap. The gap remains today and must be filled with targeted legislation. The gap has facilitated countless scandals and fraudulent activity, some very small and typical in form, others massive in profile. Further, based on my current observations and those while at the CFTC, I do not believe public interest for digital assets will wayne.
▶ 0:32:04Inaction will only result in greater risk to our financial markets and investors. As the digital asset market continues to weave itself into traditional financial institutions, concerns regarding market resiliency and even financial stability will grow.
▶ 0:32:21One common refrain in connection with past legislative efforts to fill the non-security gap suggests that a US regulatory framework will legitimize the digital asset market, leaving opportunities for bad actors to capitalize on regulatory loopholes. I believe this argument is in fact the loophole. It has only left for far too long the vast majority of the digital asset market unregulated and American investors vulnerable.
▶ 0:32:47between pursuing comprehensive regulation that does not undermine existing law and preserves the key pillars of sound market regulation or inaction. I believe there is only one choice, comprehensive regulation. I've consistently and publicly called for new legislative authority for the CFTC in order to provide core customer protections in the nonsecurity digital asset market.
▶ 0:33:11As this committee and the House Committee on Agriculture consider a legislative solution, I believe it's critical to rely on durable legal precedent to define digital tokens as either securities or commodities. As mentioned, the CFDC and SEC have a long-standing partnership that facilitates strong, robust regulation of both securities and commodity derivatives markets.
▶ 0:33:34I hope there will be continued consideration of measures to more precisely balance the important needs of each agency to comprehensively regulate their respective markets while finding ways to avoid unnecessary redundancies. As Congress continues to consider legislation to fill the regulatory gap, I'd like to focus attention on the components of a regulatory framework that would ensure US market regulators have the necessary tools.
▶ 0:34:00The CFTC and SEC have been involved in the digital asset market for over a decade, at the forefront of many of the most complex and historic enforcement cases and also working closely with other state and federal authorities. The CFTC's principles-based oversight model has served its regulated markets well, striking an appropriate balance between outcomesbased requirements and measured flexibility to meet those outcomes, serving as a solid foundation to build transparent and resilient markets.
▶ 0:34:30Second, the law and regulations are only as strong as the agency and personnel that enforce it. Appropriate funding, which includes technology and human capital, is necessary to meet the mandate of any legislatively enacted regulatory program. Third, a sensible disclosure regime is needed for non-security tokens to ensure investors are aware of risk of loss.
▶ 0:34:53Fourth, a reliable self-regulatory organization has been critical to the success of both the CFTC and SEC for decades and should be a component of any framework. Fifth, it's essential that legislation provide comprehensive authority for anti-moneyaundering, know your customer, and a customer identification program built off of existing requirements for market Finally, a comprehensive education and outreach program to support all investors,
▶ 0:35:24including the most vulnerable among us. We need to act thoughtfully but with urgency to fill this regulatory gap. I thank the chairman, ranking member, and members of the committee for your focus in this area and look forward to answering your questions. Thanks, sir. Miss Menick, you're recognized for five minutes for your presentation. Thank you, Chairman Hill, Ranking Member Waters, and members of the committee. It is an honor to be here today with you.
▶ 0:35:51I'm Katherine Vanerk, and I'm from Chicago, Illinois. I'm the chief legal officer at Uniswap Labs. Uniswap Labs has always been an American company, and we want to stay in America for the long term. Many of us in the industry are grateful for the bipartisan and detailed work put in by this committee and your staff members on the proposed Clarity Act.
▶ 0:36:16This draft is grounded in several important principles already, including recognizing that different crypto technologies present different risks and different benefits, which means they require different legal treatment and also prioritizing the experience of everyday users of this new technology. These principles are not ideological just like crypto itself is not ideological.
▶ 0:36:43It is a neutral technology that anyone can use. Uniswap Labs is a pioneer of decentralized finance or DeFi which is just one part of the broader crypto landscape. I believe that one of the most important benefits of crypto technology is that it can be a check on the deficiencies of the traditional finance system today.
▶ 0:37:06And the promise of DeFi in particular is a future where users have more choice and more access to the financial system as a whole. Where users do not have to give up custody or control of their own assets to a third party when they don't want to. This would open the door of financial access to many Americans underserved by traditional finance today.
▶ 0:37:34That promise is exactly what drew me and so many others to this industry. But America is at risk of falling behind. Every other major economy from the EU to the UK to Singapore has already taken steps to provide regulatory standards in the digital asset industry. But here at home, regulation by enforcement and the tactics of the last few years have created so much more uncertainty, not less.
▶ 0:38:03It has driven up costs and driven good actors and cutting edge innovation overseas. Good actors cannot succeed when the law is a moving target. So I believe that time is of the essence for market structure legislation. If you believe in the promise of crypto technology, then I think you should want legislation like this so the most important innovation has space to grow responsibly here in America.
▶ 0:38:31But even if you are deeply skeptical of crypto, I truly believe that you should want legislation like this, too. This bill may not answer every question. I still have questions. But it does more to protect the public than the status quo. It does more to make space for good actors in the industry. And this is a bill that we can build on for the better for the long term.
▶ 0:38:57The proposed BRCA and FTPA are both companions that fit right alongside the Clarity Act. America as a country has always been a believer in the possibility of transformational change and not assuming the worst of those who forge those new paths. As Justice Douglas cautioned in dissent in California Bankers Association v.
▶ 0:39:21Schultz, the 1974 Supreme Court case that narrowly upheld the constitutionality of the original bank secrecy act. It is quote sheer nonsense to craft laws because we quote assume that every citizen is a crook. An assumption I cannot make. I urge Congress to legislate based on facts, not assumptions about our industry as a whole.
▶ 0:39:47Uniswap Labs is committed to supporting legislation that enables the best innovation, responsible innovation in America, that protects everyday users and protects good faith developers. If there are more conversations to be had with any of you or your staff about our vision or our technology, please ask and we will show up anytime. Thank you for the invitation and I look forward to your questions.
▶ 0:40:16Thank you very much, Mr. Masset. Chairman Masset, formerly of the CFTC, we're recognized for five minutes for your oral remarks. Chair Hill, Ranking Member Waters, members of the committee and staff, thank you for inviting me today. The views I express are my own and do not represent the views of the Kennedy School of Government. Mr. Chairman, I appreciate all the work that you've done and others have done on the Clarity Act. Um, but with all due respect, you need to go back to the drawing board.
▶ 0:40:42The key objective of market structure legislation should be to provide regulatory oversight for digital assets that are not securities. We all know there's no federal regulator for that spot market. And we all know there's been a high degree of fraud, manipulation, lack of investor protection, and rampid speculation. As a result, that gap arises because we have a fragmented regulatory system. We have two market regulators, neither of whom has full jurisdiction over that spot market.
▶ 0:41:13The industry has taken advantage of this by arguing most digital assets are not securities and therefore can be issued and traded without regulation. But that's also put pressure on the Howy test because the choice facing courts is either securities regulation or no regulation.
▶ 0:41:34So the solution has to bring the SEC and the CFTC together, give them sufficient authority to address the gap, and that will also get us to clarity. So Mr. Chairman, in addition to your six principles for legislation, I suggest two above all. Do no harm and keep it simple. Do no harm means don't undermine our existing securities and derivatives laws. And keep it simple means just that.
▶ 0:42:03Now, two years ago, former SEC chair Jay Clayton, who was appointed by President Trump, and I proposed a way of doing so. We said Congress should mandate that the SEC and the CFTC should work together through a self-regulatory organization or otherwise to develop joint rules that would apply to every intermediary that trades or handles Bitcoin or ETH.
▶ 0:42:27We use those two just to establish jurisdiction over the market without as we said debating classification of each token or Congress pursuing tortured rewriting of existing definitions of securities and commodities. And we added that quote rewriting existing law might fail to bring clarity and inadvertently undermine decades of regulation and juristp prudence as they apply to traditional securities and commodities markets.
▶ 0:42:56Now, the Clarity Act seems to start with the technology and ask how can we make it easier to invest, but that's not the same as seeking to make sure our regulatory goals are met with rules that are technologically neutral. This is, after all, a technology. It's not an asset class. So, I don't think the act will provide the necessary investor protection nor the clarity that we seek and it certainly doesn't satisfy the do no harm or keep it simple principles.
▶ 0:43:25Let me give a couple of examples. The act provides an exemption for capital raising transactions for blockchain systems that is too broad to begin with and can easily be exploited. It has an expansive exemption for decentralized finance trading protocols which will permit all sorts of activities including potentially transactions in digital versions of securities to be exempt from the securities laws.
▶ 0:43:51Other provisions rely on concepts of decentralization that are difficult to measure. It uses metrics for control that are weaker than existing securities law standards and calls for assessments of value relative to a blockchain that are highly subjective. And although the act gives the CFTC authority over the trading of digital commodities, that definition would appear to cover only a small handful of what is traded in the crypto market today. the rest of the market would appear to be unregulated.
▶ 0:44:20Finally, the act doesn't do enough for elicit to address elicit finance. You know, it's 236 pages, extremely complicated provisions. It will provide endless opportunities for regulatory arbitrage. Lawyers will structure transactions to achieve lesser compliance burdens. I was a corporate lawyer for 25 years at one of the best firms in the world. I know how this works and you should have no doubt this will come massively and immediately.
▶ 0:44:48And finally, I know many of you don't want to discuss this, but President Trump's efforts to personally profit from crypto cannot be ignored. He is making billions of dollars selling memecoins and stable coins, investing in crypto exchanges and wallets and and Bitcoin mining, all of which are potentially the subject of legislation. If any member of this committee did any of those things, you would all be outraged. And so it should be no different with the president.
▶ 0:45:15The process creates a cloud over or his activities create a cloud over this process. The issues we're debating here are about technology and money. They're not about life and death. But when it comes to whether something should be done about these conflicts and who should do it, seems to me the following question is pertinent. If not you, then who? And if not now, then when? Thank you. And I look forward to questions. Thank you very much.
▶ 0:45:45Appreciate our panel's participation. For the past four years, digital assets uh let me pardon me. Uh let me turn to member questions. I recognize myself for five minutes. Uh for the past four years, digital asset markets have operated in regulatory limbo. It's critical that we finally enact digital asset legislation to provide a framework by which firms can operate in and protect consumers by establishing broad guard rails.
▶ 0:46:14I have to say this was made quite clear in President Biden's executive order on the regulatory gaps that have been referenced by our panelists today both on spot market for Bitcoin for a dollar back stable coin and certainly for clarity for what's a security and what's a commodity for purposes of CFTC and SEC rule making and oversight.
▶ 0:46:40But if we don't have legislation at the end of the day, rules can be undone by subsequent administrations and guidance can be rescended with the stroke of a pen. Which is why we're working so diligently on a bipartisan basis to craft legislation for both that dollar back payment stable coin and market structure. Sir, Mr. Royceman, let me start with you.
▶ 0:47:03If Congress were to only uh enact stable coin legislation in this session, would we be leaving the door open for more regulation by enforcement for the digital asset ecosystem just a few years down the road? Thank you for the question. I think it's imperative that Congress provide clarity in this space. It's not enough to sort of work on just stables. The market structure is sort of a critical component because it touches upon every facet of it.
▶ 0:47:33Whether you're a marketed immediary, a consumer or an issuer. These are the questions that everyone's asking. Am I scoped in or out? And what the clarity act, you know, is a significant step forward to. It's it gives insight to people about whether they're going to be scoped into the securities laws or the commodities laws. And as Mr. Ramen spoke previously.
▶ 0:47:58This gives him comfort in continuing to keep America at the forefront of innovation. Thank you. It's been determined mostly by litigation over the last few years that several digital assets such as Bitcoin, Ethereum, and Litecoin are considered commodities today.
▶ 0:48:17So, Chairman Benham, compared to the CFTC's current authorities over the spot market for these assets, how would the Clarity Act strengthen the CFTC's ability to regulate those markets and protect investors? Uh, thanks, Mr. Chairman. Um, you know, a core component of the CFTC's regulations, which are driven from core principles, is around registration of every entity within the trade cycle, right?
▶ 0:48:44This could be the intermediary that provides access to a customer, custodian that holds the asset, the exchange, and then ultimately a clearing house and settlement agency. Um and the act does uh take measures to uh provide a framework um a regulatory framework for digital commodity exchanges, brokers, custodians and everyone else involved in that value chain to both register with the CFTC.
▶ 0:49:10And within that context and by proxy registration with any regulator SEC or CFTC creates a u pretty significant volume of requirements both on who the individuals that are involved with that entity uh capital requirements surveillance oversight trade data that has to be submitted and then um at at at in many respects random um uh investigations and collection of data.
▶ 0:49:37So I do think it takes very important steps of providing clarity and transparency to these entities that are otherwise and specifically with respect to the two tokens or three tokens you named not registered or not within the regulatory lens. And I would reiterate that the the legislation also reasserts uh all the anti- fraud and anti- manipulation protections by both regulatory agencies over anything in their purview. So I think that needs to be restated as well.
▶ 0:50:05Asset classification's also been a long central challenge in digital asset markets and has fueled a jurisdictional debate that we're talking about between the CFTC and the SEC and Congress has been working hard to bring clarity to this space since 2018. The Clarity Act addresses this issues by establishing clear positive definitions of what is a deposit a digital commodity.
▶ 0:50:28And while some digital assets as tokenized stock are clearly securities, many other remain in in gray areas, which is again why I believe this law brings more clarity than perhaps my friend Tim thinks. Mr. Royceman, can you explain how the Clarity Act reduces uncertainty by clearly defining digital commodities and outlining regulatory jurisdiction quickly? Uh, quickly, it defines a digital commodity as a digital asset that's intrinsically linked to a blockchain system and its values based on its use.
▶ 0:50:59That is scoped out of the securities laws so people understand that they're going to be under the purview of Thank you. CFTC. Appreciate the panel's engagement. Let me turn to the ranking member for her questions. Thank you very much, Mr. Chairman. Um, I'd like to address this to Mr. Ma. Uh, first of all, let me just say that I think the jurisdictional issue uh could be settled at some point.
▶ 0:51:26It's been talked about for a long time, but I don't know how we get past the corruption uh that has been created by this president to do any so-called clarity. The clarity must be whether or not the president of the United States and his family are going to own and control crypto. President Trump has had several foreign actors get involved in his crypto ventures.
▶ 0:51:53For example, on May 1st, one of Trump's companies, World Liberty Financial, announced uh that an Abid Duby Abu Dhabi backed investment firm would make a $2 billion investment using Trump's stable coin, USDI, in the crypto exchange, Binance. This decision alone made Trump's coin one of the top 10 stable coins in the world.
▶ 0:52:19Later that same month, World Liberty Financials signed a letter of intent with the Pakistan Crypto Council, quote, to accelerate blockchain innovation, stable coin adoption, and decentralized finance integration across Pakistan. End quote. Shortly after Pakistan and India agreed to a ceasefire at President Trump's urgent which does not seem coincidental.
▶ 0:52:48Now my understanding of the complexity act is that it does nothing to stop Trump from making these deals. Do you agree? And what are the risks to our national security in that case? Thank you Congresswoman. a great question and I agree with you uh on the risks. You know, when I was a chair of the CFTC, I couldn't even buy Bitcoin and we didn't have the authority over the spot market.
▶ 0:53:18So, here we are with a president that's engaging in all of these activities. It's clearly a taint on the industry. It clearly, I think, makes people think that, gee, is this crypto a game that's just rigged and those who have influence, those who have connections win?
▶ 0:53:35Uh and in terms of the national security concern, yes, we cannot tell now to what extent is the president doing something because it's in America's best interests or because it's helping promote personal enrichment. Um so I think we have to address this. I don't see how we can move forward and try to create a framework for this industry if we don't do that.
▶ 0:54:07We have this market structure bill before us that we're talking about. Is there anything in the market structure bill uh that would uh absolutely prohibit the president of the United States, the cabinet members, members of Congress, etc. from owning and controlling crypto? I don't see anything in the bill. I there are obviously um ethics laws that apply to uh members of Congress.
▶ 0:54:37I uh don't know whether they prohibit ownership. I wouldn't be against people owning uh these assets in a limited amount. I think that helps you understand the market. I think it was unfortunate uh that we actually couldn't. But to invest in uh these activities and invest in businesses, especially at the level that the president is doing is clearly a conflict and clearly a problem. Well, um you know, we have laws against for example insider trading.
▶ 0:55:08This is worse. How is it we could be concerned about members of Congress etc. uh having insider information in trading and not be concerned about this ownership. I agree and you know I think we may have seen that with the meme coins. The memecoins were released uh some people seemed to know that was coming and they bought at a low price and then the price shot up and then it fell back down. Uh I think you have to address this.
▶ 0:55:38I don't see how we can say that we're um you know promoting innovation and this is going to transform the financial system uh unless we do that. What are we opening up by allowing foreign countries uh to be in the relationship that I just described with the president? You know, perhaps the greatest spokesman for this industry is Vitalic Bdderin, uh, the creator of Ethereum.
▶ 0:56:04And he described the memecoins as the perfect vehicle for unlimited bribery because someone can buy the meme coins, which benefits the president personally, yet they can claim that they were just speculating on the asset. We don't have the transparency to know. Thank you. Thank you very much. Chair chair recognizes the gentleman from Michigan, the vice chair of the full committee, Mr. Heiser, for five minutes. Thanks, Chairman Hill.
▶ 0:56:31And uh I got to tell you before I get to uh my questions, um I want to say a couple of things. One, uh I've been proudly involved in this issue for a decade. Uh having been former chair of the capital markets subcommittee, uh having been involved in oversight and um this is the future and we better get our act together. And um I'm also proud to be a co-sponsor of both FIT 21, the first version, and now the Clarity Act.
▶ 0:57:00And I want to thank Chair Hill and and Chair Style for their work on that. Um I do want to uh address one um accusation that was sort of thrown out earlier that uh this bill will increase the amount of investor harm. uh quite honestly those claiming that uh uh that this bill is going to lead to greater investor harm are not wellversed in in its details.
▶ 0:57:24The bill establishes a robust suite of requirements including issuer disclosure requirements because transparency is the best form of investor protection in my opinion. Uh lock up periods for insiders where they're not allowed to sell and then limited uh in their ability to sell to protect those retail investors.
▶ 0:57:43clear standards for custody and segregation of customer funds and listing standards for digital commodity platforms that and uh Miss Minak you are absolutely right the status quo does not offer uh the the protections and uh and and as you had said crypto should be nonpartisan um you said legislate based on facts um that is clearly not what is happening here this is about personalities and uh and politics
▶ 0:58:14uh and we cannot keep the status quo and in fact I'm I was struck by I think it was Mr. ramen, right? Your your statistic uh about in 2020 2017 42% of the innovators were housed here in the United States and that's dwindled down I think you said to 19% now. Um people in tech are going to continue to move offshore. Is that not correct? So let the record show vigorous head nodding happening uh over here. Um uh Mr.
▶ 0:58:44uh Mr. Royceman uh you uh you said that legislators and regulators have not kept pace. Um wholeheartedly agree. I've seen it firsthand. Uh and this leads me to Mr. Benham. Um you were uh you were the uh chair of the CFTC under the Biden administration. Yet you were in conflict with the Biden administration securities and Exchange Commission uh uh chair.
▶ 0:59:10And it seems interesting how I describe this is uh you know legislators and regulators love to declare things fish or fowl right black or white u commodity or security. Well it turns out this is a bit of a uh platypus as I describe it if we're trying to figure out the fish and fowl. And um in fact I I think uh in the Ethereum case uh Mr. Benham you you had said it was a commodity. uh the chair of the SEC had declared it a security.
▶ 0:59:40Interestingly enough, when he was chair of the CFTC, everything uh was a commodity in his view and and then it shifted magically somehow into being a security. Um so I guess maybe it is about uh your perspective and uh with what's going on. Um I'm going stick with you, Mr. Benham. Uh there's there's currently two registers types of derivatives exchanges including the designated contract markets and the swap execution facilities.
▶ 1:00:08Uh could you describe the purpose and similarities between these two regulatory regimes and how the clarity act extends these ideas to create a tra a registration pathway for trading platforms that list and trade digital commodities? Please. Uh thanks Congressman.
▶ 1:00:23You know, like I said to the chairman in response to his question, the the Clarity Act uses really the core principles of the Commodity Exchange Act as the the sort of vehicle to register a digital commodity exchange or any other intermediary within that trade cycle as I said earlier. So, um this would require registration, this would require books and records, surveillance, information about the individuals that are running the company. And how does that protect market participants?
▶ 1:00:51Well, I I think the challenge I face and this is repeated, you said it yourself, is the status quo does not give the CFDC any authority over current exchanges, which is why we need to do this. Correct. We need to do something. Yes, absolutely. I I I I believe this is the something. Uh this is a uh this is a great piece of work that has been put together uh between the a committee and uh and the financial services committee. So, uh, I've got a lot more. Um, and I'll follow up with some writing, but maybe Mr.
▶ 1:01:20Royce may have quickly if you could discuss what it means for blockchain to be mature and explain why these features have become an end goal. I think there needs to be sort of an end state uh for for people to feel like they're sufficiently mature enough or decentralized. And I think that's a critical thing that the the uh legislation tackles. Gentleman's time is expired. Appreciate it. Please answer that question in in writing. It's now my pleasure to call on the gentleman from California, Mr. Sherman, the ranking member of our capital market subcommittee for five minutes.
▶ 1:01:50There's no limit to how extreme nonsense can gain credibility in Washington if you put billions of dollars behind lobbying, billions behind public relations, and hundreds of millions behind campaign contributions. Once again, we see you an illustration of this where Mr. Ramen tells us that crypto is the answer to payroll because payroll you need payroll services. Uh I'm an old CPA.
▶ 1:02:20You need payroll services because you have to calculate the deductions for social security and income tax. Nobody on the internet's going to do that for free. And the current payment system is just fine if you're uh uh I if if you don't have those deductions. But of course, many of those behind crypto want to destroy the social security system by making it impossible to uh uh to collect the tax on it.
▶ 1:02:48Um the other bit of I guess nonsense uh Miss Marik Minick tells us that there's nothing ideological about this. Wrong. Crypto is the embodiment of the most pernitious ideology I'm aware of. I call it patriotic anarchism. It says that America should be powerful and the US government, federal government should be destroyed.
▶ 1:03:14Uh and the way to do that is to make it impossible to enforce our sanctions laws, our bankruptcy laws, and our tax laws. And that is the ideology behind this. Um Mr. Msad, I haven't had a a chance to read all 236 pages of the bill. Uh, have you had a chance to review the bill? And is there anything in this bill that says no bailouts for crypto, never, ever, no matter what? Is there a provision like that in the bill?
▶ 1:03:44Uh, I have not seen one, Congress. I've tried to find one. You know why it's not there? Because they want the bailouts. And the bailouts will be there unless you prohibited them. Because we've seen various presidents in 2008, they take laws that are only supposed to that are they declare an emergency and there's giant bailouts. Provisions of law exist dealing with tariffs. They're being stretched.
▶ 1:04:08So, we have an an audacious Fed and certainly an audacious executive branch uh ready to do that. Um you point out that this is the perfect mechanism for bribery. I'll point out of course that that it has already been used as the perfect mechanism when the president is in violation of the law for the benefit of the owners of Tik Tok.
▶ 1:04:32Its Chinese owners have put $300 million into his Trumpcoin. So, uh it's not just perfect in theory, it's perfect in practice.
▶ 1:04:45Not only is it a perfect way to pay the bribe, it's a perfect way to get uh a president to violate uh the Um let's see Um I should point out that so many uh okay uh is there any provision in the bill, Mr.
▶ 1:05:10saw that says that you that US tax dollars cannot be spent to buy Uh no, I'm not aware of such a provision, Congress. So we could take all the income tax collected in the month of June and put it into Trumpcoin or Mongoose coin or Skippy toilet coin.
▶ 1:05:32I I'm not an authority on appropriations, but I would think there would need to be Well, I would think there would need to be authority to do that. And if the Treasury has authority to uh buy yen and gold and pounds and if this is a currency, uh the uh advocates of having uh uh tax dollars invested in crypto have never claimed that they have just gone to the executive branch.
▶ 1:05:59So, uh, it's pretty clear that US law allows us, uh, allows the executive branch to do this. And in fact, they own over 20 billion dollars worth of crypto, but that was money that was seized, not taxpayer dollars yet. Um, I would So, we have a bill here that opens the door to bailouts and to purchases of crypto. And there's no restriction that be Ethereum or Bitcoin.
▶ 1:06:29It could be Trumpcoin, Mongoose Coin, or Skippity Toilet Coin. So, um, I look forward to working with my colleagues to improve the bill, and I'll yield back. The gentleman yields back. The gentleman from Oklahoma, Mr. Lucas, who's also the chair of the task force on monetary policy, is recognized for five minutes. Thank you, Mr. Chairman. And I want to start by following up with Mr. Benham on a few topics we discussed the last time you were before the House Agriculture Committee.
▶ 1:06:56You said during your our last conversation that one of the benefits of cross agency collaboration like the clarity act aims to promote is the market participates participants are able to utilize portfolio margining and other netting mechanisms to manage their balance sheets if they have exposure to products that have similar risk. Can you expand on your testimony?
▶ 1:07:19Why is it important for CFTC and SEC to collaborate even as we maintain bright lines of each agency's authority and clearly define judicial boundaries jurisdictional boundaries? Thanks, Congressman. U as I said before and you and I have had this discussion, two different market regulators, a lot of assets in different buckets of jurisdiction, but a lot of uh participants that uh invest and get exposure in both markets.
▶ 1:07:47And with that exposure, you can have net gains, net losses. And I think it's important um to have those margining benefits, which would require both agencies to work together to create a rule set that as a regulatory community, whether it's a capital requirement or a margin requirement to reduce some of the cost of investing if the net portfolio is either neutral or does not have as much exposure in one area as another.
▶ 1:08:14And this, I think, is a product of long collaboration between the two agencies. I think it enables market participants um to to recognize what their balance sheet costs are and ultimately um it it's a way to synergize the two agencies despite having two different market jurisdictions. Continuing with you, Mr. Benham, on a related topic, the last time we spoke, you said that capital restraints were one of the biggest barriers to entry for participation in the Treasury market.
▶ 1:08:41As chairman of the task force on treasury markets, I'm particularly focused on ensuring that our debt is attractive to market makers. Would you say in the spirit of your last answer that allowing netting mechanisms for assets like treasury cash, futures, and repos would reduce those capital Uh I short answer is yes. But I would emphasize and I've said this to you as well, Congressman, capital is a cornerstone of market regulation. Capital requirements were a cornerstone after the financial crisis.
▶ 1:09:10It's important that regulators have that capacity to charge and assess capital. But if done in an efficient way, it can create more flow of capital to markets, which I think ultimately improves liquidity, shortens spreads, uh, and creates a better ecosystem for treasury markets. In the case of the question you asked, Mr. Rossman, would you like to comment on that topic also? I would just agree with Mr. Venom.
▶ 1:09:34I think first, capital is a cornerstone, but two, there's clearly room for Okay. Uh I just came from the agriculture committee where we discussed the need for laws and regulations to keep pace with the technology advancements we're seeing in the industry and that is true for both a and energy but it's also true for financial services. In my remaining time Mr.
▶ 1:10:00Royceman would you characterize how would you characterize the importance of getting this framework done and done I think this is an important topic for Congress to step in. I think the fact that we have five people here, three of them have served in government dealing with these issues shows that there is a lack of clarity.
▶ 1:10:26The fact that there are multiple cases which lawyers spend countless hours looking at footnotes to understand whether something is security or not show that there needs clarity. The fact that there are split decisions in each agency about these things show that Congress needs to help. And so I think this framework is really important because it'll give clarity to the regulators, enable them to work together to set the framework and allow this ecosystem to to fully mature.
▶ 1:10:56I I think I don't know where this will end up in terms of this ecosystem, but I do know one thing. It's going to surprise a lot of people and it'll continue to grow. If you look at sort of the history, no one was talking about this in earnest 10 years ago and today it's spurring new companies, new innovations every day. So the sooner I think that Congress steps in and gives bright lines, that gives them clarity and and certainty for them to to continue to innovate and to keep America at the forefront.
▶ 1:11:29Yield back, Mr. Chairman. The gentleman yields back. The gentleman from New York, the ranking member on the Foreign Affairs Committee, Mr. Meeks is now recognized for 5 minutes for questions. Thank you. And uh you know I have to return back to some of the questions that ranking member Waters asked. You know because I'm also reminded that I believe it was 2016 or so that um secret excuse me Senator Rubio once called the president of United States before he was the president a con man.
▶ 1:11:58Uh, and so that made me to rethink. And then I saw Donald Trump Jr. appear on CNBC's uh, Squawkbox yesterday, discuss his family's involvement in crypto ventures.
▶ 1:12:12And then I thought about, you know, being a New Yorker, what I knew what took place before with the Trump family and how they ran their business because what they would do is they would borrow money, go in debt as they're doing in this nation, and then file bankruptcy. And I guess that's a good maybe that was good business. But then he filed bankruptcy not once, twice, three, four, five times, six, seven times.
▶ 1:12:39He was always able then to figure out I mean the average person wouldn't have been able to do anything but the banks always gave them money again you know some kind of way they changed and the banks got money then as Donald Trump Jr. said they got involved in politics. And when they got involved in politics at that time, what did it meant? Extra scrutiny. So you could do some unscrupulous things generally when you're not into policy.
▶ 1:13:05But once you get in there and the media, every watching then it meant they had scrutiny. And then he said that, you know, before they never had a problem getting money from major banks in New York, but because of the scrutiny that they were now under because they were in politics, the banks stopped taking their calls. In other words, they were debanked. And he went on to say that this experience gave him a new perspective, one that supposedly mirrored the plight.
▶ 1:13:35Now he's trying to be a regular guy because the regular guy couldn't have done what they've been doing all along. But now he's a regular guy shut out of the financial system and what's their solution? Bingo, crypto. So, let's be clear. What Donald Trump Jr. was saying was that traditional financial institutions deemed the Trump family now too risky to do business with.
▶ 1:14:00Not because they were underprivileged, but because of a long history of questionable financial practices, litigation, and ethical red flags. And those red flags are back up And so instead of reassessing the Trump family, instead of reassessing their behavior, they sought a workaround, a loosely regulated, speculative market where they could once again profit.
▶ 1:14:31Not in spite of the lack of oversight, but because of the lack of oversight. And what he failed to mention was while painting himself as a victim of the very system he once benefited from is that the Trump family has used this pivot to run what amounts to be a classic pump and dump scheme where their meme project wasn't about democratizing
▶ 1:15:02finance. It was about exploiting hype, fleecing retail investors, and enriching themselves under the guise of populism. So, Mr. Msad, let me just be let's clarity act. Let's be clear. Does the Clarity Act currently include provisions that would address or prevent political figures like members of Congress or their families, president and his family, from exploiting digital asset markets for personal gain? Yes or no?
▶ 1:15:32I I don't believe it does. No. Well, does it include language that would limit the substantial investment from foreign entities that the Trump's crypto ventures have enjoyed thus far? Uh, no, I don't believe so. Okay. And well, if not, how difficult would it be to incorporate these safeguards into the clarity guide? Is that very difficult? Would that be difficult to do? No, I don't think it would be.
▶ 1:15:56So now I'm dis puzzled because I'm wondering whether my colleagues on the other side if the person or the family that was doing that was called the Obama family or the Biden family would they appreciate or just allow this type of behavior to include? I'm not going to, you know, you don't have to answer that question. We know what that answer is. I think all of America knows what that answer is. they would be standing up here going crazy. And I apologize because, you know, frankly, I'm frustrated.
▶ 1:16:26The president has put us in a position where his actions are so egregious that we have no other choice but to focus on him today. And it is a distraction. I wish I could be just talking about the bill responsibly so that we could try to make sure that we can push this thing forward, but the president doesn't allow us to do that. The gentleman's time is expired. The gentleman from Indiana, Mr. Stzman is now recognized for five minutes. All right. Thank you, Mr. Chairman.
▶ 1:16:52And I want to just thank the committee and the panel for your work on uh this particular issue. Uh you know, digital assets, cryptocurrency um and uh this entire space is can be very complicated and and hard to understand all the time. And so I know for myself uh even though I've been talking about this issue for quite some time, it's still always something that I'm learning.
▶ 1:17:15and appreciate this committee's work to uh uh pass legislation that, you know, promotes innovation but also ensures that consumers are protected. So, it's really a remarkable time uh for us here in Congress to be working on the digital assets uh guidelines and and we're really at the forefront of this discussion. Uh even though uh there's this has been going on for quite some time and President Trump of course is willing to help lead this discussion.
▶ 1:17:43Uh several of my colleagues have been working on this for a while and it's um it's important one of the concerns that have been addressed in the clarity act is the uh the differences in traditional capital raising efforts and and Mr. Royceman I'd like to come to you with a question u and uh so this legislation addresses ongoing disclosure and transaction obligations to address distinct risk associated with a project before it reaches maturity. In the clarity act, there is a maturity test for the blockchain network.
▶ 1:18:14Um, Mr. Royceman, can you describe the role and purpose of this maturity test and explain in your view why it is important to have such a construct in this So the maturity test I think is a critical component to allow both issuers who have a project that may want to take advantage of the uh the exemption you sort of described earlier and give guidance to the regulators
▶ 1:18:44of at what point is the end state for them actually succeeding. Uh, I think the the key part of this is there needs to be a a conscious or a delineated sort of way for people to understand when their obligations cease. And I think it's unique in that it's not, I think, static.
▶ 1:19:09I think you can have the regulators, as I think they're required to to provide, uh, sort of their own rules on it, uh, contemplate the future case. uh of these uh projects. to your earlier point, you know, I think the the exemption which falls under, I think, new 4A8 under the Securities Act, you know, I think is a thoughtful way to enable projects to get access to capital and ordinary investors to participate with, I think, important customer
▶ 1:19:39protections and as you mentioned, you know, things that purchasers will need to be provided and the SEC will provide rules on that, things like risk factors, uh, information on the economics, uh, Mr. I think I talked about this earlier. You know, there's going to be requirements on insiders limitations. So, I think this is a a thoughtful way for Congress to try to address this issue. Follow up on that.
▶ 1:20:04This uh legislation also imposes higher standards on related persons and affiliates to a digital asset project as it relates to secondary market trading. Um could you describe why these higher standards um and also explain what their purpose is? So my reading of it is you don't want insiders to have uh you know ability to quickly sell out of positions uh when there's people who have less information than they do.
▶ 1:20:33Uh I think you know I I commend the committee for for laying out a lot of these or for the legislation for for laying out a lot of these requirements. I also commend them for thinking that you know the regulators will be able to iterate on these. Do these follow up or do these uh correlate with requirements in existing securities laws at all? A lot of them do. Yes, sir. Yeah. All right. Mr. R, would you like to comment at all on any of those remarks? I've got about a minute left Absolutely.
▶ 1:21:02I' I'd love to say how thoughtful um and detailed this proposed legislation is. Blockchains are not companies. Blockchains are technology and blockchains like Ethereum are the next internet. So innovation is going to happen on them. Um whether it's here or abroad and I think there has to be a standard for different kinds of blockchains. Maturity test is an excellent way to to distinguish that maturity goes back to decentralization.
▶ 1:21:34um this whole ecosystem is meant to upgrade the financial system and make it safer and more transparent and more auditable and more able to regulate and that's what um these conditions let you do. So I applaud the efforts there. All right. Thank you both. I yield back. Gentleman yields back. The gentleman from Georgia, Mr. Scott, is recognized for five minutes. Thank you very much. Let me start off by agreeing with uh ranking member Waters. This is terrible.
▶ 1:22:03This is a framework that we are being presented with today. It won't bring order to the crypto market, but it will open the door for dangerous regulatory arbitrage. Now, let's be clear. This bill doesn't provide clarity. It creates confusion. It doesn't close loopholes. It codifies them.
▶ 1:22:32The way it divides regulatory authority between the the CFTC and the SEC invites crypto firms to pick a favored regulator as if they were purchasing the most lenient umpire in a baseball game. This is not theoretical.
▶ 1:22:57Uh, the SEC enforces strict disclosure, investor protection, and anti-fraud requirements, the very standards that our public markets have upheld for decades. So, Mr. Chairman Basad, I really respect you and the nation respects you and we work together over a number of years.
▶ 1:23:26So, how will the bill's different standards for two very similar digital financial products undermine this regulatory consistency? Thank you for the question, Congressman. I agree with you that we don't want to have two different rule books here. We've got to bring the agencies together.
▶ 1:23:53And look, you know, I'm I'm sympathetic to the fact that there are areas where there's not clarity. Some of those pertain to customizing rules such as rules pertaining to custody, clearance, and settlement, and so forth to make them technologically neutral. It's disappointing that the SEC didn't do that before.
▶ 1:24:14uh some of those go to when is a digital asset not a security and we need the agencies to work together on that with some maybe general principles from Congress. So Congress needs to mandate that the agencies work together. Congress needs to give them the authority to fill the gap but you need to do that in a way that makes the message clear. We don't want to undermine the existing securities and derivatives market framework.
▶ 1:24:42And and uh chairman, how likely is it that this bill will place firms at the risk of non-compliance or enforcement depending on how the asset is later classified? Well, I think the the danger is again, as you put it, is it going to create confusion?
▶ 1:25:08I I think it's really going to cause a lot of lawyers to spend thousands of hours figuring out, you know, how they can structure transactions to get the minimal compliance burden. Uh, and that may mean, you know, using the mature blockchain test. Even Commissioner Hester Pur has talked about how a safe harbor like that, not with specific reference to the Clarity app, but with something very similar, can be gamed, can be used by people who aren't, you know, doing blockchain. So that's the risk.
▶ 1:25:38Yeah. And given that the CFTC has not been formally reauthorized since 2005, the lack of dedicated funding for this new crypto mandate is very concerning.
▶ 1:25:56Keeping these dynamics in mind, what are the real world consequences that we face in our financial system at risk from limited funding? Excellent question, Congressman, and you know well from our past discussions uh how critical this is. The CFTC is an agency with huge responsibilities, but a very small budget.
▶ 1:26:23And we're talking about potentially giving it jurisdiction over these very large crypto markets, very complicated markets at the same time that it has the responsibility to make sure our clearing houses, which are of systemic importance, are safe. You know, is it going to be able to continue to do all those things unless you give it adequate resources? I am very very concerned about that. I know chair, former chair Benham is as well. Thank you very much.
▶ 1:26:52And I am as well too. The gentleman's time is expired. The gentleman from Texas, the chair of the small business committee, Mr. Williams, is recognized for 5 minutes. Thank you, Mr. Chairman. And currently, the rules around digital assets are confusing and inconsistent. Under the Biden administration, regulators took a heavy-handed approach trying to regulate the industry through enforcement rather than through clear rules. Under existing law, developers, investors, and businesses don't know which agency is in charge or which rules apply, and that has caused some real problems.
▶ 1:27:23Some projects have left the US entirely, and many consumers have been uh using risky platforms without basic protections. So, Mr. Rumman, can you explain how having a clear stable rules would benefit consumers and give the businesses of all sizes the fair chance to grow and succeed in this market? Thanks for the question and absolutely um to be clear, responsible use cases and innovation has is already happening on blockchain rails.
▶ 1:27:53We're already seeing remittances and payments on a global scale that are making things faster and cheaper and more transparent. The the problem has been is the institutional players and retail players and small businesses that want to follow the rules of the road and have a clear way to build a business and use this technology have not had that clarity. And that's what a bill like this will achieve. And that's why everyone wants rules and everyone wants to follow them.
▶ 1:28:22Clarity actually will spur innovation rather than skirting regulation. That's not the point of it. Um, we come if we come back to the payroll point, the payroll on a blockchain isn't meant to not pay taxes or not go to social security. It's actually meant to make it more transparent and easier and faster and allow for more commerce. So, we're standing ready. I think there's a huge wave of innovation that will happen upon clear rules of the road where there isn't confusion like uh like in previous years.
▶ 1:28:53Thank you, Mr. Benham. uh in your testimony you noted that the regulatory gap for non-security digital assets has left American consumers exposed to fraud, market manipulation, and conflicts of interest. All risk that traditional financial markets are well equipped to prevent through existing regulatory frameworks. Now, legislation like the Clarity Act is designed to close that gap by establishing a functional market culture or structure, tailored disclosure, and CFTC oversight of digital commodity spot markets. So, Mr. preventum.
▶ 1:29:23Can you walk us through the this legislation directly and how it enhances consumer protections by curbing fraud, improving transparency, and bringing unre unregulated platforms under the rule of law? Thanks, Congressman. As I've said before, you know, the status quo is we have a pretty significant gap in regulation, and I know the SEC certainly has authority over security tokens. Um, and I think those things are being figured out now to the extent there is authority uh with the agency.
▶ 1:29:51But as it relates to commodity tokens or non-security tokens, the CFTC doesn't have any authority. So we are living in a regulatory vacuum where conduct is happening and regulators are not overseeing it. The the Clarity Act intends to bring a lot of the core principles which I've mentioned a few times before uh into the digital asset market space. So these core principles of regulation around registration, surveillance, data collection, settlement, making sure products are well regulated and not susceptible to fraud or manipulation.
▶ 1:30:22These were the types of things when I was chair we saw in our enforcement cases. And I often say uh you know in my four years as chair, I think nearly 30 to 40% of the enforcement docket we had was cryptoreated in some.
▶ 1:30:36Uh and I cannot emphasize enough to this committee how significant a number that is when you don't have jurisdiction or authority over a market and you're expending nearly 30% roughly of your enforcement uh personnel and allocation towards an area that's unregulated. So I think the Clarity Act takes a lot of steps towards bringing traditional market regulation from beginning to end into the digital asset space.
▶ 1:31:02uh and uh it it uses a lot of the legacy experiences we've had around market structure. Granted, this is a new and different digital uh or asset that it will require different ways of thinking. Um, it uses those core principles as the model to bring digital assets into the regulatory fold and ultimately give regulators the transparency that we need in order to protect markets and as you said ultimately customers. Okay.
▶ 1:31:32Um, I'm yield my time back. Thank you. The gentleman yields back. Uh, the gentleman from Massachusetts, Mr. Lynch, who's also the ranking member on the subcommittee on digital assets, financial technology, and AI is now recognized for five minutes. Thank you, Mr. Chairman, and the ranking member. Mr. Masid, uh there's been a pattern uh that exists in in our most recent major financial crisis in this country. We go back to the savings and loan crisis of the 80s.
▶ 1:32:02We had uh you know a a a an idea within the thrift banking system of uh riskier riskier activity. Um, among those those thrifts, we had a political will here in in in Congress and at the White House that was uh I I think cooperative with that risk-taking among some of our thrift instit institutions. Uh the some say it was, you know, regulatory capture. Some say it was just cooperation.
▶ 1:32:32But at the end of the day, uh, the American taxpayer had to bail out, uh, the banks to the tune of about a hundred bill hundred billion dollars, which was a lot of money back in the 80s. Um, then we we fast forward to a time when I was here, 2008 financial crisis. We had speculative uh, volatile financial products, you know, uh, consolidated debt debt obligations.
▶ 1:32:56We had derivatives and again we had a uh regulatory scheme among our the Treasury, the Fed, uh the OC. And as a result, we ended up with a an even bigger bailout, $700 billion in top. I voted against it. I was here. Some some members were here. But uh you know, and and then more recently, we've had Silicon Valley Bank.
▶ 1:33:25that was a major problem and and it was uh involving some of these crypto firms uh very poor risk management on the part of uh Silicon Bank but at the end of the day the FDIC had to go in there and rescue that bank and they did a force sale to JP Morgan Chase. So, you know, that was a bailout of the insured banking sector for these uninsured deposits.
▶ 1:33:48And now, now we have crypto, which is the most volatile uh asset class that we've we've considered to date. And uh we've got since Trump took office, we've got, you know, a a very um there there's been a a complete reversal of the cautionary nature of of banking with respect to crypto.
▶ 1:34:12So the FDIC, the Fed, the OC have all cancelled their cautionary uh guidance on crypto. So now we're going to have we're going to have a meshing of crypto and banking and even even pension funds. Now you see a lot of these uh state pension funds, major pensions funds investing in crypto.
▶ 1:34:32So what what I what I think is going to happen, my prediction here is because of the asymmetry that's occurring in that regulatory framework, we've got ineffectual uh regulatory capacity right now. Uh we're going to and and and on top of all this, we've got huge political influence uh being purchased by crypto coming up here spending $270 million in Congress and then look what they're doing for the White House, right?
▶ 1:35:00So lock, stock, and barrel, the whole system has been purchased. We have no effective regulation on on crypto. So my prediction is we're going to have the mother of all uh financial crisis in this country because of the involvement of crypto in banking and the standard you know the stable the traditional banking sector and uh and and in a lot of our pension funds as well.
▶ 1:35:25So what I'm, you know, this is why this whole scenario, this whole pattern is why I offered several amendments during the FIT 21 bill and the the stable act so-called for a no bailout for crypto bill just to protect the American people so they we're not on the hook when this goes bad. And none of my colleagues on the other side of the aisle supported those amendments.
▶ 1:35:54And that that's just insurance. So that what has happened repeatedly over and over and over again won't happen this time, which is the American people have to pick up the tab. And we won't have we won't have the ability because of the amount of debt we're piling on us. We won't have the ability to step in. So I guess what I'm asking you is tell me I'm wrong. Tell me tell me how I'm wrong.
▶ 1:36:17That my fears are Well, I would agree with your fears, but I think the way to address them is to try to put in a regulatory framework that minimizes the possibility of a financial crisis. It's very hard to predict where a financial crisis will come from, but we know from the past. You cannot rely on bankruptcy on this. That's correct.
▶ 1:36:40But we know from the past that high leverage, having people invest in things they don't understand and regulators who don't have sufficient insight and information about what's going on are three important factors. So we need to put in place a regulatory framework. The gentleman provides us the gentleman's time is expired. The gentleman can add additional comments for the record. The gentleman from Georgia, Mr. Louderdermilk, is now recognized for five minutes. Thank you, Mr. Chairman, and I appreciate everybody being on this panel.
▶ 1:37:07is I'm really happy to see this engagement going uh because quite of I spent 30 years in the technology industry and quite often government is so far behind uh the the industry and technology that we become suppressive of innovation. I appreciate something Mr. Ramen said is if if I got this correct um that a good regulatory framework that is flexible enough can uh encourage innovation.
▶ 1:37:37Is is that kind of what you were getting at when you said something about the clarity act earlier? Uh thanks for your question and that's that's exactly right. I think that this is a technology along with in this decade we've been privileged to have two gamechanging technologies. One's AI and one's blockchains that are all mature and ready for adoption.
▶ 1:37:59And these are technologies that are meant to improve innovation, create jobs, um, be economic drivers for the next decade and reduce counterparty risk, reduce the things that caused previous financial crises by having things like transparent open blockchains where you have minimized counterparty risk.
▶ 1:38:18So I think that for real instit institutional adoption, we've seen the tip of the iceberg of adoption and it's been it's been a lot even with it with in a regulatory um a bit of a regulatory fog on Ethereum. You have $140 billion of U$ 140 billion US dollars that are backed by treasuries that are that are helping um be a buyer of US treasuries that are proliferated. All of this will 10x or 100x with clear rules of the road. All right. Thank you.
▶ 1:38:46Like I said, we we we need to be encouraging innovation because innovation helps everyone um and gives access to markets and financial institutions and investments that may be otherwise kept out of uh certain areas of our our economy. Um Mr. Royceman, Bitcoin is the most popular digital asset in the ecosystem. It's also one of the only digital assets that both the SEC and CFTC have agreed as is a commodity.
▶ 1:39:17Under our current securities law, would it be possible for exchanges and other trading systems to list Bitcoin and a security alongside each I think you'd have to be both registered at the SEC or the CFTC.
▶ 1:39:31Uh so duel I think one of the things that the the bill is trying to address is how can you have what I think the current chairman of the SEC has had a super app something where people can go and trade commodities digital commodities and and securities and I think that's the way consumers think about it and I I don't know if we really need to prevent that from happening. So I think it's a it's a meaningful step. Um, I also just want to add one point.
▶ 1:39:59Something that I think sometimes gets overlooked in the bill is the addition of innovation to the SEC's mission. I actually think that's a a very valuable addition. It will require the regulator to take that into account when it's promagating rules. Um, and innovation is, as you mentioned, sort of a critical piece. It'll it'll allow sort of regulatory adaptability when there's new developments. And if regulators have to take in that account, you're going to have sort of futurep proof rules which I think will benefit everyone. That's thank you for that.
▶ 1:40:29Following up on my question though, what would it mean for digital assets trading platforms if Bitcoin and other digital assets that are viewed as commodities could not be listed alongside digital asset I think that the point I was saying earlier, it it would create potentially unnecessary bifurcation. Okay. Um, do dig traditional security exchanges want to offer nonsecurity digital assets? My understanding is yes. Okay.
▶ 1:40:56Could the SEC allow this without action from I think they they could. It would just be pretty tortured to be honest. Okay. Um, does the proposed legislation allow alternative trading systems to offer both digital commodities like Bitcoin and securities? And if so, how? Yes, it does.
▶ 1:41:16there's a provision uh directly addressing this issue and sorry yes and I think you know they'd be required to do rulem to effectuate it okay um and last question uh stable coins are critical components of the digital asset ecosystem while this committee has separate legislation for the issuance of dollarback payment stable coins the clarity act also contemplates that the role of stable coins in in a broader digital asset market structure how does the clarity act treat payment payment stable coins
▶ 1:41:47and why is it necessary for platforms to have the ability to trade payment stable coins alongside digital commodities? So, I'm going to try to be brief. Uh, thank you. Permitted stable coins are carved out of the securities laws uh and digital commodities. I think it's a good uh way to deal with the market structure and then you have the stable act which deals with it separately. Okay. Thank you. I yield back. The gentleman yields back. The gentleman from Missouri, Mr. Clever, who's also the ranking member on the subcommittee on housing and insurance, is recognized for 5 minutes.
▶ 1:42:17Thank you, Mr. Chairman. Uh I kind of had some editorial comments and then my questions, but uh two weeks ago I found myself on the floor uh during special orders uh in agreement with uh perhaps even total agreement with uh Representative Chip Roy with whom we don't have a lot um in common politically.
▶ 1:42:46Uh but we we we both saw um and still see some problems that we are having as it relates to uh members uh and of congress uh and members of the cabinet uh and the president vice president.
▶ 1:43:03Uh we believe that that it is wrong for uh any of us uh to participate uh in uh getting rich um by trading uh stocks uh and and in some cases trading with um um information that the public doesn't have.
▶ 1:43:27Uh and so um I I I am strongly of the belief that corruption um is the enemy of democracy. Um our our our ship of of state uh should probably be uh powered by truth and ethical standards. uh our our nation will not uh be destroyed by corrupt politicians but by those of us who know better but refuse to legislate better.
▶ 1:43:58Uh if there is malfeence at the top, it's up to Congress to make it stop and this Congress is silent. Now, uh I I I think this is absolutely necessary what we're doing, but we need to be serious uh and we don't need to be partisan.
▶ 1:44:17Uh to all of you to based on testimony presented this morning, uh it is my understanding that the legislation under considerate consideration today would help the United States uh unleash quote American innovation unquote.
▶ 1:44:36uh which uh ITC uh to include uh drastic increases in activity in the digital asset space as well as possible possibly hundreds of or thousands of new entrance among other benefits. Is is that correct? I'll just start for uh moving from left to right. Is is that Apologies. Is is the question that this would spur innovation?
▶ 1:45:05Sir, I I missed the the prelude. You missed. Yes. So then as I just said, yes, that's correct. Okay. Uh yes, I do believe rules of the road will spur innovation. Congressman, I'm going to just caution that, you know, most of my testimony is related around customer protections and and this gap in regulation.
▶ 1:45:29I'm going to caution against opining about innovation because you know I have not worked in an area but I would trust those sitting around me to make an opinion about that. Yes, more good innovation as possible with better rules of the road. Well, Congressman, I would say two things. It's great to promote innovation, but we shouldn't pick winners and losers. And blockchain is a technology. It may get superseded by other technologies. We don't know.
▶ 1:45:56So we don't want to lock in a framework that supports one particular technology. Even decentralized blockchains are a subset of that technology. There's an argument that you know maybe centralized blockchains are going to be better. The second thing I would say is what kind of innovation if we don't do a complete framework. You know what we've seen to date is the innovation is going to things that a lot of them don't have a lot of social utility like memecoins. Now, I'm not saying the government should decide what's of merit.
▶ 1:46:26That should be the market. But we need a framework that prevents the level of fraud, manipulation, and the lack of investor protection that we've seen to date. Well, if if we if I can continue along those lines, does anything in the legislation that we are discussing right now provide the necessary support and financing for the CFTC to readily respond to the admitted market uh impact uh of this legislation, including
▶ 1:46:57monitoring a vast ecosystem of new technology and entrance for compli compliance with critical national security laws. I I don't think it's enough, Congressman. There is a provision for a fee, but when we really think about the scale of these markets, what can Congress do? You should uh increase the budget authority, I mean, significantly, if you're going to give the CFTC the responsibilities to police this market uh on all those fronts.
▶ 1:47:27Absolutely. Thank you. Gentleman's time has expired. The gentleman from Kentucky, Mr. Bar who's also chair of the subcommittee on financial institution is now recognized for five minutes. Thank you, Mr. Chairman.
▶ 1:47:41Before I get into the merits of the Clarity Act and our market structure legislation, I I just have to first address this red herring that my Democratic colleagues continue to uh push this carelessly thrown out accusation and this baseless politically motivated attack against President Trump that his support somehow for a regulatory framework uh for digital asset uh market structure is somehow corrupt, that he's personally profiting ing
▶ 1:48:11from our agenda to bring clarity to the uh stable coin and market structure of digital assets. This is this is absurd. And they know it. They know that the president's assets are in a blind trust managed by his children who are not members of the administration. They're not in the government. They're in the private sector.
▶ 1:48:33When they throw these things out carelessly, these attacks, these personal partisan attacks against the president, it's not just Trump syndrome. It's about them opposing American leadership in crypto. It's about them opposing making the United States the world's crypto capital.
▶ 1:48:54It's about them so obsessed with their political hatred for the president that they're willing to sacrifice American leadership in the innovative technologies of the future. They don't like that under President Trump, Bitcoin is at a is at an all-time high. They don't like it. They don't like that he is an innovative, successful capitalist who understands that if America is to lead, we need this agenda. They don't like that and they don't want him to succeed and that's why they oppose this bill.
▶ 1:49:23Now, fortunately, we have some bipartisan support for this bill, and it should be because it shouldn't be about politics. It should be about what is right to bring clarity to the marketplace here and to embrace this kind of efficiency and friction reducing disintermediation through uh DeFi. That's what we should be focused on. And so, let me just uh move on to the merits, the merits of the bill.
▶ 1:49:49So highly regulated institutions like banks have an important role to play in the digital asset market providing scale for wider market adoption and bringing their risk management and financial resilience to bear as the market evolves. But under the US capital framework banks are not able to recognize risk reducing benefits of positions that naturally offset each other. This drives up the cost of hedging and risk management and creates a competitive disadvantage for US banks. Mr. Mr.
▶ 1:50:18Benham, do you agree that we should review our approach in US capital rules to make sure we're not disincentivizing risk reducing behavior and the use of bank intermediaries? Uh yeah, Congressman, thanks for the question. I do think and and obviously it depends on the asset under the underlying asset, right? If and and Mr. Lucas mentioned this earlier, if you're talking about Treasury cash markets and Treasury futures markets, there is a clear symmetry between those two assets.
▶ 1:50:45And I do think it is important for regulators to create incentives in terms of cost of capital so that you can have more participants, more liquidity in the market. A lot of that review is based on history of the volatility of the asset. So generally speaking, I support it, but caution against making sure that we're doing the right analysis from a regulatory perspective to ensure that the history dictates what the future may hold.
▶ 1:51:09I think I think do banks do bring risk management and financial resil resilience to bear and they need to be allowed to participate in this uh evolving innovation. Um Mr. Royman question for you on on custody. Um whether through SAB 121 or joint statements the previous administration effectively prevented banks uh from engaging in the digital asset ecosystem.
▶ 1:51:32And while the regulators have taken several positive steps to remedy this approach under the Trump administration, the clarity act I think is very important because uh there are provisions in the bill that will cement bank's ability to uh responsibly engage with the technology in statute. Um can you outline some of these provisions and describe the practical effect that they will have? Uh thank you for the question.
▶ 1:51:57I I I would say I'd have to look back at the at the legislation and and get back to you, but I think it is important for Congress to weigh in on this because to your point earlier, they're a critical part of any sort of infrastructure and the rules shouldn't be set in place to prevent people from participating in this marketplace. Well, I applaud the chairman uh for his extraordinary leadership on this.
▶ 1:52:20Uh also uh I want to thank our colleagues in the agriculture committee for um contributing on the the commodity uh definition piece and uh I fully support this legislation to bring much neededed clarity. Don't be distracted by the politics on the other side. Uh this is important and thank goodness we do have a president who wants to bring leadership to the United States on crypto. Thank you. Wow. Go back. The gentleman yields back. The gentleman from California, Mr.
▶ 1:52:50Vargas, who is also the ranking member of the task force for monetary policy, is now recognized for five minutes. Mr. Vargas, thank you very much, Mr. Chairman and ranking member holding this hearing. Especially, I want to thank the witnesses here today. Thank you very much. One of my colleagues earlier said, "People who think this bill doesn't protect the public don't know the details of this bill." Well, here's the bill.
▶ 1:53:16It is pages. The big beautiful crypto bill. I doubt that any of my colleagues read all of it. A couple of them probably did, but most of them didn't. It's like the big beautiful bill that we just passed. I voted against all the Democrats did. And now all the Republicans say, "I didn't know that was in it. I didn't know that was in it. I didn't know that was in it. If I had known, I'd voted against it.
▶ 1:53:45So anyway, I think the same thing is happening here. Unfortunately, I think someone's going to say later on that was a disgusting abomination. Just like we saw about that big beautiful bill, I think they're going to say the same thing about this big beautiful crypto bill. Msad, I want to ask you, Mr. Chairman, I want to ask you a personal question if you don't mind. Where were you employed in 1990? Uh, I was employed at Kvath Swain and Mor. So was I.
▶ 1:54:12Um, I was a summer I was working with Max Schulman and Robert Joffy who I'm sure you're familiar with. Absolutely. I don't believe you were partner at the time. Were you? Uh, not quite. I think you were a senior associate. I was. You were very scary and that's why I'm going to be prejudiced in this question and not ask it to you because we were all afraid of you because you were very brilliant at the time. I'm sure you still are. But I see that there is another Crevath partner here. I actually chose not to go there. I did get an offer.
▶ 1:54:41I went to San Diego to my hometown and practiced law there for a while. Uh fine firm are our little legal firms that were eaten up by bigger ones, but that's what happens in the legal field. So, I'm going to ask the rest of you, are any of you familiar with the Legal Tender Act of 1862? You just go ahead and answer. Anybody that knows there's a crevat partner for God's sakes. Come on.
▶ 1:55:11You ought to know that one. I'm afraid I don't. What's that? I do not. You don't? Anybody else? Okay, professor. So, do you happen to know what that is? Well, I I believe that was the law that created greenbacks that that created American dollars and tried to put an end to wildcat banking notes. I knew you would know. That's why I didn't want you to answer. Um, that's exactly right. Right.
▶ 1:55:36So that was the time that we authorized the issue Congress did of greenbacks really demand notes that were redeemable for gold. Prior to that, what happened to paper money? Uh we had individual banks uh essentially issuing notes uh and people would take those and use them to purchase. And of course then they'd have to decide were were those notes really worth what they paid.
▶ 1:56:00And there were and what happened after the Legal Tender Act of 1860 with the value of that paper money, the banknotes. Yeah. Well, they basically then started to go out of existence. That's right. Took a while. But the reason I ask this is I I think there's a very similar situation that could happen here very easily. What were to happen if we had a central bank digital dollar? What would happen to all this crypto money? I think that's the big question here.
▶ 1:56:30I think probably they'd go to zero. Well, I guess I would say two things, Congressman. One, I don't think a lot of the crypto assets that are out there today will ever become a currency like Bitcoin. They're far too volatile in price. They're not backed by a government. But that's but that is what the promise of it is. In other words, when you listen to the technologists, they say exactly that's why it's going to be beneficial. It in fact is going to be more efficient than cash. We heard that here with payroll and everything else.
▶ 1:57:00They don't talk about it as an asset class. They talk about it as a coin, as a value like money. And I think that's the problem. I don't think it's going to act that way. In fact, I think it's going to be just the opposite. That's why I think there's on the other side there's a fierce battle so we never have a central bank digital coin because I do think that all of these coins will go to zero. Well, you know, there are issues with the CBDC, of course, as you know, in terms of should that really be the role of the Fed.
▶ 1:57:28I think you've got to distinguish stable coins from a lot of the other crypto stable coins that are actually pegged to the dollar. And I only have 24 seconds left, so I do want to say this. I know there was a spirited defense of the president, but I have to tell you, this is the most obviously corrupt thing that I've ever seen a few days before he gets inaugurated. And he comes out with this Trump meme coin. It's outrageous. With that, I yield back. Gentleman yields back.
▶ 1:57:57And uh I now recognize myself for five minutes. I want to thank Chairman Hill and Ranking Member Waters for holding the hearing today. And I want to thank our witnesses for taking time to be with us. Mr. Benham, for several years, derivatives exchanges registered with the CFTC have listed derivatives contracts on Bitcoin and Ether for trading.
▶ 1:58:18Do you believe that the experience from CFTC's oversight of the digital commodity derivatives market will be helpful to the CFTC in exercising jurisdiction over the spot digital market as provided under the proposed legislation? Thanks, Congressman. Uh short answer is yes. And I think uh just quick elaboration is and this goes across any commodity class whether it's agriculture, energy, metals.
▶ 1:58:42Um you know the CFDC is tasked with obviously overseeing the markets and those specific products but we do excuse me uh the agency must have a good understanding of the underlying commodity itself. So over the years going back to when chair massed was in control and a few of the first enforcement cases were um arising the CFTC has has learned um a pretty sharp expertise in the space and had a pretty good understanding has a pretty good understanding of the underlying market itself across different digital tokens.
▶ 1:59:12Thank you. And chair Benham regarding uh section 109 of the Clarity Act which pertains to international cooperations. I'd like to explore the safeguards the CFTC would likely implement when entering into information sharing arrangements with foreign regulatory authorities.
▶ 1:59:31Specifically, uh what measures would the CFTC take to ensure that sharing sensitive information with foreign regulators doesn't compromise US national security or the proprietary business interest of digital asset companies?
▶ 1:59:47Uh well, you know, with anyou or any engagement the agency has with a foreign regulator, um it is very surgical and prescriptive in terms of who we're dealing with, who the agency is dealing with, um what the the existing relationship is between the CFTC and the non US agency and ensuring that they have the appropriate systems, system safeguards, cyber protections, data collection, uh hardware and software that if not matches the CFD FTC's
▶ 2:00:17um exceeds it as well. So there is quite a bit of due diligence done and this is not unique to crypto at all. The agency both the CFTC and SEC have been doing this for years um are are very diligent about making sure the regulator across um the the ocean is is doing what it needs to do uh to give us to give the agency confidence that it can share information with another regulator. Thank you.
▶ 2:00:41The Clarity Act requires four joint rulemakings between the SEC and the CFTC in order to set up efficient and functioning digital commodity markets. Importantly, these joint rulemakings clearly delineate their respective responsibilities. Opponents of this bill have criticized criticized these joint rulemakings citing the practical challenges for the SEC and CFTC in coordination.
▶ 2:01:06Chair Benham, can you highlight some of these joint rulemakings and explain why in your view it is essential for the CFTC and SEC to coordinate on these issues? Thanks for the question, Congressman. You know, joint rulemakings are not unique to the two agencies. Um they obviously they they proliferated in in in many respects after the financial crisis and and DoddFrank was passed in 2010. You have jurisdictional lines between commodity swaps and securitybased swaps.
▶ 2:01:34So the the two agencies did have to coordinate and and draft joint rules. Um it's difficult you know it it brings two different institutions together and you have to go through a lot of exercises that you don't necessarily go through when you draft a rule uniquely to one agency but it's very possible and I think it what what really brings the two agencies together.
▶ 2:01:53So within the context of crypto um the larger issues around defining the tokens, larger issues around having dually registered entities whether an ex exchange or a broker dealer these are the types of areas or a custodian itself. These are the types of areas where the agency I think will need to have joint rulem to ensure that there's a coordination across the the field so that the participants um to the extent necessary have a single set of rules to comply with.
▶ 2:02:20And Chair Benham, can you highlight some prior joint rulemakings between CFTC and SEC and explain some of the hurdles that were encountered? Well, you know, as I pointed out, the the financial crisis is probably the best example and the the swap dealer definition. Um, and and making sure that the two agencies are delineating which and what types of swaps are commodity swaps and what are security based swaps. Um, ultimately it was done.
▶ 2:02:46I would say the challenge is again you're dealing with 10 commissioners, not five. Uh two chairs, not one. Um and you're dealing with two different divisions, if not more, trying to promulgate a rule off of a statute when there is sometimes scant legal precedent. Uh sometimes there's better uh and you're trying to navigate much like this space, a previously unregulated uh financial asset class.
▶ 2:03:11So those are the types of things that I think the agency has a history with and does quite well, but it's certainly as you pointed out not easy. Thank you. My time is expired and the uh gentleman from Connecticut, the ranking member of the select committee on Intel, Mr. is now recognized for five minutes. Thank you, Mr. Chairman. Um, we're spending a lot of time on this side of the aisle talking about the uh corruption associated with the president's uh activities here and uh Mr.
▶ 2:03:41of ours ill- advised and cheap shot that we are engaging in politics notwithstanding uh we didn't bring this upon this effort uh and politics I've spent the last couple of weeks waiting through 263 pages of dense text which is about number 90 on my top 10 list of things to do and those of us who might be inclined to support this thing so that it can be bipartisan are not going to add our names to something that is associated with the rank corruption that we
▶ 2:04:12out of the White House. Now, to me, the way to deal with the Trump stuff is to make sure that this bill has literally platinum consumer protections, AML, anti-fraud, and yes, conflicts of interest language. And I will not vote yes on this thing unless it does. We have now had a demonstration from the highest office of the land about why that is important. So, I just say that for my Republican colleagues. Without that, I am not a yes vote and I'm going to encourage every Democrat to be a no vote.
▶ 2:04:41I think we can probably get there on that. What I'm more, by the way, what it's not, in my opinion, what's happening in the White House is not a reason to just say no to the whole bill. If we were to say we're not going to legislate on anything that the president is either corrupt or inept about, we wouldn't legislate on anything. So, I think we can get there on that. Um, what I do want to spend a little time on though is something that for me is a non-starter, which is we, and Mr. Massid, you've made this point. We must not screw up existing securities, regulation or standards.
▶ 2:05:12Uh, and um, there's a bunch of things that we need to explore there. I think, Mr. Mass, I've I've read your stuff very closely. I think that we can probably deal with some of the uncertainty around things like self-certification and what precisely a mature blockchain is. Regulators deal with that kind of complexity all the time.
▶ 2:05:27What I do want to spend my remaining three minutes on is um something that has troubled me for a long time which is um section 202 203 which seems to set up an alternative issuance primary issuance mechanism that sort of wants to look like reggga a or reggga d. It appears to allow for the general solicitation of retail investors for a complicated thing. so complicated that we're all agreeing this is a pretty tough bill to understand.
▶ 2:05:57So, uh, in my remaining two minutes and 30 seconds, Mr. Massid, I'd like you to take a minute of that because I I just don't see the logic for 202 and I see how Cravath partners will go to town on this thing. So, I'd like a minute from you, Mr. Massid, on why this is a scary proposition 202 and 203 and the exemption. I think it's uh uh, you know, creates an exemption basically the Securities Issuance Act.
▶ 2:06:21And then I do want to ra I do want to leave a minute for the rest of the panel to tell me why this new weird reggga a regggd like exclusion is a good idea given my concerns here. Mr. Massid. Sure. Thank you congressman. Yeah. This is an exemption for capital raising transactions related to a mature blockchain system. And you know the the question is why is this needed?
▶ 2:06:46We want people to raise money for this, but the question is, can we just address that through perhaps looking at disclosure requirements? Maybe those need to be customized a bit because you're raising money for something that wouldn't necessarily meet all the requirements that we would expect of other types of businesses. But to create this entirely new exception with all the definitions, I think is very problematic.
▶ 2:07:13And again, Commissioner Hester Pur herself has said that. She's pointed out in the context because this really came from her safe harbor idea and she said two weeks ago at SEC speak she talked about the fact that this type of an exception, she wasn't referring specifically to the Clarity Act, but she was saying this type of exception can be abused. Companies that aren't really trying to develop mature blockchains could use it.
▶ 2:07:42So, so when you say and I listen to you carefully, when you say that the danger here, which I think is true, this is complex enough that Cravath and Sullivan and Cromwell and all these other very, very smart, highly paid lawyers, this is this is sort of the tunnel through which they will drive through to create an arbitrage. This is what they get paid for, right? So, in my last 30 seconds, I'm going to ask the panel, why in the world here would we create a weird reggga regggd 144A like thing? Why don't we just strike that? Is there a good reason to have that in there panel?
▶ 2:08:11Congressman, I'll just add, you know, in my written statement I said we need to preserve existing laws. So, I do agree with you as you comb through this bill. Although I do believe status quo is not sustainable and something needs to get done, whatever efforts are made need to preserve existing law. Agree. So, does anybody on the panel I've got four seconds. Thank you. I I totally agree. Does anybody on the panel have the have an objection to the removal of section of section 202? We'd invite you to answer that question in writing for the chairman.
▶ 2:08:40I'm informed the for the ranking member of the intelligence committee. Time has expired. The gentleman from Ohio is recognized. Mr. Davidson, who's the chair of our subcommittee on national security, you're recognized for five minutes. Uh thank you, chairman, and I want to thank u my colleagues and staff for the work that really years of effort to bring this bill uh you know to to where it is today. I won't say it's a perfect bill. I I do think it's essential that the section Mr.
▶ 2:09:04Heimmes referenced stays in the bill because when you launch something and you know it's not a security and you know it's not a commodity, you need to have some clear path that that it it is what it what it is. We're trying to define it and a bright line test has been the core thing. Yeah, we somehow imagine that the Howie test is even adequate for the securities market but it's it's not even a law. It's from a court case back in the 50s.
▶ 2:09:30Uh so we we haven't really applied that to digital assets and it's led to uh interpretive uh art. It's like looking at modern art splatters on a painting and drawing conclusions about it. Of course, people are going to have different conclusions. That's why the one of the core things we do here we try to do back in 2018 with the token taxonomy act. It still hasn't been done to define very clearly is something a security, is it a commodity, or is it something else?
▶ 2:09:59And this bill makes great progress towards doing that. And when it isn't a security or a commodity, it needs to be clear that you have a path to launch. So otherwise, it's not going to attract any capital formation. You're just going to keep seeing capital stacks wiped out because there's no clarity that some uh Gary Gensler type figure is going to come along and just wreck the whole capital stack. So you have to have that.
▶ 2:10:22The other thing you have to have is self-custody because if you look at the the Bitcoin white paper even in the abstract part of the core premise is that you have a permissionless system. So you do need things that can be conveyed. You don't get disintermediation. You can't have DeFi without the decentralized part. So people maybe who even some people who say they want to support the bill, their only reason to support it in some cases is to try to keep this account-based.
▶ 2:10:51And honestly, the entire industry isn't even that interesting if it just becomes accountbased. So you know, I just wonder if uh you know, Miss uh Minurk, if you could address the essential nature of disintermediation and self-custody. Thank you so much for the question, Congressman. I completely agree that self-custody is a a critical piece to protect in any market structure legislation or frankly any legislation at all.
▶ 2:11:19Uh there are an enormous number of Americans who are shut out or underserved by the traditional financial system and self-custody technology is a safe digital way that checks those deficiencies of that system. If you are shut out of the banking system, we now have self-custody technology so you can safely and digitally store your own assets without having a bank approve of you. We should allow that technology to exist for every American. Yeah.
▶ 2:11:48I mean, it's essentially um the the the FTX people that were most protected were the ones that used the platform but had self- custody. Uh they had control of their property, right? Yes. So, it is a true consumer protection in that sense too. You know, M Mr. Royceman for years now I've been advocating for this bright line test and I was just wonder if you could pick up on you know how important the the bright line test that we've tried to set out in this clarity act is for the market.
▶ 2:12:17Yeah, thank you uh congressman and for your leadership in this area. I think you know Commissioner Pur talked about this most recently which is a fundamental question which people continually grapple with is how do you separate the token that's subject to an investment contract um from being an investment contract right investment contract security tokens often not securities and so what I think is you know very well intentioned and thoughtful in in the bill
▶ 2:12:48is the concept that you know a digital asset cannot be a security because for example it has a use case on the blockchain or access rights or a tool. So it it tackles this issue head on. Um I think you know it seems clear to me that this has been the product of a lot of input from from members and staff and also from the SEC and the CFTC.
▶ 2:13:11I continue I think that as you know the bill progresses you should continue to consult with them to make sure that it captures adequately what you're entailing it to mean. Yeah, thank you for that. And I think, you know, one area that we don't talk to because a lot of a lot of the public sees anything digital asset related and they fear central bank digital currency. And I think they're right to be cautious and say, "Hey, let's make sure this doesn't turn into a gateway drug or some Trojan horse to be able to deliver something people clearly don't want.
▶ 2:13:37And I don't think there's a bigger opponent of central bank digital currency anywhere than me. uh I I I don't think it would hurt to put a reference to nothing in this bill will enable or permit or otherwise uh you know facilitate the adoption of a central bank digital currency. So I hope we uh we do all that and more in the future and I just thank everyone for their work on it. Gentleman's time is expired. The gentleoman from Ohio, Miss Batty, the ranking member of our national security subcommittee is recognized for five minutes. Thank you Mr.
▶ 2:14:08Chairman and and ranking member and to our witnesses. Thank you for being here today. Uh, as you can probably tell from the range of questions that you've been getting from our members, it's important that we have the chance to engage with industry experts as yourself before advancing legislation that will establish a whole regulatory framework uh for a category of financial assets that will impact millions of Americans.
▶ 2:14:36And certainly this is a learning experience uh with us today as I reflect back on my colleague Mr. Heim's questions to uh Mr. Davidson's questions. So um Mr. Msad, I am a strong believer in responsible innovation whereby we support the growth and evolution of innovative technologies while we're also maintaining strong guard rails that would protect investors and the integrity
▶ 2:15:06of our financial system. So I believe we can do both. I think we can do both at the same time with carefully crafted legislation that incorporates feedback from all of our stakeholders including the digital asset firms and investor protection groups.
▶ 2:15:22So my question to you is what would you say are the key common sense in investor protection provisions that are missing from the current bill text uh that would still allow for responsible innovation? Well, there's quite a few things I think that are missing in terms of investor protection. I'll just give you a few. Okay.
▶ 2:15:47Um, the bill does try to establish jurisdiction over this spot market in nonsecurity tokens that we've talked about. It gives that responsibility to the CFTC. But let's just look at a couple of aspects of that. the digital commodity definition, which is what they would have jurisdiction over, is actually quite narrow. Um, and these platforms today like Coinbase and Gemini and so forth, they trade anywhere from 70 to 400 tokens.
▶ 2:16:17Very few of those would be included. So, you're left with the question of, well, what hap what about all the rest? Now, the rest may be, you know, meme coins. Some may be reward points. There may be things that we say maybe shouldn't be subject to financial regulation, but therefore, can they be listed on these same exchanges? Are they subject to the same rules? That's unclear.
▶ 2:16:39Another very basic thing that's unclear is when you have an institution like Coinbase where people go to trade, you know, if if you have a Coinbase account and you buy Bitcoin, it says you have, you know, one Bitcoin or three Bitcoin, does Coinbase have those The law doesn't require that. The law simply requires that they have essentially value equal to that to that Bitcoin. So, they could have the money invested in something else.
▶ 2:17:08Um, those kinds of things seem pretty basic. I could give you more. Well, well, let me say thank you. So, as I'm trying to go through this, uh, it wasn't that I didn't miss it. It was that it wasn't in there or it wasn't. It's very, it's a very complicated bill, uh, Congressman, and therefore, it's very hard to see what's missing and what's not missing, and also how these provisions interrelate. And, you know, Congressman Heimmes asked the question about this special exemption.
▶ 2:17:35There's a lot of things that would undermine, you know, on the one hand, we're trying to protect people investing in crypto, but on the other hand, we're doing things that may undermine protections in our traditional securities markets and and see, I see that as our role to to provide those protections. I also am the the ranking on elicit financing. And so I won't have enough time probably to get to the other members on that.
▶ 2:18:00But I think as important as this is when you have a document like this and I don't know if my colleague uh we were discussing it up here with Mr. Foster and Mr. Vargas. How many of my folks on the other side have actually read this and analyzed this you know I'm just getting this and and while Mr. Chairman this is something very important. Uh I think as our uh ranking member and chairwoman Waters uh in our meetings we like to dissect things and she walks us through all the provisions.
▶ 2:18:27I'm just saying I don't know how many folks have had the chance uh to be able to do that. Uh let me just say we also saw last week that the SEC formally dropped its lawsuit against the crypto exchange Binance uh Binance which admitted to violating US anti-money laundering and sanction laws.
▶ 2:18:48In your view, what kind of safeguards against foreign corruption and money laundering must be included in oil market structure legislation and does the Clarity Act sufficiently incorporate these safeguards? Thank you for the question. The Clarity Act does make crypto firms that are subject to a jurisdiction subject to the Bank Secrecy Act. That's a good thing.
▶ 2:19:12But I think we do need to go further because crypto assets are transferred on decentralized blockchains because we have foreign uh firms involved in this. And the Treasury Department uh two years ago put out a number of suggestions uh that they said they needed. My time is up. But but thank you. Thank you, Mr. Chairman. Yes. Thanks, the gentleoman. The chair recognizes the majority whip of the house. The gentleman from Minnesota, Mr.
▶ 2:19:42Emmer, is recognized for five minutes. I thank you, Chairman Health, for holding this important hearing today, and thank you to this committee for its consistent nonpartisan leadership on digital asset policy across multiple Congresses. The United States had a real opportunity to lead globally in building the next iteration of the internet, a peer-to-peer digital economy. And that's uh thanks in large part to this committee's work.
▶ 2:20:06The Clarity Act is a thoughtful bill that creates regulatory guard rails tailored to the unique attributes of blockchain technology while giving users and developers the confidence to engage and innovate in this ecosystem. I'm proud to be an original co-sponsor and I especially want to thank the committee for incorporating the Securities Clarity Act, my bill, into this legislation.
▶ 2:20:27The Securities Clarity Act establishes the principle that a token is distinct from an investment contract and it's gratifying to see that principle serve as a cornerstone of this market structure framework. The Clarity Act focuses on legal certainty for custodial entities, but its current draft raises an important question about who those who who about those who and are not.
▶ 2:20:49Uh, Miss Manerk, assuming Congress passes a a market structure bill that resolves the legal uncertainties for custodial entities, do non-custodial developers, those who never touch user funds, still face potential questions of liability, and if so, what kind of chilling effect could that have on developers of protocols and wallets who might otherwise want to build in the United Congressman, thank you so much for this question.
▶ 2:21:17uh companies for decades and decades, but now much more recently, software developers who never take custody or control of user assets have always been outside of the regime, the money transmitter regime. And that's for good reason. That regime originally came from the states decades and decades ago uh to address the risks of a customer handing their own money to a third party who may then take days to deliver that money uh to the recipient.
▶ 2:21:47Those risks obviously do not exist if that money owner never is handing off custody or control of their money to someone else. Fininsson issued guidance in 2019 that confirmed these principles for DeFi specifically. But recently, even though the law has been wellestablished for so long and in despite Fininsson's 2019 guidance, we have seen some attempts to stretch existing money transmission laws to capture software developers of non-custodial technology.
▶ 2:22:17Uh so there is still a risk and it it is a profound threat and has a deep chilling effect on software development today. Thank you. In your written testimony, you highlighted the Blockchain Regulatory Certainty Act, a bill I introduced with Mr. Torres recently. You said that the Blockchain Regulatory Certainty Act is essential to codifying the non-custodial actors that non-custodial actors should not be treated as financial intermediaries.
▶ 2:22:42For the benefit of my colleagues and the public, can you explain in plain terms what kinds of legal and operational risks Uniswap or its users face today without that certainty and what would change if the blockchain regulatory certainty act were included in the Clarity Act? Uh yes, I think the risk today is the uncertainty that comes from a regulator deciding to advance in an enforcement action an argument that the money transmission regime applies to software developers who are non-custodial.
▶ 2:23:10We see that as an active risk today, which means that all software developers are under threat. Thank you again. As you've outlined, today's non-custodial blockchain developers face legal risk for how others might misuse their open-source permissionless tools. That is a dangerous precedent for innovation and one that I'm thankful Chairman Hill in this committee is working with uh us to address.
▶ 2:23:37Your testimony makes clear why resolving state level ambiguity and preventing prosecutorial overreach is critical for American leadership in the digital economy. Again, I'd like to thank the chairman and my colleagues for their consistent unwavering commitment to nonpartisan digital asset policymaking and I yield back the balance of my time. Gentleman yields back. Chair recognizes the gentleman from Illinois, the vice ranking member of the full committee, Mr. Castm, for five minutes.
▶ 2:24:10thought the other gentleman from Illinois was up. Thank you. Um, so, um, we've been talking about crypto for darn near all of my six years in Congress, and I want to just share with you what scares the Jesus out of me, and I wish it shared the Jesus out of everybody here.
▶ 2:24:27The next time an executive at a crypto exchange or a crypto advocate or somebody who's throwing money into campaigns for the crypto industry shows up in my office and says, "I would be personally ashamed if a tool I created or a regulation I was advocating for or a company I ran was facilitating illegal criminal activity through money laundering, through illegal transfers. And I don't want to be a part of that. And I want to make sure that we as Americans don't let that happen. the next time that conversation happens would be the first time.
▶ 2:24:58And it's really freaking hard to take this industry seriously when no one in the industry comes out and says, "I don't want to be a part of moneyaundering." I hope that today is going to be the first time. With that, I want to talk about DeFi with you, Miss Menick. My understanding of decentralization as a definition, tell me if I've got this roughly right, is that it means that no one person or group has outsized control over a service.
▶ 2:25:22the decision-m over how the service is run is democratized among users who purchase the company's native currency or governance token. Would you would you generally agree with that as a definition? Absolutely. Okay. In light of that, Uniswap has come under some criticism recently over the Uniswap Foundation having disproportionate power over other stakeholders, including by pursuing changes such as launching a blockchain without consulting your governance token holders.
▶ 2:25:49If you agree that decentralization in involves distributing voting power among your your uni token holders, doesn't the fact that the unis swap foundation can unilaterally make decisions with without uh doesn't that weaken any claim of it being Uh thank you for the question and and to be completely explicit I am the chief legal officer of unis swap labs which is a distinct legal entity from the unis swap foundation but I but I am fairly certain that the
▶ 2:26:19unis swap foundation cannot make any unilateral government governance changes at all. Well the criticism's out there I mean we the that that exists. I mean let me let me put this another way then. As I read the Clarity Act, it would exempt essentially all DeFi services from SEC and CFTC regulation as well as all of the requirements of the bill. So just yes or no. Under the bill as you read it, would UniS swap be required to screen and verify customer identities? No.
▶ 2:26:46Would UniS swap be required to disclose information related to your company's ownership, management, conflicts of interest, risks management procedures, policies, procedures for complying with anti-moneyaundering laws under this specific act? No. But we do have other obligations. But okay, so no legal obligation to do that because because all those same rules and Mr. Msad if it doesn't apply to unis swap trumps token that Mr. Bar thinks we're just we're just talking about this because it's politics and we just hate crypto.
▶ 2:27:15Now if I'm following it right, World Liberty has signed agreements with a stateowned investment firm in Abu Dhabi, cryptocurrency regulator in Pakistan. Additional data says that the company's investors are based in places like Singapore, South Korea, Hong Kong, UAE. They don't have any obligation to disclose anything under this bill either, do they? I don't believe so. Uh it's a complicated bill. I'm still understanding it. But I think you're right. And if I I'd love to comment also on your DeFi question if I might.
▶ 2:27:45Uh I I know in your testimony you had suggested that it's a little hard to come up with a specific definition of DeFi. It's hard to come up with a specific definition. And with all due respect to my colleague, even in the case of unis swap, the unis swap protocol, right? Sure, that's autonomous software, but there's the unis swap interface. There's the unis swap trading API. Those are run by unis swap labs, which is a company.
▶ 2:28:10And and I mean this was my point about my sadness at the start because if we've got this huge barn door that we're just going to define this generic thing as DeFi and you can launder all your money through there. My god, why isn't the industry saying I don't want to be a part of that? Come on folks, I don't want to be a part of that. Wait. Okay, then advocate for the changes to fix this because like Mr. Mr.
▶ 2:28:32Assad, like under these rules, if I'm a sanctioned Russian official or I'm a CCCP linked person, is there anything that prevents me from investing in these protocols and using that to launder money through the system? Uh, if you're sanctioned and we'd have to look at whether the particular entity Well, yes. I mean, if you're sanctioned, no US person is supposed to be transacting with you. But how would you track it if you don't have the AML rules, you don't have the know your customer rules? Well, if we don't have Yes.
▶ 2:29:01if we don't have a regulatory framework over these entities where we're getting information. It's like, you know, shoot shoot the sheriff and like the law still exists, but it doesn't matter because there's no there's no cop on the beat, right? I mean, I I really think my Republican colleagues love defunding the police as long as they're white collar police. Gentleman's time is expired. I really gentleman from Pennsylvania, Mr. Muser, the chair of our oversight investigation subcommittee is now recognized for five minutes. Thank you, Mr. Chairman. Thank you all very much.
▶ 2:29:29Uh under the Gensler SEC, the Biden administration tried to police crypto through aggressive lawsuits. Trump administration and chair Paul Atkins uh of the SEC are taking the opposite tack. Set clear rules first. Let innovators build and keep capital here at home. Clarity Act introduced by Chairman Hill helps cottify that cultural change. It expands the SEC's reach over tokens sold in investment contracts.
▶ 2:29:55greenlights SEC registered firms to list and trade digital commodities and ensures the SEC has the tools it needs to shut down fraud fast. Um, that's how we can deliver on President's Trump pledge of making the United States the the world's crypto capital. Those comments run somewhat counter to what uh my colleague was just was just stating. Um, Mr. Mr.
▶ 2:30:16Royceman, do you want to comment on money laundering, not caring about money laundering and no no disclosure has been the accusation made to this bill? Not to you, but to this bill. Uh, I leave sort of the the KYC AML to to to folks who are more specialized on this. What what I think the the point you're making, sir, which I agree with, is this bill adds protections.
▶ 2:30:41It creates clear guidelines for market uh, customers and regulators what their remitt is. I think we're all in favor of that. Uh, I think there's differences of opinion across the spectrum here of whether there's robust uh, enough investor protections or that it covers everything under the sun. But I think universally everyone agrees that there is a need for better delineation between the two agencies. Agreed. That that's why we're doing it, right?
▶ 2:31:09M Marinette, do you agree with that or your thoughts on that? Yeah, I I will add that in the DeFi space um as M Mr. Msad mentioned, there is a sanctioned screening requirement for all US companies. There should be moneyaundering is still illegal, fraud is still illegal.
▶ 2:31:26But in terms of sanctioned screening in the DeFi space, uh, Uniswap Labs is a pioneer of compliance in DeFi, including blockchain analytics to uh to use blockchain information, which is the future of understanding how to identify bad actors, but to use that information to screen wallets and make sure that companies like Uniswap Labs are not allowing the use of our products by sanctioned actors. Okay. And in many ways it expands the role the SEC plays with respect to digital assets.
▶ 2:31:56Uh Mr. Royceman your comment on that. What I think it helpfully does as I as I mentioned earlier is tells them what their lane is and work you know in conjunction with the CFTC to to ensure that there's adequate anti- manipulation, anti- fraud, uh consumer protections, investor protections.
▶ 2:32:15Um there's throughout the the bill uh places for them to do joint rulemaking as well as sort of build upon I think things that the commission and I'll let my colleagues speak to the CFTC have lot long sought in terms of mandatory information for people to make informed investment decisions. All right. Thank you. Mr. Ramen, what do you see as promising about this bill for traditional financials if the clarity act were enacted? Uh thanks for the question.
▶ 2:32:45So the the first global comment is institutions traditional finance will not do business on public blockchains without protections and AML and KYC and and regulations and rules and that's what you're providing. So the largest users, the new users that are going to come on and innovate and create responsible products and actually use um decentralized technology to improve the capital markets and improve the financial system. That's not going to happen without rules of the road.
▶ 2:33:12So this is all very symbiotic and having clarity and having rules is going to bring them all to responsibly use this technology that's uh that's decent decentralized and available to the world. Without it, it's just going to happen overseas. All right. Thank you. I'm going to yield the remainder of my time to Chairman Hill. I thank the gentleman from Pennsylvania. Mr. Royceman. Uh there have been several assertions made here today that I don't think are, you know, in fact based on the draft legislation that we have of four of us.
▶ 2:33:38And I want to clarify one of those questions from my colleagues on the other side of the aisle. Does the exemption in clarity provide more information and more protections to investors than current exemptions that they're eligible eligible to be used today? Just yes or no? I I believe in it's not unfortunately yes or no. It depends on the exemptions.
▶ 2:34:02But I I do think that this provides meaningful information that they're not necessarily getting today, especially since they're tailored to digital assets. Right? That's the fitforpurpose nature of all this work. And I'd say in FIT 21, we also had broad disclosure requirements, protections, and an exemption in that bill, too, that we had 71 Democrats uh support. So we believe this bill is more robust on AML BSA disclosure requirements and how the exemption would work.
▶ 2:34:32I thank the gentleman from Pennsylvania. Will the gentleman yield? Will the gentleman? Gentleman's time is gentleman's time is expired. The gentleman from Illinois, Mr. Foster, the ranking member of the subcommittee on financial institution recognized for five minutes. Thank you, Mr. Chair and and to our witnesses. Um Mr. Massid, uh, thank you specifically for joining us today and for your testimony, which it's rare that I see testimony where I agree every with every single element of it. I think I felt like that when I read it early this morning.
▶ 2:35:01Um, and also for the the reference that you to a gentleman's whose name I afraid I've forgotten right now who uh wrote an excellent two-page summary of why decentralization is inappropriate as an organizing principle for distinguishing these. And if if people would just take if you only have time members that can't read the 300 page 200 and some page bill, they can at least read your 10 pages of testimony and that two-page statement. I think we can understand how we're going off the off the tracks today.
▶ 2:35:30Um now you um mentioned that um the the bill does not provide any uh regulation for spot markets and digital commodities. uh the definition of digital digital commodities would only cover a handful of tokens, a small fraction of the hundreds of thousands that are spun up every year. Um now I also noticed the draft of this bill includes a new exemption for digital collectibles.
▶ 2:35:55Uh the reason this caught my eye is that in February the SEC, Division of Corporation Finance, put out a statement saying that the SEC does not consider memecoins to be securities, but rather they're akin to collectibles. Okay. So, we have the Etsy, we have um this bill saying that uh collectibles are um you know are not regulated and then the SEC saying meme coins are collectibles.
▶ 2:36:20So, it seems like the chain of logic here would deregulate meme coins completely. Is am I missing something there? No, I think you're correct. Um, the digital definition, which is defining the things that would be subject to the CFTC's oversight, excludes those collectibles, which would mean meme coins, and I think it excludes a number of other things.
▶ 2:36:46And when you look at the amount of the number of tokens traded on these big platforms like Coinbase, it really is in the hundreds. And of course there are 600,000 tokens, you know, being created all the time. So the question is, what about those others? Now, you could say that, well, they're not really financial instruments, but people are getting defrauded. There's pump and dump schemes. We need to do something about it. Uh, even if it's not going to be under the CFC. Yeah, these are not small things.
▶ 2:37:15I mean, Dogecoin has a market cap of like 30 billion, correct, depending on what time of day you look at it. and and President Trump's memecoin has generated more than $350 million of fees from unknown investors. Uh and I I take they really are unknown. Um yeah, Miss America, I did that right. Um yeah, can you give me a name or can anyone give me a name of all the early investors uh who appeared to frontr run um Trump's memecoin things? No con. Okay, that's that's what I wanted to know.
▶ 2:37:45you know, so you cannot trace really important names here and and that would be essential for any regulator to understand if something unfair, some fraud on the market was being perpetrated here. Um, so I guess that's one. Um, Mr.
▶ 2:38:00Uh Bayamon, um in your testimony, you argued that Congress should provide comprehensive authority for anti-money laundering, know your customer, um and and also a customer identification program, uh to make markets for digital assets safer and less vulnerable for terrorist organizations and other illicit activity. Um you know, this is something I've long advocated for.
▶ 2:38:23And you know it's I it it breaks my heart that we haven't done something on that earlier when you consider that North Korea now has nuclear missiles that can threaten every one of us with dying from a nuclear blast be and funded almost entirely with um with crypto and this is something that did not have to happen but it's a choice that we unfortunately have made.
▶ 2:38:44Um now anonymous parties are very difficult to hold company comp accountable for this and you know in in what you'd advocated in your testimony these you know real know your customer rules and so on is that compatible in any way with anonymous self-hosted wallets or is are these really just separate visions for how we could let things proceed? Uh Congressman, thanks for the question.
▶ 2:39:10I, you know, in my experience, um, the CFTC had pretty limited authority around AML, not not so much KYC and then CIP, I think, was I would put on par with with AML and we often had to work with Treasury. Um, when we were bringing an enforcement case and in terms of the non-hosted wallets, you know, there are different functions to non-hosted wallets. There are certain benefits for it.
▶ 2:39:35And I do think, you know, as was stated earlier, if you think about the FTX example, that is an example where someone who had a non-hosted wallet was able to preserve some capital. But given my my former role in thinking about the risks associated with anonymity in this space, it is absolutely important that we have as much transparency as possible. Gentleman's time has expired. Gentleman's from Wisconsin, Mr. Style, the chair of the subcommittee on digital assets, financial technology, and artificial intelligence, recognized for 5 minutes.
▶ 2:40:04Thank you very much, Mr. Chairman. Thanks for bringing us together today to discuss the Clarity Act. Absolutely essential legislation. Um I hear some of the arguments from the left. Uh but in particular, I think the fallacy of one of the arguments that we're hearing is if we put our heads in the sand and maintain the current state of affairs that that's somehow a good thing.
▶ 2:40:23I would argue that if we actually want to protect consumers, we want to avoid an FTX, if we want to address the meme coins that were brought on to us uh by Gary Gensler and the Biden administration, now is the time to come with thoughtful ideas. And I think the Clarity Act addresses a lot of the concerns.
▶ 2:40:38I also hear a lot of arguments uh by those on the left um with the Trump derangement syndrome that we see, but I don't hear any critiques of Hunter Biden's art or the devaluation uh of that that we've seen uh since President Biden's left office. Let's dig into the bill because the bill the context of this bill is a really good bill to move us forward at a period of time where we can unleash digital assets here in the United States. Mr. Assad referenced joint rulemaking.
▶ 2:41:07The bill does that uh in particular for key definitions uh in transactions that involve trading digital commodities uh as as a security capital raising frameworks consistent uh with US securities laws. It requires robust disclosures uh and regul rigorous obligations in particular for insiders. It's noted that the United States has two capital market regulators. It's a little bit of a unique system compared to our global peers and the bill clarifies the jurisdiction of those regulators.
▶ 2:41:35the SEC addressing capital raising, the CFTC addressing the regulation of intermediaries in trading in the digital asset spot markets. Uh what we're trying to get away from is regulation by enforcement and rather have a structured rule of law. One of the primary goals of Clarity Acts to create clear and delineated jurisdiction for the SEC and the CFTC. Uh Mr. Royceman, uh in the scenario where a transaction would constitute an investment contract, it would fall under the SEC, right?
▶ 2:42:06Yes. And so, Mr. Benham, under the Clarity Act, which which market regulator would oversee trading of the digital assity digital asset commodities? CFTC. Exactly. And so, the United States is noted has this unique uh dual structure, but the the Clarity Act actually gives clarity uh as to who is regulating in this space. I think that is a really helpful and important point. Um, want to continue with you if I can, Mr. Ramen decentralization.
▶ 2:42:36The ultimate goal of the digital asset project uh is to achieve decentralization where no single person or group of people controls the underlying network. It's my hope that this legislation will encourage projects to reach that goal. So Mr. Ramen uh as you know a key component of achieving decentralization is cultivating a broad community of adopters who contribute to the ecosystem and use the digital assets uh that power these networks.
▶ 2:43:01In your view, how important is it for projects to make enduser distributions uh and allow retail participants to take part in capital raises? Thank you for the question and I think this is one of the core opportunities of blockchains like Ethereum which is giving open access to the to the whole world to to participate.
▶ 2:43:24This is about retail and consumers sharing the upside not just having tightly controlled um distributions the old the current way of of for example using VCs or and it's important for the entire ecosystem right the entire ecosystem and in your opinion does the clarity act protect retail investors who participate in digital asset capital raises which you just referenced is so important I think it gives much needed clarity for that yes thank you let let me jump to to the DeFi side uh if I can um the clarity act continues uh or
▶ 2:43:55creates new registration categories at the CFTC for centralized intermediaries such as exchanges, brokers and dealers. Uh the risks of these entities were po the the risks these entities pose are well understood and a regulars have decades of experience addressing those risks and protecting consumers. Uh so Ms. Minak if I can would you agree that no single person or group of people control unis swap protocol because this is a little bit of the dialogue that was going on moments ago with my colleague. Yes, Congressman.
▶ 2:44:23And given that, would it make uh make sense to subject the protocol itself to a regulatory framework designed for centralized intermediaries? Absolutely not. So when So let's now look at what the EU did, their framework um and other international regimes. So let's look at the EU framework that carved out uh decentralized finance, DeFi from the regulatory regimes um intended for centralized entities. Is that what the European Union did? Yes, that's exactly what they did.
▶ 2:44:52And I I think it's important to know that that's that's essential to make sure that DeFi is operating and working in the United States. I think the Clarity Act provides significant clarification and is a huge step forward. I thank you for your leadership, Mr. Chairman. I yield back. Gentleman yields back. The gentleoman from Texas, Miss Garcia, is recognized for five minutes. Thank you, Mr. Chairman, and thank you uh for convening this uh hearing. Uh this is not the first time that we're sitting here talking about cryptocurrency.
▶ 2:45:21It's the new shiny product and it could expand financial inclusion and bring digital assets to historically underbanked communities like my district. But as we debate how to best regulate cryptocurrencies, we've completely left all those people behind. They're not part of the conversation. Folks in my district are worried about where to find their next meal.
▶ 2:45:42especially as my Republican colleagues snap slashed the SNAP program, Medicaid and other necessary programs in the one big ugly bill they rammed through the House two weeks ago. Now apparently they want to ram a one big ugly crypto bill um this week. Um meanwhile investors are getting scammed out of their hard-earned money with meme coins and unstable markets.
▶ 2:46:07I think we should just rename this uh instead of the clarity bill, the calamity bill because just last week uh we saw that the millionaire holders of Trump's mean coin went to a dinner where even though they paid millions quote the food sucked. They are buying favorites with two bit scams. This dinner makes it clear that regulators aren't able to cryptocurrency. As Mr.
▶ 2:46:33Times noted that crypto bills are recklessly being pushed through Congress only to serve to legitimize his crypto scams and lack critical invest investor protections. It makes it easier to defraud hardworking American savings for retirement, a home or college. In fact, since Trump took office, regulators have rescended regulations and dropped critical enforcements.
▶ 2:46:57Most recently, the SEC officially dropped its lawsuit as against Binance, a major crypto exchange that admitted to violating admitted to violating US anti-money laundering and and and sanction laws. Mr. Msad, in your opinion, does this bill um address that anti money laundering? Um, thank you, Congresswoman, for the question. I don't think it does sufficiently.
▶ 2:47:25It does provide that certain crypto firms would be subject to the Bank Secrecy Act, which is a good thing. But one of the challenges with crypto is that these assets can be transferred without going through an intermediary, right? We've discussed that. But do you think it it adequately addresses it? No, I do not. I think the Treasury Department uh two years ago requested more authority uh to address that sort of thing. Uh, and I don't see that in this bill.
▶ 2:47:55Well, this calamity bill also includes a section that requires a study that identifies digital commodity registrants owned by foreign adversaries. This is extremely concerning. It does this isn't isn't this was admitting that that foreign adversaries are already using the crypto? Well, foreign adversaries are certainly using crypto. Uh we've seen North Korea hack um various uh crypto uh protocols, various exchanges.
▶ 2:48:25We've seen Russian smugglers uh use stable coins. Do you think this legislation addresses any of these national security? Not not sufficiently. I I think again what we need to do is really give the Treasury Department more authority with respect to crypto generally. A number of proposals were made um a couple years ago. I think those could be included in here.
▶ 2:48:50Um it's not the BSA framework applies to centralized intermediaries and that's not enough. And again, I recognize the complaint that the traditional framework isn't perfect and sure blockchain provides information. We need to make it uglier. We need to make it better. Better. So now Mr. Mr.
▶ 2:49:13Bum, you testified in your testimony that you encourage this committee uh to ensure that state and local law enforcement remain a key partner in fraud prevention. Can you explain that in simple terms because I need to go on to a second and my last question very quickly? Sure, Congressman. Very quickly, uh state law enforcement, their boots on the ground. You know, there's only so much of federal critical piece. Yeah. There's only so much of federal law enforcement agency. Do you think in your opinion that that this bill is is ready for us to sit down and mark up and send to the floor?
▶ 2:49:42I I think there probably could be some improvements around making sure that So your answer is no. It's not ready. Can you repeat the question? I said, do you believe that this bill is ready for us to mark up literally go through it and send it to the floor? Well, I think from markup in committee, it's probably there are imperfections. Sure. I just need a yes or no because my time's running out and I want to ask the whole panel that same question. I do think it's ready for a markup out of committee. You do think it's ready for markup, Miss Minick? Yes or no, please.
▶ 2:50:12Because ready for markup. Okay, Mr. Mush. Absolutely not. No. Roman, I think it's ready. And is it Rushman? Uh, Rushman. Yes, ma'am. Yes, ma'am. Mr. Congressman, I do think it's ready for markup. All right. Thank you. I yield back. Gentleman yields back. Uh, the gentleman from Florida, Mr. Donald's, is recognized for five minutes. Thank you, chairman. Uh, witnesses, thanks for being here.
▶ 2:50:37Um we have been going through this conversation around digital assets and really the regulatory environment for quite some time on Capitol Hill and one thing is clear that this industry is growing that more people not just Americans but more people around the globe are choosing to engage in it. And what is stopping the flourishing of that industry in the United States in a sound marketplace is Capitol Hill.
▶ 2:51:05And so the Clarity Act seeks to do what it needed to be done for quite some time is to as its namesake bring clarity to the regulatory structure here in the United States. So you can have fledgling entrepreneurs, you have people who are trying to seek value, those who are seeking investment, those who are major players, all understand the basic rules to the road when it comes to engaging with the regulatory agencies. In short, it is time for Congress to bring clarity.
▶ 2:51:32Um, ongoing collaboration between the SEC and the CFTC is essential for effective oversight of these markets. The Clarity Act includes several provisions that require coordination between the two agencies, particularly in areas such as definitions to ensure they are aligned and operating from a consistent framework. Mr. Royceman.
▶ 2:51:54Given the challenges with joint rules and cumbersome administrative processes, how does the Clarity Act strike the balance between collaboration and efficiency? Thank you for the question and thank you for your introduction, which I think is apt. I think it's never perfect to leave to regulators to to help define things.
▶ 2:52:16Um, as uh as Chair Benham talked about earlier, you're just doubling the the workforce in some cases where you have 10 commissioners rather than five. That said, on the guidance that is in this bill, I think it's important for the SEC and the CFTC to work together on things that will be sort of critically important to to further Congress's sort of intention of defining what's a digital commodity, how they will sort of regulate and oversee these markets.
▶ 2:52:44So I think it does a a good job of that. Um if a follow-up to that, how does a memorandum of understanding differ from other joint uh efforts including rulemaking uh that agencies are often required to do as a result of So memorandum is understanding it really depends on obviously what's in it, but a joint rulem will require them to work together put forward uh a rule making for the public to comment. Both agencies will do it and they'll work together to find uh you know a place they can all meet in the middle. U Miss Men, I have a question for you.
▶ 2:53:14In addition to clearly defining jurisdictional boundaries, what other guard rails should be imposed uh to prevent agencies from engaging in another choke point operation against digital assets? I think clear definitions uh of of the technology itself is important because what we saw over the last several years was a stretching of the law uh to reach technology that it simply didn't reach. But we could clarify that through legislation. Okay, I appreciate that. Uh development in the blockchain space is accelerating rapidly.
▶ 2:53:44Yet existing regulations make it difficult for everyday investors to participate in initial offerings. Uh the clarity act attempts to ease this difficulty with a new digital asset specific exemption that permits uh retail participations. Mr. Raman, did I pronounce that correctly? Okay, good. Thank you. Mr. Raman, how will this access benefit retail investors and incentivize projects to reach maturity?
▶ 2:54:13I think blockchains are grassroots technology and by having retail and consumers able to participate in the upside, it levels the playing field. It creates an a new opportunity that everyone can participate in, invest in, have governance over. It's a truly decentralized system and um the framework you set up is the step to get there. Well, look, I mean, and I agree with you. I think in short, you know, when it comes to retail investors, uh, we have to find ways to, for lack of a better phrase, democratize finance.
▶ 2:54:43And I would I would hope that, you know, our colleagues on the other side of the aisle join us in that effort. Um, if you're truly concerned about, you know, the big guys getting advantages on every investment vehicle before it actually hits the street, how about freeing up the regulatory environment so the little guy can actually get in on the ground floor? Let's be very clear, investments in their nature carry risk. We all know this.
▶ 2:55:08But to stop the small person, the little guy from being able to engage because big brother has decided for them that they either a not intelligent enough or b do not have the ability to risk their own capital defeats the very purpose of helping them achieve wealth and achieve the American dream here in the United States. So this is a great bill. and look forward to the markup. I yield back. The gentleman yields back. The gentleman from California, Mr. Licardo, is recognized for 5 minutes.
▶ 2:55:38Thank you, Mr. Chair, and thanks to all of our witnesses. Um, Chair Benham, I I want to ask if you could complete the answer that I think you were trying to provide to Miss Garcia. I just like to understand how you believe uh we could make this bill better in markup across the board. Yes. Yeah. Thanks, Congressman. I I do think that um I mean I I say this in my statement one and I'll always start with this funding for the agencies is key.
▶ 2:56:05I do think the DeFi area this was a really challenging area when I was chair of the CFTC where you have to balance between a centralized um that has clear sort of direct regulatory oversight versus DeFi and what really DeFi stands for. We had a number of enforcement cases around DeFi where there were serious legal questions about what authority an agency has where there's a decentralized um sort of group of participants and no central unit.
▶ 2:56:33Um, as as chair mass said, I think there's always and I do think there's room for for improvement in the AML KYC part. Um, uh, that is so critical to this particular um, area and I do think the mature blockchain um, these are the areas that are very difficult, right? Because you have very unique issues in this particular space that are not representative or not present in any other space.
▶ 2:57:00And with respect to the SEC and the CFTC, um the two agencies have struggled at times to define certain assets whether it's swaps, futures 50 years ago and then e even some indexbased products currently. So it will take time for juristprudence to develop around the digital asset uh space.
▶ 2:57:21But with respect to an asset starting as a security where folks are raising capital and then it becoming mature and sort of flipping over to a commodity, um, as much as I do think the committee did a good job in framing that issue and figuring out how to make that transition, it's extremely difficult and it will take time. So those are the areas with respect to a committee markup that I would focus on over the next couple days or weeks um to ensure that this bill is strengthened and improved.
▶ 2:57:50Th this may relate to the DeFi issue you raised, but I just want to go a little further into scope because I know I think both you and Mr. Messid have identified the fundamental core challenge we're trying to solve with this legislation, which is enormous regulatory gap.
▶ 2:58:05And as I think about all the pump and dump schemes and the rug polls uh that happen routinely in the space uh with regard to meme coins with regard to NFTTS not going to be regulated uh by the CFTC under this statute I don't know it's not clear in my mind who does regulate in that space uh if it doesn't rise to the level of finen in some kind of large criminal enterprise who regulates
▶ 2:58:36there and shouldn't we be doing something in this bill to address that enormous gap? It it's an extremely important question and I I even recall I think going back to when I was a commissioner in 2019 and 2020 thinking about the distinctions between a centralized exchange where you have a more currency or financial asset like product Bitcoin, Ether trading in a very traditional way where you have buyers and sellers in a typical order book.
▶ 2:59:01these collectibles um are in fact that in many respects and I think Chairman Massid pointed out it's a little bit of a gray line. I'm paraphrasing a bit because in some respects I think about it in the context of contract law and maybe perhaps like the Federal Trade Commission about what relationships we're having between people committing fraud around the value of an asset.
▶ 2:59:23So, it's more of a bilateral counterparty relationship as opposed to what we view collectively as what a market looks like and having bids and offers and an on uh a continuous order book. And I I can't give you a perfect answer, but it is not unlike and I will go here the event contract space where I have been very vocal about where the line should be for the CFTC in terms of what it regulates.
▶ 2:59:50There are certain products that are historically very much accustomed to an order book and a marketplace, but because of technology and because of investor demand, we're seeing a whole new set of product type um assets that people can trade in ways that are somewhat similar to an exchange but distinct as well. And this is where I think it's going to be very difficult.
▶ 3:00:14And um as much as I do think the the commodity definition captures the largest tokens, it's going to capture well over 70 to 80% of the market, the largest tokens, which end up being about five or so. But I do think Chairman Massid is right. If you look at a Coinbase or some of the other large exchanges, they're listing dozens and dozens of tokens which don't have a lot of value, the the vast majority of them, um don't trade very often and don't have too much liquidity or volume.
▶ 3:00:42And I think those are the areas where it could slip through cracks. Thank you. Gentleman's time is expired. The gentleman from South Carolina, Mr. Timonss, is now recognized for five minutes. Thank you, Mr. Chairman, and thank you to the witnesses for joining us near the end of this critical endeavor. Uh I often remind industry representatives, whether they're major players or niche blockchain innovators, that we must get this right the first time. Once this car is on the road, there might not be an exit for quite a few miles.
▶ 3:01:09I firmly believe that Chairman Hill and Chairman Thompson have crafted a bill that not only addresses regulatory certainty uncertainty but also positions the United States to be a global leader in crypto for decades to come. Uh Miss Minick, first thank you for being here today just days after recovering from a health scare. If that does not show Congress how important this legislation is for you, I do not know what will. Um, I had a great visit to Uniswap HQ a few weeks back, uh, where we discussed the importance of the Clarity Act and the excitement surrounding Congress getting this across the finish line.
▶ 3:01:39For companies like yours, what does passing this legislation mean for attracting talent to the US? Thank you for the question, Congressman, and for the kindness. I appreciate that. uh having been a part of this industry for several years now, I can say that all of us are extremely excited about the opportunity to bring more talent back to the United States to do more building back in the United States. In the last few years, we've lost a lot of products or projects to overseas development.
▶ 3:02:06Um or that development just didn't happen at all. But if we have rules of the road, then we have an opportunity to bring back uh economic activity, innovation, and jobs to America in this space. Thank you for that.
▶ 3:02:20In light of recent SEC rulemakings and the roll back of specific enforcement actions, how do the definitions and regulatory clarifications introduced in this legislation create a sustainable compliance framework that enables digital asset firms like yours to scale operations and innovate securely over the next uh four years and beyond?
▶ 3:02:39I I think a couple critical pieces of this bill that are so important are number one that it confirms certain aspects of existing law uh that have long been true but yet we've had we as an industry have had to fight over at the cost of tens and hundreds of millions of dollars in court for year for years including that secondary market trading of most digital assets is not that's not securities transactions but uh now we know that um uh there will be ways for new projects to launch launch to fund raise
▶ 3:03:09with there was no clear path for that before. So it opens up more activity where that was chilled under the prior administration. The status quo has clearly changed and the future is only um more bright. Mr. Royceman, from your time at the SEC, can you detail specific examples of how overlapping domestic agency jurisdictions have impacted market participants ability to innovate or operate efficiently?
▶ 3:03:37So I think some of my fellow witnesses talked about this you know in certain cases there has been delayed innovation because of u uncertainty about whether things are a swap or a security based swap and so what I think as a result I think they can work together to sort of ensure that there's adequate uh protections and and regulation. Thank you for that. I also want to ask about foreign regulatory inconsistencies especially given your experience with international frameworks.
▶ 3:04:02How do these inconsistencies impact crossber digital asset activity and in your view what are the most effective ways to reconcile them? Uh you know chairman Benham talked about this as well. I I I think it's important for the US to get its uh sort of song book uh right and then work with other regulators. A big part of this is obviously mutual recognition and comedy.
▶ 3:04:26So, I'm hopeful that, you know, whatever happens, uh, there is consistency and ability for for people to to work across the globe. I appreciate that. I'm going to finish up with just a few simple really yes no questions. Does the status quo of crypto regulation or lack thereof provide certainty to entrepreneurs or clear protections to consumers? Oh, I'm happily say it does there's great uncertainty, but I think Mr.
▶ 3:04:54Ramen will will Uh there's great uncertainty without rules of the road. Thank you. Um is the status quo and the threat of regulation by enforcement sustainable? Uh Mr. Royceman, Mr. Ramen, now regulation by enforcement's kept a lot of innovation at bay that's all ready to enact. Thank you. Uh would Congress passing digital asset market structure legislation solve both of these problems?
▶ 3:05:22It would definitely give the clarity to move us in the right direction. And I guess my last question is what are the consequences if we fail to pass digital asset mar market structure legislation. Blockchain innovation is going to happen anyway. Um we want to build in the US. Uh it will not happen in the US. It just won't happen here. We got to get this right. We got to do it now. Thank you, Mr. Chairman. I yield back. The gentleman yields back. The gentleman from Texas, Mr. Green, who's also the ranking member on the subcommittee on oversight and investigations, is now recognized for 5 minutes.
▶ 3:05:52Thank you, Mr. Chairman. I thank the ranking member and the witnesses for appearing as well. Mr. Msad, this may be a little bit of field of where we are today, but it's of concern to me. And by the way, I thank you very much for your cander and being forthright. It it means a lot to me to hear such testimony.
▶ 3:06:12Uh, but I'm concerned about um how cryptocurrency can impact the dollar as the currency of choice. Uh, and here's why. Right? Currently, the dollar is the reserved currency of choice. And as such we use the dollar when we want to sanction other countries.
▶ 3:06:41Other countries want to do business with us. So they keep the dollar in their reserve. If we move to this cryptocurrency with a decentralized cryptog cryptography and a relationship that can take the central bank out of the picture. So you don't have a central bank, you have a relationship that allows money to be moved freely among peers.
▶ 3:07:11And my concern is when we are trying to sanction a country, that country now has the ability to move the money. Just as we talk about the corruption, they can move this money among themselves and we not be able to sanction as well as we can now. Uh, is that a possibility? Does it does it impact our ability to to maintain the sanction regimes that we put in place?
▶ 3:07:41Well, I would I I believe that it does, but in a different way, Congressman, I don't worry about Bitcoin or ETH becoming a replacement for the dollar. I I just don't see that happening. Despite some claims of Bitcoin enthusiasts, um, they're just too volatile. They're not backed by a government.
▶ 3:08:01Stable coins can actually help solidify the role of the dollar as a currency of of international But, and this is where I agree with you, because stable coins and other crypto assets can be transferred without going through an intermediary like a bank. That's where you create the risk that we can't uh impose sanctions programs as effectively.
▶ 3:08:32We saw that with Russian smugglers using Tether to buy weapons. there were concerns about Hamas uh using crypto to fund itself. So, so look, I think this technology is very important. I want to support it, but we've got to create we've got to give the Treasury Department and other regulators adequate tools to deal with those risks. And I don't think we've done that yet. Well, you and I agree.
▶ 3:09:01And my concern has a lot to do with um how we will lose this ability to bring some of these persons that are countries I'm saying persons but the countries that are outliers who who are doing dastardly things and we want to make sure that we can curtail their activities. I don't know that we we'll have an efficacious methodology by which it can be done. Yeah.
▶ 3:09:29I I share the concern again and again I I recognize that blockchains provide information, permanent information on transactions. Law enforcement likes that to the extent they can identify who someone is, but it is still after the fact, right? The money could could have been moved. And so again, I just think we need to think a little bit more broadly about what are the tools that we need.
▶ 3:09:56We need to impose obligations on stable coin issuers to monitor their chains for suspicious wallets. We need to give the Treasury authority over stable coin transactions the same way it has over dollar transactions generally. We need to give the Treasury more authority with respect to foreign uh intermediaries like crypto trading platforms. There's a number of things we could do that we haven't done yet. Well, thank you.
▶ 3:10:23you answered the second part of my question and you you've given me some degree of comfort but uh I am still concerned about the this war for currency supremacy and in this war for currency supremacy Russia and China are both at odds with us. Uh they they would rather the dollar not be the preeminent currency of choice for reserves.
▶ 3:10:46And I don't know how ultimately it will end, but I do know that there's a real um effort made now to take the dollar down. Thank you. The gentleman yields. The gentleoman from California, Miss Kim, is now recognized for five minutes. Thank you, chairman and ranking member of the committee for hosting this hearing. And I want to thank all the witnesses for joining us today.
▶ 3:11:11You know, the state that I represent, uh, California has been a leader in cryptocurrency adoption with over 1,000 Bitcoin ATMs throughout the state and more than 8.2 million residents owning a digital asset. And my alma mater, USC, um, USC hosts an annual Southern California blockchain conference so they can highlight the future of digital assets and blockchain technology.
▶ 3:11:39So, Californians are really excited about the potential and future of digital assets. But unfortunately, by not passing FIT 21 last year, a legal cloud continues to hang over blockchain usage in America.
▶ 3:11:55So this clarity act which is led by our chairman French Hill will finally provide regulatory certainty so that America can drive the next generation of financial innovation and protect consumers like my constituents who want to participate in the digital market digital asset market. So the question is the opponents of digital assets often criticize the technology because of its ties to illicit finance.
▶ 3:12:25Let me ask the first question to you Mr. Ban Nam. How are platforms engaging in the offer and sale of digital commodities to limit illicit finance? Uh thank you Congresswoman for the question.
▶ 3:12:39you know, um, as much as the market regulation is missing, something I've long advocated for, many of the centralized exchanges that operate in the US and offer products to the United States, customers um, do have to comply with um, both state money transmission uh, requirements and also treasury requirements within Fininsen.
▶ 3:13:00So there are mechanisms in place already around AML and KYC and and to an extent CIP which I we would just You want to borrow my mic? Great.
▶ 3:13:27I'm not sure if you can uh if everybody heard, but we may we may need to have you borrow another mic if your mic is not working. I think they're all back. They all went out. Are they back on now? Let me just ask a follow-up question. Is that treatment equivalent to how platforms in traditional finance are regulated? Uh yes.
▶ 3:13:48So typically in the traditional financial space, you'll have regulation around the exchanges, the broker dealers, the custodians, and with that regulation comes u very exhaustive requirements around AML and KYC.
▶ 3:14:04again in conjunction with both states and the treasury department which has a unique authority because of the crossber nature of money but I do think without those protections and without that regulation in the crypto space as much as the crypto exchanges are complying with state level regulations and the the treasury department regulations there are components missing which I I pointed out earlier which could certainly strengthen AML and KYC. Thank you.
▶ 3:14:28You know, it's really important to note that the uh clarity act creates strong anti-moneyaundering counterterrorist financing protections and I believe that this coupled with the financial literacy provisions of the bill will provide high levels of consumer protection. And section five of the clarity act requires a study on expanding financial literacy among digital commodity holders.
▶ 3:14:53And I've heard firsthand about how the digital asset ecosystem grapples with high rates of fraud and scams. So, Miss uh Minarik, can you talk about how this um study like this one in the bill could uh help combat that issue? Yes, I I do think because DeFi is such a new and different technology from centralized platforms that it is important to study the risks and benefits.
▶ 3:15:24Um with DeFi, yes, we there is not a traditional KYC AML regime, but there is um robust and often real time blockchain analytic uh review to identify bad actor wallets and stop transactions. Um but this is new technology and so studying it will help us identify tools that will uh serve these broader interests.
▶ 3:15:46The BSA itself is a broken and in many ways um dying tool because AI can defeat it um and because it's creating honeypot after honeypot of giant troves of information within companies. So we should be looking for better tools. Thank you. You know, as we heard here today, the United States has been behind in providing regulatory clarity to the digital asset industry.
▶ 3:16:10Uh the European Union's market in crypto asset regulation was enacted over two years ago and since then we have seen a drop in blockchain and digital asset developers and companies under the Biden Harris administration. Mr. Raman, how could the clarity act help the US incentivize digital asset developers and uh projects to come back? Thank you for the question.
▶ 3:16:36Um with rules of the road institutions, companies will hire. They will your state had Silicon Valley and it was it created the next wave of of innovative companies in the US. The gentleman can can further answer the question in writing. The gentleoman's time has expired. The gentleoman from Michigan, Miss Talib, is now recognized for five minutes. Thank you so much, Mr. Chair. I'm going to start with a yes or no uh question. I hope that's okay.
▶ 3:17:03Um, but is corruption possible when a company or foreign actor seeking to influence government policy can pour millions or even billions of dollars into a venture financial benefiting the president of the United States? Mr. Rossman. I'm afraid I'm not going to talk about it any individual. Oh, it's okay. It's okay. I understand. Go ahead. It means yes, by the way. But go ahead.
▶ 3:17:33Could there be corruption? I'm here talking about a blockchain network. Of course not. You don't want to answer. How about you, Russ? Just be honest, you guys. Can there Yes. Yes. Of course. How about you, Miss Misconduct's always possible? Yes. Mr. Mass, I'm I'm sorry. was the question whether there could be corruption. Corruption possible when a company and a foreign actor invest into a venture financially benefiting the president of the United States. Absolutely. Of course. Absolutely. The answer is obviously yes.
▶ 3:18:02Unfortunately, the president's u many president's many crypto projects the president of the United States has crypto projects. I want the American people to know this. Uh been provide exactly such opportunities for corruption. And I want to talk a little bit about this because I think it's important if we're going to talk about legislation. Freight Technologies, Inc. facilities, uh, facilitates international trade, right? Freight Technologies recently announced it was spending about what, 20 billion uh, uh, million dollars to purchase Trump's memecoin. Right.
▶ 3:18:33The company's press release explicitly stated that doing so, quote, an effective way to advocate for its preferred trade policies. Companies are flat out saying that they are trying to buy influence and access via crypto corruption. But it gets worse. Just one company, Binance, yes, we're going to talk about Binance, uh, can easily put twice the amount of, um, amount in the president's pocket each year. The Emirati, what is it?
▶ 3:19:01State fund, uh, MGX, fancy little names, is investing about $2 billion in Binance via the USD1, right? The stable coined owned by Trump. USD1 is owned by Trump's family's company, World Liberty Financial. If Binance keeps the money in the USD1, the Trump family can earn interest on that. Is that correct? Right. Uh yes, I indirectly. Yes. That's because the stable coin issuers are like a bank, right? They're functioning like a bank. So, Mr.
▶ 3:19:31Can you briefly explain how the world liberty financial acts like a bank by acquiring these funds which it can then later invest? Well, any stable coin issuer takes in dollars, issues stable coins, and then it invests those dollars in treasury treasury bills or other things, and there's a yield on that which benefits the coin issuer. $2 billion invested at 3% annual return. It's a lot of money. $60 million a year.
▶ 3:19:59And with World Liberty Financial, the Trump family pockets 75% of the returns. That's $45 million in annual profits for the Trump family. Here comes the corruption. You know, the one you guys didn't want to answer. And wouldn't you know it, in just weeks after Binance, World Liberty financial deal, Trump's SEC dropped the lawsuit against Binance.
▶ 3:20:29Isn't that correct? Like that. Now, World Liberty Financial claims to be decentralized, but reporting indicates it's primarily owned and controlled by the Trump family, a suspected uh fraud artist Justin's son. You all know the investment firm DWF Labs. So, Mr. Massad, what are your thoughts on crypto platform that claims to be decentralized but demonstrates its clear centralized ownership and control?
▶ 3:20:57Well, again, the the term decentralized is thrown around so much. And with all of these platforms, you really have to look at, well, aren't there vectors of control? Aren't there uh either people who own administrative tokens that give them certain rights or or other arrangements. So, you can't just assume. So, my colleagues here are talking about the Clarity Act. What how will World Financial World Liberty Financial by the Trump family be regulated under the Clarity Act?
▶ 3:21:26Um, I'm not sure. Um, they're not going to be regulated. Well, I mean, no, I mean, it depends on what their activities are. Well, it does nothing to stop the companies by uh from using decentralized as a smokeokc screen as predatory schemes. Does it stop them? No. I one of my big concerns about the act is the breadth of that DeFi exception. That's right. Yeah. And all I would add on the on the other point is Well, time is expired. No, it's okay. It's fine.
▶ 3:21:54But I just want my colleagues, let's be honest about this because he won't be the last president that does this. So maybe pretend it isn't him and it's a future president that will use these schemes. The gentleoman's time is expired. The gentleman from New York, Mr. Garberino, is recognized for 5 minutes. Thank you, Mr. Chairman. Blockchain technology and digital asset offer America the chance to lead another generation of critical innovation that unlocks new economic opportunities for all.
▶ 3:22:21Unfortunately, have we heard from many of my colleagues today, the current regulatory framework leaves much to be desired. We must ensure that the United States remains a global leader in financial and technological innovation. And I believe that the Clarity Act is a step in that is a right step in the direction, a step in the right direction. Having trouble reading here.
▶ 3:22:41I commend Chairman Hill's leadership along with the ad committee's colleagues on this issue and look forward to providing some muchneeded clarity to rather opaque regulatory landscape surrounding digital assets. As part of this push, it is important to understand the current landscape in which digital asset projects are raising capital. Today, investors can make investments in digital asset projects through a series of exemptions, each with their own advantage and limitations. Mr.
▶ 3:23:07Royceman, what are the different exemptions that digital asset projects are currently using to raise money with investors and any obstacles that they pose? So there there's a myriad and thank you for the question. Um it goes to a point to Mr. Ramen was talking about earlier which is you know there have been sort of limitations for projects to get uh access to capital and for ordinary investors to to participate in some of this. Traditionally, I think people look to regulation D.
▶ 3:23:36Some look to regulation A and maybe even to crowdfunding. Um, but the new uh sort of exemption offered here would be uh one that could be specific for projects that are trying to reach majority. So, so how does the clarity act approach the existing exempt offerings at the SEC? So I want to be clear at least from from my read and I apologize if I'm misreading it. This is only one particular offering the capital raising transactions for you know digital assets still will be under the SEC's framework.
▶ 3:24:06All this is doing is saying there's a particular exemption um for ones that are projects that are trying trying to be mature blockchains and with them they come uh they get certain uh you know requirements from the SEC and from Congress about what they need to provide to the SEC and to uh investors and I think Chairman Hill talked about this earlier there there's still anti uh there's still anti-manipulation and anti-fraud authority for the regulators so this exemption how does it solve some
▶ 3:24:36of the limitations with the current exemptions, this new exemption. Well, I think Mr. Ramen talked about this earlier, which is I think it incentivizes um people to to to build projects that are mature and have access to capital as well as allowing sort of everyday nonacredited investors to participate. And I I I think I just want to comment on something my colleague has said. I certainly firmly believe and I think everyone here does, there needs to be adequate investor protections for people. Um otherwise, this doesn't work.
▶ 3:25:04No one wants to create an exemption that could be abused and I think the idea is the SEC has authority to sort of further tailor this and and that's the idea. You you briefly mentioned that there were still some protections for investors. Can you walk through those? I I you know I don't think we have enough time. I just because I don't remember all but very important the protection we want to make sure we get this on the record.
▶ 3:25:28Uh look, I I think there are things like ensuring that sort of affiliated persons and related persons uh aren't able to sell out uh immediately after, sort of like an insider um insider trading uh faction. There's requirements for the offering documents that must be published with the SEC. There's requirements relating to uh you know what's provided to uh the purchaser, things like risk factors.
▶ 3:25:57Um and my understanding is these things would be traded on broker dealers and subject to sort of the the traditional regulation best interest in other parts of it. Uh I I commend the the the chairman for his work on this and you know if there's anything missing people should let them know and I think the regulators can provide additional technical assistance if it's necessary. Thank you. Um finally a common way for a project to distribute digital assets to its users is through broad distributions in order to support the development of its network.
▶ 3:26:26So Ramen, how does the proposed legislation treat digital assets distributed in this manner and why does this treatment more accurately correspond to how the digital asset market operates? Uh thank you for the question and I think under the previous SEC everything was a security and that's not the actual case for a new technology, a new wave of assets. A lot of the tokens powering blockchains like ETH powering the Ethereum blockchain and securing the Ethereum blockchain um are commodities.
▶ 3:26:56And so uh this gives clarity that uh network tokens that are distributed fairly um from launch via airdrops or via other community ways of distributing tokens are actually commodities and and would be regulated differently. My time is expired. I yield back. Gentleman yields back. The gentleoman from Colorado, Miss Patterson, is now recognized for five minutes. Thank you, Mr. Chair.
▶ 3:27:24I want to thank the witnesses for being with us today and especially Miss Maneric. As I understand, you're recovering from pneumonia and still are here in person. We appreciate you. I am also deeply concerned about the president profiting off of the presidency and especially how he's using using digital digital assets to do so. And while I know that's been covered extensively, I just want to make sure that I express my deep concerns here.
▶ 3:27:54Um but outside of the presidency, the president in his actions, I know that this is really important that we come together to provide clarity to make sure that we're not seeing uh businesses move from the United States uh offshores, that we're actually providing this framework in order to make sure that we continue to thrive here in the United States and that we bring protections for consumers. And I was one of the Democrats that supported Fit 21 in the past.
▶ 3:28:22While of course there were still outstanding issues like any bill, I thought that it provided a a path for the regulation necessary and that clarity, I know that many of us want to be there in in providing additional uh amendments so that we can make sure that we're doing this in the right way. And this has a real path to becoming law this year as you know. And it's important that we get this right.
▶ 3:28:48When we look back in 25 years, it's not going to be did we get it done before August recess and did we get it done alongside the stable coin bill or in front of the Senate version. It's going to be did we do this right and protect our financial system, protect consumers, and provide a durable durable legislation that can withstand the pendulum of the political uh dynamics here at the capital.
▶ 3:29:13And so urge all of us to be able to take a little bit more time to get this right. I know that you all especially the chairman has been working around the clock to take our feedback but I don't see how we are going to get everything incorporated by next week. So first want to get that out there. um to my questions.
▶ 3:29:37Miss Manerk, in your written testimony, you mentioned that the underlying uh clarity act, it's not ideological and that while we have disagreements in the details of legis of the legislation, that the core of the issue is everyone on this committee wants a framework that supports innovation and keeps out bad actors and protects consumers.
▶ 3:29:58So to go further on this point, can you comment on what principles of the digital asset ecosystem should appeal to both partisan to members on both sides of the aisle? Thank you. Thank you, Congresswoman. Uh crypto itself is neutral technology that can be deployed for all kind of val valuable uses.
▶ 3:30:20the safe and secure exchange of value, uh the secure and immutable storage of data, and even um digital ways to create and share art. Uh there are worthwhile uses of crypto for everyone, which is what makes this um a path, a bipartisan, nonpartisan path to market structure legislation here so possible.
▶ 3:30:43Uh in addition, the United States as a whole will benefit from leading in this new technology and now is the moment to take back that leadership that we have seeded to other countries. And thank you Miss Manerk to that point.
▶ 3:30:59uh just you warned about every other major economy actually providing this framework that businesses are moving uh offshores and in America should lead the world in the industries of the future and not seed our leadership. So how urgent is the need for the US to establish clear regulations before other major economies gain an insurmountable advantage in this space? Congresswoman, I I take your caution that you noted earlier very uh seriously.
▶ 3:31:29I do equally believe that time is of the essence. So, we have competing priorities there. I think that the longer we take to do good market structure legislation, the more we are seating US leadership um not just in this innovation but to overseas regulators who will set the standards for Americans use of this technology. We should be setting those standards Great. I never usually have extra time.
▶ 3:31:57Uh we can dive into um is there anything that the witnesses feel like we haven't been able you haven't had the opportunity to speak on? Uh Mr. Msad, do you have anything that you'd like to add? Well, I I would maybe add two things. Um we've obviously talked a lot about the president's activities. I would just point out that a lot of people I speak to in the crypto sector also um don't like what he's doing but don't feel they can speak out and even publications.
▶ 3:32:29The gentle woman's time is expire. The gentleman can add additional comments into the record. Uh the gentleman from the great state of Wisconsin. Mr. Chairman, I seek recognition. For what purpose does the ranking member seek recognition? Pursuant to clause 2J1 of rule 11 of the rules of the house and clause D5 of rule three of the rules of the committee on financial services.
▶ 3:32:50I and every single Democratic member of the committee unanimously request to call additional witnesses selected by committee Democrats to testify in continuation of today's hearing, also known as minority day hearing.
▶ 3:33:08Continuing this hearing with a second panel will provide members of the committee and the American public the opportunity to consider and discuss additional perspectives on President Trump's crypto conflicts of interest and corruption, including measures like my bill HR 3573, the Stop Trump in crypto act, the effects of HR 3633, the Clarity Act of 2025 on consumer
▶ 3:33:39and investor protection, national security and existing securities and commodity futures regulation and the clarity acts potential effects on the digital asset industry and broader financial system. I also request unanimous consent to enter my minority day hearing request letter into the record. It'll be entered into entered into the record without objection. and I thank the ranking member.
▶ 3:34:08Generally, House Rule 11 is reserved for when the minorities denied a witness. Today, the minority requested uh the honorable Timothy MSAD as their witness who we invited. Uh however, we'll commit to you to adhere to House Rule 11. Uh we previously held a subcommittee hearing on the matter that the U the ranking member objected to and then we held a roundt uh on the topic. another opportunity to have engaged uh substantively on a hearing.
▶ 3:34:36Um the gentleman uh from the great state of Wisconsin is recognized. Mr. Fitzgerald is recognized for five minutes. Thank you, chairman. Um, I've heard some of the discussion earlier today and I some of this goes I know back to '08 when the original foundation of Bitcoin kind of came about.
▶ 3:34:54But there was a couple of meetings about four years ago that was still looking at a determination on whether or not we were talking about a commodity itself or if uh this could take some other form. So, um, while only some of the digital assets pro projects, um, have kind of stood the test of time, there's others that are emerging.
▶ 3:35:21So, I was just wondering, do you think the bill today, and um, this is for Miss Manerk, do you think the bill today deals with the nuances of what's been in place now for some time and what's emerging, you know, as as we speak? Thank you, Congressman, for the question. Um, I do think it's very important for any legislation to meet uh uh technology where it's at, and that is what the Clarity Act draft tries to do.
▶ 3:35:50We've we've talked a bit today about the um maturity test. That is one piece of it. uh and that helps ensure that there are uh standards in place that new projects that don't yet exist know they can follow that are not overly ownorous that prevent a new project from starting at all. And at the same time, there are broader requirements throughout the act for established players as well. So I do think we see that balance in the act.
▶ 3:36:20So Mr. Rossman, um thanks for I know you guys have been here a long time. Thank you for being patient. Um so the digital asset can be treated as a security uh at the time of the initial sale or can be part of that investment contract. Um but but the same asset must be later uh offered or sold outside uh of that investment contract.
▶ 3:36:45So, I'm just wondering, do you see that there's does this bill clear clear that up at all on what the initial offering was compared to where we end up again as of today? I'm really concerned about kind of where we were and are we going to end up in in a different place on this whole thing?
▶ 3:37:04Yeah, I think the the bill tackles that headon, Congressman, um by having I think an exception for a digital think commodity asset, saying it can be sold as part of an investment contract, but it's not inherently an investment contract, meaning it's outside of the securities laws. Um I think, you know, I think it's a valiant effort and should continue. I encourage, you know, people to continue to talk to the regulators to make sure that it it captures adequately that that concept. Very good.
▶ 3:37:34Um R uh Mr. uh u Mr. Rosten um is there a uh many founders and developers find themselves navigating outdated disclosure requirements and don't reflect the realities of what's decentralized. And I'm wondering um you know because of the protocol to the tokenbased funding models how you see this or how this how this could play out.
▶ 3:38:05Uh thank you for the question and this is an excellent step in clarifying that. I think a lot of the innovators that wanted to make decentralized networks whether they're networks or applications um didn't have any rules whatsoever and had to guess or had to go abroad and just try and avoid the whole jurisdiction. This brings clarity for that and that's why I'm so optimistic that we're going to see so much innovation in the US as a result.
▶ 3:38:30Do you still think there's a period of time in which some of these things could morph out of what's considered a commodity into some other type of entity in the I think that um over time as things become more decentralized, which is starting to be enumerated in in this bill, right? Uh you can have a globally distributed network and and a protocol that has tokens that are globally distributed. So, I think it's possible. Very good. Thank you. I yield back. The gentleman yields back.
▶ 3:39:00The gentleoman from Massachusetts, Miss Presley, uh, is now recognized for five minutes. Thank you. Now, in normal times, a US president trafficking and corruption would be condemned by both Republicans and Democrats. In normal times, the appearance of bribery, even the hint of it, would be universally denounced. But these are not normal times. In fact, in this season of reverse Robin Hood culture, these are the worst of times.
▶ 3:39:30The Trump family is engaging in mindboggling levels of corruption. So blatant, so numerous that we're overwhelmed and can't keep up, which is in fact the strategy. Today, I want to shed light on specifically the crypto bribery scheme happening in plain sight. Now, Trump launched World Liberty Financial, a crypto platform where 75% of revenues go straight to the Trump family's pockets.
▶ 3:39:58This has become a pay-to-play corruption game. Trump has occupant Trump, has zero interest in lowering costs for working families, but remains vigilant in his efforts to enrich himself. Now, uh, further evidence of this pay-to-play corruption game, player one is Justin's son.
▶ 3:40:21In 2023, the SEC sued him and his companies for defrauding investors, manipulating token prices, and secretly paying celebrities to promote tokens without disclosing payments. All of that is illegal. But after Sun purchased $75 million worth of Trump's tokens, he was appointed as an adviser to World Liberty Financial and magically Trump's SEC dropped their case against him. Maybe that's just a coincidence, but it sure does look like crypto bribery.
▶ 3:40:51Then there's Binance. The company's founder, Shangpen Sao or CC, was convicted for failing to prevent terrorists, child abusers, and cyber criminals from using his crypto exchange. Binance paid a $4 billion fine. And the SEC also sued Binance for running an unlicensed exchange. Now, that would have been a slam dunk case.
▶ 3:41:17One Binance executive literally messaged another quote, "We are operating as a effing unlicensed securities exchange in the USA, bro." End quote. I must say, the constituency of bros are certainly living their best life in Donald Trump's America. But I digress. But yet again, that case magically disappeared after a two billion dollar investment in Binance using Trump's stable coin.
▶ 3:41:44And we are supposed to think that this is just a coincidence. So let me ask a very simple question and I promise you this is not a gotcha question. This is straightforward. So I'm looking for a straightforward answer. Should companies be able to bribe the president of the United States to make SEC lawsuits go away? Yes or no? And we'll begin with Mr. Maet and work back.
▶ 3:42:12Uh absolutely No. Bribery is a crime. No, no, I'm not here to talk about uh let let me just let me say the question again, sir. Again, there's no gotcha here. This is very straightforward. Okay. Should companies be able to bribe the president of the United States to make SEC lawsuits go away? Yes or no?
▶ 3:42:41I don't think anyone should bribe anyone to make lawsuits go away. Yes or no? That's my answer, ma'am. Yes or no? I I think I just answered it. Under Trump, the SEC isn't protecting anyone. It's not regulating. Its cases are being dictated by whoever is paying the president tens of millions of dollars worth of crypto bribes. And who pays the price? It's not the billionaires or the foreign actors cutting deals behind closed doors.
▶ 3:43:10It's the average Americans who use crypto for legitimate reasons like remittances who are left unprotected in a rigged system. And to be clear, these crypto scams are not simply about Trump and his billionaire friends making money. It's even worse than that. It's about them stealing money from everyone else. If this isn't the definition of corruption, then what is? I yield back. The gentleoman yields back.
▶ 3:43:38The chair plans to have one more uh questioner prior to uh a brief recess uh while votes are being conducted. We have time on the clock. Uh the gentleman from Nebraska, Mr. Flood, uh who is also the chair of the subcommittee on housing and insurance uh is recognized for 5 minutes. Thank you, Mr. Chairman.
▶ 3:43:56While I know that some of my friends on the other side of the aisle like to talk about President Trump, it's important to remember that any current activity in digital assets is taking place under the regime set forth by the previous administration and the previous SEC.
▶ 3:44:12During the last administration, there was an opportunity for Chairman Gendler and the SEC to engage with Chairman Benham at the CFTC and put together joint rulemaking that could have provided meaningful regulatory uh clarity in digital assets. Sadly, the former chairman chose not to collaborate on a solution and instead deepened the problem by engaging in a series of enforcement actions that led to a thorough and repeated rebuke of the commission.
▶ 3:44:41The judge in the debt box summar summarized it best when he indicated uh the SEC committed a quote gross abuse of power end quote in their handling of that case. Congress also had the opportunity in 2021 and 2022 under a democratic trifecta to put forth a digital asset market structure proposal to better regulate the industry.
▶ 3:45:04Part of the reason we are still talking about the digital asset market structure today is that both the SEC and Congress did not rise to the occasion in the Biden years to provide clarity and most importantly to protect investors. Mr. Royceman, since the crypto task force in the SEC was formed, the commission has done five roundt events on topics like tokenization and custody.
▶ 3:45:30Given your experience as a commissioner during chairman Gensler's leadership, can you speak to how significant a sea change we're seeing right now at the SEC is regarding their approach to digital asset regulation relative to the approach followed by the commission when it was read led by I think first and foremost I I share what I imagine is your viewpoint which I I commend uh the current SEC for their roundts uh and and work in this
▶ 3:46:00space. There is I think excitement from every facet of the industry whether it's the consumer the producer uh I mean the the uh the programmer to the investors uh to the businesses where they're able to provide input about how the markets actually work. So I I I do think that this is a new day as SEC Chair Atkins has has called it. Thank you, Mr. Royceman. Uh Mr.
▶ 3:46:24Roman, given your experience with Ether Realize, can you speak to your view of how the Clarity Act treats DeFi? The Clarity Act uh thank you for your question first off and um the Clarity Act not only encourages but also creates guard rails and rules of the road. So DeFi um which I also like to call programmatic finance can be symbiotic to the US economy. We think that it it creates opportunity for a lot of innovation. Mr.
▶ 3:46:53Benham, during your time as chairman of the CFTC, you repeatedly called on Congress to provide the CFTC with spot market authority to better regulate digital asset commodities. If the Clarity Act were passed into law when you were chairman of the CFTC, how would you act on the responsibilities uh the bill provides to the CFTC over digital asset markets? Congressman, thanks for the question.
▶ 3:47:17It it takes many steps towards giving the CFTC the comprehensive authority it needs to regulate nonsecurity digital tokens. Thank you very much. With that, I yield back the balance of my time. The gentleman yields back. Pursuant to the previous order, the chair declares the committee in recess subject to the call of the chair. We will reconvene immediately following both. The committee stands in recess.
▶ 4:37:58The committee will reconvene and come to order. The gentleman from North Carolina, Mr. Moore, is now recognized for 5 minutes. Thank you. Uh thank you, Mr. Chairman. Um and I want to thank the testimony of the uh the witnesses. Uh some of which I sat in here to watch, some of which I watched on TV. Uh but uh couple things that that have come to mind for me is that uh you know during the Biden administration, America's innovators operated I guess what I would say in a cloud of legal uncertainty.
▶ 4:38:28Uh the patchwork of regulation which was driven largely by enforcement forced developers to choose between navigating outdated frameworks or simply moving their innovation overseas as was referenced as well. Um, this just isn't bad for business, it's bad for consumers, bad for competitives, and frankly bad for our national security.
▶ 4:38:46Uh, while the Trump administration has, uh, fortunately taken a more constructive approach to digital assets, it is ultimately up to this body, it is up to Congress to establish a clear and tailored framework that fosters innovation and that ensures strong consumer protections. Uh, the Clarity Act strikes that right balance by encouraging innovation while ensuring robust safeguards. It draws clear jurisdictional lines between the SEC and the CFTC uh allowing for capital formation in a way that uh that fits this unique technology.
▶ 4:39:17Um, with that being said, it did uh spark a couple of questions and I'd start first with uh uh with Miss Manerk and um you we've heard from innovators who spent more on SEC compliance than they've raised in capital and how does this how does the new exemption pathway in the clarity act help level the playing field for US-based projects? Thank you, Congressman, for the question. Uh I'll say speaking for uh UNISOP Labs as a project like that.
▶ 4:39:45We as a company spent millions of dollars a year, four years on an SEC investigation uh when the SEC never told us the basis of the investigation and ultimately three years later didn't sue us. This was all before we were a profitable company. That could have killed a lot of businesses and that approach we know did kill a lot of businesses in the United States. So having this type of clarity to take that cost on innovation, that tax on innovation off the table is very important.
▶ 4:40:15Thank you. Uh Mr. Royceman, can you explain why this framework is more suitable than than trying to to I guess you would say to forcefitit uh these projects into a a regggd or a reggg A+? I think there's still opportunities for people to to use whatever exemption they want to use uh based on it. But I think as Mr.
▶ 4:40:37Ramen and Mera sort of talked about, this is sort of more aligned, I think, for for projects of this uh of this sort of framework and this You know, this bill also recognizes the difference between centralized and decentralized models. So uh Mr. Ramen, you were just mentioned. I'll just ask you this question.
▶ 4:40:56Why is it so important that the legislation protects uh DeFi innovation while focusing regulatory efforts where risk is concentrated say on custo on custodial intermediaries? Thank you for the question. The key point is centralization is what's caused uh collapses. Centralization's caused crisis. Decentralization means security and reliability and uptime.
▶ 4:41:22And the bill, I applaud the bill for recognizing that and for highlighting that decentralization is an ideal that all projects should strive towards to improve the security of the crypto ecosystem. Thank you. I'll tell you one other thing. We really have to acknowledge that innovation in digital asset policy really hasn't just come from Washington.
▶ 4:41:41uh states like my home state of North Carolina have led the way in really trying to create a I would say a forwardthinking uh regulatory environment that really balances protecting consumers and encouraging responsible innovation. You know, over a decade ago, North Carolina expanded the North Carolina Money Transmitters Act to include virtual currencies. Shameless plug for my state. If you want to locate North Carolina, go ahead and come on. It's a good location. Uh but uh in in 2019, the North Carolina blockchain initiative was established.
▶ 4:42:10Two years later, the North Carolina Regulatory Sandbox Act was enacted allowing for the real world testing of innovative financial technology and insurance. Our states also explored utilizing blockchain technology to boost both security and efficiency. So Mr. Royceman, what I would say is, you know, what what benefits are there of a regulatory sandbox uh to emerging technologies like digital assets and is there any overlap between policy goals of the Clarity Act and North Carolina's regulatory sandbox act?
▶ 4:42:40So, I haven't I'm not familiar with the North Carolina sandbox act, but it sounds sounds wonderful. It was the first big beautiful bill. Um I think that the purpose uh of both is to provide clarity and to promote innovation. If with those goals in mind, having not read the other one, I think they they probably are aligned.
▶ 4:43:02So let me ask and I'm almost out of time, but do you know of any other regulatory best practices that you've seen from the that the states have initiated that Congress should consider implementing at the federal level to promote uh financial innovation? I'd have to think about that, sir. Thank you. that I yield back, Mr. Chairman. Thank you. The gentleman may uh answer the question in writing. Uh the gentleman from Florida, Mr. Herodopoulos, is now recognized for five minutes. Well, thank you, Mr. Chairman. And uh I think I would think it'd be smarter to come to Florida, but we can discuss that another time. Uh Mr.
▶ 4:43:32Oisman, I wanted to ask that question if I could. Uh we've learned in the prior hearings that because of the challenges with the previous SEC, uh digital asset users rely heavily on private capital to finance bringing in new digital assets to the market. So from an innovation standpoint, how critical is it that digital asset issuers have a variety of avenues to raise that capital, including from the public?
▶ 4:43:57I think this is just a general point which um I think we're all in favor which is promoting additional access to capital for programmers or for for innovative uh businesses and two, you know, allowing ordinary investors to to participate. So, um, whatever they use, I think, uh, or companies or issuers use, I think as long as there are adequate investor protections, um, and considerations that are tailored for those particular, uh, exemptions, uh, that benefits everybody.
▶ 4:44:27And just to follow up, um, getting into the another area, um, how should Congress tailor SEC registration requirements to fit for purpose when regulating digital asset issuers that issue digital commodities and why can't existing SEC uh, requirements for issuers accommodate the digital commodity issuers?
▶ 4:44:49So, I caution, you know, reading the definition of a a relatively new bill, but I I do think that the SEC is trying to do this, that they've had the SEC task force, they've had hundreds of meetings, they've uh pushed the uh the ball forward a lot over the last several months. I I do think what you're seeing though is it's it's complicated and it's difficult and it's timeconuming.
▶ 4:45:12Um, and it would be a lot better if Congress stepped in and helpfully sort of clarified what's in their role and what's not. And and in your opinion, the new act, the Clarity Act, literally as it's called, I mean, it's been so frustrating. I know for new member from North Carolina and I, Mr. Moore, it's it's you come here and you think that that government's kind of here to help, and it sounds like the last four years have been really challenging in that regard. Uh, there's no clarity.
▶ 4:45:39uh every time you went and visit them, you thought you're getting there and they and eventually they just throw a a wells notice at your something else. Um but that said, um do you think the bill as written today obviously I'm sure you read this at full are we meeting that that standard that you all wanted to see in the industry to give you that clarity so that your investors can make it with confidence. So I actually think that my colleagues might be better suited for this because they are actually literally in the industry.
▶ 4:46:04I do think it's important for you to continue to hear from stakeholders and again technical assistance from the regulators to make sure that it it meets that. But I think everyone here I hope everyone here realizes or recognizes that as you said the point of this is to provide clarity and Mr. Roman that same question I and you've read through the obviously you you understand this is industry better than most. Do you think we're moving in the right direction?
▶ 4:46:29One, and two, the second part of that is, is there still something that we're missing as you're seeing this industry develop every day? Thanks for that question. It's the most inspiring time that I've ever seen in the crypto space because we have this bill that gives us guidelines and and rules and regulations to actually innovate responsibly and sustainably over the course of the decades. So, I think it's absolutely a step in the right direction.
▶ 4:46:55I think there's still going to be work to do, but that work is all go like the things the bills are addressing like things like decentralization, the values that are going to make blockchains resilient and part of infrastructure are there and we're excited to work with you on that. Thank you. And Mr. B, um Ben, I'm sorry. Uh obviously you're given your role, you you understand this bill very well. You know, there's been a lot of discussion about will the capital go elsewhere? Will, you know, there's places whether it be Singapore, UAE, etc.
▶ 4:47:23I'm I'm really intrigued by the this the China question. A lot of people are talking about potentially that being an another area where people might go if we don't offer that clarity it as you see this industry. Do you think that there's any real confidence that people could trust China if we fail to step forward or do you think that it's just a matter of time with we'll kind of get our act together and move forward? Thanks Congressman. I I've always thought because this question has posed to me for many years going back to when I was first nominated to be chair.
▶ 4:47:53We have the benefit in the US of having the deepest most liquid capital markets and we also have the benefit of having a very reliable rule of law around financial markets and that inevitably is going to attract capital investors and entrepreneurs.
▶ 4:48:06So as much as we have in fact from a domestic standpoint been a bit behind other regulators across the globe, we always had the benefit of leaning on that sort of precedent of rule of law and deep capital markets to sort of keep capital here.
▶ 4:48:24Obviously with the the two folks around me, it is an important narrative to hear and listen to, but um I was always very cautious about not jumping onto that bandwagon too quickly that things were going to um just leave the country. I think really well here is we do things deliberately and I would encourage time mark. Thank you, Mr. Chairman. Thank you. Thank you. The gentleman from Louisiana, Mr. Fields, is now recognized for five minutes. Thank you, Mr.
▶ 4:48:53Chairman, and let me uh thank the the the witnesses. I really appreciate you all being here all day. Uh I just have a few questions uh for you, Mr. Masset. Uh uh one, the bill allows uh entities uh to selfcertify their intent to become a mature blockchain system within four years uh with only 60 days for the C uh FTC to review it.
▶ 4:49:19from your regulatory experience uh what are the dangers of self-certification of the self-certification process uh in your opinion? I I I think thank you for the question Congressman. I think that's a big problem uh particularly for this exemption. Uh I don't see uh why we have a structure that they should selfcertify. Um you know the idea is we want to facilitate capital raising for these projects.
▶ 4:49:49we can do that without this type of exemption. I think the real issue is just making sure disclosure requirements work uh and perhaps addressing secondary sales. But you know, with this structure, someone could say they have the intent to be a mature blockchain and then never reach it. I'm not the only one saying this.
▶ 4:50:09Commissioner Hester Pur uh has said this and and it's really herself her idea of a self of a um safe harbor which is where this provision comes from. So she's pointed out in a recent speech that this could be gamed and abused. The other question uh chairman is uh you led the CFTC during a time u when maintaining agency independence uh was paramount.
▶ 4:50:38Uh the clarity act gives the president significant influence over new crypto res regulations while the president simultaneously owns and actively promotes his own cryptocurrencies and mean coins. In your experience, what are the risks when a president has direct financial in interest in an industry that he's regulating? Um they're they're huge.
▶ 4:51:06Uh I think it creates a a dark cloud uh over what we're doing here today quite frankly because I think people look most Americans don't follow all this they don't even care that much about crypto but to the extent that they're going to hear something.
▶ 4:51:23I think they're going to have the impression that wait is this crypto thing just a game uh for those who have influence for those who can curry favor with the government and uh you know they they see these reports of the dinner that he had uh that was for people who you know bought the coins uh again as I noted earlier Vitalik Bdderin who's you know the creator of of Ethereum said the meme coins were a vehicle for for
▶ 4:51:53uh for bribery basically. So I I think it's a real problem and it's something frankly it shouldn't be partisan. I know it's become partisan today but look the Wall Street Journal has denounced this. The Economist has criticized this. It's it's not just Democrats. And and then my final question is this bill would dra drastically uh dramatically expand CFTF's uh jurisdiction over digital assets.
▶ 4:52:22Uh yet provide no authorization for additional examiners or resources. Uh based on your experience running the agency uh is the CFTC equipped to handle uh the likely flood of registrations where I maintaining adequate oversight? not not under its current budget. I know the law does have a provision for uh some fees, but their resources are going to have to be increased dramatically. These are huge markets.
▶ 4:52:51The crypto market is a huge market. It's very complicated. It's new. Uh there's going to be a lot of, you know, things of first impression and the CFTC is already stretched in terms of what it has to do. and it's got some very important responsibilities like overseeing our systemically important clearing houses. So, we do need to expand its resources significantly if it's going to be given this Mr.
▶ 4:53:18Chairman, on that note, I want to thank all of the witnesses for being here and uh I yield back the balance of my time. The gentleman yields back. I now recognize myself for five minutes. Now, I appreciate Chairman Hill for holding this hearing today as we discuss legislation to ensure that the US leads the world in innovation. The US cannot seed leadership in the digital asset space.
▶ 4:53:39The Financial Services Committee took the first step in passing a payment stable coin regulatory framework, but we also need clear rules of the road for the market structure of digital assets. You know, the United States is unique in having two separate market regulators, the SEC and the CFTC, each with different missions. One of the criticisms of previous market structure legislation was that it created two separate markets for the same asset.
▶ 4:54:06The Clarity Act solves this problem by distinguishing capital raising transactions from digital commodities sold in such a transaction. The framework leverages the unique strengths of both the SEC and the CFTC. So, I'm going to start with uh Mr. Royceman.
▶ 4:54:20Uh, in the securities context, does the SEC tell investors which stocks to buy or do we ensure that they have adequate They they don't tell consu or investors what stocks to buy, but they uh require issuers to provide enough information for them to make informed investments. Thank you. Under the Clarity Act, the SEC retains jurisdiction over issuer disclosures and obligations such as lockup requirements on insiders.
▶ 4:54:49The CFTC gains regulatory authority over digital commodity spot markets and intermediaries dealing in the digital commodities. Uh so uh I'm going to go to Mr. Venom. Um how does this play into the strengths of both agencies without creating an unnecessary complex maze of overlapping authorities? Uh, Congressman, thanks for the question. Ultimately, as I've argued, you need you have two different assets who have two two very different characteristics.
▶ 4:55:17And as as Commissioner Royceman pointed out, securities and the securities laws were built for bridging information gaps between issuers and investors. The commodities laws were built commodity derivatives laws were built for very different purposes of providing transparent, fair, and orderly markets. you don't have that disclosure requirement like you do on the security side as much as you have market integrity as the primary focus.
▶ 4:55:41So, how do you respond to skeptics that say legislation is not needed and that the SEC and CFTC have the authority already to issue regulations on digital assets that will promote innovation? Well, as I've said many times, um given the size of the market, given the particular size of a few tokens which are commodities, the vast majority of the digital asset market remains unregulated given current law. Thank you. Uh move on to uh Miss Minik.
▶ 4:56:10So fostering innovation in the United States means protecting the right self-custody. Why is it important for the Clarity Act to enshrine the right to self-custody in digital digital assets? Thank you for the question, Congressman. Uh I've mentioned in other contexts uh that my family was personally debanked in 2021 for no legitimate reason.
▶ 4:56:32Even worse than that, uh the bank held on to our money and wouldn't tell us for a period of two months if or when we would ever get it back. That is something that happens to everyday Americans all the time. They're shut out of our traditional finance system. But now we have technology so that any American can safely, securely, and digitally hold their own assets in their own control and their own custody.
▶ 4:56:57Centralized services serve great purposes, but having this option, it should be available to all Americans. Uh, thank you. Uh, thank you to the witnesses. I yield the remainder of my time. The gentleman from New York, Mr. Lawler, is now recognized for five minutes. Thank you, Mr. Chairman. I want to thank our witnesses for being here today and both Chairman Hill and Thompson for leading us in this important effort.
▶ 4:57:21As our economy is evolving, we need to be making sure that we are establishing a system that allows for our businesses to thrive and Americans to prosper. Mr. Royceman, are exempt offerings a standard feature of America's robust securities, laws, and capital markets? Yes. And are disclosures and insider obligations features of such exemptions?
▶ 4:57:47Not to the uh not always to the extent that they are in in the current sort of uh clarity act. Does the SEC's authority over disclosures apply under the clarity With respect to that exemption, there is tailored ones for them as well as rulemaking authority to to make sure that they're accurate and and completed. Is it appropriate to have tailored disclosures for capital raises involving digital commodities?
▶ 4:58:14I think I think it's helpful if you're trying to incentivize issuances in this uh in this area. I I I think the commission uh can be thoughtful in this. I think that the outline of what an investor would want to know is different uh or the requirements provides information that may not be captured under sort of traditional incentives exemptions. So, I applaud the the committee for for looking at that.
▶ 4:58:41In your opinion, would American consumers be better off without tailored disclosures? I'm all for appropriate disclosures. I don't know what tailored or not, it's enough information for an investor to make an informed decisions and overlaid with the, you know, requisite consumer or investor protections. um which again I think the SEC will be able to to help uh finalize.
▶ 4:59:08Would American entrepreneurs be better off without a clear pathway to engage in a capital raise involving digital commodities? I I can answer that, but I think Mr. Ramen is probably the the better one who's actually has a business who's trying to do this. Um but I I think everyone would be better off if we're able to enable businesses to tap into our capital markets. Mr. Ramen. Uh, thanks for the question. Happy to jump in.
▶ 4:59:34I think the more ways to raise capital in America with clear rules of the road, the better. Um, what we don't want is to force projects that want to build here to have to raise capital elsewhere. Um, when all the capital's here, the innovation's here, the talents here, and the desire is here. So, um, rules of the road will definitely help. M.
▶ 4:59:56Sparic, some members have brought up the Trumpcoin and memecoins uh I think rather extensively throughout today's hearing. Um isn't it true in fact that as a result of their concern they should support a framework like the one we are working on that includes robust disclosure and other consumer protection requirements that help the markets decide what is and is not worth their money.
▶ 5:00:23Uh furthermore, how would a comprehensive framework assuage concerns of my friends on the other side of the aisle? At the end of the day, we should not let uh these concerns hamper innovation uh and the potential of digital assets. Congressman, thank you for the question. Uh, I certainly believe that passing legislation like the Clarity Act would be better for the public as a whole than the status quo.
▶ 5:00:53It does not mean that there may not be more questions to answer, but we would be moving forward in terms of protecting the public. And I would know that the Clarity Act does reinforce the CFTC's anti-fraud authority over all commodities, which does include memecoins. So that that is a protection even though memecoins are not subject to the broader um aspects of the of the bill like digital asset commodities.
▶ 5:01:21Chairman Benham, would you please talk about the consumer protection measures within the Clarity Act? Thanks, Congressman. As I said, you know, providing that Clarity Act provides a lot of the core principles that the CFTC currently uses for its traditional markets.
▶ 5:01:39So as applied or at least applying those core principles to digital commodity exchanges and brokers and other uh components of the digital asset ecosystem would certainly provide transparency through registration, surveillance, oversight, folks and records examinations. As I said, the bill uh takes great lengths and is very successful in accomplishing a lot of the goals that I've articulated, but I certainly think uh there's more work to be done and it'll benefit certainly from a markup and having more robust conversations.
▶ 5:02:10Thank you. I yield back. Thank you. I'd like to thank each of the witnesses for their testimony today. Without objection, all members will have five legislative days to submit additional questions for the witnesses to the chair. The questions will be forwarded to the witnesses for the response and please respond no later than July 9, 2025. And with that, this hearing is ajourned.