▶ 0:23:50Chair Boozman: It's my privilege to call this committee to order and I think my colleagues for joining us today, we will be considering a nomination for chairman of the commodities, futures and trading commission. Congratulations on your nomination. We appreciate your willingness to serve. I also throw in your family's willingness to let you serve.
▶ 0:24:21Chair Boozman: Cftc is the only financial financial regulator that oversees agriculture and energy risk management markets and the resiliency of the derivative markets are critical to the commodity supply chains. Will related inefficient commodity markets help producers manage risk. Input costs, interest rate and certain come upright volatility, natural disasters, futures markets help producers protect themselves.
▶ 0:24:50Chair Boozman: Over the years, the cftc pragmatic, principles-based approach has resulted in workable regulatory framework for markets to function efficiently. The cftc has historically engaged in constructive dialogue with regulating entities market participants and this has built trust and confidence in the cftc.
▶ 0:25:13Chair Boozman: This constructive, flexible regulatory approach combined with diligent policing of the cash and derivative commodity markets has resulted in U.S. derivative markets being the envy of the world. It's my expectation as the commissioners entrusted leading the agency will continue these practices.
▶ 0:25:41Chair Boozman: At the same point, congress considers authority to regulate digital commodity markets. New markets and products such as crypto based derivatives have been developed that will require the commission's attention. As I've said before, the cftc is the right agency to regulate spot digital commodity trading.
▶ 0:26:08Chair Boozman: The cftc and only the cftc should regulate the trading of digital commodities. It's because only the cftc understands the unique characteristics of commodities and commodity-based contracts. The market knowledge combined with flex will, constructive regulatory approach is why they are the right regulators. I look forward to hearing on these issues.
▶ 0:26:39Chair Boozman: Again, congratulations on your nomination and I turned to senator klobuchar.
▶ 0:26:45Sen. Klobuchar: Thank you Mr. chair, I know we will be joined by other members. Thank you for being with us today and I would also like to welcome your family, including your parents, ken and susan, I see them there, and they seem proud of you. Your kids, connor and vivian, as well as jenna. Thank you for being here.
▶ 0:27:16Sen. Klobuchar: The commodity futures trading commission plays a vital role in ensuring the integrity of our financial and agriculture markets. That includes protecting market participants from fraud and manipulation, maintaining orderly derivative markets and enabling farmers and ranchers, manufacturers and small businesses to hedge against risk. We meet at a pivotal moment for the cftc as it faces a rapidly changing landscape across both derivatives and spot markets.
▶ 0:27:46Sen. Klobuchar: The agency is being called on to address not only the emergence of novel financial products and technologies but also broader shifts in market structure, including the growing influence of nontraditional platforms as well as changes to established platforms.
▶ 0:28:06Sen. Klobuchar: These developments raise important issues and important questions about the scope of the cftc's oversight and ability to respond quickly and effectively to risk in complex and fast-moving markets.
▶ 0:28:21Sen. Klobuchar: To tackle these challenges head-on, I believe it's in the public interest that the cftc have not only a confirmed chairman but also a fully functioning commission with the bipartisan balance and independent structure that congress intended. I can't think of a more important time that we make sure that happens. It's also essential that the cftc have the institutional capacity and staffing and resources to fulfill its mandate in the face of these emerging challenges.
▶ 0:28:51Sen. Klobuchar: That means contacting retail investors and other market participants, as I noted, from fraud and abuse, guarding against systemic risk, and ensuring transparent among competitive markets. At the same time, the cftc must foster a regulatory environment that encourages responsible innovation and adapts to new technologies without compromising its core responsibilities. Mr.
▶ 0:29:17Sen. Klobuchar: Quintenz, you bring invaluable experience to this nomination. You served as cftc commissioner from 2017 through 2021, helping to steer the agency through major market stress, including the wti crude oil collapse and early pandemic volatility. He also led the agency technology advisory committee and worked on policy issues at the intersection of syntax and market regulation.
▶ 0:29:44Sen. Klobuchar: You have -- fintech in market regulation. You have other expense and we will be interested in recruits who -- recusal information. Digital asset oversight to improving transparency and treasury futures and protecting retail customers in the wake of recent failures. We have discussed several priorities directly tied to the cftc's core mission.
▶ 0:30:13Sen. Klobuchar: Safeguarding rural co-ops and end-users, strengthening coordination with other regulators and modernizing surveillance tools to better direct market abuse before it harms consumers. I look forward to hearing more from you about how you plan to pursue these policy goals. Thank you again for being here and we look forward to the discussion.
▶ 0:30:34Chair Boozman: Gives me great leisure to introduce Mr. brian quintenz. I would like to welcome his family who have joined us today, his parents can and susan, tilden connor and vivian, and partner jenna. We are delighted to have you with us.
▶ 0:31:01Chair Boozman: He brings considerable expense and understanding to the cftc that will serve him well as chairman. During the first trump administration, he served as commissioner of the cftc after being unanimously confirmed by the senate in only 17. He has worked in financial markets and is a thought leader on innovative technology regulatory issues and began his career as a policy advisor for
▶ 0:31:32Chair Boozman: Deborah price. He is a graduate of duke university and received his masters of business a been attrition from georgetown. -- business administration from georgetown. Thank you for being here. Now I should administer the oath and you will be able to begin your testimony. Please raise your right hand. Do you swear or affirm that the statement you are about to provide is the truth, whole truth and nothing but the truth, so help you god?
▶ 0:32:04Chair Boozman: Do you agree that if confirmed you will respond to requests to appear and testify before any duly constituted committee of the senate?
▶ 0:32:11Mr. Quintenz: I will.
▶ 0:32:13Chair Boozman: Thank you, you are recognized for your statement.
▶ 0:32:17Mr. Quintenz: Thank you chairman, thank you ranking member and members of this committee. It is a true honor and privilege to be before you today as president trump's nominee to chair the commodity futures trading commission, an agency near and dear to my heart. I would first like to recognize my family.
▶ 0:32:40Mr. Quintenz: My parents, my children, my niece, and my girlfriend, as well as many friends and colleagues here with me today. I'd like to dedicate my testimony to my late twin brother and my friend who served at the agency with me. I'm deeply grateful to the president for the trustees placed in me to lead an agency that is vital and critical to ensuring the resiliency and vibrancy of the united states economy.
▶ 0:33:11Mr. Quintenz: As a nation I believe we are at the precipice of a golden age for innovation, for our derivatives markets, and the cftc itself. This could prove to be the most exciting time in the agency's history as well as its most important.
▶ 0:33:26Mr. Quintenz: If I have the honor of being confirmed a look forward to working with the members of this committee and your staff, members of the house agriculture committee, market participants and stakeholders, especially the agricultural space, to ensure that cftc regulated markets remain the most innovative, liquid hedging and price discovery markets on the planet. This is the third time I've had the privilege of appearing before this committee as a nominee.
▶ 0:33:55Mr. Quintenz: The first two were my original appointment as cftc commissioner, and I was honored to receive unanimous approval. Ultimately to have been unanimously confirmed by the full senate in 2017. When I was last before this committee pledged to visit farmers and ranchers, producers and growers at their farms and places of business. When I was a commissioner I traveled to over a dozen states across the country including arkansas and minnesota to hear about our agriculture industries use of, access to and concerns with derivatives markets.
▶ 0:34:25Mr. Quintenz: I again pledged to have the honor to be confirmed to visit farmers and enters across the country. I'm proud of the record I established as a commissioner where I focused on three main objectives -- risk, innovation and harmonization. Should I have the honor to be confirmed, I pledge to continue the agency strong focus on risk innovation as well as reciprocity with foreign jurisdictions.
▶ 0:34:55Mr. Quintenz: Further, I will have no tolerance for bad actors who defraud, manipulate or cheat the cftc markets. Customer protection has always been a key attribute of will regulated markets could the cftc is a system across regulator and perhaps the world's most systemically important financial entities, derivatives clearinghouses.
▶ 0:35:17Mr. Quintenz: First and foremost, the agency must remain laser focused on meeting its systemic and regulatory -- in my expense it is -- expands it is technology advance because of the commodity exchange act, one of the most innovation focused statutes in the world. The approach to regulation and self certification framework has crated a market place that continues to thrive with integrity.
▶ 0:35:47Mr. Quintenz: While providing individual small businesses and large firms with new hedging tools to better manage their financial, commercial and economic risk. Most recently served as the global head of policy for a crypto fund at jason horwitz. This provided valuable insights. I traveled the world meeting with other jurisdictions, regulators and government officials.
▶ 0:36:15Mr. Quintenz: I learned what they've attempted to do, with a have left to do, what has worked well or poorly. Second, I've had a direct line of sight into the future of this technology and how it can transform our lives. I view block chain as a horizontal technology that has the potential to touch every aspect of society not just as a vertical technology purely focused on financial services.
▶ 0:36:44Mr. Quintenz: Lastly, I have strong conviction the surest way to undermine U.S. global leadership and blogging technology is to let bad actors and fraudsters put -- fraudsters proliferate. I began my career on capitol hill working as a legislative agent in the house of representatives for 6.5 years. I have a deep respect for congress. Should I have the honor of being confirmed I will seek to be a trusted partner to you and your oversight response abilities so that the U.S. derivatives markets remain the best in the world.
▶ 0:37:13Mr. Quintenz: Thank you for your consideration of my nomination and I look forward to answering questions.
▶ 0:37:21Sen. Klobuchar: Thank you, senator boseman is off to fast-paced innovation in the crypto space has led to -- and while it's important to encourage an ovation I want to make sure oversight is robust so people are protected.
▶ 0:37:41Sen. Klobuchar: What specific regulatory tools or approaches would you use to ensure innovation in cryptocurrency does not come at the expense of basic safeguards and customer protections for the public?
▶ 0:37:53Mr. Quintenz: Thank you, raking member. I appreciate the time we spent in your office and recalling my trips to minnesota, I pledged to continue to do that and I really enjoy myself there. Your question is a very important one. Obviously the mission of the agency is critical. The agency oversees markets that touch every segment of society and the economy, from the energy sector to the agricultural sector to the financial services sector -- we cannot take our eye off the ball.
▶ 0:38:27Mr. Quintenz: Should the agency received new oversight responsibilities through congress, I believe they can take a technology first approach to the oversight, where we can look at to ensure the most up-to-date technologies are used so we can spend taxpayer dollars efficiently and effectively. Any new additional headcount the agency decides to commit to that oversight is a 10 employee compared to where they would be without the technology.
▶ 0:38:54Mr. Quintenz: This is the most technologically advanced regulator on the planet per its traditional remit and there's no reason it can be the same.
▶ 0:39:01Mr. Quintenz: Would you need --
▶ 0:39:05Sen. Klobuchar: Would you need additional funding and staff? Not to mention oversight.
▶ 0:39:11Mr. Quintenz: It would be a challenge to undertake a lot of the response ability, certainly the oversight part when the rules come online. I think the rule writing groups in the agency are smaller but when rules come online, there is new authority and jurisdiction and it's usually been a precedent to accord the agency new resources.
▶ 0:39:35Sen. Klobuchar: There's a growing interest to expand trading hours 24/7 for derivatives. What is your view on how the cftc should approach the shift? You believe you will need to revise rules to accommodate these developments?
▶ 0:39:51Mr. Quintenz: Thank. Another very important and fascinating question. What we seem globally through technology is the advent of 24/7 trading using a technological process that doesn't exist in the traditional derivatives markets.
▶ 0:40:13Mr. Quintenz: As the agency is looking to allow for that same kind of trading in its existing rule structure, there are different kinds of concerns that need to be addressed.
▶ 0:40:24Sen. Klobuchar: For instance, price dislocation, especially in lower volume markets like ag market, a lot of us are concerned on that front.
▶ 0:40:34Mr. Quintenz: Of course. The agricultural contracts have unique and different trading hours. I think for instance, corn trades more frequently and other contracts are more traditional.
▶ 0:40:53Mr. Quintenz: I think the agency would want to ensure we take the view of all stakeholders into account, that we listen to the people that use these markets, that the views of risk managers and headers, especially in the agricultural space, are paramount come up before we try to allow for or copy innovation and have it bleed through the system.
▶ 0:41:13Sen. Klobuchar: Thank you. I have some retail customer questions but I will wait to the end or maybe my colleagues will ask. Two remaining questions, one on refusals and conflicts, but the first is given the cftc was structured by congress as an independent commission, do you think it's appropriate for the omb director to play a central role in reviewing agency in your performance and shipping spending decisions and policy agenda?
▶ 0:41:43Sen. Klobuchar: How does the omb role relate to the commission?
▶ 0:41:45Mr. Quintenz: Thank you. I would commit that the agency will follow all executive orders and we will comply with those. I do believe it's important that the agency conduct robust cost-benefit analysis and have the partnership with other agencies, including omb involved in that process and I would commit to that.
▶ 0:42:14Mr. Quintenz: Ultimately, should I have the honor of being confirmed, I have a strong allegiance to and adherence to the statute and I care deeply about the mission of agency.
▶ 0:42:22Sen. Klobuchar: You are currently the head of policy for a venture capital firm investing in crypto companies and you're on the board of rectors for a first of its kind exchange that allows trading of event contracts.
▶ 0:42:41Sen. Klobuchar: Crypto is likely going to be a major subject of rulemaking as we discussed, and one of the portfolio companies could be the subject of enforcement investigations. The cftc just ended litigation but contracts are likely to be an issue before the commission. Do you pledge to resign from these roles and vest your financial self or recuse yourself for one or two years.
▶ 0:43:14Sen. Klobuchar: Please expand how you will carry these out, and even if you recuse yourself, there will remain the potential appearance of conflict and how will you navigate these conflicts?
▶ 0:43:25Mr. Quintenz: If I could first say, when I was a commissioner previously, I held myself to the highest standards of ethics and integrity and my reputation is critically important to me. I don't think it would have the opportunity in the private sector following my time at the agency if that was not the case. I will abide by all applicable ethics statutes and regulations I have a very robust ethics agreement that requires divestiture.
▶ 0:43:52Mr. Quintenz: I will have a screener in my office to make sure that nothing inappropriate comes before me. There are number of approved methods for divesting to ensure I can meet the timelines, and I'm prepared to ask for all avenues to do that.
▶ 0:44:07Sen. Klobuchar: Thank you.
▶ 0:44:12Sen. Hoeven: Thank you for visiting with me in the office and your willingness to serve another time. I think that's a great thing given you got not only all your private world experience and education, you have on-the-job experience as well. Our farmers don't control whether, prices are markets, so risk management is a huge thing, that something we talked about already.
▶ 0:44:41Sen. Hoeven: How we help them manage risk is of paramount importance to this committee and certainly to me, coming from an ag state, which is why we are committed to a safety net. These are risk management tools that make sense for our farmers and ranchers.
▶ 0:45:01Sen. Hoeven: Talk to me about how you will engage with farmers and ranchers to make sure they are able to use the cftc and hedging products to further manage the incredible risk they face.
▶ 0:45:13Mr. Quintenz: Thank you. I also enjoyed my conversation with you. Thank you for making time to visit with me and discuss my trips around the country, including to your and meeting with agricultural producers and users.
▶ 0:45:29Mr. Quintenz: In those travels, I heard often from the agricultural community that the risk-management management derivative markets are critical important of their hedging portfolio, but not the only tool in the toolbox. You mentioned countercyclical programs. There is interesting tie between the crop insurance markets and our futures.
▶ 0:45:55Mr. Quintenz: I think they are priced in the spring and fall and they are based on the futures market so if the agency isn't doing its job and futures markets for those products are not accurately reflecting supply and demand, we have two of those tools that aren't appropriately serving farmers and ranchers and needs.
▶ 0:46:14Mr. Quintenz: I would pledge to you to ensure the agency focuses on its true mission that the products listed the use have integrity and I would pledge to respond to the agricultural committee, I attended every prior session that the advisory committee held when I was the commissioner, including traveling for ones we did outside washington, which
▶ 0:46:45Mr. Quintenz: I've always view as important.
▶ 0:46:47Sen. Hoeven: Having served in this role once before, what are the most important things you learned last time and what are your priorities this time? What are you going to do to really make a difference the second time around? What you want to accomplish?
▶ 0:47:03Mr. Quintenz: Thank you. What I learned last time -- I learned a lot but I would try to boil it down into, number one, the agency has wonderful people. They are dedicated to the mission of the statute and the markets. It's a small but mighty regulator. It has a hundred 50 people and does this very well.
▶ 0:47:36Mr. Quintenz: In my view, no one regulates markets better than cftc. One of the reasons it can do that so well is because as I said, it is a technology first regular has the most advanced technology of any regulator I've seen.
▶ 0:47:50Mr. Quintenz: The agency can get real-time, customer level data from clearinghouses so they can immediately understand sensitive periods of the market and stress and reach out to customers and intermediaries to understand whether or not there is stress in the market they have to oversee. I developed a big respect for the agency, its mission and function and meeting that mission and statutory mandates.
▶ 0:48:19Mr. Quintenz: What I would like to do is first of all, if it's not broken don't fix it. Sure we continue that critical oversight, make sure we continue to allow for innovation in the marketplace, make sure we continue to ensure the core principles are being applied through dcm's, exchanges and clearing houses, so new innovation that meets the market isn't inhibited by the agency that we can ensure new markets to have integrity.
▶ 0:48:51Sen. Hoeven: The biggest thing we will have to deal with?
▶ 0:48:58Mr. Quintenz: The things we can expect and things we don't know about. The things we don't know about are the biggest challenges. When I was at the cftc previously, I don't think anyone saw the impact of the covid pandemic coming but there was a period in march of 22 anyone -- 2021, or 2020, where the markets expense significant stress. I believe the derivatives market handle that with flying colors.
▶ 0:49:29Mr. Quintenz: I don't want to minimize how difficult it was for people in the markets but the derivatives markets performed admirably. What we can expect as a challenge is oversight from congress potentially, making sure we are prepared for that, making sure we take a technology first approach and hit the ground running if congress decides to give the agency that authority.
▶ 0:49:53Sen. Hoeven: Look forward to working with you.
▶ 0:49:58Sen. Smith: Thank you and welcome to you and your family. When congress established the commodities future and trading commission, it designed the agency to be governed by a bipartisan panel. You highlighted the strength of the commodity exchange act and I want to hone in on this a little bit.
▶ 0:50:19Sen. Smith: The provision in the commodity exchange act says that not more than three members of the commission shall be members of the same political party and presidents have fulfilled this intent by consulting with the opposite party to maintain that balance when filling vacancies. I believe you were first nominated to be a commissioner by president obama, if that is correct, and president trump nominated two democrats and president biden did the same thing nominating a republican.
▶ 0:50:50Sen. Smith: There are currently three vacancies on the cftc and two other commissioners have announced intentions to lead. Do you support maintaining the bipartisanship of the cftc?
▶ 0:51:01Mr. Quintenz: Thank you very much. I can speak to when I was there and when I was there into the people with whom I serve, I have a very close working relationship with them and I deeply respect the commissioners and both of the chairs with whom I served. We had a very deliberative dialogue and exchanged views consistently. A lot of times we disagreed and sometimes we did agree.
▶ 0:51:31Mr. Quintenz: Sometimes I agreed with my democrat colleagues on issues the chair was doing, or against what the chair was doing and that was on both administrations.
▶ 0:51:39Sen. Smith: That's the way it should be probably.
▶ 0:51:42Mr. Quintenz: I did value that experience but I would pledge to you -- and I think the other thing that's important for me to say is when I joined the agency, it only had two confirmed positions, a chair and commissioner. When I left, it ended with a chair and one commissioner.
▶ 0:52:09Mr. Quintenz: I would pledge to you that if I have the honor of being confirmed, no matter what the makeup is, I will try to replicate the experience I had with who is there and I will ensure the agency meets its statutory mission.
▶ 0:52:24Sen. Smith: Thank you for that. Thus on exactly what I asked, my question is whether you support maintaining the bipartisanship of the cftc -- I think that's important. The ag committee operates frequently on a very bipartisan basis. The issues that affect -- that we work on a often -- we work on are often not partisan, but more regional issues.
▶ 0:52:51Sen. Smith: Would you urge the president to nominate and long-standing tradition of nominating commissioners to maintain that bipartisan balance as is the intent of congress is laid out in the commodity exchange act?
▶ 0:53:05Mr. Quintenz: Thank you. The president is the head of the executive and will make his own decisions with the advice and consent of congress but I would pledge to you that I will work with whoever is at the commission to keep the bipartisan spirit of the agency alive.
▶ 0:53:23Sen. Smith: Ok, that's disappointing. Let me ask about consolidation in the act sector, it can be a real problem about farmers as they try to get fair prices and make a good living. For seeds and chemicals, mergers over the largest players the past decade have resulted in three entities controlling 80% of the U.S. cord and seed -- corn and seed market and pesticide market.
▶ 0:53:54Sen. Smith: Cattle markets, producers are sometimes making pennies on the dollar due to a lack of packer transparency and competition and meanwhile consumers are paying more and more at the grocery store while processors, which control about 85% of the market, see soaring profits the cftc plays a role in commodity price discovery as part of the mission. Could you talk to me about how you see this role.
▶ 0:54:19Sen. Smith: The cftc doesn't have oversight over mergers or antitrust issues but it is clear that agate concentration affects our market speed is there a role for the cftc supply in getting a fair market value for products?
▶ 0:54:34Mr. Quintenz: I think there's a role for the cftc to play in ensuring the futures markets and prices and transactions have integrity and represent supply and demand and are free from corners and squeezes, which is required in the act, which I think goes to your point around consolidation and possibly market presence and activity.
▶ 0:55:02Mr. Quintenz: There are position limit rules that when I was a commissioner before, we implement it for the first time in new commodities to ensure those markets had integrity and the same kind of protections from a position that is respected. I will pledge to ensure we focus our attention on fair, orderly markets so that the prices in the futures markets reflect supply and demand for these by the end user.
▶ 0:55:32Sen. Smith: Thank you.
▶ 0:55:38Sen. Tuberville: Thank you. Thank you for being here today. Thank you for your willingness to serve. For the last four years, the biden administration led an attack on cryptocurrencies into digital assets, it was obvious to all of us. I think you know that better than anybody. One of the ways they did this was by attacking leaders in the industry like yourself and I'm glad to see today we live in a new world with the most pro-crypto president and administration we've seen.
▶ 0:56:10Sen. Tuberville: I'm eager to see you lead the cftc as we enter prosperity and I look for to supporting your nomination. When you came by my office, we discussed how you were debanked because of your stance on digital assets. For years democrat collects said this would not happen but obviously it was. You received a letter informing you were being debanked.
▶ 0:56:37Sen. Tuberville: I would like to as for unanimous consent that the letter from ubs be entered into the record. Thank you. Would you like to discuss this letter and the broader biden administration stance on crypto?
▶ 0:56:54Mr. Quintenz: Thank you. Was very disappointed to receive that. First of all, I'd like to say the relationship, the manager is a family friend in that letter. I don't hold it against him and the only reason why this would happen is because of pressure from regulators to debank a disfavored industry.
▶ 0:57:24Mr. Quintenz: These were accounts set up for my children to receive $100 worth of stock from their grandparents for christmas. I don't want to over emphasize the pain it caused me but I think it's endemic of what happened during the last administration that I don't think represented american values.
▶ 0:57:49Mr. Quintenz: I know from personal experience there were investments our firm was trying to make in small teams and we couldn't even send them a check because they couldn't open a bank account because they were in the crypto industry. I believe legal businesses deserve access to legal services and I'm glad that is starting to change.
▶ 0:58:12Sen. Tuberville: Thank you. A tough time and I understand. We are curious about the growth of prediction markets. Can you talk about the benefits of the markets and how various businesses and industries can use them for risk management women they otherwise might not have access to appropriate hedging tools?
▶ 0:58:33Mr. Quintenz: Thank you. When I was at the commission, I -- I read the law and it was clear that the commodity exchange act recognizes that an event that poses financial and economic consequences is a commodity and I think the reason the commodity modernization act that was passed in double and signed by president clinton did that was because it recognizes that events pose risks to
▶ 0:59:06Mr. Quintenz: Individuals, small businesses and large firms in the same way that exposure to physical commodity prices do. These have been hedged -- events have been hessian various capacities for a long time, it's just been through large wall street firms and complicated products where there isn't a lot of site into how they operate and market trading mechanism to create clarity around that.
▶ 0:59:34Mr. Quintenz: With the way this innovation is evolving, there will be many new methods for individuals to hedge risks they otherwise couldn't because the innovation can be targeted to a specific event and they don't have to use some other generic form of hedging that might not correlate to the risk.
▶ 0:59:52Sen. Tuberville: Thank you, can you discuss the clarity as it relates to crypto and what further actions need to be taken?
▶ 1:00:03Mr. Quintenz: As I saw when I was at the cftc and after I left , the agencies either share jurisdiction over crypto spot enforcement markets or markets through enforcement, but really it's been the sec decision to make, in terms of which products are securities, they carve out and take into their own
▶ 1:00:34Mr. Quintenz: Jurisdiction, and unfortunately I believe there was not any clarity that was offered to the marketplace and innovators and entrepreneurs to understand how they can build something that complied with the law, or something that was within the sec jurisdiction that was able to follow those rules. Both agencies have had experience in the enforcement area of crypto.
▶ 1:01:04Mr. Quintenz: For the cftc, it's mostly confined itself to fraud. Events of fraud, which are standard ponzi scheme's, not necessarily people using cryptocurrency, but it's saying they are using raptor currency for investments and then just stealing money. To the extent clarity can be added so innovators and entrepreneurs can build compliantly I think is critical for congress to consider.
▶ 1:01:37Sen. Marshall: Welcome to our meeting. The cftc has developed a rotation -- reputation as a tough regular but also having a good elation ship with market participants and being reasonable to work with on regulatory applications. Some market participants have complained the commission has lost its way and processing basic applications for regulatory licenses, which take an inordinate amount of time for approval.
▶ 1:02:05Sen. Marshall: What is your view of the cftc responsibility and basic application processes and we make sure the cftc meets deadlines in meeting those applications?
▶ 1:02:15Mr. Quintenz: Thank you. It was a delight to spend time with you in your office and recall visiting kansas which I've done a number of times and again, I pledged to do so again. I appreciate that discussion.
▶ 1:02:29Mr. Quintenz: The agency needs to meet its mandate to the statute and the markets, and part of the statutory mandate is to ensure that any new applications meet the core principles but also ensure for fair competition, which I believe means processing applications in a timely way and if they meet the obligations of the statute, if there isn't any reason to believe that anything nefarious is going on, as the commission is evaluating new
▶ 1:03:02Mr. Quintenz: Applications, I believe it should do so expediently. Not having been at the commission, I can't speak to what the delays are involving in any applications now but I would pledge to you and the market to ensure that if applications meet the standards of the act and market integrity, the commission will process them expediently.
▶ 1:03:25Sen. Marshall: If confirmed is there a way you would major that and determine what is unreasonable -- what is a reasonable amount of time and if you don't do that you can report back to us about why you are feeling?
▶ 1:03:38Mr. Quintenz: I haven't necessarily thought about that, but maybe off-the-cuff, I think one way we could think about that internally is asking the reviewers for applications, how long it's taking them to respond with new questions once the applicant has responded to the previous set of questions, to understand how long the delay is.
▶ 1:04:06Mr. Quintenz: Another is just a conversation with the reviewing team to see what is the status of these applications when they come into the building? Are they robust or very weak and is a lot of work required? How money applications over getting in general and how are those sordid?
▶ 1:04:21Sen. Marshall: If you can't measure, you can't manage it. Senator klobuchar touched on what I'm going to ask and I want to understand more clearly. We understand the critical role that ag futures play with farmers. You've been to kansas, small, relatively small farmers are using your services in a good way.
▶ 1:04:47Sen. Marshall: It's my understanding that digital assets are driving the cftc to center new market structures such as perpetual future contracts. We have concerns about that. They raised significant concerns for farmers and other traditional market participants. Had you view the role in allowing responsible innovation in ensuring traditional market structures are not exposed to potentially harmful changes that could impact ag markets?
▶ 1:05:15Mr. Quintenz: First and foremost I think it's critically important the agency listen to the community and agriculture industry to ensure we know very clearly what their preference is for how the products they use are traded. I think there's an opportunity for different kinds of innovations to affect different industries at different times.
▶ 1:05:42Mr. Quintenz: There's no reason 24/7 trading, if allowed for and flourishes in one area have to translate to other areas I think that's the case now. Agricultural contracts have different trading hours. I would pledge to have an open dialogue with the agricultural industry.
▶ 1:06:03Mr. Quintenz: I've heard these concerns already from them around expanded trading hours and the possibility of getting liquidated while they are asleep, the possibility of liquidity and concerns. I take those views seriously.
▶ 1:06:17Sen. Marshall: I think the cftc was set up in many ways to serve agriculture, not necessarily some of the newer johnny-come-lately. Thank you.
▶ 1:06:30Chair Boozman: Ah -- senator schiff.
▶ 1:06:39Sen. Schiff: Thank you. I want to talk about futures contracts. This is a space you are well familiar with from your role on the board of directors. I'm proud to represent more than 100 federally recognized tribal nations in california that have the exclusive right to offer gaming in california.
▶ 1:07:03Sen. Schiff: I'm concerned these event contracts, which seem pretty indistinguishable at least from a consumer point of view, violate -- indistinguishable from gaming, violate tribal sovereignty and violate state contracts in competition with the indian gaming regulation act. Federal law dictates the tribes have exclusive rights to police gaming in their territory.
▶ 1:07:31Sen. Schiff: If you are confirmed, do you commit to exercise the statutory and regulatory authority to call these contracts in full review?
▶ 1:07:40Mr. Quintenz: Thank you. I appreciate the concerns you mentioned. I think this is an area of the marketplace that the agency used flexibility in a way that hampered its growth.
▶ 1:08:03Mr. Quintenz: I believe the loss very clear about events that have commercial or financial or economic consequences qualifying as commodities because the act recognizes therefore a viable, invaluable futures market can be listed upon them and for people the opportunity for risk management, price discovery and price dissemination, which are the three cited national interest for the commodity exchange act and section 3a.
▶ 1:08:31Mr. Quintenz: I would pledge to you, given this is an area that has I think more recently found legislative clarity, given the actions of the agency previously, I would have a very robust, all stakeholder engagement process around this. I would listen to the concerns of the tribes you mentioned.
▶ 1:08:56Mr. Quintenz: Nothing that I'm aware of prohibits or affects the opportunity of tribes to offer those products in those markets and those services.
▶ 1:09:07Sen. Schiff: In my view, betting on the outcome of a sporting event looks like sports betting, smells like gaming, sounds like gaming, there are winners and losers like gaming, it's probably gaming.
▶ 1:09:26Sen. Schiff: If indeed it is determined these contracts amount to prohibited gaming, violating tribal sovereignty and jurisdiction, will you require the contracts to stop?
▶ 1:09:38Mr. Quintenz: Thank you. I need to -- should I have the honor of being confirmed, I believe I need to abide by the commodity exchange act. If there is a conflict between the commodity exchange act and the other act you mentioned, I believe that's best resolved through congress. I believe the commodity exchange act is clear about the purpose of derivatives markets and risk management and price discovery, and events can serve a function in that mandate.
▶ 1:10:07Sen. Schiff: If courts determine these are prohibited gaming contracts, will you enforce the law and require the contracts to stop?
▶ 1:10:16Mr. Quintenz: I think, depending on the outcome of the court case and where that is in the court system, the agency will follow the appropriate court mandate.
▶ 1:10:31Sen. Schiff: Are you indicating that if the court should rule there are illegal gaming contracts you would appeal because you personally disagree or would you recuse yourself, having come from gaming business that would be affected?
▶ 1:10:43Mr. Quintenz: No, I think I would have to -- and I think the agency would want to ensure it is appropriately defending the commodity exchange act and the agreement the agency has to regulate and preempt state laws around futures and derivatives markets.
▶ 1:11:01Sen. Schiff: You said you encourage community engagement. There was a commitment to hold a public roundtable and leaders were ready to fly out to attend I think in february but it was a public canceled. If confirmed, will you commit to holding this public roundtable?
▶ 1:11:16Mr. Quintenz: Yes. I have no information white was canceled and I will be happy to re-scheduled.
▶ 1:11:25Sen. Schiff: Would you be happy to do that before you issue any guidance on this topic?
▶ 1:11:30Mr. Quintenz: I don't have plans to issue any guidance in the near-term soy feel confident making that commitment.
▶ 1:11:36Sen. Schiff: Iq. -- thank you.
▶ 1:11:43Sen. Hyde-Smith: Thank you. Thank you for your appearance here, and enjoyed our visit and I appreciate your willingness to serve. It's a lot stepping up and having to go through this process. Thank you for being willing to do that. I want to talk about something that's already been discussed -- the rapid growth of the digital assets sector. We've seen an entirely new market emerge.
▶ 1:12:14Sen. Hyde-Smith: New products, market participants and the occasional bad actor at times, culminating in more significant work for the cftc. I believe the commission deserves credit for how it's handled these new responsibilities and I believe the challenges ahead will only grow with congress considering legislation that could further expand your jurisdiction as well.
▶ 1:12:39Sen. Hyde-Smith: How do you plan to ensure the commission remains focused on its core mission of supporting well-functioning, transparent futures? The markets producers can rely on for risk management?
▶ 1:12:54Mr. Quintenz: Thank you. It was a nice visit with you and your office and recollect my visits to your state and would love the honor to head back if I have the honor of being confirmed. It's a very important question.
▶ 1:13:12Mr. Quintenz: The agencies markets cover $350 trillion worth of hedging transactions and price discovery transactions that affect the real world economy in areas that depend on metals, energy, agriculture, different kinds of financial products like interest rates.
▶ 1:13:36Mr. Quintenz: There is no there is no room to ignore or laptop on ensuring the agency meets the critical mission especially when it comes to the systemic risk mandate. Many people don't appreciate that the cftc is a systemic risk regulator that oversees what I believe are the most systemically important financial institutions in the world.
▶ 1:14:01Mr. Quintenz: I would have no tolerance for ignoring those markets and I would pledge to ensure that the agency's full attention, historic attention is placed there.
▶ 1:14:15Sen. Hyde-Smith: We have seen growing public interest in prediction markets. Not just for trading but as tools for forecasting, academic research, and even policy analysis.
▶ 1:14:30Sen. Hyde-Smith: At the same time, questions have been raised about where to draw the lines around what types of events are appropriate for public contracts and what falls outside the scope of the cftc;'s mission. How do you believe the commission should approach prediction markets, particular when it comes to balancing innovation within need for regulatory clarity and market integrity?
▶ 1:14:57Mr. Quintenz: I think the last thing I would want to do, should I have the honor of being confirmed, is to be a value judgment regulator, try to express my own value judgments on the marketplace and undertake a process that is opaque and inconsistent. And likely illegal. In the past, the agency has taken an approach that I had disagreed with in terms of that.
▶ 1:15:31Mr. Quintenz: Adjudicating which kinds of contracts might be acceptable or not. I believe it is the role for this body and congress to decide what is acceptable or appropriate. I think it is the role for the agency to follow the statute. I have said a number of times the statute is clear that it is the purpose of the commodity exchange act and the cftc to support derivatives markets that provide for hedging risk management and price dissemination.
▶ 1:15:59Mr. Quintenz: So I would try to take a clear approach that is predictable, repeatable, durable, and legal.
▶ 1:16:06Sen. Hyde-Smith: Thank you and thank you Mr. chairman.
▶ 1:16:10Sen. Booker: I'm looking forward to come if I can get to what is one of my missions which is to get a market structure down and talk about the cftc's role in crypto oversight. I want to pick up on a line of questioning that I thought was excellent by my colleague, senator schiff.
▶ 1:16:30Sen. Booker: I have reservations about the explosion in advertising for sports betting, the addictive by design tactics employed by the industry that is ultimately the law of the land. If you are confirmed you will have an important role to play in this emerging space. We now know, we have been discussing, they are having significant efforts to offer event contracts or sports, on sports events which closely resemble sports betting.
▶ 1:16:59Sen. Booker: How she puffs -- kashi's advertising says sports betting is legal in all 50 states on our website. I want to talk about your independence in this space.
▶ 1:17:17Sen. Booker: You gave the following statement , the statutory definition of commodities includes and the current extents of our currency that is beyond the control of the relevant parties to the contract, associated with a financial, commercial or economic consequences, since practically any event has at least a minimal financial consequence, all events are commodities.
▶ 1:17:45Sen. Booker: Because of this definition any contract on the outcome of a future event would be considered a commodity futures contract. Required to be traded on a designated contract market. Do you agree with that today?
▶ 1:18:04Mr. Quintenz: Yes.
▶ 1:18:08Sen. Booker: Would not be illegal for sports book or tribal communities to take outcomes in certain states unless they are registered with cftc exchanges?
▶ 1:18:20Mr. Quintenz: No. The quote you read may have omitted a critical detail, which is if those contracts are traded across state lines.
▶ 1:18:36Sen. Booker: Ok, to me, on the face of it even with the omission you speak to, I feel like it is undermining the clear language of the commodities exchange act which states event contracts involving gaming shall not be listed if the cftc determines they are contrary to the public interest. Would you agree with that?
▶ 1:18:56Mr. Quintenz: There is a special rule for the review of event contracts. It does mention specific kinds of events that could trigger --
▶ 1:19:11Sen. Booker: You would have a role in this position, determining this space.
▶ 1:19:15Mr. Quintenz: Although I would say and I have spoken about this, I had a long statement when I was commissioner previously on this, that provision of the statute's troubles me in terms of trying to execute it with repeatability and legality especially in a post loper bright role -- world because there was no framework provided by congress on how to execute that appropriately.
▶ 1:19:45Mr. Quintenz: What constitutes the public interest, and appropriate --
▶ 1:19:48Sen. Booker: You will be in this space and I'm hoping we can talk more not in the last two minutes I have, with the role -- about the role, power and authority will have in the space and I hope you can appreciate that there will be some real questions into your independence in that role given the fact that you sat on the board of this, you can understand that.
▶ 1:20:08Mr. Quintenz: I can understand, and I think --
▶ 1:20:12Sen. Booker: I told you where I want to go but donald trump, jr. Was hired by kalshi january 13 after his father was elected president, nine days before it began offering sports contracts. One week before he was, before president was inaugurated.
▶ 1:20:32Sen. Booker: I'm worried you will be in a position where if chairman, are you going to feel empowered to prosecute a company or push back on a company that is being advised by the presidents son? This deserves exploration. I want to be able to ask you one last question but there was a lot more here that has to be discussed as I'm hearing from a lot of parties that are questioning the independence.
▶ 1:20:57Sen. Booker: Given the culture of corruption that I believe we are seeing in our country, where the president has a mean quine being invested in by foreign companies, where americans are justified wondering what influence it has on policy, you are in a position coming from a company with the president's son, we have to explore that and I hope the chairman and ranking member will want to. I very much want to spend my time working on getting the market structure built.
▶ 1:21:27Sen. Booker: I really want to talk to you more but I'm out of time now. But I'm hoping you would be willing to have a conversation as mike's subcommittee -- my subcommittee is focused on driving something forward. This area needs regulation.
▶ 1:21:41Sen. Booker: This area needs rules that we can create a lot more transparency and a lot more trust, and right now in this space of digital assets, sports betting, with a lot of things happening in america but have never happened before with the president so intertwined and his family intertwined in areas, we are seeing extraordinary profits right now. It is important that we have the objectivity necessary to govern in this space and I hope we can talk about that more.
▶ 1:22:10Mr. Quintenz: I would pledge to have the conversation and that relationship.
▶ 1:22:16Sen. Booker: Thank you.
▶ 1:22:19Sen. Justice: Thank you Mr. chairman, ranking member and our colleagues. I want to say this. We have the opportunity to nominate a fellow that is the real deal. Brian quintenz is the real deal.
▶ 1:22:40Sen. Justice: I would say this, from the standpoint of our questioning and everything, I wish to goodness that we could some way, somehow, move ahead and leave the politics on the sideline. I truly believe that this is a business guy. This is a farmer.
▶ 1:23:04Sen. Justice: This is a guy that absolutely values the ability that farmers, and I'm one of them, have to be able to hedge our products and be able to watch what is going on in the grain world or whether it be the lumber world war energy world. That value to us is very important. Now, I have to say this.
▶ 1:23:31Sen. Justice: He knows how to safeguard us and from a standpoint of, we in congress first and foremost, but then the cftc, we need to ensure that bad actors don't become at play and they absolutely have to some way, somehow prevent manipulation that could really cause us all a problem. Now, let me just say this. I'm a believer in crypto.
▶ 1:24:02Sen. Justice: I'm a believer in where we are going to go. I believe that it is a future that absolutely provides an opportunity this nation that is off the charts come off the charts in all kinds of ways. I don't think we can pass the g.e.n.I.U.S. act any faster, I mean come on the most impatient guy in town all the time. I think we need to get across the finish line now.
▶ 1:24:29Sen. Justice: My question, I really believe our chairman is the real mccoy and I believe absolutely, right behind all about, I believe -- all of that, I believe from the standpoint of market structure, market structure is hanging in the loop. The crypto world today needs us to stand up and say, legitimate. Legitimacy. That is the very first thing that needs to happen.
▶ 1:25:00Sen. Justice: And right behind that, we need to absolutely be sure, and I always call the voters toby so forgive me but we need to ensure that absolutely, toby has access, that they understand. They come into our world. So with all of that, I would say to you sir, just this.
▶ 1:25:28Sen. Justice: The next step forward I think with market structure is terribly, terribly important. Tell me your feelings.
▶ 1:25:36Mr. Quintenz: Thank you, senator. I agree with you. As I think about the crypto ecosystem, the crypto market, and the historical role for financial regulation, there are, and as I reflect on a philosophical approach to financial regulation, usually people come down on one side or the other between being
▶ 1:26:09Mr. Quintenz: Pro-innovation or pro-customer protection. There is a strong middle ground there but usually, you can think about favoring one over the other and the extreme pro-innovation philosophy is very libertarian, the philosophy and it doesn't matter how many people get harmed, and the approach -- the probe customer protection approach, you have to prove nothing bad will happen which means you don't have
▶ 1:26:39Mr. Quintenz: Innovation. You have to take some kind of choice. I have always viewed market structure legislation as an opportunity to be both pro-customer protection and pro-innovation at the same time. It can provide the clarity to builders, entrepreneurs, innovators to develop products that can become networks, that can become decentralized and that can allow people to own how they participate in those networks.
▶ 1:27:07Mr. Quintenz: At the same time, ensuring that firms that are central, better businesses, -- that our businesses and service customers and require customer trust, are appropriately regulated which is the hallmark of regulation we have had in this country for decades if not centuries. So I feel like we can do both at the same time. I would allege to you that if the cftc gets authority, it would be ready.
▶ 1:27:37Sen. Justice: I would answer bingo. That is all there is to it. Mr. chairman I'm a full believer, if some way, somehow we could move towards, because the opportunity is at our fingertips. If we could move forward with both today, it would be the right move to do. Thank you, sir.
▶ 1:27:57Sen. Lujan: Is it quintez? Appreciate you being here today and appreciate your family being here. It takes a lot out of your days to travel around with family. It says a lot that family is with you, in my opinion.
▶ 1:28:22Sen. Lujan: You have heard today and as you know, congress is grappling with a common issue, how do we build a regulatory structure around something I'm a technology that is advancing? In this case specific to cryptocurrency, one conversation I have been a part of is how can we foster american innovation while protecting consumers?
▶ 1:28:49Sen. Lujan: Looking at creating the strongest environment anywhere in the world in america. The committee has done important work to think through the hard questions on what a robust regulatory environment would look like. I want to ask about how cftc would approach this task. The cftc is a small agency come near to the sec.
▶ 1:29:15Sen. Lujan: Yes or no, do you believe that the cftc was given more explicit authority over digital assets, with it -- with the agency need more resources including staff and infrastructure?
▶ 1:29:25Mr. Quintenz: Thank you, senator. I should say yes to that. I think this is precedent that new jurisdiction comes with new resources. The historical we met of the agency as I described many times is critically important. We can't take our eye off the ball.
▶ 1:29:47Mr. Quintenz: To the extent that new authorities come to the agency, I think there are ways we can make every taxpayer dollar spent the most efficient way possible, but I would anticipate new resources would be needed.
▶ 1:30:01Sen. Lujan: I agree. When you are confirmed, would you seek more appropriated funds if you needed it to respond to a rapidly growing crypto market?
▶ 1:30:10Mr. Quintenz: Thank you, senator, I would be transparent with you and your colleagues on this committee about what I felt the needs of the agency were. I think former chairman russ benham did create his own budget requests that I think called for 120 $1 million increase in the first year that went on to $60 million. I don't have visibility into what went into that but I would want to review it and either adopt some of it or maybe redo it from a different perspective.
▶ 1:30:43Mr. Quintenz: And ensure we would take a technology first approach to that and we would ask her what we needed.
▶ 1:30:47Sen. Lujan: Digital asset companies have to prevent laundering in their platforms, they have to prevent their platforms from being used for illicit activities. How would you work to oversee digital asset providers now that the U.S.
▶ 1:31:06Sen. Lujan: Department of justice has the prioritized pursuing regulatory violations like compliance with bank secrecy act, violations associated with money laundering and other commodity laws on digital asset companies?
▶ 1:31:18Mr. Quintenz: So entities regulated by the cftc currently qualified I believe as financial institutions and therefore have to have a ky c programs supervised by the initial crimes enforcement nap -- financial crimes enforcement network.
▶ 1:31:43Mr. Quintenz: In the group ecosystem, -- crypto ecosystem, an intermediary or centralized business that has a customer relationship that accepts and transmits customer funds qualifies as a money services business and is also under fincen's rematch. -- remit. I would imagine both of those things if congress decided to pass any regulatory authority, would not change.
▶ 1:32:09Sen. Lujan: I'm concerned from the announcement from the department of justice. There are criminal networks out there involved in human trafficking, fentanyl is exploding, taking our constituents every day. I believe if bad folks anywhere in the world want to do something, because they are making a dollar, they will keep doing it, keep laundering money and whatever it may be. For the U.S.
▶ 1:32:34Sen. Lujan: To take its eye off money laundering, it seems like a big mistake. All eyes will be on cftc in this space to make sure we are able to get the ride and we don't let bad people do bad things. Mr. chairman, I have some other questions in and around sports gambling.
▶ 1:32:59Sen. Lujan: The supreme court decision a few years ago said that it was states, not the federal government's decision to allow sports betting and many states passed local legislation. New mexico is one, but immediately responded. I will submit those into the record. I appreciate you being here today.
▶ 1:33:19Sen. Warnock: Thank you, Mr. chair. Congratulations on your nomination, congratulations not only to you but to your family. In march, president trump violated the law by firing the two democratic commissioners at the federal trade commission without cause.
▶ 1:33:43Sen. Warnock: In april president trump ignored the law again and fired the two democratic board members at the national credit union administration, again without cause. These seats remain vacant. There will soon be more democratic vacancies at the ftse -- fbi c, the securities and exchange commission and the commission you have been nominated to chair.
▶ 1:34:12Sen. Warnock: Is it correct that you were originally nominated by president obama?
▶ 1:34:16Mr. Quintenz: Yes, I was nominated twice previously by president obama and president trump.
▶ 1:34:24Sen. Warnock: So a democratic president nominated you to fill a republican seat on the commission?
▶ 1:34:28Mr. Quintenz: That is correct.
▶ 1:34:32Sen. Warnock: During your term at the cftc, can you think of an example of any business before the commission that was improved by having both democratic and republican members at the table?
▶ 1:34:44Mr. Quintenz: Thank you, senator. In response to another question I can only speak to the people and the environment in which I served previously. I had a very strong relationship with my fellow commissioners and both chairs under which I served, and I count them all as dear friends now. A number of occasions we disagreed but on some occasions we did a great.
▶ 1:35:10Sen. Warnock: You think disagreement is helpful?
▶ 1:35:15Mr. Quintenz: I think there can be. I thought I was right, but you know.
▶ 1:35:23Sen. Warnock: You embodied in some ways the trajectory of your work on this commission, nominated by a democratic president, filled a republican seat. I think democratic words play an important dashboards play an important role and I think the friction and points of view is helpful. Would you agree?
▶ 1:35:46Mr. Quintenz: I think it can be, senator.
▶ 1:35:51Sen. Warnock: Bible except that it can be. I think this is a bad president, -- precedent set by president trump and I worried that it imperils the independence of crucial regulators including the cftc. Americans need to know these agencies work regardless of who the president is and I think there is certain credibility that comes with this kind of bipartisan spirit and the work. The cftc has three vacancies.
▶ 1:36:22Sen. Warnock: Do you support president trump nominating a full cftc including democratic commissioners?
▶ 1:36:27Mr. Quintenz: The president has achieved --
▶ 1:36:32Sen. Warnock: It is a simple question. It is a yes or no question. Do you support president trump nominating a full cftc including democratic commissioners?
▶ 1:36:41Mr. Quintenz: I would pledge to you to have, strive to emulate the environment of the commission but I got to experience when I was there with whoever is serving with me.
▶ 1:36:54Sen. Warnock: If confirmed, would you advocate to the white house for the president to nominate and the senate to confirm both majority and minority commissioners to the cftc?
▶ 1:37:04Mr. Quintenz: With respect, the president is the chief executive and he can make that decision with the advice and consent of congress.
▶ 1:37:13Sen. Warnock: Would you advocate for it?
▶ 1:37:14Mr. Quintenz: I don't. Tell the president what to do.
▶ 1:37:19Sen. Warnock: If the president continues to ignore precedent and the law and never nominates a democratic nomination to the commission, which ignores precedent and ignores the law, you would be the chair of the cftc. You will get confirmed. How will you as chair work to moderate the cftc and incorporate dissenting and minority viewpoints in the commission's decisions?
▶ 1:37:47Mr. Quintenz: Thank you, senator. With respect, I don't want to speak to all the different kinds of hypothetical environments the commission may experience but I would pledge that one of the core attributes of the administrative procedures act is to put out any kind of rules and notices for public comment, responses to public coming need to be incorporated into any kind of final commission action.
▶ 1:38:16Mr. Quintenz: There is a wide opportunity for dissenting views in the public comment process. I would seek to receive comment from this -- as wide a source as possible and I would pledge to work with you and your colleagues to have a transparent approach to my chairmanship.
▶ 1:38:35Sen. Warnock: You think democrats ever get it right?
▶ 1:38:36Mr. Quintenz: Sen. thune: -- Mr.
▶ 1:38:40Quintenz: I look forward to looking to --
▶ 1:38:45Sen. Warnock: The republicans ever get it wrong? Do republicans get it right?
▶ 1:38:48Mr. Quintenz: No one has a monopoly on the best ideas.
▶ 1:38:53Sen. Warnock: I think the erosion of the independence of key regulators like the fdic is alarming. It is a serious -- point I am trying to make. I hope you will hear the spirit of which I'm trying to make these points because our markets are counting and our consumers are counting on it. These agencies protect us from the worst things that could happen.
▶ 1:39:21Sen. Warnock: These political purges, because that is what we are witnessing come these political purges have weakened the regulators and undermined their independence and I worry that the cftc will follow suit if the important tradition of a bipartisan board goes away.
▶ 1:39:39Sen. Warnock: If confirmed you will have the responsibility, sir, to pervert -- preserve the bipartisan spirit of moderation and pulling and minority voices, whether or not president trump follows the law. I look forward to holding you accountable for that if you were confirmed. Thank you.
▶ 1:40:06Sen. Warnock: >> before I ask my questions I would like to add letters of support from various group for Mr. quintenz. Without objection so ordered. I think you have heard a lot from the committee today in a bipartisan way that we would like to get some sort of bill passed to regulate the digital
▶ 1:40:36Sen. Warnock: Commodity, give regulatory authority to the cftc. As congress deliberates granting the cftc a spot in the commodity regulatory authority, with key considerations, why do you believe the cftc is the right regulator the spot digital commodity trading?
▶ 1:41:01Mr. Quintenz: Thank you, I think the wonderful and scary thing about this technology is it is software and it can be anything. Which also means it can evolve. It has new ways of being governed.
▶ 1:41:21Mr. Quintenz: And under certain kinds of programming and features and governance, the description I hear from the founder of our fund that goes with me is that, I will modify this a bit, it is a globally accessible computer that can make transparent commitments. That is a powerful thing.
▶ 1:41:41Mr. Quintenz: Which also means as crypto assets and block chain technology evolve and become decentralized, it allows networks to form. And that governance process to be released outside of the control of an individual person or entity or business, and be distributed in a transparent way, that poses new and interesting questions from a regulatory perspective given
▶ 1:42:11Mr. Quintenz: That networks never just exist. They have to start somewhere, they have to grow and evolve. We can't take action that would preclude that from happening, but we have to be careful when that is happening and customers are protected. That gets to the point I was trying to make about taking action by congress that can be pro-innovation and pro-customer protection at the same point.
▶ 1:42:34Mr. Quintenz: I do believe if congress decides to give authority to the cftc to regulate spot digital commodity markets exclusively, with clarity, I think the cftc is more than up for that mandate and that mission. I think we have some of the smartest people in government at the agency with some of the best technology in all of government and anywhere on the planet.
▶ 1:42:59Mr. Quintenz: We have 10 years of history in the crypto acid environment from , starting with enforcement cases but then wonderfully, moving to innovation with the listing of the first regulated bitcoin futures contract in the world. And the insight that gave the agency over the spot market, through its derivatives market mandate, I think is an extraordinary thing.
▶ 1:43:26Sen. Boozman: Congress recognized 25 years ago that self certification strikes the right balance allowing the commission to prohibit contracts that violate the law while also fostering liquid and efficient markets and market innovation. Can you talk about the importance of self certification?
▶ 1:43:46Mr. Quintenz: Thank you, senator. I believe it was a critical future of the commodity futures modernization act of 2000. Theoretically if you put yourself in the shoes of a regulator, and I have been there, there is not a lot of incentive to improve new products. You bear the downside risk and get none of the benefit of the success.
▶ 1:44:08Mr. Quintenz: It is natural to focus on all of the risks and at the extreme, the precautionary principle approach where you have to prove nothing bad could ever happen before you allow something to happen means it will never happen. That is proved out in the data. In the 70 years before self certification existed.
▶ 1:44:29Mr. Quintenz: Futures contracts when the cftc had to approve new futures contracts, futures exchanges listed 700 products in total. In the 20 years since self certification came online to the commodity futures modernization act, 16,000 new contracts have been listed by exchanges, none of them caused the financial crisis, many were delisted because they didn't develop liquidity but some of them became critical risk management
▶ 1:45:00Mr. Quintenz: Liquidity price discovery markets and that is what I think the benefit is of the self certification.
▶ 1:45:05Sen. Boozman: Very good.
▶ 1:45:09Sen. Klobuchar: I mentioned on the retail customer participation, you are aware because you were at the cftc the derivative markets have historically been used primarily by large sophisticated entities, but recently have been, we have seen increased participation by smaller retail customers, especially the events and digital asset derivative markets.
▶ 1:45:37Sen. Klobuchar: What you think the cftc should do in response to the increasing retail participation and what -- do you think the agency needs to do more to address risks in this area?
▶ 1:45:46Mr. Quintenz: I think it depends on whether there is direct access and whether there is intermediation. There are strong customer protections across both models. All contracts traded by exchanges have to abide by the 23 core principles including things like fair and orderly markets, surveillance, not readily susceptible to manipulation, conflicts of interest that provide markets
▶ 1:46:16Mr. Quintenz: With integrity. There is an extra layer of customer protection when they are intermediated by the fcm community that need to do disclosures associated with potential loss and education and outreach. There are even some exchanges that do go direct to market participants that have those same customer protections listed in their licenses. Those are certainly models we can look at, but I take your point. I would pledge to have an open dialogue around those issues with you.
▶ 1:46:47Sen. Klobuchar: Thank you.
▶ 1:46:50Sen. Boozman: One final thing, and then we will be through I guess. Can you talk about the importance of principles-based regulation? Specifically, how it fosters innovation?
▶ 1:47:04Mr. Quintenz: Thank, Mr. chairman. I mentioned this briefly in my written testimony in my opening statement, I'm a strong believer in the benefit of principles-based regulation for a few reasons. The first is that I believe it allows responsible innovation and allows the marketplace to evolve, to try new things, to be held to a standard of best practices which do continue to evolve on their own.
▶ 1:47:34Mr. Quintenz: It prevents a one-size-fits-all regime that locks in the technology approach or standard approach. In order for it to be done responsibly, there has to be a strong dialogue between the regulator in the marketplace to ensure the regulator understands the different approaches that are out there. I think that is a very valuable exchange of information.
▶ 1:47:57Mr. Quintenz: We don't need to look any further than how wonderful these markets are to understand the importance of principles-based regulation. The cftc oversees the most resilient and liquid and innovative derivative markets in the world and it is my belief that it is because the principles-based framework.
▶ 1:48:18Sen. Boozman: Go ahead.
▶ 1:48:21Sen. Klobuchar: I am good.
▶ 1:48:26Sen. Boozman: Thank you for appearing before the committee. Members, thank you for your participation today and as always for our staff for making all of this happen. The record will remain open for two business days and with that, the hearing is adjourned.