During a Senate Banking Committee hearing on Wednesday, Sen. Bill Hagerty (R-TN) spoke about the work needed to be done to properly regulate and innovate in crypto.
00:05I really appreciate the leadership that you've demonstrated in this important area.
00:09And I also want to commend you and thank my colleagues here on the committee for your actions to support our recent genius legislation.
00:16Yes, sir.
00:16That provides much-needed regulatory certainty in the area of payment stablecoins that I think we desperately needed.
00:23And I've also been amazed and very pleased in the wake of that to see the energy and the enthusiasm behind market structure legislation.
00:30And I'm very pleased to see this same group of folks here today that are ready to testify to help us with that.
00:38For too long, the lack of intelligible definitions, jurisdiction, and pathways to registration from our regulators have forced digital asset innovation beyond our borders.
00:48One of the saddest things that I heard as I came into the Senate talking to members of the industry with the brilliant people were taking up new jobs and new positions in countries other than our own because they felt they couldn't survive here.
01:02Why is that?
01:04Because in the void of regulatory framework, the SEC and others had stepped into that void and done one of the most pernicious things that we ever see here in Washington,
01:13the so-called enforcement by regulation or regulation by enforcement, I'm sorry.
01:19That creates massive uncertainty that has lent itself to destroying the possibility of America leading in this incredibly innovative sector.
01:27And I'm so pleased to see us moving back in a new direction.
01:32So, Mr. Robinson, I'd like to start with you, if I could.
01:36In your testimony, you discussed the importance of limiting developer liability so that developers can freely build applications here in the United States.
01:44And to be clear for my colleagues, without this sort of limitation, developers could be held legally liable for the actions of third parties with whom they have no relationship.
01:53So, Mr. Robinson, would you talk with us about how you perceive the Senate's role in establishing market structure regulation that would effectively address this policy issue?
02:04Thank you, Senator Haggerty.
02:05Thank you, Senator Haggerty.
02:06This is an issue that's very important to me as a software developer myself, and I care about this a lot, and a lot of my fellow engineers in the industry have been very concerned about the potential for regulatory actions going after software developers just for publishing code.
02:18We think it is very important that the Senate include a protection shielding developers from liability, and in fact, the Blockchain Regulatory Certainty Act, which was adopted in the House as part of the Clarity Act, does address exactly that.
02:31And I would encourage the Senate to include similar language in the bill that they passed.
02:35I appreciate that.
02:37Ms. Mersinger, I'd like to turn to you.
02:39And here, I'd like to talk about the jurisdiction with the CFTC and the SEC, an area that you know a great deal about.
02:46And we're trying to delineate and establish the appropriate regulatory authorities between the two agencies, the CFTC and the SEC.
02:54And I'd just like for you to explain to my colleagues and for this audience today why it's so important that we ensure jurisdictional harmony between these organizations.
03:04Thank you for that question.
03:06To your point about regulation to enforcement, when the only regulatory actions that are occurring are lawsuits and legal settlements, there's no clarity.
03:20And you have a situation where those who want to follow the law and do the right thing, one, are worried to innovate here in the United States, but they also are not sure where to go to follow the rules.
03:34And so we have to have clarity around who's who, where, what is the right regulator and who is overseeing these markets.
03:43And from my experience in the CFTC, one of the things I'll point out is the CFTC has broad anti-manipulation and anti-fraud enforcement authority over commodity spot markets, but they do not have regulatory jurisdiction over those same markets.
03:58So the CFTC could only come in after fraud or manipulation had occurred.
04:05There was no regulatory oversight.
04:07So providing that regulatory framework so that you have a regulator overseeing these activities will prevent, will help prevent, you know, regulation through enforcement.
04:19Because you will have the examiners, you will have the regulators looking at these businesses and ensuring that they're following the laws and the regulations rather than having to come in after something bad has happened and bring enforcement cases.
04:35Got it.
04:35Well, thank you.
04:38Mr. Carlinghouse, I'm going to turn to you with a related question.
04:40We're trying to calibrate an appropriate regulatory framework here for the digital assets arena.
04:48One of the concerns I have is rather than engaging with technologists, with people in the industry who are actually at the cutting edge of innovation, lawmakers, regulators could actually try to force the digital assets markets into outdated regulatory frameworks.
05:02I think that would stifle innovation.
05:04That would put us at a great disadvantage.
05:05And as we think about it, there are certain factors that are unique to the digital assets ecosystem.
05:13And what factors would you emphasize that we focus on as we think about an appropriate regulatory framework moving forward?
05:21Thank you, Senator.
05:22I think there are unique aspects that need to be thoughtful and applied potentially uniquely to any legislation around this.
05:31That said, I do think that where Mr. Mossad and I disagree is that depending upon an SEC and CFTC to work together assumes good faith appointed officials in doing that.
05:46What we have seen previously is the SEC actually sowed confusion in the marketplace.
05:52They took contradictory positions.
05:54Under Chairman Gensler, they took actually contradictory positions in different court cases, which actually created more confusion.
06:00And so you had federal judges saying things like the SEC was being arbitrary and capricious in their application of the law.
06:08You had federal judges saying that they were not following a, quote, faithful allegiance to the law.
06:14And so my concern in depending upon an unelected appointee to make those decisions is that it assumes a good faith actor.
06:22And I think what we saw in this most recent SEC was just a war against the industry at large without a consistent application of that law.
06:32Well, I think we need to put in place a sufficient framework so that we don't have to rely on the goodwill of a particular regulator, but that it's clear to them our intention.
06:41So thank you all.
06:42Appreciate the entire panel being here today.
