During a House Financial Services Committee hearing prior to the congressional recess, Rep. Warren Davidson (R-OH) advocated for protecting self-custody of digital assets.
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00:00The gentleman from Ohio, Mr. Davidson, the chair of the subcommittee of national security, illicit finance, and international financial institutions is now recognized for five minutes.
00:10Thank you, Chairman. I think our witnesses for coming here to talk about the digital assets space today, and I intend to devote my time to talking about digital assets, the subject of today's hearing.
00:20If we've learned anything from the last several Congresses, the next market structure bill must explicitly include a bright-line test so that whether Gary Gensler is looking at it or Warren Davidson is looking at it or someone else is, they know this is intended to be a security or it's intended to be something other than a security.
00:41And the FIT-21 Act did do that, but I hope it does a little more than that, because some things we intend to tokenize securities, and we need to give a path for the SEC to do that and provide guidance for how to tokenize a security.
00:59Some things will be intended to be tokenized commodities, and we need to provide that guidance, and the last bill went a long ways to doing that.
01:07Frankly, the void that I hope we fill is yet another committee of jurisdiction here in Congress is energy and commerce, because some things are really FTC-regulated utility tokens, and they're really different things.
01:20So the idea that you can jam everything into, you know, either this or that, the reality is it's more segmented, just like the real-world assets are more segmented today.
01:31So hopefully we keep making progress on the bill, but I wanted to talk first about one of the most essential things to the entire industry, whether it's meant to be a means of payment, like our stable coin bill, or these other tokens that are out there in the market, self-custody is incredibly important.
01:51So, you know, I'd like to submit three documents for the record.
01:58One is the White House's executive order on digital assets.
02:03Without objection.
02:04The other is an amendment protecting self-custody I offered related to stable coins, and, of course, this relates to stable coins, but I'm going to talk about why similar language is essential for market structure.
02:14And the other is the underlying bill, which is the Keep Your Coins Act, which is broadly applicable.
02:20Without objection.
02:21All right.
02:22So those things, in essence, you know, we must have ironclad protections for self-custody.
02:31We don't have to theorize that people want to wreck the industry.
02:34We're listening to colleagues here.
02:36They spent about 10 hours during the stable coin bill trying to stop us from passing a stable coin bill.
02:42The ranking member opened up, basically, with Elizabeth Warren's anti-crypto army rants about the segment, sector.
02:50And we know that regulator after regulator, as recently as January, tried to make self-custody nearly illegal, like the CFPB's self-custody rule.
02:59So, you know, Mr. Warratt, can you come in on the need for legislation to prevent federal regulators from issuing any rule or regulation that would impair an individual from maintaining custody?
03:13Yes.
03:14Thank you for your question.
03:18Self-custody is at the core of decentralized finance.
03:22It's at the core of decentralized blockchains, and, you know, custodying one's assets is also a core principle of our Constitution, to control and own your property and to not be deprived of life, liberty, or property.
03:38Impairing, as you asked, someone's right to own and send, you know, their own asset.
03:49Digital assets are, you know, at their base form are not commodities or securities.
03:56Both the commodities and securities laws have, you know, frameworks that explain what it takes to make an asset into one of those other categories.
04:06But absent that, they are just property, they're just assets, and I would think that, you know, lawmakers need to balance risks against benefits.
04:19Here, the benefit of owning and controlling one's property significantly, I would argue, outweighs, you know, the risks of possible misuse, i.e., like...
04:31Thank you for that.
04:32I think that's really the tension, and, of course, you know, some of my colleagues, they want, just to keep us safe, the government to be the real custody, and that's the premise behind us, Central Bank Digital Currency.
04:43And everything about transactions becomes permissioned.
04:47And kind of their check-down position is, well, we'll use a third-party institution, and the future they promise is an account-based crypto.
04:56So that's the law, if we don't take action, and we don't overtly protect self-custody, regulators in some future regulatory environment will infringe upon it.
05:07And that's where the word impair is so important versus restrict.
05:11If it just says they shall not restrict it, they can put every condition in the world on it, which effectively bans it.
05:17And that's what a lot of these folks seek.
05:19We have to win this fight.
05:20I yield back.
05:21I yield back.