During a House Financial Services Committee hearing prior to the congressional recess, Rep. Bill Huizenga (R-MI) spoke of his disapproval for current federal regulation of digital assets.
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00:00The gentlewoman yields back. The gentleman from Michigan, the vice chair of the full committee, Mr. Huizenga, is recognized for five minutes.
00:06Thank you, Mr. Chairman. I know this is the subcommittee on digital assets, financial technology, and artificial intelligence,
00:12but it feels today like it's the committee of ironies and befuddlements.
00:16First irony is that Gary Gensler, while he was head of the CFTC, declared that anything that was digital was clearly a commodity.
00:25Now, he should know. He's the smartest guy dealing with crypto assets that he knows.
00:30But then again, when he became chair of the SEC, suddenly everything magically turned into a security.
00:35Now, you have to understand, Washington likes to declare things either fish or foul.
00:40We want very clear lines on things. Turns out that crypto assets is actually more of a platypus.
00:46It's got a lot of characteristics, and it depends on where it is as to how it should be regulated.
00:51Mr. Chairman, the second irony in all this is that it seems to me that the Center for American Progress
00:56is rather ironically named, since it doesn't seem very progressive on this.
01:01I've got to tell you, nothing says progress like a, quote, cautious approach that stops short of pushing into new frontiers.
01:09The third thing, Mr. Chair, is that some here on this committee believe it's far better for the general public
01:17and America writ large to do nothing, to sit back and just watch the realities of the world pass us by.
01:27Now, how dumb can we possibly be?
01:30We know that these are issues that we have to address.
01:33Now, I'm going to get to my questions, and I actually changed my question based on our subcommittee ranking member's insinuation
01:41in his opening remarks that the crypto industry was, quote, writing their own rules.
01:48So, Mr. Wareett, Ms. Smith, Mr. Sierra, do you believe that that's the case?
01:57I mean, if you guys are writing your own rules, you're doing a terrible job at it.
02:01Because, Ms. Smith, you mentioned in your comments about a patchwork of regulations that exist across the country.
02:11And if an industry, it just seems to me, if an industry was writing its own rules, you guys would have your act together.
02:16Or are you actually asking us to get our act together?
02:19I'm curious.
02:20Mr. Sierra.
02:22I think this Congress has a real opportunity to pass legislature that will address the core issues that everybody here cares about,
02:30which include consumer protection and the ability of crypto founders and entrepreneurs to be able to keep this technology here at home.
02:38Mr. Smith, I'm going to kind of move on to this a little bit, but feel free to answer that about writing your own rules.
02:47But I'm going to roll it into this.
02:49I mean, the SEC's response to digital assets often have resulted in using enforcement measures against many of the companies that you have worked with,
03:00some 100 in total, I believe.
03:02So, I'm curious.
03:03Can you describe a few of the rulemakings that came out of the Gensler SEC?
03:08And what were their impacts on the digital asset ecosystem?
03:12So, during the Gensler SEC, there were a number of rulemakings that happened to mention digital assets.
03:22So, it was a broader topic.
03:23So, for example, they covered the definition of exchange.
03:27The purpose was to modify the rules with respect to the treasury markets, but they also mentioned digital assets.
03:36And there were implications for DeFi protocols.
03:38That rule was proposed but not finalized.
03:43But had it been finalized, commenters to that rule mentioned that it would have resulted in them going offshore
03:48because DeFi protocols, as the name suggests, do not have a central intermediary that can comply with compliance requirements.
03:56Sticking with you, last week during our debate on stable coins,
04:00I said that Congress and regulators should recognize the unique nature of these innovations
04:06and establish a regulatory framework that targets the activity and not the technology.
04:12Can you describe the importance of Congress using rules for the custody of crypto assets in legislation that it moves?
04:19Thank you for the question.
04:21So, with respect to custody, the rules anticipate that there's physical custody, meaning there's a paper asset.
04:28That is obviously not the case for digital assets.
04:31And so, the rules need to incorporate how you can have good custody, meaning possession or control of an asset that only exists in digital form.
04:41And, Mr. Ware, I have my last 30 seconds here.
04:45You noted in your testimony that your company develops software for blockchain infrastructure and aggregated networks.
04:50Does the importance of the underlying technology, which you described in your testimony, get lost in this kind of debate?
04:57Yeah.
04:58The technology is important.
04:59Self-custody is crucial to decentralized blockchains, decentralized protocols.
05:05It's the entirety of it.
05:08And it would be great if this committee could protect that right to own property
05:14and to control one's own property on-chain.
05:17I yield back.
05:18I yield back.