Chairman Scott Joins Senator Lummis, Bo Hines for Discussion on Digital Asset Market Structure

Welcome everyone. Thank you all for hanging out with us for a few minutes here as we talk about the next iteration of making America the crypto capital of the world. I take that mandate from President Trump as a serious mandate that we will accomplish. We have the great opportunity to see America take back what has always been ours, which is to be the economic powerhouse in the world. And I think the next iteration of our economy includes digital assets in a way that no one could have imagined five years ago. Well, someone did, but it wasn't me. And I want to thank Bo, the executive director for the White House, for coming over and really moderating a conversation about this. But before you start the conversation in earnest, when you think about the success that is potentially in store for not only America but for the world because of the Genius Act signing into law, what would you say to that?

Well, thank you. Let me just say about the chairwoman of our committee on digital assets, Cynthia, thank you for your leadership on such an important topic. I do believe that Bo hit the nail on the head. I wish I had a recorder because what you just said I think is powerful. Revolutionary is what we're talking about with the Genius Act and the next iteration. The market structure I think is incredibly important as we talk through those market principles and look at the Clarity Act. If we get just the Genius Act right, it can have powerful impact. But for the market to function completely, we need both. And that's why I think it's important from my perspective as the guy that will at least be part of the glide path for the market structure to come to fruition. I want to set a timeline, Senator Chairwoman Lummis, of seeing the market structure completed before the end of September. I think that is a realistic expectation. Don't you think so, Chairwoman Lummis?

Well, yes, sir. You're the chairman, and we will do as you wish. We will make sure that we're ready to do that. We put out the guidelines for a framework of the overarching principles in a market structure bill. We had a hearing on it this week. We will take those guidelines and work with legislation that was drafted in the House as well as the Lummis-Gillibrand bill that has been out for four years. And we will sift through the principles of both that adhere to our guiding and overarching principles. We'll have a bill draft that we can hopefully put out before the August recess, then mark it up. Mark it up in September and have it where you want it.

Great. Bo, you have two senators. We often times start talking. Hey, that's okay. Thank you for moderating this really important conversation. So, we'll stop talking and start listening.

I'll just say that there can be no failure to act on market structure. Market structure has to happen in order for America, and I say this sincerely and not simply because it was a campaign promise made, but actually keeping that promise is really helpful for the notion of democratization. It is impossible for us to give greater access to people who grew up as I did in poverty in a single-parent household. Democratization to me means lowering the cost for single moms and for other folks and increasing access. The one thing we can see, I was talking to a group of Kentucky Fried Chicken franchises and they said the Genius Act is like a 3% increase in their profits overnight. And so getting market structure done means that we're also talking about setting the global stage for the innovators of the world to descend upon America because certainty and predictability is the path to greatness in any business. Every single business needs certainty and they need predictability. Under the Biden administration, they had the exact opposite. The digital asset industry would spend a lot of money getting a lawyer to present this is what will work in the market here in America just to have Gensler come back and poo-poo on it so to speak and go in an opposite direction. Enforcement actions is not the way to create predictability in the marketplace. And I'm very thankful that we now have an administration not only committed to America being the crypto capital of the world, but giving innovators and consumers the kind of certainty and predictability that will lead to this nation being the leader. Senator Lummis.

This asset class has so much potential as part of a diversified allocation for individual portfolios, for retirement funds, for endowment funds, and for a strategic reserve in some cases depending on the asset. Having digital money, which is what certainly Bitcoin is, is in keeping with where we are in our 21st-century trajectory. It started with the internet. The NSA wanted to keep the internet proprietary to government. And finally, individuals, the cypherpunks, the cryptographers, won through the courts the right to use it in the private sector by delineating cryptography as protected free speech. That's what enabled digital assets to exist. And now we're at the next place where we need to enable digital assets to be used all over the world to get money to each other faster and cheaper. It's the same with the convenience stores. They were required to stay open during COVID because they were deemed an essential service. And yet their profit margins are minuscule. And this can be a game-changer for convenience stores and grocery stores and businesses that have very small profit margins. It allows them to get money back into purchasing more merchandise faster and cheaper for everyone. It helps the consumer. It helps the business person. And interestingly, stablecoins specifically because they are 100% US dollar-backed, are backed by US treasuries and one of the 20 biggest holders of treasuries in the world currently is a stablecoin company and we will see more stablecoin businesses come into that top 20. In doing that, that creates a stronger, more robust market for US treasuries and helps once again assure, as Bo said, that the US dollar continues to dominate worldwide.

You know, one of the things I thought about as Cynthia was talking was the importance of really pausing for a second and focusing on what you said which was revolutionary. If the Genius Act requires backing of every dollar in stablecoins with a dollar in reserves, our treasuries, two trillion dollars is the number that Bill Hagerty mentioned, it could be an explosive opportunity. Number one. Number two, I saw Bill Pulte over at the FHFA suggested that he's going to lead in making sure that as you're looking for a home, the digital asset portfolio that you have, specifically bitcoins, can be used as a part of what helps you determine your creditworthiness for home ownership. So, we're talking about multiple steps in the right direction. And that's why I wanted you to repeat what you said about the revolutionary opportunity that we're discussing today. This is not just another piece of legislation. This is not just another step in the right direction. This is actually a revolution that could happen economically in our country.

Yeah, you first. I'm happy to jump in here. We've tried to find that sweet spot legislatively over the last few years. One way is to create clarity between the SEC's jurisdiction and the Commodity Futures Trading Commission jurisdiction over what is a security and what is a commodity. That way the providers of innovation know where to go for regulation. And then once that is determined we want to provide clarity within the regulatory framework so that there is an opportunity to quickly, clearly, and without threat of protracted litigation get your product available to consumers. Those are the ultimate goals of the bills we're proposing. We have discussed long and hard the notion of ancillary assets which is sort of between the two when it's really difficult to tell what is a security, what is a commodity. The great thing about having had a draft out on this for years is the industry's had a chance to vet this over and over. Then we saw the House last year pass FIT21, which showed that the House can pass market structure legislation on a bipartisan basis. Now they have the institutional memory, the muscle memory about how to pass market structure legislation. We had lost all muscle memory in the Senate about how to pass legislation out of the banking committee. As the chairman knows, it had been eight years since the banking committee brought a piece of legislation out of committee and to the floor, and that was the Genius Act. It was a monumental challenge. And then after we got it out of committee and had to further negotiate, we lost a cloture vote for crying out loud. So this was a very unusual birthing, as my old friend Al Simpson used to say. It's like giving dry birth to a porcupine. And that's what it was. It was monumentally difficult but we accomplished it because we wouldn't give up.

Yeah. And we're not going to give up on market structure. We're going to succeed on market structure. And our deadline of September 30th has been set and we're going to accomplish it. Number one. Number two, I think innovation always happens before regulation. The market is always ahead of government. To do it backwards is frankly to destroy innovation wherever you have overregulation. And what we saw in the Biden administration really was that death so to speak. It was this inability to figure out certainty and predictability. I oftentimes go back to when I was an entrepreneur, running insurance agencies and a little real estate company. You think about what's possible in the marketplace. You go do it and then you say, I wonder what this means legally. And then you figure it out. From my perspective, innovation always precedes regulation. Then regulation comes up and because of the regulatory environment that's predictable, what we see is a more nuanced marketplace where the players decide, based on the rules of the road that we understand, we're going to try A, B, and C. Sometimes A loses, B wins. And then you go back to B that won and start innovating there again. And then the regulatory environment comes back and says, we did not contemplate this because the market is smarter than the government, and then they start regulating again and that leads to another version of innovation. The dynamic nature of the marketplace is that it will continue to innovate when the rules are certain. When the rules are not certain, the innovators go somewhere else and figure it out.