🔥SENATE CRYPTO HEARING 🔥BRAD GARLINGHOUSE🔥

What's up everyone? How are you all doing this happy Wednesday? The hearing is at 10:15. That's from Alamosquez asking. And another one of you asked, "Hey, when is Brad going to be testifying?" He's going to be testifying early and often today. I've even got Brad's opening statement up on the screen where yes, he does mention XRP. He says, "Ripple leverages the XRP ledger, decentralized battle tested open source blockchain, and its native digital asset XRP to facilitate payments. XRP is built to enable fast, low-cost, and highly scalable transaction." So, yes, Brad will be mentioning XRP. I'm talking about outside of his initial statement. So, there we go.

Man, Rolling Mountain says, "How are you feeling, Claus?" I'm feeling pretty good today. I woke up and I had a whole bunch of alerts on my phone. And the reason I had alerts on my phone is because I started seeing some volume tie in with the Pumperoni. Lowercase Pumperoni. Now, here's the deal, everyone. We got to that 240 mark, but then we got rejected, but we might come back. We just got to see what happens.

Yo, and for real, can someone help me out here? I'm looking at the chat. Okay. And I see a bunch of people and it looks like they have crowns with numbers on them. I see number twos, number threes. I see purple crowns, gray crowns. Can someone tell me what the crowns are? I have never seen that in the chat before. I have no idea what that is. I'm even curious about it.

Dan Russell says, "So, this is the day all those XRP YouTubers says it'll hit 10,000." It's not going to hit 10,000 today. It's just not. Let's just be realistic. I mean, look, if we stay north of 230, it's a good freaking day. Doran Butler's hanging out with us. Says, "My face melted. I can't see." Oh, Yanni Boy says it's most active members. Oh, that's kind of cool. I didn't know that. I've never seen the crown thing in the chat before. So, maybe this is something new with a little bit of YouTuber action. Ah, pretty pretty cool.

Yeah, we got a lot of you watching. Make sure you hit the little thumbs up thingy right there. Here we've got a little XRP up on the screen. The Senate hearing. Oh, Lizzy Warren. Oh, yeah. Elizabeth Warren is here. Yeah, we're going to have to deal with her. We're going to have to deal with Lummis. Hopefully, it's not too bad. But that's going to start at 10:15 today.

The people that are going to be talking today is you got Summer Mersinger, Jonathan Levin, Dan Robinson, Brad Garlinghouse, and Timothy Massad, Richard Painter as well. So you got a pretty diverse panel right there. Overall in the crypto markets, you're seeing green up on the screen. There you go. What else do I got? It's like Patreon but through YouTube. So I guess the crown is the most active people in chat. That's pretty freaking cool. Everyone, Artisan Restoration says you're the best, Claus. No, I'm not the best. I'm improving. I think we can all agree that there are times that I make mistakes. There are things that I need to get better at, but I'm constantly improving and working on it. There we go. I like that.

Krishna says, "Yeah, the crown is new. I think it depends on the interaction." Yeah, I think that's what it is. I think it's whoever has the crown. It's like the most active in chat is maybe what that is. I don't know. Like I've never seen this before, so it's kind of cool. Awesome, awesome, awesome. Is the meeting going to be live streamed? Yes, it is everyone. I've got it up on the screen right now. I am just waiting for them to upload theirs. They usually upload it like right before it goes live. By the way, the Senate Banking, Housing, and Urban Affairs does have their own page, too. So, you could check it out if you want.

Radiant Rick says, "I swear at this point your videos move the market." I hope not. I hope not. I'm just trying to be a news guy, man. I'm not trying to move markets. I'm just trying to give y'all information as timely and accurate as possible. And just throwing it out there, I admit this is a ton of fun. If you wonder like if I genuinely like this, I freaking do. Like I freaking love this. I'm getting ready to go on vacation soon. Like it's just me. Actually I'm taking my mom and everyone else in my family is staying here. But I'm taking my mom on vacation soon. And even while I'm taking my mom on vacation, I'm going to be bringing you the news. Why am I going to be bringing you the news? Because like I like doing this. Like this for me is a lot of fun. I like doing the videos. I like interacting. I like hanging out with chat. It is. This is a lot of fun.

Krishna dropping support on the channel. Everyone give Krishna a big thank you. Dropping some roses. There you go. My German background coming through. Says Brad is going to use this to pimp his hand powdered up to smack the wicked witch of West Warren. Oh, dude. We're going to have to deal with Warren and Lummis today. All right. Just throwing it out there. We're gonna do it. All right.

Dan Russell says, "Claus, get into politics. Run for election. The world needs more men like you." I have been honestly talking about it with my wife. I don't want to go too deep into it, but we've talked about it and it's a possibility for 2026. It's a lot of it depends on my health. For those of you that don't know, I'm having a little bit of health issues right now. I'm set to see the specialist in about 3 weeks. So, you know, if my health turns around, I think I could handle some of that kind of stuff. It's just right now I just got to make sure I take care of myself. So, just throwing it out there. There we go. Other background, please. You got it. I'll put the email back up. No one wants to see Tommy Lizzy up on the screen.

Duck Scarif Effect says, "Lots of green on your screen. Will I take profits today? Maybe still believing in the long." Yeah, totally a believer in the long, but I understand the profit taking in the short term, right? No one ever went broke taking profits. I'm a firm believer in two bags. I have a long-term that I always add to, and this is for everything, not just crypto. Like, I do it with gold. I do it with stocks and stuff like that. I have a long-term bag that I add to and then I have my short-term one where like I play, you know, pumps and dumps and stuff like that. So, I'm always taking profit to make sure that like I'm, you know, putting green in my pocket. But my longs I don't touch.

Ply Ply is dropping support on the channel. Says, "Stack and relax." Everyone give Ply Ply a big thank you. I appreciate that everyone. I really do. I appreciate that one. Christian is hanging out. Says, "Claus is the most genuine person in the space. No BS, no hope, just straight honesty. If you like it or not, that's my angle. My angle is to give you the news, good, bad, happy, or sad. Now, that being said, some of the news I bring isn't the best. Some of the concern I have is look at what we got up on the screen. XRP did hit 240 this morning. My phone was blowing up like crazy. But the problem is now we're starting to pull back. And I was kind of hoping that this price action would kind of carry us into the hearing and that like we would see it kind of transition through, but it's kind of falling apart before, but we're going to keep an eye on it. Don't worry about that.

Play the pump on the dump contract, huddle for long. Yeah, that's seriously how I do it. I have two bags. Short-term bag and long-term bag. My short-term bag, dude, I play pumps and dumps all the time. That's just how it is, right? Long-term bag, I don't touch. I just add to it until I feel like I have enough and then I move to like my next thing and I add to that until I feel I have enough. Justin a truck says, "Oh, I like that name. That rings very well." Says, "Best streamer. Thanks for doing live." Oh, yeah. No problem. I'm super happy to do a live. In about 15 minutes, we should be getting them to fire up their hearing. When they do, I will bring that information to you. Like I said, I'm going to have all of this stuff set up in the description below. We're going to be good to go on that. We'll do sound checks and all that kind of stuff. Yeah. Other than that, questions, comments, we got about 10-12 minutes until it comes live.

I do have Brad's opening statement right here. Pretty good opening statement. I'm not going to read into anything too crazy about it right now, but Brad's opening statement, if you look at it. Okay, so in the description box, what you're going to find is you're going to find this right at the bottom is everyone's opening statements. It's all linked in the description below. All right, everyone. So, if you want to read the opening statement, you're welcome to. Oh, Trix dropping support on the channel from across the pond. Trick says, "Get sunscreen for your holiday factor 69." Okay, so for those of you that don't know and everyone give Trick a big thank you for dropping support on the channel. So I live in South Carolina. It is hot as balls out here. That being said, I am going on vacation here super super super soon. And where I'm going on vacation is not going to be as hot, which is nice. So I will definitely need sunscreen because I'm going to go to a very super awesome place. So yes, Trick, I will be getting sunscreen. SPF factor 69.

Axelot Life Aquatics dropping support on the channel says, "Rage out." A little bit of gamer rage right there. Love it. I got to admit, I've been playing Tarkov lately. There's got to be a reset or I'm sorry, the wipe is I believe happening today. So, I have been playing my Tarkov, everyone. Just throwing it out there. I don't know if I have any Tarkov fans in the house, but I've been playing, dude. I've been wiping. I got Tagilla yesterday. Just throwing it out there. I had a 45 rounder. I stuck it in the stomach and I just pulled that action on him. So, Aurora says, "Will Brad mention XRP or will be all about the crypto market?" Well, right now 69% of you, nice percentage, by the way, 69% of you says, "You know what? Brad is going to specifically mention XRP." Now, he's going to mention it in his opening statement. I've got it right here. But outside of his opening statement, will he mention it? And I'm thinking he will. I think he has to. I think he has to.

Braden Lee says, "What kind of bikes you got?" I got an Orbea. Oh. Ooh. Well done, Orbea. I'm a Trek guy, as you can see. I've got two Treks. I've got one right there and I've got one right there. Domane. These are both Domane. Carbon. That's how I do it, man. Just throwing it on out there. Woods only, right? Yes, Jack. Jack O'Neal. I've been playing woods only except for the last two days I've been playing interchange only. And then last night because like I know the wipe was happening, I went into factory and I was just spraying and praying. Just throwing it out there. Just throwing it out there. And my name for when I play Tarkov is Krypto with Claus. So if you shoot me or if I go after you then just throwing it out there, you know who it is cuz it's Krypto with Claus. So just throwing it out there. Yeah, I love the Trek bikes. They've been really good. A lot of good parts and I'm a big like a big like duathlon type person. I haven't been able to do one because like I've been sick lately, but like oh I love it. I've been itching to go back as soon as they give me the okay to train again. Trust me, I am going to be freaking training again because I am just I'm getting like I'm getting anxious. It's been I haven't been able to train in now oh god mid-May they had me stop completely. I'm only allowed to take walks now. I can't run. I can't do anything stressful, anything strenuous. I'm supposed to be chilling the f out. So just throwing it out there.

Let's see. Matt says, "Got any new slabs?" Yes, I ordered a couple. They're Pokemon. Just hear me out. I ordered a couple. I haven't gotten them yet. I should be getting them hopefully before I go on vacation. Just throwing it out there. Predicting an RLUSD fest. Yeah, RLUSD got some good news today. By the way, a little BNY custody action and we've got the hearing set to come in in about 8 minutes. Now let's take a look here at the price of those candlesticks. This is what I'm going to be watching very, very heavily today is the price action of XRP and if it can hold and if we get some pump during this hearing. Do we see something that comes out of this that all of a sudden the markets are like, "Yo, we want to get in on this." Doran Butler dropping support on the channel. Everyone give Doran a big thank you. Love it. Everyone, seriously, the support has been amazing. Thank you everyone for that.

Anthony Cardell says, "I've got a BMC SLR7. Love that bike." Oh, wow. Nice. Well done. Well done. Yeah, I'm a big Trek fan. Huge Trek fan. That's all my bikes have been Trek. I just I just love the parts. Their customer service is freaking awesome. I just I love it, man. I just I love it. Ben Q says, "Pokemon is investing in a whole different world." It's crazy. Just got 151 delivered. Yeah, some of these boxes, man, are going for sick money, dude. Sick sick money. But you just got to be careful because of the bubble. You know what I mean? Like that's just the problem. Schema Citizen says, "When does this meeting start?" The meeting starts at 10:15. They sometimes do run a couple minutes late, but don't worry. I will make sure that I got us all covered for that. As soon as it goes live, we'll switch over to the screen and be ready to go.

Dan Russell says, "Hey Claus, where can we pick up a Brad Garlinghouse rookie PSA?" Okay, now that being said, I shit you not. I almost bought a Jerome Powell PSA 10 slab. There are actually Jerome Powell PSA slabs out there. I shit you not. Seriously, if you go on eBay and you look it up, there are card makers that make political cards and important people cards. Seriously, they have them out there. Just throwing it out there. Let's see what else we got for you. Yeah, the Treks do last forever. They really do. They really, really last a long time. The thing that I like too is I like rim brakes. Just throwing it out there. I'm a big fan of rim brakes. So, I run all the ultralights and I run the race light rims. That's just throwing it out there. Just throwing it out there. That's how I do it. All right. I'm just being open and honest. I like my Trek bikes, you know? I'm one of those kind of people.

XRP price up on the screen. Earlier today, we hit 240 and 39 up on the candlestick. We're since pulling back a little bit. Right now, sitting at 23653. Going to keep an eye on this during the stream. And this is going to be a big one. Okay, we're going to keep an eye on it. See if the momentum continues. Flagrantly obtuse. Oh, I like that. A little bit of geometry in for this morning. Says, "Just want to say thank you for all you do. In your opinion, does RLUSD really benefit XRP at all? The burn rate is insignificant. I'm worried about implications of the injunction not being dropped. How will XRP be used in the US?" That's a really good question because you're right. The burn rate is insignificant with XRP because it takes hardly any XRP to move money. So, that's a good thing and a bad thing, right? Because it's super cheap to move money with XRP and it hardly uses any of it, right? The problem we got though is since it's super cheap to move a lot of money with XRP, you don't make money on the burn rate. What we really need more than anything is some juicy speculative news that translates into either like strategic reserve buying news or people using XRP for settlement. People using XRP for payment. Something big coming out of XRP or maybe like a DApp that all of a sudden everyone is like, "Yo, this is the DApp that uses XRP big time." We've seen out there that speculation is honestly the way of the land, right? Let's just be real here. Crypto speculation corridor is where it's at. The problem we got though is we need to get past speculation and we need to go into usage. And that's a big problem right now. Now, that being said, there's about a billion dollars worth of money committed to buying XRP as a strategic reserve asset. That is big. That is direct buying of XRP. That's the juicy news we all like to hear. But you're going to need a hell of a lot more than that because think about it. What is $1 billion worth of XRP? Like here, let's get our calculator out. Let's just do some easy easy math, right? So, let's put 1 billion up on the screen. Okay, so we got 1 billion up on the screen. Divide it by the price right now, 2.36. So, that's only 423 million XRP. That's not a lot, right? I mean, think about it. 423 million XRP is nothing. Especially when the volume of XRP is 4 billion. That's only 10% of the daily volume. So, that being said, you get what I'm saying with that. It's where we need that speculation to turn into what? Usage and utility. That's the big one.

Let's see. DJ Chrome, or D Chrome J. Gosh, sorry, I can't talk this morning. So, sometimes I feel like Ripple was using XRP to fund them when they got RLUSD. All situated XRP won't be used. Yeah, of course, these companies are using XRP to fund it. Stellar uses XLM to fund it. Tron uses TRX to fund it. Cardano Foundation uses ADA to fund it. All these companies use it. Sailor uses their stock right from strategy to fund their thing. Everyone uses it. That's not the big deal. The question you have to ask yourself though is are they using it the best, right? Are they using their money to the best of their ability to proliferate things? That's the whole thing, man. Andrew Butcher hanging out with this channel member. Thank you to all the channel members, by the way. Says, "Just got here. Come on for Brad. Give us the goods. Thanks, Claus, for the feed." You're very, very welcome. Dan Russell says, "My only PSA 10 is a Russell Wilson. Need lots to get graded." Yeah, I mean, grading is expensive though. Let's just be real here. And they've been stingy lately. Just throwing it out there.

Up on the screen right now is a lot of green. The Senate is really hanging out with us right now. Hopefully in two minutes they're going to be firing it up. I'm just waiting for them to put their stream action up on the screen. The thing with the Senate, these subcommittees is sometimes they don't run on time. So, you know, I'll help you out with that. Hey, buddy. How's it going? I got my doggy here with me. And got this up on the screen. They've got a little bit of action going on. Let me. Here we go. I've got this coming up right here. Let me just fix my windows super fast. As soon as that goes live, I'll make sure I switch to their feed. Flagrantly follows up with us dropping more support. Thank you so much for that. Says speculation is rough. Utility is needed. Even then, if XRP is used, how much could that really increase the price significantly? It can change a lot. I mean, look at what the election did for XRP. That shows you the optimism that's there. That shows you that there are tons of people out there that believe in the future of crypto. We just need like we just need the regs, man. Like seriously, we need the regs. And that's what you saw in the November pumperoni was the markets telling us, look, when regs come in, we think we can make something juicy happen. And that's the big takeaway from all this. A lot of companies don't want to buy XRP. Why? Because there's no regs. I get Torres, oh, XRP itself is not a security, but you got other judges out there that are like, look, we don't give a shit what Torres says. You've got other courts out there. In California, there's a case where the judge specifically said XRP is a security in this instance. So, what you really need is regs. And the reason why BTC and ETH are in all of those ETFs is because they're viewed as a commodity. So, if all of a sudden we get some new regs here, right, then you start seeing where companies can get into it. Then you can start looking at it and going, "Okay, well, wait a minute. Now we're not just talking about speculation of usage, speculation of regs. Now we're actually getting the regs and companies feel comfortable buying it because like how would you feel as a company, right? Let's say you wanted to buy a billion dollars worth of XRP, but then all of a sudden we get a new president in like 3 years and the new president appoints people that are anti-crypto. Now all of a sudden your billion dollar investment, what if it gets wiped, right? Like you get like another Gensler person in and all of a sudden the price tanks. Now your billion dollar investment is worth what everyone? Way way less. So that's where like you have a lot of issues where people are like yo yo yo we need the regs. We need them to go through Congress. Executive orders suck because the next president can do their own executive order, cancel them, override them, etc. That's why we need it through Congress and that's what businesses are waiting for. There you go.

Let's see what else do we got for us today. They should be starting up any minute now. They've got their little thingy up on the screen. I'm just waiting for them right now. Like I said, the Senate isn't, how do I put this politely? They're not on time like your guy is right here. I'm usually pretty early. I was hanging out with the chat for like 25 minutes before the video even started. So, just throwing it out there. Northern Redneck says, "XRP was already ruled as a currency." But the problem is you got some players saying it's a currency, some players saying this, some players saying that. You need something concrete. Irrelevant One dropping support on the channel says with the implementation of web 3, it seems the market is about to reward a group of early investors that were able to identify a paradigm shift way ahead of the rest of the population. I totally agree with that. It seems like the creators of crypto and what they saw for decentralization are going to be the ultimate ultimate ultimate winners here. But that's how it is with everyone, right? The first people that get into it that are willing to take the risk are the ones that get rewarded the most. But remember though, they're also the ones that get pounded the most. They're also the ones that had to sit through horrible price action. You know what I'm saying? So, like that's kind of something you have to keep in mind is yes, you're right. The people that get in earliest are usually the ones that make the action on it, but they're also the ones that get beat up the most. You know what I mean? Jake and Jur says, "I wouldn't mind seeing Brad scalping a Warren." Well, he wouldn't be scalping because she's a fake Native American. Just throwing it out there. Gosh. What is she 1% Native American, 100% stupid? Yeah, she's. Oh, Lizzy Warren. Just waiting for them to come on live.

90 seconds. The ranking member's coming from the. Oh, I just heard an announcement. I think they said in 90 seconds they're going to be firing it up. I just I don't know if you heard that come across. They said in 90 seconds we should be able to have this start here. Obviously, the Senate's late. They suck. I mean, when is government ever on time, right? I mean, let's be honest here. Come on now. When is the government ever on time? So we should be able to fire it up any moment. And again, I'm going to be keeping an eye on the price. I'm going to be getting very close. Gerander dropping support on the channel. Everyone give Grinder a big thank you as well. Says, "I simply just like the token." Well done. There's no harm with that as well. We all have our own things. What got you into XRP initially? Thoughts on HBAR, XDC? What got me into XRP is again the idea of moving money. I'm kind of into this whole thing where I'm like into the tech and money part of it, like the global finance money part of it. And what I really really really like about the idea of XRP is I like the idea that it's like a new version of money and it matches what we do. I like the idea that the market is open 365 24/7 because the world moves 365 24/7. Remember when Israel and Iran had their thing going on? Yeah, we were able to trade that live. You know who couldn't trade it live? The stock market.

Thank you for being here. We'll go and get this market structure hearing started. I want to begin by celebrating a significant win for the American people. Just a few weeks ago, the Senate passed the bipartisan Genius Act, the soon-to-be first federal framework for payment stablecoins. Genius is the first step towards revolutionizing the financial system and updating our payment systems and will secure US global dollar dominance for decades and decades to come. It's also a win for consumer protection and for national security. But passing Genius is more than just a legislative win. It is a testament to what's possible when Congress works together and puts principles before partisan politics. We can deliver actual results for the American people. From day one, I've promised under my leadership here at the banking committee that we would return to what we call regular order and deliver real results for the American people. With the Genius Act, we did just that. And now we have an opportunity and a chance to build on that success. Today's hearing is the first full committee hearing on digital assets. This is a crucial step toward developing a comprehensive framework that gives innovators the clarity they need and gives investors the protections they deserve. Because make no mistake, blockchain technology and digital assets are not going away. They are here to stay. The question we should ask ourselves is whether the United States will lead in shaping the future of digital finance or whether we'll let other countries like Singapore and the UAE set the standards while American jobs and innovation leaves our shores. Unfortunately, the Biden administration failed to meet the moment. Instead of clear rules, we saw an enforcement-first approach that punished innovation and created a legal minefield for entrepreneurs. However, the Trump administration understands the importance of innovation, opportunity, and keeping American talent on American soil. It's time to get back to that pro-growth, pro-America first mindset. Here's the reality. The market, not Washington, should decide what works. Our job is to set clear, light-touch guardrails to protect investors, stop fraud, and allow responsible innovation to flourish. But instead, regulators under the Biden administration have sent mixed messages, forcing companies to spend millions and millions of dollars just to guess at what's legal. In fact, we've seen agencies like the SEC and the CFTC contradict each other while the American people are left just to guess and frankly left behind. That confusion has consequences. Innovation is leaving, jobs are leaving, and the global competitors are filling that vacuum. That's why the Senate Banking Committee Republicans have put forward clear principles for market structure legislation. Principles that recognize the need to clarify and clearly define what is a commodity, what is a security, and how digital assets can trade and be custodied in a way that fosters innovation while protecting investors. We don't need more roadblocks. We need rules that actually work. That means legislation that will number one clearly define which tokens are securities. Two, supports modern trading infrastructure. Three, ensures appropriate illicit finance protections are in place. And four, protects investors while fostering innovation. And let's set the record straight, crypto isn't lawless, it's traceable. In fact, crypto companies are helping law enforcement track illicit activity with greater precision than traditional finance allows. The data shows that more illegal activity still happens with cash than with crypto. Today, we'll hear from a strong panel about what's working, what's broken, and what reforms are needed. This is not about scoring political points. It is about protecting investors, rewarding innovation, and ensuring that the next generation of financial technology is made in America. Let's seize this opportunity together and deliver clarity, consistency, and leadership the American people deserve. Thank you to our witnesses for participating in today's hearing. Such a very important hearing, and I look forward to your discussion. Ranking member Warren.

Thank you, Mr. Chairman. And I want to start with an apology. I'm going to be bouncing in and out. This is also the markup of the National Defense Authorization Act and we are in live rewriting of the bill and so I'm going to have to spend a lot of time over there and I appreciate the chairman's and the rest of the committee's indulgence here. You know, I want to thank you for having this hearing today. I have been calling for stronger rules and enforcement in the crypto market for many years now. The crypto market has grown 15-fold in just the last five years. It's now at about $3 trillion at least in 2024 where we've got the data. While growth in the market may unlock new opportunities for innovation, risks to investors, our financial system and our national security have also increased at the same time. Consider some recent data. According to the FBI, Americans lost more than $9 billion to cryptocurrency fraud last year. And it's the trend lines that are particularly concerning. It's a 66% increase from the year before. According to Chainalysis, North Korean hackers stole a record $1.3 billion from crypto platforms in 2024 and then turned around and topped it in just a single heist with a $1.5 billion heist earlier this year. According to TRM Labs, quote, terrorist organizations demonstrated increased sophistication in their use of cryptocurrency, turning to unhosted wallets, mixers, and privacy coins like Monero. We need a crypto regulatory framework that reduces these risks. But I am concerned that what my Republican colleagues are aiming for is another industry handout that gives the crypto lobby exactly its wish list. The blessing of our government's approval combined with crypto rules that are weaker than the rules that every other financial actor must follow. The crypto industry may be calling the shots for Republicans, but nobody wants weak crypto rules more than the president of the United States. A majority of President Trump's wealth, as much as $7 billion worth, is now based in crypto. From issuing his own stablecoin to issuing his own memecoin to owning a Bitcoin mining company and to controlling a huge portfolio of crypto investments. Again, according to Chainalysis, the president and his associates pocketed more than $320 million in fees alone from the Trump memecoin, while the majority of retail investors who bought that same token actually lost money. Now, if we're going to provide rules of the road for crypto, we need to shut down the superhighway for presidential corruption. At the same time, we need crypto legislation that will strengthen our financial system, not make it worse. Here are principles that I think should guide our work. First, new crypto rules shouldn't open a back door to destroy the securities laws that have served as the bedrock of our capital markets for nearly a hundred years. I'm particularly worried here because some recent proposals, including the Clarity Act that the House is voting on this week or next week, include language that would allow non-crypto companies to tokenize their assets in order to evade SEC regulations. Think for just a minute about what that means. Under the House bill, a publicly traded company like Meta or Tesla could simply decide to put its stock on the blockchain and poof, it would escape all SEC regulation. That is a serious problem for our country. Second, crypto investors should have the same protection from getting scammed or getting cheated as investors in any other asset. It doesn't have to be bigger, but it should be the same. For example, there is no reason that the rules prohibiting stock exchanges from simultaneously serving as brokers and giving preferential treatment to their own trades over their customers. We have rules against that elsewhere. Those same rules should apply to the crypto market, too. Third, ensure that turmoil in the crypto market doesn't infect our traditional financial system. And that means making sure that taxpayers are not on the hook for backstopping risky crypto bets and that crypto exchanges, crypto dealers, and other intermediaries face strong capital liquidity and risk-management safeguards so they can meet their obligations to consumers and counterparties even in times of market stress. Fourth, counter the threat of illicit finance with common sense rules to fight crime and protect our national security. Crypto service providers that act as financial institutions must be required to implement anti-money laundering programs. Republicans refused to strengthen AML rules and close sanctions loopholes in the Genius Act. And their claim was that they would deal with this in the crypto market structure bill. Well, this is it. No more kicking the can down the road. Now is the time to solve that problem. And finally, if Congress is going to ratify a sweeping crypto regulatory regime, it is critical to shut down the president's crypto-corruption. This means prohibiting public officials, including the president of the United States, prohibiting public officials from issuing, sponsoring, or profiting from crypto tokens. I'm looking forward to working with my colleagues to get this done the right way. Thank you, Mr. Chairman.

Yes, ma'am. Thank you, Senator Warren. We will now move to witness testimony. Today we have six witnesses before us. Our first witness is the honorable Summer Mersinger, CEO of Blockchain Association. Ms. Mersinger, you now have five minutes.

Thank you, Chairman Scott, Ranking Member Warren, and members of the committee. Thank you for the opportunity to speak with you today. My name is Summer Mersinger, and I'm the CEO of Blockchain Association. We're the leading collective voice of the digital asset industry in the United States, representing more than 130 of the most innovative job creators and stakeholders in the blockchain ecosystem. Our members, many of whom are startups and small businesses, are building the next generation of the internet and a new wave of finance here in the United States. From software developers and infrastructure providers to investment firms and trading platforms, we are proud to advocate for the responsible growth of this transformative technology. I'm here today to deliver a unified message from our industry. The United States urgently needs clear, comprehensive, and carefully designed rules for digital assets. Without thoughtfully crafted rules for the road, we risk stifling innovation, leaving American consumers without proper safeguards and protections, and ceding leadership in a sector that will define the future of global finance and technology. Regulating the industry with existing laws has created ambiguity, stifling American innovation and driving entrepreneurs to jurisdictions with clear legal frameworks. While jurisdictions like the EU, the UK, Japan, and Singapore are implementing bespoke digital asset frameworks, the United States is falling behind. It's not a matter of whether to regulate, it's how. We need bipartisan legislation that provides clarity, encourages responsible innovation, and reinforces America's role as a global leader in financial innovation. To guide that effort, Blockchain Association has put forward 12 principles that we believe should form the foundation of any durable market structure legislation. Let me highlight a few key themes of our principles, many of which are similar to and align with the Senate Banking Committee crypto market structure principles released recently by Chairman Scott, Senators Lummis, and others. First, we need a functional and modern framework tailored to the realities of the blockchain ecosystem. This space includes not just traditional financial intermediaries, but also software developers, validators, and other participants who don't fit neatly into 20th century regulatory categories. Second, we must recognize that digital assets are not inherently securities. Much of the current confusion stems from attempting to apply the 1946 Howey test to this technology. Code is not a security. Third, there must be a clear, workable path for platforms to register and operate. Right now, no such path exists. Fourth, consumer protections are essential. Our industry fully supports consumer safeguards such as secure custody of customer funds, detailed disclosures, bans on market manipulation, and robust oversight. These are not regulatory burdens. They are the foundation of trust and resilience. Finally, we must view establishing a federal regulatory framework as a national priority. Digital assets and blockchain technology are revolutionizing financial services, supply chains, and digital identity. The country that leads on this policy will set global norms and unlock enormous economic and strategic benefits. The United States should be that leader. And this is our moment to lead. Blockchain Association and its members are not asking for a world without rules. We're asking for clear rules. Rules that protect consumers, support innovation, and ensure that the next generation of the internet is built on American values. We urge this committee to seize this historic opportunity and pass meaningful bipartisan market structure legislation this year. We stand ready to be a resource in this endeavor. Thank you, and I look forward to your questions.

Thank you, Ms. Mersinger. We will now turn to Jonathan Levin, CEO of Chainalysis.

Chairman Scott, Ranking Member Warren, and members of the committee, thank you for the opportunity to be back here to testify. I'm Jonathan Levin, co-founder and CEO of Chainalysis, the blockchain data company. We maintain the largest database of blockchain intelligence, which powers prevention, investigation, and disruption of illicit activity on the blockchain. We serve over 1,500 clients worldwide, including the largest financial institutions, fintechs, and decentralized applications. We also support over 350 public sector agencies with tools, data, and services to fight illicit activity. Over the last 10 years of Chainalysis, we have partnered with law enforcement and industry to disrupt some of the largest threats to our national security and public safety. We have proudly helped the US government seize over $12.4 billion of criminal proceeds. These cases have included taking down the largest online drug marketplaces, seizing funds from Hezbollah and Hamas, dismantling the largest child abuse

material websites and tackling the latest pig butchering campaigns. The power of our technology combined with the authorities of law enforcement and the industry partnership have proven to be a more effective disruptor of illicit activity than anything seen before in traditional finance. Our mission at Chainalysis is to build trust in blockchains. All forms of value will be transferred using this technology. We are here to prevent abuse and pave the way for all people, businesses, and governments to leverage its potential. The United States can be the major beneficiary if we get the policy framework right and allow regulators to adapt and change with the pace of the technology. I have three policy insights that I want to share today with the committee. First, the blockchain introduces a fundamentally new model for financial oversight. We often hear the phrase in these rooms, same activity, same risk, same regulatory outcome. But the unprecedented visibility offered by the public blockchain has to be factored into the assessment of both activity and risk. With the right tools, the public ledger becomes a powerful resource for market participants, regulators, and law enforcement to protect financial integrity. The consideration of different types of activity and risks should first use all of the available information about how these mechanisms work and the relative transparency and residual risk that are associated with these mechanisms. In contrast to traditional financial systems, the ongoing monitoring, oversight, and supervision of the system must be built first on publicly available information. Second, we need to equip government agencies to fully leverage this new paradigm. Getting the right regulations in place will require building capacity of different agencies and industry bodies to tackle the different types of risks particularly as it relates to illicit finance and payments. It requires the government to understand the operational risks involved in the deployment of smart contracts and decentralized infrastructure and the accompanying mitigations. It requires the government to leverage the transparency and available real-time information for effective supervision. And we need to be designing compliance regimes so that all institutions can engage with decentralized technologies. Government agencies with the right mandates and a focus on public private partnerships will lead to the type of market infrastructure that all market participants are searching for. Third and finally, the blockchain actually enhances our ability to act quickly against illicit actors. As stated, following the money on the blockchain is actually easier than in traditional finance. But furthermore, issuers of tokenized assets can actually take actions to easily freeze and seize assets. I'll give you an example. In a recent pig butchering case, crypto exchange OKX and stablecoin issuer Tether froze and then seized $225 million of criminal proceeds in collaboration with US Secret Service. The traceability and programmability of these assets is a key benefit in addressing illicit activity. At Chainalysis, we are proud to support the US government in our ability to keep the digital asset ecosystem safe. And I look forward to your questions.

Thank you, sir. Next, we'll hear from Mr. Dan Robinson, general partner at Paradigm.

Chair Scott, Ranking Member Warren, Subcommittee Chair Lummis, Subcommittee Ranking Member Gallego, and distinguished members of the committee. Thank you for inviting me to testify today on the importance of crypto market structure legislation and how to safely and equitably grow the crypto industry in America. My name is Dan Robinson and I serve as a general partner at Paradigm, which is a research-driven investment firm focused on crypto. My research work has focused on helping portfolio companies solve technical problems related to market and mechanism design, particularly for applications in decentralized finance or DeFi. I'm here to talk about the benefits DeFi can bring to the financial system, why its promise could be strengthened by a well-designed market structure bill, and why a bill that doesn't take it into account could be harmful to innovation. Crypto provides an alternative to our traditional world of finance. What stablecoins do for money and payments, DeFi does for trading, lending, and other functions of the financial system. DeFi can reduce costs and improve accessibility by removing unnecessary frictions in the backend infrastructure of Wall Street. Decentralized finance is in its infancy, but it has already had a tremendous effect on one small corner of the financial system, crypto itself. For many crypto natives, the natural place to trade is now on decentralized rather than centralized exchanges. Decentralized exchanges work very differently from centralized ones. One illustrative example is Uniswap with over 1 billion in daily volume. The core of the Uniswap protocol is a set of smart contracts that allow any user to efficiently provide liquidity between any two assets. Anyone can use Uniswap to instantly trade with other users without ever giving up custody over their assets. These decentralized exchanges, much like stablecoins, run directly on blockchain rails. They are open, verifiable, and interoperable. This is a far cry from the opaque and fragmented back-end systems of today's Wall Street. With crypto, and especially with DeFi, we have a chance to radically upscale our markets to make them more efficient, more liquid, and more integrated across our economy. DeFi infrastructure could modernize the backbone of our financial system, reducing the fees paid by ordinary investors. Tokenized stocks could lower barriers to entry for investing in American companies and prediction markets can be more broadly brought to bear across the economy, improving our ability to foresee unexpected outcomes and hedge risks accordingly. At the same time, markets do need rules. We at Paradigm believe it is important that crypto regulations be clear, fair, and equitable. We also think it has been an unforced error for the US to be one of the last major developed countries to enact legislation on crypto market structure. In the hopes of providing some hard-won wisdom from our experience in crypto, we released 17 principles for market structure legislation. I wanted to flag three of the most important. First, crypto assets should be commodities. Crypto assets are designed to be used to interact with smart contracts and in some cases to pay for on-chain operations, not merely for investment. A token classification rubric based on the Lummis-Gillibrand ancillary assets approach would be the best way to reflect this principle. Next, any decentralized crypto asset exchange should not be required to register with the CFTC, SEC, or any other regulator. At base, a true DeFi protocol is software. Just as we do not ask Microsoft to register Excel with the SEC just because companies use it to track their IPOs, we should not demand the engineers of DeFi protocols register their software just because others use it to trade. Finally, DeFi should be protected and supported across the globe. No government should be allowed to impose global restrictions on the trading of crypto assets through DeFi. In this way, the US would be resurrecting the work done by our forefathers to protect the freedom of the seas in prior centuries and more recently freedom of the internet. Let me close by stressing the tremendous potential opportunity that lies before you on market structure legislation. Every day we at Paradigm see new ways that crypto will support economic growth in free markets. From prediction markets and DeFi to tokenized stocks and even the use of Bitcoin mining to support the electric power grid. We are now even seeing crypto markets emerge for the trading of credits in AI compute. By enacting market structure legislation that is supportive of crypto, supportive of entrepreneurs, supportive of investors, and supportive of consumers, you can blaze the trail to those new markets for all Americans. Thank you, and I look forward to your questions.

Thank you, Mr. Robinson. Now we'll turn to Mr. Garlinghouse. You are now recognized for five minutes.

Up next is the Honorable Timothy Massad at the Kennedy School of Government at Harvard University.

Good morning, Chair Scott, Ranking Member Warren, members of the committee and staff. Thank you for inviting me today. My name is Timothy Massad. I'm former chairman of the CFTC, former assistant secretary of the Treasury. The views I express are my own and don't represent the views of the Kennedy School of Government. You know, many of us are familiar with the movie Groundhog Day, in which Bill Murray is condemned to repeat the same day over and over, and he finally escapes the time loop, not through external means, but by changing his outlook on life. And I suggest that we're in a similar time loop when it comes to achieving clarity in the regulation of digital assets. And we need to change our outlook. There have been repeated congressional hearings calling for clarity in a series of legislative proposals, each claiming to provide clarity, but there's never been a consensus. And whether it's Lummis, Gillibrand, FIT21, or the Clarity Act, they all have similar flaws. They rewrite securities laws to create a new category of digital assets that their proponents claim will forever solve the problem. But none will achieve the clarity or the sensible regulation that we need. And each would undermine existing regulation. We need a different approach. And it requires recognizing a few facts. First, this is a technology. It's not an asset class. It will be used in many ways including in tokenizing securities. Second, whether something in digital form is a security, a commodity, or neither cannot be easily defined by a paragraph or two in a statute. It depends on what the token represents, whether there is an issuer, whether the transaction is one in which capital is being raised and so forth. Third, the technology and use cases are evolving rapidly, so we should not lock in definitions that will prove obsolete soon. And fourth, a principal reason for the lack of clarity is our fragmented regulatory system. We have two market regulators, neither of whom has full jurisdiction over the spot market for digital assets that are not securities. The industry has taken advantage of this gap by arguing that most use cases are not securities and can therefore be issued and traded without regulation. That has led to a lack of investor protection. Now, the primary regulatory response to date, court cases that seek to interpret the Howey test, has also not been sufficient. It was a whack-a-mole strategy even when the particulars of a case made sense. But the solution is not for Congress to become the regulator. Instead, all these factors argue for creating a process by which the SEC and CFTC work together to provide the clarity and the necessary regulation. And legislation should provide them with the proper authority, principles, and flexibility to do so. But legislation that writes detailed rules and creates a binary classification scheme is bound to fail. Former SEC Chair Jay Clayton, who was appointed by President Trump, and I proposed this approach two years ago. We said Congress should mandate that the SEC and CFTC work together through a self-regulatory organization or otherwise to develop joint rules that would apply to every intermediary that trades or handles Bitcoin or ETH. Now, that was the jurisdictional hook. It establishes jurisdiction over the market without, as we said, debating classification of each token or Congress pursuing tortured rewriting of existing definitions of securities and commodities. We also said that rewriting existing law might fail to bring clarity and inadvertently undermine decades of regulation and jurisprudence as they apply to traditional securities and commodities markets. Our existing securities and commodities markets are the foundation of the US economy and the envy of the world. Their strength and integrity rests on a regulatory framework that has been gradually and thoughtfully developed over almost 100 years and therefore a key principle for market structure legislation must be do no harm to that regulatory framework. The latest market structure proposal like its predecessors instead revises the securities laws in various ways that will create more confusion than clarity. For example, it creates a broad exemption for activities described as decentralized finance which will lead to migration of regulated activity into an unregulated sphere. Decentralized activities may warrant different regulations to achieve our regulatory goals but not a free pass. It provides an exemption from securities laws for raising funds to build a mature blockchain system, but you don't actually need to build it. You only need to have an intent to do so. The exemption isn't needed and it will be misused. And finally, it will not even regulate all the crypto activity taking place on centralized platforms today. It will however provide many opportunities for smart lawyers to engage in regulatory arbitrage. I thank you for your time and I look forward to your questions.

Thank you. And finally, we have Mr. Richard Painter from the University of Minnesota School of Law.

Thank you very much, Chairman Scott, and I thank Ranking Member Warren for inviting me to testify today. I urge this committee and the House and the Senate to very carefully look at this bill and consider whether this bill will soundly regulate the cryptocurrency markets, the market structure. We cannot repeat the mistakes of the past. 100 years ago there were hearings in the House and Senate to regulate the banking industry and Congressman Louis McFadden of Pennsylvania introduced a bill that eventually became the McFadden Act of 1927. They thought they had the perfect solution to bring banking into the modern age and have the United States be the premier center for banking in the world. The regulatory structure that was framed in 1927, the McFadden Act, was informed largely by lobbyists from the banking industry and it lasted three years. The banks collapsed in 1930. Congress had not regulated the banking industry even though it said it did. Fast forward to the 1990s when I was writing in the field of securities regulation and securities-based swaps and derivatives were coming on the scene and the argument was made that a securities-based swap is not a security. A stock can be a security but not a securities-based swap that is based on that stock. And it took years to figure out how to regulate securities-based swaps agreements under the Clinton administration, under the Bush administration. We had years of lax regulation, deregulation of the banking sector, laws passed by this Congress and we saw what happened in 2008. We do not want to make that mistake again. I implore you to carefully look through this bill. Listen to the industry experts who are here today. Listen to Chairman Massad about his experience as a regulator. Consider carefully whether we should be drafting and passing through Congress a very detailed bill that locks a lot of definitions in stone or rather take up Chairman Massad's recommendation that we have the SEC and the CFTC, the regulators, work together to respond to evolving market conditions. Consider whether it would make sense to define a stock as a security but not the tokenization of that stock. Think through these issues. Please do not make the same mistake that this Congress has made so many times before. And last, I want to emphasize how important it is that conflicts of interest of members of the Congress and the President of the United States not influence the regulation of cryptocurrency or any other industry. Under 18 United States Code 208, it is a criminal offense for a United States government official to participate in a government matter that affects their own financial interest. A Treasury Secretary who is regulating cryptocurrency or issuing meme coins and investing in a crypto business would commit a felony. But Congress has exempted itself from that statute. Congress exempted the President of the United States from that statute and the Vice President. That is wrong. We cannot have the people who are in charge of passing legislation and enforcing legislation, implementing legislation, have conflicts of interests with their official responsibilities. That includes every member of the House and Senate. You should be divesting from crypto if you're going to be regulating crypto. And the President of the United States as well. The integrity of our financial system depends upon this. We've watched this movie before. Congress passes laws to regulate the financial sector and it ends in a disaster because it was not regulated. Please do not repeat that mistake. We don't want to watch this movie again and we do not want to watch a movie that is a combination of West Wing or the House of Cards and The Big Short. Please do your jobs. Represent us, the American people. Protect our financial system so we never see again what happened in 2008, 1929, so many times before. Thank you very much, Mr. Chairman.

Thank you, sir. We'll now turn to our round of questions. We'll offer each member of the committee a generous five minutes. If you like, I'll start the questions off. Ms. Mersinger, digital assets and blockchain technology could democratize finance, giving every American, no matter the background, access to financial services at lower cost with greater speed than ever before. To achieve this revolutionary potential, there's widespread agreement from industry leaders to the president and bipartisan members of Congress that we must provide clear rules that foster innovation and protect investors. And listening to you and frankly Mr. Levin as well, I think Mr. Levin said we need a fundamentally new model because we're talking about frankly a fundamentally new world. It's not new today, but it's new to those of us who are going to pass legislation. And you talked about the importance of the existing laws as we see them are inadequate and frankly not applicable to this new opportunity to be the crypto capital of the world. From your perspective, why is regulatory clarity so important and what are the risks if we fail to provide certainty for innovators and everyday Americans?

Thank you for that question, Senator. Traditional bank regulations are not fit for purpose for digital assets and blockchain technology. Those regulations are meant for centralized intermediaries and that's not what we're dealing with here. We need a regulatory structure that is fit for purpose. Otherwise, this patchwork of regulations and state laws and the industry trying to piece together what is their regulatory framework doesn't work and it's going to push and continue to push innovators offshore. The most important thing we can do is create a framework that gives clarity. The status quo doesn't work. We need to be able to have responsible innovation here in the United States. We need a framework that provides customer protections and we also need to make sure that whatever framework we put in place that it ensures that US American values are what this new technology is based on.

Thank you very much, Mr. Levin. There's a common belief that money laundering is easy with crypto, but the truth is it's not. Blockchain technology creates a permanent traceable ledger that can help law enforcement catch those bad actors. I've said it before, so I'll say it again. It's far easier to track something that has a digital footprint than something that does not. However, some of my well-intentioned colleagues seem to think that crypto is tailor-made for money laundering when in reality it's a whole lot easier for criminals to hide their tracks with cash. What are the most common misconceptions regarding the role of digital assets and illicit finance? And what rules do digital asset market participants already comply with in this space? You talked about I think it was a couple hundred million dollars that had already been seized by working together. I think the more we illuminate how the industry is already working with law enforcement, the better we understand the digital footprint versus cash.

Thank you for the question, Senator. The way that we see this market is that the majority of activity inside cryptocurrencies and on blockchains is legitimate activity. There are trillions of dollars of payments that are made using stablecoins every year. A lot of that, the vast majority of that is not illicit activity. The illicit activity that we estimate at Chainalysis is less than 1% of the overall activity that occurs on these blockchains, which is equivalent to what we see in traditional markets. And in fact, often times less than what we see in traditional markets. And so criminals themselves and gangs and whoever else we're dealing with understand that it's not possible to launder vast sums of money in these networks and that the majority of the activity is legitimate. We do see though that when it comes to threats for example with fentanyl or pig butchering or terrorist financing the industry comes together with law enforcement to collaborate on solving these cases. And we at Chainalysis have powered thousands of investigations that have spanned international geographies, cross-national boundaries to be able to actually capture criminal proceeds in these investigations. The centralized services that have been helpful with this are subject to the AML and BSA obligations and have been from FinCEN guidance in 2013 and so have a very deep experience in actually helping law enforcement in these instances and it's through that public private collaboration that we can actually solve the problems of illicit finance.

Thank you very much. Senator Cortez Masto.

Thank you. Thank you, Mr. Chairman, for having this important hearing. Let me start with Mr. Massad. Talk a little bit about what should the goal of a market structure legislation be that we're looking at?

I think it needs to set up a process and some principles for achieving clarity and addressing this regulatory gap. The gap is that in our framework we have no regulator of the spot market for anything that's not a security. So we need to fill that and we need to bring some clarity to this question of when does the use of digital technology turn something into a security or a commodity. But that's much more complicated if you will than simply writing in a single definition. And that's why I advocate a process. That's why Jay Clayton and I advocated more of a process of bringing the SEC and the CFTC together. You don't necessarily have to merge them, but we need to have them work together on this.

Thank you. And Ms. Mersinger, would you agree with that?

I would. Yes, I would agree that we need a framework that's going to work for the industry. We need clear lines of jurisdiction here. And I totally agree with the SEC and the CFTC working together. In fact, they could do that right now and they are doing that right now. Working together to provide what clarity they can, but we still need legislation to oversee the spot market and as Mr. Massad said.

Okay. Thank you. Let me ask you this as well and maybe Mr. Massad, let me start with you again. I have heard from my state's securities administrator and many of them across the country about the paramount importance of preserving states' powers in federal market structure legislation. Can you talk about why that is important?

Yes, I think it is important because the state securities authorities have always played a critical role in our system and again I think you're going to hear a lot of comments today suggesting this is this whole new world and so forth. It is a technology and we got to remember what we have going on are still most of this activity is going through centralized intermediaries. It's not just happening on chain. So I think we still need the resources of the states as well as the enforcement resources of the SEC and the CFTC to bring to bear.

Thank you. Mr. Levin, thank you. By the way, you did some great work with Caesar's Palace. I thank you for the work that you've done. I appreciate it. And for that reason, I understand we're all concerned about the scams and the fraud that could occur that quite honestly always occurs with some sort of new technology or something happening at the federal level. Our goal here is to make sure we're protecting our consumers and giving the regulators and law enforcement the tools and the private sector to go after that and stop that. Can I ask you what are the biggest obstacles to identifying and recovering ransom payments or stolen crypto funds?

Thank you for the question, Senator. The biggest barrier that we find when we're looking for money that is being stolen or has been extorted through ransom is that money can move to foreign jurisdictions where there can be non-compliant centralized entities that actually hold cryptocurrency on behalf of those illicit flows. And that's where it's really important for the United States to be able to work across different geographies to be able to prevent the laundering of that activity in foreign jurisdictions.

And would you say that state and local law enforcement and regulators already have the tools they need to address those scams?

I would say, Senator, that we are still in the infancy of state and local agencies actually having the capabilities to be able to go after these types of crime. There are instances in certain jurisdictions where the state and local enforcement agencies actually do have capabilities at their disposal but we have found that actually there's a technology barrier to entry. And so us at Chainalysis, we've been pioneering a lot more new technology powered by AI to actually help state and local agencies get a hold of easier insights to these types of crimes so that they can go after this activity.

What is it in the market structure regulation that we're looking at that we need to be cognizant about to ensure that law enforcement whether it's federal, state or local has the tools they need?

I think it starts, Senator, with the actual regulators to actually have the tools in place to monitor the publicly available information and proactively go after the types of threats that we need rather than overly relying on a reporting structure that we've had in traditional markets.

Thank you. Thank you, Mr. Chairman.

Yes, ma'am. Senator Kennedy.

Thank you. Mr. Chairman, I've listened with great interest today and here's what I hear you saying. The four folks to my left, I hear you saying that digital assets are different. Digital assets hold great promise. Digital assets need special rules. I agree with that. The obvious question is what should those rules be and to what extent should we allow you to draft them? I've also heard some of you say that digital assets represent the next generation of the internet. Well, we let the current generation of the internet draft their own rules. And frankly, it looks like what we got as a result looks like somebody knocked over a urine sample. Congress can't even agree on basic legislation dealing with privacy on the internet. How the hell are we going to tackle this? But I hear what you're saying. I hear, Mr. Painter, as usual. If you follow him on social media, you know all politicians are crooks. Very helpful. I want to direct most of my questions to Professor Massad. Is that how you say your name?

Massad.

Mr. Massad, I'm really worried we're gonna get this wrong. We don't know. We in Congress and our staffs don't know as much as the professionals in digital assets know. And I don't see how we can possibly catch up. Tell me more about your idea of having the SEC... Well, first I don't want to run out of time here, but why is the digital assets industry so scared of being regulated by the SEC?

Well, I think we need to step back, Senator, and briefly... they don't want everything treated as a security because they don't want that entire framework to apply. But that's also because the SEC did fail to try to customize its rules to adapt for this technology and it should do that and you've got leadership at the agencies now who are working on those things.

Do you... you're suggesting that we turn to two of our agencies, one of which is the SEC and say you have expertise before we take a crack at a bill. You come up with a bill with rules with regulations. Tell us how to do this because I hear you saying in some cases digital assets are commodities in some cases that they're securities.

Congress needs to fill the gap which is if it's not a security, who's going to create a regulatory framework for it. So you do need to fill that. But these questions about exactly when is it a security, when is it not a security, how do we customize the rules, what should we do about DeFi, a lot of that should really be left to the agencies. You could establish some principles, but I wouldn't write detailed rules.

Have you looked, Professor, at Congressman Hill's legislation?

I have in detail.

What do you think?

I think it's got a lot of problems. I think it's 236 pages of regulatory arbitrage opportunities for creative lawyers. And I used to be one that did that kind of stuff.

Made a lot of money. Did you?

I did. But...

Mr. Painter, do you think Senator Gillibrand is a crook?

No. And I do not think all politicians are crooks. And...

Why did you call her a crook?

I did not call her a crook. Now, Senator, you need to focus on this bill. You're doing this again. You did it the last week's hearing on stablecoin regulation.

$217,000 in crypto donations. You tweeted that.

Yes, I did.

And then you said the crypto industry is buying Congress and the White House. This won't end well. Why do you think the crypto industry is buying Senator Gillibrand?

I said, look at the campaign contributions from this industry.

You think they've bought her?

No. I said, look at the campaign contributions.

They bought her. Do you think they bought...

Senator, you need to focus on this bill instead of trying to distort my Twitter. Last time one of my colleagues were quoting what a Marxist in Chicago said about...

What evidence do you have? He's a crook.

I said there is massive automatic campaign contributions coming into this Congress from the crypto industry.

You want to apologize, Senator Gillibrand? I do not want you to have to apologize for passing legislation that destroys our economy for you are distorting what I said just like you did in the last hearing. You're wasting everybody's time. Senator, you're a whack job.

Senator, you are wasting...

Whack job.

I think we are. Is this middle school, Senator? Senator and witness. Thank you both. I think you should apologize, Senator. I think Senator, you're wasting our time. This is not middle school. Thank you for your participation. I will say that Senator Smith is next. The floor is yours.

Thank you. Thank you very much, Mr. Chair. So, not so long ago, I think you could safely describe most individual investors in digital asset markets as enthusiasts, but that has changed a lot over the last few years as digital assets have become more mainstream. And I think the topic of this conversation today looking at what sort of a regulatory framework we need for digital assets is very important and it's important that we don't provide just a stamp of legitimacy over this sector but we are actually providing the kind of consumer protections that people need. Investors should be protected from fraud, from misleading information, from self-dealing, and from conflicts of interest by those that purport to be representing them. They should be protected from unfair and rigged markets. And those protections are going to be good for investors, but they're also going to be good for the market. So, Mr. Massad, I want to get at some of what this proposed market structure legislation should look like. And we have kind of as our, you know, the legislation that is out there, the Clarity Act. So, I'm going to just try to get at some of the issues in the Clarity Act. So, as I understand it, the Clarity Act would prevent any digital asset from being regulated if it is represented as a collectible or as art or as something that has inherent value or utility or significance beyond its mere existence as a digital asset. Do I have that right?

Yes, you do.

Okay. So that seems like a pretty big loophole to me and I want to just dive into this a little bit. So if a cryptocurrency for example was launched by a social media influencer, could that in your view have some inherent value and therefore be exempted? What about let's say a memecoin that might get you invited to dinner with the president? Would that have potential inherent value?

Yes.

Tesla is worth more than several of the world's largest automakers. If it were to issue a crypto stock token, would that have inherent value?

Well, that certainly would. That would be also exempted as a security.

So that would should be still regulated as a security, right? Which is sort of the underlying challenge as you pointed out a moment ago. So, I mean, can you imagine a crypto asset that wouldn't have some inherent value?

Well, this is the problem. It's unclear exactly what would be categorized as digital commodities under this definition. A lot of people say it would be these native tokens like...

Bitcoin. I would think about it this way. Most trading today occurs through centralized intermediaries. It does not occur through these decentralized exchanges. Those centralized intermediaries list several hundred tokens. The question is how many of those would be regulated by this? And I think it would only be a handful and that's a real problem.

Well, exactly, Mike. This seems to me like a loophole that you could drive a truck through and I don't think that that is an accident as this legislation has been developed. Let me touch on another issue. I think you know we've heard it today, crypto industry and its promoters are sort of branding digital assets as something new, as innovative, as revolutionary and therefore they need some sort of new or bespoke regulatory framework because the established rules for protecting investors and guaranteeing the fairness and fairness of markets don't apply. And I'm not arguing that there aren't some specific things that we need to address because of the nature of these assets, but here's an example of this. Under the Clarity Act, it would allow a crypto company to raise up to, I think it's $300 million from retail investors over four years as long as they would be exempted from complying with SEC registration and disclosure rules up to even if they're raising up to $300 million from retail investors. Is that do I have that right?

Yes, there's a new exemption for capital raising for building what's called a mature blockchain system.

That's right.

It does require some disclosure, but it's otherwise an exemption from SEC from registration. If a regular company was required, would be required to disclose to the SEC how they're spending the money that they raise.

Yes. I mean the challenge, the problem with that exemption is you don't actually have to build the mature blockchain system. You just have to have the intent to do it.

You just have to have the intent to do it. But you could use that money for, I mean what would stop you from using it to buy a house in, you know, the Virgin Islands?

Well, you know conceivably there could be a lawsuit against you for misleading information but you know if you had a reason after the fact.

Yeah. That's after the fact.

Right. Right. Exactly. Well, so this is and I know I'm out of time here. I just want to close by saying this is my concern is that it's not really a new regulatory regime at all. It actually is sort of continuing the status quo that has landed us in some pretty significant trouble.

I think the problem with the act is it's undermining the existing regime. We do need to customize some rules.

Yes.

But this isn't a good way to do it.

Thank you very much.

Thank you, Senator Warren. Thank you, Chairman Scott. Thank you for doing this hearing. You know, something Mr. Massad said which I thought was fascinating was that we've had times that we could have passed market structure regulation and Congress hasn't done it. There hasn't ever been a market structure regulation bill marked up by the banking committee. So I'm just not sure where that came from, that there was this idea that market structure regulations have been attempted before. It's never been attempted. But Mr. Massad, just for your sake, I just want to clarify a couple things that you said to make sure you meant to say what you said. Did you call Bitcoin a native token?

Yeah, it's often referred to as a native. In other words, Bitcoin and ETH are referred to as native tokens of their blockchain.

So, you're saying Ether and Bitcoin are the same.

Well, I'm classifying both of them as what you call native tokens of the blockchain.

So, you're saying that a native token is how you would describe Bitcoin. I just want to be clear with that.

It's a term that's used to describe when you have a blockchain and you have the token that allows you to use that blockchain, that's often called a native token. Yes.

Got it. And therein lies exactly why we need to have this market structure regulation because the idea that we would turn over this industry to some bureaucrat working at some agency is insane because that would make it so that no American company would ever invest in a digital asset company in the United States of America when you had people who are just completely lacking the fundamental technical base. This reminds me of the Facebook ad where the little lady is sitting there taking pictures off a physical wall and the guy saying, 'Yeah, none of this works this way.' Crypto, Bitcoin is a commodity. So there was a lot of talk about memecoins and NFTs. So let me ask you this follow-up question.

Chairman, if Senator, if I may just, I got to ask a question. I was the guy who declared Bitcoin a commodity.

This is the great part about being senator. I get to ask you the questions.

Okay.

So were you prohibited by law to cooperating with the SEC?

Uh no.

Why didn't you?

I did.

So, no, but you just said that what we should do is have the CFTC and the SEC work together.

Yes. Mandated.

Why didn't you do that?

Well, when I was there, I did that, sir.

So I'm saying you're saying that you solved all these problems when you were at the CFTC with the SEC?

No. The swap problems.

Okay. So, you didn't solve all the problems. So, you want us to have the SEC and the CFTC work together. But what you really want is you want Congress to abdicate its responsibilities to unelected bureaucrats. As with Jay Clayton, a Republican appointee, agree is a... Are you a baseball fan? I assume you're a Red Sox fan up there at Harvard.

No, I live in Washington, sir.

Oh, geez. All right. So, is a baseball card a security?