House Committee Considers Digital Asset Legislation

The House Financial Services Committee considered testimony on a proposed discussion draft of a legislative proposal to establish a digital asset framework and provide for related joint rulemaking from the CFTC and the SEC. (See previous coverage).

The witnesses included:

• Circle Co-founder, Chairman, and CEO Jeremy Allaire. Mr. Allaire's testimony emphasized the benefits that accrue to the United States by virtue of the US dollar being in effect the global currency of the world, but he said that continued significance of the currency depends in part on being able to transfer digital dollars (stable coins) but not necessarily a CBDC. His testimony thus focused on stable coin legislation. He said that such legislation (i) should define the "roles state and federal banking regulators should play," (ii) allow stablecoin issuers to hold their cash assets with the Federal Reserve, (iii) provide clear custodial requirements, and (iv) provide criminal penalties for circulating stablecoins that were "illegitimate digital dollars."
• Steptoe & Johnson LLP, Partner Coy Garrison, and former Counsel to Commissioner Hester M. Peirce. Mr. Johnson said that the application of existing securities laws to digital assets is not always clear and he criticized the SEC for its failure to engage in rulemaking as to digital assets. He said that the SEC was unlikely to engage in such rulemaking with a push from Congress. He asserted that the proposed digital asset bill takes a "balanced approached that is rooted in existing securities and commodities laws concepts."
• Ava Labs, Inc. Founder and CEO Dr. Emin Gün Sirer. Dr. Sirer stated that it is "imperative" that the United States "nurture and support the development of [blockchain] technology" by implementing "sensible" laws that (i) promote growth and good behavior, (ii) punish bad actors and (iii) "elevate the users of blockchain networks." He warned that the failure to "see the power of blockchain technology" will result in "disastrous consequences" by undermining economic growth and making it easier for bad actors to engage in illicit activities.
• Prometheum, Inc. Founder and Co-CEO Aaron Kaplan. Mr. Kaplan rejected calls for new laws and argued that "there is a compliant path forward for crypto in the United States that the SEC has clearly laid out." He stated that those who call for new laws are "simply not willing to comply with existing applicable securities laws and regulations" and that new legislation is "not in the best interest of the investing public or blockchain industry" because of the years it will take to put these efforts into effect.
• National Futures Association President and CEO, Thomas Sexton III. Mr. Sexton called on Congress to (i) provide the CFTC with regulatory authority that would complement its current anti-fraud authority to establish "critical customer protection rules" and (ii) amend the Commodity Exchange Act to adopt a federal registration regime for spot digital asset commodity market participants and trading platforms.