HOUSE FINANCIAL SERVICES COMMITTEE SUBCOMMITTEE HEARING
Overview
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On February 11, the House Financial Services Committee Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence held a hearing entitled “A Golden Age of Digital Assets: Charting a Path Forward.”
Witnesses in the hearing were:
- Jonathan Jachym, Deputy General Counsel and Global Head of Policy & Government Relations, Kraken Digital Asset Exchange
- Ji Hun Kim, President and Acting CEO, Crypto Council for Innovation
- Coy Garrison, Partner, Steptoe LLP
- Jose Fernandez da Ponte, Senior Vice President and General Manager of Blockchain, Crypto and Digital Currencies, PayPal
- Timothy Massad, Research Fellow and Director of Digital Assets Policy Project, Kennedy School of Government, Harvard University
Legislation noticed for the hearing:
- H.Res.__, Expressing Support for Blockchain technology and Digital Assets
- H.R.__, the Securing Innovation in Financial Regulation Act
- H.R.__, the New Frontiers in Technology (NFT) Act
- H.R.__, the Bridging Regulation and Innovation for Digital Global and Electronic (BRIDGE) Digital Assets Act
- H.R.__, To require the Securities and Exchange Commission, Commodity Futures Trading Commission, and the Secretary of the Treasury to jointly carry out a study on decentralized finance
- H.R.__, the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act of 2025
Below is a summary of the hearing prepared by Delta Strategy Group. It includes several high-level takeaways, followed by summaries of opening statements and witness testimonies and a summary of the Q&A portion of the hearing.
Key Takeaways
The following is a summary of the main topics explored in the hearing. Each is discussed in further detail in the Discussion section below.
- The hearing considered market structure legislation to create a unified federal framework for digital assets to address regulatory uncertainty and define DeFi oversight responsibilities between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
- Representatives raised stablecoin regulation as a key issue, noting proposals like the STABLE Act, to set reserve and operational requirements to ensure stability and consumer protection.
- The discussion raised unclear regulatory expectations, highlighting the BRIDGE Act, and the proposed Joint CFTC and SEC Advisory Commission, in order to streamline effective regulation. Committee Chairman Hill (R-AR) referenced the formation of a joint self-regulatory organization (SRO) a vehicle to streamline oversight and clarify digital asset classification.
- There were bipartisan discussions on and concerns over illicit finance regarding the need to strengthen Anti-Money Laundering (AML) and Know Your Customer (KYC) standards, particularly for centralized exchanges handling high transaction volumes.
Opening Statements and Testimony
Subcommittee Chairman Bryan Steil (R-WI)
DeFi and cryptocurrencies present a unique opportunity to decentralize financial power, shifting economic control from centralized institutions back into the hands of individuals. The Biden administration’s regulatory overreach and enforcement-driven approach have created uncertainty and stifled innovation, pushing crypto businesses offshore. Instead of collaborating with Congress to establish clear guidelines, the Administration’s unpredictable stance left the U.S. lagging behind other global markets, including the EU and UK, which have moved forward with comprehensive digital asset frameworks. This failure to act threatens U.S. leadership in blockchain innovation and financial sovereignty.
To correct course, lawmakers must provide a clear regulatory framework that fosters responsible growth, ensures fair and transparent rules for stablecoin issuers, and protects investors. The SEC’s repeal of Staff Accounting Bulletin No. 121 (SAB 121) and the Federal Deposit Insurance Corporation’s (FDIC) reconsideration of its crypto-related supervisory approach signal progress, but broader legislative clarity is needed. Congress and regulators must work together to establish a balanced policy that secures the U.S.’s leadership in the evolving digital asset economy.
Subcommittee Ranking Member Stephen Lynch (D-MA)
The Trump Administration and House Republican leadership demonstrated their eagerness to enact digital asset and crypto-friendly laws and regulations, with President Trump’s first EO establishing a Working Group comprised of regulators handpicked by the crypto industry. The crypto industry spent $119 million in the last election lobbying Congress on proposals such as a cryptocurrency stockpile and the prohibition of CBDC. Cryptocurrencies remains highly volatile and speculative instruments with the potential to destabilize the economy if poorly handled, with serious concerns about scams, money laundering, and illicit finance, leading to $5.6 billion in losses for Americans in 2023 alone. The failures of Silicon Valley Bank (SVB) and Signature Bank, alongside cryptocurrency collapses, did not spread to the broader financial system due to strong securities and consumer protection laws, but a regulatory regime is needed that does not simply reflect a wish list from industry advocates.
A bipartisan, collaborative approach must incorporate input from law enforcement, the Financial Crimes Enforcement Network (FinCEN), academics, and other experts to ensure robust consumer protections, AML measures, and illicit finance safeguards. The emergence of international competitors in the FinTech space, like DeepSeek, signal that Congress must move quickly to ensure U.S. competitiveness by addressing financial data privacy, expanding data portability, reducing payment costs, and fostering innovation that expands economic access and financial inclusion.
Committee Ranking Member Maxine Waters (D-CA)
My legislation, Clarity for Payment Stablecoins Act of 2023, with former Committee Chair McHenry (R-NC) provides the best foundation for moving forward to get a federal framework for digital assets signed into law.
Jonathan Jachym, Kraken Deputy General Counsel and Global Head of Policy & GR
Despite meaningful progress, the U.S. has fallen behind other jurisdictions in passing clear rules for centralized intermediaries, with harmful policies such as regulation by enforcement and restrictive banking measures deterring investment and slowing responsible growth. To establish an effective market structure framework, Congress should: (1) grant spot market authority to the CFTC to oversee centralized intermediaries and secondary market transactions in digital commodities; (2) implement effective disclosure requirements to ensure transparency and customer protection; and (3) avoid applying centralized rulebooks to decentralized protocols that operate without centralized governance or management.
Crypto policy should not be partisan, and industry consensus must drive nonpartisan collaboration to develop best practices for DeFi. While U.S.-specific regulations are needed, there is value in learning from international jurisdictions that have advanced regulatory clarity for centralized intermediaries. To prevent market fragmentation, the U.S. must take the lead in global digital asset regulation through strong leadership and international cooperation.
Ji Hun Kim, President and Acting CEO, Crypto Council for Innovation
The U.S. must lead in digital asset innovation, and Congress must provide regulatory clarity to sustain growth and global leadership. The approvals of spot bitcoin and ether ETFs, increased retail and institutional adoption, and the expanding use of blockchain-based payment rails demonstrate that the industry is reshaping DeFi’s potential. Tokenized assets and blockchain transactions can improve financial access, reduce counterparty risk, and enhance operational efficiencies. Other global jurisdictions have surged ahead by implementing tailored regulatory frameworks, ensuring that digital assets thrive under clear and structured oversight is a gap the U.S. must urgently address. Recent EOs acknowledge digital assets as a national priority, seeking to reverse the uncertainty caused by regulation-by-enforcement policies that have driven companies offshore.
Under Chair Gensler’s tenure, the SEC took dozens of enforcement actions without issuing clear guidance on asset classification, further complicating the regulatory landscape. To achieve the golden age of digital assets, Congress must: (1) pass market structure legislation to clarify whether digital assets are commodities or securities, granting the CFTC authority over spot markets for digital commodities while enforcing key consumer protections; (2) establish a comprehensive stablecoin regulatory framework, integrating effective state-based models to leverage dollar-backed stablecoins, enhancing the global role of the U.S. dollar in digital payments; and (3) prioritize the development of decentralized technologies, recognizing the value of self-custody solutions and secure digital asset management.
Coy Garrison, Partner, Steptoe LLP
The SEC must undo harmful Gensler-era policies, shifting from regulation by enforcement to clear rulemaking, but legislative action is also essential. Congress must fill regulatory gaps by passing market structure legislation and a stablecoin framework, as past hostility left the industry without a federal regulator, investor protections, or strong U.S.-based projects. The formation of a Crypto Task Force and the repeal of SAB 121 mark progress in restoring market confidence. Commissioner Peirce’s priorities should guide reforms, starting with a clear legal definition of when digital assets fall under securities laws, recognizing that a digital asset itself is not a security and applying a transaction-by-transaction analysis per case law. The SEC should reconsider Gensler-era litigation against unregistered exchanges, broker-dealers, and clearing agencies, as many cases fail the Howey Test. Improving token offerings through existing exemptions and Peirce’s Token Safe Harbor proposals would create regulatory certainty.
To establish a comprehensive regulatory framework, Congress should: (1) define clear jurisdictional lines between the SEC and CFTC to determine regulatory oversight of digital assets; (2) require tailored disclosures for digital asset holders, ensuring transparency while fostering innovation; and (3) permit disintermediated trading with real-time settlement, enforce customer asset segregation, and prohibit commingling of funds to strengthen market integrity. Federal oversight of stablecoins is necessary, and the STABLE Act provides a structured framework for their issuance and operation.
Jose Fernandez da Ponte, Senior VP of PayPal Blockchain, Crypto, & Digital Currencies
Responsible innovation and enhanced payments infrastructure are key to increasing efficiency in the digital economy, and our engagement in the digital asset space serves two primary objectives: leveraging innovation to create faster, cheaper, and stable payment instruments and ensuring their utility for mainstream commerce and payments. Stablecoins facilitate cross-border payments, open new markets, and improve treasury management, with PayPal USD (PYUSD) already being used for domestic business-to-business (B2B) payments and international transactions, reducing costs and settlement times. To maintain U.S. leadership in stablecoin innovation, Congress should: (1) pass legislation establishing market and trading frameworks for stablecoins; (2) support a state regulatory pathway, leveraging New York Department of Financial Services (NYDFS) expertise; and (3) ensure federal and state charters work in parallel, developing reserve asset management, governance disclosures, and risk management standards. Any regulatory framework must recognize that stablecoins are a payments tool, not a banking product or a security, in ensuring proportionate oversight that fosters growth and financial innovation.
Timothy Massad, Director of Digital Assets Policy, Kennedy School of Harvard University
We need a regulatory framework that fosters responsible development of digital assets, rather than enabling speculative activity and abuse, with stablecoins emerging as the most practical application of blockchain technology. The STABLE Act introduces full reserves for tokens and limitations on issuer activities, but it remains substantially weaker than prior negotiated versions. While the Act allows for federal and state chartering, it lacks sufficient federal oversight, creating risks due to weak state standards and an inadequate review process. Stablecoins must maintain true stability without relying on government-backed insurance, requiring national standards and supervision to ensure issuer accountability. A dedicated resolution process is also needed to handle issuer bankruptcy, preventing reliance on corporate bankruptcy law, which fails to address financial crime and sanction evasion risks. Although stablecoin issuers are subject to the Bank Secrecy Act (BSA), transactions can still occur outside of centralized intermediaries, bypassing compliance requirements. Expanding the regulatory perimeter is critical to addressing these gaps, with enforcement mechanisms and penalties necessary for unauthorized stablecoin issuance.
Additionally, decentralization should guide asset classification, distinguishing securities from commodities, which is why I strongly oppose the Financial Innovation and Technology for the 21st Century Act (FIT21). This legislation would create more confusion than clarity, undermining capital markets by blurring the securities vs. commodities distinction. If a digital token represents an investment contract, such as a share of GM stock, it remains a security regardless of how it is sold or transferred, reinforcing the need for precise legislative definitions in the evolving digital asset market.
Discussion
Chairman Steil: Does the crypto spot market lack a clear federal regulator, and what is the impact this has on markets? Would a federal regulatory framework for market structure and stablecoin issuance encourage development with input from legacy financial institutions? Garrison: Yes, it does lack a regulator. DeFi is not contemplated by existing law, with an ambiguous and open legal classification of digital assets as security or as a commodity. This lack of certainty can lead companies to migrate offshore. Other jurisdictions are more ahead than the U.S; Kim: A comprehensive stablecoin framework would provide certainty and clarity, supporting U.S. innovation and leadership while protecting consumers and investors with proactive standards; Ponte: The majority of dollar-denominated stablecoins are issued outside the U.S., with other jurisdictions advancing regulatory clarity. Clear regulations would accelerate financial innovation and promote competition; Jachym: A framework would enable planning and investment while ensuring the U.S. remains competitive as global markets move ahead. Similar to Dodd-Frank reforms, varying international approaches could create cross-border access challenges. Strong U.S. leadership is essential to shape global digital asset regulations and avoid geopolitical obstacles.
Representative Stephen Lynch (D-MA): What additional risks should this Committee consider as it crafts legislation to protect our broader economy and traditional finance system from the volatility and instability of crypto assets? Massad: We do not want banks exposed to the credit risks of the crypto industry, so their involvement should be limited to fee-based services or taking dollar deposits. A comprehensive framework for stablecoin issuers would allow them to manage their own risks, but a firewall between banks and crypto trading platforms would be beneficial. We must address affiliations and deposit concentration, as there are no existing rules on customer concentration. Regulatory clarity must be built step by step, starting with stablecoins before tackling broader market structure issues. There should also be a prohibition on government bailouts of crypto firms.
Representative Huizenga (R-MI): Do you agree that the SEC has not provided clear and consistent standards for digital assets, making it difficult to apply the rules? What additional actions could the SEC take to improve its regulatory approach? Jachym: Absolutely, there has been a complete lack of policymaking, with the SEC relying on regulation by enforcement rather than establishing clear rules. The agency has used an outdated jurisdictional test to classify a wide range of digital assets as securities, an approach that contrasts sharply with the constructive regulatory processes seen internationally. The industry wants to collaborate with regulators to ensure regulatory clarity while preserving U.S. leadership in digital assets. We have worked with global regulators to implement clear and actionable rules, but U.S. consumers remain unprotected, and stablecoins lack proper safeguards, such as a dedicated resolution process; Garrison: The SEC must reset its guidance because the 2019 framework, while well-intentioned, includes over sixty factors without a clear method to weigh them, making it unworkable; Kim: Crypto-related enforcement actions should be paused if they are based on registration violations without allegations of fraud or misconduct.
Representative Waters (D-CA): What are the risks of a Presidential ban on CBDC? Massad: There are lot of pros and cons about a retail CBDC, but we need the Fed to continue doing research and development around digital assets. For digital assets and tokenization to really grow as a sector, the federal payments infrastructure must be geared to handle that growth.
Representative Foster (D-IL): Is the current bankruptcy code adequate for resolving failed stablecoins? All: It is inadequate.
Representative Foster (D-IL): How do you ensure that crypto assets onboarded have not been used for illicit purposes, and how do you track transactions in self-hosted wallets? Jachym: We have a zero-tolerance policy for illicit finance, conducting KYC and AML checks for every onboarded user. Blockchain analytical tools enable real-time monitoring, detection, and prevention of suspicious activity. These tools not only screen all platform transactions but also analyze interactions with centralized intermediaries, including self-hosted wallets owned by customers.
Representative Foster (D-IL): Are anonymity and finality the main barriers to digital asset legislation? Do you agree that stablecoins enabling self-custody and permissionless transactions require legislative protections to uphold decentralization? Jachym: We must consider the $3.5 trillion crypto market, where eighty-five to ninety percent of activity flows through centralized intermediaries like Kraken. Regulation should focus on market structure to ensure clarity; Massad: The industry cannot defend the fact that centralized intermediaries serve as on-ramps for illicit activity, while simultaneously promoting DeFi. They must decide if they are willing to apply BSA compliance to DeFi.
Representative Davidson (R-OH): Do you agree that a gold-backed stablecoin, reflecting the market price of gold and backed by physical custody, provides advantages over traditional stablecoins or bank deposits, such as full reserves and reduced counterparty risk? Jachym: A robust, competitive stablecoin market is essential. The market is dominated by a few key players, limiting competition and innovation. Gold-backed stablecoins should be included in regulatory frameworks, as this sector is evolving rapidly. Other jurisdictions are already implementing stablecoin regulations, requiring global issuers to register in at least one jurisdiction. The U.S. must act now to establish clear rules for issuers.
Representative Davidson (R-OH): Do you think any current bills, like my Token Taxonomy Act, give legal clarity and a bright-line test for digital assets in regard to securities versus commodities? Massad: Other jurisdictions are struggling with whether it is a crypto asset or a financial instrument, but the difference is they have more unitary regulations in other jurisdictions Europe. States need to follow the work New York has done as a regulatory sandbox.
Representative Pressley (D-MA): Why is the CFPB proposal on crypto payments being subject to Electronic Fund Transfer Act important? Massad: We need to have a complete framework of regulation, despite the fact that industry always likes to push back against regulators. We cannot build strong financial markets if we are regulating with a political pendulum swing.
Representative Rose (R-TN): Why are stablecoins superior to traditional settlement rails for domestic B2B transactions, and how can they lower remittance costs for consumers? Ponte: We are a payments company, not a blockchain company, but we recognize the potential of stablecoin technology in shaping the next generation of payment rails. B2B payments will likely be the first area of adoption, as stablecoins provide lower financial costs, better exchange rates, and reduced counterparty risk, making them an efficient, 24/7 settlement vehicle; Kim: Traditional institutions charge five to twelve percent for cross-border remittances, while stablecoins can reduce that cost to one percent or lower.
Representative Rose (R-TN): Would you support a Joint Advisory Commission between the SEC and the CFTC to help harmonize and resolve the jurisdictional overlap? Kim: Absolutely, interagency collaboration and cooperation is critical for a clear delineation of responsibilities, as recognized by the EO establishing the Working Group and your leadership on the BRIDGE Act.
Representative Torres (D-NY): What is the cost of transferring money via conventional payment systems versus crypto or stablecoin networks? How does the foreign exchange rate spread impact this cost? Ponte: The cost of sending money overseas varies widely, but the World Bank average is six percent, with a target of three percent. Depending on the protocol or stablecoin wallet, fees can be as low as one percent. While wallet friction remains, solutions are emerging to improve transaction efficiency.
Representative Torres (D-NY): What impact would stablecoin issuers becoming the largest buyers of U.S. Treasuries have on U.S. debt? Should stablecoins be regulated like banks? Ponte: U.S. Treasuries are increasingly being used as reserve assets for stablecoin issuers. As the stablecoin market grows, net demand for Treasuries could increase, impacting the overall cost of U.S. debt. Unlike banks, stablecoin issuers do not fractionalize reserves or engage in traditional lending, requiring a distinct regulatory framework tailored to their function. A Joint SRO overseeing SEC and Commodity Futures Trading Commission (CFTC) trading could improve communication and coordination; Jachym: While exemptions could be introduced through exemptive relief, a clear statutory framework must be set by Congress to ensure consistent oversight across agencies. Other jurisdictions have already classified crypto assets under a single regulator with a unified framework. To keep pace with global innovation, the U.S. must define clear regulatory tests and jurisdictional lines for digital assets.
Committee Chairman Hill (R-AR): Can you discuss the exemptions digital asset projects currently use to raise money with investors, and what are the principal obstacles? Under current securities laws, could a national securities exchange list Bitcoin and a security together? Garrison: Most digital asset issuers rely on Regulation S, a safe harbor for offshore transactions, which prevents U.S. investor participation, excluding many from the market. For issuers targeting U.S. investors, Regulation D is used, but it limits sales to wealthy investors. The SEC could use its exemptive authority to create a new exemption, similar to Commissioner Peirce’s Safe Harbor proposal. A balanced approach that allows retail investor access while ensuring tailored disclosures and investor protections would be essential.
Representative Timmons (R-SC): How would clear regulatory guidelines impact U.S. economic competitiveness? Ponte: The lack of clear guidance has constrained product design, particularly in determining whether specific tokens qualify as securities. Regulatory certainty would allow non-bank entities like PayPal to compete globally as the next generation of payment rails emerges; Jachym: Legislative clarity would resolve foundational regulatory gaps, particularly in market structure for centralized intermediaries, driving investment and innovation. The absence of clear rules has pushed development offshore, and the U.S. must proactively invest in digital asset leadership.
Representative Riccardo (D-CA): Should there be baseline regulatory standards for state-chartered stablecoin reserves? Ponte: Yes, we support legislation with a state pathway, as stablecoins are a payments business, not banking. A federal and state framework should coexist, ensuring reserve management standards without duplicative regulation; Jachym: Agreed, a federal framework is critical while maintaining minimum state standards. Advancing a market structure bill is essential to providing regulatory clarity for exchanges and issuers.
Representative Stutzman (R-IN): What are the key points in SEC Commissioner Peirce’s Ten-Point Agenda for the Crypto Task Force, and how would they impact digital assets? Garrison: The first two priorities are clarifying digital asset classification under securities laws and defining which activities fall outside federal securities oversight. This would provide clearer SEC guidance, enabling regulated intermediaries to facilitate digital asset trading while ensuring regulatory compliance; Massad: The agenda is thoughtful, but rushing market structure legislation could create instability. Stablecoin legislation should be prioritized first; Kim: The industry is not seeking special treatment, only fair regulatory clarity; Jachym: Staking must be explicitly addressed, as it is a lesser known but crucial component of crypto ecosystems.
Representative Donalds (R-FL): How do stablecoins support U.S. dollar dominance in global markets? Ponte: The U.S. dollar’s role as the global reserve currency is a key economic strength, and most stablecoins are U.S. dollar denominated. As stablecoins enter mainstream finance, we must ensure U.S.-issued stablecoins remain globally competitive. Without clear regulations, non-U.S. entities could dominate the market, weakening U.S. influence; Jachym: Stablecoins enhance efficiency in cross-border remittances, reducing costs and transaction times. The U.S. must lead in setting global standards for both stablecoins and centralized markets.
Representative Donalds (R-FL): What role could self-regulation play in market structure, and how could it provide regulatory clarity? Garrison: Self-regulation has worked well in financial services, with models like FINRA, the National Securities Exchange system, and the NFA. There is no reason why this model could not be applied to the digital asset space.
Representative Casten (D-IL): Do you have thoughts on memecoins? Jachym: Memecoins are sentiment-driven assets, and potential losses vary by investor perception; Massad: If dogecoin had been presented to me at the CFTC instead of Bitcoin, I would not have classified it as a commodity. It likely falls under CFPB oversight, and investor protection is essential.
Representative Nunn (R-IA): Do you see this as a reset opportunity for the CFTC and SEC? How can Congress balance innovation and national security risks while ensuring new technologies are not overburdened? Jachym: Other jurisdictions worldwide have already provided regulatory clarity, while U.S. agencies remain inconsistent. We have had positive international engagements, but domestic enforcement actions have created uncertainty. The SEC and CFTC can continue collaborating while Congress advances a stable regulatory framework this cycle; Kim: Countering illicit finance and protecting national security should remain top priorities. The U.S. must develop public-private partnerships that safeguard national security while maintaining leadership in DeFi. A comprehensive framework for both market structure and stablecoins is necessary to achieve this balance.
Representative Haridopolos (R-FL): How does creating a Joint SRO to oversee digital assets compare to giving the CFTC authority over non-security digital asset spot markets? Massad: A Joint SRO could act faster, as only three votes from Republican Commissioners are needed for regulatory action, whereas Congress requires sixty Senate votes. If there is Administrative and Congressional support, it would be more efficient for regulatory agencies to address this directly. If Congress intervenes, it risks disrupting securities markets rather than resolving key issues; Jachym: Statutory authority is essential to establish foundational rules, grant the CFTC oversight, and develop a comprehensive regulatory regime.