HOUSE FINANCIAL SERVICES COMMITTEE HEARING ON DIGITAL ASSETS
On June 4, the House Financial Services Committee held a hearing entitled, “American Innovation and the Future of Digital Assets: From Blueprint to a Functional Framework.” Witnesses in the hearing were:
- Elad Roisman, Partner, Cravath, Former SEC Commissioner
- Vivek Raman, Founder, Etherealize
- Rostin Behnam, Distinguished Fellow, Psaros Center for Financial Markets & Policy, Georgetown University and Former CFTC Chairman
- Katherine Minarik, Chief Legal Officer, Uniswap Labs, New York, NY
- Timothy Massad, Research Fellow and Director of Digital Assets Policy Project, Mossavar-Rahmani Center for Business and Government, Kennedy School of Government at Harvard University, Former CFTC Chairman
Key Takeaways
- Chairman Hill (R-AR) outlined his support for the CLARITY Act provisions’ providing clarity on asset definitions and classifications, alongside certainty on jurisdictional authority between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). He emphasized the Act’s responsive clarity on what constitutes a security versus a commodity for purposes of SEC and CFTC rulemaking and oversight.
- Committee Republicans supported the Act’s drafted framework as a functional market structure, with tailored disclosure and CFTC oversight of digital commodity spot markets designed to close the current regulatory gap. They highlighted the range of regulatory gaps cited by panelists, from spot market oversight for bitcoin and dollar-backed stablecoins.
- Chairman Hill called for legislative and regulatory certainty to ensure innovation stops moving offshore. Republicans criticized the regulation-by-enforcement approach under the previous administration, with former Chairman Behnam referencing the CFTC’s thirty to forty percent crypto-related enforcement docket, despite lacking jurisdiction.
- Representative Emmer (R-MN) commended the Act’s inclusion of the Securities Clarity Act, establishing that a token is distinct from an investment contract and serving as a cornerstone of the market structure framework. He called for the Act’s inclusion of the Blockchain Regulatory Certainty Act to address uncertainties regarding legal and operational risks for non-custodial entities.
- Representative Huizenga (R-MI) highlighted the Act’s robust requirements, including issuer disclosure requirements, and how transparency is the best form of investor protection. He outlined lock-up periods and limits on insider sales to protect retail investors, clear standards for custody and segregation of customer funds, and listing standards for digital commodity platforms.
- Representative Barr (R-KY) noted that the previous administration, through SAB 121 and joint statements, effectively prevented banks from engaging in the digital asset ecosystem. He stated the CLARITY Act is important because it includes provisions that would cement banks’ ability to responsibly engage with digital asset technology.
- Representative Rose (R-TN) questioned Behnam on whether the CFTC’s experience in overseeing the digital commodity derivatives market would be helpful in exercising jurisdiction over the spot digital market, as provided under the Act. Behnam responded affirmatively, highlighting the CFTC’s understanding of the underlying market.
- Behnam said that joint rulemaking will be needed to ensure coordination and a single set of rules for participants where necessary.
- Behnam discussed the importance of any framework’s inclusion of a reliable self-regulatory organization, alongside comprehensive authority for anti-money laundering (AML), know-your-customer (KYC), and customer identification programs based on existing market participant requirements.
- Democrats, led by Ranking Member Waters (D-CA), questioned whether the Act provisions include provisions substantial enough to mitigate illicit activities using DeFi through AML and KYC requirements.
- Massad cautioned that an expansive exemption for decentralized finance trading protocols could allow transactions in digital versions of securities to be exempt from securities laws. He discussed how the Act does too little to address illicit finance and regulatory arbitrage.
SUMMARY
Opening Statements and Testimony
Chairman French Hill (R-AR)
Currently, there is no federal framework for digital assets, and the SEC and CFTC lack clear jurisdictional boundaries, leaving investors and entrepreneurs with uncertainty and often discouraging innovation in the U.S. This absence has resulted in prolonged confusion and limited protections for American consumers and investors. Companies have asked, and even sued, the SEC for regulatory clarity, while others have moved operations offshore to avoid its regulation by enforcement approach. The CLARITY Act works to provide needed regulatory clarity and establishes a clear exemption pathway for digital commodity projects to raise capital, supports secondary market trading, enables SEC-registered entities to participate in digital commodity markets, and more. Leadership across Committees committed to providing functional rules of the road for the digital asset ecosystem.
Ranking Member Maxine Waters (D-CA)
Republicans are ignoring the dangers of Trump is using the White House for personal profit by selling influence to the highest bidder, even as the crypto industry raises concerns. This rushed, overly complicated Act will increase investor harm in a market where risk already runs rampant. Some of the riskiest activities are broadly exempted, leaving constituents with no recourse when their money vanishes. The SEC has ignored precedent and refused to share its full technical analysis with Democrats, even as Republicans rush to pass the bill before the SEC Chair is invited to testify.
Subcommittee Chairman Bryan Steil (R-WI)
The CLARITY Act will unleash innovation and ensure U.S. dominance in digital assets while protecting consumers from fraud.
Subcommittee Ranking Member Stephen Lynch (D-MA)
Republicans are eager to continue doing the bidding of the crypto industry while conveniently ignoring President Trump’s blatant corruption. The CLARITY Act seems to be the latest agreement among the largest crypto companies on how they would like to be ineffectually regulated.
Elad Roisman, Partner, Cravath, Former SEC Commissioner
The CLARITY Act is a significant step forward in providing needed clarity to the digital status of many tokens, market participants, the digital asset system, and decentralized finance under securities and commodities laws. Digital assets, blockchain, and DeFi are among the most exciting developments in financial innovation. Unfortunately, Congress and regulators have not kept pace, resulting in significant uncertainty around the status and regulation of digital assets, particularly concerning the SEC’s remit. While the SEC has attempted to provide clarity, it is primarily known for enforcement actions, which many view as regulation by enforcement. As Chairman Atkins recently stated, it is a new day at the SEC, with policy now to be made through rulemaking, interpretive, and exemptive authority over ad hoc enforcement. In addition to SEC and CFTC efforts, congressional action is needed. The Act works to provide clarity through statutory definitions and by delineating the jurisdiction of the SEC and CFTC.
Vivek Raman, Founder, Etherealize
Over recent years, U.S. blockchain innovation has been unfairly penalized, underselling its potential and pushing development offshore. The CLARITY Act can reverse that trend by providing needed regulatory certainty, defining investment contract assets, and clarifying SEC and CFTC jurisdiction. Leading institutions like BlackRock, Fidelity, and UBS are already building on Ethereum, the world’s most secure and decentralized settlement layer, with $140 billion in stablecoins, $10 billion in tokenized assets, and institutional-grade financial applications live today, all despite regulatory uncertainty. The Act offers a strong framework for responsible digital asset growth while preserving decentralization defined by open networks with no single owner and resilience through millions of independent validators. For institutions, decentralization means maximum security and minimal counterparty risk. The Act values decentralization and its control and maturity tests.
Rostin Behnam, Distinguished Fellow, Psaros Center, and Former CFTC Chairman
Current U.S. law has a gap in regulation for the non-security digital asset market that has enabled widespread fraud, ranging from minor schemes to major scandals. As digital assets integrate further into traditional finance, concerns around market resiliency and financial stability will grow. A common argument against regulation is that establishing a framework legitimizes digital assets and creates loopholes for bad actors. That argument itself is the loophole because it allowed most of the digital asset market to remain unregulated, leaving American investors vulnerable. I have consistently called for new legislative authority for the CFTC to provide customer protections in the non-security digital asset market. The CFTC’s principles-based oversight model serves its markets well, balancing outcomes-based requirements with flexibility to build transparent, resilient markets. Legislation should ensure a precise balance between the needs of each agency while avoiding unnecessary redundancies. Appropriate funding, including technology and human capital, is essential to meet any legislative mandate. A reliable self-regulatory organization, which has supported both the CFTC and SEC for decades, should be part of any framework. Legislation must provide comprehensive authority for AML, KYC, and customer identification programs based on existing market participant requirements.
Katherine Minarik, Chief Legal Officer, Uniswap Labs, New York, NY
The promise of DeFi is a future where users have more choice and access to the financial system, and do not have to give up custody or control of their own assets to a third party, but the U.S. is at risk of falling behind. Every other major economy, from the EU to the UK to Singapore, has already taken steps to provide regulatory standards in the digital asset industry. In the U.S., regulation by enforcement and the tactics of the last few years have created more uncertainty, not less. Innovation must have space to grow responsibly in the U.S. The Act may not answer every question, and I still have questions, but it does more to protect the public than the status quo and make space for good actors in the industry. The proposed BRCA and FTPA are both companions that fit right alongside the Act.
Timothy Massad, Digital Assets Policy Project, Former CFTC Chairman
The Act provides a capital raising exemption for blockchain systems that are too broad and can be exploited. It contains an expansive exemption for decentralized finance trading protocols that could allow transactions in digital versions of securities to be exempt from securities laws. Provisions rely on decentralization concepts difficult to measure, use weaker control metrics than existing securities law, and call for subjective assessments of value relative to a blockchain. Although the Act gives the CFTC authority over digital commodities trading, that definition appears to cover only a small portion of today’s crypto market; the rest would remain unregulated. The Act also does too little to address illicit finance. At 236 pages, with extremely complicated provisions, it will create endless opportunities for regulatory arbitrage. Lawyers will structure transactions to achieve lesser compliance burdens, which will come massively and immediately.
DISCUSSION
Chairman Hill (R-AR): If Congress were to only enact stablecoin legislation in this session, would it be leaving the door open for more regulation by enforcement for the digital asset ecosystem? Roisman: It is not enough to just work on stablecoins. Market structure is a critical component because it touches every facet, whether a market intermediary, consumer, or issuer. Everyone is asking questions on scope.
Chairman Hill (R-AR): How would the CLARITY Act strengthen the CFTC’s ability to regulate spot markets and protect investors Behnam: A core component of the CFTC’s regulations, driven by core principles, is registration of every entity within the trade cycle, including intermediaries providing customer access, custodians holding assets, exchanges, and ultimately clearinghouses and settlement agencies. The Act takes measures to provide a regulatory framework for digital commodity exchanges, brokers, custodians, and others in the value chain to register with the CFTC. It takes important steps toward providing clarity and transparency to entities that are not currently registered or within the regulatory lens.
Chairman Hill (R-AR): Can you explain how the CLARITY Act reduces uncertainty by clearly defining digital commodities and outlining regulatory jurisdiction? Roisman: It defines a digital commodity as a digital asset that is intrinsically linked to a blockchain system and whose value is based on its use, so people understand they will be under the purview of the CFTC.
Chairman Hill (R-AR): Does the exemption in the CLARITY Act provide more information and more protections to investors than current exemptions available today? Roisman: It depends on the exemptions. But I do think that this provides meaningful information that they are not necessarily getting today, especially since they are tailored to digital assets.
Ranking Member Waters (D-CA): Is there anything in the Act that would absolutely prohibit the President, Cabinet, or members of Congress from owning and controlling crypto? Massad: I agree with you on the risks, and do not know of anything in the Act. On the national security concern, we cannot tell what extent the President is acting in the U.S.’s best interests or promoting personal enrichment.
Representative Huizenga (D-MI): How does the CLARITY Act extend this to create a registration pathway for trading platforms that list and trade digital commodities, and how does it protect market participants? Behnam: The Act uses the core principles of the Commodity Exchange Act (CEA) as the vehicle to register a digital commodity exchange or any other intermediary within the trade cycle, as stated earlier. This would require registration, books and records, surveillance, and information about the individuals running the company. The status quo does not give the CFTC any authority over current exchanges.
Representative Huizenga (D-MI): What does it mean for a blockchain to be mature, and why have its features become an end goal? Roisman: There needs to be an end state for people to feel like they are sufficiently mature enough or decentralized.
Representative Lucas (R-OK): What are the benefits of cross-agency collaboration? Behnam: Many participants invest and get exposure in both markets. It is important to have margining benefits, which would require both agencies to work together to create a rule set, whether a capital requirement or a margin requirement, to reduce some of the cost of investing if the net portfolio is neutral or has less exposure in one area than another. It enables market participants to recognize their balance sheet costs and is a way to synergize the two agencies despite having two different market jurisdictions.
Representative Lucas (R-OK): Would allowing netting mechanisms reduce the capital disincentives that act as barriers to entry for participation in the Treasury market? Behnam: My short answer is yes, but capital requirements are also a cornerstone of market regulation. If done in an efficient way, it can create more flow of capital to markets, which ultimately improves liquidity, shortens spreads, and creates a better ecosystem for Treasury markets; Roisman: Capital is a cornerstone but there is clearly room for improvement.
Representative Lucas (R-OK): Is this bill important? Roisman: Congress needs to step in. This framework is important because it will give clarity to regulators, enable them to work together to set the framework, and allow the ecosystem to fully mature.
Representative Meeks (D-NY): Does the Act include language limiting the substantial investment from foreign entities in Trump’s crypto ventures? Massad: I do not believe it does, and such incorporation would not be difficult.
Representative Stutzman (R-IN): What is the role and purpose of the maturity test for blockchain networks in the Act? Roisman: The maturity test is a critical component to allow issuers for a project to take advantage of the exemption, and to give guidance to regulators on when the end state for that project is considered successful. The exemption under new Section 4A8 of the Securities Act is a thoughtful way to enable projects to access capital and allow ordinary investors to participate, with important customer protections. Purchasers will need to be provided with disclosures, and the SEC will issue rules covering items such as risk factors, information on the economics and requirements on insiders, including limitations.
Representative Stutzman (R-IN): Why does the Act impose higher standards on related persons and affiliates to a digital asset project as it relates to secondary market trading? Roisman: You do not want insiders to have the ability to quickly sell out of positions when others have less information than they do; Raman: The maturity test is an excellent way to distinguish that, and maturity ties back to decentralization. This entire ecosystem is meant to upgrade the financial system and make it safer, more transparent, auditable, and able to regulate.
Representative Scott (D-GA): How will the Act’s different standards for two very similar digital financial products undermine U.S. regulatory consistency? Massad: Areas where there is not clarity include customizing rules such as custody, clearance, and settlement to make them technologically neutral. It is disappointing that the SEC did not address this earlier. Some of the ambiguity also pertains to when a digital asset is not a security. The Act may create confusion and lead to thousands of hours spent by lawyers structuring transactions to minimize compliance burdens. That may include use of the mature blockchain test.
Representative Scott (D-GA): What are the real-world consequences and financial system risks from limited funding at the CFTC? Massad: The CFTC is an agency with significant responsibilities but a very small budget. There is concern about expanding its jurisdiction to cover large, complex crypto markets while it already has responsibility for systemically important clearinghouses.
Representative Lynch (D-MA): How will Americans not be on the hook if a future financial crisis is triggered by the growing involvement of crypto in the banking sector Massad: I agree with your concerns, but the solution is to establish a regulatory framework that minimizes the possibility of a financial crisis. It is difficult to predict where a crisis will emerge, but high leverage, uninformed investors, and regulators lacking sufficient insight and information are key risk factors.
Representative Loudermilk (R-GA): With bitcoin agreed upon by the CFTC and SEC as a commodity as well as under current securities law, would it be possible for exchanges and other trading systems to list bitcoin and a security alongside each other? Roisman: I believe it would be registration with both. The Act’s addition of “innovation” to the SEC’s mission is a valuable change to require the regulator to consider innovation when promulgating rules, allowing regulatory adaptability as new developments emerge.
Representative Barr (R-KY): Should we review our approach in U.S. capital rules to make sure we are not disincentivizing risk-reducing behavior and the use of bank intermediaries? Behnam: It is important for regulators to create incentives through cost of capital to increase participation and liquidity. Much of the review is based on the asset’s historical volatility. While I generally support it, I caution that regulators must conduct the right analysis to ensure history appropriately informs it.
Representative Barr (R-KY): What are some provisions in the Act that cement banks’ ability to responsibly engage with digital asset technology Roisman: I would have to look back at the legislation and get back to you, but I do think it is important for Congress to weigh in on this as a critical part of infrastructure.
Representative Vargas (D-CA): What would happen to all this crypto money if we had a central bank digital currency (CBDC)? Massad: I do not think a lot of the crypto assets that are out there today will ever become a currency like bitcoin. You must distinguish stablecoins pegged to the dollar from a lot of other crypto.
Representative Rose (R-TN): Will the CFTC’s experience overseeing the digital commodity derivatives market be helpful in exercising jurisdiction over the spot digital market as provided under the drafted Act? Behnam: The CFTC is tasked with overseeing the markets and those specific products, but it must also have a good understanding of the underlying commodity itself. Over the years, going back to when Chair Massad was in control and the first enforcement cases arose, the CFTC has developed sharp expertise and a good understanding of the underlying market across different digital tokens.
Representative Rose (R-TN): Regarding Section 109 of the Act, what safeguards would the CFTC likely implement when entering into information-sharing arrangements with foreign regulatory authorities? What measures would be taken to ensure that sharing sensitive information does not compromise U.S. national security or the proprietary business interests of digital asset companies? Behnam: In any engagement with a foreign regulator, it is very surgical and prescriptive in terms of who the agency is dealing with, what the existing relationship is between the CFTC and the non-U.S. agency, and ensuring that they have the appropriate systems, system safeguards, cyber protections, data collection, hardware and software that, if not matches the CFTC’s, exceeds it. There is quite a bit of due diligence done, and this is not unique to crypto. The CFTC and SEC have been doing this for years and are very diligent in making sure foreign regulators are doing what needs to be done to provide confidence that ours can share information with another.
Representative Rose (R-TN): Can you speak to the four joint rulemakings required by the Act and explain why it is essential for the CFTC and SEC to coordinate on these matters? Can you highlight some prior joint rulemakings and explain some of the hurdles that were encountered? Behnam: Joint rulemakings are not unique to the CFTC and SEC. They proliferated after the financial crisis and the passage of Dodd-Frank in 2010, particularly around jurisdictional lines between commodity swaps and security-based swaps. The financial crisis is perhaps the best example, particularly the swap dealer definition, where they had to delineate which swaps were commodity swaps and which were security-based swaps. The challenge is coordination and attempting to promulgate a rule from a statute that may have scant legal precedent. As with digital assets, they were navigating a previously unregulated financial asset class. The Commissions coordinated and drafted joint rules, which is difficult, as it brings together two institutions requiring processes not typical for single-agency rulemakings, but they have historical experience and helps unify them. With issues such as defining tokens and dually registered entities, whether exchanges, broker-dealers, or custodians, joint rulemakings will be needed to ensure coordination and a single set of rules for participants where necessary.
Representative Himes (D-CT): Why is this new Reg A and Reg D-like exclusion created under Propositions 202 and 203, which effectively exempts certain offerings from the Securities Issuance Act, a good idea, given the concerns raised? Massad: This is an exemption for capital raising transactions related to a mature blockchain system. The question is why this is needed. We want people to raise money for this, but could we just address that by looking at disclosure requirements, maybe customizing them, since the fundraising may not meet the requirements we expect of other businesses? Creating an entirely new exception with all the definitions is very problematic. Commissioner Peirce said this type of exception, though not referring specifically to the Clarity Act, can be abused, as companies not truly developing mature blockchains could use it; Behnam: Although I do believe the status quo is not sustainable and something needs to get done, whatever efforts are made need to preserve existing law.
Representative Davidson (R-OH): Can you address the essential nature of disintermediation and self-custody? Is it fair to say that the FTX users who were most protected were those who used the platform but maintained self-custody and control of their property? Minarak: Yes, it is. Self-custody is a critical piece to protect in any market structure legislation or any legislation., with its technology as a safe digital to check those deficiencies of serving those underserved by traditional banking. We now have self-custody technology so you can safely and digitally store your own assets without needing a bank’s approval. We should allow that technology to exist.
Representative Davidson (R-OH): How important is the bright line test outlined in the Act for the market, especially given the advocacy for such a clear standard? Roisman: Commissioner Peirce highlighted a fundamental question that industry continues to grapple with of how to separate the token from the investment contract it may be associated with. Investment contract security tokens are often not securities. What is well-intentioned and thoughtful in the Act is the concept that a digital asset cannot be a security solely because it has a use case on the blockchain, such as access rights or functioning as a tool. It tackles this issue head on and appears to reflect significant input from members, staff, the SEC, and the CFTC. Continued consultation with both the SEC and CFTC is important to ensure its intention.
Representative Beatty (D-OH): What key common-sense investor protection provisions are missing from the Act’s text but would still allow for responsible innovation? Massad: There are quite a few things missing on investor protection. The Act tries to establish CFTC jurisdiction over the spot market in non-security tokens, but the digital commodity definition they would regulate is actually quite narrow. Platforms like Coinbase and Gemini trade seventy to 400 tokens, yet very few of those would be included, raising the question of what happens to the rest. Some may be memecoins or reward points, and arguably not subject to financial regulation, but can they still be listed on the same exchanges, and are they subject to the same rules? That remains unclear. Another basic issue is that if you buy bitcoin on a platform like Coinbase, and your account says you own one or three bitcoin, the law does not require the platform to hold that exact amount of bitcoin, only value equal to it, which could be invested elsewhere. Those seem pretty basic.
Representative Beatty (D-OH): What kinds of safeguards against foreign corruption and money laundering must be included in digital asset market structure legislation? Does the CLARITY Act sufficiently incorporate these safeguards? Massad: The Act does make crypto firms that are subject to a jurisdiction subject to the Bank Secrecy Act (BSA), but we need to go further because crypto assets are transferred on decentralized blockchains, and because we have foreign firms involved in this. Two years ago, Treasury put out a number of suggestions.
Representative Emmer (D-MN): Assuming Congress passes a market structure bill that resolves legal uncertainties for custodial entities, do non-custodial developers and those who never touch user funds, still face potential questions of liability? If so, what kind of effect could that have on developers of protocols and wallets who might otherwise want to build in the U.S.? Minarik: Software developers who never take custody or control of user assets have always been outside the money transmitter regime, which originated decades ago at the state level to address risks from third parties holding customer funds before delivery. Those risks do not exist when custody is never transferred. FinCEN’s 2019 guidance affirmed this principle for DeFi, but despite that guidance and longstanding legal clarity, there have been recent attempts to stretch money transmission laws to apply to developers of non-custodial technology, posing a profound threat and chilling effect on software development.
Representative Emmer (D-MN): What kinds of legal and operational risks are faced without the certainty provided by the Blockchain Regulatory Certainty Act, and what would change if that Act were included in the CLARITY Act? Minarik: The risk today is the uncertainty that comes from a regulator deciding to advance in an enforcement action an argument that the money transmission regime applies to software developers who are non-custodial. We see that as an active risk, which means that all software developers are under threat.
Representative Casten (D-IL): If decentralization involves distributing voting power among UNI token holders, does the fact that the Uniswap Foundation can unilaterally make decisions not weaken any claim of it being decentralized? Minarik: Uniswap Labs is a distinct legal entity from the Uniswap Foundation, but I am fairly certain that the Uniswap Foundation cannot make any unilateral governance changes at all.
Representative Casten (D-IL): Under the Act, would Uniswap be required to screen and verify customer identities, or to disclose information related to ownership, management, conflicts of interest, risk management procedures, policies, and procedures for complying with AML laws? Minarik: No, but we do have other obligations.
Representative Meuser (R-IN): How does the Act expand the role the SEC plays with respect to digital assets? Roisman: It tells them what their lane is and works in conjunction with the CFTC to ensure that there is adequate anti-manipulation, anti-fraud, consumer protections, and investor protections. There is places for them throughout the Act to do joint rulemaking and build upon things long sought in terms of mandatory information to make informed investment decisions.
Representative Foster (D-IL): Does the Act’s exemption for digital collectibles and the SEC’s statement that memecoins are akin to collectibles effectively lead to the complete deregulation of memecoins? Massad: I agree with your logic that it does. The digital commodity definition, which defines what would be subject to the CFTC’s oversight, excludes collectibles, meaning meme coins, and likely excludes a number of other things. When you look at the number of tokens traded on large platforms like Coinbase, we need to do something about it, even if not under the CFTC.
Representative Steil (R-WI): Given the decentralized nature of protocols, would it make sense to subject the protocol itself to a regulatory framework designed for centralized intermediaries? Did the EU’s MiCA framework carve out Defi from the regulatory regimes intended for centralized entities? Minarik: Absolutely not. MiCA did include a DeFi carveout.
Representative Garcia (D-TX): Is the Act ready for markup and floor vote? Behnam: There are imperfections, but it think it is ready for markup; Minarik: Yes; Massad: Absolutely not; Raman: Yes; Roisman: Yes.
Representative Donalds (R-FL): Does the Act strike a balance between collaboration and efficiency? Roisman: While it is never perfect to leave definitions solely to regulators, it provides important guidance that allows SEC and CFTC to work together on critical issues, such as defining digital commodities and regulating these markets in line with congressional intent.
Representative Donalds (R-FL): In addition to clearly defining jurisdictional boundaries, what other guardrails should be imposed to prevent agencies from engaging in another Chokepoint Operation against digital assets? Minarik: Clear definitions of technology itself are important because, over the past several years, the law was stretched to reach technology it simply did not cover. That can be clarified through legislation.
Representative Liccardo (D-CA): If pump-and-dump schemes and rug pulls involving meme coins and NFTs are not regulated by the CFTC under this proposed statute, and if they do not rise to the level of a large criminal enterprise, who regulates that space? What in the Act should address that enormous gap? Behnam: Certain products have traditionally relied on order books and marketplaces, but due to technology and investor demand, new asset types are now traded in ways that resemble exchanges yet remain distinct. While the commodity definition likely captures the largest tokens, covering over seventy to eighty percent of the market or roughly five major tokens, Massad is correct that platforms may list tokens with low value, limited trading, and minimal liquidity, which are more likely to slip through regulatory cracks.
Representative Moore (R-NC): What benefits are there of a regulatory sandbox, and is there any overlap between the policy goals of the CLARITY Act and North Carolina’s Regulatory Sandbox Act? Roisman: The purpose of both is to provide clarity and to promote innovation. I will have to think on other initiatives.
Representative Fields (D-LA): What are the dangers of the self-certification process allowed in the Act, where entities can self-certify their intent to become a mature blockchain system within four years, with only sixty days for the CFTC to review it? Massad: I do not see why we have a structure where they should self-certify. The idea is to facilitate capital raising for these projects, and we can do that without this type of exemption. The real issue is making sure disclosure requirements work and perhaps addressing secondary sales. But with this structure, someone could claim intent to be a mature blockchain and then never reach it.