Sam Liccardo Asks Witness: Is The FTC Currently ‘Equipped To Regulate’ Digital Assets?

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During a House Financial Services Committee hearing prior to the congressional recess, Rep. Sam Liccardo (D-CA) questioned Rodrigo Seira, a Special Counsel at Cooley LLP, about the Federal Trade Commission’s ability to regulate digital assets.

Transcript

00:00California. Mr. Liccardo is recognized for five minutes. Thank you Mr. Chair and

00:04thanks to all the witnesses for helping to guide us and inform us. Mr. CRI, I

00:12appreciate the fundamental concern I think that all the witnesses have

00:19shared which is a need for regulatory clarity and you point out in your

00:24written testimony, I think you've said something similar verbally that current

00:29securities disclosure rules are really focusing on irrelevant information and in

00:34your written testimony you identify what you believe might be relevant as we

00:38think about crypto regulation, governance mechanisms, network design, tokenomics,

00:44which I can't say I fully understand but I look forward to getting up to speed on,

00:47cybersecurity, network utility of assets. Is the CFTC equipped to regulate the

00:54disclosure of those features of a digital asset to ensure that those disclosures

01:04are full and fair and accurate? Thank you for your question. I think the the core

01:10point that I'm trying to get across is the securities laws framework are designed

01:14under the premise that the value and existence of a security is dependent on

01:19an issuer and in many contexts for tokens that relate to decentralized networks

01:25where there's no issuer that's controlling the token that premise is

01:29false and it's not servicing the right information. I think we would have to

01:32update the disclosure regimes under either the SEC or the CFTC to be able to

01:36fully account for this but the issuer centric model is has a wrong focus and the

01:42wrong approach to really get at what consumers of these digital assets need to

01:47be protected. And so regardless then and I certainly understand appreciate the

01:55point you're making CFTC would need substantial I mean this is not the same

02:00as regulating pork bellies clearly it would need perhaps more expertise more

02:07staff etc is that right? I think that's right the CFTC has not historically

02:14regulated retail markets it's been more of a regulator of sophisticated markets but

02:18I think with the right funding and the right team I don't see a reason why they

02:24wouldn't be able to do it. Ms. Smith I also want to express my appreciation that

02:29Wilmer has taken what I regard to be an ethical response to the

02:35administration's efforts to force law firms to capitulate. Thank you for to your

02:41firm and I appreciate your call for regulatory clarity and and I would agree

02:45that we don't want regulation by litigation. We have seen though in just

02:50the last 24 hours this was earlier suggested announcement from the deputy

02:54attorney general that the national cryptocurrency enforcement team would be

02:59disbanded. We had earlier announcements from the Department of Justice that the

03:04market integrity major fraud unit would no longer handle criminal cases

03:08involving crypto. Is it fair to say that there are significant criminal uses of

03:15cryptocurrency that we should be concerned about? I think that there may be

03:24criminal uses in crypto but there's criminal uses in all types of financial

03:29markets. You say there may be you don't believe that there are criminal uses

03:34today of cryptocurrency? There are some criminal uses but my broader point is

03:42that they're not unique to crypto. Agreed but there are certainly aspects of

03:47crypto particularly with regard to anonymity that may facilitate criminal

03:50activity more easily. Is that fair to say? I'm not sure if I would agree with that

03:56statement. For example North Korean hackers using tornado cash just to take one of many

04:02examples. Anonymity is in fact a tool that helps criminals. Is it not? It is a factor but on the

04:12other hand there has been instances where there has been hacks and the hackers have

04:16been identified because of the blockchain transactions. And undoubtedly if there are

04:22criminal uses or perhaps fraudulent uses which maybe may cross over the line to

04:32criminal activity a rug pull pump and dump scheme that's clearly intended to defraud.

04:37Someone should investigate and prosecute those criminal cases shouldn't they?

04:44Yes those cases should be prosecuted. And SEC, CFTC, none of those agencies have

04:49criminal prosecutorial authority do they? I don't believe so. And so it would have to

04:58fall on the DOJ. Justice Department would not? Yes or perhaps other regulators. Well we need

05:05Department of Justice to step up. All right thank you no further questions.

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