Amy Klobuchar Asks Obama's Former CFTC Chair About Joint Supervision Of Crypto Regulation With SEC

5 months ago

During a Senate Agriculture Committee hearing prior to the congressional recess, Sen. Amy Klobuchar (D-MN) questioned former Commodity Futures Trading Commission Chairman, Timothy Massad, about cryptocurrency regulation.

Transcript

00:00Thank you very much, Mr. Chair. I'll start with you, Mr. Massett. You talked about the CFTC

00:05having a role and a clear one with regulating digital assets. And then you also talked about

00:13how you and the former Trump chair have suggested doing something where the SEC does some of it

00:22and the CFTC does some of it. Mr. Sexton raised this issue that he's concerned. I don't want to

00:28put words in your mouth, right? But that there would be vagary or two, you know, that are

00:34regulating the same thing. Could you talk about how you think this could work in today's environment

00:39in terms of making those kinds of suggestions or including that in legislation? Because I

00:44found that interesting. Certainly. The first thing is that Mr. Clayton and I were suggesting

00:51that if we were trying to establish jurisdiction over the spot market without

00:57rewriting securities laws, without rewriting the definition of security, that's why we

01:03argued for joint rules. Secondly, this is a different market. And I think we have to recognize

01:12that. It's much more retail than what the CFTC has regulated in the past. And I have great

01:18respect for the agency's abilities and expertise. But we need to keep that in mind. We also need

01:23to keep in mind that this will be an exception, a very big exception in that the CFTC does not

01:29regulate other spot markets. And we don't want that exception to grow. I wouldn't want to see

01:34other constituencies come and say, well, why shouldn't the CFTC regulate this spot market?

01:39And finally, it's an unusual technology in that you are going to have things that start out as

01:45securities and then become commodities. That's the reason why they have to work together. So how would it

01:50work? It would involve some joint rulemaking. It would certainly involve one of the agencies

01:56taking the lead. And I think in terms of implementing rules, enforcing rules, that could

02:02certainly be the CFTC with respect to this digital commodity spot market. I think it should also involve

02:10an SRO, a self-regulatory organization. I have great respect for the work of the NFA. I think that

02:16could be jointly supervised as the Lummis-Gillibrand proposal advocated. So I think it would be a

02:23combination of joint rulemaking, perhaps a joint SRO. You could even have common commissioners. And I

02:30realize that would be a big step. I haven't advocated merger. I'm not advocating merger. But I think

02:36this is an unusual situation that we're in. And this is a technology that is going to have

02:43multiple uses. And it's necessary that we approach it in a way that we have consistency

02:51across the board.

02:53Thank you. Mr. Benham, Mr. Massa just talked about that concern on the retail and how uniquely retail

03:01services in terms of all the people that have purchased this and it's part of their savings. What

03:07specific approaches would you recommend to ensure that innovation in crypto does not come at the

03:13expense of basic safeguards and customer protections for the public? Would there be specific marketing,

03:19disclosure rules? What would you see?

03:21Thanks, Senator. I think it's important to note, and I've said this many times probably before the

03:25committee. Yes, in fact, Chairman Massa, I agree with him. A lot of the market is retail

03:31oriented, unlike the typical CFTC market, which is more institutionally oriented. But we have to

03:37look really at the asset itself as opposed to the constituency that's investing. Commodities versus

03:44securities are regulated in very different ways. Securities are regulated in a way to bridge

03:47information gaps between an issuer of security and investor because you have centralized individuals

03:54and audited financial statements that need to be disclosed to investors. That is not the case with

03:59commodities. So I don't think you're going to need to build. And quite frankly, I don't think you can build

04:04an investor disclosure regime at the CFTC like you have one at the SEC because you can't simply

04:11disclose something about Bitcoin that you can about a share of a stock. Second, I advocated this. I said this in

04:18my testimony. Yes, the CFTC will absolutely need to increase its ability to get information out about the risk of

04:26loss associated with investing in digital assets. The CFTC has a very well built

04:31out customer education program. But I believe the committee should think about

04:35investing in that program to further. Thank you. And I'll get more from you

04:39personally. So thank you for your ideas. Just one last question, Mr. Massad. In considering any

04:45legislation to regulate these digital markets, we can't ignore the numerous ways that

04:51President Trump has sought to profit from digital assets and influence. His Trump meme coin offers a

04:57non-transparent backdoor for those seeking presidential favors or attention, including the

05:02recent crypto dinner he sponsored that put money directly in his pocket. His World Liberty Financial

05:09issued stablecoin, USD1, only recently entered the market, but it has already skyrocketed to be one of the

05:17top five stable coins. What effect do these activities have on the crypto industry and on efforts to

05:23regulate it? And as you and I seem to agree in my opening in your comments that this has to be part of

05:30any regulation. I think it's a black eye for the industry. And I know a number of people in the

05:36industry that have expressed that but are afraid to speak out. And I think it gives the wrong impression

05:42of what this sector is about. And that's why it's so important to address it through rules on

05:49conflicts, divestment, and so forth. And I hope also I can come back on the disclosure point later.

05:56Well, I'm sure I'll have a second round or someone else. Thank you. One of my colleagues will ask you.

06:00Thank you. Thank you.

Amy Klobuchar Asks Obama's Former CFTC Chair About Joint Supervision Of Crypto Regulation With SEC

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