Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, delivered the following opening statement at a full Committee hearing entitled, “The Future of Digital Assets: Providing Clarity for the Digital Asset Ecosystem.”
Good afternoon. Last week, Republicans posted a bill that would rewrite our nation’s securities and commodities laws. Committee Democrats are taking a serious and thoughtful look at this piece of legislation. However, the bill is 160 pages long, highly complex, and was only made public about a week ago. Any bill that would so dramatically overhaul our nation’s capital markets must be worked on collaboratively with the Minority. We also need the analysis and views of our independent regulators, the Administration, and stakeholders on the implications of this legislation.
With that said, I have some initial concerns I’d like to discuss today. For starters, I am particularly worried that the Republican bill would allow crypto firms that are currently being sued for violating our securities laws to continue doing business through provisional registration. We witnessed last year when disgraced FTX CEO Sam Bankman-Fried defrauded millions of customers, and now the SEC is taking actions against firms like Binance and other firms for potentially similar behavior. The bill appears to halt any enforcement actions by the SEC against crypto firms, even when they have committed fraud. This provisional registration could reward bad actors with a “get out jail free” card and allow them to continue harming consumers and investors.
We also know that FTX illegally commingled customers’ funds to make undisclosed investments and to trade against its own customers. The SEC has ramped up its enforcement against other crypto firms for this same misconduct. Broker-dealers today are, and have been for decades, prohibited from commingling customer assets. So, I wonder why Republicans would legitimize this illegal practice for crypto firms and allow customer funds to be put at risk.
Another point I’d like to raise is that three crypto firms recently received approval to operate legitimately under our securities laws. Franklin Templeton received approval to offer a money market fund on the blockchain, O-T-C Markets received approval to trade crypto securities, and Prometheum, of which the CEO is our witness today, received approval to custody and trade crypto assets.
As SEC Chair Gensler has repeatedly said, the door is always open for crypto companies to register with the SEC. Despite the claims of some in the industry, our securities laws—which have worked for every other industry for 90 years—can also work for crypto firms.
Turning to the stablecoin bill that was also noticed for this hearing, I am encouraged by the legislative progress being made. That said, while Republicans have heeded a few of our concerns, there are still major red flags, including the bill’s lack of diversity and inclusion protections, weak consumer protections, and wholly insufficient oversight by the Fed of state-chartered stablecoin issuers. So, I look forward to returning to the negotiating table to finish what we started last Congress. I do believe that Mr. McHenry and I have gotten a long way in dealing with stablecoins, and I’m sorry that it got interrupted somehow, but I’m looking forward to getting back and negotiating to see if we can move stablecoins forward.
Thank you. I yield back.
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