[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                  AMERICA ON ``FIRE'': WILL THE CRYPTO
                 FRENZY LEAD TO FINANCIAL INDEPENDENCE
                AND EARLY RETIREMENT OR FINANCIAL RUIN?

=======================================================================

                             HYBRID HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON OVERSIGHT
                           AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 30, 2021

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-35
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
45-360 PDF                 WASHINGTON : 2021                     
          
----------------------------------------------------------------------------------- 

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           PETE SESSIONS, Texas
DAVID SCOTT, Georgia                 BILL POSEY, Florida
AL GREEN, Texas                      BLAINE LUETKEMEYER, Missouri
EMANUEL CLEAVER, Missouri            BILL HUIZENGA, Michigan
ED PERLMUTTER, Colorado              ANN WAGNER, Missouri
JIM A. HIMES, Connecticut            ANDY BARR, Kentucky
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
JUAN VARGAS, California              TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey          LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam            WARREN DAVIDSON, Ohio
CINDY AXNE, Iowa                     TED BUDD, North Carolina
SEAN CASTEN, Illinois                DAVID KUSTOFF, Tennessee
AYANNA PRESSLEY, Massachusetts       TREY HOLLINGSWORTH, Indiana
RITCHIE TORRES, New York             ANTHONY GONZALEZ, Ohio
STEPHEN F. LYNCH, Massachusetts      JOHN ROSE, Tennessee
ALMA ADAMS, North Carolina           BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas
MADELEINE DEAN, Pennsylvania         WILLIAM TIMMONS, South Carolina
ALEXANDRIA OCASIO-CORTEZ, New York   VAN TAYLOR, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
              Subcommittee on Oversight and Investigations

                        AL GREEN, Texas Chairman

EMANUEL CLEAVER, Missouri            TOM EMMER, Minnesota, Ranking 
ALMA ADAMS, North Carolina               Member
RASHIDA TLAIB, Michigan              BARRY LOUDERMILK, Georgia
JESUS ``CHUY'' GARCIA, Illinois      ALEXANDER X. MOONEY, West Virginia
SYLVIA GARCIA, Texas                 DAVID KUSTOFF, Tennessee
NIKEMA WILLIAMS, Georgia             WILLIAM TIMMONS, South Carolina, 
                                         Vice Ranking Member
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 30, 2021................................................     1
Appendix:
    June 30, 2021................................................    37

                               WITNESSES
                        Wednesday, June 30, 2021

Goldstein, Alexis, Director, Financial Policy, Open Markets 
  Institute......................................................     6
Hammer, Sarah, Managing Director, Stevens Center for Innovation 
  in Finance, The Wharton School, University of Pennsylvania.....    10
Parker, Christine, Partner, Reed Smith LLP.......................     8
Su, Eva, Financial Economics Analyst, Congressional Research 
  Service (CRS)..................................................     5
Van Valkenburgh, Peter, Director of Research, Coin Center........    11

                                APPENDIX

Prepared statements:
    Goldstein, Alexis............................................    38
    Hammer, Sarah................................................    51
    Parker, Christine............................................    59
    Su, Eva......................................................    66
    Van Valkenburgh, Peter.......................................    79

              Additional Material Submitted for the Record

Sherman, Hon. Brad:
    Wall Street Journal article, ``Bitcoin Miners Are Giving New 
      Life to Old Fossil-Fuel Power Plants''.....................    90
Van Valkenburgh, Peter:
    Written responses to questions for the record from 
      Representative Davidson....................................    96
    Written responses to questions for the record from 
      Representative Emmer.......................................    99

 
                AMERICA ON ``FIRE'': WILL THE CRYPTO 
               FRENZY LEAD TO FINANCIAL INDEPENDENCE.
              AND EARLY RETIREMENT OR FINANCIAL RUIN?

                              ----------                              


                        Wednesday, June 30, 2021

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Al Green 
[chairman of the subcommittee] presiding.
    Members present: Representatives Green, Adams, Tlaib, 
Garcia of Illinois, Garcia of Texas, Williams of Georgia; 
Emmer, Loudermilk, Mooney, Kustoff, and Timmons.
    Ex officio present: Representative Waters.
    Also present: Representatives Sherman, Davidson, and 
Gonzalez of Ohio.
    Chairman Green. Good morning, everyone. I am Congressman Al 
Green, and it is my honor to call the Oversight and 
Investigations Subcommittee to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, Members of the full Financial Services Committee who 
are not members of this subcommittee are authorized to 
participate in today's hearing. And I would like to note that 
Mr. Brad Sherman, who is a member of the Full Committee, 
without objection will be accepted as a participant.
    Today's hearing is entitled, ``America on `FIRE':--`FIRE' 
being an acronym for financial independence/retire early--Will 
the Crypto Frenzy Lead to Financial Independence and Early 
Retirement or Financial Ruin?''
    With the hybrid format of this hearing, we will have some 
members and witnesses participating in person and others on the 
Webex platform. I remind all Members participating remotely to 
keep themselves muted when they are not being recognized by the 
Chair. The staff has been instructed not to mute Members, 
except when a Member is not being recognized by the Chair and 
there is inadvertent background noise.
    Members are also reminded that they may participate in only 
one remote proceeding at a time. If you are participating 
remotely today, please keep your camera on, and if you choose 
to attend a different remote proceeding, please turn your 
camera off.
    I now recognize myself for 2 minutes to give an opening 
statement.
    It is my pleasure to open the second in a series of 
Financial Services Committee hearings on issues related to 
cryptocurrency and digital assets. Most of us in this room are 
old enough to remember the financial calamities that cost so 
many, so much: the 2008 mortgage crisis; the Allen Stanford 
Ponzi scheme; and the Bernard Madoff Ponzi scheme. In each of 
these cases, and in others that I haven't enumerated, investors 
and financial institutions suffered severe losses, then sought 
and/or received bailouts from the Federal Treasury. Their 
refrain seems to have been, ``Keep the government out of my 
life until I lose money.''
    So today, we ask, will there be a bailout of digital asset 
investors if their investments' market value drops to zero? If 
we believe that such is not the role of the Federal Government, 
should there be an amount or form of reserves required to 
backstop digital securities should they fail, or, instead, are 
today's investors in digital assets entirely reasonable in 
expecting the Federal Government to provide a backstop in 
certain cryptocurrencies should these digital assets become 
large enough to have a systemic impact on our economy? If so, 
should there be greater Federal oversight and rating agencies 
to evaluate the risk and performance of these digital assets?
    Today's hearing will consider the answers to these 
questions and assess the systemic risk to the economy, as well 
as the risk of loss to individual investors posed by recent 
periods of extreme volatility in crypto assets that are not 
backed by any form of tangible collateral.
    It is now my pleasure to yield to the new ranking member of 
the subcommittee, whom I must congratulate, the gentleman from 
Minnesota, Mr. Emmer. And I do look forward to working with 
you.
    Mr. Emmer. Thank you, Mr. Chairman. I, too, look forward to 
working with you. I appreciate you holding this hearing today, 
and I will give a big thank you to our witnesses for appearing 
before the committee. I look forward to all of your testimony.
    Financial technology and cryptocurrency are the future of 
the global financial system. In general, Fintech lowers the 
barriers to entry to the traditional financial system and 
offers all consumers, no matter where they are, the ability to 
access convenient financial services at low competitive costs.
    Cryptocurrency is no exception, as we have seen from the 
huge consumer demand for these innovative assets backed by 
technology that is permissionless, open, and private. 
Cryptocurrency allows people to transact with each other in 
real time across borders for very little cost in a way that is 
so transparent and verifiable, that it maintains more trust 
than traditional financial transactions with a third-party 
intermediary.
    Most importantly, cryptocurrency and blockchain technology 
unlock access to opportunity. The open-source nature of these 
technologies offers millions of Americans the opportunity to 
study the underlying code, develop blockchain projects, and 
launch their own businesses, all without having to ask anyone 
for permission. That is an incredible opportunity.
    Over the last few years, I have been fortunate to meet with 
many great crypto and blockchain innovators. The common refrain 
during our discussions is that they so badly want to develop 
their new crypto and blockchain ideas right here in the United 
States, but they don't, because of continuing uncertainty with 
Federal regulation and, perhaps more importantly, the lack of 
enforcement of existing laws and regulations. They are afraid 
to launch new projects that, for example, might classify them 
to be a, ``money transmitter,'' even though their work has 
nothing to do with money transmission.
    Still, the thought of having to comply with an overly 
burdensome State-based money transmission licensing system in 
the United States is too much of a challenge for these 
entrepreneurs to be worth their time and their investment, so 
they head overseas where the regulatory compliance is more 
streamlined.
    I have also been told by two co-founders of a company, who 
are in the midst of developing a new blockchain network, that 
they wanted to hire American developers, but because there 
isn't a streamlined process at the SEC to determine, what is a 
security, they couldn't pay American developers with their 
token. So, they actually went out and hired a team of 
developers in Europe instead, where they can confidently comply 
with existing regulation.
    As I mentioned, Fintech and cryptocurrencies are the future 
of finance, but we are missing out as a country because 
American entrepreneurs are still unsure of how to navigate our 
existing regulatory system. This means high-tech jobs are going 
overseas, and capital formation opportunities for everyday 
Americans are being missed, all part of the chilling effect 
that comes when we do not answer the questions that industry 
leaders and consumers are begging for, questions like: what 
digital assets are a security; what digital assets are a 
commodity; and what digital assets are a currency? Answering 
these questions will keep innovation here in America and unlock 
new opportunities for every American to access.
    To conclude, let's be clear that these things are already 
regulated, but we need clarity in application and enforcement 
of the existing laws and regulations. There are also areas 
where we can and should streamline our regulatory framework to 
ensure that we realize and benefit from crypto investment and 
innovation right here in the United States. I look forward to 
learning from the witnesses how we can address these 
challenges, and I yield back the remainder of my time.
    Chairman Green. The gentleman yields back. The Chair now 
recognizes the gentleman from California, Mr. Sherman, who is 
also the Chair of our Subcommittee on Investor Protection, 
Entrepreneurship, and Capital Markets, for 1 minute for an 
opening statement.
    Mr. Sherman. Thank you so much for this time. Those in the 
cryptocurrency space are naturally pro-crypto. Their fortunes, 
their relevance, and their fame depends upon the success of 
cryptocurrency. Cryptocurrency is something you can bet on, but 
if people want to have the animal spirits to take risks, I 
would prefer them to invest in equity markets to support the 
building of American companies, or the California lottery to 
support the schools in my State. Cryptocurrencies are highly 
volatile, so one person makes a million dollars and retires at 
age 45 and loses $100,000, Coinbase makes money, and one 
millionaire goes on TV and says how wonderful it is, but nine 
others do not retire in dignity, but instead become eligible 
for Medicaid.
    Cryptocurrencies can ultimately be successful only if they 
are successful currencies, and evading the Know Your Customer 
(KYC) rule is the one thing the cryptocurrencies have as an 
advantage to the U.S. dollar. Cryptocurrencies have the 
political support of the patriotic anarchists who are rooting 
for tax evasion. I hope we shut it down.
    Chairman Green. The gentleman's time has expired.
    The Chair now recognizes the Chair of the full Financial 
Services Committee, the gentlewoman from California, Chairwoman 
Waters, for an opening statement.
    Chairwoman Waters. Thank you very much, Chairman Green. 
Congress and regulators face many challenges as we grapple with 
how to best regulate cryptocurrencies, including cryptocurrency 
issuers, exchanges, and investments. This committee is 
committed to providing not only more transparency in this 
minimally-regulated industry, but to ensuring that appropriate 
safeguards are in place, and so we have begun a thorough 
examination of this marketplace.
    Today, I look forward to hearing from our panel about the 
risk of fraud and market manipulation that can hurt retail 
investors and regular consumers. Furthermore, I look forward to 
learning about the systemic risk presented by hedge funds 
rushing to invest in highly-volatile cryptocurrencies and 
cryptocurrency derivatives. So, thank you, Chairman Green, for 
convening this hearing today, and I yield back the balance of 
my time.
    Chairman Green. Thank you, Madam Chairwoman.
    The Chair now recognizes the Vice Chair of the 
subcommittee, Representative Williams of Georgia, for 1 minute 
for her opening statement.
    Ms. Williams of Georgia. Thank you, Mr. Chairman, and thank 
you to all of our witnesses for joining us today for this 
critical conversation. Often in Congress, it is up to us to 
write the rules of the road while the road is being built. This 
rings especially true when we talk about the rapid development 
of digital assets. We have to be sure that the legislative 
regulatory frameworks governing digital assets keep up with the 
pace of innovation. What is at stake is ensuring that financial 
innovation is appropriately serving all of the people. The 
people of Georgia's 5th District want financial services that 
are responsible and help them improve their lives, and it is 
our responsibility to make sure that any financial innovations, 
including digital assets, meet that bar. I look forward to our 
discussion today, Mr. Chairman, and I yield back the balance of 
my time.
    Chairman Green. The gentlelady yields back, and thank you, 
Ms. Williams. It is now my honor to welcome each of our 
witnesses, and I am pleased to introduce our panel: Eva Su, a 
Financial Economics Analyst for the Congressional Research 
Service; Alexis Goldstein, the director of financial policy at 
the Open Markets Institute; Christine Parker, a partner at Reed 
Smith LLP; Sarah Hammer, managing director of the Stevens 
Center for Innovation in Finance at the Wharton School of the 
University of Pennsylvania; and Peter Van Valkenburgh, the 
director of research at Coin Center. Welcome to each of you, 
and thank you for being here today.
    The witnesses will be recognized for 5 minutes each to give 
an oral presentation of their testimony. Once the witnesses 
have finished their testimony, each Member will have 5 minutes 
within which to ask questions.
    For the witnesses in the hearing room, on the table in 
front of you is a timer that will indicate how much time you 
have left. When you have 1 minute remaining, a yellow light 
will appear. I will ask you to be mindful of the timer, and 
when the red light appears, to quickly wrap up your testimony 
so that we can be respectful of both the other witnesses' and 
the committee members' time. And without objection, your 
written statements will be made a part of the record.
    Ms. Su, you are now recognized for 5 minutes to give an 
oral presentation of your testimony.

STATEMENT OF EVA SU, FINANCIAL ECONOMICS ANALYST, CONGRESSIONAL 
                     RESEARCH SERVICE (CRS)

    Ms. Su. Thank you. Chairman Green, Ranking Member Emmer, 
and members of the subcommittee, thank you for the opportunity 
to testify today. My name is Eva Su, and I am an analyst in 
financial economics at the Congressional Research Service 
(CRS), focusing on capital markets and securities regulation. 
The CRS provides Congress with analysis that is authoritative, 
confidential, objective, and nonpartisan. Any arguments 
referenced in my written or oral testimony are for the purposes 
of informing Congress, not to advocate for a particular policy 
outcome.
    In recent years, financial innovation in capital markets 
has fostered a new asset class, digital assets, and introduced 
new forms of fundraising and trading. Digital assets, which 
include cryptocurrencies, crypto assets, or crypto tokens, 
among others, are digital representations of value.
    The current regulatory landscape for digital assets is 
perceived by certain industry observers to be fragmented. 
Multiple agencies apply different regulatory approaches to 
digital assets at the Federal and State levels, regardless of 
the terms used to describe digital assets. Depending on their 
characteristics, some digital assets are subject to securities 
laws and the regulations that are designed to protect investors 
and maintain fair, orderly, and efficient markets, and 
facilitate capital formation. Others, such as Bitcoin and 
International Securities Services Association (ISSA), are not 
considered securities and, generally, not directly subject to 
those requirements.
    The Securities and Exchange Commission is the primary 
regulator overseeing digital assets, securities offerings, 
sales, and investment activities. My testimony focuses on 
issues related to digital assets securities regulation.
    Digital assets' increasing presence in capital markets 
raises policy questions regarding whether changes to existing 
laws and regulations are warranted, and if so, when such 
changes should happen, what form they should take, and which 
agencies should take the lead. The current innovative 
environment is not the regulatory regime's first encounter with 
changing technology. In the past, some technological 
advancements have led to regulatory revamps, whereas others 
were dealt with through the existing regime. Regulatory 
oversight generally strives to balance the need to foster 
financial innovation with objectives to ensure market integrity 
and investor protection as well.
    In general, policymakers contending with major financial 
innovations have historically focused on addressing risk 
concerns while tailoring a regulatory framework that was 
flexible enough to accommodate evolving technology.
    Current developments that raise policy issues include, 
first, digital asset exchanges. Some industry observers 
perceive digital asset trading platforms as functional 
equivalents to securities exchanges in buying and selling 
digital assets. These platforms are not subject to SEC 
regulation, potentially making them less transparent and more 
susceptible to manipulation and fraud.
    Second, digital asset custody. Custodians provide 
safekeeping of financial assets. Digital assets present 
custody-related compliance challenges because custodians face 
difficulties in recording ownership, recovering lost assets, 
and providing audits, among other considerations.
    Third, digital asset exchange traded funds (ETFs) are 
pooled investment vehicles that gather and invest money from a 
variety of investors. ETF shares can trade on securities 
exchanges like a stock. The SEC has not yet approved any 
digital asset ETFs because of market manipulation and fraud 
concerns.
    Fourth, stablecoin. Stablecoin is a digital asset designed 
to maintain a stable value by linking its value to another 
asset or a basket of reserve assets, like Facebook Diem, 
formerly known as Libra and Tether. In policy discussions, some 
suggest applying ETF regulatory frameworks to certain 
stablecoins. Others argue for more disclosure of the underlying 
reserve assets to expose potential deceptive activities.
    That concludes my testimony. I look forward to your 
questions. Thank you.
    [The prepared statement of Ms. Su can be found on page 66 
of the appendix.]
    Chairman Green. Thank you, Ms. Su.
    Ms. Goldstein, you are now recognized for 5 minutes to give 
an oral presentation of your testimony.

STATEMENT OF ALEXIS GOLDSTEIN, DIRECTOR, FINANCIAL POLICY, OPEN 
                       MARKETS INSTITUTE

    Ms. Goldstein. Chairman Green, Ranking Member Emmer, and 
distinguished members of the subcommittee, thank you for 
inviting me to testify today. I am the director of financial 
policy at the Open Markets Institute, where my work focuses on 
financial regulation and consumer protection. Previously, I 
worked as a computer programmer at Morgan Stanley in electronic 
trading, and at Merrill Lynch and Deutsche Bank as a business 
analyst serving on the equity derivatives trading desks.
    Earlier this year, the blowup of a single-family fund, 
Archegos Capital, led to $10 billion in bank losses after the 
firm's bets on about a dozen total return swaps imploded. 
Because these sorts of derivatives aren't currently reported to 
the Securities and Exchange Commission on Form 13F, banks and 
regulators alike were entirely in the dark about Archegos' 
positions until it blew up. The extent of hedge fund and family 
involvement in cryptocurrencies lives in a similar regulatory 
blind spot.
    Chairwoman Waters, to her credit, has introduced discussion 
draft legislation to try and address some of these concerns 
with Form 13F, and I believe that Congress and regulators 
should also consider requiring that hedge funds report their 
cryptocurrency positions on this form. If a majority of hedge 
funds with billions of dollars in assets under management begin 
to hold significant positions in crypto, as certain surveys 
indicate they are interested in doing, it may produce dire 
risks for financial systemic risk, and it may induce future 
crises as volatile swings in the cryptocurrency markets could 
lead to things like forced liquidations of their assets.
    In addition to hedge funds, large, too-big-to-fail banks 
and Silicon Valley venture capital firms are also a growing 
presence in crypto. Venture capital firms have already invested 
$17 billion in crypto firms so far this year, which is more 
than 3 times what they invested in all of 2020. If you combine 
this with the fact that some cryptocurrencies have a majority 
of their supply held by a very small number of people, it 
raises concerns around concentration. For example, as of 
February, the top 20 largest Dogecoin addresses held half of 
the cryptocurrencies' entire supply.
    There are also broad investor and consumer protection 
concerns in cryptocurrency that I have personally observed as a 
user of crypto exchanges and DeFi platforms. In traditional 
financial markets, barring a serious liquidity crisis, if you 
buy something, you can generally assume you can sell it back, 
especially with a stock. But on DeFi protocols, like Uniswap 
and SushiSwap, anyone can upload a new cryptocurrency token, 
and anyone can add a liquidity pool for it, including malicious 
actors who design tokens that can be bought but never sold. 
These so-called honeypot tokens are so prevalent that some DeFi 
protocols include an explicit warning about them on their 
website. Some crypto investors try to read the smart contracts 
or code of new coins to look for common pitfalls and avoid 
scams, but this is an extremely high bar for non-programmers.
    Some of the more concerning areas I have seen in DeFi are 
on platforms that offer derivatives. Frankly, it reminds me of 
the over-the-counter derivatives marketplace before the Dodd-
Frank Act--I worked in as a banker in the late 2000s--with 
things like the U.S.-based dYdX, OPEN, which offers options on 
cryptocurrency, and Ribbon Finance, which offers structured 
products based on crypto. Recently, CFTC Commissioner Dan 
Berkovitz said in his speech that unregistered DeFi exchanges 
may not be legal under the Commodity Exchange Act.
    I have also used a DeFi protocol called PancakeSwap, which 
often advertises very eye-popping annual percentage rates in 
exchange for locking a pair of cryptocurrencies into the 
platform's liquidity pools. Annual percentage rates (APRs) are 
probably not the right metric to attempt to use for what the 
crypto community calls yield farming, as the rates can vary 
wildly even on a single day.
    But just to give you one example, in early May, PancakeSwap 
posted a tweet saying that you could get an over 100,000-
percent APR if you locked in your Dogecoin on PancakeSwap. They 
later stated that special rate was only there for 13 days, 
which is questionable to use for an APR. Users complained that 
the rate offered was nowhere near what they were advertising on 
Twitter, yet they tweeted again the same day that, ``The longer 
you wait, the less free money you get.''
    I believe that Congress should continue to examine if there 
are regulatory gaps that require new legislation in order to 
ensure consumer and investor protection in crypto and avoid 
systemic risk. Regulators should continue to monitor the space 
and ensure compliance with existing laws. Thank you. I look 
forward to your questions.
    [The prepared statement of Ms. Goldstein can be found on 
page 38 of the appendix.]
    Chairman Green. Thank you, Ms. Goldstein.
    Ms. Parker, you are now recognized for 5 minutes to give an 
oral presentation of your testimony.

     STATEMENT OF CHRISTINE PARKER, PARTNER, REED SMITH LLP

    Ms. Parker. Thank you. Thank you, Chairman Green, 
Chairwoman Waters, Ranking Member Emmer, and members of the 
subcommittee for the opportunity to appear before you today, 
and thank you to the subcommittee staff for their hard work in 
putting together this hearing. My name is Christine Parker, and 
I am a partner in the New York office of Reed Smith. I am 
actually joined today by my colleague, Trevor Levine, who was 
kind enough to brave the heat to come to D.C. with me.
    My practice focuses on regulatory enforcement and 
transactional matters related to commodities, derivatives, and 
digital assets. I routinely advise both regulated and 
unregulated digital asset market participants in connection 
with a number of different Federal and State regulatory and 
prudential regimes.
    At the outset, I want to note that there are a lot of use 
cases for blockchain and digital ledger technology, for which 
cryptocurrency serves as the fuel. I urge this subcommittee to 
engage with organizations that are working at the grassroots 
level to establish industry-sponsored, voluntary, self-
regulatory associations for digital asset and crypto markets on 
both a global basis and at the national level, because I think 
there is a lot to be learned from them.
    I also want to point out that if we are going to innovate 
how we regulate these new markets, it really calls for a new 
kind of financial regulator. At a minimum, we need financial 
regulators that reflect the diversity of retail investors who 
are active or want to become active in the crypto markets. As 
advocates for responsible innovation, I don't think the crypto 
industry has been very good at pushing forward diverse voices, 
but we can, and we should, and we will do better on that front.
    However, we are here today to talk about the retail 
investors who are training in the crypto markets, and I know 
there has been a lot of focus on the recent volatility in these 
markets and what does that mean for Congress, for the 
regulators, and for retail investors.
    Just a quick point: The volatility in the crypto markets, I 
think, is not solely attributed to their lack of regulation. I 
will point out that crypto exchanges, such as Gemini and 
Coinbase, are not regulated like the Chicago Mercantile 
Exchange or the New York Stock Exchange, but they are regulated 
by the New York Department of Financial Services as limited 
purpose trust banks. They are subject to the same Anti-Money 
Laundering (AML) and Know Your Customer (KYC) requirements as 
any other Federal- or State-regulated bank, and the Commodity 
Futures Trading Commission (CFTC) has anti-fraud and anti-
manipulation authority over the purchase or sale of Bitcoin in 
spot and forward trades on these trading markets, and has 
actively used that authority in this space.
    Separately, volatility is not unique to the crypto markets. 
Last April, the crude oil market went negative, and in 
February, natural gas markets were incredibly volatile due to 
Winter Storm Uri.
    And there are products that are offered on CFTC-regulated 
exchanges that are available to retail customers that are based 
on market volatility, so some investors are actually seeking 
out assets that are based on volatility on these very highly-
regulated exchanges. That being said, the question that we are 
really grappling with today is, how do we best protect retail 
customers who are actively trading in the crypto markets?
    I think it is somewhat problematic to just sort of simply 
equate the crypto markets with terrorism, tax evaders, and bad 
actors. Realistically, every member of this subcommittee has a 
law-abiding constituent who enjoys trading crypto, so what is 
in the best interest of this constituent of yours who is 
trading crypto right now? Access to crypto markets that operate 
under a clear regulatory framework with both customer 
protection mandates and opportunities for risk that are 
commensurate with the suitability of the investor is necessary.
    Right now, we have an absurd patchwork of regulatory 
regimes at both the State and Federal level. We have regulation 
by enforcement, interpretation, guidance, interpretive 
guidance, and public statements from regulators. One regular 
trader says that a crypto asset is a currency, another says 
it's a security, and the outcome of that is incredibly harmful 
to retail customers. This lack of clarity stifles innovation in 
the U.S. and, frankly, drives retail customers to foreign 
exchanges. So, how do we better regulate cryptos?
    The CFTC and the SEC should be empowered by Congress to 
move quickly to provide retail investors with a broader array 
of regulated crypto products that are attractive to market 
participants, but come with the robust market oversight of 
these regulatory regimes. This should happen now.
    First, Congress should direct the SEC to immediately create 
clear, workable criteria as to which digital assets are 
securities and, therefore, subject to U.S. securities laws and 
regulations.
    Second, while regulators in New York and Wyoming, in 
particular, have been very crypto-forward regulators and will 
continue to be leaders in this space, Congress needs to pass 
legislation to provide for the Federal preemption of the 
current State-by-State licensing requirements of the direct 
purchase and sale of cryptocurrency. This will ensure that 
these transactions are subject to the level of market oversight 
that we currently have in the futures and securities markets. 
The logical regulator here is the Commodity Futures Trading 
Commission, but you must ensure that you fully fund them so 
they can take on this mandate.
    Thank you for the opportunity to speak today, and I look 
forward to your questions.
    [The prepared statement of Ms. Parker can be found on page 
59 of the appendix.]
    Chairman Green. Thank you, Ms. Parker.
    Ms. Hammer, you are now recognized for 5 minutes to give an 
oral presentation of your testimony.

 STATEMENT OF SARAH HAMMER, MANAGING DIRECTOR, STEVENS CENTER 
 FOR INNOVATION IN FINANCE, THE WHARTON SCHOOL, UNIVERSITY OF 
                          PENNSYLVANIA

    Ms. Hammer. Chairman Green, Ranking Member Emmer, and 
members of the subcommittee, thank you for the opportunity to 
testify today. My name is Sarah Hammer. I am managing director 
of the Stevens Center for Innovation in Finance, and senior 
director of the Alternative Investments Program at the Wharton 
School of the University of Pennsylvania. I also oversee the 
Blockchain Laboratory within the Stevens Center at Wharton. 
Additionally, I am an adjunct professor of law at the 
University of Pennsylvania Law School, where I teach an upper-
level juris doctor course on financial regulation.
    Before I proceed, I would like to note that the views 
expressed here today are my own and not the views of the 
Wharton School or the University of Pennsylvania.
    Blockchain is a shared immutable ledger that facilitates 
the recording of transactions in a network. Today, blockchain 
technology infiltrates and powers a myriad of institutions, 
functions, and assets in the United States and globally. The 
use cases for blockchain are too numerous to cover in detail 
here, but they include decentralized finance, enterprise 
blockchain, cybersecurity enhancements, and even addressing 
climate change.
    The subject of today's hearing is cryptocurrency. At the 
outset, it is worth noting that there is no official public 
data source for cryptocurrency prices, market size, or 
volatility. This lack of data is a significant problem. 
However, unofficial data sources have estimated that the total 
value of the cryptocurrency markets may exceed $2 trillion. 
Investors in cryptocurrency include retail, high-net-worth, and 
institutional investors, such as private funds corporations, 
and endowments. Retail investment in cryptocurrency may give 
rise to particular concerns about investor protection, given 
the possibility of fraud or business failure, the lack of 
disclosure, and the high level of price volatility.
    The Securities and Exchange Commission is charged with a 
tripartite mission of protecting investors; maintaining fair, 
orderly, and efficient markets; and facilitating capital 
formation. At the same time, the SEC faces challenges in 
applying capital markets and securities regulations to 
cryptocurrency. Chief among these challenges is whether the SEC 
has the authority to regulate a particular instrument.
    Currently, the SEC evaluates crypto sales through the lens 
of a test known as the Howey test, which evaluates whether an 
instrument qualifies as an investment contract for the purposes 
of the Securities Act. While the SEC has applied securities 
regulation to dozens of initial coin offerings based on the 
Howey test, there is still a lack of clarity as to whether it 
applies to a number of crypto transactions that currently do 
not comply with SEC registration and disclosure obligations. In 
addition, a number of exchanges that offer trading and crypto, 
including those that meet the definition of a, ``security,'' do 
not register with the SEC. Given this, there is a strong need 
to establish a clear, sufficient, and appropriate regulatory 
framework for cryptocurrency.
    I turn now to the issue of systemic risk. As discussed, the 
value of the cryptocurrency market is estimated to possibly 
exceed $2 trillion, and it is characterized by very high levels 
of price volatility. Additionally, estimates are that more than 
2,000 different cryptocurrencies currently circulate globally. 
For context, estimates of subprime debt prior to the great 
financial crisis are less than $1 trillion.
    Moreover, since no official data source exists for crypto 
markets, financial regulators are at a distinct disadvantage in 
evaluating their regulatory options. Because of the 
infiltration of crypto into so many institutions, functions, 
and assets, the potential risks must be carefully evaluated in 
a coordinated fashion.
    In light of the risks and considerations of crypto, a 
myriad of agencies, States, and international standard-setting 
bodies are implicated. Thus, a key question for regulation is, 
how should we proceed and in what forum?
    Importantly, a government authority already exists that 
could support the development of a clear, sufficient, and 
appropriate framework for regulation of crypto. Established in 
2010 by the Dodd-Frank Act, the Financial Stability Oversight 
Council (FSOC) is the appropriate forum to engage in evaluating 
and addressing potential systemic risks, convening and 
coordinating Federal rulemaking on issues that touch multiple 
agency jurisdictions, and consulting with State and foreign 
regulatory authorities. I believe that by leveraging the 
authorities of the FSOC to support the development of a clear, 
sufficient, and appropriate framework for crypto, we can 
address concerns about fostering innovation, providing 
consistency, establishing global reach, and balancing our 
regulatory objectives. Thank you.
    [The prepared statement of Ms. Hammer can be found on page 
51 of the appendix.]
    Chairman Green. Thank you, Ms. Hammer.
    Mr. Van Valkenburgh, you are now recognized for 5 minutes 
to give an oral presentation of your testimony.

STATEMENT OF PETER VAN VALKENBURGH, DIRECTOR OF RESEARCH, COIN 
                             CENTER

    Mr.  Van Valkenburgh. Chairman Green, Ranking Member Emmer, 
members of the subcommittee, thank you for the invitation to 
speak with you today. My name is Peter Van Valkenburgh. I am 
the director of research at Coin Center, which is an 
independent nonprofit that is focused on cryptocurrency public 
policy.
    The Bitcoin network has been processing transactions for 
longer than Uber has been offering rides. Bitcoin and other 
cryptocurrencies have enabled 3.1 billion transactions in the 
last 10 years, securing over $2 trillion in value. If 
cryptocurrencies were unregulated to this day, would that not 
be an incredible failure of our regulatory system?
    As I will outline, it is not a failure, because over the 
last 10 years, cryptocurrencies have been regulated. Some of 
that regulation, of course, does come from the technology 
itself. The scarcity of Bitcoin, a total supply of only 21 
million, is not preserved by the goodwill and honesty of the 
participants on the network. It is secured by a transparent, 
peer-to-peer accounting technology, a public blockchain that 
makes fraud trivially cheap to detect and absurdly expensive to 
commit.
    But much regulation has also come from the Federal and 
State Governments. The onramps and offramps where people buy 
and sell Bitcoins for dollars and safekeep them are heavily 
regulated. They are State license money transmitters or else 
they are chartered banks and trust companies. Before offering 
any services to Americans, they must prove minimum capital 
requirements, post bonds, and open their doors to yearly 
examinations. They are also classified as financial 
institutions under the Bank Secrecy Act. They must register 
with the Financial Crimes Enforcement Network (FinCEN), know 
their customers, and share the details of suspicious activities 
with law enforcement.
    Cryptocurrencies like Bitcoin and Ethereum are commodities, 
but many crypto assets meet the flexible definition of an, 
``investment contract,'' and are, therefore, securities, which 
means their issuance and their trading are regulated by the 
SEC. Cryptocurrency derivatives are regulated by the CFTC. 
Finally, anyone who markets a cryptocurrency service or tool 
that is deceptive or fraudulent is liable under various laws 
enforced by the CFPB, the FTC, the SEC, the CFTC, and State 
attorneys general.
    And the results of all of this regulation speak for 
themselves. In 2020, only 0.34 percent of all cryptocurrency 
transaction volume involved a criminal sender or recipient. 
Despite several high-profile hacks of overseas exchanges, no 
American exchange has suffered a substantial hack or loss of 
consumer funds. Operators of money laundering exchanges 
overseas have been arrested, sales of unregistered tokenized 
securities have been targeted by SEC enforcement, and criminal 
ransomware rings have had their servers seized and their 
ransoms recovered. All of this has happened by sensibly 
applying existing laws to the cryptocurrency space. We don't 
need new regulations.
    And all of this has also happened while preserving the 
fundamental value of cryptocurrencies as open access platforms 
for financial services and innovation. Unlike any other 
transactions technology that works online, an open blockchain 
network is accessible to people that banks and tech companies 
would rather ignore than serve. With the rise of central bank 
digital currencies from authoritarian nations happening in 
tandem with the rise of Bitcoin, we are at a decision point as 
an advanced technological society. Are we willing to accept 
some risks if it means we can eliminate the choke points to 
economic participation that further inequality and stifle 
innovation, or would we prefer to strengthen those choke points 
and outlaw alternatives in the hopes that a powerful elite will 
smartly choose who should and should not have access to 
powerful tools and volatile markets?
    For every transaction that we want blocked, there is 
another transaction we should celebrate for being unstoppable. 
Yes, there are some criminals making payments on the Bitcoin 
network because banks won't bank them. There are also pro-
democracy activists in Belarus and anti-police violence 
protesters in Nigeria taking donations on the Bitcoin network 
because local banks won't bank them. Nonprofits like Bisol and 
the Feminist Coalition in Nigeria raised millions of dollars in 
Bitcoin donations last year, donations they were forbidden from 
accepting by a corrupt or otherwise uncaring banking sector in 
their respective countries.
    In America, we don't always agree, but no matter what, we 
are tolerant and expect everyone to have the opportunity to 
stand up and fight for their own vision of the good. Crypto 
innovation embodies that aspiration. It is rough around the 
edges but holds some values above all: every node is an equal; 
no one's voice should be censored; and work, rather than 
privilege, is what counts in consensus. Thank you.
    [The prepared statement of Mr. Van Valkenburgh can be found 
on page 79 of the appendix.]
    Chairman Green. Thank you, Mr. Van Valkenburgh.
    I now recognize the Chair of the Full Committee, the 
gentlewoman from California, Chairwoman Waters, for 5 minutes 
for questions.
    Chairwoman Waters. Thank you very much, Mr. Green. Ms. 
Goldstein, earlier this year, PricewaterhouseCoopers released 
their third annual survey of hedge funds in the cryptocurrency 
market. According to the survey, cryptocurrency currently 
accounts for 10 to 20 percent of all assets under management 
for 1 in 7 hedge funds. Over 60 percent of the hedge funds 
surveyed expressed a desire to start investing in 
cryptocurrencies or to accelerate their existing investments in 
cryptocurrencies by the end of 2021. Hedge funds often manage 
funds on behalf of mutual funds, pension plans, and other 
institutional investors which affect millions of regular 
consumers and investors.
    Ms. Goldstein, do you see any systemic risks associated 
with hedge funds investing heavily in cryptocurrencies? And I 
am more interested in this, having just listened to the last 
presenter who talked about the choke point that we should not 
be so concerned about. What do you think?
    Ms. Goldstein. Thank you, Chairwoman Waters, for the 
question. I am very concerned about the presence of hedge funds 
and cryptocurrency. I think we have seen with the Archegos 
meltdown this year that when banks have prime broker 
relationships with hedge funds or family funds, as Archegos 
was, who are doing risky things, it can redound to the 
taxpayer-backed financial system. Credit Suisse lost billions 
of dollars. All of the banks lost some $10 billion. If hedge 
funds get further into crypto, they don't care about direction. 
They will go long. They will go short. They can use leverage. 
There are lots of cryptocurrency exchanges like FTX, and 
Binance, and many others that allow people to use insane 
amounts of leverage, 100 times to 1, and hedge funds are the 
perfect client to use those sorts of leverage.
    So what happens if a huge number of hedge funds, who have 
prime broker relationships with too-big-to-fail banks, all 
happen to be in similar crypto positions, whether it is long or 
short, and there is massive volatility in the market? They may 
have to sell some of their other assets. It may lead to margin 
calls in their non-crypto assets, which could lead to forced 
liquidations and sort of redound to the banks themselves in the 
form of counterparty risks. So, I think--
    Chairwoman Waters. Let me ask you, are there any reporting 
requirements hedge funds must comply with that would provide 
regulators and the general public more transparency regarding 
which hedge funds are most heavily invested in 
cryptocurrencies, and which of these institutional investor 
counterparties may also be exposed to potential risk?
    Ms. Goldstein. Madam Chairwoman, there are not, to my 
knowledge, because cryptocurrency is not currently reported on 
the Form 13F. It is not seen as an ownership interest, so 
regulators are essentially totally in the dark about what hedge 
funds' cryptocurrency positions are, and, I suppose, have to 
rely on the financial press or trying to figure out, based on 
the transactions on the blockchain and de-anonymize certain 
addresses and figure out who are the hedge funds. But there is 
no formalized way for regulators to know how much hedge funds 
are in crypto.
    Chairwoman Waters. Ms. Hammer, you just spoke to this issue 
somewhat. Would you give me your knowledge about what kind of 
oversight do we have now, what agencies have, what 
responsibility, and what should we have?
    Ms. Hammer. Chairwoman Waters, thank you for your question. 
I, too, have concerns about crypto trading by private funds, 
and one of the key issues, as I discussed in my opening 
statement, is transparency and the availability of data. In the 
crypto markets, we have no official public source for data. 
Investors are operating based on online websites. There are 
sometimes disparities over prices and interpretations of what 
volatility may be.
    And in some ways, it harkens back to credit default swaps 
prior to the great financial crisis. That was a market that was 
traded almost exclusively over-the-counter and highly 
unregulated. When the great financial crisis hit, we saw that 
credit default swaps exacerbated the risks, but once we 
regulated them and instituted central clearing counterparties, 
we had an official data source and an oversight regulator such 
that we could identify where the risks lay. I think the same is 
true for crypto.
    And, as Ms. Goldstein said, the issues related to leverage 
and whether it is appropriate or not for some of these assets 
are extremely important. I do believe that, at a high level, 
the authority of the FSOC to convene, to coordinate the 
regulators is crucial because we are talking not just about 
markets issues or private fund issues. We are talking about 
crypto within banks. We are talking about crypto within 
insurance companies and other non-banks, and that can implicate 
taxpayer dollars in a number of different ways. So, in our 
system, the FSOC can convene to coordinate those authorities to 
work together.
    Chairwoman Waters. Thank you very much. I yield back the 
balance of my time.
    Chairman Green. The gentlelady yields back.
    The Chair now recognizes the ranking member of the 
subcommittee, the gentleman from Minnesota, Mr. Emmer, who also 
serves on our FinTech Task Force, for 5 minutes.
    Mr. Emmer. Thank you, Mr. Chairman. This is interesting 
following on the testimony, the questions we just heard. Mr. 
Van Valkenburgh, let's start with this idea that there is a 
need for regulation. When people promise investors wild profits 
from proposed new digital tokens in an initial offering, is 
that regulated?
    Mr. Van Valkenburgh. A promise of future profits reliance 
on the issuer's efforts is basically the Howey test. It is how 
we classify things as investment contracts, and so the SEC 
would probably treat those offerings in all cases as 
securities. They regulate issuance and trading.
    Mr. Emmer. Let me keep going. I want to come back to that 
one, because I want to talk about what the SEC would probably 
do and why that is a problem. When people make bets, again, Mr. 
Van Valkenburgh, on the future price of cryptocurrencies or 
trade with leverage, as we heard referenced, is that regulated?
    Mr. Van Valkenburgh. That is on the future price of an 
underlying commodity of swaps or futures. These are commodities 
derivatives, and the CFTC has jurisdiction over that kind of 
trade and those markets.
    Mr. Emmer. So, yes, it is regulated.
    Mr. Van Valkenburgh. Yes.
    Mr. Emmer. Can companies sell and transmit--and this 
probably goes to the first bit of testimony--cryptocurrency 
without identifying their customers? Is that regulated?
    Mr. Van Valkenburgh. That is heavily regulated, and while 
Representative Sherman said that the one advantage of this is 
avoiding KYC, I have to argue that every U.S. exchange is Bank 
Secrecy Act (BSA)-regulated. They have to know their customers, 
and file suspicious activity reports, and this has been the 
case since at least 2013.
    Mr. Emmer. So, the prices of cryptocurrencies, like 
Dogecoin, have been quite volatile and seemingly susceptible to 
influence by statements from persons and groups, maybe even 
manipulated, as was suggested by one of the opening statements 
here today. Is that regulated, Mr. Van Valkenburgh?
    Mr. Van Valkenburgh. As an open source, open network 
cryptocurrency, Dogecoin likely does not qualify as a security. 
To the extent that line is unclear, Congressman Emmer, you 
introduced excellent legislation last Congress that was 
bipartisan and co-sponsored by Representatives Soto and Khanna, 
that would help clearly delineate that line between securities 
and commodities. But if we assume today that Dogecoin is a 
commodity, it is still a regulated commodity for various 
purposes. Specifically, in the manipulation context that you 
raised, the CFTC has the duty to investigate and prosecute 
manipulation, including at commodity spot markets under their 
Commodity Exchange Act (CEA) authority, Section 6(c)(1), which 
the Dodd-Frank Act added to the Commodity Exchange Act.
    As SEC Chairman Gensler recently testified, there is, in 
some ways, a gap here, because unlike traditional commodity 
spot markets, which are like cattle auctions--I am buying a 
commodity from you, you are selling it to me--these markets 
have much higher volumes and a lot more retail participation. 
So accordingly, it may be appropriate to extend market 
supervision to these entities.
    Another reasonable approach that I think would follow 
Chairman Gensler's recommendations is another piece of 
legislation that you introduced last Congress, the Digital 
Commodity Exchange Act--I'm sorry, former Representative 
Conaway introduced the legislation, but you co-sponsored it. 
And for that, we are grateful because it would create a 
reasonable guardrail-based approach to market supervision for 
places where people are trading these commodities, even at the 
spot market level.
    Mr. Emmer. I would add that I also introduced the 
Securities Clarity Act, which provides clarity for the SEC on 
token issues to swiftly determine when and if a token is a 
security. In the short time we have left, I believe that we do 
have the regulatory framework, the laws in place. People in 
this country don't get to run under the radar if they are not 
complying with KYC and all of the other regulations that are 
out there.
    Would you agree, Mr. Van Valkenburgh, that the real issue 
here is, while we can do some work perhaps as Congress on the 
margins to clean up some of this, the real issue is that the 
application of existing regulation and laws has not been 
consistent, and there has been little enforcement in terms of 
court decisions or things that can give us precedent so people 
in this area know what is right and what is wrong?
    Mr. Van Valkenburgh. I think that is right. There is a 
certain wisdom to our flexible and open standards for investor 
protection in this country, like our securities laws that have 
these broad and flexible standards. However, they only work if 
controversies end up in court and judges make clear rules about 
new application of those laws. And one thing we have seen is a 
replacement of a lot of decisions made by judges acknowledging 
the interest of the parties, with administrative guidance that 
is not always as clear as it could be. But the underlying laws 
are sound and should be applied.
    Mr. Emmer. Thank you.
    Chairman Green. The gentleman's time has expired.
    The Chair recognizes the gentlewoman from North Carolina, 
Ms. Adams, for 5 minutes.
    Ms. Adams. Thank you. Thank you, Chairman Green, Ranking 
Member Emmer, and Chairwoman Waters for holding the hearing 
today. To our witnesses, thank you as well.
    Ms. Parker, there is a great deal of interest from both the 
public and from Members of Congress with respect to the current 
regulatory framework overseeing cryptocurrencies. So, as the 
Vice Chair of the House Agriculture Committee, I have heard 
plenty of discussion from my colleagues about not only who 
should regulate cryptocurrencies, but how they should regulate 
these entities. As you alluded to in your statement, many of 
these discussions have centered around the roles of the SEC and 
the CFTC. So, how are cryptocurrency markets currently 
regulated in the U.S., and is this level of oversight and 
regulation sufficient protection from the attendant risk posed?
    Ms. Parker. Thank you. That is an excellent question, and 
sort of like you, I come from the commodities world when I am 
looking at these markets, and Bitcoin and Eth are the two 
tokens that have a very clear regulatory framework. They are 
commodities. And so at the spot level, the cash level, the CFTC 
has generally not been active in that space in terms of the 
robust market oversight that they provide to their futures 
exchanges, and that is just because of the function of the 
commodity markets. They sort of arose from commercial entities 
coming together to buy and sell their pork bellies and orange 
juice concentrate, and wheat, and corn, and soy. And so, those 
markets--we don't really have established treating spot markets 
for physical commodities or any form of commodities. So, 
Bitcoin is sort of a novel application as an intangible 
physical commodity. It is sort of a novel application of these 
laws and these systems that have existed for almost 100 years.
    What I would recommend, what I think makes sense is that 
since the CFTC is a very sort of robust and experienced market 
regulator, I think it makes sense to draw digital asset spot 
products. I am not talking about other physical commodities, I 
am not talking about financial commodities, just digital asset 
spot commodities. I think it makes sense to pull them into the 
CFTC's market oversight framework and apply those market 
conduct and market surveillance requirements that are imposed 
on the CME and ICE to these spot markets because they--
    Ms. Adams. Thank you, Ms. Parker. I want to move on, if I 
can.
    Ms. Parker. Yes.
    Ms. Adams. I am trying to get another question in, but 
thank you so much.
    Ms. Su, let me pivot to focusing on consumer protections. 
In my opinion, we have spent too much time over the past few 
years focusing on what happens on Twitter, but when it comes to 
cryptocurrency volatility, Twitter has been front and center. 
In January, we watched Bitcoin, with each Elon Musk tweet, 
fluctuate in the months thereafter, so let me ask you, what are 
the most concerning risks to investors in the marketplace, and 
how can those risks be mitigated most effectively by 
regulators? Ms. Su?
    Ms. Su. Yes, thank you. I think from an investor protection 
perspective, if you look at capital markets-related concerns, 
there are three groups of primary risks we consider. Market 
volatility, as you highlighted, is definitely front and center, 
but the traditional way to handle it is through disclosure and 
investor restrictions. By that we mean you provide material 
information about the risk so investors would go into risk 
taking in an informed way so they would price the risk 
accurately. Similarly, with investor protection regarding 
restriction, if you deem the instrument to be highly volatile 
and highly risky relative to the risk tolerance and the 
financial cushion certain individual investors have, you may 
exclude those investors from such investments.
    Ms. Adams. Okay.
    Ms. Su. There are other risks related to fraud and scams, 
so obviously, you handle it through rulemaking, enforcement, 
reporting. And then the third category, which people usually 
don't pay particular attention to, is safekeeping functions, 
like the lost password. I think you are probably generally 
aware that about 20 percent of a certain digital asset was lost 
due to the lost key--
    Ms. Adams. Yes, ma'am.
    Ms. Su. --and custodian. Yes, custodian service, remedy 
that.
    Ms. Adams. Thank you, ma'am. Thank you very much. I am out 
of time, and, Mr. Chairman, I am going to yield back.
    Chairman Green. The gentlelady's time has expired.
    The gentleman from Georgia, Mr. Loudermilk, is now 
recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman, and thanks to the 
panel for being here. It is a very important hearing we are 
having here today, and I think it is something we need to be 
looking at. But one of the aspects of being here is that a lot 
of times, people draw a line in the sand very early on, and 
they take an early position on something, especially when it is 
dealing with technology, because it is something they either 
don't understand or there is this fear factor. And I have seen 
that with cryptocurrency, because a lot of times, we don't see 
the forest for the trees. And in this case, I think there is 
something that we miss out on because we have either decided we 
are for or against cryptocurrency, and that part we are missing 
out on is the blockchain technology that is underlining, which 
I think is very valuable for us in this nation, especially in 
the Federal Government.
    And I have been advocating for a long time that we utilize, 
or at least we look very strongly at using blockchain 
technology as a solution to our cybersecurity issues here in 
this nation. When you consider the Federal Government--and we 
know that we have had cyberattacks--there has been loss of data 
and people's personal data has been inadvertently disclosed, 
which caused a lot of issues. That isn't that hard to do when 
you consider at how many points my personal information and 
others' personal information resides within the Federal 
Government. There is duplication of data in every place. My 
Social Security number, my date of birth, my address, phone 
number, all of this resides in another system that is 
susceptible to attack. And all it takes is one weak link, and 
then you have exposed it.
    If you look at it as a veteran, my information is at the 
VA. From years of working in business, it has been with various 
departments, the Social Security Administration, you name it, 
the IRS--if you look at all of the different databases, I did a 
count one time, and there could be 47 different data points 
where just my information would reside, and all it takes is the 
breach of one of those. Because of the decentralization of 
blockchain, it seems to me, that may be the solution to the 
cybersecurity problems that we have in this nation.
    Ms. Hammer, is this something that you would agree with, 
and can you describe how the blockchain technology could be 
used to enhance cybersecurity?
    Ms. Hammer. Congressman, thank you for that excellent 
question. I appreciate the chance to talk about the potential 
benefits of blockchain technology. It is absolutely something 
that I would agree with and certainly something that we work 
with on a day-to-day basis at the Stevens Center at Wharton. As 
you mentioned, blockchain is a decentralized technology, and 
that is key because it has no single point of failure, so there 
are many different uses for the technology, in addition to 
cryptocurrency. With each new block in blockchain, the previous 
blocks are stored, and this creates a fully traceable history 
log, so it can potentially have many cybersecurity 
applications. Blockchain can, therefore, be used to create 
security profiles for user data, such as you mentioned, and it 
protects the data by decentralizing it.
    In addition, blockchain technology incorporates something 
known as public key and private key security. Public key 
infrastructure, much like an email address, can be used to 
authenticate and authorize parties. And private keys can be 
combined with it for end-to-end security and encryption of our 
data. Blockchain can be used for many different means in 
cybersecurity. It can decentralize security devices, such as a 
home security system, to discourage hackers. It can protect 
websites by decentralizing domain name servers, such as 
separating an IP address from a name. And it can be, in fact, 
combined with other security protocols, like biometrics, in 
order to strengthen our cybersecurity options. So, I fully 
agree there are many applications for blockchain technology, 
and it is important for us to remember that this is the 
technology that powers crypto. But the technology itself also 
has many applications, and we would behoove ourselves to 
consider those innovative possibilities.
    Mr. Loudermilk. And that is the challenge I have had, is 
separating what some will consider the stigma of cryptocurrency 
from blockchain. In the remaining time, I have one other 
question. Do you have concerns with a potential central bank 
digital currency?
    Ms. Hammer. Thank you, Congressman, for that excellent 
question. I know that central bank digital currency has been 
the subject of other hearings in this forum, and certainly it 
is something that is being studied really across the country by 
many different academics and not-for-profits. I think it is 
important to consider that central bank digital currency could 
take many different forms. It could be blockchain-powered. It 
could be not blockchain-powered and run along a traditional 
database system such as we do currently. There are concerns 
about central bank digital currencies. Some of them relate to 
issues around privacy and whether it actually achieves the 
objective of having a central bank digital currency because, 
rather than a decentralized system, which cryptocurrency is or 
blockchain is, having a central bank digital currency would 
concentrate our private information and, therefore, could 
potentially be a target for hackers. At the same time, I 
recognize--
    Chairman Green. The gentleman's time has expired. Would you 
kindly give the rest of your answer in writing and submit it 
for the record?
    Ms. Hammer. Absolutely. Thank you.
    Chairman Green. Thank you very much, and when I have my 
time, I may give you the opportunity to finish with my time.
    The gentlewoman from Georgia, Ms. Williams, the Vice Chair 
of the subcommittee, is now recognized for 5 minutes.
    Ms. Williams of Georgia. Thank you, Mr. Chairman. My top 
priority in Congress is ensuring that those most marginalized 
remain at the center of our policy considerations. When it 
comes to digital assets, this means making sure that investors 
of all experience levels have equitable access to information 
about the digital asset that they are investing in.
    Ms. Hammer, how can regulators best communicate with all 
consumers, especially those who may be investing for the first 
time, about any risk associated with investing in digital 
assets and ways to avoid predatory behavior in the market?
    Ms. Hammer. Congresswoman, thank you for that excellent 
question, and, as I mentioned in my oral testimony, investor 
protection is a key concern and priority when we think about 
cryptocurrency. And I return to what I recommended in terms of 
coordinating Federal agencies because investor protection, 
consumer protection, and even ERISA in the Department of Labor 
are implicated when we think about investing in these markets. 
Not every investor is the same. Investors have risk profiles. 
They have different periods of time that they can invest in, 
and not every asset is appropriate for every vehicle.
    Today, we are seeing cryptocurrency being introduced into 
things like retirement funds. We are seeing the rise of 
cryptocurrency amongst younger investors through different 
applications. And so, I do feel strongly that: number one, 
coordination through the FSOC, through the Federal financial 
agencies is extremely important both from a consumer protection 
perspective and investor protection; and number two, that we 
have the data and the resources to evaluate what is happening 
in the market. Without an official public data source, I think 
that we are a little bit in the dark about what the proper 
regulatory framework should look like.
    Ms. Williams of Georgia. Thank you. It is important that we 
ensure consumer protection when it comes to digital assets, but 
we also have to be sure that we are protecting the health of 
the broader economy as the use of digital assets expand. So, 
Ms. Hammer, more on this. Given that digital assets can change 
rapidly in value, are there legislative considerations that 
Congress should keep in mind to ensure any risk to the broader 
economy is minimized as investment expands in these assets?
    Ms. Hammer. Thank you, Congresswoman, for that question as 
well, and I do believe systemic risk is a key concern. I do 
believe that the Financial Stability Oversight Council is the 
proper authority to consider systemic risk. Under Section 120 
of the Dodd-Frank Act, it actually has a specific mandate to do 
so. The fact is that cryptocurrency has really infiltrated many 
different aspects of our financial system, and regardless of 
what we may think the benefits and costs of that may be, it is 
the reality today. Not only do investors hold crypto in their 
individual portfolios, but we see it in private funds, as Ms. 
Goldstein mentioned. We see it in banks. We have permitted 
banks to serve as custodians. We have national trust banks that 
are operating as crypto companies, and we have 50 different 
States that are looking at a myriad of crypto rules. I think at 
last count, 31 States were actually looking at crypto 
legislation in the current session, so this level of activity 
can be useful if it is innovative, but I think the key thing is 
that we have a race to the top and not a race to the bottom. 
And there are some things that should be regulated on a Federal 
level.
    As far as what a specific legislative mandate would look 
like, I think that is to be determined after substantive study 
by the FSOC, after we have established some public data sources 
and there is clear coordination amongst the agencies.
    Ms. Williams of Georgia. Knowing that we need more research 
and investigation around this, I am thinking more along the 
lines of some of my priorities in Congress, which are ensuring 
consumer protection and the benefits to financial inclusion for 
more people. So, are there any considerations that you have in 
mind for Congress that specifically speak to those two areas?
    Ms. Hammer. Thank you, Congresswoman, for that point as 
well. I think the issue of financial inclusion is crucial when 
we think about crypto. As we digitize our economy, the reality 
is that some people may be included more and some people may be 
included less, and I tend to think globally, because that is 
the kind of research that we do at The Wharton School. When I 
think about financial inclusion globally, there are 1.7 billion 
people who are unbanked, and two-thirds of them do have mobile 
phones. Now, that may differ from what we have in the U.S. I 
think that having legislative priorities around consumer 
protection related to these assets would be important, but I 
also think that clarity in that space and international 
coordination is key because the technology, going back again to 
the uses of the technology, has many beneficial functions for 
others in other areas who may not be so lucky to have stable 
currencies. They may be subject to political and economic 
instabilities that make using crypto an important method for 
them to run their businesses and to support their families.
    Ms. Williams of Georgia. Thank you, and my time has 
expired.
    Ms. Hammer. Thank you.
    Chairman Green. The gentlelady's time has expired.
    The Chair now recognizes the gentleman from Tennessee, Mr. 
Kustoff, for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman. Ms. Hammer, if I can 
continue with you just briefly, I know that you were not 
finished answering Mr. Loudermilk. Was there anything you 
wanted to say in conclusion to his questioning?
    Ms. Hammer. Thank you so much, Congressman. We were 
discussing central bank digital currency (CBDC), and I wanted 
to acknowledge that there may be privacy concerns around 
central bank digital currency, but emphasized that there are 
many different iterations the technology can take. And I think, 
going back to some of our earlier discussion, one of the key 
priorities that we focus on in our work related to Fintech and 
blockchain at the Stevens Center is financial inclusion. And 
so, when I think generally at a very high level about CBDC, I 
believe that is a focus that we should continue with, and it is 
an important topic of discussion related to crypto as well. 
Thank you.
    Mr. Kustoff. Ms. Hammer, if I could, along those lines, 
Vice Chair Quarles of the Fed, I believe on Monday, I am going 
to characterize, expressed some skepticism about central bank 
digital currency. My question to you is, and we have talked 
about innovation and about stifling innovation, do you 
personally have concerns if we move slowly, and, say, the 
Chinese accelerate? Can you play out what happens over 12 
months, 24 months, 5 years?
    Ms. Hammer. Thank you, Congressman, for that question, and 
I know it is an important topic for all of us as we think about 
CBDC. To be honest, I don't have any particular expertise on 
China and our policy as it relates to China. I would say that 
one of the things that I think is valuable about thinking about 
blockchain technology generally and CBDC as it may relate, is 
how it can improve our financial infrastructure and our 
financial system. We live in a world today where it takes days 
to clear and settle a payment. We live in a world where we have 
intra-day between counterparties who are trading. We have an 
antiquated central clearing counterparty system that is in need 
of a revamp in some ways. And so, I believe that we should be 
doing everything we can to modernize our system, and that we 
should be taking advantage of the available technologies.
    The key thing, from my perspective, is regulatory clarity. 
I think that clarity is required for businesses to innovate. I 
see it every day in some of the companies that we work with. 
For a company to develop a product, or create a go-to-market 
strategy, or raise money, they need clarity in the law, and 
this is an area where they just don't have it on particular 
issues. So, my belief is that we should be working in a 
coordinated fashion to provide that.
    Mr. Kustoff. Thank you, Ms. Hammer.
    Mr. Van Valkenburgh, inflation is a concern for people 
across the country, certainly in my district in West Tennessee. 
In an interview recently, you talked about or you advocated 
essentially that a consumer may want to buy Bitcoin because it 
could be a way to balance an investment portfolio against the 
threat of inflation. Could you expound on that, please?
    Mr. Van Valkenburgh. Sure. So, the intuition here is fairly 
straightforward. Bitcoin is the world's first digital 
commodity, and it functions rather like gold, except it is gold 
that you can send peer-to-peer over the internet. Now, as to 
the wisdom of any particular investment in a portfolio, I think 
most people agree that diversity is how we can achieve greater 
financial stability for ourselves and for our major 
institutions. And so, my point in that previous interview was 
simply that, as part of a diversified portfolio, one might be 
interested in owning some Bitcoin, along with some gold, along 
with some stocks--American industries, overseas industries--in 
order to achieve some balance and hedge against the risk of 
inflation should we see it being pronounced.
    Mr. Kustoff. And you may have answered this, but would you 
advocate that strategy, for lack of a better word, for the 
average retail investor?
    Mr. Van Valkenburgh. I think we have guardrails in place 
now for these Bitcoin spot markets, for example, that make that 
a safe bet as long as we have good investor education, which is 
always a perennial problem. But if you go to the right places, 
the American-run companies, they are State-licensed money 
transmitters, they are New York Department of Financial 
Services-chartered banks and trusts. And these are safe places 
where a customer will be given clear information about what 
they are buying from a person who has posted a bond, can prove 
minimum capital requirements, and has a robust regulatory 
structure around them to ensure investor protection.
    Mr. Kustoff. Thank you, sir. I thank you, I thank the other 
witnesses, and I yield back.
    Chairman Green. The gentleman yields back.
    The Chair now recognizes the gentlewoman from Michigan, Ms. 
Tlaib, for 5 minutes.
    Ms. Tlaib. Thank you so much, Mr. Chairman. We all know 
that cryptocurrency like Bitcoin currently consumes enough 
energy to power a small nation, and the Cambridge Bitcoin 
Electricity Consumption Index is one of the most-cited 
cryptocurrency energy estimates. Right now, estimates sit 
actually at an annualized consumption of 66.14 terawatt hours. 
That is actually around a third of the energy consumption of 
Facebook, Google, and Amazon's data centers combined. But due 
to the decentralized nature of cryptocurrency, even the 
Cambridge model is just a small--not a precise estimate, and 
their upper bound is probably as high as 150 terawatt hours 
each hour. As Bitcoin miners compete against one another for 
increasingly scarce tokens, energy usage increases.
    Mr. Van Valkenburgh, how can we better measure the energy 
consumption and energy resources of cryptocurrency to account 
for its carbon footprint?
    Mr. Van Valkenburgh. I agree that the Cambridge data is our 
best shot right now at looking at this question. What we have 
the benefit of is knowing everything that the peer-to-peer 
ledger tells us. It is shared and open. It is not a proprietary 
standard from a corporation. And the peer-to-peer ledger shows 
us how much work these miners are performing to make sure that 
transactions get in blocks and they are not censored by some 
third party or some government that wants to coerce certain 
transactions or block certain transactions. It is this vibrancy 
between miners that guarantees that the miners cannot form a 
cartel and choose to systematically exclude certain persons 
from this financial system. When you have them compete and when 
you have evidence of their competition in the form of proof-of-
work calculations on a public ledger that any person can audit 
independently, you get that censorship resistance. As far as 
energy usage--I'm sorry.
    Ms. Tlaib. No, go ahead. I need to get to my next question, 
because I really want to talk about the carbon footprint.
    Mr. Van Valkenburgh. Okay. I will be brief. I'm sorry. So 
as far as energy usage, it is worth noting that the traditional 
financial sector uses an estimated 5 times more energy than 
Bitcoin. Now granted, the traditional financial sector moves 
more money, but it is worth noting that Bitcoin energy usage 
does not scale per transaction, so most of the costs are the 
fixed costs of setting up an open peer-to-peer system that is 
robust, and we have technologies like the Lightning Network 
that can bundle millions of transactions into that existing 
system without a meaningful increase in energy. So, it is 
possible we can have an open financial system that is 
censorship-resistant using one-fifth of the energy of the 
current financial system, if we were to eventually move more 
transactions--
    Ms. Tlaib. Sure. Thank you. Ms. Goldstein, is 
cryptocurrency fundamentally incompatible with a carbon-neutral 
future?
    Ms. Goldstein. Congresswoman, thank you for the question. I 
think it depends. It depends on the cryptocurrency. It depends 
on which system it uses for validation. So, proof of work, I 
would argue, is the most carbon-intensive of the validation 
systems in cryptocurrency. This is the one that Bitcoin uses, 
this is the one that Ethereum currently uses, but it is trying 
to move away from it, and that is because it is effectively a 
lottery system. Any miner can try and compete for the 6.25 
Bitcoin reward that is generated every 10 minutes, and everyone 
is essentially trying to guess the address of the next block. 
Some people describe this as solving complicated math problems, 
but it has a lot of people competing for a single reward and it 
generates a lot of energy.
    I think as more cryptocurrencies embrace different 
validation methods, whether it be proof of stake, proof of 
history is another one, perhaps the footprint could be reduced, 
but it seems unlikely that Bitcoin will move away from the 
proof-of-work method. And as you cited, the Cambridge Index, 
when crypto is very high, when Bitcoin reached its highs in 
May, we saw an estimate of 143 terawatt hours, which is more 
than the consumption of Argentina and more than the consumption 
of Norway. And so, I think the answer is it depends, but I 
think the proof-of-work validation method is climate-
incompatible.
    Ms. Tlaib. Well, no, a recent study out of China suggested 
that without taking any action to curb the greenhouse gases 
produced by electricity generation for Bitcoin mining, that 
they could see, like, 130 million tons of carbon per year. Mr. 
Chairman, my point is that the climate crisis is here. We need 
to do everything we can in our power and our purview to really, 
truly reduce our carbon footprint and so many other things that 
we are trying to do in addressing that. I saw firsthand what 
was happening in my community as we saw record rainfall. But I 
really do appreciate this committee hearing, and I yield back.
    Chairman Green. The gentlelady yields back.
    The Chair now recognizes the gentleman from South Carolina, 
Mr. Timmons, for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman. Some of my Democrat 
colleagues have painted a broad brush against cryptocurrency as 
the purview of charlatans and scammers. In fact, Mr. Sherman 
has called for an outright ban on cryptocurrencies in the 
United States. If we could, just for a moment, take a deep 
breath and heed the words of President Obama's own CIA 
Director, Mike Morell, who, in a recent report said that, 
``Bitcoin's use in illicit finance activity today is extremely 
limited and blockchain ledgers are a highly effective crime-
fighting and intelligence gathering tool.'' He urged for a more 
fact-based dialogue between industry and government to ensure 
that real risks are mitigated and the opportunities for 
potentially revolutionary technologies are not squandered.
    Mr. Van Valkenburgh, is this the road we are headed down? 
Are cooler heads prevailing or will alarmism win out?
    Mr. Van Valkenburgh. I have been lucky to have the job that 
I have had for the last 6 or 7 years now where we have gotten 
to meet with all of the regulatory agencies that have some 
piece of jurisdiction over cryptocurrency, both in the Obama 
Administration and now in the Trump Administration. And I have 
always been impressed by the level of knowledge of that one 
person, or maybe that small group of people within the agency 
who is focused on this technology and focused on reasonably 
applying the existing rules to the risks presented by the 
technology. I think at the regulatory level, we have seen 
cooler heads prevail for a long time, and I am grateful for 
that. We have had reasonable regulation from an anti-money 
laundering standpoint. To counter what Representative Sherman 
suggested, we have seen KYC and AML at all of the U.S. 
exchanges and robust suspicious activity reporting. And I have 
talked to law enforcement who have actually said they prefer 
doing investigations when it is on an open blockchain network 
because there is a single source of truth, which is a ledger, 
rather than a number of dubiously well-held records at 
international financial institutions.
    Mr. Timmons. Sure. Thank you. Thank you for that answer. It 
really frustrates me when I hear members of this committee 
imply that Americans are not smart enough to know that 
investing in cryptocurrencies carries risk or even the capital 
markets, more broadly. We heard a similar tone in the GameStop 
hearings as well. They won't come right out and say it, but I 
find it insulting that members of this committee feel that 
their constituents don't know what they are doing when they 
make investments. I am not going to patronize the folks back 
home in my district. Do we have a role in making sure they know 
what they are getting into? Absolutely. But let's stop implying 
that our constituents don't know what they are doing.
    My next few questions are for Ms. Hammer. There is a common 
misperception which we have heard several times today that 
cryptocurrency is, ``unregulated.'' However, we have seen the 
SEC and other regulators at the State and Federal level be 
proactive in enforcement actions and providing guidance as to 
how businesses can offer services in relation to 
cryptocurrency. Can you describe the current regulatory state 
of cryptocurrency in the United States, and regulations that 
crypto companies have to comply with in regards to consumer 
protection?
    Ms. Hammer. Thank you, Congressman, for that excellent 
question, and it definitely covers many of the issues that we 
have discussed here today and the complexity of the regulatory 
framework. The reality is that crypto and crypto companies 
receive different types of regulatory treatment throughout our 
regulatory system. This is how our system works. The Internal 
Revenue Service issued a notice in 2014 that crypto would be 
treated as property, but if you are paid in crypto for your 
work, it is treated as income and taxed as such. The Securities 
and Exchange Commission may regulate cryptocurrency as a 
security if it meets the criteria of the Howey test unless that 
particular asset is eligible for an exemption. In some cases, 
crypto may be regulated as a commodity by the CFTC, and there 
are many different types of companies that interact in the 
crypto world now that have different authorities, such as the 
National Trust Charter from the Office of the Comptroller of 
the Currency. And as I mentioned earlier, we have a number of 
States that are innovating their own regulatory frameworks.
    So, my key issue is that we need regulatory clarity in our 
policymaking, and I believe that we have an authority in place 
through the FSOC to lead that at a high level. The FSOC has a 
mandate under Dodd-Frank Section 120 to coordinate around 
issues related to potential systemic risk. And in addition to 
that, it has the ability to form a technical or advisory 
committee, including one that would work with the States. In 
addition, the FSOC is charged with consultation with 
international standard-setting bodies, and we have talked about 
a number of issues today that are international in nature. In 
fact, crypto crosses borders. There are places where there are 
gaps in the regulation, and the best way to address that is 
through international standard setting.
    Mr. Timmons. So, do you think that the Federal agencies 
have the tools necessary to coordinate their efforts around 
blockchain and crypto regulation, or do you think it is going 
to require congressional action?
    Ms. Hammer. I believe that we have the authority in place 
to coordinate through the Financial Stability Oversight 
Council. That said, I think we have a lack of clarity in the 
regulatory framework, and I strongly believe that we need to 
have official public data sources. In order to create a 
framework for cryptocurrency regulation, we need a map, and to 
have a map, we need data about where is crypto, where do the 
risks lie, et cetera.
    Mr. Timmons. Ms. Hammer, I'm sorry, my time has expired. I 
appreciate your answer. With that, I yield back. Thank you.
    Ms. Hammer. Thank you.
    Ms. Williams of Georgia. [presiding]. The gentleman from 
Illinois, Mr. Garcia, is now recognized for 5 minutes.
    Mr. Garcia of Illinois. Good morning everyone, and thank 
you, Chairman Green and Ranking Member Emmer, for hosting this 
important hearing, and, of course, thank you to the witnesses 
today. I think it is easy to fall into a trap of believing that 
cryptocurrency is too technical for everyday people, that 
trends like GameStop and crypto are funny, weird coincidences 
that might make you rich. The fact is that the crypto market 
represents more than $2 trillion in assets, and $2 trillion 
matters to everyone. In this committee, it is our 
responsibility to look after the financial system.
    I watched my neighbors lose their homes in the great 
financial crisis, and many neighborhoods in my district never 
recovered. I am glad that we have not faced another crisis like 
that yet, but I am very worried about the future. The fact is 
we don't know all of the risks that cryptocurrencies create for 
us, and we know that cryptocurrencies are extremely volatile. 
We know that some of our largest banks are figuring out ways to 
get into them, but we don't know how concentrated ownership is, 
and we don't know how exposed our hedge funds already are. So, 
in short, we know that crypto is big, but we don't know all of 
the threats that it can pose.
    Ms. Goldstein, it seems like many of the cryptocurrency 
proponents are at least honest. They want to get around 
regulations. How much of the appeal of cryptocurrency is just 
regulatory arbitrage instead of real innovation?
    Ms. Goldstein. Thank you for the question, Congressman. I 
come at this from the perspective of someone who worked at 
Merrill Lynch and Deutsche Bank--well, Merrill Lynch prior to 
the 2008 financial crisis. I worked for the over-the-counter 
equity derivatives trading desk before Dodd-Frank, when there 
was no regulation, and all of the trading was essentially 
opaque, and the cryptocurrency markets remind me of that time. 
And there have been statements in this hearing today that all 
U.S.-based exchanges have Know Your Client requirements, which 
is true, but that is not the only place U.S. users can trade 
cryptocurrency. There are DeFi platforms, and I have yet to 
come across a single DeFi platform that has Know Your Customer 
requirements. And so, there are a number of ways to sort of 
evade some of the so-called safeguards that are already being 
touted as being in place.
    And I think we need to look at what CFTC Commissioner Dan 
Berkovitz recently said in a speech, which is that some of 
these DeFi platforms are operating as unregulated, unregistered 
exchanges and may be illegal under the Commodity Exchange Act. 
I also think that we need to be concerned about leverage--
leverage by institutions, but also leverage by retail 
investors. Retail investors in the stock market traditionally 
can't have more than a 2 to 1 leverage, but in cryptocurrency 
markets, many individual investors can get up to a 125 to 1 
leverage, and that can wipe you out quite quickly. And so, 
there are opportunities in the space, unfortunately, for 
regulatory arbitrage, and I do think that is part of the reason 
that they have been successful to date. I do think that the 
regulators should take a close look at their existing 
enforcement abilities to see what can be done about that.
    Mr. Garcia of Illinois. Thank you. I think you just got to 
the second question I was going to ask you, and that is, what 
are the most important things that regulators can do to keep 
crypto from threatening our financial system?
    Ms. Goldstein. Congressman, I will take a shot at 
elaborating. I do think that in some ways, the United States is 
behind. There has been a lot of recent regulatory activity. 
Canada has pursued enforcement actions against Bovet and 
KuCoin, among others. Japan and Germany have warned Binance 
about their so-called tokenized stocks, which are essentially 
crypto assets that track the performance of stocks and look 
very similar, to me, to the kinds of equity swaps or total 
return swaps that crashed the Archegos Family Fund. We recently 
saw the U.K.'s Financial Conduct Authority (FCA) tell Binance 
that they need to put a warning on their website as of today 
saying that they are not registered with the FCA. And I think 
in some ways, the U.S. regulators are behind international 
regulators in putting out these sort of consumer warnings, so 
that is one thing that they could do.
    Another thing that they could do is look at leverage by 
retail investors. Why is there this difference between the 
access to leverage of retail investors in the stock market and 
in the crypto markets? And as I said in my opening statement, I 
think it is very important, whether it is Congress or the 
regulators, that we pursue an avenue to ensure that private 
funds, like hedge funds, are disclosing what their 
cryptocurrency positions are so that the regulators can get a 
handle on any systemic risk concerns.
    Mr. Garcia of Illinois. Thank you so much. I yield back.
    Chairman Green. The gentleman yields back.
    The Chair now recognizes the gentlewoman from Texas, Ms. 
Garcia, for 5 minutes.
    Ms. Garcia of Texas. Thank you, Mr. Chairman, and thank you 
for calling this very important hearing on a topic that has 
been on the minds of many of us. The issue of crypto assets is 
so important to us because we must understand what the 
financial marketplace of the future will look like. Digital 
assets present an exciting new frontier with the potential to 
bring the unbanked into our economy. In fact, 12.2 percent of 
Latinos and 13.8 percent of Black households were unbanked in 
2019 compared to only 2.5 percent of White households. This is 
not the first time I have discussed that, and I will continue 
to discuss it.
    While cryptocurrency is a new frontier, we must be cautious 
to make sure that we protect consumers from any avoidable 
risks. We need to bring disenfranchised Americans into the 
financial fray, but we must also look at the bigger picture to 
make sure that we do not inadvertently allow a system to grow 
that grants too much market power to a few decision makers. It 
is our job as lawmakers to protect the consumers from financial 
abuses. This includes protecting the sovereignty of the U.S. 
dollar. We cannot allow anyone to compete with our U.S. dollar. 
Without a sovereign dollar that represents the primary form of 
currency in this country, we risk destabilizing our financial 
markets, and I would also suggest it would destabilize global 
markets. We must protect the valued merits of the U.S. dollar, 
both in cash and digital form.
    Stablecoins, such as Facebook's Diem, present a sovereignty 
risk to our domestic currency. In other words, there is a risk 
of these stablecoins replacing the U.S. dollar and undermining 
the Federal Reserve's ability to perform its critical functions 
as the central bank. The World Economic Forum has warned its 
member countries of this risk, and the Bank for International 
Settlements has urged countries to form their own central bank 
digital currencies so they can offer access and still protect 
the sovereignty of their currencies.
    Last Congress, I introduced a bill to regulate and manage 
stablecoins as securities. Pegging them to a currency without 
proper regulation, like Facebook has done with Diem, is a step 
forward, but it does not address all of the risk.
    Ms. Goldstein, I wanted to start with you. How urgent is 
this need for regulating stablecoins and protecting the U.S. 
dollar?
    Ms. Goldstein. Congresswoman, thank you for the question. I 
think it is an urgent need for regulators to look into 
stablecoins. Thankfully, we have already had State attorneys 
general looking at the problem. New York State Attorney General 
Letitia James has looked at BitConnect, which operates the 
Tether stablecoin, and they have recently reached a settlement, 
and you can no longer buy Tether in the State of New York. But 
I think there are a lot of questions about what is Tether 
actually backed by. They recently had to disclose a number of 
their reserves, which included commercial papers and cash-like 
products, but they had very little actual cash. They had some 
commodities. They had some other digital assets. And I think 
there was recent reporting, I believe it was in the Financial 
Times, where they asked some of the large banks, who tend to be 
one of the major counterparties for commercial paper, and they 
said they hadn't done any business with BitConnect, so who are 
they doing business with?
    I think this is an opportunity to make sure that 
stablecoins are actually based on something, and we are not 
just relying on faith, that it is actually pegged to some 
denomination of the U.S. dollar or another currency. And I 
think perhaps one way to approach that would be to have central 
banks issue central bank digital currencies--
    Ms. Garcia of Texas. Right. And we hear from some, ``You 
can't do that.'' It is not about regulation. We can't go under 
as a government. We always just regulate. We have to allow for 
innovation. Do you see that it is possible to strike a balance 
where we protect innovation and we allow that to occur, but 
balance the need for the sovereignty of our dollar, and balance 
of protection that we need for consumers?
    Ms. Goldstein. Congresswoman, yes, I think we absolutely 
can achieve that balance. I don't think it is unreasonable to 
want to ensure that something that pretends to be pegged to one 
U.S. dollar actually is and isn't capable of breaking the buck 
and people losing their funds. That is not to say that there 
aren't existing problems in the financial system. I think there 
may be similar problems with money market mutual funds and 
their sort of ability to peg themselves to the dollar and break 
the buck. But we can always do better, and we can strike the 
right balance to both protect consumers and also encourage 
innovation. I don't think that they are in conflict.
    Ms. Garcia of Texas. Thank you. I did have one more 
question, but I will submit it in writing, Mr. Chairman. I see 
that my time is down to 3 seconds, so I will yield back.
    Chairman Green. The gentlelady yields back. The Chair now 
recognizes the gentleman from Ohio, Mr. Gonzalez, for 5 
minutes.
    Mr. Gonzalez of Ohio. Thank you, Mr. Chairman, and thank 
you to our panel. In a way, I am sort of encouraged by today's 
hearings. I think there is more broad agreement than is normal 
in this committee, at least amongst the panel, the majority of 
the panel, that we do need clarity. We do need clarity with 
respect to how we are going to regulate in this space because 
we are pushing a lot the innovation overseas. I hope we get 
that clarity.
    Ms. Parker, I want to start with your testimony. You 
suggest, to my earlier point, that this uncertain regulatory 
environment does choke innovation and pushes projects overseas, 
correct?
    Ms. Parker. That is correct.
    Mr. Gonzalez of Ohio. Thank you. And it forces Americans to 
do things like use VPNs as a workaround, and I think you 
rightly highlight that this is a bad outcome for Americans.
    Ms. Parker. That is correct.
    Mr. Gonzalez of Ohio. Thank you. You also say that 
regulators are hesitant to get involved when, in your words, 
``relevant Members are hostile to crypto.'' Subcommittee Chairs 
on this specific committee would qualify as relevant. I won't--
    Ms. Parker. They qualify as relevant, but not hostile.
    Mr. Gonzalez of Ohio. Right.
    Ms. Parker. Right.
    Mr. Gonzalez of Ohio. But some, potentially. So assuming 
regulators are listening, and I didn't want to put you in that 
box there, but you did say it, listening, I would encourage 
them to listen to the Full Committee and not ``relevant 
Members'' who say ridiculous things, like people should invest 
in the California lottery instead of cryptocurrency, and 
suggest that if it is possible to lose money, that some people 
are going to make money and others are going to lose money, 
that whatever that thing is, whatever that instrument is, ipso 
facto should be banned. And also, people who suggest that 
because there are money launderers and bad people who use 
cryptocurrencies--and there are, we know that--that it should 
be banned.
    I would like to cite a statistic by Katie Haun, who broke 
up the Silk Road scheme a while back: 99.9 percent of money 
laundering with fiat currencies goes unprosecuted. So, the 
commentary around whether we should allow cryptocurrencies to 
exist on AML lines, I would ask, compared to what? Compared to 
a fiat where 99.9 percent goes unprosecuted?
    I want to shift now to Mr. Van Valkenburgh. Another comment 
was made was, well, it is highly volatile, and because it is 
highly volatile, there is necessarily systemic risk, and we 
should ban it because it is highly volatile. Here are some 
bubbles in the crypto space: in 2011, it went from $1 to $31 
down to $2, with no systemic risk; in 2013, $13 to $266 down to 
$65; in 2015, $65 to $12.42 to $200. And then obviously, in the 
last year, we have seen it go from a couple thousand to 
$60,000, back down to $30,000 and bounced up. At any point, Mr. 
Van Valkenburgh, did the Federal Government have to step in and 
prop up the cryptocurrency markets or save anybody?
    Mr. Van Valkenburgh. No. By definition, cryptocurrencies 
are unbacked. We have heard some Members question whether that 
is wise, but something that is not backed doesn't have promises 
associated with it, and so there aren't promises to be 
disappointed and someone to be bailed out in that case. It is 
like gold. How would you bail out the price of gold? Whom would 
you pay?
    Mr. Gonzalez of Ohio. Exactly. And then with my final 
minute, I would like to talk to you. There was a comment made 
that people are going to lose money, and that is definitely 
true. Can you compare blockchain and cryptocurrencies to the 
early internet? Maybe use the Pets.com and Amazon analogy, if 
you could.
    Mr. Van Valkenburgh. Absolutely. So, these are brand new 
systems that do something amazing. They allow people across the 
world to coordinate to perform and provide a service that 
previously could have only been performed and provided by a big 
company. So, just like the internet suddenly gave us the 
ability to all have our own blogs and not necessarily have to 
rely on the New York Times or the Wall Street Journal, the 
nature of Bitcoin is quite radical. It allows us to rely on 
ourselves in addition to centralized entities. And the 
radicalness of that innovation is something that people will 
get excited about for the right reasons, and sometimes overly 
excited for the wrong reasons. So, I think it is a good 
metaphor.
    Mr. Gonzalez of Ohio. Right. And so, there is risk in the 
system, but with great risk comes great reward, and if you want 
to ban risk, well, guess what? You also ban reward and you ban 
innovation. And so, I thank you, and with that, I yield back.
    Chairman Green. The gentleman yields back.
    The gentleman from California, Mr. Sherman, who is also the 
Chair of our Subcommittee on Investor Protection, 
Entrepreneurship, and Capital Markets, is recognized for 5 
minutes.
    Mr. Sherman. Especially after the last gentleman's 
comments, I have a lot to say, and I will use my 5 minutes to 
say them. Of course, as I pointed out in my opening statement, 
and thank you, Mr. Chairman, for allowing me to make an opening 
statement, those who live in the crypto world have their 
relevance, their fortunes caught up in making this successful. 
We are told that cryptocurrencies are fun and useful, and there 
might be somebody in my district who enjoys trading them. One 
thing that would be useful would be a $10,000 bill. It would 
occasionally be used to buy an automobile, but it would be 
uniquely valuable for those drug dealers. We would make their 
lives so much easier when they have to deal with these $100 
bills. Imagine if they had a $10,000 bill. And our natural 
tendency is to try to facilitate and help people do their 
financial transactions. But I, for one, am not looking for a 
more accurate heroin scale to make sure that one drug dealer 
doesn't get cheated by another.
    We are told that you have to be for cryptocurrencies, 
otherwise, you are anti-science. I am for the internet. I am 
for semiconductors. I am for computers. I am for blockchain. 
That does not mean I have to be for a cryptocurrency or, for 
that matter, for that $10,000 bill that would make the lives of 
some of our constituents easier. We have to keep pace with 
China. China is close to banning all cryptocurrencies. They are 
going to protect their economy, protect their currency, and 
protect their tax collection system. If we fail to keep up with 
China, we will fall behind.
    The biggest threat to Bitcoin is Ethereum. The biggest 
threat to Ethereum is Dogecoin. The biggest threat to Dogecoin 
is Catcoin, Dogecoin, and Hamstercoin. There is an unlimited 
number of potentially popular cryptocurrencies. Compare that to 
sovereign currencies. There are a limited number of nations, 
but even then, there are four or five big economies. The 
Uruguayan peso will never displace the U.S. dollar, but will 
Ethereum displace Bitcoin? Will Hamstercoin displace Ethereum? 
And, oh, by the way, if people are going to take the time and 
effort and the intelligence to create new cryptocurrencies, 
will they have a back door so that they can have a few trillion 
dollars of their own? We are told that is impossible from the 
same people who say it was impossible that between 2017 and 
2020, more than $19 million worth of Bitcoin and Ethereum were 
successfully double spent, effectively counterfeiting the 
supposedly hamper-free currencies. We are going to have one 
cryptocurrency after another, and those cryptocurrencies will 
have less and less protection.
    I want to commend Rashida Tlaib for talking about the 
effect on our planet, and I ask unanimous consent to put in the 
record an article from the Wall Street Journal detailing how 
coal plants that had been mothballed, that were no longer being 
used, are being put back online just to create electricity to 
mine Bitcoin.
    Chairman Green. Without objection, it is so ordered.
    Mr. Sherman. One of our witnesses says that traditional 
financial systems use 5 times as much energy. Yes, that is to 
do 500,000 times more transactions. Everything that is 
purchased on this planet at the retail level is purchased with 
a sovereign currency, so the 5 times is a tiny percentage. We 
are told that cryptocurrencies can be a hedge against 
inflation. We know that currencies are supposed to be a store 
of value. The dollar does erode in value, perhaps a quarter of 
a percent a month. You can buy Treasury inflation-protected 
securities and be fully protected from inflation, or you can 
say that you are trying to get a good store of value, so you 
are going to invest in a cryptocurrency that could lose a 
quarter of its value if there is a joke on SNL, as there was 
recently and, as we saw, a nearly one-quarter drop.
    We are told that we are going to have Know Your Customer at 
the level where you are trading and investing, but ultimately, 
Bitcoin is supposed to be a currency, and so you transfer it to 
your individual wallet, and there it is totally anonymous. Yes, 
the records are maintained forever anonymously, and, with that, 
you have the perfect tool for those who are underpaying their 
U.S. taxes by a trillion dollars a year, concealing $3 trillion 
a year in income. And that means perhaps $30 trillion that has 
to be hidden every decade. Only with cryptocurrencies can we 
evade the effort to enforce our tax laws. That is why 
cryptocurrency is popular.
    Chairman Green. The gentleman's time has expired.
    Mr. Sherman. I yield back.
    Chairman Green. The Chair will request that the gentleman 
place his question in writing for the record.
    Mr. Sherman. Thank you.
    Chairman Green. The Chair now recognizes the gentleman from 
Ohio, Mr. Davidson, for 5 minutes.
    Mr. Davidson. I thank the chairman, and I really appreciate 
this hearing. We have come a long way in Congress, just by 
having this hearing, so thank you. Thank you for the colleagues 
who have taken time to prepare for it. Some know the topic very 
well, and some are just getting acquainted with it, and some, 
no matter how well-acquainted, will remain hostile to the idea. 
Look, I won't spend long on Mr. Sherman's remarks, but China is 
building the creepiest surveillance tool in history. We should 
absolutely not emulate them. The whole fact that China is doing 
that is why we should be embracing decentralized distributed 
ledger technology that is more secure and does protect privacy. 
We could actually go further to defending freedom and restoring 
our Fourth Amendment constitutional protections in the 
financial sector by embracing the potential of this technology, 
not by being hostile to it. The third-party doctrine has 
annihilated the whole concept of privacy, and, yes, we 
absolutely should keep the country safe. I could spend a lot 
longer, but I am reminded of Proverbs 26:4, so I won't spend 
longer on his comments.
    Ms. Su, your testimony is the only one I saw that discussed 
Tether at length. I would like to delve into that for a moment. 
Ms. Goldstein, you spoke about the same topic. Last month, 
Tether revealed the breakdown of its reserves. In their 
disclosure, we learned that nearly 50 percent of its reserves 
are held in unspecified commercial paper of unknown quality. I 
looked at a few constant net asset value funds or liquidity 
funds held by larger banks to see how their composition 
compares to Tether's. While these funds are not a part of the 
crypto market, they are targeted for investors with surplus 
cash deposits who seek liquidity from their investments. Thus, 
they serve a similar function to Tether or other stable coins.
    What I found when I looked into these liquidity funds was 
that commercial paper accounted for around 25 to 30 percent of 
their underlying reserves in the net asset value funds. 
Additionally, we know the quality of those commercial paper 
holdings is disclosed. Ms. Su, based on Tether's disclosure, do 
you think there should be further disclosure regarding its 
underlying composition?
    Ms. Su. Yes, I think that one was the first disclosure 
ever, and the New York Attorney General's office took actions 
in investigating the case prior to its mandated disclosure as 
part of the settlement agreement. And some of the argument 
focused around the earlier promise of full backing and whether 
the disclosure came out to match that early promise.
    Mr. Davidson. Yes, and definitely a relevant piece. It is 
easy to break the buck, particularly when you hold structured 
credit with an undisclosed quality for the structured credit, 
so where they are at in the position is really important. It 
may not actually be a stablecoin.
    Ms. Parker, in your written testimony, you said that the 
SEC is not comfortable approving traditional regulated products 
based in crypto, such as a Bitcoin ETF, even though it, ``would 
provide more transparency into crypto markets.'' You go on to 
say, ``Because of this hesitancy, there is a lack of regulated 
products that are commercially attractive to market 
participants.''
    Ms. Parker, can you expand on how regulated commercial 
products like a Bitcoin ETF and other traditional regulated 
products would bring additional consumer protection elements to 
the cryptocurrency system?
    Ms. Parker. Thank you, Congressman. That is a great 
question. My point really is that there are not sort of the 
Bitcoin ETFs, the leveraged products, the margin products that 
are available on foreign exchanges that U.S. customers are 
routinely accessing through the internet with a VPN that 
provides, frankly, too much leverage. And they are likely 
inappropriate for most retail customers. So my point is, to 
sort of stop that phenomenon, let's counter with having U.S.-
regulated exchanges, securities exchanges, futures exchanges, 
list regulated products that have some form of margin, that 
have some form of leverage that is available to retail 
customers that is appropriate for their sort of credit and 
suitability for their trading experience.
    So, let's have this as a U.S. alternative to the foreign 
exchanges that U.S. customers can access because it is just a 
website. So, the Bitcoin futures, the margin products, the 
leveraged spot products that retail customers are desperately 
seeking at the overseas exchanges, let's have them in the 
United States.
    Mr. Davidson. Thank you for that. I really appreciate it. 
It is a great point. Some regulation would be good. I would 
love to talk more, but this is the point of the Token Taxonomy 
Act that has been bipartisan from its origins, and it would 
provide some regulatory clarity for what is a security and what 
is not. It wouldn't have anything to do with the ETFs, but it 
would provide a basis for it, and if we can get to that, we 
really can do a better job of protecting consumers. Generally, 
when we protect consumers, we do provide some regulatory 
clarity, and we had a great hearing on SPACs. You can have an 
ETF in SPACs, but currently nothing with Bitcoin, so thanks a 
lot. My time has expired, and I yield back.
    Chairman Green. The gentleman's time has expired. The Chair 
now recognizes himself for 5 minutes.
    Dear friends, I do have some consternation, and my 
consternation emanates from 2008 when I, as a member of this 
very committee, sat down on a lower part of the dais, and I was 
here when then-Secretary of the Treasury, Hank Paulson, 
appeared. He sat right out in front. I remember Representative 
Cleaver was to my left, I believe, and Representative Scott was 
to my right. The Secretary wanted $700 billion. He had 
approximately, I thought, 5 pages asking for $700 billion. I 
have since read that it was 3 pages. Be that as it may, $700 
billion to bail out what were called exotic products at the 
time--$700 billion. As you can well imagine, my constituents 
were up in arms. They were calling me by the hundreds demanding 
that I vote against a $700-billion bailout. Being the good 
steward that I am, I voted against it. And as I stood in the 
cloakroom and I could see the tabulation of votes, there also 
was a television monitor, and I could see the monitor 
indicating that the vote was failing and the stock market was 
directly proportional to what was happening with the vote. As 
the bill failed, the stock market was going down. The next day, 
my constituents were calling by the hundreds. ``What is wrong 
with you? You voted against the bailout. My 401(k) is now at 
risk.'' I learned an important lesson: Do what you think is in 
the best interests of your constituents, even when they may 
disagree.
    This hearing is taking place because I think it is in the 
best interests of my constituents that we get a better 
understanding of what we are dealing with. I remember Chairman 
Bernanke--I have a statement from him that I would like to 
read, and I will do this quickly. He said that the $182 billion 
bailout of American International Group (AIG) made him angrier 
than anything in the recession. AIG took risks with unregulated 
products, like hedge funds--I am paraphrasing--while using cash 
from people's insurance policies. He said the government had no 
choice but to bail it out. Who knew AIG was the glue holding 
the world together, the global order together? This is of 
concern to me.
    And, Ms. Hammer and Ms. Goldstein, if I can get to both of 
you, I would like your comments on my concern. You have 
mentioned FSOC. I don't know how that will help us with a 
living will, for example. This is of concern to me. How do we 
manage a behemoth once it becomes so big, that if it fails, it 
may bring a nice sizable portion of the economy with it? 
Nothing is too big to fail, but you can be so big that if you 
fail, you will hurt the economy.
    Ms. Hammer, let's start with you.
    Ms. Hammer. Mr. Chairman, thank you so much for your 
question, and I fully agree with your statement about the 
importance of evaluating potential systemic risk where taxpayer 
dollars are concerned. I often speak in my law class about the 
difference between an emergency response and a proactive 
policymaking framework. And the problem with an emergency 
response is that it is inherently backwards looking, and you 
create what is known as an emergency state relationship between 
the actors.
    We have the opportunity, through the FSOC and Dodd-Frank 
Section 120, to create a proactive policy framework for 
cryptocurrency. That means gathering and evaluating data, 
coordinating the agencies, creating a committee that could 
consult with the many States that are legislating in this area 
as we speak, and consulting with international standard-setting 
bodies. And you mentioned living wills, Mr. Chairman. I think 
that is an important point because there are many aspects of 
our regulatory framework that still need to be ferreted out and 
relate to cryptocurrency. And so, I strongly believe that is 
the place to start and that we have the resources to do it, and 
that by putting together our collective minds, we can tackle 
this problem.
    Chairman Green. Thank you. My time has expired. My 
apologies, Ms. Goldstein, but if you would submit comments for 
the record, I would greatly appreciate it.
    Dear friends, I thank the witnesses for their testimony and 
for devoting the time and resources to share their considerable 
expertise with the subcommittee. Your testimony today will help 
to advance the important work of this committee and of the U.S. 
Congress in understanding and addressing the risks and 
opportunities inherent in widespread investment in digital 
assets, including cryptocurrencies.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    Dear friends, the hearing is now adjourned, and, witnesses, 
I would like to come down and thank you personally.
    [Whereupon, at 12:05 p.m., the hearing was adjourned.]

                            A P P E N D I X

                             June 30, 2021
                             
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