By Debbie Stabenow of michigan. Good morning, calling this hearing to order of the Senate Committee on agriculture and nutrition and pleased to see all of ours colleagues here for the important hearing and discussion. Were here today because rapidly increasing number of americans are investing in cryptocurrencies yet theres no federal oversight over what makes up the majority of this market and just as quickly as theyve risen in population, weve seen the value drop and results of hard working americans that lost billions of dollars and dollars they used to support families, keep roofs over their head and save for hard earned retirement. Theres been thehe value of some widely traded coins and built sents on the dollar. Meanwhile 1. 2 billion worth of crypto currency was stolen in hacks some lack trust. We need clear consist rules for the road that allowed good actors to innovate and grow while first and foremost keeping customers safe. Oversight of one of the two nation regulators and its our job to ensure we bring necessary protections to this marketplace. Together with my partner senator boseman and with colleagues senator booker, thune, and hildebrand, theres the customer act and this gives the commodity futures, Trading Commission oversight. Digital assets that act like commodities such as bitcoin and no federal oversight and hole in our Financial System and il believe we must close it. Our bipartisan will require they register with the cfg. Our bill focuses on Consumer Protection and requires that theye segregate and safeguard assets and hold sufficient capital, and abide by rigorous cybersecuritycy standards. It will eliminate in this market and it will mandate that platforms speak truthfully and dont engage in misleading advertising its the rights regulator. Congress gave the Agency Oversight into the markets being a mainstay for all the producers during recent supply chain disruptions and elevated commode can i did prices. Commodity prices and how the ctfc leaders and this week we receive add letter from former republican chairman expressing his support for the bipartisan bill. This bill gives the Agency Additional resources to get this job done right. , which is so important. Other financial agencies in regulating Digital Assets and also important. Comments about the fcc Work Together to make this market. Or just just ast we get in putting together the document. Weve had productive discussions with fcc staff about the bill as we appreciate and will continue. As President Biden recognized, this is a big response ability with a lot at stake and will take all of us at the table working together and at our table today will be some of the brightest leaders in this space. And i look forward to hearing from each of you on how we can continue to bring transparency and actableability to this marketplace while still enabling the innovation that makes this technology so promises. The Digital CommoditiesConsumer Protection act and this bill im proud to cosponsor with the chairwoman as well as senators thune and booker will bring regulatory certainty to the growing digital commodity ecosystem. Market integrity and Consumer Protection and fostering environment that encouraging innovation and our bill gives the ctc the authority to do just those things and currently its subject to patch work at the state and federal level and Market Structure and Consumer Protection and its without protection that technologies will continue in the economy for decades to go. Theres time for regulatory certainty to the market and create a frame work making sense for domestic and international per spect and i have impeartive they work with industry andon consumer add colorado cats for laws and participants through a process. Anything less hurts everyone. Regulation by enforcement without any meaningful engagement with market partis pants is no way to police the industry. Its unfair to stake holders who are bringing in good faith and then punished because theyve not been given the rule of the road. Innovation and grow theyll wry and enforce rules and provide retail and fully understand the functions of the commodities theyre buying and selling. I hope todays hearings provides a opportunity for coming down on the waying in on the most important features of the bill including constructive recommendation to improve the bill as we look forward a committee market. The right fit for expanded regulatory role for the commodities market and Work Together to protectot consumers and allow the ever growing technology to flourish. I want to thank chairwoman stabenow for the discussion hearing from our witnesses before i conclude, i would like to welcome one staffer to the committee and thank anothero staffer who will be leaving shortly. First i would like to welcome erica shabbot. Shes the new majority staff director for chairwoman stabenow and no stranger to the senate. For the last 20 years, she served as senator, served senators and former chairman of the committee which we all know and are going to miss as he retires and we look forward to erica and look forward to service to the committee. Secondly i would like to thank kirin is a native canton and spent the last 50 years working for the senate first senator robertson, the legislation that were discussing today is largely the product and the committee has greatly benefited for the expertise and charm and i wish darren Great Success for Many Services and were trying not to be bitter over the people that have hired him. Thank you so much for recognizing erica. Hee may think hes leaving ad i think were not going to let him right in the middle of all this. Really, oh my goodness. I do so appreciate our wonderful staff weve been fortunate on the committee in past, present with some of the smartest, hard working people that there are. Were very much a work in partnership and on this bill thats been handed and we really appreciate all that. Our witness is chairman of the Trading Commission and certainly know either prior to prior to that was a valuable member of ourta staff on the Agriculture Committee and welcome, chairman and we recognize you for five minutes of testimony. Thank you. Chairwoman stabenow, boseman and member of the community, thank you for allowing me to be here fotoday. I believe that to be more true today and thanking the committee to address the needs for the dcppa and analyze what Additional Needs wed have to support its implementation. Digital asset commodity cash markets have retail participation and more on platform base custody arrangements outside of the traditional regulated banking sector. Since i last testified over 1 trillion in market value was lost in conjunction with the failure of several large high profile firms in the shadows and inner seconded models and and they do wait on traditionalna Financial Markets and i publicly stated several times including to this committee, many Digital Assets constitute commodities and recognized by dcpa and the expertise and experience make right regulator for the Digital Asset commodity market. Customer protections through the principles based market oversightt and disclosure regime aimed atd ening transparency integrity and security of actions. Dealers and custodians with the future association and they acknowledge the key role that regulations like the future association playing safeguarding with markets and safety is often adapted oversight capability and in the wake of 2008 financial crisis and theyve provided authority of over 95 of the swabs market and serving as cornerstone of robust Regulatory Regime for 350 trillion swaps market. Returning to the danielal asset market with a lack of full visibility into the commodity asset market and the Agency Enforcement program had to lean primarily on tips and complaints from the public to identify fraud and manipulation. And primary innovation and they leverage the historic market regulator that is required in cftc regulated derivative market and compliant with Core Principles and the platforms establish and enforce rules minimizing and the integrity of transactions and intermediary and protecting customer funds. Critically all digital commodity plat for the purposes must maintain adequate financial, operational, and managerial resources and and treatment of customer assets. In times of instability, uncertainty, or market misduct. Thee dcc pa directly addresses the increased role of retail participants in the Digital Asset markets by directing the commission to adopt customer protection rules requiring digital commodity platforms to disclose to r customers material conflicts of interest and material risks of trading Digital Commodities. Establishing duties to communicate in a fair and balanced manner and establishing standards for the platforms marketing and advertising. Ththe resources contemplated by theth funding mechanism in a clr mandate for customer education and outreach to ensure the efforts reach all demographics that can reach swiftly in their regime as well. On september 21, 1922, nearly 100 years ago to the day, the grain futures act of 1922 was wsigned into law, which led to the near immediate establishment of the then cftc. With that legislative accomplishment, this committee and the congress swiftly responded to a policy need no matter what was on the heels of emerging risks of American Consumers and becausee of then new Financial Markets and products. Lo technological innovation and promise of development. Theme rich history overseeing Commodity Markets and coupled with expertise and track record that rests on Firm Foundation offul and disciplined cop on the beach and stands ready to tackle the new risks and opportunities one century later. Thank you and i look forward to answering your questions. Thank you very much, mr. Chairman. As youve indicated, i was talking about as i well. Crypto currencies live g by every day americans right now. And some concern that had the cftc has not had a customer protection mandate and therefore may not have the tool that you need to protect these retail customers. Could you respond to that . Thank you, senator. I would say unequivocally the Commodity Exchange act and the rules that the commission from the law supports protection and without question. In thinking about the layers and theres several layers to the customer protection regime. You see its important to identify at this sort of foundational level with more specific requirements for the registered and its directly addressing cybersecurity and operational risks and this is directly about protecting customer funds and customer assets. Conflicts of interest, something you noted in the issue area and core principle and entities that your bill contemplates with the Trading Platform and brokers, dealers, custodians and best interest t of the client and customer and no one else. We have Core Principles and the battle of the agency so that we can monitor for example the trading practices and making sure that the marketke is free from fraud and manipulation. Prohibiting contracts being listed on Trading Platforms that are ready susceptible to manipulation. These are just a few of the nearly two dozen Core Principles that make up the regime and ultimately are manifested through the rule they describe. The second layer is how do we make sure that our regulated entities are complying with the rules and regulations. We do this with a series of inspections, examinations and investigations and we work in tandem withne our partner and te National Futures association and another provision you include in the act to create selfRegulatory Regime to include the environmental market reare compliant with the law. We make sure that they have adequate proficiency and information they need to comply with the law. Thing is enforcement and went have to ensure that individuals are held accountable for breaking the law. This is obviously one of the key components of our requirements as a civil lit gator. Our agency strucked with funding over the past decade or so and ive looked at data points in the past ten fiscal years and average punt over 240 million per year. In that same period, this ten year period over average of 1. 5 billion per year and six times plus return on investment for the american taxpayer in enforcement penalties. A few months ago i had the privilege of talking to the attorney general as he announced settlement with the trading advisers and oil markets. This was a agreement by the cftc and we need to ensure our Energy Markets are free of fraud and nah manipulation and that was brought to the cftc and it underpins trillions of dollars in contracts and student loans, mortgages, over ten years ago was bound to be on the benchmark itself and the financial contracts andfi was manipulated and trillions in dollars of fines against Financial Institutions across the globe and that was uncovered just downtown at the cftc and these are some examples of the work we do from the rule set, implementation and law and how we enforce it and the accountability and layered on top of that is all things you include inar the bill and its extremely important is the bankruptcy protection and to your bill is extremely important and we prioritize customer funds and customer assets above all else. Above creditors and security holders and this in total is a very robust, very comprehensive customer protection regime and worked in markets very well for decades and contemplate in your bill, will workdital commodity. One otheruestion. The ft. Swapped with the full settlement rponseo the regulation Digital Assets in this new innovation. Takeust a moment and add about how you would talk about workg. Obviously twoery important agencies ftc and make regulators in the space and working together. And going back 40 years withs security futures and commodity futures. We we are constantly talking at the highest level in chair enforcement and we naturally have intersections between the markets and entitiesith the intermediate broker dealers and understands at a high level what the goal is and its not about the ftc a sec and its about theeg regulatory frame work, abt Financial Markets. Its about proteing customers and if we keep that goal in mind, think well be able to accomplish what were tasked with. Thank you very much. Senator boseman. Thank you, madame cha and i appreciate your questions concerning enforcement. Thats one thing thatomes u in regards to the bill, this is cftc had the ability with enrcer and you aweredhat question very, very well explaining your role in the great job youre doing wit the resources that you he and punching the weight and still enabling protectin the customer while still enabling innovation soso again, thank you for generl a great response in that regard. Another thing that comes up is user fs on derivatives, market activities, and i had the opportunit ive been on the subcommittee on appropriations thatas to do with thatnd chpions efforts that makeure that the cftc does not have the authorit to impose user fees on derivative mket activities. Editor, in short the answer is yes. The bill is drafted prescriptivg lead t ensure the fee would only be assessed on the digital commodity platforms. And not on traditional derivative mket. Rate. So it wouldake cgressional authorization toauat do that. In fac further do you believe it is clear that t only user fee precedent, as a result of is bill is it would takehe additional legislation to authorize user fee in the tradional derivative market of the cftc oversight . Yes. Very good. I also want to thank you and your staff. They haveone a very, very good job of providing technical assistance. Not only with this bill but again the many years we have worked withh them. One of the suggestions we have heard from numerous industry stakeholders is about the definition of theti dealer. Because our bill is intended to protect retail consumers, it is not our intent t cover proprietary trading firms invest on their own accounts. To be covered under the definition dealer. As currently written do you believe our legislation covers this kind of nonretail consumer faci marke activity . Senator good question. I think i agree wh youn principle that we are trying to focus on retail customers. And in this case the principal trading firms of t proper traders as they are morean commonly known would be exempt from the dealer definition. That is consistent with the act and this comttee and the commission with respect to traditional. The carveout for proprietary traders . Comedy youl back my time i appreciate your answers a personal staffre you understand t is in answering questions. Again thank y veryuch for. Thank you verych much, i went over a few moments forount back to pray thank you so much fothat. Ill now tur to senatoror klobuchar and i believe senator ernst will be here shortlyhe will bee next. Thank you very much. Thank you as well senator boseman. Chairman i think weve talked about this before ive appreciated you visiting my office as well. As y mention in your testimony, these are volatilee markets. I think we all saw that big time when we saw Digital Currencies were approaching their highest values and are spending the millions even more on these celebrity endorsements. I think we all thought the sup