During a House Financial Services Committee hearing, Congressman Warren Davidson discussed his support for modernizing U.S. financial laws to keep pace with innovations in technology. Updating these laws is critical to enabling U.S. markets to flourish. Davidson noted that failure to provide regulatory certainty is causing Facebook and other American companies to move to other countries to launch their products.
Congressman Davidson and his colleagues in Congress are leading bipartisan legislation, the Token Taxonomy Act, to provide regulatory certainty for businesses, entrepreneurs, and regulators in the U.S.’s blockchain economy.
Congressman Davidson: “I want to focus on an industry desperately in need of clarity as it pertains to securities laws. Cryptocurrency, digital assets, and blockchain is a rapidly growing industry that is poised to disrupt many parts of our markets and could be transformative for families everywhere. Facebook launching its own cryptocurrency – along with partners such as Visa, Lyft, Mastercard, Andreessen Horowitz and many other reputable global firms – is a sign that digital assets are not going to go away.
I recently introduced the Token Taxonomy Act with seven of my colleagues which defines what is and what is not a security. This bill is a bipartisan approach to try to address the regulatory certainty issue.
Mr. Crimmins, you recently provided freedback on this bill before it was reintroduced. What questions are facing investors in digital assets as it pertains to securities laws and how is regulatory uncertainty hurting investors in this market right now?
Mr. Crimmins: “Thank you and I appreciate what you are doing with the Token Taxonomy Act with your colleagues on both sides of the aisle. This is something that is really different from what it was two or three years ago. Two or three years ago when we talked about cryptocurrency, it was this murky, secretive stuff that was trying to get transactions, financial activities away from government, away from Wall Street, put it under a blanket, use it to funnel drug money and terrorist financing and really scary stuff and that still is something we do have to deal with. What we are seeing now, including one recently approved by the SEC, and that is a recognition that blockchain technology, the distributed ledger which allows for security and financial transactions can be used legitimately. It is not the people under that blanket trying to hide their activity, it can be used legitimately, but how—how to get it right—
Congressman Davidson: “So when you talk about how to get it right, it’s interesting that these companies didn’t leave the United States to avoid sunlight … Facebook has attracted all the attention they can – and where do they go? They went to Switzerland, a country that has regulatory certainty in this space.
Mr. Crimmins: “That’s the problem. When this—when regulation began there were small jurisdictions, I think Malta and Lichtenstein. Now we have Switzerland, which is not exactly a small player in the financial scene, leading the way ahead of America. That should not be. They have Crypto-valley and all this stuff they are doing there, and they are trying to get it right. The choices they make should not be the ones that dominate the world. The choices that dominate the economies generally should be the ones that are made by America, the largest economy in the world. We should be in a considered fashion by your colleagues here on both sides working in a bipartisan fashion as you are with the Token Taxonomy Act.
Congressman Davidson: “These are American firms broadly launching products, we have the ideas, we have the innovation. What we do not have is Congress providing regulatory certainty. The SEC is limited on what they can do as is the CFTC. Frankly, we are waiting for Congress to act. One of the main reasons for having disclosure and security laws is the reduction in information asymmetry between the investor and a promoter of an investment. Sometimes the promoter of the investment, as it’s been illustrated with Facebook, isn’t an entity. There’s no headquarters for Bitcoin. It has always left the quandary how do you do it. Other digital assets are transparent. But if it is truly decentralized, and can no longer be altered, how do we do it? We need the regulatory certainty to do so. I think Facebook may have tipped the balance to where there’s momentum and more people at least understand some of the nature of blockchain.”