Financial Innovation and Technology for the 21st Century Act

Floor Speech

BREAK IN TRANSCRIPT

Mr. FOSTER. Mr. Chair, I thank Chair Waters for yielding.

Mr. Chair, I rise in opposition to this bill.

I am encouraged by the dialogue and collaboration that has taken place between the House Financial Services Committee and the House Ag Committee on this bill. I believe in the potential of distributive ledger technology. I am, in fact, the co-chair of the Congressional Blockchain Caucus and perhaps the only Member of Congress who has actually programmed a blockchain client.

However, I cannot support this bill in its current form. To that end, my office submitted three constructive clarifying amendments, none of which were made in order by the Rules Committee.

This legislation contains several fatal flaws.

First, this legislation largely shifts oversight of the digital assets industry away from the Securities and Exchange Commission which has a long track record of successfully protecting retail investors from abuse in the financial markets toward the CFTC which has traditionally overseen markets with significantly less retail participation.

Secondly, it would create a safe harbor for wannabe pirates through a so-called intent to register that shields crypto firms from SEC investor protection rules before the agencies even have time to write the rules.

Thirdly, the bill was not crafted through regular order. This version of the bill contains a new and dangerous title that was never considered by the Financial Services Committee, title II, which would create a new class of investment in contract assets which has the potential to undermine decades of legal precedent governing the securities laws, and it would create opportunities for regulatory arbitrage.

Instead, it was airdropped in during closed-door negotiations and before it was materialized for a final vote today. That is not regular order.

Finally, this bill also fails to address fundamental challenges of digital assets related to uncontrolled anonymity of self-hosted digital wallets that I believe must be addressed for the digital asset industry to accede to a healthy and sustainable future over the long term.

For example, to be regulated as a commodity under this bill, no person or group can have owned more than 20 percent of the assets at any point over the preceding 12 months.

Mr. Chair, how can this possibly be guaranteed when unknown fractions of ownership are held in anonymous self-hosted wallets?

This bill requires the SEC to issue beneficial ownership disclosure rules, however, the SEC has little or no means of compelling individuals or firms in other countries to comply with such a requirement.

This beneficial ownership test could be skewed by noncompliant foreign owners, by individuals spreading their holdings across multiple wallets, or by dead or lost crypto that artificially inflates the amount of the asset that is currently judged to be in circulation.

The list goes on.

This legislation actually ties the hands of the top financial crimes watchdog, the FinCEN, by limiting their ability to respond to issues related to self-custody of digital wallets which they will tell you is the main issue that they struggle with every day in trying to prevent financial crimes.

Given the widespread use of digital assets by bad actors, we should strengthen the authorities of FinCEN and not weaken them.

My colleagues and I, as I said, offered several constructive amendments to this bill to clarify and address these issues, and the Rules Committee, controlled by the majority, unfortunately, chose to exclude every one of them from today's debate.

Given the content of this bill and its failure to address these issues, I cannot support this bill, and I encourage my colleagues to vote ``no.''

BREAK IN TRANSCRIPT

Source