May 22, 2024

Rep. French Hill (R-Ark.), who serves as the Vice Chairman of the House Financial Services Committee, joins "First Mover" to break down the Financial Innovation and Technology for the 21st Century Act.

Video transcript

We actually give the roadmap to these two agencies and it's much better than current law where Chairman Ginzler loses in federal court. He doesn't have a clear road map on what's a security, what's a commodity? He encourages people to come in and register and then he never returns their phone call. The financial innovation and technology for the 21st century Act, also known as Fit 21 is set to be voted on in the house later today. Fit 21 would establish a clear framework for digital assets in the United States identity. Find where and how each token and exchange might be regulated. The Republican bill has garnered bipartisan support and several Democrats are pushing their colleagues to vote. Yes. Joining us now is Congressman French Hill who heads the crypto subcomittee congressman. Welcome to first mover. You bet Jen's great to be back with you. It's great to have you here again. Now, a big day, everyone is waiting for this vote that's scheduled for later this afternoon. I want to get into your head a little bit. What do you think is gonna happen? Well, it's a historic day because it's the first time that uh our nations come together and had a comprehensive bill that supports Web three Blockchain development and the future of the internet and the future of how we can use uh Blockchain for removing cost increasing compliance, reducing fraud, creating innovation and make sure that America stays at the top of the global technology race. So it's a historic day and I'm excited about it and the work that's been done by both Democrats and Republicans in the administration and on Capitol Hill, I think you'll see in a very bipartisan vote later this afternoon, which in my view, gives us a strength going over to the United States Senate and finding their concurrence and also their best ideas for this space as well. Give me a little bit of insight here. What have the conversations been like with the Democrats? Has it been smooth sailing up until now? What's the back and forth been like? Yeah, it's such an important question. I, I see a generational issue here where uh younger Democrats uh catch on to what's going on here. They recognize that the existing securities and exchange commission rules are inadequate for dealing with uh bringing innovation to the market that includes tokens and clearly delineating what's a security? It should be regulated like a security. But what is a decentralized functioning uh Blockchain that those tokens might well uh much better be uh regulated and exchanged in a commodity environment. So this bill sets out that roadmap creates that framework. What's a security is treated as a security, what's a commodities is treated as a commodity? And we create clear definitions for how to do that. Who's a dealer, who's an exchange, how to custody digital assets? This will increase money coming to the US, increase innovation. I think give us the best regulatory framework for a digital technology going forward. Uh And it will give investors more clarity, consumers more clarity. And if we combine this Jen with a privacy bill, which I also think we need to have Congress pass and a payment stablecoin bill, we will have gone a long way to crafting the right federal regulatory environment for moving from an analog services future to a digital future. Any thoughts ideas on how many Democrats might support the bill in the vote later on today? Well, last week, we got a bit of a glimpse on this. Uh we had uh 21 Democrats support Republicans in rejecting the sec uh driven staff accounting bulletin on custody, which was prejudiced against a digital ads that it was very poorly done. And then over in the Senate, there were 60 votes uh with that Republican position in the Senate last week, including Chuck Schumer, the majority leader. So I believe that we've done a good job making this a bipartisan issue. And I think we'll get more than 21 Democrats this week on fit 21. Here's some reasons why this bill is responsive to President Biden's own executive order to say that there are regulatory gaps in the regulatory framework for digital assets and that Congress should be the one to close those gaps. Secondly, uh we've had Richie Torres and some of his colleagues, Wiley Nichol of North Carolina, Jim Himes of Connecticut, uh talked to their fellow Democratic caucus members saying this is a good bill. It's a bipartisan bill. And finally, President Biden himself this morning, uh issued the statement of administration position uh on fit 21 and he did not, uh, he, he said he affirmatively he will not veto this bill that there's some things that he would do differently and he hoped to work with the Senate on those. But that was very encouraging. And I think that will be a green light for innovation, supporting capital markets, supporting Democrats to vote with Republicans this afternoon. It's interesting you bring that up. I know that last week, the Senate recently voted to kill, um, the S ECs crypto accounting policy. We were just talking about that and while, uh President Joe Biden said that he won't veto this. He vowed to veto that decision. Do you think that that will happen? Such an interesting point? I mean, they are not consistent. That's exactly what I'm trying to say. It's not consistent. And, you know, AAA congressional Review Act Action by the, uh, the Republicans against a rule made by a Democratic administration does pit it as a political exercise. But I would recommend to the president that he's making the right decision not to veto fit 21 to work with Republicans and Democrats to have a regulatory framework for digital assets. And in doing so, we correct the errors in the staff accounting bolt in 121 on, on crypto custody. So I would encourage the president to not veto the congressional review Act, agree to work with Republicans and Democrats in the House and Senate that there's a better approach. Uh Gary Ginzler himself has said he did not consult with the other regula regulatory bodies. Janet Yellen, the Treasury Secretary, Jay Powell, the Federal Reserve chairman said they were not consulted on the staff accounting bolt. And that's one reason why so many Democrats voted with Republicans on that. It was ill conceived and it doesn't even take into account that it's the bank supervisors that principally oversee custody rules, not the sec. I'm glad you brought up uh sec chair Gary Gensler because today he said that fit 21 would create new regulatory gaps, undermine decades of precedent regarding the oversight of investment contracts, putting investors in capital markets at immeasurable risk. How would you respond to him uh ahead of the vote later this afternoon? Yeah. So I I reject his argument that fit 21 opens a new loophole. He's arguing that someone could now have a non digital asset company. Let's say Apple and that Apple could issue tokenized shares and escape all the registration requirements around the sec. For example, that's just not true. It's not true in the definition section of Fit 21. And it's not true in the text of Fit 21. And I think we can demonstrate that beyond a shadow of doubt, uh, with the securities lawyers talking to securities lawyers that this assertion he's making is, is not, uh not based, in fact, I mean, if it's not based in fact, why do you think he's out there saying it? Why do you think he's being so public about it? Is it that he, he wants to continue leading the SEC the way it's being led with a lot of uh regulation by enforcement? What do you think is motivating him to make these comments if they're not true? Well, I can't explain it because this bill is very clear. It gives uh authority to the SEC and the CFTC to jointly write the rules around crypto. Now, think about that. We are directing them to write the rules to give transparency. What's a digital asset? What's a commodity? What's a security who can be a dealer? How do you become a broker? How do you register as an exchange? And how do you do custody? We actually give the road map to these two agencies and it's much better than current law where Chairman Ginzler loses in federal court. He doesn't have a clear roadmap on what's a security, what's a commodity? He encourages people to come in and register and then he never returns their phone call. So we give a road map for him on that subject. So I cannot explain why he's taken the position that he had. I just uh I think he's isolated uh from other regulatory leaders like Chairman Benham, the Democratic appointed chairman of the Commodities Future Trading Commission. Uh He completely supports Fit 21. He and his staff have been excellent uh interlocutors and providers of technical assistance on our bill. And the SEC staff themselves have provided technical assistance in drafting Fit 21. So we feel very confident in the direction that we're taking. We're disappointed that Chairman Ginzler uh doesn't see that this is better than current law and gives him the tools ability and uh a process that can allow him to be a better, a better regulator and a better supervisor in this space congressman. If the bill does pass, do you think that the CFTC has the resources it needs to uh properly co oversee the space with the SEC? Well, Chairman Benham gave a specific uh recommendations to the House Agriculture Committee and he, he's testified in our joint hearing about the funding that he needs. And this bill includes uh the proper funding for the CFTC to stand up the authorities that they need to, to uh deal with digital commodities because it is a a new area for them outside the futures market on Bitcoin, they will now have the spot market authority on uh Bitcoin, for example, and they'll have these exchanges that they need to oversee and supervise as well. Now, I got to ask you, we are in an election year. It's what we are talking about. We're ramping up for. Um and crypto is seemingly becoming uh um an issue that folks are paying more and more attention to. Do you think that there are really single issue voters in this election? You know, I've never seen a single issue voters over my few years in elected office that really drive the narrative and turn the table on an election. But I think it's right to say that the Republicans in this interest are the supporters of innovation of capital markets, capital, market innovation, internet innovation, the future of technology. But I don't want to make that a partisan statement because I want a large vote today where Democrats and Republicans come together and that we stand as we did back in the 19 nineties for American being a leader uh in internet technology. Now it's time to do the same thing when it comes to web three Blockchain use and tokenization. This will bring many benefits to consumers across our society, both and both in the public sector and the private sector. And I have to ask you just with all of the excitement in the industry yesterday, with the sudden movement on the spot. Ether ETF S. Do you think we're going to see an approval of the for the spot Ether ETF? Um, as soon as tomorrow? Well, I know there's a deadline here in May for the commission to act and I would hope after the court cases in and around Bitcoin, the response of consumers and of companies and providers of the Bitcoin Etp product that they would step forward and do this in the right way. I think it's justified and I think their experience, both their litigation experience as well as their uh analytical performance experience in approving those etps for Bitcoin would hopefully get them to. Yes. So we look forward to hearing a positive response from the commission. They'll have to explain themselves what the difference is if they're not able to approve these products. Well, that's exactly it. There was, um, some speculation, some chatter by analysts yesterday that maybe there was a sudden change in the S ECs heart due to political pressures. Do you think that that could be the case? Well, I'm sure they, uh, work hard at the commission to follow the law, follow their supervisory practice and follow the facts. When they approve any product for availability to the consumer. It took a long time to get these Bitcoin etp products approved. Uh, they've said for years that the futures market and the cash market were not correlated and there was a, a real discrepancy there. Uh, Commissioner Purse sec. Commissioner Purse said that. Well, that's just not true. And ultimately it took a court to intervene, to get them to head in the right direction. And then suddenly when they announced that they approved it, they did find that the futures market and the cash market were in sync. So perhaps they'll come to the same conclusion uh, for, uh, this round. All right. And Congressman Hill, just before I let you go. Can we expect a Hill chairmanship at the House Financial Services Committee from you? Well, I've certainly uh started talking to my colleagues about uh my interest and passion for serving as the next Republican leader of the House Financial Services Committee. You know, I've devoted my whole life to economics and financial policy, starting out as a, as a young banker out of college and then a staffer for the Senate Banking Committee during the 19 eighties, uh Deputy Assistant Secretary of the Treasury for Bush 41 a coordinator of All White House economic policy for Bush 41. And then since the nineties, an entrepreneur starting businesses uh being a broker dealer CEO being a bank CEO. So it would be an honor of a lifetime if my colleagues uh thought I should be the right person to take that leadership position, but we'll be talking about it the rest of the year.

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