Forbes Interview with US Congressman French Hill: Congress Urgently Needs to Pass Encryption Legislation
Original post by Steven Ehrlich, Forbes
Original compilation: Luffy, Foresight News
Congressman French Hill (R-Ark), vice chair of the House Financial Services Committee and chair of the inaugural House Financial Services Subcommittee on Digital Assets, Financial Inclusion, and Technology, has held numerous meetings on issues including stablecoins and the overall crypto market. Hearings. He is also a co-sponsor of the recently introduced Financial Innovation and Technology for the 21st Century Act (FIT for the 21st Century Act), along with Congressman Dusty Johnson (RS.D.) and Congressman Glenn GT Thompson (Glenn GT Thompson) (R-Pennsylvania).
In this interview, we cover a variety of issues, including: the legislative environment for cryptocurrencies, his thoughts on the Ripple decision, how his team is working with the SEC on new legislation, and central bank digital currencies (CBDCs) and tokens. chemical securities.
Forbes: What do you think of the current legislative environment for cryptocurrencies?
French Hill：The legislative environment for cryptocurrencies is clearly better than it was two or three years ago. In the House of Representatives, we have now passed the first comprehensive regulatory framework for digital assets, and we have passed the first prudently effective stablecoin proposal in history. We believe this closes a significant regulatory gap.
Forbes: Are there any major differences between the House of Representatives and the Senate?
French Hill：Interest in cryptocurrencies has grown even stronger in the Senate, led by two senators, Lummis of Wyoming (R-WY) and Gillibrand of New York (D-NY). In my opinion, our bill has advantages over the approach they have taken on stablecoins and the regulatory framework. But weve reached out to them, and now that weve successfully passed bipartisan legislation on the framework section and stablecoin legislation, we look forward to working with them in the coming days. In the Senate, the Banking Committee and the House Agriculture Committee must also be considered. So one of the really important strategic differences in how we approach this is the decision of the House Agriculture Committee under Glenn Thompson and the House Financial Services Committee under Patrick McHenry to jointly do this work, bringing together human resources and member engagement. A lot of our meetings are joint meetings, and we have joint hearings.
Forbes: What was the origin of the 21st Century FIT Act?
French Hill：We know the regulatory challenges. At the heart of these challenges are questions surrounding the Howey test and what is and what is not a security. If something is or is not relevant to an investment contract, what about the circumstances surrounding it? So thats a core part. Secondly, Clayton, the former chairman of the SEC, made remarks about initial coin offerings during the Trump administration a few years ago. This is a way for blockchain projects to raise funds through tokens. We know this is an issue that must be dealt with, and it is related to but different from the Howey test. Finally, how do we maintain transparency in these digital asset transactions, and what are the related requirements and rules? When you think about trading, you have to think about custody, you have to think about reporting, you have to think about whether these brokers should be licensed. We hope to answer all of these questions in the Fit for Purpose Regulatory Framework Bill. Therefore, we present the core challenges seen in court cases and law enforcement regulation. We also have some issues related to commodities, such as there is no spot market regulation to authorize spot markets, but we have Bitcoin futures. But the Commodity Futures Trading Commission (CFTC) believes they need a statutory fix for this. And theres not really a mandated investor protection framework within the CFTC, but we know its important.
Forbes: What do you see as the biggest differences between your bill and the Senate bill?
French Hill：I have been focused on solving our bills problems. But my philosophy is that in order to build consensus, we should build on the existing framework of the SEC. So if you look at how weve moved from focusing on fundraising to decentralization, I explain that there are checks and balances that exist all the way from a Reg-A private placement all the way through to an IPO.
Forbes: What is the litmus test when new legislation is needed versus better guidance, better rules?
French Hill：As a general statement, I believe that many of the challenges we see in the digital asset ecosystem can be effectively addressed through exemption relief or proposed rulemaking under the SEC’s existing authorities. But the committee and its chairman have shown no interest in it. So its my judgment that we should take a legal approach and address this through prescriptive language in the law on how they do joint rulemaking. But the statute allows us to mix those responsibilities between security and commodities, which would be extremely difficult without congressional direction for the CFTC and the SEC to work together. For example, we offer brokers or exchanges the ability to obtain dual SEC and CFTC licenses. CFTC Chairman Behnam and his team can definitely work in an integrated manner with SEC Chairman Gensler and his team. But in some ways I think the direct approach weve taken through statutory means is more compelling and perhaps more helpful.
Forbes: We’ve talked before that while commodities have been traded in regulated markets for centuries, the CFTC doesn’t have a specific spot market regulator. Can cryptocurrencies as commodities bridge this gap?
French Hill：I think peoples interest in bitcoin continues. It is generally believed to be fully decentralized and not a security. We already have a derivatives regulator, but not the spot market. Obviously, this is what the market needs. However, the CFTC cannot actually achieve this goal. Thats why I think the timing is right. It also allows us to take a comprehensive approach with our regulations that basically define how to prove that you are decentralized, which I think will become easier over time. I think this mystery will be solved as people bring projects that are clearly decentralized. Its obviously not clear today.
Forbes: What does decentralization mean to you?
French Hill：Decentralization means that the blockchain and its functions are operating in a manner that clearly resembles autopilot or self-fulfillment, and evidence shows that insiders and interested parties never own more than 20% of the tokens. So its a functional test, its a software test, its essentially a proprietary test.
Forbes: There are reports that the SEC has been slow to provide feedback on this bill and some others. How would you evaluate the cooperation with the SEC on this bill?
French Hill：I dont think the SEC will be particularly helpful when we start developing concepts for the bill before its actually drafted. But when we put words on paper and began to flesh out that framework (definitions, powers, and directions), the SEC was able to provide verbal and technical assistance to our drafters.
Forbes: When this collaboration happens, Genslers team will be involved. Your feelings about Gensler regarding this issue have been made very clear. But is there anything more specific you can say about his involvement in this bill?
French Hill：My point has been made very clear. During his two years as chairman, the SEC’s attitude toward digital assets has been disappointing. There are 1 million creditors in the FTX case, but I havent seen any evidence in the last year that the SEC took any action against FTX before it collapsed. Our Oversight Committee would very much like to have access to all emails, messages, minutes of meetings of anyone involved with FTX who cooperates with the SEC. Although they condemned Kim Kardashian for promoting cryptocurrencies, they never actually protected American investors. Some people find it inconceivable that the SEC approved the S-1 and listed Coinbase, but they in turn claim that Coinbase is not operating in a fair manner.
Forbes: What is your assessment of what the administration is doing and the role they play?
French Hill：As a general statement, I want to commend Treasury and her team under Yellen for working very constructively with House Republicans and House Democrats on stablecoin legislation and regulatory framework legislation. I believe they think its important for Congress to act here to achieve the goals of the Presidents Digital Assets Task Force.
Forbes: I wonder why the hearings of the House Financial Services Committee are more lively than the hearings of the Agriculture Committee?
French Hill：Of course, the House Financial Services Committee has oversight authority over the SEC, and the SEC currently has a Democratic chairman. Democrats on the House Financial Services Committee strongly support Chairman Genslers opposition to changing the law. He believes he has all the regulatory and legal powers needed to govern and answer every question about cryptocurrencies. I dont agree with that, I think its a wrong position. But many in the Democratic camp seem to agree with him, so I think thats at the heart of the disagreement. Speaking before the House Agriculture Committee, U.S. Commodity Futures Trading Commission (CFTC) Chairman Behnam seemed to welcome more authority and creative ways to try to clarify the markets he regulates, which he believes will benefit futures markets, derivatives markets and this new potential of digital goods to their markets. So I think thats probably the nature of oversight, these two committees are driving different conversations.
Forbes: Let’s talk briefly about the Ripple decision. What was your initial impression?
French Hill：confusion. I dont think it clarifies the Howey test, consumer protection, and the role of insiders and cryptocurrencies at all. I think this is another example of why we need legislation here. I would say that it essentially defeats the purpose of investor protection when institutional investors are treated differently than retail investors. Insiders are then free to sell their positions on the market without any additional scrutiny.
Forbes: How does this impact your bill?
French Hill：We are very aware of the role of interested parties, foundations or insiders in raising funds for digital asset projects in a start-up environment and moving towards decentralization, as well as the protections for airdrop token participants or non-internal token purchasers (by virtue of investment contracts) . Its no different than how we protect this in Reg D, private equity, or emerging growth companies. I think this is clearly a flaw in Ripple. And then we also figure out how to get liquidity before decentralization happens; and then when decentralization happens, we have a holding period, like a 12-month lock-up period in an IPO, where they can have free liquidity . We try to treat institutions and ordinary retail investors in a logical way, provide some protection and provide some transparency, and I think the XRP case shows that that can help. Even if you claim that this is not an investment contract, that is just lip service.
Forbes: What are your thoughts on all the important parts of cryptocurrency legislation?
French Hill：I think this shows that members of Congress recognize that Web3 innovation, blockchain innovation, the earliest stages of innovation are happening; institutional investors and consumers have demand. If we dont promote that framework, then youre going to see this kind of activity shift overseas. Two developed markets, the UK and the EU, have taken aggressive steps to attract businesses.
Forbes: What are your thoughts on the launch of CBDC and FedNow payment services?
French Hill：FedNow is still a long time away. The Federal Reserve asked the private sector to create a real-time payment system, and they did. And then the Fed said, were going to create one as well, which is what theyve done since the 1960s, both in the ACH space and in the wire transfer space. FedNow will play a positive role, especially in the commercial space. I think consumers already think they have it, they dont, but they think they have it through services like Venmo, Visa Direct and Mastercard. My question is: Will you eventually make the line or ACH system open 24*7? How are you going to staff this? In fact, were going to have a hearing on this in a few weeks. FedNow has nothing to do with CBDC, and I do not support retail CBDC. I dont think its necessary in developed markets like the United States. This is why I believe that USD-based stablecoins and the private sector around them will foster innovation to determine the interest in this payment technology.
Forbes: Some of your colleagues are going further and trying to ban CBDCs outright. What do you think?
French Hill：I believe that a CBDC should not be launched without the first law of Congress. People demonize this concept because they are afraid of it or dont understand how it works. So I think the best way to approach this is to say, Look, let Congress authorize the creation of this, and then people will have confidence that their Fourth Amendment protections will be in place and that the technology will be used. But its still early, and I havent seen a particularly effective CBDC project around the world.
Forbes: Do you think stablecoin issuers will pay interest? If so, must it be a security?
French Hill：I think if its tokenized cash and not a money market fund, then the answer to your question is no, they dont pay interest. But we need to see how things play out.
Forbes: What are the views of major banks and traditional financial institutions on cryptocurrency legislation?
French Hill：Large financial institutions are currently experimenting with blockchain and tokenizing payments within their networks. They have a strong interest in cryptocurrency custody. But some in the industry dont want any non-bank to issue a stablecoin.
Forbes: What do you think about tokenized securities?
French Hill：Our legislation does not address the tokenization of securities shares or bonds. In fact, our specific definition of digital assets is not like this. It excludes commercial loans, mortgage-backed securities, fixed income and stocks. But were very interested in pursuing another piece of legislation where you can create a framework where you can tokenize existing assets. We may have a hearing on this.
Forbes: Is there anything else you would like to share?
French Hill：Im very pleased with the results of the vote and the deep engagement along the two party lines. People in New York, Philadelphia, Little Rock didnt know about the collaboration between the two committees. I think thats going to help us find people in the Senate who are willing to come on board and help us, even if they dont know it yet because theyre not involved in it. Youll find other members who want to work on it, both on the financial side and on the commodity side. I think this is great. I believe the message from Congress is that people are leaving the United States because of Genslers actions. Thats why youll see a bigger audience here.
