Our Digital Asset Subcommittee held a hearing to address the fast-paced evolution of the digital assets space. They reiterated the need for clear regulations — fast. Titled "American Innovation and the Future of Digital Assets On-Chain Tools for an Off-Chain World," the hearing brought together industry experts and policymakers to discuss the challenges and opportunities presented by blockchain technology. Particularly important to the discussion was recent enforcement activity from the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). It provided a valuable forum on the above actions and their potential impact on the nascent digital asset industry.
Opening the hearing, Subcommittee Chairman Dusty Johnson (R-SD) recognized the importance of the ongoing dialogues. Johnson referenced the House Committee on Agriculture's hearing, where businesses and entrepreneurs showcased blockchain's potential in solving real-world problems.
This hearing forms part of a larger effort by leading Republicans in Congress to advance digital asset policy within the United States. On April 4, Representatives French Hill and Glenn Thompson introduced six bipartisan principles. These principles are intended to help provide regulatory clarity and certainty to support innovation in the digital assets industry.
The Department of Justice’s (DOJ) surprise announcement to eliminate its digital asset litigation division was a controversial topic raised during the hearing. Democrat members repeatedly expressed their concern over the intent of this action.
Alexandra Thornton of the Center for American Progress articulated her concerns about the risks and uncertainties posed by the emerging digital asset industry.
all of these risks and uncertainties today would counsel a much more cautious approach to adoption of a regulatory regime for an industry plagued by scams, theft, and hacks.” - Alexandra Thornton
Garrison emphasized the critical importance of developing smart regulations to foster real innovation in the digital assets industry. He proclaimed that the status quo is just not working anymore.
“Passing digital asset market structure legislation is essential to promote American innovation in blockchain technology. The status quo is unacceptable,” - Coy Garrison
Garcia criticized the SEC’s recent move to dismiss a number of cases it has taken against companies related to digital assets. Smith made the case that only congressional action can provide true regulatory clarity to the digital assets industry.
“While the Securities and Exchange Commission (“SEC”) has taken steps within its jurisdiction to provide regulatory clarity, these actions alone are not sufficient. I believe that Congressional action is necessary to have true regulatory clarity for the digital assets industry,” - Smith
Rep. Bryan Steil (R-WI) emphasized a focus on providing issuers and market participants with clear guardrails. Fischer argues that passing this type of legislation will enhance capital formation and shield both the digital asset ecosystem and the traditional financial system from harm.
“It is crucial for this Committee to enact legislation that provides clear guidelines for issuers and market participants, facilitates capital formation, and maintains the integrity of both the digital asset ecosystem and the traditional financial system,” - Bryan Steil
“Through this process, we must ensure that American innovators and entrepreneurs can thrive here at home.” - Bryan Steil
Dr. Chris Brummer, one of the witnesses, urged the Council to focus on the dire consequences of inaction. It strangles the system, raises risks, and stifles innovation, he noted.
“Inaction weighs down the system. Risks multiply. Innovation slows. And when the inevitable reckoning comes, the cleanup is far more disruptive than thoughtful, incremental reform would have been,” - Dr. Chris Brummer
He discussed the need for regulatory frameworks that stay ahead of innovation.
“the reality is that innovation doesn’t wait… The question is whether our regulatory frameworks will move with them. Because in the end, it’s not innovation that creates risk—it’s the refusal to meet it with clarity, creativity, and courage.” - Dr. Chris Brummer
Jake Werrett told us how blockchains are changing the world for good. They de-centralize digital assets and re-allocate control over information, ownership and privacy back toward the people.
“In recent years, blockchains have emerged as one of the most transformative architectures of the Internet… What began as a monetary innovation has become a foundation for decentralizing all forms of native digital assets, shifting control over information, ownership, and privacy back to individuals.” - Jake Werrett
Rodrigo Seira makes the case that the existing securities regulatory framework is ill-equipped to regulate crypto. Second, he believes that it does not achieve its stated policy objectives.
“It is clear that the current securities regulatory framework is not a viable option to regulate crypto and fails to achieve its stated policy goals,” - Rodrigo Seira
He stressed the need for a common sense approach that balances innovation while still protecting consumers. This framework should provide for balanced disclosures and consumer protections, but still empower companies to innovate without the threat of capricious enforcement actions.
“A predictable framework will protect users by requiring appropriate disclosures and consumer protections while ensuring that companies can innovate without the constant fear of arbitrary enforcement actions.” - Rodrigo Seira
“We’ve seen that debt balloon in recent years—especially in crypto, where sometimes the absence of a single new rule or proposal has left an entire sector navigating in the dark.” - Dr. Chris Brummer
“the current lack of regulatory clarity has caused harm to both crypto-native and traditional financial services firms… Many traditional financial services firms, which are heavily regulated, have decided not to offer digital asset products or services altogether because of this regulatory uncertainty.” - Smith
