My lords, ladies and gentlemen, it is a great honor to be invited to speak today before the All-Party Parliamentary Group on Blockchain Technologies. Thank you to Lord Taylor, Mr. Vickers and Dr. Navi, and Lord McNicol, Lord Goddard, and Mr. Lamont for convening today’s event to discuss digital assets policy and regulation. I am pleased to share with you an overview of the United States’ swift progress on developing and implementing the Trump Administration’s crypto roadmap.
Golden Age of Crypto
We believe that the American story is one of innovation. From the great transcontinental railroads, to the internet worldwide, American entrepreneurs have held high a shining beacon to the future. The President’s Working Group on Digital Asset Markets, established by executive order by President Trump in the first days of the Administration, recognizes our American spirit of innovation and endorses the notion that digital assets and blockchain technologies can revolutionize not just America’s financial system, but systems of ownership and governance economy-wide.
The President’s Working Group is ushering in the Golden Age of Crypto and published its report, Strengthening American Leadership in Digital Financial Technology, about 6 weeks ago with a comprehensive set of recommendations to provide regulatory clarity and adopt a pro-innovation mindset towards digital assets and blockchain technologies.
The report addresses key areas such as:
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Positioning America as the leader in digital asset markets
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Modernizing bank regulation for digital assets
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Strengthening the role of the U.S. dollar
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Combating illicit finance in the Digital Age
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Ensuring fairness and predictability in digital asset taxation
For too long, a lack of clarity and destructive regulation-by-enforcement policy has held back U.S. businesses and entrepreneurs whilst the rest of the world established frameworks for digital assets and crypto to facilitate innovation in their jurisdictions. Indeed, many U.S. innovators were driven offshore to jurisdictions with more regulatory clarity, such as in Asia, Europe, and the Middle East. That is why the U.S. cannot delay in moving forward to welcome back home Americans and others that want to invest, hire, and build in the United States of America.
Accordingly, with respect to digital asset markets, the President’s Working Group report recommends that the SEC and CFTC use their existing authorities to (1) immediately enable the trading of digital assets at the Federal level by providing clarity to market participants on issues such as registration, custody, trading, and recordkeeping; and (2) allow innovative financial products to reach consumers without bureaucratic delays through the use of tools like safe harbors and regulatory sandboxes.
The report lauds Congressional efforts such as the historic enactment of the GENIUS Act to establish the first-ever Federal regulatory framework for stablecoins, and the passage by the House of Representatives of the groundbreaking CLARITY Act and other legislative proposals on digital asset market structure. Meanwhile Congress continues this important work, the U.S. market regulators are answering the President’s call to act now with two complementary initiatives to continue the swift progress on providing regulatory clarity: the SEC’s Project Crypto and the CFTC’s Crypto Sprint.
Golden Age of Market Innovation
Together, the SEC and the CFTC are embarking on a new beginning for coordination between our agencies. We will work together to harness our Nation’s unique regulatory structure into a source of strength for market participants, investors, and all Americans. To the extent possible and appropriate in the public interest under existing statutes, our agencies will consider harmonizing product and venue definitions; streamlining reporting and data standards; aligning capital and margin frameworks; and standing up coordinated innovation exemptions using existing authority.
Last Friday, SEC Chairman Paul S. Atkins and I announced a joint SEC-CFTC roundtable to be held on September 29 to discuss regulatory harmonization that will enable increased market choice and protect investors through clear, predictable, and pro-innovation regulatory frameworks that addresses, among other topics, innovation exemptions and DeFi.
The turf war is over.
CFTC Crypto Sprint
I have long advocated that simplicity is the solution, and that the U.S. must have a durable and flexible approach to regulation that will keep up with continuing innovation and stand the test of time. I have cautioned that we must take to heart the lessons learned from the Dodd-Frank Act, which had unintended consequences such as creating regulatory moats and market fragmentation.
This means relying upon technology-neutral regulations that do not have to be continually rewritten to keep up with innovation, and activity-based regulations that do not require burdensome and costly entity-registration requirements that stifle competition by raising the gate to new entrants with less capital like start-ups and entrepreneurs.
Next steps
Right after the release of the President’s Working Group report, the SEC and CFTC outlined our near-term initiatives. As part of our Crypto Sprint, the CFTC has launched public consultations on listed spot crypto trading and all other President’s Working Group report recommendations, with comments due by October 20.
The SEC and CFTC released a joint staff statement last week that current U.S. law does not prohibit SEC- or CFTC-registered exchanges from facilitating trading of certain spot crypto asset products. In other words, we are bringing digital assets and crypto inside our existing regulatory perimeter for securities and futures exchanges, which provides unmatched access, market integrity, and investor protection for nearly 100 years.
U.S. capital markets are the deepest and most liquid in the world, and we will use that strength now.
Cross-border framework
Throughout my term and my sponsorship of the CFTC’s Global Markets Advisory Committee, I have been a staunch advocate for access to markets. Drawing upon the lessons learned from Dodd-Frank, it has been a priority for me to ensure that there is a pragmatic cross-border framework, including substituted compliance, mutual recognition, and passporting as appropriate, in order to avoid market fragmentation. That is why I believe that we should use our existing registration categories for brokers, dealers, exchanges, and other market participants because the CFTC’s cross-border approach to foreign markets, products, and intermediaries has been in place for decades.
We should not have to reinvent the wheel.
Two weeks ago, the CFTC released an advisory to reaffirm our longstanding framework for the registration and recognition of non-U.S. exchanges or foreign boards of trade (FBOTs), which dates back to the 1990s. By using this framework to provide regulatory clarity for non-U.S. exchanges, whether traditional or digital asset markets, that are in jurisdictions with comparable regulatory regimes to the U.S., this is the fastest way that we can legally onshore trading activity efficiently and safely under CFTC regulations and open up U.S. markets to the rest of the world.
Because of the lack of U.S. regulatory clarity and the enforcement-first approach of the past several years, many U.S. firms established affiliates in non-U.S. jurisdictions with clear regulations for crypto asset activities. For example, these U.S. firms may have an EU crypto derivatives trading venue that is authorized under the Markets in Financial Instruments Directive (MiFID) regime as a regulated market (RM) or multilateral trading facility (MTF). These EU trading venues could seek to provide access to U.S. market participants under the CFTC’s regulatory frameworks for FBOTs or exempt swap execution facilities (SEFs), as appropriate.
The CFTC will also explore whether trading platforms authorized under the EU Markets in Crypto-Assets Regulation (MiCA), or similar virtual asset or crypto asset regimes, would also qualify under the CFTC’s current cross-border frameworks. Because so many foreign jurisdictions, in the vacuum over the past several years of a coherent U.S. digital asset policy, have implemented regulatory regimes that are not technology neutral, but are instead specific to crypto and blockchain technology, I believe it is critical for the U.S. to evaluate the most pragmatic path forward, particularly because those non-U.S. crypto asset regimes already include pillars such as capital, risk management, market conduct, retail protection, custody, conflicts of interest, transparency, and illicit finance.
Conclusion
As you know, I believe in a level playing field for global businesses and global markets. I also believe in the power of strong U.S. leadership to catalyze global solutions to common challenges with expert input from key stakeholders. Our U.S.-UK special relationship has always led both our great Nations towards shared economic prosperity, as evident from our two international capitals of finance, New York City and London. The time for action is now. Thank you.
