Ranking Member David Scott Opening Statement at Full Committee Digital Assets Hearing

Hearing

Thank You Mr. Chairman.

Today's hearing marks the culmination of this series of digital asset hearings and our first hearing on the Majority's draft legislative proposal to regulate digital assets, made public this past Friday.

I have always appreciated and shared the desire of the Chairman to work in a bipartisan manner.

Unfortunately, negotiation of this proposal has been limited to Republicans on the Financial Services and Agriculture Committees.

I have a long history of fighting for more resources for the CFTC. So you shouldn't be surprised when you hear me say that the CFTC needs and deserves more resources.

The markets the CFTC regulates are ever evolving and the CFTC needs the resources to get the right talent and technology to continue its good work.

I am always the first person to ask what additional authorities are needed by the CFTC to keep our markets healthy.

This proposal doesn't seem to be in response to the wants and needs of the CFTC. Instead, the proposal establishes a number of complex and untested processes raising questions as to whether the provision will meet the stated goal of the industry to establish clear regulatory and registration guidelines.

One example of this is the provisional registration process which would be in place while the CFTC and SEC undergo a very resource intensive joint rulemaking process.

Any time you must shift longstanding regulatory processes and practices, there is a chance that something will fall through the cracks. And the fact the bill provides no additional staffing or funding resources makes that even more likely.

As it currently stands, the digital asset industry without a doubt exposes all who choose to participate to serious potential financial risks and uncertainties. This is well established information we have gathered over the past several Congresses, this Committee has highlighted these risks both in hearings and proposed legislation.

The digital commodity spot market, where many of these assets are purchased and traded by market participants, are operated according to an ill-suited regulatory regime that varies substantially based on the state in which the trading platforms are operating.

Over the past year alone we have observed first-hand the fragility and vulnerability of this industry as it lost billions of customer funds to questionable and insufficient business practices.

From the collapse and bankruptcy of major digital asset trading platforms such as Terra and FTX, to ineffective cybersecurity practices and the inherent vulnerability of digital asset trading platforms to hackers who stole a record $3.8 billion dollars from cryptocurrency businesses in 2022, this is not sustainable and cannot go on.

I'd just like to take a moment to thank Chairman Behnam for agreeing to testify here today.

I greatly appreciate the productive relationship this Committee has enjoyed over the years with the CFTC and the proactive work of the Commission, going back to 2014, to engage the digital asset industry and invest in growth of appropriate expertise.

I yield back.

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