▶ 0:05:32The committee will come to order. Welcome and thanks for joining this hearing. It's entitled American Innovation and the Future of Digital Assets: Onchain Tools for an Off-Chain World. After brief opening remarks, members will receive testimony from our excellent witnesses today and then the hearing will be open to question uh open to questions. In consultation with the ranking member and pursuant to rule 11E, I want to make members of the subcommittee aware that other members of the full committee may join us today.
▶ 0:06:04Uh I'm pretty excited. This is our first hearing of this subcommittee uh commodity markets, digital assets, and rural development. And I'm particularly excited about the gentleman sitting to my right. Don Davis is a great human being, a great member of Congress. Uh we worked together on this digital asset stuff uh in the last Congress. I enjoyed working with Yadira. Uh and I'm going to enjoy working with Don as well. Uh Mr. Davis isn't the only one in a new role. Half of this subcommittee are new members to the subcommittee.
▶ 0:06:35So, we're going to be doing a lot of learning together. And I I'm sure I speak for Don as well in that we we we're excited to have a new crop of people excited to make sure that these commodity markets and rural development and crypto issues uh work well. And of course, a portion of our work, an important portion is digital assets, and that's what today's hearing is on. But it's certainly not the only thing we deal with in this committee. Uh, of course, rural development, rural energy, commodity futures trading commission, uh, legislation to reauthorize the CFTC.
▶ 0:07:03This is all going to be a part of the work that we're going to do together. Uh in the digital asset space though, it was last Congress that the the full committee did an extraordinary job working in a bipartisan way and with the folks at financial services uh to craft and then pass the bipartisan comprehensive market structures bill uh the financial innovation and technology for the 21st century act fit 21.
▶ 0:07:29It passed the House uh floor by 279 to 136. I think Don Ha has those numbers tattooed um on his upper arm. He'll show you if you ask pretty please nicely. And and we're going to pick up right where we left off. Earlier today, Chairman Styles digital assets subcommittee on the financial services side held their first hearing on market structure. That was not a coincidence.
▶ 0:07:56Just like last Congress, everything we do, we're going to be doing in tandem and working together. We are united and committed to advancing comprehensive bipartisan market structure legislation and getting it to the president's desk. Our legislation will bring legal certainty to issuers and to users of digital assets. There will be clear customer protections to buyers of digital assets. And it's going to foster an environment of investment and innovation. And that's going to benefit the whole country.
▶ 0:08:25Today we're going to hear from entrepreneurs who are using blockchain and digital assets to solve realworld problems. Again, we get back to the uh the hearing of or the title of this hearing uh onchain tools for an off-chain world. Uh some of these concepts, some of these solutions are really fun. And in that way, it's not about crypto. It's about cattle guys trying to figure out how to make it easier and more profitable for ranchers to market their cattle.
▶ 0:08:53It's about a gifted engineering trying to make a less expensive, more robust, more precise GPS system for precision agriculture and other location-based systems. It's about a law professor who's building automated systems to help developers comply with legal disclosures in a way that consumers can actually understand.
▶ 0:09:13Our work on market structure legislation is ultimately about how to ensure that those ranchers, those engineers, those professors and many many others can use digital tools to bring their ideas to life and to power uh the American dream. We have a terrific panel of witnesses to help us understand that work uh and the legal landmines which can disturb and slow innovation.
▶ 0:09:38I'm looking forward to today's hearing and our work over the next few months and of course ultimately uh punching fit 21 uh across into the end zone and onto the president's desk. With that, I want to welcome the distinguished and recognize the distinguished ranking member, the gentleman from North Carolina, Mr. Davis, for any opening remarks he'd like to give. Well, thank you so much u Mr. Chair and look forward to continue service with you on this committee.
▶ 0:10:04um thank you so much for um not only your service um to our country but in particular um for the work that we've done and I believe we'll continue to do on this committee and to all of the members and to our witnesses um thank you for being with us today. I would like to in particular um to highlight and just um thank our ranking member um as well as our chair for their leadership and giving us guidance um for um the work before us in the 119th Congress.
▶ 0:10:34Um just this past month I had the privilege of participating in the digital um chambers DC blockchain summit. Um, we came together to reinforce what I think is a simple but powerful idea and that is digital asset policy remains vital for American My priorities in particular as we move forward um over the 119th um for our subcommittee market structure one um getting digital
▶ 0:11:04market structure legislation across the finish line to provide our markets with certainty uh the certainty that's necessary um so that we can continue to operate um to ensure that the United States remain um leader. The future is counting on us. I truly believe that and we must rise for this occasion that's before us now. Number two, um CFTC.
▶ 0:11:33The next we must reauthorize the CFTC. With increased work for the CFTC coming on the future market structure and other related legislation, we need to ensure the CFTC is reauthorized and provide um they're provided with adequate ability and staffing to carry out this its job.
▶ 0:11:53And third, which is shifting gears a little bit for me, but I think I speak volumes for rural America, which I understand in the first congressional district of North Carolina, uh we rely tremendously on rural development. um broadband deployment, community facility support and all the USDA rural development u programs. Um these are essential for our rural communities.
▶ 0:12:16These priorities um come with the need for a commitment to move forward on this subcommittee, a commitment for holding hearings, roundts, um events, um whatever it takes, we're committed, Mr. chair um and to those who are here. As the House Financial Services Committee advances legislation, it's vital that subcommittee keeps pace.
▶ 0:12:42Our jurisdiction, commodity markets, digital assets, and rural development places us at an intersection of innovation and making a difference in the lives of many people across this nation. And I do not take that lightly.
▶ 0:12:56any legislative framework we move forward must account not only for market structure and investor protection but also for innovation happening far um from the trading floors innovation that can empower rural America improve public services and unlock economic opportunity where it's needed most. I look forward to working with you, Mr. Chair. Um and thank you so much for the witnesses that are here again today.
▶ 0:13:25Uh before we recognize the chairman and the ranking member for their opening comments, uh after consultation with ranking member Craig and ranking member Davis, uh I would ask uh for a UC to limit uh questioning time for members to four minutes. And I'll tell you why we want to do that. Votes are going to get called and rather than just shut down people at the end of the DAS. We thought if we all took a little bit less uh we could share more bountifully uh with all uh and so I would ask for UC on that. Is there any objection? Hearing no objection.
▶ 0:13:54Uh members will be given four minutes of questioning time. And listen, if there are issues we still have to resolve uh and votes haven't been called yet, we'll do another round, right? It's not about shutting anybody down. Um and then for our our witnesses, Mr. Davis and I'll kind of run this thing together. So if he recognizes you, don't think he's going rogue. We just kind of like to tag team this a little bit. And so with that, uh I would recognize the chair of the full committee, Mr. Thompson, for whatever remarks he would make. Well, uh thank you, Mr. Chairman. I want to congratulate you, Mr.
▶ 0:14:23chairman on your reappointment as chairman of the subcommittee. You were a key part of our success on digital assets last year and I am so pleased that you've agreed to take on this role again. Um and ranking member Davis, congratulations on your appointment as ranking member. I I know how excited you are to take on this role. Uh I know that the two of you are going to be do a great job leading the committee's work on digital assets, rural development and derivatives.
▶ 0:14:53I also want to welcome all the members of the subcommittee here today. And again for the 119th Congress, there was a great demand to serve on this subcommittee. Uh in no small part because of the opportunity to work on the digital asset issues. I'm so excited for the work of the subcommittee to continue. I want to thank you all for your willingness to serve on it. There's great potential for digital assets to provide sign significant value for the American public and American agriculture.
▶ 0:15:24Uh not just in monetary terms, but as tools to solve realworld problems as we'll hear about today. But as we'll also hear about today, digital asset developers, users, and institutions still need clear, thoughtful rules of the road to create these solutions. Congress must act so that we do not lose out on this American innovation. And I want to underscore what Chairman Johnson said.
▶ 0:15:51Uh we are once again working handin glove with the House Financial Services Committee to craft legislation that will do uh just that. This is perhaps unusual for Congress, uh, but it's the right thing to do to make good public policy. I want to thank House Financial Services Chairman French Hill and her digital asset subcommittee chairman Brian Steele for for their partnership.
▶ 0:16:15U Chairman Steele held hold a held a great subcommittee hearing on digital assets earlier today. Uh, no one can solve this issue alone. It takes cooperation of committees and regulators to build a a workable framework to oversee digital assets. The result of this approach la last Congress was our digital asset market structure bill FIT 21 passing the house with a strong bipartisan vote.
▶ 0:16:43Finally, also want to thank our witnesses for coming today from different parts of the country to uh share their expertise with us and I look forward to your testimony and discussion that follows. Uh thank you, Mr. Chairman, Mr. Ranking Member, and I yield back. The gentleoman uh from Minnesota, Miss Craig, is recognized. Thank you so much, Mr. Chairman. Uh I want to thank the subcommittee for holding this hearing. The two of you are already demonstrating an amazing ability to work on a bipartisan basis.
▶ 0:17:12So, thank you for that, particularly in this Congress. Um there is a wide range of views in Washington, of course, surrounding cryptocurrencies. And while these new financial products have their supporters and detractors, I think there is one thing everyone can agree on. We need to establish a clear and comprehensive regulatory structure to govern crypto.
▶ 0:17:37Today though, the subcommittee is reviewing a different question which I appreciate by looking beyond crypto at the potential other uses of the underlying technology that makes crypto possible. Blockchain technology. Blockchain technology is not crypto, but basically is the operating system upon which it is built.
▶ 0:17:59And like other operating systems we're more familiar with on our phones or computers, people can build applications on the blockchain that serve real world non-crypto purposes. Today we will be hearing from some of our witnesses who will talk about those non-crypto use cases of distributive uh ledger technology like blockchain.
▶ 0:18:22And it's important that we learn about these uses as Congress works to develop legislation to establish a regulatory structure for the financial products that use blockchain technology. We do not want to inadvertently stifle innovation of non-financial uses of the technology.
▶ 0:18:41At a time when it seems like many of the bills that Congress votes on seem designed to foster partisan conflict, I'm hopeful that the committees and subcommitteees potential work in this space can lead to legislation that can win broad bipartisan support. If we're successful in that effort, it will not be because of the meme coins issued by the president and his family or the cryptocurrency companies they buy.
▶ 0:19:08Those efforts actually undermine the credibility of the entire industry. Instead, our success will be built on the stories we hear today. Stories of ordinary Americans trying to do what Americans do best, innovate. I look forward to hearing our witnesses uh today. And I thank the chairman and ranking member of this subcommittee as well as chairman Thompson for bringing all of us together. And with that, I yield back. If there are any other members with opening statements, of course, they can submit those for the record.
▶ 0:19:37And with that, we will recognize our witnesses. Our first witness is Mr. Bill Hughes, senior counsel and director of global regulatory matters with Consensus Software Incorporated. And our next witness is Mr. Mark Tig, the founder and chief revenue officer of Cattleproof Verified LLC. And our third witness today is Mr. Mike Horton, a project creator at Geodet Foundation. Next witness is Dr.
▶ 0:20:03Chris Brummer who's the Cesqua Centennial Professor of Financial Technology at Georgetown. He is also the chief executive officer at Blueprint. And our fifth and final witness today is Mr. Corey Garrison, who is a partner at SteepTew LLP. Although uh we are cutting ourselves a little short. We're not cutting your testimony time short, of course. And so uh Mr. Hughes, you are recognized for five minutes. Thank you, Mr.
▶ 0:20:29Chairman, Chairman Johnson, Ranking Member Davis, and the distinguished members of the subcommittee. Uh, I thank you for this invitation to testify about how blockchain is a special technology that allows us to innovate in all aspects of the American economy, including the agriculture sector. I work as a senior legal counsel at Consensus Software, a software developer that is headquartered in Fort Worth, Texas.
▶ 0:20:55Our business is helping to build the next version of the internet, often called web 3, using primarily the Ethereum blockchain. Ethereum is the first and most established programmable blockchain. So just like Bitcoin, it allows you to safeguard your own assets without a bank or custodian and to send funds without a payment intermediary.
▶ 0:21:18But unlike Bitcoin, it additionally supports software programs, often called smart contracts that greatly expand what the network can do. New computer networks like Ethereum have enticed meaningful computer engineering talent to migrate to the blockchain space to build the apps that will impact our future.
▶ 0:21:39What we see with Ethereum is the building of a new world computer where anyone can build software programs that replace service providers and where everyday people can enjoy better access to important services. Consensus has been closely tied to Ethereum since 2016. Our flagship offering is the MetaMask wallet which you can find in basically every app store. It is the most power popular self-custody wallet software in digital assets with over 100 million users world worldwide.
▶ 0:22:09MetaMask is a browser interface essentially. It allows you to read the blockchain to execute transactions on your own behalf and to safeguard your digital assets. Those assets include digital dollars, native digital assets like Bitcoin and Ether, and NFTTS that could represent art or essentially any ownership of a real world asset. A wallet like MetaMask is the link that brings the digital assets to today's internet.
▶ 0:22:39So, it is a critical piece of tooling. Blockchain unlocks a software application frontier that can meaningfully impact the real world in ways that the current internet simply cannot. Much attention is paid to the financial applications of decentralized finance and to payment stable coins and rightly so.
▶ 0:22:58They are indeed powerful new innovations that will mature uh as the technology evolves and the economic and activity in traditional finance slowly moves to blockchain. But blockchain applications are much more diverse than finance. And I think we've recognized this today so far. Developers are creating apps with commercial and social applications.
▶ 0:23:25Blockchains and blockchain apps, if we take a step back, are all grounded on basic economic incentives. On most blockchains, there is a native digital asset, which is the foundation of that incentive structure. For example, on the network, Ether is the native digital asset. It's how users pay for moving value or accessing software applications on the network.
▶ 0:23:50Ether is how the people who maintain the network infrastructure voluntarily are paid for their work. You can think of it this way. If the Ethereum blockchain was an engine, Ether is the gasoline on on which it runs. There are thousands of developers using these blockchains to build services to solve real world problems. I'm very interested to hear more about two such projects which are going to be testifying here today.
▶ 0:24:17They are just two examples of what is possible if the market is provided the freedom and clarity to innovate. We are at a watershed moment today with an opportunity to move on from the past several years of outdated thinking. Uh while the rest of the world has updated policies to embrace innovation, the US unfortunately has lagged behind threatening its leadership role on this issue.
▶ 0:24:44But I think it's a new day and America is back open for blockchain businesses of all stripes. And you see that out in the market. People are coming back. New companies are coming into the space especially from overseas. Durable clarity on the law is what we need today to ensure that we can capture the opportunities presented by blockchain technology. What we can build is only limited by our imagination and the law. So I'm pleased to be with you today to explore these topics.
▶ 0:25:13and we at Consensus applaud uh this committee and this subcommittee in particular for taking an important leadership role on these issues. Thank At this time, we'll recognize Mr. Mark T for up to five minutes. Chairman Johnson, ranking member Davis, distinguished members of the subcommittee, thank you for the opportunity to speak with you today. Uh my name is Mark Tag, and I come to you not just as a tech founder, but as a fourth generation cattleman. Uh, my family has stewarded the same land in Oklahoma for over a century.
▶ 0:25:44Uh, land that was origin originally allotted to my Chickasaw great-grandmother by the Daws Act of 1887 following the Indian Removal Act of 1830. Our ranch is proudly recognized by the state of Oklahoma as a centennial ranch honoring 100 years of continuous family I'm also the co-founder and chief revenue officer of Cattleproof Verified, a Wyoming doiciled and USDA certified process verified program provider operating at the intersection of agricultural providence, blockchain infrastructure, and rural economic development.
▶ 0:26:14Our mission is to bring integrity, transparency, and innovation to one of the most critical and most overlooked sectors of the America of the American economy, the livestock and commodity markets. At the core of our solution is something deceptively simple. It's verifiable data. In an age where trust drives markets, American agriculture is still being held back by fragmented systems, paper trails, and lack of transparency. That's not just inefficient, it's expensive, and it's unfair to both producers and consumers.
▶ 0:26:42Cattleproof is is building uh onchain tools for off-chain assets, namely real world commodities like cattle, feed, and pasture that need providence, audit auditability, and programmable trust. But let me be clear. We are not asking ranchers to become technology experts or replace markets. We're building tools that work in the background quietly adding security, efficiency, and access. Here's how it works. One, it's verification at the source.
▶ 0:27:06Uh ranchers enter data, upload verified documents, breed registration, vaccination records, feed logs, location data into our system. That information is cryp cryptographically uh signed and anchored onchain, creating a USDA certified digital identity for each animal. Two, uh, proof of provenence. Once these credentials are in place, downstream partners, lenders, packers, insurers, regulators, even retailers can verify claims instantly without relying on a centralized authority.
▶ 0:27:34Three, uh, tokenization of livestocks and inputs. Uh, representing ranch ranch assets as tokens on a blockchain enables fractional ownership, collateralization, and real-time liquidity, opening the door for real financial inclusion. For instance, a young rancher could tokenize part of a verified herd to raise working capital through decentralized lending pools. Four, settlement and reporting. Using blockchain ensures audit trails and automated compliance with evolving domestic and export regulations, something that is increasingly important in global trade.
▶ 0:28:04And five, stable coin payments. Cattle proof intends to integrate onchain payments for cattle and other assets using the anticipated Wyoming stable token. uh WYST can enable users to transmit dollar denominated transactions of any value anywhere in the world nearly instantly with significantly reduce fees compared to traditional aer. This reduces counterparty risk and the concept of float from transactions. Let me emphasize this is not hypothetical. This is live. Ranchers are already using cattle proof today.
▶ 0:28:33For example, the Chalkaw Nation ranches, a sovereign tribe in Oklahoma, are using cattle proof to create public trust and transparency in their progressive animal handling and land stewardship practices via USDA process verified programs. But if we want rural if we want rural America to be part of the digital economy, truly part of it, we need regulatory clarity and in digital infrastructure to match. Here's why this matters. Rural America is often left behind when it comes to fintech innovation. Blockchain gives us the rare opportunity to reverse that. Digital assets need real world use cases.
▶ 0:29:03Agriculture is the perfect test bed. Combining blockchain technology with inputs from RFI RFID tags and other data capture can create verifiable records of an asset's life cycle. Commodities represent trillions in value. If we bring these assets onchain with transparency and trust, the US can lead the next era of programmable real world markets. To help us get there, we need your help to make digital asset market structure right.
▶ 0:29:27Uh, new digital asset tools depend on lowcost, fast, and transparent settlement and a clear legal framework for stable coins like the stable act passed by the financial services committee last week, especially those backed by US dollars or US treasuries will empower rural communities to access compliant next generation financial products. While legislation must be bipartisan and well informed, time is of the essence. Uncharacteristically, foreign foreign jurisdictions are ahead of America in deploying regulatory frameworks to accommodate the rapid proliferation proliferation of digital assets.
▶ 0:29:56In closing, with the right tools and the right policies, we can ensure that America doesn't just keep up, but leads the world in unlocking the value of real world assets on chain. Thank you again for your time, and I look forward to your questions. Mr. Nor, Mr. Horton, you're up. Let's go. All right. Good afternoon, Chairman Johnson, Ranking Member Davis, and members of the subcommittee. It's a pleasure to be here to tell you a bit about the Geonet Foundation and the great technology the Geonet community has developed to help American farmers.
▶ 0:30:26By way of background, I am from Austin, Texas, and I received a bachelor's and masters in electrical engineering from UC Berkeley in 1996. Prior to initiating the Geonet project, I co-founded two successful startups in the field of navigation. Today, precision agriculture is a well-proven technology that provides substantial economic benefit to the American farmer through efficient crop applications, which is also good for the environment.
▶ 0:30:52Precision agriculture depends on precision GPS and I am going to describe how blockchain has enabled Geonet to improve the reliability and reduce the cost of precision GPS for the American farmer. The global positioning system or GPS is known by most people as the way to find directions when driving. Typical GPS accuracy is measured in feet, not inches.
▶ 0:31:21Standard GPS is useful for finding a grocery store, but it is not capable of identifying where a specific plant is planted or to help steer a tractor without running over the plants themselves. To enhance GPS accuracy, precise positioning or precision GPS techniques are able to improve GPS location accuracy from several feet to subinch accuracy. The most precise method of precise positioning is RTK or kinematics.
▶ 0:31:52Precise positioning techniques like RTK require either a direct or indirect connection to one or more GPS reference stations. This is what a GPS reference station looks like. For this technology to work at scale and across the country, a network of these GPS antenna is necessary. As I attempted to launch Geonet, it quickly became apparent that it would cost billions of dollars to place antenna around the country.
▶ 0:32:21Capital that we did not have. Through my research, I discovered that blockchain can solve this problem. Utilizing blockchain technologies, the Geonet network has grown quickly and it is now the largest precise positioning RTK network in the world with more than 15,000 registered stations. In any given week, more than 10,000 professionals use the network accessing 6 to 7,000 geoet stations daily. This type of application of blockchain now has a name.
▶ 0:32:51It is called deepen or decentralized physical infrastructure networks. Geonet is one of the leading deepen networks but there are many many more deepen networks being built globally including deepen networks for broadband internet, mobile internet, decentralized energy and more. Geonet is extremely useful because it offers reliable high accuracy positioning needed to conduct precision agricultural farm practices as well as the precision required by many robotics and drone systems.
▶ 0:33:20In agriculture, Geonet is beloved for its lowcost accessibility to small and big farm operators alike and its compatibility with both new and old equipment. The USDA's Dale Bumper Small Farm Research Center has been an active Geonet Node operator for over a year and USDA research staff has validated quality and accuracy on both new and old machines. to the infarmer who requires the precise position signal.
▶ 0:33:45Geonet subscriptions offer savings from 33% to 90% peranom compared to centralized corporate competitors. In the southern states where small farms are diverse in size and scope, geoet provides small farmers an ROI to use precision a while higher cost centralized solutions are out of reach or simply don't provide RTK coverage in the area.
▶ 0:34:05In the Midwest, Geonet's unprecedented station density in places like Sou Falls, South Dakota, provides the best immunity to solar weather, which in 2024 knocked more expensive services offline during the critical planting season, causing significant economic damage. On the West Coast, fully robotic farm practices are becoming popular, and Geonet is the solution of choice for two of the leading autonomous farm equipment companies.
▶ 0:34:30The god blockchain token is the key mechanism and becoming pop is the key mechanism which allows the network to operate and grow successfully without capital investment required from a centralized entity corporate or government. For this innovative digital infrastructure to function, Geonet depends on reliable blockchain networks. Because of blockchain technology and networks, Geonet has been able to grow quickly.
▶ 0:34:57Geonet encourages the subcommittee to consider ways to enhance clarity on digital asset regulation so that high utility applications of blockchain can thrive in the United States. Thank you and I look forward to answering your questions. Thank you, Dr. Bremer, uh Chairman Johnson, uh Ranking Member Davis, and members of the committee. Uh I've always loved this committee, not just because I'm from the great state of Arkansas and uh was pleased to hear about Dale Bumpers there.
▶ 0:35:25Uh but because of the bipartisan uh nature of this committee, it's a it's a real pleasure. Uh I'm a professor over at Georgetown where I teach courses on financial regulation, crypto assets in the law, securities law, and uh international financial regulation among other subjects. I'm also the founder of and CEO of Blueprint, a startup that leverages AI and blockchain technology to reinvent and enable regulatory market and consumer disclosures and communications for companies and governments around the world.
▶ 0:35:55As both an academic and as an entrepreneur, I've come to appreciate that building a novel business, especially one rooted in emerging technologies, requires more than innovation for innovation's sake. It demands a merger of manufacturing and disclosure. Entrepreneurs today must not only develop compelling products and services, but also must communicate clearly and accessibly about the complex infrastructures powering them. In essence, creation and explanation now go hand in hand.
▶ 0:36:24Now, Blueprint was born of this idea that making things and disclosing things need not be separate endeavors. They are two sides of the same coin. And today, a little more than a year later, Blueprint is on track to count as customers, issuers, central banks, and blockchain builders again from around the world.
▶ 0:36:42When I started my career as a securities law professor, the logic of disclosure was built on and premised on the prevailing regulatory technology of the time, pieces of paper, and the US mailing system. Fast forward and new channels have arisen for communications. Hyperlinks to web pages and even social media tweets have been recognized as a means through which builders can fulfill and create regulatory expectations.
▶ 0:37:07But when it comes to the latter, perhaps no other technology is more interesting and creates more potential than blockchains. They are programmable, immutable, and transparent. The perfect compliance technology. Startups of course have to be snipers even when they see big objectives and opportunities and identify friction points and build from there.
▶ 0:37:32So for blueprint, our first product thinking through disclosures and compliance and it'll be the one that I'll focus on today was Europe and focusing on Europe's new regulations, Mika, which took a step forward of doing uh that which uh the SEC at that point could not, which was tailoring a disclosure regime for crypto assets based upon the production of something that they call white papers uh sort of like S1's of of a sense for issuers of crypto assets.
▶ 0:38:00But there were still plenty of questions even uh within Mika. The legislation was filled with undefined terms left open to interpretation such as the basics conflicts of interest. Um uh what exactly are certain kinds of digital asset features and compliance really wasn't cheap. Hiring lawyers to draft a white paper even in the EU can cost tens of thousands of euros and can take weeks to complete.
▶ 0:38:25So my team of lawyers and engineers and lawyer engineers, yes they exist, created a solution u enabling companies to effectively turboax white papers based on a range of consumer data and inputs. Part of the process involves collaborating with L1's L2s in this particular instance the European community, national central banks and more and navigating Europe's first Mika pilot here from the United States. And we worked on bespoke legal rappers for new to date for new data sources and providers. But we didn't stop there.
▶ 0:38:55Recognizing the programmable nature of blockchains, we also built tools for developers enabling them to embed uh regulatory metadata on chain. And we started with the various L1s first starting with Mika related metadata. And now we've started to do the same here in the United States. Now, Blueprint's first use cases were born in financial services, but we're thinking big about the digital economy as a disclosure economy, whatever its guys.
▶ 0:39:22So we're not just building a business but we're building systems applicable beyond financial markets. So here for the cases of today we've seen interesting questions about cattle but what happens of course when you're thinking about cattle that aren't just tagged but are also bought and sold. And here for blueprint we think about infrastructure to put in place to make that happen when uh farmers and ranchers want to hedge against different kinds of fluctuations. How can you do that and embed that process on chain?
▶ 0:39:49Similarly, Blueprint thinks about companies like Geonet to explain and publish who is validating the data and how can entrepreneurs build efficiently on that data. Effectively, building high-quality digital infrastructure isn't easy. We do need your help. We need clear rules of the road so that people can know how to build compliance technologies. And the rule book itself needs updating.
▶ 0:40:12As I've said before, even if technology moves and the rules remain the same, something can go wrong, especially if weaknesses arise, creating risks or creating challenges for for innovators who can't build or both. I look forward to having a further conversation with all of you today and thank you for the invitation. We need clear rules of the road. Yes, indeed, Dr. Brummer, well said, Mr. Garrison, it's your five minutes.
▶ 0:40:39Thank you, Chairman Johnson, Reagan Member Davis, and members of the subcommittee for inviting this securities lawyer and grandson of a dairy farmer to testify here today. My name is Ky Garrison. I'm a partner in Steto's blockchain and cryptocurrency practice where I advise clients on securities and derivatives law matters. Uh was uh prior to SPTO, I was an attorney at the SEC for nearly nine years where I had the honor of serving as counsel to current commissioner Hester Purse. I am testifying today on my own behalf and not on behalf of the firm or any client of the firm.
▶ 0:41:08My message is rather straightforward. It's that passing digital asset market structure legislation is essential to promoting American innovation in blockchain technology. The promising use cases presented to you here today along with all projects built on blockchain technology rely on digital assets being transferable.
▶ 0:41:27People that hold digital assets, people that want to participate in the protocols, and people that want to express a view on the price of a digital asset all meet on spot market Robust digital asset markets therefore serve a vital function facilitating price discovery for digital assets. However, there are two main problems with the status quo.
▶ 0:41:47First, exchanges lack any federal regulatory oversight to promote market integrity, to monitor against fraud and manipulation, or to impose requirements to safeguard customer assets. While there are a number of responsible platforms, the lack of a federal regulator leaves open the door to another FTX-like failure. Second, entrepreneurs face an unnecessary stumbling block of regulatory uncertainty in the US.
▶ 0:42:12Specifically, the SEC under Gary Gensler initiated litigation against a number of digital asset trading platforms, alleging that such entities were operating as unregistered securities exchanges, broker dealers, and clearing agencies. While the SEC asserted jurisdiction through enforcement actions, the agency declined to provide a pathway to registration.
▶ 0:42:32Perhaps most troubling, the SEC failed to articulate a cogent and consistent analysis for the fundamental legal issue at hand being how secondary trading of digital assets involve the sale of investment contracts securities. Faced with such legal uncertainty, entrepreneurs looking to build a decentralized network in the US often choose not only to build and launch offshore, but to exclude or limit the participation of US persons.
▶ 0:42:59This outcome hurts US competitiveness and it encourages entrepreneurs and capital to flow to other jurisdictions. Fortunately, new leadership at the SEC and CFTC are already beginning to reverse the failed crypto policies of the last four years. For example, the SEC crypto task force led by Commissioner Purr has issued clear statements scoping outside of the securities laws certain transactions and is actively soliciting public input. There are limitations, however, to what the SEC and CFTC can achieve absent direction from Congress.
▶ 0:43:29One significant regulatory gap is that neither agency has clear statutory authority to regulate spot market trading of digital assets. Congress and this administration therefore have a tremendous opportunity to work together to bring sensible regulation to the digital asset industry by enacting market structure Last week, Chairman Thompson published six principles for this market structure legislation which I believe provide sensible guideposts upon which a framework can be built.
▶ 0:43:58I respectfully offer a few observations for this subcommittee in assessing these principles. Principle number one is that legislation must promote innovation. If a digital asset itself is labeled a security under the legislation, then each transaction in that digital asset, even outside of a digital asset exchange, would be subject to the securities laws.
▶ 0:44:20This would severely restrict the ability for that digital asset to be used as intended on its network that could drive the development of the network and capital flows offshore. The legislation should focus on regulating the spot market trading of digital assets, not regulating their intended use within the relevant network. For principle number two, that legislation must provide clarity for the classification of assets. In developing any test to divide jurisdiction between the CFTC and SEC, I propose that the subcommittee weigh the following factors.
▶ 0:44:51First, whether the test will upend current practice and bifrocate spot digital asset markets, and if so, whether there's a compelling customer protection or market integrity justification for doing so. Second, whether the benefits of simplicity and administration of the test for both regulators and industry participants should be prioritized. Third, whether there are difficulties of coordinating between the SEC and CFTC in creating and maintaining separate rule books.
▶ 0:45:18and fourth, whether any agency has the capability to fully perform all market oversight functions on their own. In conclusion, the timing is right for Congress to and this administration to work together to implement a muchneeded regulatory framework. Thank you for your leadership on this important topic and I look forward to your questions. Excellent job panelists. That's exactly what we needed.
▶ 0:45:39Uh as a reminder and perhaps those who arrived after uh Gavl by UC we've reduced time uh for our questioning for four minutes a piece so that we don't uh injure the people at the end of the DAS when votes are called in the spirit of bipartisanship ranking member Davis will play traffic cop for a bit until the burden uh irritates him in which case he will revert it back to me. So with that uh ranking member All right at this time we recognize the gentleman from Tennessee Mr. Rose.
▶ 0:46:07Thank you, Chairman Johnson and Ranking Member Davis for holding this hearing. Uh I'm honored to have uh been appointed as to serve as vice chair of the subcommittee on commodity markets, digital assets and rural development for the 119th Congress and I look forward to working with the chairman and ranking member to advance US commodity markets and digital assets while also delivering uh success for rural America. Let me get right to my questions. Mr.
▶ 0:46:32Hughes, as agriculture enters this era of digital assets, how can we better integrate innovative technologies like MetaMask into more production agriculture transactions and increase the usage of these tools? Well, I think we need to start thinking about how these assets can migrate online.
▶ 0:46:51And I think you heard a little testimony earlier about the benefits of putting things like cattle, at least an instantiation of cattle and all the information that pertains to a particular head of cattle on chain. So you can know the data and and uh that asset is there to be traded in a very uh streamlined manner.
▶ 0:47:11Once you do that, an interface like MetaMask allows you to control those assets, give permission uh to who can see the data and and what types of transactions you're going in uh willing to go into. It's it's about getting the real world onchain, but but that requires a regulatory framework that allows companies and industries to explore this space. And so that's what we hope happens this year. Sure. Well, thank you.
▶ 0:47:40and I share your view of what we need to do next. Mr. Togg, in your written testimony, you mentioned that blockchain technologies can increase security and transparency and lead to stronger relationships between buyers and sellers. With that in mind, please elaborate on how these technologies can strengthen market access for producers and enhance the possibility of producers receiving higher prices. Absolutely. Uh thank you for your question. As Mr.
▶ 0:48:07you said uh you know the the blockchain network is central to to what we're creating. Um the idea behind our our our product is trust and transparency, right? We're trying to create trust and transparency up and down the chain, no pun intended, so to speak, from the producer all the way to the consumer. Um one of the one of the ways we do this is uh we use uh USDA process verified programs. Uh we started with uh those programs because to date those are the best ways to identify individual head of cattle.
▶ 0:48:37Um and by putting that data on an immutable ledger that is you can trust that ledger from start to finish. It can't be changed or it can be changed but there the the the recordation of that change will occur. Um so it provides transparency from that the birth of that animal to the harvest of that animal. Thank you. And and Mr. Dr. Todd, can you further explain how integrating blockchain technologies into the beef industry can minimize the issues we see with payment methods and delays? Absolutely.
▶ 0:49:06You know, uh cattle transactions really haven't changed in about 150 years. Um essentially today, uh if if if we take our cattle to market, uh we sell them at a at a sale barn. The sale barn gets paid their amount. Uh the sale barn takes the check. Uh they hold the check, then the check goes to the bank, and the bank holds the check and etc. So from the date you deliver your cattle to the day that you get paid for your cattle, there's a there's a delay there of days or even weeks.
▶ 0:49:32Um using blockchain technology and and smart contracts there, we can absolutely make that almost instantaneous. Uh but also ensure that lean holders and other people that are in that uh that are in that transaction also get instantly paid with full compliance. Thank you. And and I'll end here, Dr. Brummer. It's always nice to have a fellow uh con fellow with connections to Vanderbilt Law School. I'm an alum and uh good to have you with us today. Tell me in just the 10 seconds here, how do we speed up the adoption period from early adopters to late adopters?
▶ 0:50:03I I I think uh certainly having a a UX um uh that enables people to engage the technology uh from its benefits and not just from a sort of n cryptonative uh uh interface. makes it a lot easier for more people to engage with the technology and for people to have a sense of trust in the technology obviously will do a lot towards uh mainstreaming that technology. Thank you chairman for your our ranking member for your indulgence. I yield back. Gentlemen's time's expired.
▶ 0:50:32At this time we're going to recognize the amazing representative from Illinois is Miss Lazinski. Thank you ranking member and thank you to our subcommittee chairman Johnson uh for having this panel today and appreciate all of the panelists here for your testimony. Um, I want to reiterate my thanks to Chairman Johnson for his bipartisan work uh to get Fit 21 across the finish line here in the House last Congress.
▶ 0:50:56I was really proud to work alongside him uh to pass a few of my consumer protection priorities that ended up being included in that final bill, which I thought was really important. You know, I've said this before. It's really whether you like it or not. Uh whether we're ready for it or not, blockchain technology is here and it is here to stay.
▶ 0:51:17Um so I believe it's in our best interest to utilize this technology for positive purposes and I know some of which um as panelists, you've shared some of those positive um outcomes with us in your testimony. I want to share with you one of those applications going on in my district. Um the University of Illinois, the Urbana Champagne is in my district. I'm a proud alum. Uh they're doing some really great work at the U of I Geese College of Business. Um uh which is the home to a lot of blockchain firsts.
▶ 0:51:47Um in 2022, GE started the first blockchain ever to be created by a business school. We call it iBlock. iblock is a platform that allows geese faculty and students to create accounts and view transactions in a classroom setting. It is also used to teach students how to build customized blockchain environments for their own use in the classroom.
▶ 0:52:11Their ultimate goal with IBLC is to expand our knowledge of blockchain technology and what they call a scalpable production scalable I'm sorry scalable production system. They also work jointly with the college of engineering and the college of law to expand technology and usability and to navigate the regulatory environment.
▶ 0:52:30Additionally, in 2023, Protocol Labs gave the first ever cryptofunded donation to GE, a donation to be used to research blockchain questions and solutions. And this is not to mention the many other gifts that have been given to Geese over the years to research uses for blockchain technology. So in the time that I have, I just have one quick question for Dr. Brummer.
▶ 0:52:54Given your position as an entrepreneur using blockchain, but also as an academic, I imagine you have a unique take on these applications. Can you speak to the role that higher education particularly through research play in expanding the uses of Thank you so much. I have colleagues and friends at uh Urbana Champagne uh not just in the wall school, great great university.
▶ 0:53:18Yeah, I I I think universities u have a unique gift of both uh students who are much more likely to be involved in the technology and they're also learning. So they're not necessarily um uh stuck uh and a little bit more open-minded to to at least explore. And I think universities have a unique position because we ask questions and the best of us don't have answers.
▶ 0:53:43So when you can approach a new novel technology uh with fewer priors but also with an education and skill, you're much more likely to be able to kick the tires on that technology in a very straightforward way. And and I think that's what I see in a lot of my students. I ask my students all the time like how many of you have interfaced as law as law school students with blockchain technology? The hands will go up and then I'll ask more conventional stuff and they'll ask me what that is and I feel old. So uh that makes a lot of sense. Thank you very much. and I'll I'll yield back.
▶ 0:54:15The gentle lady yields. At this time, we recognize the gentleman from Oklahoma, Mr. Lucas. Thank you. Many legislative proposals for a digital asset regulatory firm rate framework grant the CFTC authority to oversee spot market authority for decentralized exchanges. Mr. Garrison, what are your views on how to address the spot market gap? Why is it so important to pay attention to this issue in our discussions around digital asset market structure?
▶ 0:54:48Thank you. So I I think the importance comes from the fact that there is no federal market regulator overseeing the spot digital assets right now. So that that means all participants are subject to the whims of the trading platforms and what protections they put in place um on their own. Right. So things like uh preserving market integrity, um searching for and seeking to prevent fraud and manipulation, front running these types of concerns, the safeguarding of customer assets.
▶ 0:55:18There's no federal standard uh that is being imposed upon them right now. And I think that is that that would rightly be a focus for for Congress as it considers market structure legislation. The United States is unique in that our markets are overseen by two different regulators, the SEC and the CFTC. And this can present challenges particularly for hedging strategies that involve products in both jurisdictions.
▶ 0:55:43For example, investors might hedge treasury holdings in the SEC jurisdiction, of course, with Treasury futures in the CFTC jurisdiction. This situation will also come up in digital asset markets. Continuing again with you, Mr. Garrison, how should the committee be thinking about this as we look at market structure legislation? Should we allow for digital asset products that are naturally hedged and offset to be marginalized together in the same portfolio?
▶ 0:56:13So, I think the the focus and the the cleanest approach is to continue to keep clear lines between the CFTC that analyzes the risk hedging functions and the SEC. Uh, and to also finding the right spot of does the CFTC and SEC share jurisdiction over the spot markets or do you just assign to one or the other? Now, there's obviously a lot of pros and cons with either approach, but at the end of the day, the SEC and CFTC have a long tradition of working together. There certainly are challenges that can come along with that.
▶ 0:56:42But as we saw in 2020 when the SEC and CFTC had a open commission meeting together and voted on uh various rules in in connection with each other, as long as the leadership of those agencies are working handing glove, then they can achieve uh regulatory harmonization. A theme that I continue to hear in my discussions with industry experts is the need for regulatory clarity in the digital assets market to encourage innovation and stay competitive globally.
▶ 0:57:11That's why my bill, the securing innovation and financial regulation act codifies lab CFTC and the SEC's strategic hub for innovation and financial technology. Both of these offices would make the commission more accessible to market participants and foster fintech innovation. Mr. Tag, your product currently helping ranchers in my home state of Oklahoma is quite the technological achievement.
▶ 0:57:36What would it mean for a producers to have regulatory certainty and assistance like that that would be provided through my bill? Uh, thank you, Congressman Lucas. Yeah, um, it would be uh, essential. Um, one of the things that we need as entrepreneurs is that regulatory certainty for investment. Um, most investors are not going to invest a large sum of money into a product that there's not regulatory certainty on.
▶ 0:58:01Uh, but it also means that with that investment, we can provide these type of tools to ranchers and and and farmers too uh to make sure that they get all the benefits of of this technology. Thank you. And I yield back. Ranking member. Thank you so much. At this time, Mr. figures from the great state of Alabama. Four minutes. Thank you. Uh thank you for hosting this hearing, Mr. Chair and Mr. Ranking member.
▶ 0:58:25Um I um I represent a very rural district geographically about 80% of my district is is relatively rural, some of the most rural parts of the state of Alabama. Um where getting online is a challenge. Um, and when we talk about blockchain technology, when we talk about being able to leverage the assets and the benefits of this technology, uh, that is something that concerns me with making sure that our rural communities, uh, don't get left behind.
▶ 0:58:50I'm supportive, um, of the benefits of the technology and supporting of innovating in ways that uh, will further um, will further positive life outcomes and business outcomes and just overall experience for our rural communities. So, uh, can you guys talk to me a little bit about what we can do, uh, to ensure that our rural communities are not left out in this wave, uh, of innovation? Um, and if we can, um, we can start with you, Dr. Tay or Mr. T, I'm sorry. Uh, certainly. Yeah.
▶ 0:59:19Uh, you know, I I believe that, uh, uh, investment in in rural broadband structure, particularly in the rural areas, is vitally important, especially for what I do. Without that, I I'm kind of a non-starter, right? But I do also believe that blockchain technology is bringing a lot of things to bear that will make that investment in real broadband technology much more attractive because we're actually bringing real world use cases that need a lot of piping so to speak to come back to the market.
▶ 0:59:44So I think it it all a rising tide lifts all boats is essentially what I'm saying. Anybody else want to take a stab at it? Um, Congressman, I think yes, these technologies um that use blockchain called deepen or decentral decentralized physical infrastructure networks are particularly good at bringing technology to um more rural communities.
▶ 1:00:07Um, our first customer in the agricultural space, Deep Sand, was stymied by the fact there was no precise positioning network in his southwest corner of Oklahoma that he could access. And that's what got him started in looking into us. wasn't interested in crypto or web 3 or anything. It was a practical need to be able to build infrastructure and provide infrastructure to his customers which are which are farmers. All right. Thank you.
▶ 1:00:31And I know from a security standpoint, from a cyber security standpoint, like one of one of the um I think attractive elements to blockchain technology that some people are familiar with are its u the benefits and being able to secure it. Um can you talk a little bit about the steps that you guys take and how you guys prioritize that cyber security to make sure that when we can deploy this technology in rural areas these are rural farmers that even if they can you know take advantage of the technology if something goes wrong if uh if somebody's attempting to manipulate anything talk about how you guys prioritize
▶ 1:01:02securing um securing this technology and and how we make sure that farmers in Eupfalla uh can feel secure in the investments uh that they're breaking in these sorts of In our case, uh, Congressman, the hardware itself has a cryptographic chip in there that is, um, certified by the foundation and that's what allows us to, uh, support a decentralized um, you know, deployment of these stations is that there is actually a
▶ 1:01:32device in there that is programmed to sign the data and ensure that data is authentic and originated from a a real uh, geoet station. We also leverage the infrastructure in space. Um the different satellite constellations have different data that comes down and our devices get to see because we have a global footprint, we see that data first and we can use that as kind of a code to make sure that people aren't faking the data.
▶ 1:01:58And the last thing I'll just add just more so of a statement is you guys are great at breaking this down and and as we say in Alabama, putting the hay down where the goats can get it. Um, and I think that's necessary uh in general from a messaging standpoint for more Americans to feel comfortable in this technology is hearing these real world practical explanations uh at a very base level understanding. So I appreciate what you guys are doing, man. Thank you. I yield back. Gentlemen's time's expired.
▶ 1:02:25At this time we recognize the gentleman Tracy Man from Kansas. Great. Thank you and thank you both for hosting this hearing. Thank you all for being here. you know, this committee and Congress, frankly, has really grasped with, you know, how what does it look like to regulate the cryptocurrenc cryptocurrencies and there's different degrees of opinion on that, but I feel very strongly and this panel really exemplifies the fact that we got to make sure whatever we do there doesn't hinder new technologies from being built on the blockchain.
▶ 1:02:54And I think just shining a light on, you know, what you all are doing, it's remarkable the technologies that you're building and how it really helps our a producers um every day is is amazing. I represent the first district of Kansas, which is uh western twothirds of of the state. U for for the most part, you know, we we've we've seen production in my district and around most of the country, you know, dramatically increase regularly and pretty um constantly over the last 150 years.
▶ 1:03:23Um we're now in this season, as we all know, where specifically for our commodity producers, we have very high input costs and uh and relatively low commodity prices. um which is you know puts a big squeeze on our some of our best a producers you know are eating into working capital and it's a very dire situation on the family farm but appreciate y'all being there appreciate new technologies they're helping to address these concerns uh my first question uh for you would be uh for Mr. Corton, you know, as mentioned, it's becoming ever more expensive to to farm.
▶ 1:03:52Margins continue to shrink and I've been add and out a little bit, but how does your technology or your service help farmers achieve the benefits in a way that can help both small, medium, and large time large producers become more efficient? Uh, good question, Congressman. Yes, as one of our customers always tells me in in the a business, farming is hard enough.
▶ 1:04:15And um the way precise positioning helps farmers is that when you you know farm a field, if you drive the tractor manually, um you'll have anywhere from 10 to 20% of overlap. Like you you basically drive over the same area multiple times.
▶ 1:04:32By having centimeter accurate GPS, you're able to let the machine steer itself and it avoids that overlap and that translates directly into reduced input costs such as fuel and chemicals when you're spraying and that uh really drops to the bottom line. Now, traditionally, um, centralized solutions to this problem have either lacked coverage in certain areas or they've been pretty darn expensive, and that's provided a hard time for smaller operators to get an ROI with the technology.
▶ 1:05:02Um, through this kind of community-based approach that what what is how this blockchain based geoet network works, we've been able to bring that cost substantially down and introduce the precision agriculture technology to a lot of new farmers. Tremendous. And then how does that work? So does their combine or tractor sprayer have to be equipped with certain obviously software um and hardware to be able to utilize the technology? Yes sir. So there's two solutions.
▶ 1:05:29One solution is to use the uh technology that's already on the equipment and most modern equipment or I'd say I should say all modern equipment being built today by folks like John Deere Case um and uh ADCO does come equipped ready to connect to a network like Geonet. And then there are solutions for retrofitting machines. So you can put on uh a retrofit kit uh that will actually sort of put a motor on the steering wheel which will allow it to automatically steer.
▶ 1:05:55And those are also extremely popular and let you utilize older assets and bring value out of them. Great. Well, thank you for having this hearing. As an aside, I'll never forget 20 years ago I was in real estate business, but I called my dad and he I knew it was planting, right? And I said, "Hey, dad, what are you doing?" He said, "Well, I'm sitting on the side of the field." And I said, "Why is that?" and he said, "Well, my satellite's down." And I remember this 20 I remember that moment knowing things are never going to be the same. Uh because he no longer, you know, spend the $30,000 to put markers on the side of the planter because you don't need them.
▶ 1:06:25But if you're sat if the technology doesn't work, um you're entirely shut down. But I commend you and all of you all for for what you're doing and how it's helping producers in the field. And thanks for having this hearing. I'll yield back. Gentleman yields. At this time, we'll recognize our axel vice ranker and that's Mr. Vinman from Virginia. Thank you, chairman. Thank you, ranking members. Uh, thank you, ranking member.
▶ 1:06:49Um, I'm proud proud to uh and honored to serve as the vice ranking member for the subcommittee on commodity markets, digital assets, and rural development. And um I've had um a career that involved um emerging technology and policy at the highest levels. uh my work at the White House National Security um illustrated to me how important it is to get the balance right on emerging technology.
▶ 1:07:18And so for instance, when we're looking to balance protecting consumers versus not stifling technology, it's obviously very critical for emerging technology to get that balance right. So could you uh Dr. Broomer, can you please share your perspective on FIT 21, which passed from the committee last year, what it did well and the areas where it could be Uh, absolutely. Uh, Congressman, it's it's it's a big question.
▶ 1:07:48Um, I I think the FIT 21 uh did a number of things uh that were excellent uh particularly given the context uh in which the bill was put together. I mean it it it it does something that you've heard from all of us here today that it helps to define clear rules for the CFTC and the SEC. It helps to modernize your digital asset trading platforms. It starts to uh put us on the journey of of registration requirements for uh digital commodity exchanges.
▶ 1:08:17I think those are real accomplishments and they cannot be um overlooked. Um I I think that uh uh when you create rules particularly for emerging technologies a couple of things you want to probably keep in mind um fit 21 was probably written uh where it had certain kinds of um node and validation uh architectures in mind that were more 2020 and I think uh however you decide to to sort of think through your regulatory perimeter
▶ 1:08:47it has to be sort of futurep proofed and flexible enough to engage with however technology ends up uh evolving. Um I think uh the there are certain kinds of things you you certainly always want to see. Um you want to ask yourself about the segregation of customer um assets. Uh you want to ask yourself and ensure that in bankruptcy uh there's some kind of defined status for uh customer um funds uh with exchanges.
▶ 1:09:18But really, you know, I'm I'm here to talk about obviously disclosure. I think from the disclosure um there was a lot of good work done to kind of identify for the SEC uh certain kinds of disclosures that you would uh need. Um I think the SEC is going to have it its job and perhaps even elaborating on that list, bringing in things like tokconomics, which I think is is really important if you're uh going to be an investor.
▶ 1:09:44Um was actually quite delighted to see my friend uh Brian Quintins uh over at the CFTC and I know he'll have his own hands uh full I think the disclosure issues and and what needs to be disclosed even in with decentralized assets. It's an interesting question but it's not something that the CFTC has not tackled before. I mean it kind of inheres to the to the nature of commodities. So I I think I'd like to see a little bit more about about that. Thank you. And then I have a question for you Mr. Horton.
▶ 1:10:11Um, I think about things as a retired 25-y year veteran of of the Army in national security um context and and your system. Um, you you talked about GPS uh in your in your testimony. Can you elaborate on some of the potential um national security benefits to blockchain Yes, sir.
▶ 1:10:33Um, I think having a decentralized network of these nodes provides a very good way to detect things like GMing and spoofing and localize those things. The GPS signal that comes to us from 12,000 miles away from space, it's very weak when it gets here to the planet. And so having these nodes out there that are very sensitive, uh, receivers is able to help us identify those types of things.
▶ 1:10:55We are also working with um some of the new low earth orbit satellites that are being launched to provide ground infrastructure for those and doing that in a decentralized way I think provides additional will provide over time additional benefits to the um sort of reliability and resilience of our positioning networks. And thank you. I would like to ask the same thing from everybody but I'll wait till next time. Thank you. Time's expired.
▶ 1:11:22At this time, we're recognizing our subcommittee chair, Mr. Johnson from South Dakota. Thank you, Mr. Ranking Member. I'm struck by how thoughtful all of the testimony is and how much agreement there is. And to just kind of underline that, I'm going to ask three yes or no questions. I'm not attempting to trap anybody. If uh after we're done with my three yes or no questions, if you want to clarify your answer, I'll give you time. I promise. And so, I'm just going to ask uh each question and just roll down from uh from you, Mr. Hughes, down to Mr.
▶ 1:11:52Garrison and we'll just see if we have any agreement on these things. Uh so first off over the next few years uh gentlemen will uh blockchain technology enable fantastic new capabilities in hundreds of industries? Yes. Yes. Yes. Yes. Yes. Would it be good for our country if we are the home for that innovation? Yes. Yes. Yes. Yes. Yes.
▶ 1:12:21is a lack of a clear regulatory regime around digital assets and blockchain. Does that risk reducing innovation and investment in this country? Yes. Yes. Yes. Yes. Yes. Oh, you guys are so good. Some of my colleagues and and on both sides of the aisle will sometimes wonder if any of this is real. And I get it.
▶ 1:12:45When we imagine going to pay for bubble gum with Bitcoin at the point of sale, that maybe doesn't seem like a huge step up from the way we can pay with our phones today. But what you gentlemen have been talking about today is real life. This is about marketing capital. This is about precision agriculture. This is in fact real. And what we know is that if we don't get a regulatory structure in place that our country risks falling behind. And so Mr.
▶ 1:13:13T you talked about this transparency and some of this power that comes on the cattle side, but we could get some of that from other solutions. Couldn't there be some centralized solutions, you know, like an eBay or an Amazon that would give some of this transparency? Why blockchain?
▶ 1:13:31So we we specifically chose blockchain versus a central eBay, PayPal type of model because even then you're still having to trust a central authority or a central person to to trust that data and there's potential for bias there. Blockchain is a distributed letter there a ledger if there is no bias.
▶ 1:13:50Uh so we specifically chose that for the trust factor over creating just a central eBay PayPal type and that is those capabilities number one they're exquisite today but also it's hard to imagine what innovators like you and others will be able to do over the course of the next few years. Is that right? Oh that that's correct.
▶ 1:14:12you know, the uh the technology uh just is ever expanding and and as I have was having discussions with other panel members, you know, you can literally go into the ether, no pun intended, uh when you're talking about blockchain technology and what it can do. So, Mr. Horton, you explained in your testimony, Geonet has its own token, but it doesn't have its own blockchain. So, help us understand what's the Geodet protocol, what's Geode, how does that interact with the Salana? Give us some sense of how they fit together.
▶ 1:14:42Um yeah, so you could think about the the layer block layer one blockchain as kind of this distributed operating system that projects like Geonet build on top of. And Geonet is an application that um really connects providers of this RTK data to users of this RTK Dota and the token is able to help those buyers and sellers transact and record that data in a consistent transparent way.
▶ 1:15:10It also provides an ability for you to reward the stations that are pro providing good coverage and good performant data and incentivize that coverage to grow. Yeah, very well said. With that, I would yield back uh and recognize uh a gentleoman whose efforts in the last Congress strengthened the final fit 21 product uh the ranking member of the full committee, Miss Craig. Thank you so much, Mr. Chairman. Um this question is to Dr. Brummer.
▶ 1:15:40Uh we all know that one of the key components to customer protection is disclosure. But historically while acknowledging the need for disclosure regulations for customers, uh many in the financial sector complain continuously about the cost of current and new customer disclosure requirements.
▶ 1:15:58From your testimony, it sounds like blockchain can offer a solution that could help the financial sector meet many of its current or potentially new customer disclosure obligations at much much lower cost. Do I have that right? Number one, because if we can enhance customer disclosures at an affordable price, that enhances customer protection, too. Am I correct? Absolutely.
▶ 1:16:23um you know one of the and this is I think building on on another sort of uh statement that we've all heard blockchains are pretty neat uh they allow data to be composable programmable um it's transparent uh and and that programmability enables all kinds of functionality um and there are certain kinds of questions you know I I I deal with central banks and regulators and and and L1's and L2s all around the world and when we look at different regulatory regimes there's a neat aspect ect and
▶ 1:16:53functionality in uh blockchains that can enable disclosure solutions at a much lower cost, faster um execution um and and really can frankly even give uh lawyers a run for their money in in in terms of the compliance um uh services uh that that you can now put on chain. Thank you so much. I I actually have a question for the whole panel and please keep your answers a little short here.
▶ 1:17:18Are any of you familiar with the approach that foreign governments have taken with regulating this technology? And if so, any lessons learned, dos or don'ts that we could take away from their examples? Uh, I think u, yes, I am familiar. Um, I think a lesson that they've that can be taken away is focus on centralized intermediaries first because that's where the majority of the economic mass is currently.
▶ 1:17:44They have not had a and the second lesson is they've not had a heavy hand on regulating the technology itself because that allows innovation in the real world applications which I think it you see as examples at this table. Um I that that is definitely not my area of expertise. Uh but uh I do think that you know as I stated in my in my testimony that that you know our regulation time is of the essence because I do believe that there are other jurisdictions way ahead of us. Thank you. Uh yes I'm not a a lawyer.
▶ 1:18:14I'm an engineer, but um same basic answer as as Mark. We found that other jurisdictions um have clearer guidelines for what is a digital commodity, what is a utility token and that is helpful and that is why you find the the vast vast majority of um projects that do have a token have their foundation based offshore. Thank you. I'm not a lawyer either. Unfortunately, I am. uh I deal with uh lots of international folks as well.
▶ 1:18:43Um uh I I think that where uh most regulators sort of get caught up from time to time is that uh we're taking terms of art and we're trying to translate them into a legal regime. And I think one of the interesting tasks that all of you will will have is is coming up with something that's uh elastic enough for the future but concrete enough I think for people to work with and and to build on top of and and sometimes internationally regulators uh and and policy makers kind of stumble a little bit on that.
▶ 1:19:14Thank you. One last quick observation is those regulators or jurisdictions that have allowed for experimentation through some type of sandbox I think have have shown a great ability to allow industry to try new things while also preserving consumer customer protections. Thank you, Mr. Garrison. Um that is fantastic. That's a lot of info in uh very short amount of time. So with that, Mr. Chairman, I yield back. Mr. Nun, you're recognized. Well, thank you, Mr.
▶ 1:19:39chair and I'd like to align myself with a lot of what Representative Craig just highlighted here. Look, I I'm from a state from Iowa. We know the CFTC. We know corn, pork, bellies are commodities, and we know that my bankers in Main Street, De Moine have stocks and bonds, and those are securities. It's a pretty straightforward gig. But serving on both a and financial services, we recognize that when we enter the digital asset space, it's a lot more confusing, not only for the innovator, but certainly for the end user.
▶ 1:20:06As we look forward on this, I guess I am challenged by the regulatory uncertainty that seems to have occupied this space. We'll take Ethereum for example. Look, first, Mr. Chairman, it was treated in 2018 uh as a security. The SEC officials said that it was not and certainly as securities changed and the CFTC then agreed.
▶ 1:20:29But then went to the Biden administration and under the Biden administration, the SEC labeled it is a security and the CFTC called it a commodity. Now we've got a conflict. Going forward, I've asked both the former chair of the SEC and the FTC uh CFTC right here in this room, chairman will recall, to help provide some clarity for this issue. And guess what? We walked away more confused than where we began. That is not good for American investment.
▶ 1:20:58That's not great for American innovation. And most importantly, this allows our competitors in the space to be highly successful when they have some framework and the United States is looking at overregulating something that it clearly can't even figure out on its own. So with that, Mr. Hughes, you've worked not only in the digital asset space, you're a software guy. Do you think candidly this type of whiplash is hurting American innovators? It absolutely is.
▶ 1:21:24uh our products are used by software developers and over the last several years really the the work has migrated overseas. I think you're starting to see that change now. But when we're talking about a chilling element, we're not only talking about apps like MetaMask and other apps, you're talking about the chains themselves.
▶ 1:21:44um being an open-source software computer networking dev one day um going about building a new world computer and then all of a sudden you're served with an SEC subpoena out of the blue. That doesn't that doesn't make for a conducive working environment trying to evolve the next era of of innovation. These people want to work in the United States. They want to work with US companies. They want to found US companies. Um they want to they're this is where the talent is. this is where the capital is.
▶ 1:22:14If we just get a coherent regulatory structure that people can actually comply with rather than it being impossible to comply with, we're going to see a lot of doors open and that's going to be a very good thing for this industry, but the country is as well. So, I can think of no better way to spend an afternoon than having a government official call you in. We're from the government. We're here to help you.
▶ 1:22:34Um, but I've heard real horror stories from folks who have gone in to try and be helpful from the private sector only to be lambasted by the SEC and then to be fined for the very information they shared with the SEC trying to get clarity to the tune of lawsuits and millions of dollars being spent in this. Briefly, can you share your thoughts on between the SEC and the CFTC? Did anybody offer a road map here that we should start replicating and get into law here in Congress?
▶ 1:23:05I Well, unfortunately, no. We were very much encouraging both agencies to engage with Congress to come up with a coherent regulatory regime. I think the CFTC did a much more admirable job. I would agree with you on that. Um, but what what we're seeing now is full engagement. I think what the what the SEC is doing now um is should be applauded. I think their task force is the right way to go about doing it. there's a kind of a a cart and a horse problem because we need a new legislative regime and then the SEC has to fill in the gaps as well as the CFTC.
▶ 1:23:36But they're doing a great job trying to narrow the gap. Um but really they're they're putting a ball up on a tea for Congress to kick the field goal and that's what we need to have. My time is expired. Uh I yield back the chair only to say that made in America starts with keeping our innovators right here in the country to begin with. Thank you, Mr. Uh although she's a freshman, she is certainly no stranger to this chamber how it runs. With that, we would recognize the gentleoman from Maryland, Miss McClan Delaney.
▶ 1:24:03Uh thank you and thank you to our chair and ranking member for organizing this and of course to our incredible panelists. Um I do want to lift up I I believe we need a muchneeded bipartisan regulatory framework for clarity to ensure that there's transparency, trust, um prevention of fraud and manipulation and the promotion of innovation and US competitiveness. Very key. Um, and I would like to forward interest time for the records um, questions to Dr. um, uh, Broomer and uh, Mr.
▶ 1:24:30Garrison and I am a Hoya lawyer um, lawyer as well. So, go Georgetown. Uh, but um, I'm also an Idaho potato farmer's daughter and represent the um, sixth district of Western Maryland. And so um, I'm going to be talking about applying blockchain technology um, to agricultural supply chains and in particular some of our dairy farmers. Um a secure food supply chain plays an essential role as we know in ensuring customer trust and protecting health and blockchain technology is definitely a solution to these challenges.
▶ 1:25:01Um but the in traceability and uh solutions you know our farmers and ranchers and businesses want verifiable information and this technology could really be at the core of the next revolution. Um Mr. take um your testimony had highlighted the potential um benefits in um recordkeeping and traceability, but Maryland farmers have really started to have an interest in blockchain technology um for traceability.
▶ 1:25:27Can you tell me how like my farmers there and across the country we can really adopt but also build trust in this technology to modernize their their operations and improve efficiency? And is there any other challenges you haven't me mentioned which exist to get this technology widely deployed? Excellent question. So you know generally in the a space we're generally price takers. We're not price makers. Um and verifiable data is something that can help us receive a premium for our product.
▶ 1:25:56For example cattle are a great example if you put cattle in a commodity market you can't tell one from the other. But if you have verifiable data you can tell that story of of that individual through that and then get paid your premium through that. Obviously through USDA process verified programs, they have they have great premiums that they can offer through those.
▶ 1:26:12Um even even in the farming community for for example also if you can verify that a specific crop came from from a specific region um and you have that that verifiable data that shows that you have a premium product versus another one that's a great way for farmers and ranchers to receive premium products you know and and a lot of the challenges that we have that I would say especi specifically in the a space is you know blockchain technology and crypto especially to a producers can be a little bit scary. um we have a lot of education to do.
▶ 1:26:42Um that's what as I mentioned in my opening testimony that I I really feel like we want to be in the background. We don't want to be up the front. We want to be helping these markets uh operate more efficiently um so we can help those price takers get a premium versus being being you know in a commodity. Sounds good. And then um this is to all any of you who want to um quickly um talk about this.
▶ 1:27:06I spent um many rural uh areas don't have the required infrastructure as we discussed and most of my life much of my life I spent uh working to bridge the digital divide um particularly in rural America. Um to any of the witnesses and as we roll out rural broadband are there platforms designed for farmers to use in low bandwidth environments or do any of your platforms offer offline capabilities for like the 20% of farmers in my district that lacked high-speed
▶ 1:27:36Uh we do we do offer offline capability. So we'll cache the data and and re-upload as you uh get access our network um does rely on having good internet connectivity. Um but I think that these decentralized protocols called deepend networks these decentralized physical infrastructure networks really offer an attractive way to extend coverage um out to rural areas very cost-effectively. Thank you. I yield back.
▶ 1:28:08Mr. Jackson, you are recognized. And again, uh, a member who spent a lot of time on the bill last year and made it better with his efforts. You're Thank you, Chairman Johnson. Thank you, Ranking Member Davis. Um, to m to Dr. Bronner, a question for you on key elements that you would like to see uh that should be required in this legislation regarding digital assets and what protections would you recommend?
▶ 1:28:38Um how best can we help the Uh as I said earlier, I I think that the FIT 21 was pretty remarkable in terms of how much ground it was able to cover. um when I look at it from a 10,000 ft uh level uh there are core kinds of protections if you want to mainstream the technology and if you want to uh think about uh segregating customer assets u I think that's that's that's an important uh thing to think about uh you want to create a
▶ 1:29:08um a mode of regulatory clarity identifying both the SEC and CFTC oversight that is uh workable and and and and doable uh both in theory and and in practice uh and engaging with both the academics but also the industry folks on that I I'm sure you've been very uh engaged in uh from the disclosure standpoints I I would suggest that when it comes to the commodities and digital commodities uh that
▶ 1:29:38you recognize uh really the long-standing tradition that the the CFTC has of creating uh disclosures in its own way. Uh I think a lot of people have have said that the CFTC has no experience when it comes to disclosures and and creating information. Actually, it actually has a very long-standing history of being able to do so. It just doesn't in way that's different from the SEC.
▶ 1:30:00And to think through, well, what does that look like for the digital commodity space, I think, is is something that uh either legislatively or through the rulemaking process is something that eventually people are going to have to grapple with. Thank you so much. And the second question would be open to anyone on the panel regarding the um uh digital um ledger platform. Do you see an advantage or disadvantage in a public versus a private?
▶ 1:30:24Which do you I I think that time has started to to demonstrate that open permissionless ledgers are the economics around them are a lot more attractive than private ledgers. And that's simply because a private ledger, you have to instead of just running a single server, you have to run lots of servers.
▶ 1:30:47Uh, Wall Street has uh examined private blockchains as as a platform to to improve their own internal services, but also to uh offer uh new offerings to to customers. Those efforts have largely wound down. If if you're on an open permissionless ledger like Ethereum, what you're basically doing is you're plugging into a system which already works.
▶ 1:31:12So your infrastructure costs are very low and the security and the and the uh open architecture is really advantageous for you. So I think open permissionless ledgers are things that um we should be supporting in any future legislation. Well, thank you very much and I'd like to thank Chairman Thompson for coming back to hear my testimony. Um I yield back my time, Mr. Johnson. Mr. Davis. Thank you, Jonathan. Without the legend of Howard, Pennsylvania, Mr.
▶ 1:31:41Thompson, you are recognized. Yeah. Well, my my apologies for uh uh I feel like I'm speed dating this afternoon. Uh chairman's work never ends. So, um but I am so grateful to all the witnesses that are here and to our leadership that we have with the subcommittee. It's a very exciting time. we uh we don't really know everything that's what over to the horizon here. Um but you've shared some insight into that.
▶ 1:32:10So uh so I'll be quick my four minutes u which I'm blown through already. Mr. Teague, you're a fourth generation cattleman and we want to make sure the next four generations of your family can carry on the tremendous legacy of your ranch, but those in the sector are constantly met with new challenges.
▶ 1:32:27You said, quote, "American agriculture is being held back by fragmented systems, paper trails, and a lack of transparency." How do you see blockchain and digital asset tools being part of the solution to this problem and ensuring that we are we see the next four generations of American farmers, ranchers, and producers? And and do you see these tools encouraging younger generations to get into that sector to continue the hard work that that you and so many others do? Thank you for the question, Chairman Thompson.
▶ 1:32:55And you know, I I absolutely believe that solutions like ours are are key to attracting younger folks into the industry. Um, as most of you know, the kids there's a there there's an app for that, right? They they expect that in in today's world.
▶ 1:33:10Um, and and if you think about it from, you know, for example, if I have my children and my nephews, for example, if they develop a specific type of grass-fed beef cattle that that can top the market and they need that to be able to transfer that data to the public to create that trust and transparency to get that premium, um, we offer that solution to do that. Um, and in today's market, you know, as I'd mentioned earlier, you know, we haven't changed in 150 years. We we've been doing it for the same way for a long long time. Uh and it's just become inefficient.
▶ 1:33:40Uh it and and it it really breaks down trust because when you have a paper trail or if you're relying on paper versus an immutable ledger, um papers get lost for example, right? You know, we have that that nightmare tale of losing your cabin records in in the washing machine because you forgot to take your cabin book out, right? So yeah, no, I I believe it's absolutely essential for for to continue. Very good. Thank you. Uh Mr. short.
▶ 1:34:04Not only is geode geoet a solution to farmers and others who rely on precision mapping data, but blockchain was the solution to creating geodet. You said quote it would have cost billions of dollars to place antenni around the country end quote. Would this project for would this project for precision mapping be possible without blockchain technology? Can you please speak to blockchain's unique ability to be part of the solution to this problem?
▶ 1:34:34Yeah, I think there's a very strong evidence that it it's not possible and that the um people have been trying to build this kind of network for 20 years and uh both centralized companies as well as governments have spent a lot of money trying to put up stations and and create a network um and it just hasn't happened. And Geonet in two years has been able to build the world's largest network by in terms of stations by more than a factor of two.
▶ 1:35:01And I think at the root of that is um the underlying blockchain and the incentive that you can provide by having a token. We presented the idea first at the Institute of Navigation's GNSS plus conference and it's a very conservative community. We thought the idea of introducing using blockchain to solve this problem of a reference station network would be, you know, controversial. We didn't know if people would like it.
▶ 1:35:26And in turn, it it won the best presentation award and uh immediately attracted folks from the industry to help us participate um and create this network. Well, very good. Thank you for uh thank all of you and thank you for for for telling that story um for all of you you know sharing that story about um exciting prospects for the future. And with that, Mr. Chairman, my time is expired. All right. Thank you so much, Mr. Chair. We appreciate it.
▶ 1:35:55The capability of blockchain technology feels limitless um not only in the cryptoreated world but across all industries. Um, as we've been hearing so much of today, um, North Carolina's first congressional district is extremely rural, 22 counties.
▶ 1:36:15Matter of fact, I was informed that every single single county by our state's definition, all 22 are defined as rural. As we've heard time and time again in different hearings held by the agriculture committee, rural communities sometime can feel left out of the process. not quite fully understand um how they integrate. I'm here back home all the time.
▶ 1:36:42Um especially when we're talking to farmers, small town mayors, you know, people back home that's just trying to make it. So my question, and I'm going to try to go at this a different way. Um Dr. Brunner Brummer is if you can make that pitch, we're back in rural North Carolina, rural America.
▶ 1:37:10What would be pitch for why blockchain various applications? It makes dealing with the government and others a lot easier. Uh we've already heard about um paper and and how paper can isn't always the best uh technology especially if you're in rural areas.
▶ 1:37:37Uh I I grew up in area and I tell my friends here it's like I actually had to hop down a dirt road to get to my mailbox and then people then ask me what's a mailbox uh here in DC sometimes and and I understand that that challenge. Um, but one of the things we've already talked about compliance with with with with the rules, but I've always thought about how can you make communication understandable no matter who you are.
▶ 1:38:04Disclosures not just for in a legal sense, but in terms of businesses and communications. I think it helps with adoptability, adaptability for people to to to use the technology. You're talking about farmers who are themselves becoming proactive participants in transparency and making that information available to people who buy their products. What we do at Blueprint is we just take that data and then we put legal wrappers around it and we automate it so they don't have to think about it.
▶ 1:38:32But but ultimately you're talking and you'd go to those towns and those mayors and say, "How can we make sure that we connect you better to the the overall digital economy?" And the way in which we can do this is in a way where you don't have to necessarily even know that you're operating on something called a blockchain, but we're going to show you and give you certain kinds of tools so that you don't have to pay as much and that you can move and do things a lot faster and at scale. Mr.
▶ 1:39:00Tay, I heard you talking earlier. I mean, we're talking about the farmers agriculture. I get the question I hear people ask me all the time, what are they doing up there? So my question is you can continue along this thought line this line of question but you mentioned earlier education.
▶ 1:39:22What do you believe is the best strategy and pro approach that we can take to educate members of Congress, educate the constituency broadly speaking because guess what members are often driven by their constituents. I would love to hear. Yes sir. Uh excellent question.
▶ 1:39:47You know, education is going to be key in this issue because well, one of the great things about the technology is is if we can speed up payments and reduce cost, right? That's that's a game changer for a lot of folks in rural areas, right? But, you know, being able to break down the technology or break down the concepts to the simplest levels we can possibly make them. You know, for example, our solution where you take a cow and you put a tag in its ear and you identify that cow and that cow and as it travels through the chain, you could follow it through its life cycle.
▶ 1:40:16people understand that that's a very easy way to to to give you the concept of a blockchain and why that you can trust that data because it's an immutable it's a digital notary essentially is what it is. So I believe that you know breaking it down to the simplest concepts we possibly can is going to be key to educating most folks. Thank you to all the witnesses and Mr. Chair we yield Mr.
▶ 1:40:41Davis, what an experience in a uh town in a time so often fascinated by food fights. Uh there were no insults today. Uh no indictments, no political speeches. Instead, it was just good, thoughtful people examining an issue of critical importance. People asking questions uh to learn rather than to demonize. And I just what what a great opportunity. The panelists were excellent. I think our members were excellent.
▶ 1:41:07uh we are filling out this record as we work together uh to build an even better market structures bill um that uh that is going to become the law of the land. And uh with that, sir, if you have any closing remarks, uh we're happy to hear them. Mr. Chair, those are great words to end on. Uh under the rules of By the way, thank you for the UC. Uh there were three members who got to ask questions because of our flexibility that wouldn't have otherwise gotten to ask them before votes which have been called.
▶ 1:41:36So again, a good opportunity working together. Under the rules of the committee, the record of today's hearing will remain open for 10 calendar days to receive additional material and supplementary written responses from the witnesses to any questions posed by the member. And with that, this hearing is adjourned.