the topic is an important one for anyone who cares about american competitiveness in the financial
services sector a financial ecosystem that empowers users over bank ceos and other powerful
central decision makers and the next iteration of the internet in which individuals are able not
only to read information and write content but also to own a piece of the networks themselves
this doesn't seem like a new financial system per se but really an extension or perhaps expansion of
our present one well i would disagree with that um i think what what i believe we're seeing is a new
open infrastructure layer on the internet a missing infrastructure layer of the internet that
is designed around value exchange and economic coordination that is rooted in you know immutable
data the ability to interact with counterparties in a very very safe way that hasn't existed
before on the internet and really many of the efficiencies that the internet brings in terms of
moving information brought into moving value but also with greater degrees of security than
are often offered through the existing financial system so i really do believe we're building a new
global economic infrastructure layer in your view is additional guidance defining clear rules of the
road for investors and market participants needed at this time thank you for the question we believe
this is a very important area of focus for the sec and this committee we do agree that the laws are
clear however existing laws regulation and legal precedent make it clear that blockchain tokens
are not securities so we believe that the law clearly shows that blockchain-based digital
assets are one of two things either a new form of digital property or a new way to record ownership
as brian brooks spoke earlier about we do believe that clarity is needed because these
are new assets it's a new way of transacting with these new protocols that we spoke about
and i think it would benefit all of us in the ecosystem to have agreed upon definitions
i think from the standpoint of what's available in the market today one of the things that we
need to do better in this industry and i think we're working in that direction
is much like the early days of the web we need to focus on uh consumer-oriented uh products
that are that have a lot of information about the the challenges and also brings the person through
from a literacy standpoint so they understand you look at user experience you look at ux design all
of these things are really really important and as we saw in the early days of the web it happened it
came together we became better at educating the the audience about what's available and what's
out there the nice thing about blockchain is you have immutability you have records that are out
there that can't be changed this information is already leveraged by chain analysis for example
an elliptic to demonstrate the different things that are happening on chain and i think it off
it allows us the opportunity to create a lot more foundational efforts with respect to user
experience and focus on these consumer protection issues that you're talking about one of the really
innovative properties of cryptocurrency markets are 24 7 risk monitoring and engines we do not
have overnight risk or weekend risk or holiday risk in the same way traditional assets do
which allow risk monitoring and de-risking of positions in real time to help mitigate volatility
um we've been operating for a number of years with billions of dollars of open interest
we've never had customer losses um clawbacks or anything like that even going through periods of
large movements in both directions we store collateral from our users in a way which is not
always done in the traditional financial ecosystem to backstop positions and the last thing that i'll
say is if you look at what precipitated some of the 2008 financial crisis you saw a number
of bilateral bespoke non-reported uh transactions happening between financial counterparties which
then got repackaged and re-leveraged again and again and again such that no one knew how much
risk was in that system until it all fell apart if you compare that to what happens on ftx or other
major cryptocurrency venues today there's complete transparency about the full open interest there's
complete transparency about the positions that are held there is a robust robust consistent risk
framework applied and we're excited to work with the cftc on our u.s license and regulated venue to
bring a lot of this to u.s customers as well as digital assets become more common in the global
marketplace with the total digital asset market reaching almost three trillion dollars as ranking
member mchenry just said how do we ensure the u.s dollar remains a reserve currency well mr lukemire
it's terrific to see you again and um i'd give you a couple of thoughts on that important question
one is if we start with stable coins before we talk about other crypto assets i've said for a
long time that the secular reduction in dollar holdings as a percentage of global central bank
holdings is alarming and this has been going on for more than 10 years at this point so dollars
is a share of the european central bank the japanese central bank etc has has shrunk from
80 plus percent to more like 60 plus percent in a short amount of time what that tells me is that in
the future with the rise of china and other major economies the us dollar can't take its primacy
for granted and we need to start thinking about competing on utility on features not just based on
a post-world war ii monetary system that we could take for granted for the last two generations
and that's one of the reasons that i've been such a supporter of internet-enabled dollars
which allow us to compete on features not only on history i think that's really critically important
the second thing i would tell you is as we enter year 11 or 12 of a highly inflationary environment
after all we've been printing enormous numbers of new dollars since the financial crisis there will
come a time gradually then suddenly when the attractiveness of the dollar relative to other
currencies could change one of the benefits of the crypto economy is that it creates some counter
incentives on the part of the fed to do that kind of policy because people will flee to other kinds
of assets and that sort of market competition is something that i think will ultimately
shore up our monetary policy and keep the dollar where it rightfully ought to be which is as the
dominant reserve currency it's been for all of our lives can you talk about the difference between
a stable coin versus a central bank digital currency and what advantages do does a stable coin
offer that that a digital dollar say at the fed would not be able to offer thank you congressman
barr i'm happy to i think the first difference is that uh stable coins are operational and growing
in the market today and they're built on uh an open internet technology model so when we think
about all of the things that we've seen built on the open internet on these open protocols and
networks whether it's ubiquitous information exchange communications interaction around
the world that same open internet model is the foundation for stable coins and so i think that's
a fundamental difference a cbdc which is a con concept right now it's not operational would very
likely be a very closed loop technology that's tightly administered and run by the government
and would unlikely be accessible in the same way that these open networks are accessible and so i
think that's a critical difference but i i would come back to the most important which is that
most payment system innovations in the world have been driven by the private sector and i think
what's taking place today with digital currency is is no different can you talk about some of
the negative consequences that could happen if we take a heavy-handed approach to regulating
this developing technology well i come back to mr vargas's question a second ago which i think is
the right way to answer your question you know mr vargas asked the question of um people have
the potential to lose a lot of money these things are volatile they're risky how do we protect them
from those kinds of issues there are two ways of answering that one is to prevent as many people
as possible from accessing this amazing technology for example the way the current legal regime works
is certain kinds of assets can only be purchased by accredited investors meaning rich people
so the only people who can get rich on this are people who are already rich that'd be one way
of protecting people from losing money is to make sure that only the richest can access it another
way of addressing it would be to make it safer the way that we made equities safer 40 years ago
right we created mutual funds diversification sector funds and other things that make it easier
for regular americans from places like my hometown and colorado to buy equities without having to be
stock experts strangely in the u.s we've refused to do that so far so we don't allow crypto mutual
funds we don't allow people to diversify the way that they do in canada germany singapore
the united arab emirates and a series of other regulated economies around the world so i would
argue the way to win is to bring more people into the system more safely not to keep them out
at their own peril so i represent the south bronx which is often said to be the poorest
congressional district in america and of greatest concern to me are the use cases of crypto that
would improve the lives of the people of the south bronx i represent a heavy population of immigrants
who often pay predatory fees in order to send remittances to their loved ones abroad so what
can crypto blockchain web 3 do for that dominican immigrant in the south bronx who is burdened by
remittance fees that she cannot afford how much more affordably and quickly can the crypto economy
facilitate remittances mr cascarelli if you could take that question and please be specific
yes uh thank you for the question um i think this is a really important element of the technology
which again is that it's open to anybody you don't need to have a bank account
you don't need to in fact rely on any intermediary so somebody who's an immigrant and wants to send
remittance to family member another country is able to do that and um there's ways to deal with
both crypto and to do it with a stable coin and all you need to do is download a wallet
and then you can send it to somebody else anywhere in the world and so this is a really powerful
tool for democratization of access especially for those who have difficulty getting bank accounts
there's no minimum fees there's no minimum balances there's no check cashing fees that are
part of this technology and you can do it in some cases for you know a penny or less one bitcoin
transaction a single purchase sale or transfer uses the same amount of electricity as the typical
u.s household uses in more than a month and so this is really outstanding to me and many folks
do not uh know this many americans and folks that are talking about this issue and so miss dickson
can you explain why for a cryptocurrency like bitcoin that rely on proof of work model mining
is such an energy intensive process thank you for the question this is a really important
area obviously in terms of sustainability and the focus on what we do in this space
we should always be trying to do it better and much more efficiently uh the in bitcoin is the
proof of the the way that bitcoin consensus is achieved is through uh really complicated math
equations and so there's a lot of energy that's needed to be used to be able to make that happen
i know best about the the consensus mechanism on stellar which is the stellar consensus protocol
which can be done on a very small computer any of the ones that you have in front of you
and the uh it consider we had a university of london did a study on the stellar network itself
and the uh network is is low in terms of energy consumption it's around point zero zero zero
two two kilowatts per hour for each transaction that's less than a transaction for visa so that's
a really important comparison for us all to think about so not every consensus mechanism is proof
of work or proof of stake again there are many many different ones out there and depending on
the mechanism it depends on the energy consumption but it's definitely important for us to be able to
try to do this better more efficiently and to consider the sustainability concerns around it