00:00Thank you very much. I appreciate you and Senator Boozman having this hearing. It's
00:07an incredibly important topic. Thank you. You've got a hard job. It's kind of a mystery,
00:13all this bitcoin to a lot in these tokens, and I appreciate you doing the job that you're
00:20doing, doing it so well. Just, I have really two questions. As I understand it, in your
00:26testimony you said that CFTC lacks the authority to regulate the cash spot markets for bitcoin.
00:33Is that right? That's right, correct. Okay. And that's one of the few investment tools
00:38available for investors to invest in cryptocurrency. So should Congress expand the CFTC's authority
00:45to include cash spot markets, the CFTC's enforcement authorities would likely need
00:51to increase beyond anti-fraud, right? So do you believe that the disclosure process
00:58for digital commodities should be the same as the current requirements for physical commodities?
01:08So Senator, thanks for the question. It's a really important one because I think a lot
01:12of the debate around the two agencies and the historical record of the CFTC and what
01:18it's oriented towards really misses some of the points around what we're trying to accomplish
01:23and what gap we're trying to fill. This is exclusively what I've called for for several
01:27years now, legislation around commodity tokens. And if you look at commodity tokens, and this
01:34really goes to your question, or commodity assets, whether it's corn, soybeans, natural
01:38gas, or oil, the disclosure regime that's built around commodities is really market
01:44and risk based. It's not actually about the commodity. And I think the best way to think
01:50about it is if you think about wheat, for example, what would you disclose about wheat
01:55on a periodic or a constant basis, on a quarterly or annual basis? Wheat is a decentralized
02:01commodity. It's grown all across the world. You wouldn't be able to disclose to an investor
02:05of a wheat futures contract what exactly the risks are associated with investing in the
02:10commodity itself. And I think that's very important to juxtapose against the Securities
02:15and Exchange Commission and corporate disclosures around centralized entities that have executive
02:21teams, boards of directors, audited financial statements, material risks to their business.
02:26And that's the information that bridges a gap between a company that's issuing stock
02:30and an investor. You want that investor to know as much information about all of that
02:35corporate issuance so that they can make the best informed decision. That doesn't exist
02:40on the commodity side. So I would think as it relates to digital tokens, we would have
02:44to be consistent around disclosures as they relate to market risk and material risk as
02:51it relates to the token itself. Some very characteristic driven disclosures around the
02:57token and what an investor might need to know before they make an investment.
03:02Thank you very much. Another question. But I think we're under surveillance here. Representative
03:07French Hill just came in.
03:08I was going to mention that, Senator Welch, that we do have one of the leaders in the
03:14House.
03:15We've all got to be on our best behavior. Welcome.
03:19The second question is about the energy consumption. I mean, this isn't necessarily in the regulatory
03:26space, but there is some question, I think, about what disclosures have to be made. It's
03:30an astonishing amount of energy use in this new domain. What I understand is crypto mining
03:38accounted for 2.3 percent of domestic electricity demand, as much electricity as the entire
03:44State of West Virginia or Utah combined last year. That's going to go up, especially as
03:51there's more mining related to it. And there's real implications, not just the increase in
03:57the amount of energy, but it has an impact on ratepayers in Vermont and elsewhere. And
04:04I'm concerned about that. What are the side consequences? Folks who have nothing to do
04:09with the whole market are not in it. It doesn't affect their lives, but it does affect their
04:13electricity bill, or it could.
04:16So my question is, with the energy demand from crypto placing a heavy burden on our
04:21electric grid and consequent potential price increases for everyday consumers, particularly
04:28with the demands that are imposed by the extreme weather, is there any room for the CFTC to
04:34consider requiring climate risk disclosures for crypto mining operations?
04:39Thanks, Senator. So, again, that would fall within the remit of legislation. So if that's
04:47something you want to consider, my team is happy to work with you and your staff to figure
04:51out a way to accomplish that. I'm certainly aware of this issue and the consumption of
04:55energy as it relates to mining of tokens. We've observed this over a number of years,
05:00and it has ebbed and flowed. And I think to credit some in the industry, there has been
05:05efforts to shift towards renewable energy sources as opposed to traditional fossil fuel
05:09based sources. But again, the numbers are staggering in some instances. And in this
05:15moment where we have high energy costs, huge new demands from artificial intelligence,
05:20it's certainly something that we need to think about. And I think in previous efforts
05:23to create authority, there have been provisions and potential bills around studying this issue
05:30at the CFTC with our other federal partners, Department of Energy, FERC, and otherwise,
05:35to see what is actually happening on the ground, how much energy is being used, where are the
05:40pockets of demand, how it's affecting communities and across the country, and whether or not
05:45there are any solutions to both reduce that demand or potentially to shift it to less
05:49intensive renewable sources. So an issue we're thinking about, but certainly would
05:53welcome the opportunity to work with you.
05:54Thank you very much. I yield back.
05:57Thank you very much. Senator Gillibrand, let me first thank you for all of your wonderful
06:03work in a broader sense. We know that our jurisdiction is commodities and the CFTC,
06:08but very much appreciate your efforts in this area.
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