0:08 well first and foremost congratulations
0:11 on your new role as acting chair it's
0:13 very exciting uh in your confirmation
0:15 statement you said and I'm going to read
0:17 this for btim to make sure I get it
0:20 right we must refocus and change
0:22 Direction with new leadership to fulfill
0:24 our statutory mandate to promote
0:27 responsible Innovation and Fair
0:30 competition in our markets what is that
0:31 actually look like for you and
0:33 specifically how do you balance
0:35 fostering Innovation while ensuring Fair
0:37 competition and Market Integrity in a
0:39 rapidly evolving space like digital
0:41 assets well thank you so much for having
0:44 me here it's great uh to be here at this
0:46 conference especially because I was just
0:48 saying backstage I think this is the
0:51 first time as acting chairman that I've
0:53 P publicly spoken about our digital
0:55 assets agenda so it's pretty exciting to
0:58 be here and thanks so much for having me
1:01 I think um the key asp aspect of what I
1:03 wanted to come right out and Signal um
1:06 when I became acting chairman is that it
1:08 is a change we are going to be making a
1:10 change from the policies of the last few
1:13 years and key to that is what I have
1:15 almost been repeating as a mantra the
1:17 entire time that I've been a
1:18 commissioner and now as acting chairman
1:21 which is it's Back to Basics the cftc
1:25 has a pretty uh simple mandate we are
1:26 here to ensure that we have
1:29 well-functioning markets that are deep
1:31 and liquid and enable our Market
1:34 participants to hedge their risks we uh
1:36 oversee risk transfer markets as former
1:38 chairman Chris John Carlo has said many
1:42 times hello and
1:45 um key though in that in the ability of
1:47 the commodity derivatives markets to
1:49 enable that risk transfer is the fact
1:52 that we are Innovative a lot of times
1:54 people uh talk about some of the changes
1:55 that are going on in our markets whether
1:56 it's digital assets or prediction
1:58 markets which is something El I've
2:01 spoken a lot about and say you know this
2:04 type of change and having uh new asset
2:07 classes or new underlyings is not that
2:11 disimilar to when the cftc uh back in
2:14 the 70s um expanded the scope of our
2:16 markets not just from physical
2:19 Commodities like wheat or grain oil or
2:22 gold but to financial Commodities you
2:23 know the thought of having interest
2:26 rates or indices as Commodities back
2:28 then was very revolutionary and now if
2:30 you think about it those are the largest
2:32 uh markets that we oversee when you
2:35 think at the 400 trillion notional uh
2:37 derives markets so to me I think it's
2:40 just a Natural Evolution although it is
2:43 sort of another Cambrian explosion of uh
2:45 how our markets are changing to fit uh
2:47 today's day and age but otherwise it's
2:49 Back to Basics it's fairly simple we
2:50 have a principles-based regulatory
2:52 framework uh what that means and the
2:54 benefits of having a principles based
2:56 regulatory framework is that we are more
3:00 able to quickly uh adapt and anticipate
3:01 to new and emerging risks or
3:03 developments technological innovations
3:06 and so on in our market so I don't know
3:08 that it really changes so much what we
3:12 do but what I do think is key to um what
3:13 new leadership and a new change in
3:16 direction is is how we approach the
3:18 issues of the day and so one of the
3:20 things that I talked about during one of
3:22 my first uh senior staff meetings as
3:25 acting chairman was that uh to me I'm
3:29 going to be guided by the three M first
3:34 is mission is this our mission two
3:37 markets does this serve the markets and
3:40 three mindset are we approaching this
3:42 with the right mindset do we have an
3:45 open mindset do we have a growth mindset
3:46 so I think being Guided by these three
3:48 Ms that's how we're going to ensure that
3:51 we're balancing uh promoting responsible
3:53 Innovation while also ensuring Fair
3:55 competition Market integrity and
3:57 protecting our Market
3:59 participants awesome you recently
4:01 announced a series of round taes that
4:03 you'd like to do on the evolving trends
4:05 like Market structure conflicts of
4:07 interest and more particularly digital
4:10 assets uh given the wide variety of
4:12 stakeholders in this room and
4:14 potentially watching a live stream right
4:16 now in the digital assd industry that
4:18 are present here today can you just
4:21 elaborate on what type of key insights
4:22 you would like to gather from these
4:24 discussions and are there any specific
4:26 issues that you are particularly Keen to
4:28 learn about or
4:31 address the other thing that's been fun
4:33 about my 3 weeks I think as acting
4:36 chairman is I have uh told people that
4:38 if you want to know what I'm going to be
4:39 doing we'll just look at everything I've
4:41 been saying for the last two years and
4:43 if I said it that means I'm going to go
4:45 and try to do it now and roundtables and
4:47 public engagement in an open and
4:49 transparent way is Again part of getting
4:52 back to basics that's what we here as
4:54 public servants are meant to do we are
4:56 here to engage with the public we are
4:58 here to hear from the public because
5:01 that's one of the core foundations of
5:03 being in a democratic country like the
5:05 United States it's a participatory
5:07 democracy and so that's why it's so
5:09 important to me that we have roundtables
5:12 as structured open and transparent
5:14 forums for the public to come and share
5:16 their views with us to have input into
5:19 the policymaking process because it's
5:23 inconceivable to have a government where
5:25 we're going to mandate the laws and the
5:27 rules that you have to live by every day
5:29 and yet you have no voice or no say in
5:32 the matter to me that's just un American
5:34 so the round tables are very key to that
5:36 and the key thing with these round taes
5:37 again being part of the government is
5:39 that there are rules by which we make
5:42 policy um part of that is that we need
5:44 to have a rational basis for what it is
5:46 that we do um particularly when we are
5:48 changing our policies or or embarking
5:51 upon a new area of policy and part of
5:53 having a rational basis for what we do
5:54 means that we are having input from
5:58 experts we have data we have studies uh
6:00 all of those things are part and parcel
6:02 of having a rational basis for why we do
6:04 things so a round table is very
6:07 important because our uh participants in
6:09 this round table and just members of the
6:11 public we'll be able to submit comments
6:13 again we will hear from experts we will
6:15 hear from stakeholders such as uh
6:18 industry leaders uh technology providers
6:20 uh those who are actually building and
6:22 participating and shaping these markets
6:24 as well as from other interested
6:26 stakeholders like public interest groups
6:28 so it's designed to bring everybody to
6:30 have a seat at the table
6:32 and to be able to contribute that's
6:34 really the key thing is because I feel
6:36 that many of the policies of the past
6:38 several years have not in fact been data
6:41 driven they've not been um taking an
6:45 empirical look at uh the benefits of and
6:47 the risks but the benefits in particular
6:50 of uh technological developments like
6:53 blockchain fully agree one of the key
6:56 themes of the day is that we may be at a
6:58 pivotal moment in the evolution of
7:00 onchain markets
7:01 uh as you know Ando is building out a
7:04 platform to facilitate more issuance of
7:06 tokenized assets and really bringing
7:09 more institutions on chain uh but one
7:11 thing that will need to happen in
7:13 addition to the technology and
7:15 infrastructure is just more regulatory
7:18 Clarity right um and I know You' said
7:19 this before but can you share your
7:21 thoughts on how the cftc plans to
7:23 support greater institutional
7:25 participation in nonchain markets and
7:27 are there any specific things in the
7:28 short term that you would plan to address
7:30 address
7:33 so looking at having uh institutional
7:36 markets and digital assets is something
7:38 that I've been very particularly looking
7:42 at since about 201 uh 16 or 2017 and I
7:44 think we probably began talking about it
7:47 when we were both at our previous firms
7:49 possibly in 2018 or 2019 so it's been a
7:52 long time coming and when you think
7:55 about the cftc's uh role overseeing
7:57 again the derivatives markets this is
7:59 where I think about what maybe very well
8:02 be the killer app for blockchain
8:04 technology in tokenized financial
8:07 markets which is collateral management
8:10 collateral management is something that
8:12 underpins the entire J's markets it's
8:14 trillions and trillions and trillions of
8:19 dollars um being able to enable uh new
8:22 Innovations like 247 trading um being
8:25 able to reduce settlement clearing um
8:27 and other operational risk all of those
8:28 things are some of the benefits that
8:30 have long been written about uh with
8:33 blockchain technology and so one of the
8:35 key initiatives I wanted to do in my
8:37 role as a commissioner was to sponsor
8:39 the global markets advisory committee
8:40 which has a digital asset markets
8:42 subcommittee I've been so proud to be
8:44 able to sponsor their efforts because in
8:46 the last uh just over a year actually
8:48 they've put forward a number of key
8:49 recommendations which we will now be
8:51 looking to implement at the cfdc under
8:53 my leadership as acting chairman one of
8:56 those is a us uh digital asset taxonomy
8:58 this is really key because if you're
8:59 going to be doing something you all need
9:01 to be on the same page and talking about
9:03 the same things and importantly it will
9:07 help to bridge uh our us markets with
9:08 the rest of the world who has been ahead
9:10 of us right we have been left behind in
9:13 this because we've been um kind of in a
9:15 a food fight or something in the United
9:17 States over over this technology where
9:18 it's become this battle between good and
9:20 evil instead of just thinking that it's
9:21 technology technology is not good or
9:24 evil so that's very important Bridging
9:26 the Gap between the US and the rest of
9:28 the world being a useful tool for us
9:30 policym to begin to understand what do
9:32 we mean when we talk about digital
9:33 assets and the different use cases for
9:37 digital assets including uh use cases in
9:38 uh again tokenized financial markets
9:41 tokenized uh financial instruments um
9:43 Financial activity utilizing blockchain
9:46 technology the other very important
9:47 recommendation um that was one of the
9:49 most recent GMAC recommendations is
9:54 around the use of DT to enable uh to
9:57 tokenized non-cash Collateral again um
9:59 one of the the very simple use cases of
10:02 that is stable coins as collateral uh
10:04 for duros transactions um being able to
10:07 post it as a margin whether it's initial
10:10 margin or or um a variation margin in
10:12 our markets so that's something that I
10:14 would actually like to pursue
10:16 operationalizing again um consistent
10:19 with direction that we receive from the
10:22 White House and the um on our efforts
10:23 with the president's working group on
10:25 digital asset markets we recently had uh
10:27 one of our first kickoff calls on that
10:29 and working closely together of course
10:30 with with the US Department of the
10:32 treasury and with our fellow Regulators
10:35 um over at the SEC but looking at how to
10:37 stand up um as I've called for a digital
10:40 asset markets pilot program to explore
10:43 the use of tokenized non-cash collateral
10:46 and that could really be um looking at
10:47 our existing rules and regulations and
10:51 seeing if there's any um comfort that we
10:53 may need to provide uh whether it's
10:56 through um a letter or through some
10:58 other uh key parameters or factors or criteria
11:00 criteria
11:02 to be utilizing this in our markets but
11:04 I think that's a measure of regulatory
11:07 certainty that we can provide in a pilot
11:11 program that will then be a bridge to
11:13 being able to use this in our markets um
11:15 you know on an everyday going forward
11:17 basis but after it's been carefully
11:20 studied after we've received the data to
11:21 support that this actually minimizes
11:23 risks um it's gone through a cost
11:25 benefit analysis and so I do think that
11:27 we will be looking at sort of the
11:28 eligibility criteria for people to
11:30 participate in the effort and then we
11:32 will be collecting the data and then
11:35 publishing a report so more to come but
11:36 I think that's going to be the most
11:38 impactful first thing that the cfdc can
11:41 be doing on our own um in pursuing the
11:44 president's agenda and then like I said
11:45 working together with all of our
11:47 counterparts on the executive order for
11:50 digital asset markets yeah I I love that
11:53 because I'd love to just um dive a
11:55 little bit deeper on that recommendation
11:56 on the use of tokenized non-cash
11:58 collateral because obviously for a
12:00 company like Ando Finance is the largest
12:02 issuer of tokenized treasuries on public
12:04 blockchains that was kind of a big deal
12:06 so can you just elaborate a little bit
12:09 in your own words why you think that
12:10 recommendation is so impactful and what
12:15 it will cause if you think about
12:18 why why use blockchain technology in
12:19 institutional markets like our
12:22 institutional markets are fantastic they
12:25 are great they work there is again you
12:28 know 400 trillion notional in
12:31 derivatives in our markets um every day
12:32 there are trillions and trillions of
12:34 dollars in transactions whether it's in
12:37 the FX markets the rates markets um
12:39 credit markets commodity markets you
12:42 name it Equity derives markets all of
12:44 the pipes and plumbing of the financial
12:47 system work great today but of course
12:49 could it be better are there ways that
12:51 we could reduce Opex for firms are there
12:54 ways that we can reduce capex for firms
12:56 one of the things about Dodd Frank and I
12:58 think one of the the the most important
12:59 or impactful
13:02 um reforms of Dodd Frank that most
13:05 fundamentally reshaped Market structure
13:07 was actually not title 7 which was the
13:09 deros regulation but it actually was the
13:11 capital and margin requirements those
13:14 are the things that really shaped um who
13:16 the key Market participants were it
13:17 really shifted from being much more of a
13:20 dealer Market uh to being um more
13:22 diverse as far as Market participants
13:23 you have alternative liquidity providers
13:26 who now take up a very large portion of
13:29 our Market um provision and so since
13:31 dealers have been constrained with their
13:32 balance sheets they're able to
13:35 intermediate less and less and so when
13:38 you have this Global hunt for scarce
13:41 Capital when you have to look at every
13:43 dollar of the activity that you're doing
13:44 and figure out how much Capital are you
13:47 going to allocate towards that activity
13:49 that's where Innovations like blockchain
13:51 technology being able to be more Capital
13:53 efficient being able to reduce um the
13:54 time for example that you've got your
13:56 collateral locked up in settlement
13:57 processes being able to reduce
14:00 settlement fails being able to um
14:02 mitigate all of those different risks
14:04 and become more efficient those are real
14:07 dollars and cents that are adding up and
14:09 it's a a
14:13 truly massive opportunity and so that's
14:14 why I think it's important to look at
14:16 institutional markets and to look at
14:17 something I mean honestly this is
14:19 actually a pretty boring topic
14:20 collateral management is not the kind of
14:23 thing that gets people very excited um
14:25 many of these are sort of middle and
14:27 back office type functions but it's
14:29 critically important to our financial
14:31 markets obviously haven't come from a
14:33 bank that was the pipes and plumbing and
14:34 is the pipes and plumbing of the entire
14:37 world it's something that we saw um and
14:40 all banks see as a massive opportunity
14:41 well for what it's worth the people at
14:43 onto Finance get very excited about
14:45 tokenized collateral so at least that's
14:46 one group I see some head nods in the audience
14:47 audience
14:50 so um all right shifting gears a little
14:54 bit um I'd love to just get your take is
14:56 there anything right now happening in
14:57 digital assets or the broader
14:59 tokenization space that you are
15:01 personally very excited about and is
15:03 there anything maybe happening that
15:07 could even help your role in and or
15:09 support the mission of the cftc to
15:11 ensure fair and orderly
15:13 markets there's many exciting things
15:16 happening but I think um maybe the best
15:17 way to address this is to talk about
15:19 some of the near-term deliverables that
15:21 we have and and how we are approaching
15:23 all of these issues and then kind of
15:27 talk about some of the perhaps um next
15:28 steps after we sort of do these
15:30 near-term deliverables so in the
15:33 president's um executive order uh we do
15:36 have a couple near-term deliverables so
15:38 uh within 30 days we need to report upon
15:42 all of our rules regulations orders and
15:43 other things that we've done as agency
15:45 action that impacts digital assets we
15:48 are currently working on um completing
15:50 that inventory across the entire agency
15:52 um I've also asked the digital asset
15:55 Market subcommittee of my GMAC to also
15:57 work on doing that um as well so that
15:59 way we can cross check and and basically
16:01 um make sure that we've got a good list
16:02 um that's been scrubbed and is
16:04 comprehensive that's one of the first uh
16:06 deliverables that we'll be doing um
16:08 after that of course there's another uh
16:10 60-day report and then there's the
16:13 180-day report so we are working on
16:14 pulling all of this together in order to
16:16 be able to meet those deliverables and
16:17 to be able to contribute to the
16:19 president's working group we are also
16:20 looking at bringing on board um
16:22 hopefully a couple senior advisers uh
16:24 crypto Market structure experts that
16:27 will be incredibly helpful to us um I
16:29 have many former colleagues that have
16:31 been uh you know Wonderful resources so
16:33 looking forward to having some of these
16:35 sort of temporary senior advisers that
16:37 can help us with the crypto Market
16:39 structure uh besides that um like I said
16:41 in order to do initiatives like my
16:42 tokenization pilot we also will be
16:45 looking to be um deepening our bench of
16:48 talent and bringing in Industry experts
16:51 who have um actually built Solutions or
16:53 have led initiatives to deliver
16:55 Solutions those are going to be key
16:57 skill sets that we need at the agency
17:00 because we don't really have that uh in
17:02 the public sector it's not to the same
17:03 um level of course as you have in the
17:05 private sector uh so that's going to be
17:07 something very important so there's just
17:09 a lot of things that we need to do at
17:13 the agency to enable um this openness uh
17:15 and this ability to truly understand and
17:16 get in front of and create a
17:18 forward-looking regulatory framework or
17:20 structure for digital asset activities
17:23 or for generally just new technology in
17:26 our markets uh besides doing tokenized
17:29 collateral again so interesting one of
17:31 the top priorities I think um besides
17:33 that there's a lot of other interesting
17:35 things um that we could be looking at uh
17:36 some of the other work streams that my
17:37 digital aset Market subcommittee has
17:39 been working on have been utility tokens
17:41 for example I actually think one of the
17:43 things that may bring the most
17:46 regulatory Clarity the fastest is to
17:49 identify um to Define what is a utility
17:52 token and that it is not a
17:54 security that actually I think would
17:56 bring a lot of clarity to a broad swath
17:57 of the marketplace and it's the approach
17:59 that many other jurisdictions have have
18:01 taken as well um one of the other and
18:04 and actually at the last GMAC meeting
18:05 there was a presentation from the
18:07 utility tokens workstream which is led
18:09 by Chris Perkins who's the president of
18:11 coin fund and a former colleague of M at
18:14 city and um they've done a tremendous
18:15 amount of work on thinking through a
18:17 regulatory framework for utility tokens
18:19 and how does uh that fit within the
18:22 cfc's jurisdiction the other work stream
18:24 which um has been led by a couple other
18:26 of our uh subcommittee members including
18:30 peran boring who's the um CEO of the uh
18:32 digital Chamber of Commerce is around
18:36 nfts I believe that nfts are not a
18:39 security they are things um and the cftc
18:41 has broad jurisdiction over Commodities
18:43 that are you know Goods articles um
18:46 Services interests rights etc etc so I
18:50 think that's another area where um if I
18:52 take a step back and think about what is
18:54 the opportunity in web 3 what is the
18:59 opportunity in creating um either new uh
19:02 wholly native digital assets or digital
19:04 assets that are a representation of
19:06 something else so whether it's the the
19:08 right to use something to transfer
19:10 something or to use something whether
19:13 that is uh tangible or intangible a lot
19:15 of that is actually commercial activity
19:17 and so that brings me back to my first
19:19 sort of threshold question which is is
19:21 this a commercial activity or is it a
19:22 financial activity because if it's a
19:24 commercial activity it's actually not
19:25 going to be regulated by Financial
19:28 Regulators we have other um we have
19:30 state regul ulation in the United States
19:31 we have the Federal Trade Commission at
19:34 the federal level and a lot of what's
19:36 very exciting for how our lives are
19:38 going to change on an everyday basis in
19:41 a in a more digital uh world and in
19:44 Virtual Worlds is actually in the
19:46 commercial space think about uh the way
19:49 nfts are being used in sports or
19:52 entertainment uh in fashion in media all
19:54 of that is very interesting that's all
19:56 being led by corporates probably former
19:58 clients of yours I'm sure and former
20:00 clients of mine and so that's something
20:03 where I think we really don't want to
20:06 inhibit that growth in those sectors
20:08 that are not the financial sector it's
20:10 actually other sectors of the
20:13 economy awesome well as time is flying
20:15 by I want to make sure that we do touch
20:19 on defi right there is growing
20:21 prominence I would say of decentralized
20:23 Finance I don't know what the exact
20:25 number is of capital in defi right now
20:27 but it is growing so there's been some
20:29 discussion on how that really should be
20:32 regulated uh the previous administration
20:33 I believe it's fair to say tried to
20:35 clamp down on defi in a wide variety of
20:37 different ways that caused quite the
20:40 Uproar in the defi Community um what do
20:43 you believe is the cftc's role in
20:45 regulating Defi and what would what do
20:47 you think a good regulatory framework
20:49 for defi would look like I think a lot
20:51 of the issues of the past several years
20:53 is based on a fundamental
20:56 misunderstanding of Defi and then of
20:58 course the appropriate way to regulate defi
20:59 defi
21:01 uh when I first became a commissioner
21:02 and again based on the work that I've
21:04 been doing um at city and in the private
21:07 sector uh I think maybe two or three
21:08 months after I became a commissioner I
21:11 gave a keynote at nasdaq's technology of
21:13 the future conference where I outlined
21:16 10 fundamentals for responsible digital
21:19 asset markets and none of those was like
21:20 this is Defi and this is what we need to
21:23 do about defi actually what I talked
21:25 about besides Common Sense things like
21:28 combating illicit Finance um and
21:32 insuring risk management and uh um
21:35 anti-f fraud uh measures is that we
21:38 really need to appropriately use
21:40 activities based regulation versus
21:43 entity-based regulation and I think the
21:45 challenge is that with defi people have
21:48 been trying to apply an entities based
21:50 regulatory approach to it but there's
21:52 not actually entities are there in defi
21:54 not like that actually what's more
21:56 appropriate is an activities based
21:58 regulatory framework when you when you
22:00 look at defi one of the first examples I
22:02 used um in thinking about it is is
22:04 Napster so for those of you who remember
22:07 Napster who were perhaps in college as I
22:10 was at the time um with Napster it's a
22:14 peer-to-peer sharing Network how are you
22:16 supposed to go and ask every college
22:18 student to register as something when
22:20 they're on Napster that doesn't seem to
22:23 make much sense but you shouldn't be
22:27 using um the internet to do illegal
22:28 things right and that's actually the
22:31 approach that they took with um file
22:33 sharing and uh with the intellectual
22:36 property and copyright and other issues
22:38 theft of intellectual property so why
22:39 would it be any different for any other
22:41 internet activity it isn't that's how we
22:42 regulate the internet we regulate the
22:44 activities that people do on the
22:45 internet and that's how I think about
22:50 defi I love it as a um closing thought
22:52 it seems like right now there
22:55 is more or less a historical burst of
22:57 energy around the topic of digital
23:01 assets so in your opinion how does the
23:04 industry kind of a avoid fumbling the
23:07 historic moment in squander the promise
23:08 that the next two to four years could
23:11 really have um do you have any parting
23:13 thoughts or wisdom that you would share
23:14 with the people here
23:18 today approaching things from a
23:21 realistic and dare I say an adult
23:24 perspective anybody who thinks that
23:25 there's going to be something that involves
23:26 involves
23:29 money um and doesn't have any rules or
23:31 regulations is that's not realistic
23:34 that's that's pretty ridiculous right um
23:35 so for those who think that there's
23:36 going to be money involved and there's
23:38 going to be no regulations whatsoever
23:40 that's not realistic so I think just
23:42 come to something with a reasonable
23:45 approach that is something that makes
23:46 sense that isn't something where people
23:48 immediately can poke a million holes in
23:50 and then you lose credibility because I
23:52 think um what has been most challenging
23:54 for the digital assets industry is
23:56 actually a credibility gap there have
23:58 been a lot of very bad actors um um and
24:00 there it's been appropriate to take very
24:04 strong um actions to um pursue and to go
24:07 after fraud but fraud is fraud no matter
24:09 what you can't lie cheat or steal no
24:11 matter what you're doing whether it's
24:13 digital assets or other things and so
24:16 the problem is that those frauders
24:18 people who are lying cheating and
24:21 stealing people's money that has given
24:23 the industry unfortunately a um a bit of
24:26 a bad rap and so I think the industry
24:28 has done such a good job um particularly
24:32 in the last uh year plus to rehabilitate
24:35 um the image and to make clear the
24:36 difference between somebody who's just
24:38 lying and stealing versus people who are
24:40 really trying to build something
24:42 Innovative that's going to bring net net
24:47 a great deal of good to um to society uh
24:49 to the economy so that's been really
24:52 good progress so let's not backslide on
24:55 that amazing progress being made to
24:58 close the credibility gap so keep the
25:02 moment them going and be realistic love
25:04 it I want to really thank you for taking
25:06 the time to join us on this stage today
25:07 it was incredibly interesting to hear
25:10 your perspective on these questions and
25:13 I am personally very excited to see what
25:15 all the things that you can do as the
25:16 acting chair thank you so much it's a
