Financial Services Committee on Digital Assets Review

The February 11, 2025, House Financial Services Subcommittee hearing, titled “A Golden Age of Digital Assets: Charting a Path Forward,” provided a platform for key stakeholders to discuss the challenges, opportunities, and legislative priorities for the digital asset ecosystem. Below is a list of the witnesses who testified, and a detailed breakdown of the five main topics discussed by digital asset participants, with specific examples and insights from the hearing.

Witnesses Who Testified

Jonathan Jachym – Deputy General Counsel & Global Head of Policy & Government Relations, Kraken

Ji Hun Kim – President & Acting CEO, Crypto Council for Innovation

Coy Garrison – Partner, Steptoe LLP

Jose Fernandez da Ponte – Senior VP & GM of Blockchain, Crypto, and Digital Currencies, PayPal

Timothy Massad – Research Fellow & Director of Digital Assets Policy Project, Harvard Kennedy School

 Need for Regulatory Clarity

Participants emphasized that the current “regulation by enforcement” approach has created significant uncertainty for digital asset businesses. This approach has led to inconsistent enforcement actions by agencies like the SEC and CFTC, which have stifled innovation and deterred investment in the U.S.

  • Example: Jonathan Jachym (Kraken) highlighted how Kraken faced enforcement actions despite attempting to comply with unclear regulations. He argued that a lack of clear guidelines has made it difficult for companies to navigate compliance requirements.
  • Proposals: Witnesses called for a unified federal framework to replace the patchwork of state and federal regulations. Timothy Massad (Harvard) suggested that Congress should establish clear standards for token classifications (commodity vs. security) to reduce ambiguity.

Risks of Regulatory Overreach

Witnesses warned that excessive regulatory overreach could push innovation offshore, harming U.S. competitiveness in blockchain technology.

  • Example: Ji Hun Kim (Crypto Council for Innovation) pointed out that Europe’s Markets in Crypto-Assets (MiCA) regulation provides a clearer framework, making it more attractive for businesses compared to the U.S.
  • Impact: The Biden Administration’s alleged Operation Choke Point 2.0 was cited as an example of regulatory overreach. Jose Fernandez da Ponte (PayPal) explained how debanking practices targeting crypto firms have disrupted legitimate operations and hindered financial innovation.

Potential of Digital Assets

The transformative potential of blockchain technology was a recurring theme, with witnesses advocating for its ability to modernize financial infrastructure and promote financial inclusion.

  • Example: Chairman Bryan Steil noted that digital assets could enhance the dollar’s dominance in global markets by enabling faster, cheaper cross-border payments.
  • Use Cases: Witnesses highlighted real-world applications such as tokenized real estate, decentralized finance (DeFi), and supply chain transparency. Timothy Massad emphasized that while blockchain holds promise, its adoption has yet to deliver significant economic value at scale due to regulatory hurdles.

Stablecoin Regulation

Stablecoins were a focal point of discussion, with participants urging Congress to prioritize legislation that ensures transparency and consumer protection while fostering innovation.

  • Example: The introduction of the Stablecoin Transparency and Accountability for a Better Ledger Economy Act (STABLE Act) was discussed as a step toward creating robust standards for stablecoin issuance.
  • Concerns: Witnesses stressed the importance of distinguishing between payment stablecoins and speculative cryptocurrencies. Jose Fernandez da Ponte noted PayPal’s efforts in developing stablecoins backed by reserves, but he warned that unclear rules could hinder their adoption.

Operation Choke Point 2.0

The hearing addressed allegations that the Biden Administration’s Operation Choke Point 2.0 targeted crypto firms by pressuring banks to sever ties with them.

  • Example: Coy Garrison (Steptoe LLP) testified about clients who were debanked without explanation due to their association with digital assets.
  • Impact: Witnesses argued that this approach undermines legitimate businesses and limits access to essential banking services, creating unnecessary barriers for entrepreneurs in the crypto space.
  • Recommendations: Participants called for legislative safeguards to prevent such practices in the future and ensure fair treatment of digital asset businesses.

Conclusion

The hearing underscored the need for balanced regulation that promotes innovation while addressing risks like fraud and systemic instability. Witnesses advocated for legislative action to provide clarity on token classifications, establish stablecoin standards, and prevent debanking practices targeting crypto firms. The discussions highlighted both the challenges facing the U.S. digital asset sector and its potential to revolutionize financial services if properly regulated. (video provided below)