Charles Hoskinson’s Address Senate Committee On Crypto Regulation
Innovation makes specifics difficult. We should focus on principles instead, blockchains enable the liquidity of value, thought and commerce at a scale and speed society has never enjoyed before. Instead of predicting the outcome of these new capabilities, we ought to decide on what risks we must guard against what fundamental rights consumers should have and how to use new tools for the greatest possible good. On thursday june 23, charles hoskinson, the ceo of input, output, global and founder of the cardinal blockchain testified to the u.s house subcommittee on commodity exchanges. Energy and credit hoskinson discussed the immense possibilities of the blockchain and suggested what responsible regulation of the technology emerging crypto industry could look like in his opening remarks before congress hoskinson uses his blockchain engineering company as an example to illustrate the convenience, interconnectivity and value that the Blockchain industry could bring to many industries. He also speaks about the issue of regulation, urging regulators to focus on principles that will work for the whole industry rather than specifics. That would almost be impossible to achieve yet again, hoskinson proves himself to be a perfect representation of not just the cardinal blockchain network, but the whole of the cryptocurrency industry. Before the video ends, we will bring you more news from the congressional hearing, but before then here is charles hoskinsons opening remark. Please watch share and, like this video and dont forget to drop your thought, comments and observations in the comments section below thanks and enjoy the video chairman, maloney ranking member fishbach members of the subcommittee and congressional staffers, who worked so hard.
Thank you for inviting me to testify at this hearing. I applaud the work of this subcommittee and i appreciate you all taking the time to provide a forum for the blockchain industry. The blockchain industry has grown over the past decade from a small group of uncommercialized volunteer developers, and it was very small believe me to a trillion dollar global economy, encapsulating sophisticated engineering, scientific research, publicly traded companies and millions of users. While our remarkable growth yields significant opportunities, ranging from infrastructure security to entirely new economies like metaverses and nfts, it also has presented new challenges and amplified the existing problems. Our legacy systems cannot handle the rapid movement of value without counterparty risk and require centralized middlemen. Our regulatory tools, risk management systems and oversight processes were never designed for such speed scale and rapid evolution. For example, in just four years, our industry has touched concepts ranging from ipos to intellectual property, to completely new business structures, called daos that are effectively leaderless and jurisdiction. Free reflecting upon the 20th century, the dominance of the united states has rested upon three pillars: our financial services, our technology companies and our manufacturing capabilities. These industries are rapidly transforming under the demands of globalization, increased competition, new technologies and our desire to define esg rules to ensure a sustainable values driven global economy at our core. Our industries technology is about creating distributed ledgers to store information that needs to be transparent, audible, time stamped and immutable.
This process enables records of social and economic concerns to be reliable and programmable, for example, as a rancher, i have to deal with water rights. Grazing leases, blm land and numerous other agreements, contracts and economic events. Many of these are not digitized, nor are they shared in ways to provide emergent value to policy makers, regulators and researchers. The consequences of this fragmentation and lack of digitization are a large amount of inefficiency. Replication of work and a lack of access for entrepreneurs and innovators, who could build new products and services that would dramatically reduce costs and improve efficiency for all stakeholders. The power of blockchain technology is its universality and permissionless model for innovation. Our company input output has never had to pay a royalty file, a patent application or acquire a license to pursue business in countries as diverse as ethiopia to mongolia. Thus, we have to understand that categories based regulation that is segregated to the borders of a particular jurisdiction and relies upon centralized actors for reporting and disclosure is unlikely to be effective and, frankly, will inhibit regulation. Furthermore, the internets governance, evolution and innovation are controlled by the itu or some other transnational body, but rather by thousands of interconnected and interdependent agencies and private companies working towards the self emerging common goals of increased connectivity capacity and utility. If we are to discuss how to regulate our industry, protect consumers and align growth with the realities of modern society, then we ought to have the humility to admit.
Innovation makes specifics difficult. We should focus on principles instead, blockchains enable the liquidity of value, thought and commerce at a scale and speed society has never enjoyed before. Instead of predicting the outcome of these new capabilities, we ought to decide on what risks we must guard against what fundamental rights consumers should have and how to use new tools for the greatest possible good. It seems prudent to focus on concepts like measuring decentralization information, asymmetries, accessibility of data and access, rather than arguing about jurisdictional bodies or asset categorization. Cryptocurrencies are financial stem cells at their core. They can be nearly any asset and can change over time principles. Dont change, for example, the notion of measuring consolidation and its risks has been an endeavor. The united states has pursued, and is frankly, good at since the sherman antitrust act of 1890, while none of us are personally familiar with life in the 1890s. Wed certainly be comfortable with the intent and concepts behind the sherman antitrust act, centralization of markets and power seldom leads to good outcomes. I hope we can engage in a fruitful and ongoing dialogue throughout the coming months. As the united states debates, the regulatory future of the american blockchain and cryptocurrency industry, like the prior congresses in the 1990s, discussing the regulatory framework for the internet that led to the rise of trillion dollar companies, i believe this congress can achieve great results by working with Our industry and a principles based legislative approach and leveraging our capabilities to innovate and adapt.
One important aspect of the regulation of the cryptocurrency industry is the issue of which crypto assets are commodities and which are securities when asked about the suitable approach to responsibly regulating the cryptocurrency industry, especially regarding transparency and consumer protection. Hoskinson gives the lawmakers a much needed lecture on the completely transparent nature of the blockchain. Please listen to charles hoskinsons reply on the topic. You know when you look at cryptocurrencies in general. Ive always viewed them like financial stem cells, theyre theyre kind of more fundamental than a particular category like a currency or a commodity, and really it depends on the markets, theyre, traded on and the use and utility that they have. But at the end of the day, you have to ask yourself what public policy considerations are you attempting to satisfy? Is it sanctions compliance? Is it consumer protection? Is it market stability? What we do as an industry is were all about transparency, so its kind of funny were talking and debating about disclosure regimes, theres no other financial asset in the world. That really is as transparent as a cryptocurrency, every transaction from the very beginning for bitcoin, for example, from january 3rd 2009 is known. Every single one, the holdings of the founder are known because all of these things are publicly available to everybody. So its more about my view, understandability and the tooling required to make this work on a global basis. So i dont think it would be wise to say well.
Is it a security or a commodity or fall into this temptation of whos, the more permissive regulator or what is the regulatory arbitrage, but rather just take a step back and say what things do we want to guard against and we now have 13 years of history As an industry of, i think, six or seven collapses a whole bunch of interesting new things like nfts that have always pushed the limit and a global marketplace with more than 100 million people floating around that we can draw from, and we can look on a case By case basis and build a framework that makes sense, whats encouraging to me as an entrepreneur briefly, is that theres, a lot of great legislation thats been proposed recently, like the dca, the fia uh theres executive orders that have come through that are trying to force clarity Amongst the executive branch, so these things together create a global dialogue and if were clever about it, i think we can converge to a reasonable compromise that we as an industry, can live with and continue to be competitive with during the congressional hearing, hoskinson makes a very Strong case for distributed ledger technologies. First, he argues that the blockchain industry can provide transparency and auditability to existing industries. According to the ceo, even the agricultural industry could benefit by using blockchain to manage and oversee its economic events. Hoskinson also counsels against the use of category based regulation, which would rely on centralized actors and thus be an ineffective approach toward regulating the decentralized cryptocurrency ecosystem instead.
Hoskinson suggests the use of principles based regulation, which is more flexible, can adapt and evolve alongside the nascent technology. Without strangling an industry that has only started by stating his preference for principles based rather than category based regulation, hoskinson speaks against some of the stipulations of the lummis bill, which would attempt to regulate crypto assets using the categorical approach, as stated in the build the jurisdiction Of digital assets will be divided between the commodities and futures trading, commission or cftc, and the securities and exchange commission or sec, while both agencies have classified bitcoin and ethereum as commodities. Their stance on the status of other crypto assets like cardano, is not as clear most notably sec, chairman gary gansler, previously opined that most cryptocurrencies are securities which would leave them at the mercy of the completely centralized regulator. However, the cardano founder believes that many crypto assets have qualities that cannot be completely captured by defining them as just commodities or securities. He suggests that the industry can still be regulated without limiting crypto assets under this binary, while there would still be sufficient room for consumer protection as a stakeholder of the industry and someone with a first hand witness of the decay in the traditional finance sector. What would you define as suitable and responsible regulation for the cryptocurrency industry? Please share your opinions as well as comments on the congressional hearing in the comments section below and dont forget to hit the like button and subscribe to the channel.