WEBVTT - CFTC Chair Rostin Behnam on the Fight to Regulate Crypto 0:00:10.680 --> 0:00:13.640 Hello, and welcome to an episode of the Odd Lots Podcast. 0:00:13.720 --> 0:00:15.040 I'm Tracy Alloway. 0:00:14.760 --> 0:00:15.960 And I'm Joe Wisenthal. 0:00:16.800 --> 0:00:20.239 We are very happy to be recording a live episode 0:00:20.320 --> 0:00:24.200 in Chicago at the ISDA AGM. There are a lot 0:00:24.320 --> 0:00:29.200 of talking points. You hear a lot of things like leverage, liquidity, risk, 0:00:29.600 --> 0:00:33.440 how to properly regulate and handle trillions of dollars worth 0:00:33.640 --> 0:00:36.000 of derivatives. But there's another thing that you hear quite 0:00:36.000 --> 0:00:37.040 a bit about as well, Joe. 0:00:37.280 --> 0:00:41.400 Right, of course, NonStop talk about crypto. Obviously, crypto itself 0:00:41.720 --> 0:00:44.519 wanes and ebbs in terms of how much people are 0:00:44.560 --> 0:00:47.600 interested or paying attention. Maybe we're still in a winter 0:00:47.880 --> 0:00:49.960 right now, but I feel like the next time there's 0:00:50.000 --> 0:00:52.800 a summer, a lot of how that market looks is 0:00:52.880 --> 0:00:55.000 going to be based on decisions and choices that are 0:00:55.000 --> 0:00:57.720 happening today by industry participants in regulators. 0:00:57.880 --> 0:01:02.400 Perhaps ironically, but not necessarily unexpectedly, when the lines on 0:01:02.440 --> 0:01:05.240 the chart go down in crypto, there does seem to 0:01:05.240 --> 0:01:09.000 be some extra regulatory attention paid to the market. So 0:01:09.200 --> 0:01:11.160 I am very pleased to say that we have the 0:01:11.200 --> 0:01:13.560 perfect guest to discuss all of this. We are going 0:01:13.560 --> 0:01:17.080 to be speaking with CFTC Chairman Russ Benham Russ, thank 0:01:17.160 --> 0:01:18.720 you so much for coming on all thoughts. 0:01:18.880 --> 0:01:20.720 Thanks Tracy, Thanks Jo, It's good to be here. 0:01:20.959 --> 0:01:23.600 I want to start out with a very simple question 0:01:23.720 --> 0:01:27.040 that I think everyone agrees on, who should regulate crypto? 0:01:28.440 --> 0:01:30.800 Well, you know, we have. 0:01:30.680 --> 0:01:35.200 A very unique system of financial regulators in the US. 0:01:35.480 --> 0:01:39.479 I don't think that's new or something novel to either 0:01:39.520 --> 0:01:42.960 of view or the audience or the listeners as well, 0:01:43.000 --> 0:01:44.920 and I think it's been built up over decades. It's 0:01:44.959 --> 0:01:47.240 been built up as a result of crises and different 0:01:47.640 --> 0:01:51.160 instances or sort of inflection points in the financial history 0:01:51.160 --> 0:01:55.840 of the US, both monetary system and financial markets. But 0:01:56.120 --> 0:01:59.720 because of that, we have over time developed a pretty 0:01:59.760 --> 0:02:02.840 comp comprehensive regulatory system where each agency, whether it's the 0:02:02.840 --> 0:02:06.880 market regulators or the prudential regulators, has a unique responsibility 0:02:06.920 --> 0:02:10.040 and it really falls on what type of asset are 0:02:10.040 --> 0:02:12.720 they regulating. Is it a banking asset, is it a 0:02:12.800 --> 0:02:15.959 market sort of financial asset or with trading markets and whatnot. 0:02:16.000 --> 0:02:18.000 And we have the SEC and the CFTC as the 0:02:18.040 --> 0:02:21.320 market regulators, and the banking regulators which include you know, 0:02:21.360 --> 0:02:22.520 the FED, occ FD. 0:02:22.600 --> 0:02:23.120 I see, so. 0:02:24.720 --> 0:02:28.400 As much as the crypto conversation presents new and novel 0:02:28.480 --> 0:02:31.960 issues and questions about the underlying asset, how to regulate it, 0:02:32.040 --> 0:02:34.560 whether to regulate it. I do think, and I've said 0:02:34.560 --> 0:02:36.639 this many times before, we have to sort of use 0:02:36.680 --> 0:02:39.639 the same playbook that we've used in the past as 0:02:39.639 --> 0:02:42.320 we think about policy that we construct for crypto. 0:02:42.919 --> 0:02:45.840 So you mentioned that people are aware of, you know, 0:02:45.880 --> 0:02:49.440 the unique nature of the US regulatory regime. But as 0:02:49.480 --> 0:02:51.360 much as we're sort of know that, like, I still 0:02:51.360 --> 0:02:53.840 have very you know, I'm not a Washington person. I 0:02:53.840 --> 0:02:56.160 don't know how it works. Like do you and your 0:02:56.240 --> 0:02:59.600 counterparts of the other agencies? We see these headlines, right, 0:02:59.639 --> 0:03:01.600 we'll talk about that is like to see if TC 0:03:01.680 --> 0:03:04.200 has one view and this secs another view on these things? 0:03:04.360 --> 0:03:05.560 Do you guys call each other. 0:03:05.520 --> 0:03:06.400 Up in chat? 0:03:06.480 --> 0:03:06.600 Like? 0:03:06.680 --> 0:03:09.040 How does that work? The sort of Yeah, do you 0:03:09.040 --> 0:03:09.679 guys just talk? 0:03:10.080 --> 0:03:12.960 Gensler is here later, Yeah, can we get them throwing 0:03:13.000 --> 0:03:13.280 that out? 0:03:13.360 --> 0:03:16.560 Do you just talk about Wait, we absolutely do talk. 0:03:16.680 --> 0:03:19.600 We talk within the context of a lot of the 0:03:19.639 --> 0:03:22.960 interagency working groups, which you're familiar with, the f SoC 0:03:23.120 --> 0:03:26.000 or the President's Working Group, but we also do have 0:03:26.400 --> 0:03:29.639 one on one conversations, and a lot of these conversations 0:03:29.639 --> 0:03:32.040 that we have, and this is my perspective, of course, 0:03:32.080 --> 0:03:34.480 I can't speak for the others. Is high level, sort 0:03:34.480 --> 0:03:37.400 of thirty thousand feet about what we're thinking, what we're seeing, 0:03:37.880 --> 0:03:41.200 who the registrant pool is that we're starting to observe 0:03:41.240 --> 0:03:43.920 within our markets, and how we need to approach this. 0:03:44.040 --> 0:03:46.360 A lot of the work gets done at the SNAFF level, 0:03:46.400 --> 0:03:49.640 a lot of the technical, legal work, economic work. But 0:03:49.720 --> 0:03:52.640 we are shaping policy and we're shaping decisions as we 0:03:52.720 --> 0:03:56.040 see risks emerge, as we see new markets emerge. But 0:03:56.400 --> 0:04:00.680 communication is frequent, it's very transparent, and I will say this, 0:04:00.680 --> 0:04:03.200 I've said this many many times before. We have common 0:04:03.280 --> 0:04:05.920 interests across the US government in terms of what we 0:04:05.960 --> 0:04:07.960 want to accomplish and how we want to accomplish it. 0:04:08.360 --> 0:04:11.600 Can you maybe clarify that last bit, because there is 0:04:11.640 --> 0:04:14.880 this ongoing debate about whether or not crypto should be 0:04:15.000 --> 0:04:18.440 regulated in a meaningful way at all. I guess the 0:04:18.520 --> 0:04:21.159 argument against regulating it would be that that way you 0:04:21.240 --> 0:04:24.279 kind of keep it out of the wallt financial system, 0:04:24.520 --> 0:04:28.160 you get less contagion. So what exactly are you thinking 0:04:28.279 --> 0:04:30.600 in terms of regulating the space, what is the end goal? 0:04:31.000 --> 0:04:33.080 Yeah, you know, this is a question that I think, 0:04:34.520 --> 0:04:36.720 I think about a lot, But it really comes down 0:04:36.800 --> 0:04:40.240 to me thinking about my position and my current role 0:04:41.040 --> 0:04:44.240 and how that intersects with the markets as they're developing. 0:04:44.279 --> 0:04:47.679 And I know and I can appreciate that others, including yourselves, 0:04:47.760 --> 0:04:51.120 might have a different perspective about crypto, how if it 0:04:51.120 --> 0:04:54.039 should be regulated, and the experiences we had, most notably 0:04:54.120 --> 0:04:59.960 last year in twenty twenty two, and how those repercussions 0:05:01.720 --> 0:05:04.360 affected traditional markets, if at all. And there's a strong 0:05:04.480 --> 0:05:08.120 argument that they didn't impact the traditional markets. But as 0:05:08.160 --> 0:05:11.040 I think about my role, and let's just break down, 0:05:11.480 --> 0:05:14.800 you know, that puzzle of financial regulators in the US. 0:05:15.880 --> 0:05:20.240 As one of two chairs of the two market regulators 0:05:20.240 --> 0:05:23.280 in the US, it's very difficult for me to sit 0:05:23.400 --> 0:05:27.000 back and say, you know what, this will just fizzle 0:05:27.040 --> 0:05:29.560 over time, or this is not in the best interest 0:05:30.160 --> 0:05:33.719 of the United States or economy, national security or whatnot, 0:05:34.160 --> 0:05:37.359 or we don't have to necessarily worry about this because 0:05:37.360 --> 0:05:40.480 there's no contagion risk to other parts of traditional markets. 0:05:40.920 --> 0:05:43.760 I think we've all read or heard or maybe no 0:05:43.920 --> 0:05:48.320 individuals who were hurt from last year's You know turmoil 0:05:48.400 --> 0:05:52.680 in the crypto markets. It is a largely unregulated market, 0:05:52.760 --> 0:05:57.120 notwithstanding some state level requirements, and I do think my 0:05:57.279 --> 0:06:00.360 responsibility within the context of the mission of the SAC 0:06:00.520 --> 0:06:03.800 is to protect investors and when it comes to commodity 0:06:03.839 --> 0:06:07.120 financial assets, which many of these tokens are, I have 0:06:07.240 --> 0:06:09.360 to do everything I can with the power I have 0:06:09.520 --> 0:06:13.280 as Chair of the CFTC to ensure that US customers 0:06:13.320 --> 0:06:17.560 are protected, and we use every tool we have within 0:06:17.600 --> 0:06:22.040 our toolbox, whether it's regulatory, whether it's putting out notices 0:06:22.080 --> 0:06:26.280 and advisories, or most notably and importantly as using our 0:06:26.360 --> 0:06:30.040 law enforcement tool through enforcement. So we continue to use 0:06:30.080 --> 0:06:34.880 these tools. But I don't see given the way the 0:06:34.920 --> 0:06:38.000 market's developing and evolving, and the CFTC does have a 0:06:38.080 --> 0:06:41.359 unique role and has had a unique relationship with crypto, 0:06:41.440 --> 0:06:45.160 our relationship with crypto at the CFTC certainly precedes me. 0:06:45.279 --> 0:06:47.280 It goes back to twenty fourteen, is I think when 0:06:47.279 --> 0:06:50.920 we brought our first enforcement case, and we've seen the 0:06:50.920 --> 0:06:55.200 development of derivatives products on crypto over many years. We 0:06:55.279 --> 0:06:58.760 have listed futures contracts on both bitcoin and ether going 0:06:58.800 --> 0:07:01.960 back several years now, so we do have a very 0:07:02.080 --> 0:07:06.480 vested interest in the protection and the monitoring and the 0:07:06.520 --> 0:07:09.680 surveillance of this underlying cash market, which, as I said, 0:07:10.240 --> 0:07:14.360 remains largely unregulated. So I will continue advocating. I think 0:07:14.400 --> 0:07:18.000 there's a lot of individuals in Congress and around Washington 0:07:18.040 --> 0:07:21.800 who agree with me, and certainly some who disagree, But 0:07:22.560 --> 0:07:26.800 I do always sort of fall back to that home 0:07:26.840 --> 0:07:29.720 base for myself is chair this agency that I have 0:07:29.800 --> 0:07:32.760 to focus on protecting US customers, and as long as 0:07:32.760 --> 0:07:36.120 this market exists, potentially grows ebbs and flows in terms 0:07:36.160 --> 0:07:39.000 of size and market cap, we need to do whatever 0:07:39.040 --> 0:07:40.600 we can to protect those investors. 0:07:40.760 --> 0:07:42.640 All right, So we've been to tell you a little 0:07:42.640 --> 0:07:44.480 bit high level here, so I want to like jump 0:07:44.520 --> 0:07:48.920 into it just a specific question, and you mentioned the 0:07:49.000 --> 0:07:52.880 existence of a bitcoin and futures that are traded. My 0:07:53.040 --> 0:07:56.920 understanding is that on the matter of ether specifically, there 0:07:57.000 --> 0:08:01.040 is a different perspective at the CFTC and the SEC. 0:08:01.320 --> 0:08:02.200 Is it a commodity? 0:08:02.400 --> 0:08:03.240 Is it a security? 0:08:03.720 --> 0:08:06.680 And I was kind of a two part question, which is, 0:08:07.440 --> 0:08:09.720 you know, how do you arrive at the view that 0:08:09.840 --> 0:08:12.800 say ether is a commodity and therefore should be regulated 0:08:12.880 --> 0:08:15.800 as such. And then we're I guess More importantly, you 0:08:15.840 --> 0:08:17.880 know there are other coins out there, and so there 0:08:17.880 --> 0:08:21.840 are other Ethereum competitors level one blockchain platforms like a 0:08:21.880 --> 0:08:25.320 Salona or something. Would the logic that leads you to 0:08:25.400 --> 0:08:28.080 sort of make the case that Ethereum should be seen 0:08:28.120 --> 0:08:31.120 as a commodity apply to other coins potentially as well. 0:08:31.600 --> 0:08:37.119 Well, it's it's less logic as opposed to legal analysis. 0:08:37.160 --> 0:08:40.559 So maybe you know those are within the same bend diagram, right, 0:08:41.280 --> 0:08:43.040 Legal analysis hopefully is logical. 0:08:43.400 --> 0:08:45.679 My husband's a lawyer, and I would debate that statement. 0:08:45.760 --> 0:08:49.839 Yeah, but you know we, as I said, and Joe 0:08:50.160 --> 0:08:52.840 you pointed this out, we have two listed futures contracts, 0:08:52.880 --> 0:08:55.720 one on Bitcoin and one on Ether. And this is 0:08:55.760 --> 0:09:00.560 not because we the CFTC, sought out market participants exchanges 0:09:00.600 --> 0:09:02.960 and said you should do this. Nor is it because 0:09:03.000 --> 0:09:05.400 we have a list on our website that says these 0:09:05.440 --> 0:09:08.360 tokens are commodities and these tokens or securities. This was 0:09:08.400 --> 0:09:13.400 a market driven effort by exchanges, probably driven by client 0:09:13.480 --> 0:09:18.520 demand to list two particular tokens and the process that 0:09:18.880 --> 0:09:21.960 sort of transpires when you list a contract, and this 0:09:22.040 --> 0:09:24.480 is not unique to crypto. This happens in that the 0:09:24.559 --> 0:09:27.800 ad complex, the energy complex, the metals complex, and others. 0:09:28.320 --> 0:09:30.800 Is you know, there's legal analysis done. 0:09:30.720 --> 0:09:32.559 By the exchange. 0:09:33.520 --> 0:09:36.839 They have to conform with the laws and the regulations 0:09:36.880 --> 0:09:41.720 of the CFTC. There's open dialogue over sometimes many months 0:09:41.720 --> 0:09:45.080 to make sure that the contract conforms with our legal 0:09:45.120 --> 0:09:48.760 requirements and that at some point there's two avenues to 0:09:48.800 --> 0:09:52.199 go down. You can something called self certify a contract, 0:09:52.280 --> 0:09:55.120 or you can seek approval from the Commission. So this 0:09:55.160 --> 0:09:58.000 is what happened with both the bitcoin and the Ether contract. 0:09:58.000 --> 0:10:02.719 Bitcoin in twenty seventeen, Ether in about twenty twenty. And 0:10:03.040 --> 0:10:06.040 that is what we've done historically and consistently, and in 0:10:06.080 --> 0:10:08.680 the context of your question about is it a security 0:10:08.760 --> 0:10:12.640 or is it a commodity, there's no doubt we within 0:10:12.679 --> 0:10:16.959 the agency and at the staff level examine the characteristics 0:10:16.960 --> 0:10:20.160 of a financial asset to ensure that it complies with 0:10:20.280 --> 0:10:22.640 the law and that it falls within the definition of 0:10:22.640 --> 0:10:26.200 a commodity and more importantly, is not a security. If 0:10:26.200 --> 0:10:28.040 you look up at the definition of a commodity under 0:10:28.040 --> 0:10:32.240 the Commodity Exchange Act, nearly everything is a commodity, including 0:10:32.280 --> 0:10:37.040 a security. It's just securities are exempt from the CEA. 0:10:37.160 --> 0:10:41.520 So we do have dialogue with the SEC and other agencies, 0:10:41.559 --> 0:10:44.240 and we go through this sort of legal analysis to 0:10:44.400 --> 0:10:48.079 ensure that we feel confident that when in exchange or 0:10:48.160 --> 0:10:52.040 registrant lists a contract, it does in fact comply with 0:10:52.080 --> 0:10:52.360 a law. 0:10:52.480 --> 0:10:54.000 Now, I'll add. 0:10:53.920 --> 0:10:56.040 Very quickly, and many in this room know this, and 0:10:56.080 --> 0:10:58.000 I'm sure many of your listeners know this as well. 0:10:58.320 --> 0:11:02.000 We have to drive our legal analysis from legal precedent, 0:11:02.160 --> 0:11:04.360 which your husband will know, right, And this how we test, 0:11:04.440 --> 0:11:07.480 which talks about, you know, four factors about an investment 0:11:07.480 --> 0:11:09.760 of money in a common enterprise with an expectation of 0:11:09.760 --> 0:11:12.760 profit from the work of others, and that for better. 0:11:12.679 --> 0:11:13.240 Or for worse. 0:11:13.360 --> 0:11:16.120 Is this sort of driving force that sits as the 0:11:16.160 --> 0:11:20.479 foundation of our legal analysis to this day for digital assets. 0:11:20.559 --> 0:11:23.920 When we think about that question about securities versus commodities, 0:11:23.960 --> 0:11:27.240 and I know Congress is contemplating this, we've raised this question. 0:11:27.920 --> 0:11:31.600 There are many characteristics about the financial the digital financial assets, 0:11:31.640 --> 0:11:35.120 which are common to traditional financial assets, but there are 0:11:35.120 --> 0:11:38.040 certainly many characteristics which are unique and I think demand 0:11:39.360 --> 0:11:42.680 a unique set of thoughts and policy driven ideas about 0:11:42.720 --> 0:11:44.760 how and whether we should regulate it. 0:11:45.080 --> 0:11:48.119 So, just on that note, could you have a situation 0:11:48.240 --> 0:11:51.200 where someone creates a coin or a token and they're 0:11:51.280 --> 0:11:55.240 raising money and it is a security as defined by 0:11:55.320 --> 0:11:57.480 legal precedent and you know, the how we test and 0:11:57.520 --> 0:12:01.640 things like that, but then technology is enables it to 0:12:01.760 --> 0:12:04.599 become decentralized enough that it could be a commodity. 0:12:05.400 --> 0:12:07.120 Yeah, I mean, there's no doubt about that, and that 0:12:07.200 --> 0:12:10.559 this is certainly a question that we've been grappling with, 0:12:10.600 --> 0:12:12.959 and I know Congress is thinking about it as well. 0:12:13.080 --> 0:12:16.040 That you know, initially, Tracy, as you point out, there's 0:12:16.120 --> 0:12:18.600 going to be a pooling of capital from investors to 0:12:18.720 --> 0:12:21.600 start a protocol or to start a project, and at 0:12:21.600 --> 0:12:24.320 some point there would be a milestorm or inflection point 0:12:24.320 --> 0:12:27.600 where that asset flips from being a security because of 0:12:27.640 --> 0:12:29.360 those characteristics and then ends up. 0:12:29.240 --> 0:12:30.040 Being a commodity. 0:12:30.400 --> 0:12:32.320 We've never had to deal with this, I think in 0:12:32.360 --> 0:12:36.199 the context of traditional, non digital assets. But again, these 0:12:36.240 --> 0:12:39.800 are the types of questions that I think force policymakers 0:12:39.880 --> 0:12:44.280 elected officials to think about which regime do these financial 0:12:44.320 --> 0:12:49.600 assets properly fit into? And the policy case that I've 0:12:49.679 --> 0:12:53.679 made as the chair of the CFTC is, you know, 0:12:53.880 --> 0:12:58.240 we have to think about how these assets exist within 0:12:58.280 --> 0:13:03.760 the financial ecosystem and what requirements we should layer on 0:13:04.400 --> 0:13:07.120 to each of the financial assets as it relates to 0:13:07.200 --> 0:13:11.080 customers and investors. Right, And if you think about the 0:13:11.120 --> 0:13:13.480 SEC and the thirty three Act and the thirty four 0:13:13.520 --> 0:13:17.520 Act and how and why that those laws were built, 0:13:17.840 --> 0:13:21.200 it is in fact this term is thrown around a lot, 0:13:21.240 --> 0:13:24.400 but to bridge an information gap between an issuer of 0:13:24.440 --> 0:13:27.520 a security and an investor. Right to provide as much 0:13:27.520 --> 0:13:32.440 information between that centralized body of individuals that's running a company, 0:13:32.520 --> 0:13:35.800 or running an organization, or running a common enterprise, so 0:13:35.840 --> 0:13:38.680 that investor, whether retail or institutional, can make the most 0:13:38.679 --> 0:13:39.480 informed decision. 0:13:39.679 --> 0:13:40.040 Fine. 0:13:40.280 --> 0:13:42.720 Commodity markets are completely different in the sense that you 0:13:42.760 --> 0:13:46.040 have decentralized financial assets, whether it's weak, whether it's crude, 0:13:46.240 --> 0:13:50.880 whether it's palladium, and you want to create a resilient, 0:13:51.080 --> 0:13:55.760 transparent market environment so that the individual investor, whether retail 0:13:55.800 --> 0:13:59.760 but more commonly institutional, understands the risks associated with a 0:14:00.040 --> 0:14:04.080 investing in commodity markets, but more importantly can understand and 0:14:04.200 --> 0:14:08.960 know with confidence that the infrastructure around those trading markets, 0:14:09.000 --> 0:14:12.920 whether it's the intermediary, the exchange, the clearinghouse, the custodian, 0:14:13.240 --> 0:14:17.120 are well regulated and sort of resilient in their ability 0:14:17.160 --> 0:14:19.200 to manage that trading and that execution. 0:14:35.240 --> 0:14:38.800 See you mentioned when a new commodity or any new 0:14:38.840 --> 0:14:43.400 future is launched, the entity can either self certify or 0:14:43.480 --> 0:14:45.920 go to you for approval. There is one type of 0:14:46.040 --> 0:14:48.160 entity that I'm pretty sure does not do any of that, 0:14:48.280 --> 0:14:51.800 and that is Defy exchanges. If I were to launch 0:14:51.880 --> 0:14:54.360 a DeFi exchange, I come up with some new code 0:14:54.400 --> 0:14:56.240 that's like, oh, this could be a novel way of 0:14:56.480 --> 0:15:01.240 trading futures for some of these digital assets. What do 0:15:01.360 --> 0:15:04.160 I have to do to be in your good graces? 0:15:04.200 --> 0:15:09.320 What would constitute are any defile exchanges doing that? What 0:15:09.360 --> 0:15:11.560 would get me in trouble? And are the laws clear 0:15:11.680 --> 0:15:14.640 for someone interested in the space such that they could 0:15:15.280 --> 0:15:18.560 create a code, manage the code, manage a DOW perhaps 0:15:18.600 --> 0:15:21.000 that runs the code, such that they can stay on 0:15:21.040 --> 0:15:21.800 your good side. 0:15:22.320 --> 0:15:25.680 Yeah, Joe, you wouldn't be the first who would do that, 0:15:25.840 --> 0:15:29.000 so you're a little bit behind the ball there. But 0:15:29.760 --> 0:15:33.480 you know, this does raise questions about whether or not 0:15:33.560 --> 0:15:37.040 you have individuals involved in programming and what the code 0:15:37.160 --> 0:15:40.400 is and how it's set. But ultimately, and I do 0:15:40.480 --> 0:15:44.880 think you know this raises this question about regulation by enforcement, 0:15:45.000 --> 0:15:49.640 and I very vigorously oppose, at least from a CFTC perspective, 0:15:49.640 --> 0:15:52.960 and that's the only agency I can speak for, is 0:15:53.000 --> 0:15:56.920 that we have done everything in our power while I've 0:15:56.920 --> 0:16:00.880 been chaired and including my predecessors, to remain transparent and 0:16:00.920 --> 0:16:05.160 to engage with market participants in this digital asset defy space, 0:16:05.640 --> 0:16:08.600 to ensure they know as much as they can about 0:16:08.640 --> 0:16:12.160 what the Commodity Exchange Act requires and what is required 0:16:12.240 --> 0:16:15.440 of them if they're going to offer futures options or 0:16:15.480 --> 0:16:20.200 swaps to US customers. And I think it's easy to suggest, oh, 0:16:20.280 --> 0:16:23.600 there's you know, there's no institution, there's no individual, it's 0:16:23.680 --> 0:16:27.400 just code. You can't regulate that. It's sort of self effectuating. 0:16:27.840 --> 0:16:30.840 But that's really the wrong set of questions. It's really 0:16:30.880 --> 0:16:34.560 about what are US customers being offered and exposed to 0:16:35.200 --> 0:16:37.880 and who is the either individual or the group of 0:16:37.920 --> 0:16:41.440 individuals who set up that entity that code to offer 0:16:41.480 --> 0:16:42.160 those products. 0:16:42.240 --> 0:16:44.800 So we are not legal counsel. 0:16:44.880 --> 0:16:47.200 We don't provide legal advice per se. And I know 0:16:47.280 --> 0:16:49.760 that's a challenge. There are barriers to entry, as many 0:16:49.840 --> 0:16:53.000 people in this audience knows to participate in regulated markets. 0:16:53.280 --> 0:16:55.720 But regulated markets are why we have the best markets 0:16:55.720 --> 0:16:58.600 in the US and in the world, and it really 0:16:58.680 --> 0:17:02.040 is incumbent on individuals to understand and appreciate that if 0:17:02.040 --> 0:17:05.159 you're going to offer derivatives to US customers, there is 0:17:05.200 --> 0:17:10.720 a very well developed and mature legal base and requirements 0:17:11.200 --> 0:17:12.359 for complying with the law. 0:17:13.560 --> 0:17:17.639 Speaking of exchanges, this wasn't necessarily a DeFi exchange, but 0:17:18.119 --> 0:17:21.120 a centralized one. I want to personally thank you for 0:17:21.119 --> 0:17:24.200 producing one of the most entertaining legal documents of all 0:17:24.280 --> 0:17:27.679 time in the form of the lawsuit against Binance, And 0:17:27.720 --> 0:17:29.480 for those of you in the audience who haven't read it, 0:17:29.560 --> 0:17:32.240 I highly recommend that you do. It is a good 0:17:32.240 --> 0:17:34.800 reminder to pick up the phone every once in a 0:17:34.840 --> 0:17:38.320 while and don't write everything down in emails. But was 0:17:38.320 --> 0:17:41.560 there a legal advice that is not legal advice? But 0:17:41.920 --> 0:17:45.439 was there anything in there that surprised you or that 0:17:45.680 --> 0:17:50.600 said something about the nature of the crypto ecosystem itself 0:17:50.720 --> 0:17:53.080 and the way that it's being run. I mean, you 0:17:53.160 --> 0:17:56.879 had people openly talking about, you know, this might be 0:17:56.920 --> 0:17:59.160 money laundering, but it's only eight hundred dollars. You can't 0:17:59.200 --> 0:18:03.679 even buy an AK forty seven for that, Well, this 0:18:03.840 --> 0:18:04.480 was in an email. 0:18:04.920 --> 0:18:06.399 I'm going to be careful about what I say and 0:18:06.440 --> 0:18:07.120 when I don't say. 0:18:07.160 --> 0:18:10.560 Given that it's it's active litigation, I certainly can say 0:18:10.560 --> 0:18:13.159 that it was not our intent to entertain. But you know, 0:18:14.200 --> 0:18:17.960 it is certainly a well developed complaint. And credit to 0:18:18.000 --> 0:18:20.800 staff at the CFTC for doing the really hard work 0:18:20.800 --> 0:18:24.359 to put that together. I think at this point, and 0:18:24.400 --> 0:18:29.159 I've been at the Commission remarkably almost six years, nothing 0:18:30.359 --> 0:18:32.560 surprises me anymore. 0:18:32.640 --> 0:18:35.040 So we do our work, we do it hard. 0:18:35.080 --> 0:18:37.080 We know that there's a lot of individuals out there 0:18:37.119 --> 0:18:39.800 who either don't want to comply with the law, choose 0:18:39.840 --> 0:18:43.120 to evade the law, or don't know about the law, 0:18:43.320 --> 0:18:46.560 and you know, sometimes they will do things that are surprising, 0:18:46.960 --> 0:18:50.720 including writing things down. But we are focused on making 0:18:50.720 --> 0:18:55.080 sure we're applying the law protecting investors us investors. And yeah, 0:18:55.160 --> 0:18:59.680 that case, it's ongoing, and we're going to keep vigorously 0:18:59.680 --> 0:19:02.600 bringing bad actors to account here and we'll see what happens. 0:19:02.680 --> 0:19:05.000 Is that at this point is still active and those 0:19:05.040 --> 0:19:06.120 are only allegations. 0:19:06.480 --> 0:19:09.800 Does it feel like the digital nature of this space, 0:19:09.920 --> 0:19:13.040 the fact that the participants are so online, so much 0:19:13.040 --> 0:19:16.480 of the activity takes place online. Does that make enforcement 0:19:16.600 --> 0:19:18.360 actions easier or harder? 0:19:18.480 --> 0:19:20.920 From your perspective, Yeah, it's a good question, and I 0:19:20.960 --> 0:19:24.639 think it actually kind of goes to I'm going to 0:19:24.840 --> 0:19:27.080 just pivot a little bit, but I think within the 0:19:27.119 --> 0:19:30.000 same context or theme. You know, there's a lot of 0:19:30.080 --> 0:19:34.400 individuals who question the use case for digital assets, right, 0:19:34.480 --> 0:19:38.640 and so often we hear about bad actors illictit finance 0:19:39.240 --> 0:19:45.080 utilizing this vehicle digital assets to sort of conduct their business, 0:19:45.160 --> 0:19:49.920 which is unfortunately nefarious and sort of contravention to law 0:19:49.920 --> 0:19:54.760 and good good practice. But what I've observed from a 0:19:54.800 --> 0:19:59.280 regulatory perspective and recognizing the sort of counter to that 0:19:59.440 --> 0:20:03.560 is using you know, traditional paperbacked FIAT. What I've recognized 0:20:03.600 --> 0:20:07.119 over the past couple of years working with my colleagues 0:20:07.160 --> 0:20:11.480 at the Treasury Department, FBI, other law enforcement agencies are 0:20:11.480 --> 0:20:15.040 the regulators, is we're really developing a lot of very 0:20:15.119 --> 0:20:19.240 sophisticated tools to trace the use of digital assets as 0:20:19.240 --> 0:20:22.920 a means to conduct illegal activity. So I think from 0:20:22.960 --> 0:20:25.720 my perspective, it's still a little bit the jury is 0:20:25.760 --> 0:20:30.840 out on whether or not. As these technologies develop and 0:20:30.880 --> 0:20:35.000 as the surveillance tools continue to mature whether or not. 0:20:35.160 --> 0:20:37.159 I think from a law enforcement perspective, we're going to 0:20:37.200 --> 0:20:39.959 be able to root out fraud and manipulation and elicited 0:20:40.040 --> 0:20:44.199 activity in fact easier than we do under traditional forms 0:20:44.640 --> 0:20:46.200 of illegal activity. 0:20:46.720 --> 0:20:50.520 So a year ago, at this time, FTX was still 0:20:50.560 --> 0:20:53.439 a big thing, and they were in the process of 0:20:53.480 --> 0:20:57.480 attempting to sort of restructure how or pushing to restructure 0:20:57.520 --> 0:21:00.760 how futures were traded in the US and beyond crypto, 0:21:00.800 --> 0:21:05.159 like a fundamental rethink of how futures are traded with 0:21:05.720 --> 0:21:09.720 potentially direct access to the exchange, proposals for twenty four 0:21:09.720 --> 0:21:13.439 to seven, algorithmic automated margining, things like that, And at 0:21:13.440 --> 0:21:15.399 the time I think you were like somewhat opened to 0:21:15.480 --> 0:21:18.400 this idea. Then, of course FTX collapsed a few months later, 0:21:18.440 --> 0:21:21.720 and I think for now that's dead, but the core ideas, 0:21:21.800 --> 0:21:24.200 like would you still be open to some of these 0:21:24.240 --> 0:21:27.760 ideas and just in terms of like rethinking how we trade. 0:21:28.080 --> 0:21:32.200 Obviously they're still currently in people's minds, probably associated with FTX, 0:21:32.440 --> 0:21:36.080 but the ideas themselves in terms of like what futures 0:21:36.119 --> 0:21:39.480 trading could look like in the future, could you could 0:21:39.480 --> 0:21:42.000 you see that conversation revisited at some point. 0:21:42.160 --> 0:21:44.879 Yeah, you know, I think if you as I reflect 0:21:44.960 --> 0:21:49.200 on twenty twenty two and that FTX sequence of events, 0:21:49.280 --> 0:21:51.600 which goes back to twenty twenty one when they bought 0:21:51.880 --> 0:21:54.920 the entity sort of that they had purchased was leder x, 0:21:54.920 --> 0:21:59.439 which recently just got auctioned off to a bidder. I 0:21:59.440 --> 0:22:03.960 think it's my responsibility, in any chairs responsibility to always 0:22:03.960 --> 0:22:06.359 be open to new ideas. Right we have we have 0:22:06.480 --> 0:22:10.199 these very clear milestone moments in market structure and market 0:22:10.240 --> 0:22:14.480 technology over the past one hundred years that clearly have 0:22:14.640 --> 0:22:19.200 put markets on a different path in a different course. 0:22:19.280 --> 0:22:20.119