Rep. Tom Emmer (R-MN) on FTX, the SEC, and the House Crypto agenda for 2023 (EP.382) [TRANSCRIPT]

Nicolas Carter 

Welcome back to On The Brink. I’m sitting down for the second time with Representative Tom Emmer from Minnesota. We’re very excited to have him back. A lot has happened since we talked, the midterms occurred. Tom, you’ve been elected Whip in the House. So congratulations for that just right off the bat. That’s incredible.

Tom Emmer 

Thank you.  It’s a great new challenge, Nick, fun to be with you again. It’s great. We’re moving into the Christmas week. We’re already in the Christmas season, but a lot has happened since you and I last sat down.

Nicolas Carter 

Yeah, thank you for making time. So much has changed. The current Congress, or at least the House has changed hands. The Senate did not. So now we have a split Congress. We had a hearing last week, we had a massive fraud in the crypto markets. Unfortunately, that’s not good. But it’s also you know, I feel like crypto is growing through this. And hopefully, we’ll be more anti fragile and functional on the other side.

Nicolas Carter 

So yeah, why don’t we just start with the hearing? Actually, you made waves at the hearing – crypto Twitter was on fire with your comments. So you were maybe the star of that hearing. So we were denied the opportunity to hear from Sam Bankman-Fried. He was obviously arrested by Bahamian  authorities the night before the hearing was due to happen. But we did get to hear from Mr. John Ray, who is currently presiding over the bankruptcy. What did you make of Mr. Ray’s comments? What were your sort of personal impressions from that?

Tom Emmer 

He’s been brought in to do a job. He’s a guy who, you know, when all the the when the painting falls off the wall in the glass breaks, he’s the guy who comes in and has to pick up all the pieces and try and put the painting back together again, as best as he can. And he’s just getting started, which was evident. I would have been nice to talk to Sam Bankman-Fried. I frankly, I don’t have any evidence of it. But I don’t think his arrest the night before the hearing was coincidental. I think it was purposeful. And I think we’ll find that out going forward.

As far as Mr. Ray. And it’s nice, Nic, but we don’t we don’t go into these hearings to be the to be the star, we go to get into the information. And what I find so interesting, and there were some great questions. By the way, Bryan Steil from Wisconsin was fantastic. Andy Barr from Kentucky. Bill Huizenga. I thought Ritchie Torres from New York was good. I thought I thought Gottheimer from New Jersey was good. These are Republicans and Democrats who are going after this thing.

And if there was one common thing, which I think we were able to distill as well as anybody. This is about centralization, centralized finance. This is not about decentralization, which is really what the whole crypto community has been about from the beginning. It’s about open permissionless and decentralized transactions on a public blockchain that you can literally follow. It’s self policing. Right? And it’s interesting because you, you get to the end of this hearing. A John Ray was great, because we we teed up a bunch of very simple questions about, you know, this guy didn’t – this typically, the only difference between this and fraudsters financial fraudsters from the beginning of time is we’ve now moved into digital assets, as opposed to hard currency bearer bonds, you know, all these things that have been used in the past. It’s the same problem though you had a centralized authority with just a handful of people Sam Bankman-Fried being the center of that centralization.

And they were self dealing. They were self dealing, whether it was Alameda or was FTX International. There, the funds were being shared. There weren’t controls, there weren’t internal controls. The typical things that you see just did not exist. And it’s amazing if you think about it, Nick, because the investors were very sophisticated. Where was the due diligence that they were doing? And then you look at the SEC, Gary Gensler is in this thing up to his eyeballs, which we should talk about, because I think that ultimately is where the blame goes. But it was about decentralization versus what this fraud is all about. Which, quite frankly, is what led us to the problems in 2008, which is what’s led us always to the financial issues that we’ve had. It’s why the technology the technology did not fail, Nick, that’s that was our point. Decentralization is the point and you will see crypto continue to grow. But when we’re talking centralized finance, whether it’s digital assets, or the assets that pre existed the crypto community you gotta have adequate safeguards and oversight, and they clearly did not exist. And the SEC was asleep at the wheel and/or, and/or was complicit in this fraud in some respect?

Nicolas Carter 

Wow, very strong words there. I mean, so actually you mentioned that you felt that the timing of the indictment was maybe not entirely coincidental. Can you elaborate on that? I mean, who do you think had an incentive to sort of stop the general public from hearing to you know, to stop the House being able to interrogate Mr. Bankman-Fried.

Tom Emmer 

I think there’s a whole bunch of people that possibly had incentive to  keep Sam Bankman-Fried from coming out in public and having this open hearing because they don’t know what he’s gonna say. I mean, the Bahamas, the government of the Bahamas has an incentive. I mean, for goodness sakes, you got Sam Bankman-Fried and Mr. Wang allegedly opened all the doors to allow the Bahamas government to literally take $100 million dollars of funds to reimburse 1500 residents of the Bahamas. What that was all about, Nick?

You also have the government in the Bahamas, whoever that is, right? If it was the leader, if it was the Prime Minister, whoever was it, if they got them to print, I’m sorry, to what mint not print mint 300 million in tokens? What’s going on there? And then to see the speed with which this indictment apparently moved at. It’s an unusual speed that it moved at by any account. You talk to anyone in the prosecution business. They’ll tell you that this this really went a in a much faster fashion than most of these that they have ever seen out of the Southern District of New York.

I mean, what’s the connection because we’ve got an executive branch that was heavily invested into FTX. And I shouldn’t probably use the word invested. But they were spending time with Sam Bankman-Fried I mean, Gary Gensler spent more time with Sam Bankman-Fried than anyone else in the it appears than anyone else in the crypto community over the last six, eight months. Nick, why was that and we have information that he was talking with Sam Bankman-Fried, FTX and then a trading firm in the US called IEX.

He was talking to them about a digital assets trading platform, by the way, something he wasn’t allowing anyone else–when I say he Gensler–was not allowing anyone else to get into. In fact, he was I would argue, was being very aggressive in his oversight of all the good actors in the environment, while he was meeting with someone that we now know was a fraud from the beginning. Which by the way, apparently, Gary Gensler’s SEC is now telling us that FTX and Sam Bankman-Fried were a fraud from the beginning in 2019.

Nic, when did they know that? When did he know that he was a fraud? And why are they meeting with Sam last March, having conversations about how they might create a special path for him? And FTX and IEX to create a digital trading platform, why were they working this all the way through? And you and I, a lot of us didn’t see how bad this was because they weren’t sharing with us. We sent a letter you might remember in March asking for very detailed information, which if we would have gotten it back then we probably would have been able to be on top of this a lot sooner. But Gary Gensler in the SEC wouldn’t give us the information that ourselves and our colleagues, both Republicans and Democrats in the Financial Services Committee, were requesting last March.

We had to wait until this fall to find out when the whole thing started to unravel, and they released text that they were working on over in the Senate of a bill that was going to essentially give FTX and Sam Bankman Fried, what I would argue, is a monopoly in this country on a digital assets trading platform. That’s when this whole thing started to come apart. We’ve got to know by the way, what was Gary Gensler doing with that, why was he allowing that to proceed? Why wasn’t he doing his job? Why wasn’t the SEC doing the oversight?

And by the way, let’s talk about Elizabeth Warren, because Elizabeth Warren now introduces a bill to take us to the next level of surveillance. I would argue if she’s going to use the FTX experience to try and push her China-styled Central Bank Digital Currency or oversight. Look, Sam Bankman-Fried is corrupt with centralized authority. I would argue that this is the problem with our government and people like Elizabeth Warren who are pushing for that same type of centralized authority inside government to be a surveilling you, Nic Carter and anybody else who’s out there, transacting business in this sector.

But it’s pretty amazing. To me, this is old as the hills. This is a centralized finance operation, run by a crook. This was a failure of business ethics. This was a failure of an individual who was corrupt at the core. This was not a failure of the technology because again, as we said at the hearing, decentralization is the point.

Nicolas Carter 

Lots of digest there. Let’s let’s dig into the March letter. So you and some colleagues wrote this letter to Gensler in March, asking for more insight on his contact with crypto platforms. And then, more belatedly, now Gensler and his proxies in the press are trying to spin that letter pejoratively, basically saying that you are attempting to stymie his efforts to investigate these platforms, was their genuine investigation of these platforms. Were you in any way stymieing him? Or was this just an attempt to understand his interactions with these platforms?

Tom Emmer 

Well, I think if people read the letter, which we tweeted out, again, I think within the last two weeks, with annotation, so people can literally compare the language in the letter to the annotations and say, Oh, I see why they were asking for that. Right. And you got four Republicans, you got four Democrats on the committee hearing. So he’s alleging the Democrats who have a Democrat in the White House and control the Senate and the House that they were actively trying to stymie his investigation.

What investigation is first, Nick? I mean, he clearly hasn’t been doing investigations. Because if he really was doing real investigation, substantive work, how did he miss Terra? Luna? How did he miss? How did you miss all these other ones? And the biggest one, of course, is FTX, which he appears to be working with directly. So I don’t know that his narrative is going to stand up. It certainly doesn’t stand up when you start looking at what we were asking for because he did that. You might remember back in March, we sent the letter.

And the reason we sent this letter, Nick was because the community anonymously, I mean, we know who they are, I’m not going to disclose but it wasn’t FTX, by the way, nobody associated with FTX was giving us this information. But entities that were getting voluntary requests for information, were contacting our office and say, ‘These don’t feel voluntary, that we don’t know what they’re doing.’ It was like the SEC led by Gary Gensler was throwing out this huge net. Even their own enforcement had admitted to me at a hearing a few months ago, to entities beyond their jurisdiction.

They were sending these these letters. You know, it’s like a sweep letter where they’re trying to bring in all kinds of data and information. From our perspective, we’re hearing from the community that these don’t feel voluntary. We’re getting information inside the SEC that says, if someone doesn’t respond to their satisfaction, the SEC satisfaction with the sweet letters, then their job was to make their lives miserable, which, you know, there’s a huge expense to that, because you got to hire lawyers, you got to keep going through the process.

It seems now in retrospect for me, and we’ve got a lot of investigation to do. And thank goodness, we’ll have subpoena authority going forward. Not only were they doing this, but why were they doing it to all of what appeared to be the good actors in the in the crypto space, but they were leaving FTX which, at some point, they had to know how corrupt they were.

And, you know, ultimately we know what happened is it hurt everybody. So Gary Gensler can tell the world oh, ‘these members of Congress were the ones that were trying to stop me.’ But it doesn’t match with any of the actions that he took.

Nicolas Carter 

Right. And Gensler has received criticism, I believe, even outside the crypto industry for not being fully transparent with his calendar. I think we’re trying to figure out exactly what’s going on with his public calendar disclosures which appear to not be comprehensive. What do we know about his meetings with either FTX directly or his meetings with IEX? Which, according to the FT, FTX owned a controlling stake in that organization? What did we actually know about those those meetings, if anything?

Tom Emmer 

Well, the calendar thing, I know what you’re talking about, and it appears that he has, or someone has, removed things from his calendar? Possibly, I mean, I so we don’t know that this is complete, right? We need to do more investigation. But what we do know right now is back in October of 2021, right? So more than a year ago, Nick, the date was October 29, 2021, Gensler himself met with IEX. That’s the the US trading firm that, you know, we have information that the way it was disclosed later, after this meeting, and I’ll get to that in a second, is that FTX and IEX FTX.US – IEX the trading firm – entered into a partnership. Well, you may know that recently the financials leaked on Alameda, the Hong Kong entity that literally was it appears commingling funds with FTX international that’s listed on Alameda’s financials, again, that we’re leaked, that that was an acquisition by FTX.

FTX paid 270 million for IEX. We’ve got a lot of work to do there to find out what the what the relationship is who the individuals are, why they were connected to Gensler, why he’s meeting with them, actually, who he’s meeting with specifically, and why he’s meeting with them back in October of 2021. By the way prior to that meeting, so I should put these in chronological order. October 19 of 2021. Gensler meets with FTX and Sam Bankman-Fried. October 29. About a week later, he meets with IEX. Okay, interesting. In March of 2020, to march 23. So this is after our letter, our letter was March 16. Okay, March 23, SEC staff met with FTX and IEX representatives together. We understand – and again, all of this that I tell you, we’re going to have to confirm through ongoing investigation in the next Congress – we understand the discussions were about giving this soon to be formed entity, special treatment, that the SEC was going to allow them to operate almost in a safe harbor, and this is I think, ultimately looking forward from that point March of last year to where we are now.

My guess is they were already talking about giving this entity that they were going to create the monopoly in a digital asset trading. On March 29 now, about a week later, remember I told you it was March 23 that staff at the SEC met with Sam Bankman-Fried and representatives from IEX. Six days later, Gary Gensler met with Sam Bankman-Fried, FTX and IEX representatives. And then in July, I want to say April of this year is when IEX and FTX amounts a partnership. And we were trying to find out what was the nature of that partnership. What is it what was it supposed to do it but it was never confirmed and they would never be clear exactly what it was going to be.

And then the last one that we know of was last July, July 29, Gary Gensler met with IEX. And we know that subsequent to that FTX was putting a huge push in Congress, specifically on the Senate side of the building to move legislation that we subsequently find out was very beneficial to FTX. And not very beneficial to anyone else in the community, because it would have effectively I believe, given FTX and IEX, a monopoly on digital asset trading in the US, and presumably, which is what we have to find out, I presumably with the blessing of Gary Gensler himself.

Nicolas Carter 

It’s interesting you mentioned subpoenas. So as far as I understand, do you gain the subpoena ability when the House changes hands? Obviously now Republicans control the houses, is that how that works? A Republican House can now issue subpoenas, whereas they sort of couldn’t before?

Tom Emmer 

Yeah. So we, we are the minority right now. So Patrick McHenry is the ranking member, in effect, the chair of the minority members of the of the committee. As such, he does not have subpoena authority, that Maxine Waters as the Chair has that authority, as you correctly point out, that’ll change in January. Patrick McHenry will be the chair of the House Financial Services Committee. As soon as he becomes the chair he can unilaterally issue subpoenas for information to individuals and or regulators like Gary Gensler in there, people should understand these subpoenas are not how would I say it they’re not the end all they’re not like the ultimate authority, but because they do have limitations. But but for crypto, I would just say having a chairman who is in charge, and is ready to use the subpoena authority that is available to them, that’s great news.

And I guess I’ll give you an example: the committee can give out subpoenas to witnesses, they want to come in and testify before the committee, or a subpoena can be sent out to order a group or a regulator, again, like Gary Gensler to gather documents and records that would aid the committee’s investigation. And as you if you and I have been talking at length for the last 15-20 minutes, there’s a lot of information that we need. Documents, I mean, emails, we asked John Ray the other day, specifically about the communications involving, you know, FTX and IEX. And what the SEC knew, obviously, he’s not inside the SEC, but John Ray, who is trying to pick up all the pieces from FTX International and all its related, I think there’s like 100 different entities that are related, you can imagine, and if there are going to be a ton of written communications, whether their emails, their texts, their maybe even, you know, written letters, et cetera, all kinds of communications that we are going to try and obtain. He told us that he would work with us to get us those, we can do that through that entity. And then we can also do it through the SEC itself by virtue of a subpoena and start to get to the bottom of what’s going on there.

Nicolas Carter 

And I think representative McHenry did state in his comments at the hearing that he intended to, to use that authority. So I think we’re all very much looking forward to understanding the truth of what happened there in terms of your own role. So as I noted, you, you have been elected Whip for the next session, what does that actually mean? I mean, for those that aren’t as familiar with Congress, what does the role of a Whip entail?

Tom Emmer 

Well, first off in the leadership structure in the house, the speaker obviously is the top leadership position. And then you have a majority leader, which in the next Congress will be Steve Scalise. And then the number three position in the house is the Whip. The Whip has a very interesting and I would argue the most important job in the house. It is the nerve center for everything that’s going to happen. The speaker obviously will direct the agenda. The majority leader essentially builds the calendar for the year. And then he is the one responsible for what comes to the floor, you know, what are we actually going to be voting on?

The Whip is the one that is in communication with every single member. And by the way, it’s not just Republican members. Yeah, the Republicans are going to take control, but the Whip’s office is responsible for the entire house, to the extent that we have Democrats that want to work directly with us, because they have priorities they have to get done. It’s all one of the same, it’s what can we reach agreement on? And then how can we move it through the house so that I can report to the majority leader that this area, for instance, if we’re talking about one of the one of the bills that I’ve introduced the securities clarity act, for instance, if it comes out of Patrick McHenry’s Financial Services Committee, I can report to the majority leader that we have the votes to pass the securities clarity act out of the house, and then the majority leader, obviously, I’d be involved in the discussions with the majority leader and the speaker would make a decision amongst us. Yeah, that’s one that we want to move and we want to send over to the Senate.

I would add, Patrick McHenry will have a huge role in this, because the chairs of the different committees, they’re the ones that will be driving the agenda out of their committee. And obviously, we have to be in constant communication with the chairs and the members of those communities committees to know what their priorities are, so that we can help translate that up the the chain, to the majority leader and the speaker so that we can move these things and I think for the crypto community, it’s huge. Patrick McHenry, I sat down with him again yesterday, he’s made it clear to me that he has a very significant agenda that involves digital assets. And it’s, you might remember, he was he was actively engaged in negotiations on stablecoin legislation last summer and leading in the fall.

I’m grateful that it didn’t happen. He was working his his best to try and get to a point where, you know, we’d have something that was substantive that we could move, Maxine Waters had led him to believe that she was willing to do that. And remember, she’s got members over there that do see, crypto, I’m going to remind everybody is not a Republican thing. And it’s not a Democrat thing. This is the most nonpartisan area, and it must stay that way that there is so he was trying to do that, you know, communicating with Treasury communicating with the Fed at all. And it just, they just wouldn’t come far enough. It was a bridge too far. They wanted too much for the I would argue for the authoritarian the digital authoritarian state that they would like to create. Thankfully, Patrick McHenry was having none of that. So good news for the crypto community is that Patrick will be the chair. Patrick guide does have a mean he’s he knows what it is we’re doing. And he’s got members on both sides of the aisle but want to push a some important stuff for the crypto community.

Nicolas Carter 

The McHenry stablecoin bill, I know these things are sort of constantly changing. So as far as I understand was kind of McHenry-Waters bill. And that was it, you know, drafted under obviously, political constraints. It’ll be a little bit different going forward. Do you expect any stablecoin legislation under McHenry’s aegis to be sort of promoted to be on the agenda? You know, as we start the new year?

Tom Emmer 

No, I think you’ll be looking at more market stuff. I think you’ll be looking at you know, he’ll have two tracks. And I don’t want to speak for him even though I told you I just met with him. But he will make his plan known as he feels comfortable as we get into the next Congress. But knowing Patrick and knowing our committee, I believe where he’s going to head in this area is more of market issues as opposed to you know, the a stable coin let’s talk about the market. Let’s talk about you know how digital assets play a vital role in the financial markets hit not just here but around the world. If and how we can make sure that that innovation stays here in this country as opposed to driving it to the Bahamas, where we might not have the oversight that I mean, that’s one of the big questions people should ask themselves. Why was Sam Bankman freed operating out of the Bahamas in the first place? He should have been here in this country. Yeah, I would expect that while stablecoins are important, and I’m not going to say that you won’t see something you won’t see what they were working on before. I’m pretty sure. Because like you say, things have changed. And I think Patrick is in the best position, as is the Financial Services Committee that he will be cheering to really make an honest difference in this in this space. And I’m really looking forward to what what we’re going to be able to do with his leadership.

Nicolas Carter 

Yeah, the stablecoin space is interesting, because I felt that it’s actually one of the more salubrious corners of the crypto market, I mean, frankly, stableccoin seem to work pretty well. Especially, we have a robust environment of onshore stablecoins that are issued by credible entities. I don’t see really any major issues. I mean,  things could be more codified, right now, they’re, you know, issued under a variety of state trust licenses or the state by state money transmitter, they all seem to work pretty well.

So as far as priorities are concerned, I think, you know, maybe spot market regulation, clarifying regulatory status for tokens or commodity, you know, crypto assets, those seem to be the more pressing issues. And as you note, I mean, the crypto industry has been so offshore, historically, with the onshore exchanges being punished to a certain degree to date, they come to the table, they talk to the regulators, they kind of get punished. And meanwhile, you have Binance manages 60% volumes worldwide, and they don’t even have a domicile, we don’t know where they’re incorporated. FTX was a top three largest exchange domiciled in the Bahamas clearly didn’t have the institutional infrastructure to regulate them appropriately. They were dominant exchange. So I think the challenge is now you know, how on earth do we bring the lit crypto markets back onshore, and in a manner such that, you know, end users can get the products they need and deserve? Without, you know, pushing them away? So in terms of like specific bills, which could address that. I know you’ve been prolific actually, in terms of, you know, introducing various types of draft legislation. Is there anything in particular that you are interested in kind of promoting in the new session that that might address these market considerations?

Tom Emmer 

Well, before before I go there, what you just said, I’m going to tell you that – Let’s put it this way. I some of the members, Republican Democrat who want to work in this area, what you just identified is exactly where I think the majority of the committee is already pointing their attention to with one exception. I think where it all starts is privacy. I think that will be the priority is the privacy component, because we could talk about all these great things that we might do. And you’re right, I mean, we’ve got the stopping CBDC’s, we’ve got all kinds of stuff that we’ve we’ve offered for very specific reasons.You broke them down very well, just now in in laying out what the issues are, where the real problems are. It’s not with stablecoins. We’ve got some market issues that we need to address.

But it really comes back to privacy. Right? When you see what Elizabeth Warren has offered. And she’s doing it by suggesting that this is going to clean up fraud, this is going to protect investors. That’s not what she’s doing. She’s literally the same. You got the Sam Bankman-Frieds out there with their centralized operation, committing fraud that has been around since there were financial markets to be defrauded, and investors and now you got a government representative who, under the guise of Nick, ‘we’re here to protect you. But in order to do that, we need to take all of this information in the house and we need to control it.’ Because if we can control all your information and all Tom’s information, everybody else’s, we can keep you safe from the Sam Bankman Frieds of this world, Nick, my question is, how do you keep me safe from the Elizabeth Warren’s of this world? And her and her people who are going to use that information, you know, and sorry, I’m gonna get off just a little bit, because I’ve heard Kevin McCarthy talk about one of the first things we’re going to do is we’re going to defund the 87,000 new IRS agents that Democrats created in their so called the inflation reduction bill.

You know, what I think should be at the top of that list, we should get government out of the business of surveilling people who have cumulative transactions of $600 or more. We blew the whistle on this more than a year ago, it was the same time that the infrastructure bill that all of you in the crypto community was so interested in because they were going to suddenly tax you, because they saw you as a cash cow that they could now find a new revenue stream coming out of crypto into government to support many of their worthless programs. And some of the ones that are important to I’m sure, but at the same time, what they were trying to do in that bill, is they want a government through a forced oversight mechanism, forced meaning every bank, every credit union, everybody that holds your money, they would have had to report to the federal government, specifically the IRS. I don’t think it was the Treasury back then. But I could be wrong. ‘Tom Emmer has a cumulative transactions of $600 a month (ed. note: Rep. Emmer meant ‘year’) or more?’ They raised it trying to tell us that ‘Oh, no, it’s okay. We raised it to $10,000.’ Think about that, Nick, you got a car payment. You gotta you gotta pay rent, or you got a mortgage, you’re buying food, you can get to that $10,000 cumulative number really fast. And right now, what they did was they snuck it in on these payment systems.

So if you’re, for instance, transferring cash by Venmo, do you know that if you have a cumulative transactions of $600 or more Venmo has to report that to the federal government? I don’t think most people understand that, Nick. i Right. That’s where the Elizabeth Warren’s of this world wants to go. They want to be able to know what Nick Carter and Tom Emmer are using their money for this is the Chinese model of digital authoritarianism, that we absolutely have to stay vigilant on and make sure that they can’t do so I would say in addition to all those market issues that we’re talking about, it starts with privacy, we got to make sure that the these central authority bureaucrats and politicians don’t take over.

Nicolas Carter 

So in looking through the various pieces of draft legislation you’ve published, you have your bill, which addresses CBDCs, you have a forked assets, tax treatment bill. Yep. You have the Blockchain Regulatory Certainty Act and the Digital Commodity Exchange Act. Is that right? Which of those? Would you like the crypto community to sort of dig into?

Tom Emmer 

I think the securities clarity act. First and foremost, I think it’s very important. Because Congress needs to take back its authority, make sure that the SEC knows we’re the ones who make these rules. They’re just the ones who are supposed to be working with the community to make sure they know the rules and that they can comply with them. And I think the securities clarity act, unlike my colleague, Warren Davidson from Ohio, who’s got the tokenization act – and I love Warren Warren’s a great friend – but his was too rigid to me, I think the securities clarity act, then I’ll leave the people in the community to make their own judgment. But you got to have something that’s flexible enough going forward, because things are going to change.

You were talking about stable coins earlier. One of my problems with the stablecoin legislation wasn’t just that it’s working really well right now the way it is, right, the way stable coins are being used. But more importantly, a stable coin today, Nick, is that what a stablecoin is going to look like? Two years from now? Let’s not have government rush in and build the, you know, the house that you have to live in, when in fact, you got all kinds of space to move around in and explore. So I think that’s one the other one that I do think this is always going to be at the heart of what I do is the CBDC bill that tells government ‘Hey, you don’t get to you don’t get to create a currency.’

Because I think there’s so much of this that follows right if we allow the central government to create a central bank, digital currency. What’s the next step, Nick, the next step is the Federal Reserve suddenly becomes a retail bank that every American has to have an account at the Federal Reserve. Is that where we want to head? This is you know, And when you hear Republicans and Democrats alike, because again, it’s not a partisan area, but when you hear them talk about studies, and no, no, don’t don’t even go there, because a study is just the first step. It’s that old phrase about the camel getting its nose under the tent. Right? The second you let the nose under guess what? The rest of it is eventually coming.

Nicolas Carter 

So the Securities Clarity Act, you know, I can assure you there’s a view in the crypto community that the Howey Test that is decades and decades old, and that is currently used to ascertain whether something is a security or not, and crypto introduces a whole new design space. And maybe, maybe it’s not as clear or maybe it’s not as fit for purpose to apply this test to crypto assets, which blend elements of utility of cash flows or governance. So do you feel that that is currently appropriate? And for in order to determine whether you know, crypto asset is a security or not? Or do you feel that maybe there’s some sort of new envisioned approach, which we could use to regulate crypto securities in a way that treats them? Or is sort of more modernized?

Tom Emmer 

That’s the whole reason for doing the securities clarity act. I don’t think a case the pre exists digital assets that dealt with oranges in Florida, can control, when is it? You know, just an investment? Versus when does it become, you know, part of a securities offering or vice versa? Right? Because initially, it could be a securities offering, which can morph into something else. Right. And I think the key is, who’s responsible for that? Is that the SEC, is it another entity within the alphabet soup of government executive branch? Regulators? I think that’s the issue when we’ve been using this Howey Test. Why? Because it’s the closest thing that we had, I think it’s time that Congress actually do its job and have this discussion. And what I would say to everybody in the in the crypto space, where we and tell us, you know, the different things that you’re doing out there, don’t expect that myself or one of my colleagues are actively doing this with you, we’re not, we have staff that is some are participating in the in the actual markets.

But all of them are studying it, you guys are living it. So from your life experience, please relate that to us so that we can actually do good in this space over the next two years. Because, again, I think anything that the beauty of having the Republicans in charge of the Financial Services Committee, the beauty of this could be Democrats, but under the leadership that Ms. Waters has shown over the last two years, she didn’t help us very much. I mean, we have 40 hearings on housing, everything was looked at from a from a perspective of us and them and it was a constant, it just, that’s not what government it’s what it’s become.

We got to change that. I think the crypto community can help us change that as well. It’s about we, it’s about Democrats and Republicans. It’s about people from all walks of life with different political views. We all want the same things. We want to be able to succeed the way we believe we define success, right for us and our families. And one of the big things about the experience in this country that makes the experience what it is, is access to capital is the ability to do business with others and not be restricted. And I think crypto is that opportunity to return us to what has made this country great and what will continue to make it great, which is allowing people to explore and innovate and be entrepreneurs. The key is going to be for the community that you plug in with your specific because I could do this all day, Nick, we could talk about the specific stuff that I put in, because I have very might be surprised but I have some very strong opinions about what government should do and what it shouldn’t do.

And I love the crypto community, not because of the transactions, but I love the crypto community because you are facilitating evolution of the Internet, the technology itself from what we experienced right now, which is much like the centralized authority that Sam Bankman-Fried took advantage of. It is a world with intermediaries and what you promise is a world that will not be void of intermediaries, there’s always going to be a need for a third party to inter mediate a transaction or oversee a transaction. And there will be value that the parties to that transaction are willing to give that intermediary to do whatever function we want. But you know, what’s important is that Tom Emmer and Nick Carter, we’re going to make that decision, we’re going to be able to say to each other, alright, I want to do business with you. I can you and I, Nick, we can get an intermediary, and it’s going to add this cost to the transaction that we’re going to do. Or I don’t need an intermediary anymore. I can go direct, I can exercise my freedom directly with Nick Carter. And he returned directly with me which, again, that’s why I’m in this space, I can go through every bill and tell you what my priorities are.

I think ultimately having a crypto friendly people in leadership, having crypto friendly people actually busy building the agenda and bringing you in, be willing, offer yourselves to come in and talk about different things that you’re working on. And where you think government oversight is necessary and where you think it’s unnecessary and why I think for centralized financial operations, I think you should always have oversight. I think, I think telling me that I’m too dumb to make decisions on my own and take risk on my own. And I have to have government involved in every single transaction. I think that’s outrageous. And I think this country was built on the fact that we’ve got people who don’t think the same, who don’t live the same, and yet, are still able to do business together and improve each other’s lives. And I think that’s the beauty of crypto.

Nicolas Carter 

So we’ve had you on for a long time, you’ve been very generous with your time. As we wrap. What I’m really curious about is post FTX. Obviously, FTX was a calamity and I think influenced policymaker and regulatory attitudes worldwide as it should, right. I mean, this is a top exchange going down causing enormous harm to retail and institutional investors. Have your colleagues have their attitudes changed towards the industry post FTX, either on the Republican or the Democratic side? Are you seeing, you know, more market hostility from their camp? Or is it is it still the same general objective, which is cleaning up these markets and making them more functional?

Tom Emmer 

I think I see three things. I see those that who have loved government centralization and control authority. I see I’ve seen them. These are the the Elizabeth Warren types, they have jumped on this. I couldn’t believe it. It was Juan Vargas the other day to from California, these guys have jumped on it. ‘Oh, you see, it’s corrupt to the core, we’ve been warning you and these people,’ I’ve gotten a kick out of the fact that a couple of them want to point towards myself and others on the Republican side, right? They want to make this a partisan issue, when they’ve got colleagues sitting right there with them that are with me, that agree with us, right that this is not partisan. And they look foolish, Nick, because that’s the one group that Elizabeth Warren’s probably the most dangerous, I would say, maybe that’s a strong word. But she’s, she’s good at what she does. These guys who don’t know anything of what they’re talking about, they just they sound stupid. When you respond. And you know, those of you in the community, when you listen to them, the more they talk to the more you know, they don’t have a clue of what they’re talking about. There’s that group that is jumped on board. They’re either they were either scared of it, or they prefer government authority. And frankly, they would take us down the road of digital authoritarianism.

Then there’s a group, which I would say I belong to, that already understands that this was a failure of an individual, or individuals, this was a failure of centralized finance, something that is as old as the hills. Okay. This is business ethics, 101, that failed. And it’s not the technology.

And then there’s a third group, they’re kind of not sure what to believe. They have constituents, the sad part about it, all of us do, but they have constituents who were hurt pretty badly by this thing in there, staying low, probably being very smart, listening to all the different things coming in. Those are very responsible and thoughtful people because they know what they don’t know. And I think there’s a larger group of them than there are in either the two groups I just described in Congress right now. I think over time, over time, they will be influenced by us, those of us in Congress and they will pick one side of the other the other place where they’ll be influenced is perhaps the public square. Sometimes the fools in journalism – I mean you do have responsible journalists but you got some out there that were literally, I felt like they were trying to write excuses for Sam Bankman-Fried. By the way, just this, this kid is not well, I think somewhere along the way, Sam Bankman-Fried this gaming billionaire. I think he lost the ability to discern reality from the virtual world that he’s in. It’s almost as though he thought he was playing a virtual game. He’s Super Mario, Super Mario, who just got knocked off the top block. And now guess what, he just pushes the button and gets to start all over again. It’s not the way this works.

And I think those three groups, the most important thing will be responsible journalism, not conflating centralized finance with decentralized finance, right. And digital assets, as long as they’re reporting that accurately and people recognize decentralization is the point. Open permissionless public blockchains are self policing. When you have centralized authority that’s operating in a back room with doors closed, you can’t see what they’re doing. That’s where you need government oversight. That’s where you need the bulk of your government regulation. And frankly, that’s what failed in this case, because the government regulator most responsible Gary Gensler in the SEC, it looks like they were they were either buying into the romance of Sam Bankman-Fried and FTX or literally they were bought off like a lot other people by Sam Bankman-Fried and FTX to look the other way and help them get what it was they were trying to do. And in the meantime, the ones that lost were all of these, these investors.

Nicolas Carter 

Well, I think that’s our time today. I can’t thank you enough for joining us again. And certainly we’re looking forward to your work in the next legislative session and, and getting these answers that I think we deserve about, in particular the behavior of our regulators. So Mr. Emmer, thank you again for joining us.

Tom Emmer 

Keep up the great work, Nick, you and the community and remember, plug in, you don’t want people making decisions that they don’t have a clue of what they’re working on. Make sure you’re plugging in and keep informing and educating every elected official out there. Appreciate you Nick. Have a great Christmas. Great holiday.

Nicolas Carter 

Thank you, same to you.