00:00Senator Cortez Bastow. Thank you. Thank you, Mr. Chair, for having this important
00:06hearing. Let me start with Mr. Massad. Talk a little bit about what should the
00:14goal of a market structure legislation be that we're looking at? I think it
00:19needs to set up a process and some principles for achieving clarity and
00:25addressing this regulatory gap. The gap is that in our framework, we have no
00:32regulator of the spot market for anything that's not a security. So we need to fill
00:37that. And we need to bring some clarity to this question of when is the use of
00:43digital technology turned something into a security or a commodity. But that's much
00:47more complicated, if you will, than simply writing in a single definition. And
00:53that's why I advocate a process. That's why Jay Clayton and I advocated more of a
00:58process of bringing the SEC and the CFTC together. You don't necessarily have to
01:02merge them, but we need to have them work together on this. Thank you. And Ms.
01:06Mersinger, would you agree with that? I would, yes, I would agree that we need a
01:14framework that's going to work for the industry. We need clear lines of
01:23jurisdiction here. And I totally agree with the SEC and the CFTC working
01:28together. In fact, they could do that right now, and they are doing that right
01:33now, working together to provide what clarity they can. But we still need
01:38legislation to oversee the spot market, as Mr. Massad said. Okay, thank you. Let me ask you this as well, and maybe, Mr. Massad, let me start with you again.
01:51I have heard from my states, a security administrator, and many of them across the
01:56country, about the paramount importance of preserving states powers in federal
02:01market structure legislation. Can you talk about why that is important?
02:06Yes, I think it is important because the state securities authorities have always
02:10played a critical role in our system. And again, I think you're gonna hear a lot of
02:16comments today suggesting this is this whole new world and so forth. It is a
02:20technology, and we got to remember what we have going on are still most of this
02:26activity is going through centralized intermediaries. It's not just happening
02:30on chain. So I think we still need the resources of the states, as well as the
02:35enforcement resources of the SEC and the CFTC to bring to bear. Thank you. Mr. Levin,
02:42thank you. By the way, you did some great work with Caesars Palace. I thank you for
02:46the work that you've done. I appreciate it. And for that reason, I understand we're
02:53all concerned about the scams and the fraud that could occur, that quite
02:58honestly always occurs with some sort of new technology or something happening at
03:02the federal level. Our goal here is to make sure we're protecting our consumers and
03:05giving the regulators and law enforcement the tools in the private sector to go
03:10after that and stop that. Can I ask you, what are the biggest obstacles to
03:15identifying and recovering ransom payments or stolen crypto funds? Thank you
03:20for the question, Senator. The biggest barrier that we find when we're looking
03:25for money that is being stolen or has been extorted through ransom is that money
03:31can move to foreign jurisdictions where there can be non-compliant centralized
03:36entities that actually hold cryptocurrency on behalf of those illicit flows. And
03:41that's where, you know, it's really important for the United States to be able to
03:45work across different geographies to be able to prevent the laundering of that
03:49activity in foreign jurisdictions. And do, would you say that state and local law
03:55enforcement and regulators already have the tools they need to address those, the
03:59scams? I would say, Senator, that we are still in the infancy of state and local
04:06agencies actually having the capabilities to be able to go after these types of crime. There
04:11are instances in certain jurisdictions where the state and local enforcement
04:18agencies actually do have capabilities at their disposal, but we have found that
04:22actually there's a technology barrier to entry. And so, us at Chainalysis, we've been
04:27pioneering a lot more new technology powered by AI to actually help state and local agencies
04:33get a hold of easier insights to these types of crimes so that they can go after this activity.
04:39What is it in the market structure regulation that we're looking at that we need to be cognizant
04:46about to ensure that law enforcement, whether it's federal, state, or local, has the tools they need?
04:52I think it starts, Senator, with the actual regulators to actually have the tools in place to monitor the
04:59publicly available information and proactively go after the types of threats that we need, rather than
05:05overly relying on a reporting structure that we've had in traditional markets.
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