Lawmakers Want Use Cases, Witnesses Want Regulation: Today’s House Energy and Commerce Subcommittee Hearing

Today’s hearing of House Energy and Commerce’s Subcommittee on Innovation, Data, and Commerce titled, “Building Blockchains: Exploring Web3 and Other Applications for Distributed Ledger Technologies,” was a rare opportunity for lawmakers to discuss blockchain applications beyond the financial realm – and learn.

And though some Democrats appeared to read from a script written by Democratic party leadership – such as the Subcommittee Ranking Member Rep. Jan Schakowsky (D, IL) and Rep. Lori Trahan (D, MA) who seemed to try and paint blockchain technology as a threat – other Members from both sides of the aisle often asked substantive questions.

This included Rep. Darren Soto (D, FL), who took his turn during the hearing’s Q&A section with a straightforward query about blockchain use cases.

Soto is well-known on Capitol Hill for his support of the burgeoning blockchain industry with his work on several blockchain-related bills including co-sponsorship of Majority Whip Rep. Tom Emmer’s (R, MN) recent “Securities Clarity Act“. He was also a co-chair of the Congressional Blockchain Caucus in the 117th Congress.

As evidenced by the answers to Rep. Soto ‘s question, witnesses mostly wanted to talk about the need for regulation, not use cases.  (Video is here.)

(Lightly edited for clarity)

REP. DARREN SOTO: In the beginning, in my opening remarks, I talked about a lot of the areas where we were already able to pass amendments into both the National Defense Authorization Act and the Appropriations Act and get a lot of the blockchain advances under federal law. It was mentioned by our colleague, [Rep. Rick Allen (R, GA)]: the food tracing with the FDA to help with public safety; helping with encrypted communications through our military; protecting veterans records, among other areas, going forward.

So, we in Congress want to make sure we’re good partners in advancing this critical technology, whether it’s for economic reasons, security, for advancing critical resources. So, I’ll start with Mr. Wyatt, but I’m going to ask all of you the same question. Mr. Wyatt, if there could be one particular partnership the federal government could help advance in some of these areas. What do you think it should be that we should work on and why?

RYAN WYATT, POLYGON LABS: I think the best thing that we could do is have clear regulatory clarity on how to operate with just a nuanced understanding that there are protocols, there are wallets, there are exchanges, and there’s a lot of nuance there. So my ask would be to continue to push forward with very clear regulatory guidance on how to operate this new tech. And that would ensure that tech innovation would stay here in the US and that we continue to foster some of the best talent in the world.

REP. SOTO: But if there’s a particular subject matter, what would that be? I get you all want regulatory reform.

RYAN WYATT:  I think, in general, decentralization is such at the heart of this where we are removing intermediaries and so I think the subject of decentralization is of the most important, constant topic.

REP. SOTO: Mr. Schulman, what would be a great partnership with the federal government to help advance blockchain technology?

ROSS SCHULMAN, ELECTRONIC FRONTIER FOUNDATION: That’s an interesting question. I’m not 100% sure that the federal government needs to partner.

REP. SOTO: Let me define it more in the most broadest terms – like funding or laws or encouraging research, not like ownership in the strictest sense -partnership in the facilitating sense.

ROSS SCHULMAN: I’ll offer two then. I think the first – which I’ve sort of mentioned it before – is the Federal Trade Commission has a huge role to play in protecting consumers. I think it needs more funding and more people.

The other is has to do with how the government approaches jurisdiction over blockchain entities. I think there’s clarity that definitely needs to come about for what exactly is a decentralized autonomous organization – a DAO – how it is subject to the law, how it’s not subject to the law. I think those questions are just starting to percolate in the courts and and it’s going to be very interesting watching that and figuring out what the answer is.

REP. SOTO: Thank you, Mr. Schulman. Obviously, neither of you has identified a particular subject, but regulatory. And I get that. But, I know Professor Sudler had mentioned space already. I represent a district right next to the Space Coast. So how can we partner with you all in advancing technology to use blockchain and space?

PROFESSOR HAASHI SUDLER: One of the biggest relationships that we would look at is with the Department of Defense. Space is open for business. There are more satellites going into space. And it makes it a target for cyber criminals, for bad actors and for nation states who have shared interest to attack either individual satellites or constellations. So we’re very open to looking at this type of new problem because it’s an a new area that needs a lot of solutions, and would love to certainly look at some of those national security issues.

REP. SOTO: Thank you. And Professor Reyes, where do you think – through funding and incentivizing-  we could advance blockchain in America?

PROFESSOR CARLA REYES: I think it would be excellent to have a funded education program for lawmakers and regulators because that really does matter. And all the regulatory clarity we all have been asking for depends on understanding the difference between the financial use cases and the non-financial use cases. I’d also really love to see the federal lawmakers take a cue from some of their state counterparts where states have done an excellent job of pushing private law reform around decentralized autonomous organizations around the property rules, for example. And it would be excellent to see federal law – to the extent that it’s inconsistent in any way, or somehow getting in the way of those reforms being effective – it would be really excellent to see those changes take shape as well.

REP. SOTO: Thank you so much. My time has expired.