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Late last month, I read Jerry Damerow's and Philip Martin's recent columns about digital assets. Mr. Damerow and Mr. Martin explored blockchain technology--the technology that powers digital assets--and what it may bring to the future of finance. Collectively, they covered different facets of the digital asset ecosystem--from memecoins to stablecoins to Bitcoin--and offered their respective analysis on each.
When crafting legislative policy for an emerging asset class, lawmakers must consider both risks and opportunities. In addition to understanding the promise of this technology, this means learning from key inflection points in recent history.
When the Internet came into full blossom in the 1990s, citizens were amazed they could pay a small fee for a dial-up account that allowed them to access global information and send messages worldwide. The Internet worked because of open, neutral rules.
In 1996, Congress ensured the legal foundation of the Internet by voting to keep it free and open. The government agreed to only regulate, tax, or conduct oversight over how people utilize the Internet. This created the blossoming of what we call Web1. Over the past 25 years, corporate giants that are now household names have come to dominate the Web, moving us to the age of the platform--or Web2.
Enter the Bitcoin Whitepaper, which in 2008 introduced the technical foundation for blockchain technology, making it possible to transfer value online without centralized intermediaries and reinvigorating the original open and permissionless promise of Web1.
Since then, computer scientists, venture capitalists, entrepreneurs and innovators have worked to build on this foundation, writing applications for both financial and commercial use cases utilizing blockchain technology.
Blockchain applications offer the opportunity to go back to the fundamentals of the Internet--open network protocols--by combining them with peer-to-peer value exchange. Together, these tools and opportunities are often termed Web3.
For this to be successful, there must be a clear, functional regulatory framework. In my work in the U.S. House of Representatives, and now as chairman of the House Committee on Financial Services, this has been my objective for the past four years. My colleagues and I have worked to craft "fit-for-purpose" guardrails that protect innovators and consumers and enable this "back to the future" era of the Internet, Web3, to flourish.
In a financial services context, this includes the idea of tokenized payments or dollar-backed payment stablecoins, the tools at the heart of the GENIUS Act. Essentially, this is a new "payment rail" leveraging blockchain. Today, you use your debit card, credit card, write a check, or send a wire transfer. Those are still very viable payment rails. A dollar-backed payment stablecoin is simply a payment alternative in a blockchain context. For example, one of the most proven uses of stablecoins is for overseas payments at reduced cost and with features like prompt confirmation and programmability.
In July, the House passed a second bill in addition to GENIUS Act--the CLARITY Act. This bill had a strong bipartisan vote with nearly 300 Republican and Democrat members supporting. The CLARITY Act provides clear rules of the road for digital asset market participants, including the disclosures necessary when raising money by selling digital commodities, rules for safeguarding customer funds, and how memecoins would be offered by market participants.
The bill also includes strict anti-fraud and anti-manipulation protections, anti-money-laundering obligations, and rigorous standards for brokers, dealers, and exchanges.
For Web3 to thrive in financial services, both bills must be passed and fully implemented. With GENIUS Act now law, it's critical that the Senate consider and pass the CLARITY Act.
Our country will flourish and lead the globe in Web3 innovation if we have clear guidance for consumers, innovators, and investors. The combination of GENIUS Act and CLARITY Act provides precisely that.
U.S. Rep. French Hill represents Arkansas' 2nd District.