Senate Banking Committee Tim Scott and Senator Cynthia Lummis Preview Next Steps for Clarity Act

Good morning, everyone. Letting people settle in here. It is a privilege and honor to be moderating two leaders in the Senate that have not only been pivotal to policy in our area, but have really been a force for our industry. My name is Jonathan Yahem. I'm Global Head of Policy and Market Structure at PayWord. One of our most well-known brands is Kraken. We have very deep roots here in the great state of Wyoming. A state bank, a number of our other operating entities. And it's a privilege to introduce Chairman Scott, Chairman of the Senate Banking Committee. He's going to talk a little bit about how we got here and what's moving forward. I do appreciate that the Chairman does not hold my North Carolina roots against me as a senator from South Carolina. Well, I wouldn't go that far. I hold him against me, but you just know so many people here. I'm going to be careful how I respond to your North Carolina roots. I appreciate that, as does John Darcy, a couple of other North Carolina guys here. And, of course, our dear friend, Senator Lummis, who has been a force for this industry and for policy and clarity in the United States. So, great pleasure here. I think we're going to start out with a little bit of recap, how we got here, talk about why this bill is so important for the United States, maybe a little bit about those final hours there right before recess. We made a lot of progress. We were close to that end zone. We were. And then we're going to talk about the future, what's next. So maybe start, Chairman Scott, help remind this audience. We have a lot of people here. Some have been in the trenches for five years. Others kind of follow this from a headline view. Why is this bill so important for the United States? Well, for me, it's about economic dominance globally. If you're going to remain the most important economic force for good in the world, that's America, we have to do so by innovation, bringing the best founders, the greatest thinkers, and the best risk takers to our shores to produce it here. If we get this right, America will be the most dominant community, culture, country on the planet for the next century. Getting it wrong means we cede that high ground, perhaps for a generation, maybe for a lifetime. Yeah, I think we're all focused on progress here in the U.S. PayRoad runs a global business. We've been around 15 years. We've actively expanded around the world. Now that Choke Point's done, it's allowed us to invest and grow. I think what we've seen time and time again is that most of the G20 has moved forward with some type of clarity, some through the regulatory phase. It allows us and others to invest and grow and creates a level playing field for customer protection. I think that's what colleagues from both sides of the aisle need to understand. No question about that. As a small business owner myself for a number of years before I went full-time in politics, business needs certainty and predictability. Without those two pieces, you find some other place that has it. Getting it done, not just from a regulatory standpoint here in America, we need it done by embedding in the laws of our country so that we have long-term perspective on what that certainty and predictability looks like. If you think about a regulatory environment that is conducive for growth and flourishing in this industry, that's good news. Better news is getting it done from a legislative standpoint. That's the kind of long-term opportunity that attracts more people to our shores. I really mean what I said. If we are going to be the most dominant economic superpower in the world, it requires innovation. It requires market structure. It requires technology. To get that right, for generations to come, people will look back at this as the infancy of what changed and created the kind of traction for America to remain the most dominant power on the planet. I'd like to come back to that difference between clarity and legislation versus regulation in a minute. Senator Lummis, let's go back to a couple weeks ago. There was a lot of work right there in the final stages. We were close. A lot of headlines, a lot of confusion. Could you help walk us through where we got to, even though it was not the outcome that I think we all wanted, which was to see more progress. I think taking the silver lining, there was a lot of progress made. Help us understand what happened there and how you see things sitting here in August. Thank you, Jonathan. It's great to be with you. Senator Scott set the stage last Labor Day, so almost a year ago, for the Clarity Act to move forward. We negotiated literally all year with the Democrats trying to get a bill that could get 60 votes to move forward on the floor of the Senate. There were just constant demands for change. We accommodated a lot of them. We got down to finally getting the bill out of committee, which in itself was a Herculean effort. I want to thank Senator Scott for both his patience and his diligence in trying to bring the other party to the table. We did get two Democrat votes in the committee, and it came out of the Banking Committee in May, I think. Yes. We've continued to negotiate all summer. We then had to mold some products together because, as you know, the CFTC part of the bill that deals with commodities had to go through the Agriculture Committee, whereas the SEC part of the bill had to go through the Banking Committee. We had to meld those together to get a final product. The Banking Committee minority party was very resistant to moving forward, so we continued to work with them all summer. Things like affiliate trading, DeFi, conflicts of interest were some of the issues that have driven us to the table with members of the Ag Committee. We finally got to the point where we just needed to vote. But then there's something called a time agreement that leaders, both Republican and Democrat, have to agree to to give up time so you're not running into the August recess. Senator Schumer would not give up time if we were going to do the Clarity Act. And so Senator Thune had to leave it on the cutting room floor for now. But I had a fit and fell in it, and Senator Thune was kind enough to actually schedule the bill for September 15, at 2 p.m. no less. We actually have not only a day, but a time. And so we will move forward on that date and that time. Now, the reason that that's so helpful is that, as Senator Scott, as chairman of the Banking Committee, can attest, you have to force them to vote to get them to be serious about it. Otherwise, they will negotiate ad nauseum. When this bill started last Labor Day, it was less than 300 pages. It's now more than 600. We have given the Democrats over 100 of their demands and requests. But as long as there's no date certain where they have to actually vote, there's no end to what they want. Let me just add something here. It is impossible to understand how much misery you have gone through getting this to the one yard line. As chairman of the committee, I am so thankful to be in a position to guide the calendar on the Banking Committee. What you've been doing is the Lord's work. I mean, literally, you are doing things that will, I think, reverberate throughout the history of this country going forward. Unfortunately, what Schumer realized was buying time protects the Democrats. And they refused to make a deal for one reason and one reason only. The more time they have, the better off they are. When we force a vote, it makes them put their cards on the table. And the only way we got to a successful vote in the Banking Committee was when I was finally able to wrestle all 13 members on the Republican side. It created the necessity of the Democrats making a decision and two decided to come on board with us. Without having the same process on the floor of the Senate, the Democrats will never have a vote on this bill. Elizabeth Warren's team wants to run crypto. Yeah. Out of the country. Yep. Period. Overcoming that hurdle is what you've been working on every single day. And they keep moving the goalpost. That's why a bill that started under $300 is now over $600. And they still say, I'm almost there. Exactly. They were almost there at $310. And then $350. And $400. They were almost there at $500. And they needed more time. Yeah. Because they wanted more language in the bill. Well, and nobody knows better than Senator Scott because he negotiated the truly impossible, and that was a housing bill. And as you know, one of the impediments on our side of the aisle is that the banks want changes to the Genius Act, which was the stablecoin bill that passed last summer. They want the changes in the Clarity Act. And so they've been working hard on the Republican side of the aisle to scuttle our bill until they get what they want. Now, Senator Tillis on our side, and Senator also Brooks, whose praises I wish to sing. She is a legislator's legislator. They came up with a compromise with the banks, with their lobbyists. The banks later fired their lobbyists and now want a do-over because they didn't get everything they wanted. And so this bill has had a lot of landmines placed in its way during the course of the year. And Senator Scott is absolutely right. What finally brought just a couple of Democrats to the table was the fact that every Republican had committed to vote for clarity in the committee. And as long as they think they can chip away at Republicans, they don't get the blame, so to speak, for killing the bill. And, you know, we've been working our tails off trying to keep this bipartisan. I also can't say enough good things about Senator Kirsten Gillibrand of New York. She has been the most rock-solid partner on this that a person could ever want. But she's literally, she and also Brooks, are just about the only ones that are committed to moving this bill forward on the other side of the aisle. So I wish I could say that this has been the most bipartisan experience involving every stakeholder. It hasn't been. It's been a tough row to hoe. Yeah, and I think, you know, one thing I've learned, especially the last few months, having worked on this for five years. I know a lot of people in the room have worked on this. Sometimes these contests come down to grit, determination, endurance, and who wants it more. And one thing I am absolutely convinced and confident is these two individuals, these two leaders, have that grit and that determination and want it more. And so I think as an industry, we need to feel good about that and continue to galvanize and unify behind our Senate leaders going into September. So maybe we'll talk a little bit about the outlook here and what's next. And, Mr. Chairman, I wanted to touch on that legislative versus regulatory, as you mentioned earlier. Why, you know, we've heard and I have a great amount of respect for our market regulator leaders, Chairman Atkins, Chairman Selig. You know, we've heard signals they're ready to go. They're ready to move regulation. Why is it so important to get legislation done, have this in statute? Well, there's no doubt we should all be excited, be excited about the regulatory leadership under the Trump administration. Atkins has done a fabulous job. I talk to him constantly. We are on the same page, hand in glove. It is a fabulous relationship. But maybe some of you are old enough to remember the Gensler days. I felt someone almost get nauseous literally on the front row. Well, that's what happens when it's all regulation. You go from Atkins to perhaps Gensler again, 2.0, 3.0. We can't afford that. The only way to avoid that kind of seesaw is to embed it in legislation. And you're 100 percent right. I always say it takes grit and grace to be successful in politics. At the end of the day, we win. There's no question about the fact that this will become law. The only question is how do we get it to the finish line and when does that happen? I think we have a really good shot at September. But at the end of the day, what we don't want is a regulatory framework that lacks certainty. That requires legislation. And in order for us to get that done, we need to plow consistently with great determination for the next several weeks. So maybe let's talk about the next several weeks. Let's go to the policy. Senator Lummis, there's been a lot of great work. Outstanding issues we've heard about. BRCA, law enforcement related issues, the ag title, which is really the fundamental tenet of how you regulate centralized intermediaries and give them a path to registration. Yield rewards has popped back up on, as you mentioned. And then there's ethics. Can you sort of talk through where we are on the policy and what progress has been made and what landmines might be laying out there for the next couple of weeks? Yes. So Senator Cortez Masto from Nevada was the Attorney General in Nevada. So she, because of being in Nevada, has had a lot of experience with illicit finance, money laundering, and so she's very sensitive to that issue. And knowledgeable. The problem is, as we continued to work with her and brought the law enforcement groups on board, we could never get the Association of Assistant Attorneys General, U.S. Attorneys General, on board. Now, they put out a proposal that would say coders and developers basically had to prove they were innocent in terms of the knowledge they had about the use of their products. They had to be able to prove that they didn't know that their products were being used for illicit finance. That's not how our system works. And so that became the line that we drew. We don't want to flip the U.S. justice system on its head and make people prove they're innocent. So we're protecting coders and developers who put out products not knowing whether they're being used for illicit finance or legitimate finance. So that remains a barrier within the bill, and to the extent that you give to the Cortez Masto, you lose on the more libertarian members. On both sides of the aisle, by the way. So that remains an issue. But the biggest sticking point is President Trump. The Democrats want to hold his feet to the fire. They want to punish them for the means that they put out before the election and made a lot of money on. They want to punish World Liberty Financial for its success and for choosing a partner in the Middle East. The President, to his credit, Bernie Marino and I went and worked with him, and he agreed to something no President has ever agreed to. The U.S. Constitution and case law supporting it do not allow us, whoever we are, to add more requirements to the office of the President. President Trump, the first President of the United States who's ever done this, agreed to submit himself to more criteria than any President ever has. He can choose between a blind trust that is approved by the ethics division within the executive branch, or he can fully divest. And I thought that was an enormous step for a President to take. That's not good enough for the Democrats. And so Senator Tillis, a Republican, has been negotiating with some Democrats, I think particularly Arizona. Senator Gallego, to come up with some stronger terms. I said, I've been to that well. I sat in the Oval Office with the President and asked him to do this, and I didn't think he'd agree to it, but he did. And so I'm not going back to that well. You all can go back to that well. So we'll see if the President will go further. So I don't know what he'll do, but I can tell you he's already agreed to more than any President in history. So kudos to him. And the reason he did that is he gets how important this industry is to the United States, how important it is that we embed it in this country, how we can protect innovation and protect consumers. And I really think we've hit that sweet spot in the Clarity Act. Absolutely. Well, some more work to be done, but I think we're cautiously optimistic, maybe more so than that, that we can get that window. So, Chairman Scott, I know we have a couple minutes left. I want to finish with a Wyoming touch, but before we do that, what does it look like for September? If there's a will, will the calendar provide a way? Yeah, listen, we have the vote on September the 15th at 2 p.m., so it's good news. Number one. Number two, the wrestling continues on ethics and the rewards, which, of course, we thought it was all settled, but now they have a rearview mirror that's getting bigger and the windshield's getting smaller. And so we're going to have to wrestle that down one more time. What I've been saying to the banks, to be honest with you, is show me the money, because if there is deposit flight, show me. And so what we've been able to show is that over the last instant passage of the stablecoin legislation, we've seen deposits grow over 3%, and some have suggested as high as 3.5%. So I keep saying, I hear your fears, but show me the money. And now, instead of talking to associations, I'm calling CEOs of banks. When you're chairman of the bank committee, just take the call. And so literally, I'm like, can a brother get a dollar? Because I can't figure this out. Literally cannot figure this out. Deposits are going up. And right now, literally, if the market structure, the crypto community, digital assets want to do anything to attract more deposits, it's now. If we're going to have legislation that makes it harder to attract the deposits, you should be for that. Today, it's wide open. Tomorrow, it's more restricted. What am I missing here? Well, I think one thing we've seen is the banking community is divided on the subject. And I think there are some that see the opportunity and the unlock. I mean, our mission at PayWord is to grow the ecosystem and bring in more institutional investment in that space is one way to do that. And Clarity does provide that. And Jonathan, one note on that. This is your digital asset angel. I'm your digital asset pain in the rear. But he's the angel. He put, because community banks in particular were so insistent that this was going to hurt them, Senator Scott put 10 pro-community banking bills in the housing bill that's already long. So they got tremendous relief from legislation they got scooped up into in about 2009 and 2010. And they need to acknowledge that you went to bat for them in a way that they really needed relief. They were legitimately burdened by that. So I know we're at time. I want to finish with legacy and turn it over to Senator Lummis. She announced she was not running for the U.S. Senate again. But I think something about legacy and what this means for you and the state of Wyoming. One thing I do know is true. Legacy and leadership. I've had the privilege and fortune to work with a lot of your teams. Some are still part of the team. Some have moved on to different roles. I think it's a testament to your role as a leader, the people that you have trained and set off to bigger things. And it's been a privilege to work with you and work with them. And I know our co-CEOs, Arjun and Dave, feel the same way. But what does legacy mean for you and the state of Wyoming that's played a big leadership role for this industry? Well, I was born here. And I hope to die here. This is my beloved home, Wyoming. And I have three grandsons. And I want them to have choices in their future, their financial future, how they choose to make a living. I hope one of them is going to be a rancher who I can work with side by side. But this industry provides freedom. It provides protection from an overbearing government. It provides opportunity. It's a new financial product. It is the basis because of the blockchain for the 21st century. And you're at the very front of it. Because after clarity passes, we're moving right into artificial intelligence. And they sort of go hand in hand. Web 3 sort of comes after you because you pioneered the use of blockchain technology. So I look at my grandkids. They're so cool. And I love cows almost as much as my grandchildren. And so I just see this all as the way that people in this country will continue to grow here in the world they want to help shape. And you're laying the framework for that. So I want to thank you for that. And I want to thank Kraken. You know, Jonathan, you did something special for this state. Kraken announced that for every baby born in Wyoming on this calendar year, they were going to contribute $1,000 alongside those Trump accounts. And it's a true blessing for kids in Wyoming. We need to keep more of them here. That was always the goal of Wyoming's being in the forefront of legislation to embed digital assets here in Wyoming. Both because we have the culture of wide open opportunity. But also because we're number one in the country in terms of our college graduates leaving the state and going elsewhere. And we need an industry that can help keep our college graduates here. And this is the industry that we want to invite in to help have a community of both college graduates and blue collar workers. And heaven knows that this industry, along with artificial intelligence, is going to employ a lot of engineers and computer specialists, can help us retain our talent, our youth. And give them an opportunity here so they don't have to leave this beautiful state to find a job. So that really is the, that's the reward at the end of the rainbow for me, Jonathan. And I want to thank you all for helping us get there. Well, we're privileged to be part of the Wyoming family and look forward to continuing to invest. Let me just have a small question. Sure. And a quick question. All right. Did she say Wyoming and South Carolina? Thank you.