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THE DISRUPTER SERIES: DIGITAL CURRENCY AND 

BLOCKCHAIN TECHNOLOGY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, 

AND TRADE 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MARCH 16, 2016 

Serial No. 114–126 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

MICHAEL C. BURGESS, Texas 

Chairman 

LEONARD LANCE, New Jersey 

Vice Chairman 

MARSHA BLACKBURN, Tennessee 

GREGG HARPER, Mississippi 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

GUS M. BILIRAKIS, Florida 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

FRED UPTON, Michigan (ex officio) 

JANICE D. SCHAKOWSKY, Illinois 

Ranking Member 

YVETTE D. CLARKE, New York 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

BOBBY L. RUSH, Illinois 

G.K. BUTTERFIELD, North Carolina 

PETER WELCH, Vermont 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Tony Ca ́ rdenas, a Representative in Congress from the State of California, opening statement .................................................................................... 4 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 5 

Prepared statement .......................................................................................... 6 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 100 

WITNESSES

Jerry Brito, Executive Director, Coin Center ........................................................ 7 

Prepared statement .......................................................................................... 10 

Juan Suarez, Counsel, Coinbase, Inc. .................................................................... 20 

Prepared statement .......................................................................................... 22 

Jerry Cuomo, Vice President, Blockchain Technologies, IBM ............................. 35 

Prepared statement .......................................................................................... 37 

Paul Snow, Chief Architect and Co-Founder, Factom, Inc. .................................. 47 

Prepared statement .......................................................................................... 49 

John Beccia, General Counsel and Chief Compliance Officer, Circle Internet 

Financial ............................................................................................................... 53 

Prepared statement .......................................................................................... 55 

Dana V. Syracuse, Counsel, BuckleySandler, LLP ............................................... 64 

Prepared statement .......................................................................................... 66 

Matthew Roszak, Chairman, Chamber of Digital Commerce, and Co-Founder, 

Bloq, Inc. ............................................................................................................... 74 

Prepared statement .......................................................................................... 76 

SUBMITTED MATERIAL

Letter of March 14, 2015, from Ryan Zagone, Director of Regulatory Relations, Ripple, to Mr. Upton and Committee Members, submitted by Mr. 

Burgess ................................................................................................................. 101 

(1) 

THE DISRUPTER SERIES: DIGITAL CURRENCY 

AND BLOCKCHAIN TECHNOLOGY 

WEDNESDAY, MARCH 16, 2016 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND

TRADE, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 11:50 a.m., in room 

2123 Rayburn House Office Building, Hon. Michael C. Burgess 

(chairman of the subcommittee) presiding. 

Members present: Representatives Burgess, Lance, Bilirakis, 

Brooks, Schakowsky, Ca ́ rdenas, and Pallone (ex officio). 

Staff present: Leighton Brown, Deputy Press Secretary; James 

Decker, Policy Coordinator, Commerce, Manufacturing, and Trade; 

Graham Dufault, Counsel, Commerce, Manufacturing, and Trade; 

Melissa Froelich, Counsel, Commerce, Manufacturing, and Trade; 

Giulia Giannangeli, Legislative Clerk; Paul Nagle, Chief Counsel, 

Commerce, Manufacturing, and Trade; Olivia Trusty, Professional 

Staff Member, Commerce, Manufacturing, and Trade; Dylan 

Vorbach, Deputy Press Secretary; Michelle Ash, Democratic Chief 

Counsel, Commerce, Manufacturing, and Trade; Christine Brennan, Democratic Press Secretary; Jeff Carroll, Democratic Staff Director; Caroline Paris-Behr, Democratic Policy Analyst; Timothy 

Robinson, Democratic Chief Counsel; Diana Rudd, Democratic 

Legal Fellow; and Matt Schumacher, Democratic Press Assistant. 

Mr. BURGESS. The Subcommittee on Commerce, Manufacturing, 

and Trade will now come to order. I will recognize myself 5 minutes for the purposes of an opening statement. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

I want to welcome all of our witnesses. Good morning, and welcome to the next hearing in our Disrupter Series. Today we will be 

examining digital currency and blockchain technology. This technology has the potential to disrupt a whole host of industries from 

financial services to manufacturing, supply chain management, and 

to health care records, by infusing transparency and trust in traditionally closed systems. 

This is a new technology. The White Paper describing the first 

public blockchain application, Bitcoin, was published in 2009, and 

already there has been a billion dollars in capital investment over 

1,000 firms, most of which are startup companies. 

2 

Having seen the development of email, development of the Internet, transitioning of the United States economy to the digital space 

in the last two-and-a-half decades, I am interested to hear from our 

panel about what the development of blockchain technology means 

for the next 25 years of global commerce. 

Bitcoin is the best-known digital currency and a good case study 

for the disruptive nature of the blockchain. The Federal Reserve 

Bank of Chicago highlighted how Bitcoin’s blockchain solves two 

basic issues with digital currency, by controlling the creation and 

avoiding its duplication. Bitcoin limits an individual’s ability to 

copy and paste new money files to double spend—we do that in the 

Federal Government sometimes—to double-spend digital wealth 

through advanced cryptographic signatures. 

The solution Bitcoin presents to currency may also be applied to 

other asset cases, including intellectual property, mortgages, and 

other property records. In a way, it provides a way to create singular possession online, mimicking possession in the physical 

world, but with a transparent and immutable ledger recording of 

the possession along the way. 

While there have been issues through the development and 

growth of Bitcoin, including some of the Mt. Gox issues, the technology has withstood the stress of growth to date. In the same way 

that the Internet has transformed communications, the adoption of 

blockchain technology has the potential to disrupt digital asset 

transfers. 

Cyber security is at the forefront of this subcommittee’s activities 

in this Congress. It is fascinating to see the possibility of another 

technological revolution on the horizon that could help address the 

trust and security issues that are a daily challenge for individuals 

and companies in every sector of the United States economy. 

However, to serve as an alternative to today’s settlement mechanisms, the technology must demonstrate the scaleability needed to 

handle the volumes of transactions to flow through United States 

firms on a daily basis. I do hope our panelists will discuss their 

work and address the concerns about the viability of the blockchain 

moving forward. 

I have heard about many potential use cases for this technology, 

including digital health records, where security and immutability 

are necessities. I would be interested to hear how blockchain technology could help individuals gain control over their health records 

and transparency into how those records are created and shared. 

Today’s witnesses represent a variety of interests in digital currency and blockchain technology industries. We will hear about 

what consumers can do today using digital currency. We will also 

hear about consumer protection issues that may develop. Even 

more exciting is the potential for consumer benefits that have yet 

to be realized for the firms that leverage the blockchain. 

Currently, a number of regulatory bodies at the State and Federal level have weighed in or are considering action around Bitcoin 

and other blockchain applications. While there are serious concerns 

to be addressed with the anti-money laundering effects for digital 

currency, we should also be cognizant of the future applications of 

the blockchain technology that may improve transparency in both 

the public and private sectors. These future applications could be 

3 

stifled if the regulatory environment becomes too burdensome on 

small companies trying to leverage this new technology. 

Once again, I want to thank all of our witnesses for taking time 

to inform and educate us about the applications and future potential of digital currency and blockchain technology. I certainly look 

forward to a thoughtful and engaging discussion. 

[The prepared statement of Mr. Burgess follows:] 

PREPARED STATEMENT OF HON. MICHAEL C. BURGESS

Good morning and welcome to the next hearing in our Disrupter Series. Today 

we will be examining digital currency and blockchain technology. This technology 

has the potential to disrupt a whole host of industries from financial services to 

manufacturing supply chain management to health care records by infusing transparency and trust into traditionally closed systems. 

This is an incredibly new technology—the whitepaper describing the first public 

blockchain application, Bitcoin, was published in 2009. And already there has been 

$1 billion in capital investment to over a thousand firms, most of which are startups. 

Having seen the development of email, the Internet, and the transitioning of the 

U.S.’s economy to the digital space in the last two and a half decades, I am interested to hear from our panel about what the development of blockchain technology 

means for the next 25 years of global commerce. 

Bitcoin is the best known digital currency and as a good case study for the disruptive nature of the blockchain. The Federal Reserve Bank of Chicago highlighted how 

Bitcoin’s blockchain solves the two basic issues with digital currency: controlling its 

creation and avoiding its duplication. Bitcoin limits individual’s ability to copy and 

paste new ‘‘money files’’ to double spend or accumulate ‘‘digital wealth’’ through advanced cryptographic signatures. The solution Bitcoin presents to currency may also 

be applied to other asset cases including intellectual property, mortgages, and other 

property records. In a way—it provides a way to create singular possession online, 

mimicking possession in the physical world, but with a transparent and immutable 

ledger recording the possession along the way. 

While there have been issues through the development and growth of Bitcoin, including the Mt. Gox issues, the technology has withstood the stress of growth to 

date. In the same way that the Internet transformed communications, the adoption 

of Blockchain technology has the potential to disrupt digital asset transfers. 

Cybersecurity is at the forefront of this subcommittee’s activities this Congress. It 

is fascinating to see the possibility of another technological revolution on the horizon 

that could help address the trust and security issues that are a daily challenge for 

individuals and companies in every sector of the US economy. 

However, to serve as an alternative to today’s settlement mechanisms the technology must demonstrate the scalability needed to handle the volume of transactions that flow through U.S. firms on a daily basis. I hope the panelists will discuss their work to address concerns about the viability of the blockchain moving forward. 

I have heard about many potential uses cases for this technology, including for 

digital health records, where security and immutability are necessities. I would be 

interested to hear how blockchain technology could help individuals gain control 

over their health records and transparency into how those records are created and 

shared. 

Today’s witnesses represent a variety of interests in digital currency and 

Blockchain technology industries. We will hear about what consumers can do today 

using digital currency. We will also hear about consumer protection issues that may 

develop. Even more exciting is the potential consumer benefits that have yet to be 

realized for firms that leverage the blockchain. 

Currently, a number of regulatory bodies at the State and Federal level have 

weighed in, or are considering action, around Bitcoin or other blockchain applications. While there are serious concerns to be addressed with anti-money laundering 

efforts for digital currency, we should also be cognizant of future applications of the 

blockchain technology that may improve transparency in both the public and private 

sector. These future applications could be stifled if the regulatory environment becomes too burdensome on small companies trying to leverage this new technology. 

I thank the witnesses for taking the time to inform us about the applications and 

future potential of digital currency and blockchain technology. I look forward to a 

thoughtful and engaging discussion. 

4 

Mr. BURGESS. I will yield back my time and recognize Mr. 

Ca ́ rdenas of California as the ranking member of the subcommittee. 

OPENING STATEMENT OF HON. TONY CA ́ RDENAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. CA ́ RDENAS. Thank you very much, Mr. Chairman. I would 

like to thank all the witnesses for coming forward today to help enlighten us about your views on what we are going to talk about in 

this hearing today. In this hearing, we are looking at digital currency and blockchain terms that don’t often enter every conversations. Although with today’s Metro shutdown, the ride-hailing services using the blockchain may have helped people get here to work 

today. 

As we continue this subcommittee’s Disrupter Series, we again 

run into the same key question—how must yesterday’s rules evolve 

to fit today’s technology. Digital currency like Bitcoin lacks many 

of the features we usually associate with traditional money like the 

U.S. dollar. It doesn’t come in paper bills. It is not issued or guaranteed by a Government. Electronic transactions with digital currency may not require a bank to serve as an intermediary. 

Digital currency has not been widely adopted in part because it 

has several changes. Digital currencies lack some of the protections 

provided for more traditional financial products. The value of currencies like Bitcoin has fluctuated wildly. Few merchants accept 

them at this point. Meanwhile, digital currencies have become associated with illegal transactions such as money laundering, 

ransomware, and the sale of illicit goods and services. 

If digital currencies are to be widely accepted at legitimate payments, they need to provide sufficient safeguards for their users, 

and they need to come under an adequate regulatory regime to address unlawful use, particularly in terms of money laundering and 

financing of terrorism. But digital currency is really just our entry 

point for discussion of a more fundamental innovation—blockchain. 

Blockchain is this concept of a digital public ledger to track 

transactions. It is an innovation that can have many different applications. Blockchain could have many other applications beyond 

digital currency. Proponents talk about blockchain’s ability to cut 

out intermediaries. In some cases, this could be helpful. 

At the same time, we need to think about what we may be losing 

in the process of cutting out this middleman. For example, in financial transactions, the middleman is the bank, and banks have rules 

and reporting requirements they must follow to prevent money 

laundering and financing of terrorism. If the bank is cut out, we 

need alternative means to detect such activity. 

While blockchain is theoretically transparent as an open ledger, 

permissioned blockchain, where the ledger is private or invitationonly, could potentially enable anti-competitive activity. These are 

not arguments against blockchain. Rather, they are challenges for 

developers to address as innovation moves forward. Developers 

have a responsibility to protect user privacy, stop fraud, and prevent use of their products for illegal activity. 

5 

Carrying out these responsibilities may look different than it did 

for earlier products, but let’s be clear. Compliance with rules to 

protect consumers or protect our security is not an inconvenience. 

It is a necessary part of participating in our economy. One of our 

roles on the subcommittee is to wrestle with how new technology 

affects consumers and interests with the law. 

States are already figuring out how to regulate these new products and markets. Federal agencies are monitoring digital currency 

markets. These efforts require understanding the unique attributes 

of these new technologies. As we start examining this new space, 

I hope our witnesses can help inform our discussion and provide 

answers on not only how blockchain can be used but also how these 

uses interact with rules to protect consumers and protect security. 

With that, I welcome our witnesses, and I look forward to the 

testimony today. 

Mr. BURGESS. The Chair thanks the gentleman. The gentleman 

yields back. 

The Chair recognizes the gentleman from New Jersey, Mr. 

Pallone, 5 minutes for your opening statement, please. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Burgess. While some members surely have heard of Bitcoin, few have likely heard of the recordkeeping software underpinning it called blockchain. Today we 

will have the opportunity to explore the benefits and risks of using 

crypto-currency sometimes referred to as virtual or digital currencies. We also will get an understanding of the benefits and risks 

of the blockchain for financial and nonfinancial uses. 

Whether using Bitcoin, the most well-known and widely used 

crypto-currency, or another one, peer-to-peer digital transactions 

have the potential to reduce fees and wait times for consumer purchases. In addition, crypto-currencies can offer advantages to 

underbanked and unbanked populations, especially in regions 

where state-backed currency is consistently unstable and traditional financial services are less accessible. They also may offer 

users increased privacy in comparison to traditional payment methods. 

However, at the same time crypto-currencies raise important 

issues that should be explored, they are not legal tender, and their 

value is not guaranteed by any central authority. Therefore, they 

have proven to be vulnerable to price volatility, deflation, and 

hacking. In addition, many existing consumer protections, such as 

requirements that banks have systems in place to limit consumer 

loss and detect money laundering, may not apply to crypto-currencies. 

For example, current law ensures that you are not responsible 

for unauthorized credit card charges over $50. No such protections 

exist for purchases made with crypto-currency. Also, digital payments can be irreversible, making simple consumer transactions 

like returns and chargebacks more complicated or impossible. 

While originally created for crypto-currency, the recordkeeping 

technology, blockchain, has gained enormous interest in the last 

6 

few years with more than $1 billion raised in venture capital so far. 

In the financial sector, firms are looking at placing stock and bond 

trades on the blockchain. In the nonfinancial arena, the full range 

of possibilities may be endless. Blockchain is being tested for possible applications in health care, green energy, copyright, and voting, to name a few. 

The blockchain can automate contracts, making them faster to 

complete. They can increase transparency in property rights disputes and help protect intellectual property. And, in many sectors, 

the blockchain may improve privacy protections, reduce human 

error, and lower administrative costs. 

Just as with crypto-currencies, blockchain raises important 

issues for us to explore. Some experts have pointed out that permission blockchains, in which only vetted and approved users can 

participate, may use anti-competitive tactics or price-fixing that 

would violate antitrust regulations. Others have suggested that the 

blockchain is too rigid for many potential applications. It does not 

include the necessary flexibilities to ensure consumers have basic 

rights, such as the ability to resolve disputes. 

So I just want to reiterate that consumer protections must be 

considered as these new technologies are developed. I look forward 

to hearing from all of our witnesses about the current and future 

uses of crypto-currencies and the blockchain, and the consumer 

protections that go with them hand in hand. 

And, again, Mr. Chairman, I thank you, and I yield back the balance of my time. 

[The prepared statement of Mr. Pallone follows:] 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

Thank you, Chairman Burgess. While some members surely have heard of 

Bitcoin, few have likely heard of the recordkeeping software underpinning it called 

the blockchain. 

Today we will have the opportunity to explore the benefits and risks of using 

cryptocurrencies, sometimes referred to as virtual or digital currencies. We also will 

get an understanding of the benefits and risks of the blockchain, for financial and 

nonfinancial uses. 

Whether using Bitcoin, the most well-known and widely used cryptocurrency, or 

another one, peer-to-peer digital transactions have the potential to reduce fees and 

wait times for consumer purchases. In addition, cryptocurrencies can offer advantages to underbanked and unbanked populations, especially in regions where statebacked currency is consistently unstable and traditional financial services are less 

accessible. They also may offer users increased privacy in comparison to traditional 

payment methods. 

However, at the same time, cryptocurrencies raise important issues that should 

be explored. They are not legal tender, and their value is not guaranteed by any 

central authority. Therefore, they have proven to be vulnerable to price volatility, 

deflation, and hacking. 

In addition, many existing consumer protections, such as requirements that banks 

have systems in place to limit consumer loss and detect money laundering, may not 

apply to cryptocurrencies. For example, current law ensures that you are not responsible for unauthorized credit card charges over $50. No such protections exist 

for purchases made with cryptocurrency. Also, digital payments can be irreversible, 

making simple consumer transactions like returns and chargebacks more complicated or impossible. 

While originally created for cryptocurrency, the record-keeping technology— 

blockchain—has gained enormous interest in the last few years, with more than one 

billion dollars raised in venture capital so far. In the financial sector, firms are looking at placing stock and bond trades on the blockchain. In the nonfinancial arena, 

the full range of possibilities may be endless—blockchain is being tested for possible 

applications in health care, green energy, copyright, and voting, to name a few. 

7 

The blockchain can automate contracts, making them faster to complete. They can 

increase transparency in property rights disputes and help protect intellectual property. And in many sectors, the blockchain may improve privacy protections, reduce 

human error, and lower administrative costs. 

Just as with cryptocurrencies, blockchain raises important issues for us to explore. 

Some experts have pointed out that permissioned blockchains, in which only vetted 

and approved users can participate, may use anticompetitive tactics or price fixing 

that would violate antitrust regulations. Others have suggested that the blockchain 

is too rigid for many potential applications, and does not include the necessary flexibilities to ensure consumers have basic rights such as the ability to resolve disputes. 

I want to reiterate that consumer protections must be considered as these new 

technologies are developed. I look forward to hearing from all of our witnesses about 

the current and future uses of cryptocurrencies and the blockchain and the consumer protections that go with them, hand-in-hand. Thank you and I yield back. 

Mr. BURGESS. The Chair thanks the gentleman. The gentleman 

yields back. 

Seeing no other members present who wish to give an opening 

statement, the Chair would like to remind members that, pursuant 

to committee rules, all members’ opening statements will be made 

part of the record. 

And, again, we want to thank our witnesses for being here with 

us this afternoon, for taking their valuable time to testify and educate the subcommittee. Today’s witnesses will have the opportunity 

to summarize their opening statement, followed by a round of questions from members. Our witnesses for today’s panel hearing include Mr. Jerry Brito, Executive Director at Coin Center; Mr. Juan 

Suarez, counsel at Coinbase; Mr. Jerry Cuomo, Vice President of 

Blockchain Technologies at IBM; Mr. Paul Snow, Chief Architect at 

Factom; Mr. John Beccia, General Counsel and Chief Compliance 

Officer at Circle Internet Financial; Mr. Dana Syracuse, former Associate General Counsel of the New York Department of Financial 

Services at BuckleySandler LLP; and Mr. Matthew Roszak, Chairman of the Chamber of Digital Commerce and co-founder of Bloq, 

Incorporated. 

We certainly appreciate you all being here today. We recognize 

the significant expertise that is before our panel today. We will 

begin the panel with you, Mr. Brito, and you are recognized for 5 

minutes for an opening statement. 

STATEMENTS OF JERRY BRITO, EXECUTIVE DIRECTOR, COIN 

CENTER; JUAN SUAREZ, COUNSEL, COINBASE, INC.; JERRY 

CUOMO, VICE PRESIDENT, BLOCKCHAIN TECHNOLOGIES, 

IBM; PAUL SNOW, CHIEF ARCHITECT AND CO–FOUNDER, 

FACTOM, INC.; JOHN BECCIA, GENERAL COUNSEL AND 

CHIEF COMPLIANCE OFFICER, CIRCLE INTERNET FINANCIAL; DANA V. SYRACUSE, COUNSEL, BUCKLEYSANDLER, 

LLP; AND MATTHEW ROSZAK, CHAIRMAN, CHAMBER OF DIGITAL COMMERCE, AND CO–FOUNDER, BLOQ, INC. 

STATEMENT OF JERRY BRITO 

Mr. BRITO. Mr. Chairman and Ranking Member, members of the 

committee, my name is Jerry Brito, and I am the Executive Director of Coin Center, an independent nonprofit research and advocacy 

center that is focused on the public policy issues facing crypto-currencies like Bitcoin and Ethereum. Our mission is to be a resource 

to policymakers and members of the media who want to learn more 

8 

about digital currency technology and to develop legal research 

that meets the policy challenges this technology presents. 

I want to thank you for inviting me to participate in this hearing. 

I would like to provide some background on the technology we are 

discussing. I would also be happy to answer any technical questions that you might have or to explain some of the regulatory activity that we have seen to date. 

Now, digital currencies are nothing new. They have existed for 

decades from Microsoft points to Facebook credits to airline miles, 

and neither are online payment systems new. PayPal, Visa, Western Union Pay, these are all examples. So what is it about Bitcoin 

and similar cryptograph-based currencies that make them unique? 

Bitcoin is the world’s first completely decentralized digital currency, and it is the decentralized part that makes it unique. 

Decentralized means that there is no issuer, no central authority, 

and there is no company, no building, no server. Before the invention of Bitcoin, for two parties to transact online, to transact electronically, always required a trusted third party, someone like 

PayPal or Bank of America. 

Why was that? Well, what would an online transaction have 

looked like without a trust intermediary? Let’s think first about a 

cash transaction where no third party is needed. If I hand you a 

$100 bill, you now have it and now I don’t, and we can verify that 

the transaction has taken place by looking at our hands. 

If we try to do that online, what would that look like? Well, we would have to represent the $100 billion digitally, and we would 

have to basically create a $100 digital file, and I would attach that 

$100 file to a message, much like I might attach a photo or Word 

document to an email, and I would send it to you. You would then have the $100 file, but what about me? When 

I email a Word document to you, is a document deleted from my 

computer? No. I retain a perfect digital copy. So if it was a $100 

file, I would retain the perfect digital copy of that same $100 bill, 

and I could send it to a second person or a third person or a fourth. 

This is what computer scientists call the double-spending problem, 

and we solve that problem by employing trusted third parties like 

PayPal. 

When I send you $100 using PayPal, I don’t communicate directly with you. Instead, I ask PayPal to deduct that amount from 

my balance on their ledger and add it to yours. This means, however, that we must each have an account with the same party that 

we trust. Bitcoin’s invention is revolutionary, because for the first 

time the double-spending problem can be solved without the need 

for a third party. Bitcoin does this by distributing the necessary 

ledger among all the users of the system, via a peer-to-peer network. 

Every transaction that occurs in the Bitcoin network is registered in a distributed public ledger which is called the blockchain. 

The global peer-to-peer network, composed of thousands of peers, 

takes the place of the intermediary. You and I can now transact 

online without an intermediary. 

Now, why would one use Bitcoin instead of a traditional payment 

system? There are many reasons, but chief among them is because 

if there is no intermediary transaction costs can be lower, making 

9 

Bitcoin transactions cheaper and faster than some existing systems. And perhaps more importantly, though, Bitcoin allows for 

new kinds of transactions that were never before feasible, including 

micro transactions, self-executing contracts, and other innovations. 

Bitcoin is an open network protocol. This means that unlike 

PayPal or a credit card network, you don’t need permission to join 

and transact. As a result, Bitcoin is an open platform for innovation, just like the Internet itself. In fact, Bitcoin looks today very 

much like the Internet did in 1995. 

So some dismissed the Internet then as a curiosity, but many 

could see that such an open platform for innovation would allow for 

world-changing applications to be built on top of it. Few in 1995 

could have foreseen Facebook or Skype or Netflix, but they could 

see that all the building blocks were there for some amazing innovations. Bitcoin is like that today. We can’t conceive yet what will 

be the killer applications on Bitcoin and open crypto-currencies, but 

it is pretty obvious the day will come. 

Bitcoin faces some challenges, however, and chief among them is 

regulatory uncertainty, especially at the State level. If we think 

back again to the early Internet, it was not until the Government 

made it clear that it would pursue a light-touch regulatory approach that Internet innovation really took off. 

Bitcoin today is in need of similar commitment from Government. Therefore, as you consider regulatory policies that affect this 

infant technology, you should take care to measure their impact on 

continued innovation. If you need any further assistance as you 

consider digital currencies, please do not hesitate to contact us at 

Coin Center. Again, our mission is to build a better understanding 

of these technologies and to promote a regulatory climate that preserves the freedom to innovate using blockchain technologies. We 

are more than happy to connect you with the appropriate academics, experts, and practitioners in the space. 

Thank you for your time, and I look forward to your questions. 

[The prepared statement of Mr. Brito follows:] 

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Mr. BURGESS. The Chair thanks the gentleman. 

Recognize Mr. Suarez for 5 minutes for your opening statement, 

please. 

STATEMENT OF JUAN SUAREZ 

Mr. SUAREZ. Chairman Burgess, Ranking Member, and members 

of the subcommittee, thank you very much for the opportunity to 

testify this morning on the role that virtual currency may play in 

disrupting today’s financial services landscape. 

My name is Juan Suarez, and I am counsel for Coinbase, the 

world’s leading retail Bitcoin exchange platform. Coinbase was 

founded in early 2012 with the simple goal of becoming the easiest 

place to buy and sell Bitcoin. At the time of Coinbase’s founding, 

one Bitcoin cost less than $10, virtual currency had not entered the 

mainstream, and little to no venture capital had been invested into 

the industry. 

Today, 4 years later, one Bitcoin is valued at several hundred 

dollars, several leading online merchants accept Bitcoin as a means 

of payment from customers all over the world, and over $1 billion 

of venture capital has been invested into the space. We believe the 

rapid emergence of Bitcoin, together with other decentralized virtual currencies, is attributable to certain core characteristics that 

naturally orient the technology towards innovation and free and 

open use. 

These characteristics include the following. First, decentralized 

virtual currencies are, by definition, distributed, meaning that perfect strangers may transact securely online without requiring the 

involvement of a trusted intermediary or a proprietary infrastructure. Second, virtual currencies are openly accessible via Internetconnected devices anywhere in the world. And, third, decentralized 

virtual currencies typically operate via an open source software 

protocol, and any software developer can build and independently 

own applications that facilitate new and innovative interactions 

among users. 

These characteristics are strongly reminiscent of the early Internet, which began as an open network with modest underpinnings. 

They grew to revolutionize commerce and the way we communicate 

and which contributed untold billions or trillions of dollars to the 

United States economy. 

Virtual currency, in our view, has the same promise. It has the 

fundamental capacity to expose entrenched financial services to unprecedented competition, to bring about new efficient and global 

consumer financial products, and, by virtue of very low marginal 

transaction costs, to unlock entire new industries never before realized. 

Today we are still in the very early stages of virtual currency. 

The most widely adopted use of virtual currency thus far has been 

as an asset class for investing savings or for trading, but there are 

a great many additional applications of virtual currency with enormous promise. 

And to just give you two examples, first, simply, as a means of 

payment for a good or service. Bitcoin rails have several advantages relative to customary online payment methods. Bitcoin is 

truly global, so a merchant can immediately accept payment from 

21 

customers worldwide. Bitcoin is a push payment method. A merchant need not collect, and a customer need not provide sensitive 

payment credentials to settle a transaction. 

This reduces proliferation of a customer’s personal information 

and reduces the risk of catastrophic data breaches. And as a push 

payment, like handing over cash, there can be no fraudulent reversals, which cost online merchants billions of dollars in avoidable 

losses each year. This translates into savings. 

Today, prominent payment processors that have integrated 

Bitcoin payment rails advertise processing fees less than one-third 

the cost of fees charged by those same processors to process card 

transactions. A second use case is remittance for peer-to-peer payments. Bitcoin and derivative technologies enable transactions that 

can be processed and settled at a cost of pennies, in some cases 

even less. 

As of the time of this testimony, the fee associated with an average Bitcoin transaction is in the range of approximately 10 cents 

or below. That means a consumer can send, for example, $100 

worth of Bitcoin anywhere in the world for just a few pennies. 

Today that same transaction would cost consumers around the 

globe on average more than $7 using conventional remittance services. 

These and many other applications of virtual currencies are 

being actively pursued by thousands of developers all around the 

world, and we anticipate enormous innovation and growth in the 

virtual currency economy in coming years. And through the hard 

work of companies like Coinbase, together with core development 

teams, we can ensure that this innovation occurs in a safe and secure manner with cooperation among industry, consumer protection 

agencies, policymakers, and law enforcement. 

Thanks very much, and I look forward to any questions you may 

have. 

[The prepared statement of Mr. Suarez follows:] 

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Mr. BURGESS. The Chair thanks the gentleman. 

Mr. Cuomo, recognized for 5 minutes for your opening statement, 

please. 

STATEMENT OF JERRY CUOMO 

Mr. CUOMO. Good morning, Chairman Upton, Ranking Member 

Pallone, Chairman Burgess, Ranking Member Schakowsky, and 

members of the subcommittee. My name is Jerry Cuomo, and I am 

the Vice President for Blockchain Technologies at IBM. And thank 

you very much for the opportunity to testify this morning. 

We at IBM believe that blockchain is a revolutionary technology. 

With blockchain we can reimagine many of the world’s most fundamental business interactions, and at the same time open the door 

to new styles of digital interactions that we have yet to even imagine. You are wise to include blockchain in your study of disruptive 

technologies, because blockchain has the potential to vastly reduce 

the cost and complexity of getting things done across industries, 

Government agencies, and social institutions. 

I also want to tell you what blockchain is not. It is not Bitcoin, 

the crypto-currency. While blockchain is the core technology that 

enables Bitcoin to operate, it can be used for entirely different purposes. Whereas Bitcoin operates as an anonymous network, 

blockchain can be used as a trusted network to handle interactions 

with known parties. 

It is our strong feeling that the benefits of blockchain are realized in its broadest use, across the broadest set of industries, from 

supply chain to trade settlement, from tax to land deeds, birth certificates and social security. This morning my testimony makes 

four points, which I will summarize now. 

The first point is about how blockchain changes the game. At the 

center of a blockchain is the notion of a shared ledger. Think of 

this as one of those little black accounting books. However, this 

book has seemingly magical properties. You see, members of a 

blockchain network each have an exact copy of the ledger. New entries in the ledger are instantaneously propagated throughout the 

network. Therefore, all participants in an interaction have an upto-date ledger that reflects the most recent transactions, and the 

transactions, once entered, cannot be changed. 

Now, let me tell you why and how blockchain actually changes 

the game. Transactions can now be settled instantaneously versus 

in days. Cost is reduced due to elimination of middlemen. And because of how these transactions are stored on the ledger, the 

chances of tampering and collusion are greatly reduced. 

My next point is blockchain technologies must be made enterprise-ready. The core blockchain technology must focus on security 

and privacy concerns that arise within enterprise use cases. In addition, computer systems and networks must be architected so they 

scale up and can handle immense volumes of transactions. Simply 

put, we in IBM are openly working with a group of industry collaborators to build a new blockchain from the ground up, with privacy, confidentiality, scaleability, and auditability, front and center. This is what enterprise-ready means, which leads me to my 

third point. 

36 

Blockchain must be open. For blockchain to fulfill its potential, 

it must be based on nonproprietary technology. And doing so will 

encourage broad adoption and ensure compatibility and interoperability of systems. Specifically, this enterprise-ready blockchain 

must be built using open source software with a combination of liberal licensing terms and strict governance. Only with openness will 

blockchain be widely adopted and enable innovation. 

We are participating with over 30 industry players in the 

Hyperledger Project led by the Linux Foundation to create an open, 

enterprise-ready blockchain. 

And my last point is blockchain will greatly benefit from Government participation. Blockchain holds the promise of enabling more 

effective interactions between Government and business. For example, working as an invited member of an enterprise blockchain, 

Government agencies could be able to better collaborate in financial and commercial systems, and spot potential problems before 

they become critical, regarding everything from tax to land use. 

So it is critical that U.S. companies and Government agencies 

lead the world in demonstrating the potential of blockchain. 

Now, I should add that blockchain isn’t the answer to everything. 

There will be situations where it will improve efficiencies, but there 

will be others where it is simply not a good fit. Furthermore, we 

should not underestimate the technical and organizational challenges of building and adopting blockchain systems. 

Blockchain is a classic emergent technology, but it is so strikingly different from what people are used to that many leaders are 

adopting a wait-and-see attitude. Now, we applaud judicious caution, but now is the time to quickly assess the potential of 

blockchain and begin experimenting. Therefore, we urge Congress 

and the Obama administration to study and discover the best uses 

of blockchain for the U.S. Government. 

We also want to pay attention to regulatory approaches to maximize its potential while protecting the interest of citizens. 

Blockchain may have begun its existence as the underpinning of 

the crypto-currency, but now it stands in the open, a powerful tool 

ready to serve business and society. 

And thank you again for your invitation and I would be glad to 

answer any questions you have. 

[The prepared statement of Mr. Cuomo follows:] 

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Mr. BURGESS. The Chair thanks the gentleman. 

Mr. Snow, you are recognized for 5 minutes, please. 

STATEMENT OF PAUL SNOW 

Mr. SNOW. Thank you, Chairman Burgess and members of the 

subcommittee for the opportunity to testify before you today. I am 

Paul Snow, the Chief Architect of Factom, a protocol to provide 

blockchain solutions to a wide range of problems above and beyond 

simple currency transactions. 

Let me do something strange here. I am a developer, and so I 

am going to talk to you about what a blockchain really is and—— 

Mr. BURGESS. Mr. Snow, I hate to interrupt. Just be sure your 

microphone is on. I think—— 

Mr. SNOW. You know, I might be on now. Do I need to reset? OK. 

Well, I am going to do something strange here, and I am going 

to try to help you guys be developers like I am. I am going to actually explain to you what a blockchain is. OK? 

First and foremost, if you don’t understand hashing functions, 

you will never understand blockchains. Now that is scary, so let me 

tell you what a hashing function is. Any piece of data at all—a picture, a video, even your signature, your address—any piece of data 

at all can be mathematically constructed to create a very small fingerprint, and that fingerprint is unique for that piece of data. 

If I make one little change to that data, I will get a completely 

different fingerprint, and no fingerprint of any two data sets, no 

hash of two different data sets, has ever matched. This is called no 

collisions. There is no collisions. So fingerprint, certain data. 

Change it, break the fingerprint. 

Now, we talk about blockchains, so what is a block? Well, block 

is a lot of data. It is a lot of transactions, but it could also be 

records, it could be records for a mortgage, it could be the process 

by which you validate a land title in a land titling system. It is just 

a bunch of data. 

Now, we make blocks. We take a bunch of this data, and we put 

it together. That is a block. And guess what we do to it? We hash 

it. Now, what have we done when we hashed it? We have created 

a block of data you never get to change again, because if you 

change it, you will break the hash. 

Now, what do we do with a hash? Well, we will put it in the next 

block, and then we will collect some more data. Now, that is the 

chain in blockchain. It is a chain of blocks completely tied down 

and secured against any modification in the future by the hash 

that is in the next block in the chain. And as I progress and collect 

more data, nobody gets to change the past, and that is really the 

magic of blockchain. 

So what can I do with blockchains? I can do a lot of stuff. Can 

I secure a lot of data? Well, yes, because there is this other trick 

we can do with hashes, and that is we can have a tournament. 

How many of you have been to a tournament before? Have you ever 

seen a tournament bracket? You can follow your team all the way 

from the beginning, competing against thousands of other teams, 

all the way to its winner slot. Your team always wins, right? All 

the way to the winning slot, and all I have to consider is that team 

48 

and the games it plays in. I don’t have to look at all of those other 

participants. 

Ms. SCHAKOWSKY. Can Cub fans do that, too? 

Mr. SNOW. What is that? 

Ms. SCHAKOWSKY. Can Cub fans—— 

Mr. SNOW. Cub fans, yes, they can. Sometimes the chain is a little shorter. 

So the idea is I can take a ton of data, and I can create one— 

I can combine—instead of games that are hashes, I can end up 

with one hash at the end that secures a ton of data, and there is 

a small path to any piece of data that proves that data hasn’t 

changed. I don’t have to look at everything. 

Factom is built on that. That is the protocol that I am building, 

and I build a collection of these Merkle Trees, these tournament 

brackets, for data that is collected, and I place that hash in a public witness. And the public witness in this case is Bitcoin 

blockchain, because it has the most secure data structure on the 

planet right now. 

But we can also go put it in IBM’s Hyperledger or in Ethereum 

or many other blockchains, and we create a basis by which you can 

write an application that runs in the context of a private chain 

within all the security that we need for some applications. And it 

can access vast sums of data, like weather data, like transactions 

on exchanges, huge sets of data, and prove that that data is historically correct and accurate. And that is basically the power of the 

blockchain is to create histories that you can trust that can be validated and verified and can be used across many different systems. 

And I will be happy to answer any questions anybody has. And 

if you want to apply as a programmer, I can certainly talk to you 

about that, too. Thank you very much. 

[The prepared statement of Mr. Snow follows:] 

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Mr. BURGESS. Yes. Not likely. Mr. Beccia, you are recognized for 

5 minutes, please. The Chair thanks the gentleman. 

Mr. Beccia is recognized. 

STATEMENT OF JOHN BECCIA 

Mr. BECCIA. Thank you, Chairman Burgess, Ranking Member 

Schakowsky, and members of the subcommittee. My name is John 

Beccia, and I am General Counsel and Chief Compliance Officer for 

Circle Internet Financial. We are a consumer company focused on 

making payments more secure, safe, and simple. 

Circle is a member of the Electronic Transactions Association, 

the leading trade association for the payments industry. I am 

grateful to be part of the subcommittee’s Disrupter Series. The 

blockchain represents one of the most important technical innovations of our time. It has potential to impact myriad industries, retail, media, health care, Government, and energy, but today I am 

going to focus, really, on how the blockchain can impact financial 

services, talk a little bit about the benefits, risks, and the regulatory environment. 

There is no question that payments can be improved. Traditional 

payments are controlled by networks that charge fees for transactions and have cumbersome processes that are subject to data 

breaches. Digital currency holds promise to improve payments, 

since there is no central authority and the value is stored across 

a distributed network. 

So what are the benefits? For consumers, it can be used in a variety of transactions. It can be used to split a lunch tab with your 

co-workers, a mother sending funds to a daughter in college, or 

someone sending money to a relative overseas. Digital currency 

makes these transactions simple, less costly, and secure, and it also 

provides instant access to funds. It also offers privacy, because on 

the blockchain personal information is not disseminated. 

Digital currency has the ability to reach unbanked and underserved communities. Cross-border transactions are offered at a 

fraction of the cost of typical remittance fees. Merchants also like 

this technology because of the benefits. It is not subject to interchange fees, chargeback risks, or the liability of storing customer 

information. 

Blockchain technology is still in its infancy. While there are over 

12 million people with digital wallets, more than 100,000 merchants accepting Bitcoin, and nearly 200,000 daily transactions, the 

majority of consumers are still learning about the benefits of 

Bitcoin. Like any other technology on the Internet, adoption is 

going to take some time. 

At Circle, we believe that money should be exchanged freely, the 

same way people exchange other information over the Internet, 

whether it is photos, messages, et cetera. Our social payments application allows consumers to make payments in multiple currencies on the Circle platform and to anyone anywhere in the world 

on the blockchain. It also is done in a fun mobile experience that 

uses tools like GIFs, emojis, and photos. 

Incubation and blockchain testing among firms of all sizes is 

really setting the stage for the expansion of financial products, economic growth, and job creation. Now, there are some risks associVerDate Mar 15 2010 14:02 Jun 09, 2016 Jkt 037690 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 C:\PROGRAM FILES\WS_FTP\20322.TXT WAYNE
54 

ated with digital currency, and I am sure you have heard about 

those risks, and the industry has worked very diligently to address 

those risks. 

First, digital currency is subject to money laundering. Unfortunately, global AML laws are updated and really should be revised 

to account for 21st century technology. The transparent nature of 

the blockchain, however, provides us some more transparency to 

detect illicit activity. The industry has created risk management 

systems which are really innovative and have collaborated quite a 

bit with Government to address these risks. 

Second, which I believe is important to this committee, consumer 

education and protection is vital. The CFPB and the FTC have 

issued advisories on digital currency. Companies in this space 

should have disclosures to provide clear language about fees, risks, 

obligations, and dispute resolutions. Consumers need to know their 

funds are secure, and that is why our customers have FDIC insurance protection if they are holding dollars in their account, and we 

have also secured private insurance for those customers who are 

holding digital assets. 

Third, those digital assets really need to be protected, so companies like us who are acting as custodians need to have best-in-class 

protocols to ensure that we are protecting digital assets whether 

they are online or offline. And that is why we support the White 

House’s recently announced Cyber Security Action Plan and feel 

that companies should work to make sure that all financial transactions are safe. 

The regulatory environment for digital currency has evolved 

quite a bit over the last couple years. For companies like Circle, we 

need to be registered as a money transmitter at the Federal level 

as well as licensed State by State. Whereas States like California 

have pending legislation on digital currency, New York has created 

their own BitLicense, and that was finalized last year. 

We are currently the one and only company that does have a 

BitLicense, and we take that responsibility very seriously. In addition, the Conference of State Bank Supervisors are coming out with 

regulatory principles, or have come out with principles, in an attempt to provide clarity among the States. 

While we are encouraged by the regulatory framework, there is 

work to be done. Regulatory uncertainty and/or regulatory arbitrage makes it difficult for businesses to utilize this service and for 

consumers to feel confident in the service. We also encourage Congress to consider more efficient charter choices, both the digital 

currency-based firms as well as FinTech firms in general. 

Disruption in payments is happening now. The lessons learned 

from digital currency and financial services can be applied to other 

industries, and we look forward to discussing that with you in 

question and answers. 

Mr. Chairman, this concludes my testimony. I look forward to 

answering any questions you may have. Thank you. 

[The prepared statement of Mr. Beccia follows:] 

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64 

Mr. BURGESS. The Chair thanks the gentleman. 

Mr. Syracuse, you are recognized for 5 minutes. 

STATEMENT OF DANA V. SYRACUSE 

Mr. SYRACUSE. Mr. Chairman, Ranking Member Schakowsky, I 

thank you for inviting me here to speak today. My name is Dana 

Syracuse. I am counsel at BuckleySandler LLP, and I am the 

former Associate General Counsel of the New York State Department of Financial Services, which is the principal financial services 

regulator in New York State. 

While I was there, I was responsible for helping to lead several 

initiatives, including bringing enforcement matters against some 

banking institutions for AML/BSA failures and violations of OFAC 

sanctions programs, helping to lead the department’s effort in the 

area of cybersecurity, and also helping to lead the department’s efforts in the area of regulation of emerging payment systems, including Bitcoin, blockchain, and my current practice at 

BuckleySandler focuses on these same areas. 

For the sake of clarity, I want to break out what the regulatory 

environment looks like in the area of the payment system around 

Bitcoin, separate and apart from blockchain. I agree with my fellow 

panelists that the Bitcoin payment system really is revolutionary 

and has the power to bring into the financial fold the unbanked, 

the underbanked, and those who may not have the benefit of a 

modern banking system. 

It also has the possibility of being the catalyst of driving the 

modernization of our Apollo era payment system into one that is 

faster, less expensive, and more reliable. But the challenges faced 

by regulators in this new era is going to be how to create the appropriate guard rails that protect consumers, prevent money laundering, and impose proper cybersecurity standards while at the 

same time not hindering innovation. 

In New York, with the drafting of the BitLicense, where we came 

out was not regulating Bitcoin, not regulating the underlying 

blockchain protocol, but rather taking a functional approach and 

regulating those who are acting as financial intermediaries, meaning those who are put, in essence, in a position of trust. So that 

includes the law companies, exchangers, and transmitters. 

And because of the kinds of functionality that they were offering, 

the regulation, therefore, imposes certain capitalization requirements, anti-money laundering requirements, cybersecurity, which I 

think the importance of cannot be understated, and the other challenge is how to do this while at the same time continuing to help 

foster innovation. 

And that is why the BitLicense has an on ramp for smaller companies, and it is something that I would encourage any other 

States or regulatory bodies that choose to step into this area also 

include, because the fact of the matter is, you know, this is an area 

that has a tremendous amount of innovation, and it is, I believe, 

unreasonable and could be a hindrance to innovation to potentially 

saddle companies like that without outsized compliance functions 

that may not necessarily equate with the potential dangers that 

are there. 

65 

I also believe that a uniform approach would—across all the 

States would be a good goal. The Uniform Law Commission has an 

effort underway right now, and Mr. Beccia mentioned the CSBS 

model framework as another example. 

Now, turning to blockchain, you know, there is—the blockchain 

is the underpinning backbone architecture on which different applications can be built, Bitcoin being the most well-known. There is 

significant interest in the way banks and clearinghouses and exchanges may use blockchain to transform existing business models, 

whether they be through closed systems or on the public 

blockchain. 

Significant time and money is being spent in understanding this. 

While blockchain is new, the kinds of functionalities that are going 

to come out of it—securities clearing, identity management—those 

are not. So the question that needs to be asked is, you know, when 

these new functionalities arise, is there an existing regulatory 

framework that already answers the question or meets the concerns, if it is for protection concerns, the AML concerns, that Government and regulators could potentially have. 

The other important thing to take away from this is that regulation around the blockchain protocol itself would be a hindrance to 

innovation. It is ill understood right now, companies that are doing 

some of the creative work in there haven’t reached I would call it 

market adoption yet sufficient to say that it is worth the candle of 

potentially saddling them with burdens that they don’t need. 

In conclusion, you know, regulation in the area needs to be 

smart. It needs to be the result of study. And I thank you and look 

forward to your questions. 

[The prepared statement of Mr. Syracuse follows:] 

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Mr. BURGESS. The Chair thanks the gentleman. 

Mr. Roszak, you are recognized for 5 minutes for an opening 

statement, please. 

STATEMENT OF MATTHEW ROSZAK 

Mr. ROSZAK. Good morning, and thank you, Chairman Burgess 

and the distinguished subcommittee for the invitation to testify 

today. I would also like to commend your staff for the thoughtful 

engagement going into today’s hearing. 

My name is Matthew Roszak, and I am pleased to be here on behalf of the Chamber of Digital Commerce where I serve as chairman. The Chamber is the world’s largest trade association representing the blockchain industry. Through education, advocacy, 

and working closely with policymakers, regulators, and industry, 

our goal is to develop a pro-growth legal environment that foster 

innovation, jobs, and investment. 

I am from Chicago, and I have been working as a venture capitalist and technology entrepreneur for 20 years, deploying over a 

billion dollars of capital and founding a dozen companies during my 

career. I have also invested in over 20 blockchain companies 

through my firm, Tally Capital, and more recently I co-founded a 

software company called Bloq, with Jeff Garzik, a technology visionary and core developer of Bitcoin. 

Blockchain technology has captured the imagination of thousands 

of innovators around the world and created what I call a 

generational opportunity for entrepreneurs and investors. That 

translates into once in a lifetime. So think railroads, automobiles, 

telephony, and the Internet. It has the potential to play on that 

scale or even greater. From the recent covers of the economists and 

Bloomberg, if it feels like you are reading about blockchain everywhere, well, it is because you are, and there is a good reason for 

that. 

The technology of money has evolved over the centuries from 

shells, wampum, salt, tally sticks, gold, and paper currency, to bits 

and bytes. Today banking and finance are in the process of being 

redefined as blockchain technology is creating an entirely new operating system for money and poised to be one of the most important inventions in the history of finance. 

Trusted intermediaries will soon be disrupted and decentralized 

peer-to-peer networks will blossom reducing tons of friction and 

saving billions in transaction costs while unlocking financial access 

to the entire world, yet we are still in the early days akin to the 

dial-up phase of the Internet. 

In terms of Bitcoin’s State of the Union, and taking a famous 

quote from Charles Dickens’ A Tale of Two Cities, ‘‘It was the best 

of times, it was the worst of times.’’ This very much applies to 

Bitcoin today. Despite some of the sensational headlines, investment and innovation in this industry has grown at an incredible 

pace. Venture capital surpassed a billion dollars last year, with 

some of the best and brightest entrepreneurs and professionals 

from Silicon Valley to Wall Street to K Street all racing in, along 

with over 100,000 merchants accepting Bitcoin for goods and services. 

75 

Bitcoin is indeed alive and well. And also named companies, such 

as Citibank, Deloitte, Foxconn, IBM, PwC, Microsoft, NASDAQ, 

and many more have all dedicated significant resources to exploring blockchain technology. 

I would also like to highlight a challenge the Bitcoin community 

is currently facing. Something tells me this committee might be 

able to relate. Making decisions in a decentralized system is not 

easy. Bitcoin is experiencing significant growing pains as the number of transactions are increasing exponentially. This is a clear indicator of Bitcoin’s success and a testament to its global adoption. 

Now, the challenges reside in how to best increase the throughput of the system in order to support greater transaction volumes. 

Unlike a Government or company, there are no members of Congress in Bitcoin, nor a CEO or board. That is all purpose-built and 

part of the fundamental power and beauty of Bitcoin’s math-based 

composition. 

However, when there is friction in decision-making, that gridlock 

can sometimes be overwhelming, if the debates, fights, and passions involved are in many ways a feature of the system and not 

a bug. There is an opportunity on the horizon to create an open 

forum for building consensus with more constructive ways to outline goals, priorities, and risks, which would serve as an important 

barometer for stakeholders in the ecosystem. And there are plenty 

of well-known platforms to draw from, including W3C, ICANN, 

Wikipedia, Linux, and even the United Nations, where certain best 

practices can be explored and leveraged. 

Extremely talented and brilliant people have solved some of 

Bitcoin’s toughest problems. These statesmen usually work as volunteers, purely out of love for the technology. Through their Herculean efforts, the system’s features, security, and especially its resilience have all improved dramatically. The system stresses, heals, 

learns, and evolves. 

In conclusion, the amount of financial and intellectual capital 

being poured into this ecosystem, I see incredible promise and opportunity, especially with hundreds of startups betting their lives 

on blockchain, and believe this new technological frontier has the 

potential to benefit society and industry with privacy, security, and 

the freedom of conveyance of data, which in my mind ranks up 

there with life, liberty, and the pursuit of happiness. 

Thank you very much. 

[The prepared statement of Mr. Roszak follows:] 

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Mr. BURGESS. The Chair thanks the gentleman and thanks all of 

our witnesses. We will move into the Q&A part of the hearing. 

Each member will have 5 minutes, and we will go one round and 

perhaps longer. We may have a series of votes that interrupts us, 

but let me recognize myself for 5 minutes. 

Mr. Syracuse, very fascinating testimony from all of you, but yesterday a situation was brought to my attention where someone 

was—a crime was committed, and the crime was committed using 

something called ransomware, which I did not know about until 

yesterday. It is a fairly interesting technology that I guess criminals have developed, and the payment was instructed to be made 

in Bitcoins. 

Now, it wasn’t like a bag of Bitcoins be taken down to the wharf 

and left under a boat. It was, you know, where do you go with this 

stuff? And when I questioned, you know, ‘‘Well, why don’t you just 

follow the digital trail?’’ he was like, ‘‘You can’t do that.’’ So can 

you kind of enlighten me and the subcommittee on what are saw 

of the law enforcement aspects here? 

Mr. SYRACUSE. Sure. I mean, I think that there are a couple of 

things going on in that story. You know, firstly, virtual currency, 

Bitcoin, it is highly traceable. There are services in place that regulators and law enforcement have and need to educate themselves 

of if this is going to be regulated that allow one to follow using 

blockchain forensics, the flow of funds from one exchange to another or from wallet to wallet. 

The issue also is, at a certain point, that person is going to need 

to exit and get Fiat out. So that speaks to the importance of making sure that the exchanges—the entry points and the exit points, 

the on ramp and off ramp—are regulated. And also, that story, it 

is less about virtual currency and Bitcoin. 

You know, Bitcoin is used as cash, which can be used in criminal 

enterprise. They kind of outlawed that, but it is a story about 

cybersecurity, and a larger conversation that needs to be had 

around regulation in that area and creating proper standards 

there. 

Mr. BURGESS. You know, maybe I have watched too many crime 

dramas on TV, but it seems like Clint Eastwood would have put 

an ink cartridge into the bag of money that stained the dollar bills, 

so that anyone knew when they were pushed across the counter 

that this guy is the criminal. Is there any way technologically to 

attach that sort of detection device to the Bitcoin transaction? 

Mr. SYRACUSE. I think that there are coins that are known now 

that have been used in criminal enterprises that are, in essence, 

marked. But, yes, they can be programmed in such a way. But the 

key thing is to make sure that these blockchain forensic tools are 

being utilized, so you could follow it, so you could trace the funds. 

Mr. BURGESS. Well, you know, again, that was interesting. That 

case just literally came before me yesterday as we were preparing 

for this hearing today. 

Mr. Brito, did you have something you wanted to add to that? 

Mr. BRITO. Sure. One thing to keep in mind about ransomware, 

which is a very serious problem, is that it predates Bitcoin and decentralized digital currencies. We have seen ransomware as far 

89 

back as 20 years, and what makes ransomware possible today is 

three things. 

It is a breach of a computer. Essentially, you get hacked. Number 

two, cryptography. Essentially, your files on your computer aren’t 

encrypted, so you no longer have access to them. And, number 

three, it is a payment method. So in this case it is Bitcoin. So you 

can pay the person who is in ransom. 

Of those three things that are necessary for ransomware, 

encryption and digital currencies have incredible potential, you 

know, good uses, right? So cryptography is what keeps our bank 

balances safe. Digital currency, as we have talked, is what makes 

it possible. 

The third component, though, the breach, the hack, the lack of 

cybersecurity, that is where the real concern is. And I am happy 

to say that, in conjunction with the CDC, Coin Center and a lot of 

the companies in this space have created something called 

blocktion lines, which is a public-private forum between law enforcement and the companies in this space to begin to discuss and 

educate law enforcement about how they can do this kind of tracking to, you know, get the bad guys. 

Mr. BURGESS. Are there places a criminal can go, countries to 

which they can go, where these traceability aspects are muted or 

disrupted? 

Mr. BRITO. So the traceability of the coins, as it were, on the network cannot be compromised. You can still trace the coins. The 

problem is that the off ramp and on ramp may be in a country that 

is not cooperating with law enforcement in other countries. But 

that, again, is an issue not of Bitcoin’s issue, of cooperation between law enforcement. 

Mr. BURGESS. Mr. Suarez, just briefly let me ask you, how do you 

determine the value of a Bitcoin? Is it all one unit size, or are there 

various sizes? 

Mr. SUAREZ. Well, the value of Bitcoin is determined in the same 

way that the value of really any kind of digital asset or commodity 

is determined, which is effectively through supply and demand. 

And so the price of Bitcoin on the coin-based platform today, which 

is probably something in the low $400 range, is really just a function of how many people are willing to purchase Bitcoin and how 

many people are willing to sell it. 

To your question about fractions of a Bitcoin, the reality is you 

can transfer fractions of a Bitcoin, very tiny fractions of a Bitcoin, 

just as easily as you can a full Bitcoin, or many Bitcoin. And that 

opens up very exciting possibilities. 

So, for example, one of the issues I think that was discussed 

today is the concept of micro payments online where I can viably 

send you two pennies worth of value or 10 pennies or 50 cents 

worth of value because I am going to tip you because I like a comment that you made on my Internet form, for example. And that 

is not a technology or that is not a payment form that is viable 

today, because the cost of those smaller payments would exceed the 

value of that transfer. So we can transact in tiny fractions of a 

Bitcoin. 

Mr. BURGESS. That is very interesting. 

90 

The Chair recognizes Ms. Schakowsky of Illinois, 5 minutes for 

questions. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. I apologize for 

being late. I did get to hear most of the testimony. 

I wanted to ask questions about consumer protection also and financial fraud and abuse. There is all kinds of protections set up 

to guard against financial fraud and abuse through traditional currency transactions. Banks can flag suspicious activity and limit 

withdrawals, which make it harder for a thief or a fraudster to 

empty out our bank accounts. 

And I understand that those kinds of checks may not be in place 

for digital currency, but I did—and another example would be that 

the consumer protections required by the Truth in Lending Act 

may not apply to loans or credits of digital currency, raising questions about transparency and about fairness. 

So, Mr. Syracuse, I wanted to ask you, you have experience in 

the public sector and in this kind of regulation. If a consumer 

needs to contest a purchase made, for example, with Bitcoin, say 

the product they bought is defective or the service was never performed, are they protected in the same ways that they would have 

been if they had used a credit card or a debit card? 

Mr. SYRACUSE. Not necessarily. But depending on what exchange 

or what facilitator they are using, they may have those policies in 

place. You know, I would be curious to—the answer is not necessarily. 

Ms. SCHAKOWSKY. Not necessarily. And are those kinds of risks, 

then, disclosed? Do consumers—— 

Mr. SYRACUSE. Yes. 

Ms. SCHAKOWSKY [continuing]. Make assumptions, do you think? 

Mr. SYRACUSE. Yes. So under the BitLicense, there are certain 

enumerated disclosures that need to be made. So disclosures about 

volatility, disclosures about the irreversibility of a transaction, they 

have to be made. 

Ms. SCHAKOWSKY. And in what form—you know, I get all of 

these privacy disclosures and all of these things that just say 

‘‘punch agree’’ if you agree? 

Mr. SYRACUSE. Well, that is the issue is at what point does one 

kind of turn a blind eye to it? And then the other issue is, in this 

digital environment, you know, how much information can one actually absorb in that little screen? You know, I think that there 

should be a conversation around what consumer protection looks 

like in the digital age as our banking functions shift from brick and 

mortar to an increasingly mobile environment. I think it is going 

to be kind of a necessary area to roll up our sleeves. 

Ms. SCHAKOWSKY. And what are those things, other ways that 

the digital currency exchanges and wallets can be better protected, 

and what would that look like? Sure. Mr. Snow, sure, and then 

Mr.—— 

Mr. SNOW. I would like to change the conversation just a little 

bit, because it is in fact true that digital currency is—what am I 

trying to say? Nonreversible, yes. It is a nonreversible transaction. 

But blockchains do have the potential for the consumer to have a 

much more assured understanding of what they are purchasing. 

91 

So let me tell a really short story about a friend of mine who 

builds computer parts on a sideline. He is retired, so now he 

spends hours and hours in a bedroom building little kits. It is what 

intel engineers do, I guess. 

And one of his parts, if it is not an authentic part, the whole 

board that he creates, bricks, it kills itself. And he can work at it, 

beat on it, and bring it back to life, but his customers get really 

upset if it has a nonauthentic part on his board. So he bought a 

bunch of chips from Alibaba, you know, the Chinese eBay sort of 

thing, and they assured him he was getting valid chips. And he put 

them on the board, and they weren’t valid. 

And then when he goes to their consumer protection group, the 

manufacturer always wins. Therefore, he just had to go find some 

more parts and replace all these chips. 

Now, here is where the blockchain can help you. Because you can 

create a public notified ledger of where parts came from, the manufacturer of the real genuine part could have put on a chain, ‘‘These 

are parts I have sold to Company X.’’ And Company X could put 

on that same chain that it sold these parts to Company Y. 

And then Company Y could be the guy that my engineer friend 

is talking to, and he says, ‘‘I want authentic parts,’’ and they say, 

‘‘Yes, you have these three parts. And, see, they are in this chain, 

and I can cryptographically prove that there is a path of legitimate 

parts that came from the manufacturer to this guy, and he is about 

to sell them to me.’’ 

Now, others would say, ‘‘Well, he could turn around and still 

send you the bogus parts, right?’’ But, see, the trick is, when the 

next customer said, ‘‘Sell me some parts,’’ Company Y would have 

already said, ‘‘He sold the legitimate parts to my friend.’’ He would 

have to represent the real parts as clones. 

And so you are in a position where we can create audit trails for 

consumers that exist in places well beyond our jurisdictions to 

prove that when you are buying goods and services, drugs, food, 

that it is coming from where it is stated that it is coming from, and 

limit the ability of middlemen to pass off clones and knockoffs as 

the real product. 

Now, that doesn’t help at the refund level. 

Ms. SCHAKOWSKY. I am going to—we are going to—we are about 

to—— 

Mr. SNOW. It does help to—— 

Ms. SCHAKOWSKY [continuing]. Get a gavel here, because we 

have gone over time. So I hear you saying, though, that you can— 

we can build into the creations of consumer protections, but I am 

not convinced that we don’t need some assurances, outside regulations, some sort of framework that we all agree to, and I think the 

conversation, unfortunately, can’t continue now. 

But I think that is the conversation we need. How do we do it? 

And maybe some of it is embedded and some of it is imposed. 

Thank you. 

Mr. BURGESS. The gentlelady yields back. The Chair thanks the 

gentlelady. 

Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you, Mr. Chairman. 

92 

What privacy concerns should the public consider when the public is thinking about buying digital currency? To the panel in general, anyone who would like to respond. Yes. 

Mr. BECCIA. So I would just note there is a couple of things that 

come up in terms of privacy in digital currency. First, there is a 

lot of questions about the anonymity of digital currency, and, you 

know, digital currency does offer benefits to consumers. It offers financial privacy. 

So when you are doing a digital currency or Bitcoin transaction, 

you are not giving over your credit card information or your personal information in that transaction. So if you are buying something on a merchant that accepts Bitcoin, like at Overstock.com, 

that is just a cryptographic type of code that you are providing 

them and not that personal information. 

So it is actually a benefit in terms of from a consumer perspective. But on the flip side, where regulators look at it and are concerned as far as the anonymity, and so not understanding either 

where that money is going or who that customer is. And so what 

we kind of do to mitigate the risks are, obviously, similar to any 

other financial service, we have to really know who our customers 

are. 

And so we have detailed AML programs, and we look at the 

unique risks of our customers. Our customers are mostly online 

customers. They are customers from multiple countries, and they 

are conducting digital currency transactions, which are a little 

more complex. So we need to create systems that are a little more 

technically advanced to address that. 

Mr. LANCE. Thank you. At the moment, the public can invest in 

gold or silver or currencies. Does the public have the ability to invest in these digital currencies? Yes? 

Mr. SUAREZ. Yes, Congressman. So absolutely. So one of—the 

platform we operate, for example, will allow customers to establish 

a coin-based account, indicate how many Bitcoin they want to purchase, and then to send us money to settle a purchase transaction. 

And so the simple answer to your question is, yes, there is an 

existing retail platform that allows customers to purchase Bitcoin. 

Mr. LANCE. And the price fluctuates, I presume, as is true of any 

other currency? 

Mr. SUAREZ. That is exactly right. And so most of our customers 

today, at least at Coinbase in the United States, are attracted to 

the volatility of Bitcoin, because they are investing effectively in an 

asset whose value they anticipate will go up. And so a lot of savings energy is being poured into that. 

Obviously, there are many more applications of virtual currency 

beyond that, but that is the initial use that we see. 

Mr. LANCE. Thank you. Are there differences between a public 

blockchain and a private blockchain? Mr. Cuomo? 

Mr. CUOMO. Yes, I will take that one. So I think when we typically think about blockchain, we associate Bitcoin. But the interesting thing is that the blockchain is a design pattern that can be 

applied very broadly. 

And when we start to apply it to managed things of value—that 

can be land deeds, any kind of certificates, birth certificates, death 

certificates, contracts—things that are managed by, let’s say, reguVerDate Mar 15 2010 14:02 Jun 09, 2016 Jkt 037690 PO 00000 Frm 00096 Fmt 6633 Sfmt 6633 C:\PROGRAM FILES\WS_FTP\20322.TXT WAYNE
93 

lated environments, it is attractive to start thinking about a 

blockchain that is permissioned. All right? Not just anonymous, 

right? 

And the beautiful part about the blockchain architecture is it allows for this. And the way I am thinking about it is a dial, right, 

where you can dial in at one level very tight permissions, so think 

about it as a membership club. To get in, you have to at the door 

show them your ID card and you are allowed to come into the room 

and transact. 

But a permissioned blockchain could also be permissive, right? 

You can open it up and be somewhat liberal. For example, two parties exchanging carve-in numbers may have a certain level of permission to exchange cars with one another. Maybe one is an auto 

manufacturer; maybe the other is an auto dealer. 

But the Department of Motor Vehicle—and you might only be 

able to see those cars that pertain to you, right? So you will have 

permission to only see the things on the blockchain that are relevant to your transactions. But the Department of Motor Vehicle, 

when it came in through the door of the club, of the car club so 

to speak, it was given broader permissions as an auditor in that 

blockchain network. So it can see more, and it can actually be able 

to provide an auditing service. 

Mr. LANCE. Thank you. I certainly know who IBM is, 

BuckleySandler. These other entities, are these new to our commerce in this country? Bloq? Factom? Coinbase? Are these relatively new organizations? 

Mr. SNOW. We are a really, really old blockchain company of 

about 2 years. 

Mr. LANCE. I see. 

Mr. SNOW. It is a very new space. Most of us are fairly new. 

Mr. LANCE. I see. Thank you. My time has expired. 

Thank you, Mr. Chairman. 

Mr. BURGESS. The gentleman yields back. The Chair thanks the 

gentleman and recognizes the gentleman from Florida, Mr. Bilirakis, 5 minutes for questions, please. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. Appreciate it so very 

much. Thanks for holding the hearing as well. 

Mr. Roszak, many have raised concerns regarding the potential 

for terrorism financing due to the ability of users to make anonymous transactions. Address that, please. 

Mr. ROSZAK. Criminals—— 

Mr. BILIRAKIS. Address the concerns, yes. 

Mr. ROSZAK. Yes. Criminals have always been early adopters of 

the newest technology, whether that goes back to the days of 

NASCAR and having a faster car or cell phones or the Internet or, 

in this case, digital currencies being used for terror finance and 

money laundering. 

As we have heard on this panel, the traceability of digital currencies is more and more profound. The Chamber of Digital Commerce co-founded the Blockchain Alliance, and we are working with 

law enforcement to help them provide the forensics and tracing for 

certain issues that come about with those use cases. But those are 

the very fringe use cases, and, quite frankly, digital currencies, esVerDate Mar 15 2010 14:02 Jun 09, 2016 Jkt 037690 PO 00000 Frm 00097 Fmt 6633 Sfmt 6633 C:\PROGRAM FILES\WS_FTP\20322.TXT WAYNE
94 

pecially Bitcoin, is not a great use of funding for criminal activities 

like that. 

Mr. BILIRAKIS. Thank you. Anyone else wish to address that? 

Yes, please. We will go here—down here. 

Mr. BRITO. Sure. I would add that to date we have not seen terrorist financing using digital currency, although it absolutely is a 

possibility. What we see instead is the use of prepaid cards and 

other centralized methods that can truly guarantee anonymity, and 

we see the Director of the Financial Crimes Enforcement Network 

at the Treasury Department testify before Congress in a hearing 

about digital currency that cash is still the number one way that 

folks launder money and conduct terrorist financing. 

Mr. BILIRAKIS. Who else? Briefly, please. 

Mr. SYRACUSE. I would also just add that, you know, it is probably more of a concern in the traditional banking environment. I 

know that when I was with New York DFS we brought major enforcement actions against banks for failing to follow sanctions programs. 

And also, you know, to date, the virtual currency community, the 

Bitcoin community—the ones that are licensed have been very responsive, and the figure that I heard to date was that something 

like 5,000 suspicious activity reports had been filed. So to the extent that you are dealing with a regulated institution, hopefully it 

is capturing bad activity. 

Mr. BILIRAKIS. Go ahead, please. 

Mr. SNOW. One thing to understand is Bitcoin is a public ledger, 

and so the larger your organization is, the more transactions you 

have. The more transactions you have, the more ability forensics 

has to look at the blockchain and see the picture of your organization. This means that Bitcoin blockchain is decidedly a terrible use 

for large criminal organizations. 

And this came out in the Department of Justice’s digital currency 

conference that they had last year at the Federal Reserve Bank in 

San Francisco, and the FBI and numerous agencies stood up and 

said basically, ‘‘We can dig these organizations out of the 

blockchain. So we really would like them to use it. We can capture 

them.’’ 

I do think that individuals, small fry, might get through a lot 

easier with digital currency, but the larger the organization, the 

more opportunity to trip up and the more opportunity to catch 

them. 

Mr. BILIRAKIS. Thank you very much. Very informative. Next 

question, again for Mr. Roszak, what advantages are there for consumers to utilize Bitcoin and other digital currencies, rather than 

traditional ways to send and receive assets today? 

Mr. ROSZAK. Bitcoin, for example, is used for a variety of use 

cases, both as a currency and a store of value. From a currency 

standpoint, it could also be used for micro transactions. So think 

of a nickel going over the Internet is expensive today. Using 

Bitcoin or digital currencies, it is very cheap, very efficient, secure, 

and fast. And a nickel might not sound like much, but a nickel 

from 50 million people starts to add up. Part one. 

Part two, remitting money around the world is a very expensive 

endeavor, time-consuming endeavor. Right now, the remittance inVerDate Mar 15 2010 14:02 Jun 09, 2016 Jkt 037690 PO 00000 Frm 00098 Fmt 6633 Sfmt 6633 C:\PROGRAM FILES\WS_FTP\20322.TXT WAYNE
95 

dustry is about a half a trillion dollars in size. That can get turned 

upside down with remittance saving lots of money and putting that 

back into the global economy. 

Mr. BILIRAKIS. Thank you. Next question, why is the price of 

Bitcoin so volatile and is there fluctuation in purchasing Bitcoin? 

Or does fluctuation occur for the funds already purchased and 

available in a consumer’s eWallet? I know that the chairman addressed this to a certain extent, asked this question, but yes. 

Mr. ROSZAK. Fundamentally, Bitcoin is in a price discovery 

phase, and it is a supply and demand dynamic. And we are still 

in the early days of Bitcoin. There is 15 million, plus or minus, 

Bitcoins outstanding today. It has got a market value of about 400, 

so it is a $6 1⁄2 billion currency today. 

On a relative basis, that is small. But if you look at historically, 

it has been one of the better performing currencies on the plant. 

And as you have heard, the amount of investment and innovation 

that has been planted in this industry is still yet to be seen. And 

so we are at the front end of this. 

Mr. BILIRAKIS. Thank you. You wish to—— 

Mr. BECCIA. I was just going to point out a similar thing, that 

it is a supply and demand issue. And it is a fact that, really, the 

users are using it or looking at it as early adopters more as an 

asset rather than a currency or a payment vehicle. And I think 

long term, as we see more people using it for payments, which I 

think is really the use case, we will see a greater stability in the 

price and we won’t see as much volatility. 

But in the meantime, I think that for consumers it is important 

for companies in this space to, one, educate consumers about the 

price volatility, and then do things to make sure that those risks 

are mitigated. 

So as I mentioned earlier, for example, a company like Circle, we 

allow our users to also hold their value in U.S. dollars, which is 

not subject to volatility, but still have the benefits of making transactions on the blockchain. So there will be different innovations 

that will take out the price volatility, but I think long term, from 

an economic perspective, we will see less fluctuations. 

Mr. ROSZAK. One final point in terms of financial access. So buying a cup of coffee or a pair of jeans here in DC with Bitcoin is not 

going to change our lives. But if you are a soccer mom in Brazil, 

a goat herder in Ghana, or a taxi driver in Indonesia, you have a 

super computer in your pocket, and you could buy Bitcoin, and that 

allows you to participate in the global economy. So financial access 

is a huge driver of digital currencies globally. 

Mr. BILIRAKIS. Thank you very much. 

Mr. BURGESS. The gentleman’s time has expired. 

The Chair recognizes the gentlelady from Illinois for redirection. 

Ms. SCHAKOWSKY. Thank you. Mr. Syracuse, I wanted to ask you 

a couple more questions. In your testimony, you stated that regulators should focus on the uses of blockchain rather than their underlying technology. In New York, you led the process of developing 

the BitLicense program, as you stated in your testimony, and this 

process focused on the use of Bitcoin for digital currencies and included a two-day hearing with a wide range of stakeholders. 

96 

So what were some of the issues that were discussed in your 

hearing? 

Mr. SYRACUSE. I think at the hearing there were discussions of, 

obviously, the technology, how does it work, the extent to which 

Bitcoin, the currency, should be regulated and what different aspects of the ecosystem should be regulated. 

And the result of that was this kind of functional approach, 

which was figuring out what are the traditional functionalities that 

kind of fall within the jurisdiction, which would mean financial— 

those offering financial services and financial products. 

Ms. SCHAKOWSKY. But were there existing laws that covered 

or—— 

Mr. SYRACUSE. No. 

Ms. SCHAKOWSKY [continuing]. Could cover? 

Mr. SYRACUSE. So this is another one of the debates which was 

whether or not to put virtual—to regulate this area under existing 

money transmission law or create something new. And where New 

York came out was that for our law, our New York State money 

transmission law, would only govern transmission of money from 

Point A to Point B and wouldn’t capture the exchange companies 

or the wallet companies. 

Now, that is not to say that other States would be able to capture that kind of functionality under their own money transmission 

laws. 

Ms. SCHAKOWSKY. And have some of the other States been doing 

that or not? 

Mr. SYRACUSE. Some other States are. Some other States are. So 

I believe North Carolina, New Hampshire, and a handful of others 

are attempting to do that. And that is a perfectly valid approach. 

Ms. SCHAKOWSKY. What factors unique to digital currencies did 

the department think were important in developing new regulations? 

Mr. SYRACUSE. Well, the way we initially kind of got interested 

in it was we were getting inquiries from our money—the money 

transmitters that we regulated saying, ‘‘Is this money? What 

should we do with it?’’ And then that kind of launched our inquiry. 

So we sent out subpoenas, we started meeting with numerous 

members from industry, law enforcement, academics, and the thing 

that was interesting was the way these new service providers were 

popping up in the ecosystem. 

And then we started wrestling with, well, what are the antimoney laundering concerns? What are the consumer protection concerns? Cyber security, you know, the BitLicense weaves in a 

cybersecurity provision. New York State now is trying to lead the 

effort in having a nationwide conversation about regulation in 

cybersecurity. That is a very important factor. 

Ms. SCHAKOWSKY. Absolutely. Mr. Beccia, earlier you seemed to 

want to make a point and didn’t have time. I wondered if you 

wanted to say anything now. 

Mr. BECCIA. I thought the consumer protection point was very 

important, and so just to give you a little more of a flavor of what 

companies in the space are looking at. I think, obviously, from a 

State standpoint, States like New York and others, and that are 

regulating this either as money transmission or from a separate liVerDate Mar 15 2010 14:02 Jun 09, 2016 Jkt 037690 PO 00000 Frm 00100 Fmt 6633 Sfmt 6633 C:\PROGRAM FILES\WS_FTP\20322.TXT WAYNE
97 

censing perspective, have right in their regulations very detailed 

consumer protection protocols, whether it is disclosures to marketing materials at the point of sale, dispute resolution, and whatnot. And so we are very, very cognizant of those. 

I think also there is protections for customer funds, which are 

vital, and so every State—we have to segregate our customer 

funds, we have to have surety bonds for funds, and things like 

that. 

At the Federal level, I think the CFPB and the FTC are very engaged here, and so they have issued warnings and advisories. They 

have started to collect complaints on their portals. And I would expect to see more regulations in terms of disclosures and things that 

are important and things that are—you know, you see at more traditional financial services and apply them to digital currency. 

But I think, really, the big picture here is that, you know, we operate in a regulatory environment that is very similar to financial 

services. We are still the one and only company that has received 

a BitLicense, and so I can tell you, having gone through that process, it was almost like getting a bank charter. And so New York 

took a very thoughtful approach and was very thorough in terms 

of things that Mr. Syracuse mentioned, the very important risks, 

which are AML, consumer protection, and cybersecurity. 

And so I think, you know, not only do we have those which are 

similar to financial services, but on top of that they are really dealing with the specific risks for this industry. 

Ms. SCHAKOWSKY. Thank you. Thanks all of you. 

Mr. BURGESS. The gentlelady yields back. The Chair thanks the 

gentlelady. 

We do have a series of votes on, but I wonder if I could just go 

down the panel and ask for your thoughts on what is going to be 

the game changer that consumers see, what application of 

blockchain technology. Mr. Brito, we will start with you, and then 

we will just work down the line. 

Mr. BRITO. Sure. I think if I knew, I would be out building it and 

making a fortune. So—— 

Mr. BURGESS. Wait a minute. Wait. You are not suggesting this 

isn’t a productive use of your time. 

Mr. BRITO. No. 

Mr. BURGESS. Being in front of the United States Congress. 

Come on. This is where I live my life. Please proceed. 

Mr. BRITO. That said, you know, as with the early Internet, I 

think the killer applications are going to come from left field, 

maybe things that we can’t expect. But if I had to take a guess 

today, I would say it is going to be in areas where technology excels 

and does things that our current payment system and our current 

sort of asset systems do not do. And to me those are micro transactions and macro transactions. 

So the ability to have very, very small payments that today our 

existing payment systems do not allow to be efficient or economic. 

Imagine, you know, if you think about the web, the business model 

of the web is essentially either charging you a monthly big fee, for 

video, for audio, for articles, or showing you advertising. 

The only reason we have that choice of business models is because we can’t pay directly a few pennies for this one article or this 

98 

5 minutes of audio. This technology for the first time makes it possible. 

The other is macro transactions, really big cross-border payments 

that today are expensive and take a long time because of the expense and inefficiency in the corresponding banking system. 

Mr. BURGESS. Mr. Suarez. 

Mr. SUAREZ. Thanks, Mr. Chairman. That is a great question, 

and I also don’t know the answer to that. But when I think about 

some of the core attributes of what substantialized virtual currency 

offers, for example, you can engage in a transaction without having 

to disclose your confidential payment credentials, and so there are 

security advantages there. 

The cost—as Mr. Brito was just mentioning, it opens up opportunities for all sorts of micro transactions that are, you know, just 

economically not possible using credit cards. And you think about 

the global scale of this, which is like the Internet. Anyone can plug 

into it. Literally, anyone in the world can develop applications on 

top of the Bitcoin protocol. You start to appreciate the enormous 

potential. 

So I think a lot of the opportunity lies in micro payments. There 

are people working on technology to allow micro payments in 

browser, and that is what Mr. Brito I think was getting at, where 

you can visit a Web page and automatically transact a micro payment to click through to read something rather than having to view 

ads or have a pay wall. 

There are enormous potential, as my colleagues have discussed, 

in terms of using it as a clearance or property transfer mechanism. 

And so I am not sure which of those is going to take off, but it is 

going to be something I think very impactful. 

Mr. BURGESS. Very well. 

Mr. CUOMO. Mr. CUOMO. Yes. Thanks for the question. Great question. You 

know, I think for every one payment, coin-oriented use case, there 

are thousands of nonpayment, noncoin-oriented use cases. So what 

really captures our imagination at IBM are some of the use cases 

that might happen around things like Internet of things where 

they intersect with everyday life. 

So think about insurance and liability. Think about the new autonomous vehicles, self-parking vehicles out there. So who is liable 

if a self-parking vehicle crashes? All right? So I think what we can 

give back to our citizens is finer grain with the blockchain, finer 

grain liability insurance, such that when you are in control of the 

car, it is immutably recorded on the blockchain that you are in control, you are driving. 

And when the software takes over in your car and starts parking, 

that is immutably placed on the ledger, such that if an accident occurs while, you know, the car is self-parking perhaps, the manufacturer is liable or the person who wrote the software. So when you 

start thinking beyond coins, you know, what the possibility is, it is 

just amazing. 

Mr. BURGESS. Mr. Snow, and let’s be brief because I have only 

got a couple minutes left before I have to go vote. 

Mr. SNOW. Well, you are beginning to know me, because maybe 

I am not always brief. I do believe that the idea that you can know 

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the history and the history can’t be changed and you can distribute 

that to all corners of the earth will create new ways to organize 

projects and companies and efforts. 

And so you will see a dramatic reduction in the overhead of corporate oversight essentially to create products, goods, and services 

to people. It is basically distribute everything, and what that looks 

like I will—— 

Mr. BURGESS. We will have to wait and see, won’t we? 

Mr. SNOW [continuing]. Like everyone else, I don’t know. 

Mr. BURGESS. Mr. Beccia. 

Mr. BECCIA. Yes. So very quickly, thank you, Mr. Chairman. So 

when you think about the early days of the Internet and how long 

it takes for real innovation to evolve, I think you are going to see 

the same thing here, but it is really exciting. I think when you look 

at the payment space and you look at the risks, you look at the regulations that are needed, it is amazing where we have come even 

in a short period and where we can go. 

But I am really also excited about the other use cases. So when 

you think of having real estate transactions, recordkeeping systems 

for those, for securities, for smart contracts, things like that, I 

think, you know, there is endless possibilities there. 

Mr. BURGESS. Wonderful. Mr. Syracuse. 

Mr. SYRACUSE. I think my fellow panelists have touched upon 

most of the salient points, exchanges, the ability in insurance, the 

ability in big data to put ownership of one’s identity and credentials information into their own hands, so it is an asset that they 

are able to then leverage. 

But I think the truth is, the people that know the answer to this 

question are probably sitting in a dorm room at MIT or a dorm 

room in another part of the world, and the key thing for us is to 

make sure that nothing that, you know, we do as regulators will 

prevent or hinder that, and will create an environment where that 

can grow. 

Mr. BURGESS. Yes, Mr. Roszak. 

Mr. ROSZAK. We have heard a lot of great use cases for the movement of money, digital currencies, tokenization of assets. And one 

of the greatest assets that can be employed into this new railroad 

is digital identity, how we manage that identity, the privacy, the 

security, and make each transaction unique, whether you are buying something at the convenience store or applying for a job or 

going to the hospital or applying for a mortgage. 

Each of those interactions takes a different part of your digital 

identity, and this technology enables you to really take control of 

that and do that privately and securely. 

Mr. BURGESS. Since the observation was made that someone in 

a dorm room right now is maybe working on that, whatever that 

next technology is, I will just offer that at some point in the future 

to have my individual medical records only accessible by me, but 

the larger, the identified data available to researchers, FDA, whoever wants to study the cross-hybridization between this medication and cardiovascular disease, the Vioxx story from several years 

ago might have been very, very apparent had that capability been 

available. 

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I want to thank all of you. You know, some mentioned the Internet of things. I have just got to tell you, when we had the Internet 

of things hearing, we had things here. When we had the drones 

hearing, we had drones here. I was so looking forward to finding 

out whose face was on the Bitcoin, and I still don’t know even after 

the end of this hearing. 

But seeing as there are no further members wishing to ask questions, I again want to thank our witnesses for being here. 

Before we conclude, I would like to submit the following document for the record by unanimous consent: a letter from Ripple. 

Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

And pursuant to committee rules, I remind members they have 

10 business days to submit additional questions for the record. I 

ask our witnesses to submit their responses within 10 business 

days upon receipt of those questions. 

Without objection, the subcommittee is adjourned. 

[Whereupon, at 1:20 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Our Disrupter Series continues as we focus on digital currency and blockchain 

technology, just another example of how innovative uses of technology are powering 

the economy into the future. From executing smart contracts to settling money 

transfers in minutes instead of days, millions of folks in Michigan and across the 

country could see the blockchain transform how they engage in everyday commerce 

in the next few decades. 

The exciting aspect about this technology, however, is that it can do much more 

than impact currency, it has the potential to affect almost every industry that relies 

on intermediaries to establish trust between two parties that want to do business. 

This can change how folks sell their car, sign a mortgage, or share music. 

Back home in Michigan, startups are raising millions in venture capital to grow 

their blockchain-based businesses. For example, BTCS, headquartered in Troy, 

Michigan, raised $4.25 million in 2015 to develop its transaction verification services 

business on the Bitcoin blockchain. 

In the manufacturing space, supply chain management continues to challenge 

companies’ internal management functions as well as recall effectiveness. Given 

that the blockchain shows everyone in the network the current state of any asset 

and that asset’s history on the blockchain, tracking a particular good around the 

world from port-to-port is now possible and the information trustworthy, which can 

help improve logistics for the auto industry. 

In the public sector, blockchain technology could positively disrupt voting, compliance, and real-time reporting. 

The applications for blockchain technology are truly incredible. Everywhere there 

is an asset transfer, the blockchain can bring transparency and trust. As with any 

emerging technology, it is important to understand the risks and benefits to consumers and I hope our panel can speak to these issues for digital currency and future blockchain applications. 

I thank Chairman Burgess for continuing the Disrupter Series and highlighting 

the positive impact that emerging technologies, like the blockchain, are having on 

our economy. 

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