SAB 121 Joint Resolution Approved By Financial Services; New Amicus Brief For Kraken

Rescinding SAB 121

HFS markup – SAB 121

At yesterday’s abbreviated House Financial Services markup (video is here), the Committee sent two digital asset-related bills to the House floor.

The House Joint resolution rescinding the Securities and Exchange Commission’s (SEC) controversial Staff Accounting Bulletin 121 (SAB 121) sponsored by Reps. Mike Flood (R, NE) and Wiley Nickel (D, NC) was approved by a final tally of 31-20… all Republicans and 3 Democrats (Rep. Nickel, Rep. Ritchie Torres (NY), Rep. Josh Gottheimer (NJ)) voted for the bill.

From the Majority press release:

    • H.J.Res.109, providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Securities and Exchange Commission relating to “Staff Accounting Bulletin No. 121,” offered by Rep. Mike Flood (NE-01), overturns the SEC’s SAB 121. By overturning SAB 121, the Resolution will ensure consumers are protected by removing roadblocks that prevent highly regulated banks from acting as custodians of digital assets.”

Video of Rep. Flood’s hearing comments are here as he makes a detailed case for the bill with Members.

Jake Chervinsky, formerly of Blockchain Association and currently Chief Legal Officer of Variant Fund, was heartened by the “good news” of the bill’s passage out of committee but noted on X,  “Bad news: that’s likely the end of the story in Congress. Getting repeal done is nearly impossible. Lawsuit or bust.”

Chervinsky doesn’t see the bill taken up by the Democrat-controlled Senate or signed into law by the White House.

what you should know: It will be interesting to see the strategy employed in the Senate by the joint resolution’s sponsor Senator Cynthia Lummis (R, WY). Is there a sympathetic Democrat who can help? Perhaps. Senate Finance Chair Ron Wyden (D, OR) partnered on a Congressional letter regarding the SEC X account hack with Sen. Lummis in early January. Continue reading “SAB 121 Joint Resolution Approved By Financial Services; New Amicus Brief For Kraken”

Senator Stabenow ‘Back To Crypto Work’ In Senate Agriculture; Crypto PAC Pours On Funds

Senator Stabenow

Chair Stabenow is back

Politico’s Meredith Lee Hill reports that Senate Agriculture Chair Debbie Stabenow (MI), a key pro-crypto Democrat in the Senate, is ready to deal with crypto issues again after concluding some finer points of the amorphous Farm bill.

Ms. Hill tweeted yesterday on X that Stabenow “confirms she’s back to crypto work amid an impasse in farm bill talks Stabenow, a member of Dem [leadership], said there’s ‘interest’ in both chambers to address crypto this yr + she’s ‘seeing where we can get agreement.'” Read more in Politico (subscription).

This appears to be an opportunity for the House’s digital asset market structure bill to find a “safe space” in what has been a generally reluctant, Democrat-controlled Senate.

It doesn’t seem farfetched that Senate Ag Ranking Member John Boozman (R, AR) is also supportive of crypto legislation today given his past support for Digital Commodity Consumer Protection Act (DCCPA).

what you should know: All work stopped on crypto and DCCPA in Senate Agriculture when FTX imploded in November 2022. There was a post-mortem hearing in December 2022 with former Stabenow counsel and CFTC Chair Rostin Behnam -and that was it.

(Let alone all the Democrats running for cover due to FTX CEO Sam Bankman Fried’s “radioactive” campaign donations.)

Unlike Senate Banking where Chair Sherrod Brown (D, OH) is a roadblock to digital assets legislation for Senators like Sen. Cynthia Lummis (R, WY), Senate Ag with Chair Stabenow’s renewed interest may breath life into Sen. Kirsten Gillibrand’s (D, NY) digital asset efforts. Gilllibrand sits on Senate Ag, and is co-sponsoring the Responsible Financial Innovation Act [S.2281] with Sen. Lummis.

Stabenow announced her retirement from the Senate in January 2023. She’ll hold her current seat until this January 2025. Continue reading “Senator Stabenow ‘Back To Crypto Work’ In Senate Agriculture; Crypto PAC Pours On Funds”

New Sandbox Legislation Promises Protection For Innovation; Digital Assets AML Bills

AML bills

innovation sandbox

Yesterday, House Financial Services (HFS) Chair Patrick McHenry (R, NC) formally announced the reintroduction of the “Financial Services Innovation Act of 2024” [H.R.7440] framing the creation of new offices for financial innovation across banking regulators as “sandboxes.”

The bill was previously introduced by the Chair in December 2022 in the 117th Congress.

From the Chair McHenry press release, “Budding fintech firms currently operate in fear of heavy-handed penalties brought down by regulators that have failed to work with Congress to provide clear rules of the road. That’s why I’m reintroducing the Financial Services Innovation Act. This commonsense legislation will give entrepreneurs an opportunity to test legal and regulatory waters before taking new products and services to market. Innovators have long flocked to American markets…”

what you should know: McHenry’s bill will be up for a vote at tomorrow’s HFS markup. How Democrats will line up on the bill is unknown, but if it’s anything like the markups last July for the stablecoin [H.R.4766] and digital asset market structure [H.R.4763] bills, five to six Democrats seem possible at a minimum such as Reps. Jim Himes (CT), Ritchie Torres  (NY) and Josh Gottheimer (NJ). Continue reading “New Sandbox Legislation Promises Protection For Innovation; Digital Assets AML Bills”

Cruz Joins Emmer On Anti-CBDC Crusade; Reps. Flood And Nickel Talk SAB 121 With Consumers

CBDCs and the 2024 election

Cruz joins CBDC bill

Yesterday, Senator Ted Cruz (R, TX) brought his “upper house” seal of approval to anti-CBDC (Central Bank Digital Currency) sentiments currently being driven by Majority Whip Tom Emmer (R, MN) and his “CBDC Anti-Surveillance State Act” [H.R.5403] which includes 97 Republican co-sponsors.

Republicans see opportunity with the CBDC issue in the 2024 general election says Fox Business.

Senator Cruz, the Ranking Member on Senate Commerce, shares with Fox that he and five “Senate colleagues, including Bill Hagerty (R, TN), Rick Scott (R, FL), Ted Budd (R, NC), Mike Braun (R, IN), and Kevin Cramer (R, NC), will sponsor a new bill called the Central Bank Digital Currency Anti-Surveillance State Act.” Read more.

Treasury rumor 

Commodity Futures Trading Commission (CFTC) Commissioner Kristin Johnson may be getting a new job. Politico reported yesterday that she’s under consideration for Assistant Secretary for Financial Institutions at Treasury. Read more from Politico (subscription).

Commissioner Christy Goldsmith Romero (D) has also been rumored for the position.

Commissioner Johnson, a Democrat, has been active on issues related to digital assets including public speaking at events such as Blockchain Association’s Policy Summit last November (her remarks). When she first arrived at the Commission in 2022, she moderated a CFTC webcast titled “Digital Assets and Financial Inclusion.” Continue reading “Cruz Joins Emmer On Anti-CBDC Crusade; Reps. Flood And Nickel Talk SAB 121 With Consumers”

Anti-Crypto Loses In Court Again; Digital Assets Joins The Election Agenda

another loss

emergency loss

So much for the “emergency.”

Late Friday, the “emergency” survey of cryptocurrency miners’ energy usage to be undertaken by the Department of Energy’s Energy Information Administration (EIA) was put on a 4-week hold… at a minimum. Read more in Reuters. Another court loss for anti-crypto advocates.

It was less than a month ago that the EIA at the behest of the White House’s Office of Management and Budget (OMB) had announced that crypto mining was a threat to the energy grid, hence the need for an emergency survey.

See the EIA survey (PDF).

The public release of its results was said to be a cause for serious concern by complainants Riot Platforms and Texas Blockchain Council.

District Court Judge Alan Albright was unequivocal in his motion for a temporary restraining order (TRO): “The Court believes that Plaintiffs (i.e. TBC and Riot Platforms) are likely to succeed in showing that the facts alleged by Defendants to support an emergency request fall far short of justifying such an action. As a result, the determination likely violates the APA as ‘arbitrary, capricious, [or] an abuse of discretion.'” (h/t @lee_bratcher)

See Judge Albright’s “Order on Motion for TRO.”

Perianne Boring, CEO of industry organization Chamber of Digital Commerce said on X, “This is a victory for all proponents of freedom and rule of law.” The Digital Chamber has supported the lawsuit.

what you should know: Another day, another rules violation. Friday’s court order echoes the findings of the Government Accountability Office (GAO) last October where the Securities and Exchange Commission’s controversial Staff Accounting Bulletin 121 violated the Congressional Review Act (CRA), “which adopts the definition of rule under the Administrative Procedure Act (APA) but excludes certain categories of rules from coverage.” Continue reading “Anti-Crypto Loses In Court Again; Digital Assets Joins The Election Agenda”

Fed Governor Waller Supporting Stablecoins; White Hats Get Behind Security Alliance

stablecoins and the dollar

dollar-backed stablecoins

Federal Reserve Governor Christopher Waller, a Republican, spoke at a banking conference in the Bahamas last Thursday about the dominance of the U.S. dollar and saw a role for U.S. Dollar-backed stablecoins.

Noting decentralized finance’s (DeFi) inherent use of stablecoins, Waller writes, “About 99 percent of stablecoin market capitalization is linked to the U.S. dollar, meaning that crypto-assets are de facto traded in U.S. dollars. So it is likely that any expansion of trading in the DeFi world will simply strengthen the dominant role of the dollar.”

Waller makes note of Euro-backed stablecoins and the increasing use of the Chinese renminbi but concludes unequivocally, “I do not expect to see the U.S. dollar lose its status as the world’s reserve currency anytime soon, nor even see a significant decline in its primacy in trade and finance. Recent developments that some have warned could threaten that status have, if anything, strengthened it, at least so far.”

Read the speech (Feb. 15).

more tips:

    • U.S. Regulators Do Have Some Control Over Stablecoin Tether: JPMorgan (Feb. 17) – CoinDesk

what you should know: The Republican House Financial Services Committee X account tweeted in reaction to Waller on Friday, “The proliferation and adoption of well-regulated, dollar-denominated stablecoins will bolster the dollar’s status as the global reserve currency.” Waller’s statement is more fuel on the fire to support the “Clarity for Payment Stablecoins Act” [H.R.4766], which is awaiting a House floor vote. Continue reading “Fed Governor Waller Supporting Stablecoins; White Hats Get Behind Security Alliance”

FinCEN Hearing Sheds Light On Its Digital Assets Strategy; Closing “The Revolving Door”

FinCEN and digital assets

FinCEN hearing

Yesterday’s House Financial Services (HFS) hearing focused on U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) included attention to digital asset matters.

Republicans expressed skepticism (see Chair Patrick McHenry’s comments) about some FinCEN processes and largely focused on the unnecessary data grab and resources required by FinCEN with programs such as those enabled by the Corporate Transparency Act (CTA). The CTA requires businesses to register their beneficial owners by the end of the year. So far, according to FinCEN witnesses Treasury Undersecretary Brian Nelson and FinCEN Director Andrea Gacki, 500,000 out of 32 million have complied thus far.

Among the digital assets highlights…

Crypto gadfly Rep. Brad Sherman (D, CA) said during his Q&A time that pro-crypto advocates were trying to “de-fang” the U.S. government with cryptocurrency.

Rep. Bill Foster (D, IL) explored the efficacy of secure digital IDs and suggested that it would have “huge benefits to the federal taxpayer” in its ability to stop fraud.

Rep. Sean Casten (D, IL) explored illicit finance and digital assets during his Q&A time. He wanted Treasury’s Nelson to highlight why “bad guys like mixers” – Nelson and Director Gacki said that mixers essentially anonymize transactions that “shield illicit finance.” Casten introduced the phrase “chain hopping” and said it was a problem with illicit finance.

Majority Whip Tom Emmer (R, MN) brought up “the erroneous Wall Street Journal report” on October 10 regarding Hamas, illicit finance and crypto. He asked Undersecretary Brian Nelson about how much crypto was actually received by Hamas. Nelson demurred and said he could share info privately which the Whip took him up on.

Continue reading “FinCEN Hearing Sheds Light On Its Digital Assets Strategy; Closing “The Revolving Door””

New Letter Responds To Warren Criticism, Bill; Porter Draws Crypto PAC Attention

ex-military respond

military letter #2

Blockchain Association’s ex-military members have sent a new letter to Congress regarding the illicit finance and crypto debate currently swirling. Yesterday’s communication doubles the signatories of the previous BA letter back in November and clearly states their opposition to legislation being floated in Congress as well as related national security concerns.

The letter states in bolded text:

“The Digital Asset Anti-Money Laundering Act (DAAMLA) risks our nation’s strategic advantage, threatens tens of thousands of U.S. jobs, and bears little effect on the illicit actors it targets.”

Read the new letter.

Back in December, Senator Elizabeth Warren (D, MA), who is the author of DAAMLA,  sent a letter in response to Blockchain Association which accused the organization of, essentially, revolving door politics and undermining “bipartisan efforts in Congress and the Biden Administration to address the role of cryptocurrency in financing Hamas and other terrorist organizations” Continue reading “New Letter Responds To Warren Criticism, Bill; Porter Draws Crypto PAC Attention”