CFTC Chair Behnam Waiting On Congress; Senate Stablecoin Bill Bubbles

CFTC Chair on Congress

Yesterday, Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam (D) appeared on CNBC’s Squawk Box and provided an update on his agency’s views related to digital assets and legislation.

Here are some quick clips…

Chair Behnam: “It’s taken a bit longer than I would hope. (…) I think members in Congress are trying to figure out the landscape. We have a lot of regulators in the US – both on the market side and the banking side. But ultimately, I’ve said this for a while, there is a gap in regulation, and Congress is going to have to step in and really overcome this feeling of not wanting to legitimize the technology and seeing this as not something that’s tenable or sustainable. It’s here. It hasn’t gone away and we’re seeing it with the price and some of the bigger coins and there are issues around regulation in terms of customer fraud and manipulation.”

“But then some of this illicit activity and terrorist organization use, I think, should be really concerning for members of Congress and all of us as Americans… I mean, that seems like an easy bipartisan fix, but it’s just knowing how politics works. You’re probably not likely to get a clean bipartisan issue without weighing into the areas where there is a bunch of arguments back and forth.”

the three-legged stool

Chair Behnam: “I view [digital assets] as a three-legged stool: you have the AML KYC issues, which is around illicit activity and terrorist financing; you have the stablecoin issues (…); and then you have the market structure issues which is very important to me as a market regulator.”

“A lot of momentum has been around the the anti-money laundering (AML) and know your customer (KYC) [issues] … and that really goes to the heart of some of the issues that we’ve elevated at the CFTC around Binance and things that they were doing. But a lot of members are very focused on that. I’m very focused on markets. There’s a lot of focus on stablecoins.”

what you should know: In the past, Chair Behnam has been clear that he thinks cryptocurrencies like Bitcoin, Ether and others – including stablecoins – are “commodities.” This differs from SEC Chair Gary Gensler‘s noncommital view on Bitcoin and “securities” view on all others. Also, Behnam’s involvement with last year’s Digital Commodity Consumer Protection Act (DCCPA) and Senate Agriculture was blown up by the implosion of FTX led by its CEO Sam Bankman-Fried.

Senate Stablecoin bill

Punchbowl News’ Brendan Pedersen said on X yesteday that Senators Cynthia Lummis (R, WY) and Kirsten Gillibrand (D, NY) are creating their own stablecoin bill with special attention to the Federal Reserve’s oversight responsibilities. Gillibrand tells Punchbowl about their version, “It’s a little more refined on what the state path is outside of a state bank… So, if you want to have [a crypto company] as an issuer of a stablecoin, what requirements will be on them, what Fed oversight would be included? We think we have a nuanced position which might be a sweet spot.” Read more (subscription).

what you should know: Gillibrand *must* have her home state’s regulator involved here – the New York Department of Financial Services (NYDFS). NYDFS Superintendent Adrienne Harris (D) has been adamant about not giving away pre-emptive, stablecoin oversight to the Federal Reserve. Meanwhile, House Financial Services Chair Patrick McHenry (R, NC) is looking for a way to get his stablecoin bill through Congress. Does Lummis-Gillibrand have the stablecoin answer? The devil’s in the “sweet” details.

SAB 121 next year

Chamber of Digital Commerce policy executive Cody Carbone appeared on the Thinking Crypto podcast and prognosticated that the SEC’s Staff Accounting Bulletin 121 on crypto custody – which was identified on October 31 by the Government Accountability Office (GAO) for its overreach – will result in a resolution of disapproval of SAB 121 from Congress next year and the President will sign on to the disapproval.

Carbone also remains optimistic about digital assets legislation early next year: “Everything and everyone says – including [Chair Patrick McHenry (R, NC), and Rep. French Hill (R, AR)] – Q1 2024. If you look at some of the appropriations timelines and when they need to fund the government – there’s some deadlines in January and February. Once those are dispensed with, March is when I’m really looking for these bills to move forward.” Hear more on Apple Podcasts.

more tips:

Dear senators, don’t drive crypto miners, validators and more out of the US – Cody Carbone in Blockworks

what you should know: There is shaping up to be two sides of 2024 digital assets legislative progress pertaining to the House Financial Services and Agriculture Committees. One side will be around a House Floor vote on bills such as the digital asset market structure [H.R. 4763] or stablecoin [H.R. 4766] bills. The other will be whether these bills, or some elements of the bills, can ride through Congress (likely attached to a “must pass”) and get the President’s signature and therefore become law. Stablecoins appears to be the most likely. Swimming amidst these two lanes are growing concerns around anti-money laundering, terrorist financing and digital assets – particularly from the Senate.

use case or natsec

A new blockchain-based identity matching service from China’s Ministry of Public Security will opt-in all 1.4 billion Chinese citizens into something called ReadDID.  CoinDesk’s Sam Reynolds explains, “The RealDID service launch will enable users to register and log in to websites anonymously using DID addresses and private keys, ensuring that business data and transactions remain disconnected from personal information.” Read more.

what you should know: This may draw the interest of Members of Congress including Rep. Zach Nunn (R, IA) whose bipartisan CLARITY Act  [H.R.6307]  tracks the “economic and national security risks posed by foreign adversarial blockchain networks.” Meanwhile, for the anti-CBDC crowd – and without knowing more details – this new Chinese initiative appears to be similar to a Central Bank Digital Currency (CBDC),  but without the currency and with an intrusion into the private lives of citizens. On the flip side is efficiency with privacy controlled by government -or as Chinese state media calls it according to CoinDesk: “the world’s first national-level real-name decentralized identity system.”

still more tips

Crypto exchange KuCoin to shut in New York, pay $22 million to settle lawsuit – Reuters

Opinion: Crypto is ‘so back’ for everyone—except retail investors – Fortune (on Yahoo)

“Global Crypto Networks and U.S. National Security,” November 30, Blockchain Policy Summit panel discussion with MetaMask, FBI, FinCEN, Department of Justice and Consensys (Video) – YouTube

Opening Statement of Commissioner Kristin Johnson Before Monday’s Market Risk Advisory Committee Meeting –