CFPB rule hearing
The House Financial Services (HFS) Subcommittee on Digital Assets, Financial Technology and Inclusion hearing led yesterday by Chair French Hill (R, AR) on the Consumer Finance Protection Bureau (CFPB) proposed rule on non-banks, i.e. payment apps.
At the hearing’s open, Chair Hill highlighted bipartisan concerns about the rule which he said could unnecessarily inhibit industry and innovation, limit consumer choice and, in general, is an overreach by the agency. Crypto and digital wallets are swept up in the rule.
See hearing video and witnesses’ prepared testimony.
Over the course of the hearing, of the five witnesses, only Professor Christopher Odinet from the University of Iowa supported the rule.
Chair Hill added in his opening remarks, “There is no doubt that this proposal will decrease incentives to innovate in the payments space and leave consumers encumbered with fewer firms from which to choose a payment method–that decreases competition.” Read the entire statement here.
However, Democratic leadership led by HFS Ranking Member Maxine Waters (D, CA) and Subcommittee Ranking Member Steven Lynch (D, MA) staked out its familiar position around consumer protections and fears of “Big Tech’s” undue influence and therefore supported the rule.
Crypto skeptic Rep. Brad Sherman (D, CA) proffered his support for the rule and connected it to the digital assets industry and lobbying. In the Q&A, Rep Sherman delivered some zingers to the lobbying community, “This initial pre-rule is long past due. I’ve been in this town for a long time, and I’ve snuck in at least once to ‘Lobbying 101″ secret classes. The rule is very simple. The teaching is simple…”
Sherman continued, “If the facts are on your side, argue the facts. If you’re on the side of good public policy, argue the public policy. And if the facts are against you and the public policies are against you, argue the procedure. That is mostly what we have here. People telling us that the procedure is somehow off now the most extreme of those arguments is to have the cryptocurrency industry come in and say how god-awful outrageous it is that somebody would treat crypto as a currency. If you aspire to be a currency you should aspire to be regulated like a currency.”
In addition to all HFS Republicans expressing concern during the hearing, a January 5 letter (see it) showed seven HFS Democrats who have their own reservations including Rep. Jim Himes (D, CT), Rep. Josh Gottheimer (D, NJ) and Rep. Wiley Nickel (D, NC).
what you should know: The message in the hearing from the rule’s detractors seemed to be “we are watching you CFPB.” Considering the legislative docket these days coming out of House Financial Services and the dwindling Congressional calendar of the 118th Congress, a piece of legislation staking out a new law that prevents the CFPB’s expanding jurisdiction seems unlikely. Or does it?!
terrorism and crypto
Late yesterday, The Wall Street Journal said that a new report from U.S. Treasury indicates as much as $165 million in digital assets “may” have been transacted by the terrorist organization Hamas prior to the October 7 terror attacks in Israel.
The new information reported by the WSJ appears to be Treasury’s response to the November 15, 2023, Congressional letter sent to President Joseph Biden and Treasury Secretary Janet Yellen by a bipartisan group of over 50 lawmakers led by Majority Whip Tom Emmer (R, MN) and House Financial Services Chair Patrick McHenry (R, NC). The Congressional missive asked a series of questions on the known facts around crypto and the financing of terrorism – specifically as it related to Hamas. See that letter.
According to the WSJ, Deputy Treasury Secretary Wally Adeyemo said in the Treasury letter sent to Congress with the report, “We continue to assess that Hamas and other terrorists have a preference for the use of traditional financial products and services, but I remain concerned that as we cut off their access to traditional finance these groups will increasingly turn to virtual assets.”
event next week
Next Wednesday, digital assets platform Coinbase hopes to bring together 300+ attendees, including policymakers, for a Washington, D.C. event titled, “Update the System Summit.”
The summit aspires to galvanize support for digital assets and innnovation with 40 on-stage participants including Senator Cynthia Lummis (R, WY), Rep. Ritchie Torres (D, NY), HFS Chair Patrick McHenry (R, NC), Rep. Warren Davidson (R, OH), Rep. Jim Himes (D, CT) and Coinbase CEO Brian Armstrong.
The event promises to show how “crypto use cases impact everyday life.”
central bank tokenization
Ledger Insights reports that BNY Mellon’s former head of tokenization, Benjamin Duve, has joined the European Central Bank (ECB).
Duve’s ECB title is Lead Market Infrastructure Expert in the Market Infrastructure and Payments Directorate and “he will help the ECB formulate its long term vision for the tokenization of money and assets. The role covers issuance, post trade, collateral and wholesale payments.” Read more.
progressives for crypto
According to Politico, The “left leaning” Roosevelt Institute, has come out with a new paper authored by Todd Phillips (who often comments on crypto on X).
In a post titled, “Crypto Skeptics’ Supreme Risk: The Danger of Relying on Courts to Decide Crypto’s Fate,” Phillips teases the paper and argues on Roosevelt institute’s website that Congress must act: “Legislators should codify an expansive view of what is a security—and in the process socialize the idea that many crypto assets should be considered securities, regardless of any Supreme Court holding to the contrary. Congress should also push for a strong regulatory regime for crypto assets that are commodities to elucidate the differences between crypto securities and commodities.” Read more and get the paper.
bitcoin ETF reluctance
Apparently some financial advisors are not buying into the Bitcoin spot market ETF craze and showing some reluctance to recommend the new crypto-backed product to their clients. They’re worried about getting sued.
In The Wall Street Journal yesterday, Matt Apkarian of research firm Cerulli Associates explains, “If bitcoin was to crater and go towards zero, there can be some damage to their reputation because some clients might view allowing products on a platform as some sort of stamp of approval. (…) It definitely opens up advisers to more potential for lawsuits.” Read about the reluctance.
DoJ convicts crypto mixer
A Russian-Swedish national, Roman Sterlingov, was convicted this week by the Department of Justice in connection to running a “tumbler” (a.k.a. crypto mixer) on the dark web called Bitcoin Fog between 2011 and 2021.
In reference to the DoJ conviction, computing community website Bleeping Computer explains, “Mixing services allow users to obfuscate the origin of their digital possessions so that they can be safely withdrawn in “fresh” wallets not associated with illicit activities, making it harder for law enforcement to trace the funds.” Read more.
more tips:
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- Bitcoin Fog Operator Convicted of Money Laundering Conspiracy (March 12) – Department of Justice
still more tips
How Far is the SEC Willing to Reach into DeFi? A Look at the BarnBridge DAO Settlement. – DeFi Education Fund
Block’s new crypto wallet can only be purchased with real cash – The Verge
Spot Bitcoin ETFs Could See $220B of Inflows in Next 3 Years: JMP Securities – CoinDesk
Crypto exchange OKX receives in-principle approval for Singapore payments licence – Reuters