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TradFi’s crypto island vision
Traditional finance organization Independent Community Bankers of America (ICBA), which says its membership represents 99% of all banks in the U.S., is lobbying Congress to “take a closer look at regulatory agencies’ ‘inadequate’ oversight of crypto and to resist efforts to let nonbank stablecoin issuers access the Fed’s payment rails,” reports Politico’s Zach Warmbrodt.
Indeed, the ICBA wants crypto explicitly separated from the banking system. The threat is apparently so acute that cryptocurrency goals lead the 2023 agenda list: “ICBA urges Congress to exercise robust oversight of the federal financial agencies. In particular, community bankers are concerned about agencies overstepping their statutory authority in rulemaking; the use of informal communications, including press statements and social media, to convey expectations and effectively make rules outside of the notice and comment requirements of the Administrative Procedure Act; and inadequate oversight of non-bank financial firms, including financial technology and cryptocurrency firms which pose significant risk to the broader financial system.” See the ICBA agenda.
Brown calls for crypto hearing
Senate Banking Chair Sherrod Brown (D, OH) has set a hearing titled “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets” for February 14. See Senate Banking’s February hearing schedule. The title for the hearing informs Brown’s pointed misgivings rather than potential for unlocking innovation in cryptocurrencies. Though he sent a letter in November to Treasury Secretary Yellen, Chair Brown offhandedly suggested at December’s “FTX implosion” hearing whether crypto should be regulated at all – perhaps suggesting that keeping it unregulated is to keep it outside of the U.S. financial system -another tactic of anti-crypto forces.
Keep an eye on: will Ranking Member Tim Scott (R, SC) attempt a partial roll out of his digital assets agenda at the hearing?
SEC lawsuit imminent
Craig Salm, chief legal officer of Grayscale Investments, talks with Beltway/banking trade publication Capitol Account about Grayscale’s Bitcoin ETF trial which begins oral arguments March 7 in the D.C. Circuit.
Salm admits that if the Securities and Exchange Commission (SEC) hadn’t approved a Bitcoin futures ETF – and therefore signal in Grayscale’s estimation that it’s own Bitcoin Trust could be converted to an ETF – it may not have ever considered a lawsuit against its regulator, the SEC. Read the Q&A. This trial looks to be a big story in March where the court system may draw boundaries for crypto where Congress and regulators have not.
digital assets hearing in March
On the Thinking Crypto podcast (and reiterated on Twitter), Blockchain Association’s Director of Government Relations, Ron Hammond, says there will be a digital assets hearing in front of the full House Financial Services Committee on March 9 – the one year anniversary of President Biden’s Executive Order on digital assets. Hear the podcast. HFS Chair Rep. Patrick McHenry also suggested on the Takeout Podcast two weeks ago that there will be a followup to the December FTX implosion hearing in February, too.
Yesterday, “FTX Debtors” issued a press release saying they required the return of recent donations made to political candidates and other organizations by former FTX CEO Sam Bankman-Fried and other officers of the company. “To the extent such payments are not returned voluntarily, the FTX Debtors reserve the right to commence actions before the Bankruptcy Court to require the return of such payments” – read the two-paragraph press release. A bit more is here from Coindesk.
life support for lobby
The Block reports that The Association for Digital Asset Markets no longer has a CEO or head of policy as of January 1. The Block’s Kollen Post reports on an internal email, “Brad Volpi, the board president and head of digital assets at Hudson River Trading, tells ADAM’s members: ‘We believe ADAM’s role as an industry-led group, with the roster of high-quality organizations committed to good market structure and advocating for thoughtful regulation is paramount.'” Read more. Also worth a read is Kollen Post’s feature on CFTC Commissioner Caroline Pham, who Post suggests could be a future CFTC Chair.
Rostin Behnam, Chair of the Commodity Futures Trading Commission (CFTC) provided a broad overview of CFTC digital assets strategy on Friday at the ABA Business Law Section Derivatives & Futures Law Committee Winter Meeting. A big part of CFTC strategy – right now – is enforcement and Behnam explained a September action against Ooki DAO, “Recently, the Commission brought the first enforcement action against a decentralized finance trading protocol that had transformed into a decentralized autonomous organization, a DAO, offering leveraged and margined retail commodity transactions to the public. In making the calculated decision to be a DAO, the DAO claimed that its status as a DAO rendered it enforcement-proof.” Not so fast, as Behnam explains. Litigation is ongoing. Read the speech.
Ever see the finances for Decentralized Autonomous Organization (DAO)? See MakerDAO’s here as the DAO says it reported a profit. Axios reports 2022 financials showed “a healthy balance sheet, with over 10% of its $5.1 billion in assets backed by real-world stuff.”
banking ambiguity with crypto
Bank holding Silvergate Capital Corporation, which provides fiat/crypto rails to crypto exchanges among others, ran afoul of the Justice Department according to a Bloomberg report on Thursday. And then on Friday, American Banker’s Kyle Campbell reported, “Policy advocates say a 2020 change to the FDIC’s rules around brokered deposits opened the door for San Diego-based Silvergate and others to load up on deposits from crypto firms without taking precautions to protect themselves against volatility.” Read more (subscription).
Later, American Banker’s Campbell explored the topic in a tweet thread saying, “Ultimately the Silvergate episode is another window into the regulatory ambiguity around bank involvement with crypto. And it is just one example of how the FDIC’s new brokered deposit rules are playing out in real time.”
the stablecoin decade
Patrick Hansen, Director of EU Strategy and Policy for Circle (makers of the USDC stablecoin), delivered an argument for the use of stablecoins in a tweet storm on Sunday. Hansen says that stablecoins are less speculative than even the US Dollar and concludes, “Stablecoins – offering 24/7 instant settlement on a credibly-neutral, shared global ledger – will become a core part of the global payments infrastructure over the coming decade.” Read it.
Separately, VISA’s head of crypto, Cuy Sheffield, said yesterday at the StarkWare Sessions 2023 Conference in Tel Aviv that the global payments company is looking to stablecoins to potentially address the bottleneck created by SWIFT. Sheffield said, “…we’ve been experimenting, we publicly announced. We’ve been testing how to actually accept settlement payments [with stablecoins].” Read more on Cointelegraph.
You want more
- Co-author of President Biden’s “The Administration’s Roadmap to Mitigate Cryptocurrency Risks” departs – @BrianDeeseNEC on Twitter
- Crypto Crisis: A Timeline of Events – The Wall Street Journal
- India’s retail giant Reliance to accept CBDC at stores – TechCrunch
- The IBM–Maersk blockchain effort was doomed to fail from the start – Cointelegraph
- US Air Force Pumps $30M Into Blockchain for Supply Chains – Blockworks
- NFTs, Trademarks, and the First Amendment: A Primer on Hermès International v. Rothschild – Pryor-Cashman
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