CFTC on DeFi
Commissioner Christy Goldsmith Romero (D) of the Commodity Futures Trading Commission held her Technology Advisory Committee (TAC) meeting yesterday. Goldsmith Romero is the Committee’s sponsor and the agenda reflected her alignment with Democratic leadership currently when it comes to tech and markets – professing a strong interest in consumer protections versus innovation.
In an opening statement yesterday, Commissioner Goldsmith Romero said, “From the time that I arrived at the CFTC, I have talked about the importance of promoting innovation that is responsible, and studying emerging issues around digital assets to prevent harmful unintended consequences, particularly to retail customers, market integrity and financial stability.” Read more.
CFTC on DeFi – report
TAC’s Subcommittee on Digital Assets and Blockchain Technology co-chairs Carole House, a former National Security Council director, and Cornell law professor Dan Awrey published a study yesterday on Decentralized Finance -or DeFi.
House presented 10 “Issues for policymakers” from the new DeFi report beginning with “Determining whether and how DeFi fall within the existing regulatory perimeter.” See the slide on X.
Then, House highlighted recommendations on next steps for policymakers in DeFi including those around “identity.” See three of the recommendation slides.
digital assets memo
The memorandum for House Financial Services’ (HFS) Digital Assets, Financial Technology and Inclusion Subcommittee hearing on Wednesday was released yesterday and included five witnesses: Jeffrey Dinwoodie, counsel at Cravath, Swaine & Moore; Bill Hulse at U.S. Chamber of Commerce; Ji Kim, general counsel at Crypto Council for Innovation; Paul Kupiec at American Enterprise Institute; and Amias Gerety of QED Investors. Get the memo (PDF).
The 5-page memo for the hearing titled, “Regulatory Whiplash: Examining the Impact of FSOC’s Ever-changing Designation Framework on Innovation,” reveals a concise history of the Financial Stability Oversight Council (FSOC) – the subject of tomorrow afternoon’s proceedings. See the hearing page for the latest.
what you should know: The Subcommittee’s Republican majority led by Chair French Hill (R, AR) will be on the attack and raise the specter of over-regulation courtesy of FSOC, a committee born out of Dodd-Frank. As it relates to digital assets, FSOC’s stance has arguably inhibited integration of the asset class into the U.S. financial system. Meanwhile, the Democratic majority may ask for more regulation in the interest of protecting the financial system. (See HFS Ranking Member Maxine Waters’ (D, CA) press release on FSOC from last April.)
Yesterday on X, Senator Cynthia Lummis (R, WY) weighed in on the crypto tax conundrum for miners and validators and a new rule enacted by the IRS on January 1. Lummis said, “Nobody should find out they are a felon because of regulatory uncertainty, but sadly the rules surrounding crypto assets in America are as clear as mud right now.”
Commenting on a screenshot of a Chamber of Digital Commerce letter to Congress on the tax matter, the Senator touted her own legislation, “This snapshot shows exactly why we need the regulatory clarity provided in Lummis-Gillibrand [S.2281].” See it.
Gensler crypto thread
In a tweet thread published on his personal X account, Securities and Exchange Commission (SEC) Chair Gary Gensler offered “…some things to keep in mind if you’re considering investing in crypto assets.” With approval of Bitcoin spot market exchange-traded funds (ETFs) seemingly days, if not hours, away, Gensler provided what seemed to be purposeful confusion as he tweeted in part: “Those offering crypto asset investments/services may not be complying w/ applicable law, including federal securities laws. Investors in crypto asset securities should understand they may be deprived of key info & other important protections in connection w/ their investment.” The ETFs will be approved by the SEC – so, are they potentially subject to a compliance lawsuit? Read more.
what you should know: Gensler appears to be making sure that Democratic leadership knows he’s still in the anti-crypto camp much to the chagrin of the digital assets industry and its supporters in Congress.
Payments provider PayPal has turned to DeFi to try and improve the sluggish pace of adoption for its PYUSD stablecoin. “The lending protocol Aave is conducting a ‘community temperature check’ on potential PYUSD onboarding into Aave’s Ethereum pool. The initial vote ends Jan. 11th and follows a PYUSD activation on the automated market maker Curve in late December,” reports Blockworks. Read more.
Stablecoins by Market Capitalization – CoinGecko
what you should know: After launching their stablecoin in August, PayPal received a subpoena from the SEC about the stablecoin’s inner-workings last November. Hard to say if the subpoena is inhibiting success of the PayPal stablecoin, but it can’t help.
“1/ Today, Paradigm filed comment with the CFPB on their proposed “Larger Participants Rule,” re digital wallets used in consumer payments. The CFPB targeted this Apple / PayPal / Cash App, but the rule would also capture crypto wallets & all kinds of onchain activity…” – Tweet thread from Alexander Grieve, Paradigm on X
still more tips
McHenry succession fight will test crypto’s pull on the Hill – Politico
Fee War Breaks Out in Spot Bitcoin ETF Race – The Wall Street Journal
SEC vs Terraform; Warren Attacks Former Nat Sec Officials’ Participation in Policy Debates – DeFi Education Fund
How many more times will we be conned by crypto? (Jan. 5) – The Hill