Rep. Emmer on national debt
Speaking just prior to the House Speaker vote at the U.S. Capitol, Majority Whip Rep. Tom Emmer (R, MN) made his case for at a at PGP For Crypto event in Washington, D.C.
Rep. Emmer’s case for digital assets has different elements, but he made clear one benefit, in particular.
He said: “You [have] $33 trillion in debt -we have no way to pay for it right now. We’re not even thinking about how we pay for it. We’re bleeding about a trillion and a half a year.”
“The only hope in my mind we have is… much like the Internet when it exploded back in the 90s – it was allowed to explode. We had something in this country called ‘the boom’ – 25 years of the largest wealth creation in history. Now, some of us believe that the ‘pie’ is just *this* big and we [have] to divvy up the ‘pie’. Others of us believe this is just the beginning. And if we keep this here [in the U.S.] – we allow this innovation to grow here, we allow the 21st century economy and opportunity to be here in the United States of America.”
“And when we start to make some better decisions on how we pay our bills – and what we’re putting money into – we can grow this economy to the point where we can pay that off. That’s the future for the United States of America. And I would argue to my friends on the Senate side [and] my house colleagues that are playing this political game… we gotta stop [and] figure out how to work with the technology and the entrepreneurs that are creating it so it stays right here. This is where it belongs. This is where I think we benefit dramatically from it.”
See the full video of Rep. Emmer at the PGP for Crypto event on YouTube.
Fed’s Bowman – CBDCs
In addition to trumpeting the benefits of the Federal Reserve’s new payment system, FedNow, a speech by Federal Reserve Governor Michelle Bowman, a Republican, brought a skeptical view of a Central Bank Digital Currency (CBDC) – and stablecoins – in the United States yesterday.
Speaking at an event featuring a roundtable discussion on CBDCs in Washington, D.C., Bowman said:
“….the potential benefits of a U.S. CBDC remain unclear, and the introduction of a U.S. CBDC could pose significant risks and tradeoffs for the financial system. These risks and tradeoffs include potential unintended consequences for the U.S. banking system and considerable consumer privacy concerns. The U.S. banking system is a mature, well-functioning, and effective system that delivers important benefits to our economy. Within this system, banks play a number of important roles, including providing consumers with access to credit and other banking and payments services, all within an established regulatory perimeter. In addition, bank compliance and reporting programs support important public policies, like deterring criminal activity and protecting consumer financial data. Banks also play an essential role in the transmission of monetary policy, and they provide the foundation for a well-functioning economy and financial system.”
“The U.S. intermediated banking model helps to insulate consumer financial activities from unnecessary government overreach, and I believe this is an appropriate model for future financial innovation. If not properly designed, a CBDC could disrupt the banking system and lead to disintermediation, potentially harming consumers and businesses and presenting broader financial stability risks. As policymakers, we would need to carefully consider how an intermediated CBDC, with private-sector service providers, could be designed in a way that maintains financial institution involvement and minimizes, or ideally, eliminates related disruptions to the broader U.S. financial system.”
Fed’s Bowman – stablecoins
On stablecoins, Fed Governor Bowman also expressed skepticism, “Stablecoins purport to have convertibility one-for-one with the dollar, but in practice have been less secure, less stable, and less regulated than traditional forms of money. Digital assets used as an alternative form of money and payment, including stablecoins, could pose risks to consumers and the U.S. banking system. Therefore, it is important to understand risks and tradeoffs associated with digital assets and new arrangements used for banking and payments. While I support responsible innovation that benefits consumers, I caution against solutions that could disrupt and disintermediate the banking system, potentially harming consumers and contributing to broader financial stability risks. And, where the activity happens outside the regulatory perimeter, consumers would be left without the adequate protections that our regulated and supervised banks provide today in the United States.”
Nevertheless, Bowman said she supported a “sensible regulatory framework” which would incorporate what”works well” in the U.S. banking system and allows for “private sector innovations within established guardrails.” Powerful traditional finance industry lobby, the American Bankers Assocation, re-tweeted the speech and added on X that, overall, the “ABA shares some of her concerns.”
Read the full speech. And, read a summary on CoinDesk.
hear ye, hear ye
What House Speaker drama?
Late yesterday, the House Financial Services Committee led by the Republican majority and Chair Patrick McHenry (R, NC), who is also House Speaker pro tempore, announced three hearings for next week. See them all.
For digital asset lovers, two hearings *could* be impactful:
Capital Markets Subcommittee Hearing led by Chair Ann Wagner (R, MO): “Examining the SEC’s Agenda: Unintended Consequences for U.S. Capital Markets and Investors”
Date: Tuesday, October 24, 2023, 10:00 AM ET
Place: 2128 Rayburn House Office Building
Financial Institutions & Monetary Policy Subcommittee Hearing led by Chair Andy Barr (R, KY): “The Tangled Web of Global Governance: How the Biden Administration is Ceding Authority Over American Financial Regulation”
Date: Tuesday, October 24, 2023, 10:00 AM ET
Place: 2220 Rayburn House Office Building
House Speaker nom
“Former Speaker [Newt] Gingrich tonight in his column: ‘Speaker Pro Tempore McHenry is a lot better solution than gridlock and chaos. He should be empowered this week and let’s get on with the peoples’ business.'” – Robert Costa, CBS News, on X last night
EU heads up – MiCA
The European Securities and Markets Authority (ESMA) issued a statement yesterday saying that its preparing the implementation of the Markets in Crypto-Assets Regulation (MiCA) which will complete the “transitional phase” in the European Union (EU) in July 2026. The regulator also warned about the limitations for EU entities working with companies outside MiCA’s regulatory perimeter.
From the statement: “ESMA also underlines that the provision of crypto-asset services or activities by a third-country firm is strictly limited under MiCA to cases where such service is initiated at the own exclusive initiative of a client (the so called ‘reverse solicitation’ exemption). While this exemption will be subject to further guidance by ESMA, it should be understood as very narrowly framed and as such must be regarded as the exception…” Read the entire statement.
Patrick Hansen, policy director for Circle in the EU, deciphers the news on X, “….the last thing that EU supervisors want to see, after years of MiCA-related work, is foreign, unregulated businesses circumventing MiCA rules through reverse solicitation. So expect the scope to be, in ESMA terms, ‘very narrowly framed.'” Read his informative take.
illcit financing
Israel orders freeze on crypto accounts in bid to block funding for Hamas – The Financial Times
Hamas Still Struggles To Use Crypto, But Is Fundraising In Other Ways – Ari Redbord of TRM Labs on Forbes
Remarks by Under Secretary for Terrorism and Financial Intelligence Brian Nelson at Deloitte’s 15th Annual Anti-Money Laundering Conference – U.S. Treasury
SEC on blockchain risks
The Securities and Exchange Commission (SEC) released its 2024 Examinations Priority Report for its Division of Examinations yesterday. Get it (PDF).
Of particular interest is a priority subsection titled, “Risk Areas Impactive Various Market Participants: Crypto Assets and Emerging Financial Technology.”
The use of blockchain technology – in whatever form – appears to open firms and advisers up to deeper examination by the SEC. The report reads, “In addition, the Division will assess whether any technological risks associated with the use of blockchain and distributed ledger technology have been addressed, including whether compliance policies and procedures are reasonably designed, accurate disclosures are made and the risks pertaining to the security of crypto asset securities are addressed, if required by applicable law.”
Fox Business reporter Eleanor Terrett says on X about the new crypto priorities: “Does this indicate that (SEC Chair Gary Gensler) is using agency resources and funds paid for by registered companies to make a priority of cracking down on crypto – an industry he has not been authorized to regulate yet? Or does the SEC expect that more crypto companies will be registered with the agency in 2024?” Read more.
An SEC press release explains the Division of Examinations unique responsibilities within the securities regulator: “The Division conducts examinations and inspections of SEC-registered investment advisers, investment companies, broker-dealers, transfer agents, municipal advisors, securities-based swap dealers, clearing agencies, and other self-regulatory organizations.”
still more tips
FTX’s Political Donations Came From Stolen Customer Funds, Testifies Company Insider Nishad Singh – The Wall Street Journal
Australian government poised to regulate crypto exchanges like financial firms – DL News
Binance.US Ends Direct Dollar Withdrawals – Unchained
PGP for Crypto Briefing: Global Encryption Day panel discussion (Video) – PGP for Crypto on YouTube