Senate Banking Hearing On Illicit Finance With Treasury; Hester Peirce Challenges SEC Dem Majority

illicit finance hearing

Next Tuesday’s Senate Banking hearing titled, “An Update from the Treasury Department: Countering Illicit Finance, Terrorism and Sanctions Evasion” led by Chair Sherrod Brown (D, OH) will likely include discussion on digital assets.

The sole witness will be the ubiquitous Wally Adeyemo, Deputy Secretary of the Treasury,  an articulate anti-crypto advocate of Dem leadership. Back in November, Adeyemo had sent letters requesting more power over crypto to Senate Banking and House Financial Services. The next day, Adeyemo challenged the crypto industry in a speech at the Blockchain Association’s Policy Summit which included a discussion about the tools U.S. Treasury is seeking – and why. Read that speech.

See the hearing page.

what you should know: Will Democrats like Chair Brown and  Senator Elizabeth Warren (D, MA) use the hearing as a launchpad for their own illicit finance bills targeting digital assets? If they do not use it as a launchpad, it seems fair to wonder if the effects of crypto campaign dollars and pro-crypto candidates running against each Senator have re-configured existential priorities.

The Hester Peirce SEC

In a keynote speech at Tuesday’s annual “SEC Speaks” conference connecting the legal community with the Securities and Exchange Commission (SEC), SEC Commissioner Hester Peirce (R) provided another pointed commentary on the direction of her Commission especially as it relates to digital assets and  broader recommendations to the SEC and the securities community it encompasses.

Read the speech – this could be seen as a potential plan – and pitch – for an SEC under Commissioner Peirce if the White House changes parties this fall.

Peirce cited guidance from the controversial Staff Accounting Bulletin 121 (SAB 121) as a particularly “pernicious weed.” and suggested, “Rules of such broad effect should be set by the full Commission, not by staff answering only to the Chairman.” Chairman in the case of SAB 121 is Gary Gensler who oversaw the instatement of the rule beginning in April of 2022.

For Democratic leadership that likes to wrap itself in the interests of consumer/investor protections when it comes to digital assets, Peirce makes the case that SAB 121 – supported by the SEC’s Democratic Commission majority – is a threat to investors.

But, the thrust of her comments was what she described as “the dwindling of genuine Commission and staff engagement with the public.”  She added, “The Commission—not the staff or market participants—is to blame.” Peirce then offered a three-part plan addressing each SEC constituency: the Commission, the SEC staff and market participants. And for the Commission, echoing themes of her SAB 121 comment, she asks for “reduced rulemaking” among other points.

more tips:

    • During the keynote, Commissioner Peirce referenced her 2019 speech to the same audience titled, “SECret Garden” which said of the Commission: “We have our own secret garden—a tangle of staff pronouncements hidden beyond a wall without a readily accessible entrance.” Read that one.

what you should know: An example of the secret-ness of the SEC was highlighted at a June 2023 House Agriculture hearing on digital assets when Dan Gallagher, a former SEC Commissioner and current Chief Legal Compliance Officer at Robinhood Markets, described a pro-active registration attempt by his company with the SEC for its crypto product which ended up going nowhere. Gallagher said at the time: “We went through a 16-month process of trying to register a special purpose broker dealer. And then we were pretty summarily told in March [of this year] that that process was over and we would not see any any fruits of that effort.”

Peirce SEC – reaction

The speech and SAB 121 comment struck a nerve with some on X.

Alexander Grieve of venture firm Paradigm reacted to Peirce’s speech, “When SEC staff tells HFSC staff in a closed-door briefing that regardless of what happens with the SAB 121 CRA, they’re still going to provide the same guidance privately that SAB 121 gives publicly — hard to give benefit of doubt…”

Also on X, George Mason professor J.W. Verret, a past Congressional witness, commented on Peirce’s speech this week:

“Talked with some former SEC enforcement guys getting coffee this morning at SEC Speaks who were badmouthing her comments and I challenged them for defending a division where Debt Box sanctions happened, where Gurbir’s political speeches happen, they mumbled something about how commissioners should defend staff first. It’s a club, that’s the culture of SEC enforcement now.

what you should know: A bipartisan group of House Financial Services lawmakers voted for a Joint Resolution that rescinds SAB 121 at a March 1 markup. The Senate version of the joint resolution is being championed by Senator Cynthia Lummis (R, WY), but will likely have to wait for the next Congress given the Democrat-controlled Senate and current Dem leadership such as Senate Banking Chair Sherrod Brown (D, OH), who appears to be publicly “all aboard” with the SEC’s position on digital assets.

speech by enforcement

    • In the decade since we brought our first crypto enforcement actions, our approach has been consistent, principled, and tethered to the federal securities laws and legal precedent. After all, every lawyer here knows what the test is to determine whether a crypto asset was offered and sold as an “investment contract,” and therefore a security: it’s the Howey test.[1] It’s not the “essential ingredients” test, or the Beanie Baby test, or some other test that industry folks might like to create for themselves.” – SEC Director of Enforcement Gurbir Grewal keynote at “SEC Speaks” this week

141 Republican co-sponsors

Majority Whip Tom Emmer’s (R, MN) CBDC Anti-Surveillance State Act [H.R.5403] added Rep. Lisa McClain (R, MI) and Rep. Richard Hudson (R, NC) as co-sponsors on Tuesday. See them on

PYUSD stablecoin launches

PayPal’s cross-border money transfer service – Xoom – announced yesterday that “U.S. users now have the option to fund money transfers to friends and family abroad using USD converted from PayPal USD (PYUSD), a U.S. dollar-denominated stablecoin…” The network offers the ability to send stablecoins to users 160 countries, says the company. See press release.

The press release footnote reminds that “issuance of and custody of PayPal USD is performed by Paxos Trust Company.”

more tips:

    • PayPal’s PYUSD is 12th largest stablecoin by market cap – CoinGecko

what you should know: After PayPal announced its stablecoin last August, Democratic leadership publicly expressed disbelief about PayPal’s stablecoin product when House Financial Services Ranking Member Maxine Waters (D, CA) said in a statement, “I am deeply concerned that PayPal has chosen to launch its own stablecoin while there is still no Federal framework for regulation, oversight, and enforcement of these assets…” Read that statement.

And then in November, the SEC subpoenaed PayPal about its stablecoin plans.

(Though Dem leadership rarely speaks to CBDCs, a related argument pits private stablecoins from so-called ‘big tech’ against a government-controlled Central Bank Digital Currency (CBDC).)

Nevertheless, amidst global crypto momentum, a U.S. Treasury pressing for stablecoin law (Treasury Secretary Janet Yellen, June 2023) and a bipartisan stablecoin bill headed for a House Floor vote, PayPal has not stopped. Cross-border payments is the lowest of the low-hanging “use cases” when it comes to why crypto rails are a good thing.

crypto politics

For a skeptical view of the crypto industry’s involvement in American politics today, readers might want to check out “The Staying Power of Crypto’s Political Machine” in American Prospect this week. AP’s Luke Goldstein quotes Better Markets’ Dennis Kelleher who says of crypto, “It’s a lawless industry with a business model that is basically ‘catch us if you can’ [with lawsuits], and before you can do that we’ll buy enough politicians to get a special law passed that has the appearance of regulation with the reality of deregulation.” Read more.

what you should know: Dennis Kelleher was a key member of President Joe Biden’s 2020 transition team along with current SEC Chair Gary Gensler.

Ripple’s new stablecoin

    • Ripple to Issue USD-backed Stablecoin Bringing More Utility and Liquidity to XRP Ledger – press release
    • Ripple Labs joins stablecoin rush amid crypto market revival – Financial Times

Coinbase expands globally

    • Coinbase obtains registration as a Restricted Dealer in Canada – Coinbase
    • Coinbase secures restricted dealer license in Canada, pushing expansion abroad amid SEC crackdown – CNBC

MRAC meeting

The Market Risk Advisory Committee (MRAC) led by Commissioner Kristin Johnson (D) of The Commodity Futures Trading Commission (CFTC) will hold another hearing next Tuesday. Past hearings (Dec. 2023 e.g.) have included digital asset topics under the “Future of Finance” subcommittee. No agenda is available, yet. See the release.

still more tips

BIS and Banks to Test Tokenization of Cross-Border Payments – Bloomberg via

DeFi developers behind crypto exchange Phoenix close $20 million Series A round – Fortune on Yahoo

Intellectual Property Infringement: Crypto Used in Sales for Illicit Streaming Services and Counterfeit Pharmaceuticals (March 29) – Chainalysis blog