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Choke Point 2.0 – Republicans
It’s official. The “Choke Point 2.0” battle is on.
“Today, we are seeing the resurgence of coordinated action by the federal prudential regulators to suppress innovation in the United States,” read the press release from the Republican-controlled House Financial Services Committee yesterday.
House Financial Services (HFS) Committee Chair Rep. Patrick McHenry (R, NC) has chosen to officially amp up the “Choke Point 2.0” accusation of federal agencies by sending new letters to the heads of the Federal Deposit Insurance Corporation (FDIC), Federal Reserve and Office of the Comptroller of the Currency (OCC).
Read them (PDFs):
Federal Reserve Chair Jay Powell
FDIC Chair Martin Gruenberg
OCC Acting Director Anthony Hsu
HFS Subcommittee of Oversight and Investigations Chair Rep. Bill Huizenga (R, MI) and Rep. French Hill (R, AR), Chair of the Digital Assets, Financial Technology and Inclusion Subcommittee are co-signers which explicitly accuse the agencies of coordinated action similar to the original Operation Choke Point in 2013.
Republicans ask for a huge amount of data from the three officials – including communications – be delivered by May 9. One can imagine recurring hearings on this topic throughout the 118th Congress driven by Republicans.
Jerome Powell, a Republican, may be thinking, “Why me?”
Choke Point 2.0 – Democrats
Democrats no doubt saw this coming with the Republican majority in the House and probably have a few options here.
Pro-crypto Democrats in the House can just watch, wait and maybe participate. These Dems include Representatives Ritchey Torres (R, NY), Josh Gottheimer (D, NJ) and even freshman Wiley Nickel (D, NC) (who just came aboard as yet-another-co-sponsor of Chair McHenry’s “Keep Innovation in America Act”).
Meanwhile, anti-crypto Democrats will be put in the position of defending the Biden Administration and its regulators who are being accused of Obama-era Choke Point 1.0, political tactics. These Democrats will no doubt accuse the Republicans of their own political motivations. (ya think?)
HFS Ranking Member Maxine Waters (D, CA) and Digital Assets Subcommitee Ranking Member Steven Lynch (D, MA) who suddenly spiked the stablecoin bill at last week’s stablecoin hearing – after expressing interest only one month prior – will lead the “Anti-Crypto Army” rhetoric embraced by the Biden Administration and Senator Elizabeth Warren (D, MA) since the implosion of cryptocurrency platform company, FTX. The hope by Dem leaders is that “anti-crypto” stance will fuel gains in the 2024 general election including the re-election of President Joe Biden.
Nevertheless, will a split begin to show itself among Democrats on the House Financial Services Committee? If there’s one thing Democrats have been good at in comparison to the Republicans (speaker election, debt ceiling), is unity.
Finally, HFS and Digital Assets Subcommittee member Rep. Brad Sherman (D, CA) will likely celebrate the regulators and may call for more points to be choked. He has never flaked. God bless.
Choke Point 2.0 – Senator Warren
Senator Elizabeth Warren’s “Digital Asset Anti-Money Laundering Act” is expected to be re-introduced shortly and is a restrictive view on digital assets regulation generally derided by industry and Republicans, except Senator Roger Marshall (R, KS), her co-sponsor.
Undoubtedly, Senator Warren’s legislation will appeal to her base, the Democratic base and even some Republicans like Senator Marshall. Yet, the political calculus could be more nuanced by next year.
If by October 2024 of next year her legislation is seen as another outgrowth of Choke Point 2.0 and the case is made however slightly by Republicans regarding overreach by government, then the small, malleable middle of the electorate could be affected – the middle which will decide who will be the next President. And then the damage could could be catastrophic for Dems.
In her favor – she has been one of Congress’ cagiest politicians.
It’s Choke Point 2.0 versus the Anti-Crypto Army. Bare-knuckle politics, get ready!
Libra advocate on regulation
Former Facebook executive David Marcus discusses his new Bitcoin startup, Lightspark, and the state of the digital assets industry today with The Verge. You may recall that in 2019 Marcus was a very popular guy and appeared in front of Congress to discuss Facebook’s Libra cryptocurrency plans. (See the 2019 hearing video.)
Marcus is hopeful about his startup and Bitcoin, in particular, due to the fact Bitcoin “has the greatest regulatory clarity.”
But when he looks at the overall industry, Marcus is less sanguine, “…of course we don’t have enough regulatory clarity. I’ve been very vocal about that as well, which is if you want to reap the benefits of this revolution – because it is a revolution that will actually benefit consumers and create the next generation of leading companies – and if you want all of that to happen in the US, you need to have clear laws and regulations that, on one hand, protect consumers but, on the other, really incentivizes innovation to stay onshore …” Read more.
Fed doesn’t need no Congress
This oughta get Republicans riled – and some Dems, too. In American Banker, reporter Kyle Campbell finds someone who says the Federal Reserve doesn’t need Congress to start a Central Bank Digital Currency (CBDC). The rabble rouser is Jonathan Dharmapalan, founder and CEO of a financial software firm called eCurrency which says it provides technical assistance to governments establishing CBDCs. Dharmapalan tells American Banker, “This is actually an execution of the intent of the Constitution and the subsequent laws that were put into place that caused the United States dollar to exist, then applying those to a digital instrument, no different than the notes and coins we carry in our pockets — or those, I should say, that we are not carrying in our pockets anymore.” Read more.
breaking things
The New York Times looks at the “crypto crackdown” and where cryptocurrency platform Binance and its enigmatic founder, Changpeng “CZ” Zhao, fit in the regulatory maelstrom. Right in the middle, it appears.
One of Senate Banking Chair Senator Sherrod Brown’s (D, OH) preferred crypto experts, law professor Hilary Allen of American University (see December’s Crypto Crash hearing), provides a quote to the NYT about Binance, “It’s the biggest exchange for crypto, and if it gets clamped down on, that’s going to be a big deal. (…) It’s hard to see the rest of the crypto industry remaining unscathed.”
An ex-IRS investigator, Tigran Gambaryan, has been hired by Binance as the “Head of Financial Crime Compliance” to help defend the company against the SEC, CFTC, the Department of Justice as well as crypto ne’er-do-wells. Gambrayan tells the Times that the company has matured since its early startup days and today Binance “sees itself as a tech company. (…) They break things. All the exchanges have done it.” Read more.
sustainable blockchain
A new report from the World Economic Forum culls from resources as diverse as PwC and Cambridge Center for Alternative Finance in order to look closer at the reality of blockchain energy consumption. A contributed piece from Protocol Labs in Forbes covers the news and notes the complexity of getting sustainability data related to blockchain tech. For example, “most blockchain nodes do not report their location or hardware, numerous assumptions go into evaluating their energy consumption.” The upshot according to the report is more can be done to ensure a sustainably-aligned future for Web3 including the adherence to reporting standards. Read more in Forbes.
See: Guidelines for Improving Blockchain’s Environmental, Social and Economic Impact – Insight Report, April 2023 (30 pages, PDF) – weforum.org
sustainable blockchain – glossary
There’s a nice sustainability glossary on page 25 of the WEF’s report. Some of the basics are covered such as: “Environmental, social and governance (ESG): ESG stands for environmental, social and governance. These three elements are called pillars in ESG frameworks and represent the three main topic areas on which companies are expected to report. The goal of ESG is to capture all of the non-financial risks and opportunities inherent in a company’s day-to-day activities.”
South Korea crypto bill
The Bitcoinist reports that South Korea is on the verge of approving new regulations for cryptocurrency later this year. The current bill’s contents are familiar to questions regulators have discussed in the U.S. Bitcoinist begins,”The bill mandates that crypto service providers maintain user assets and deposits separately from their own assets, have insurance, hold reserves for contingencies such as hacks or system failures, and record all transactions.” Read more.
today’s hearings
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- “The Future of Digital Assets: Identifying the Regulatory Gaps in Spot Market Regulation,” 2 pm – House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development
- “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure,” 2 pm – House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion
- “Oversight of the Financial Crimes Enforcement Network (FinCEN) and the Office of Terrorism and Financial Intelligence (TFI),” 2 pm – House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions
still more tips
Franklin Templeton claims that fund will be the first U.S. registered mutual fund run on blockchain technology – CoinDesk
Africa fell in love with crypto. Now, it’s complicated – rest of world
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