House Republicans Demand Transparency From SEC; New Law Moves UK Ahead On Digital Assets

House Republicans and SEC

Top House Republicans state they’ve had enough obfuscation from Securities and Exchange Commission (SEC) Chair Gary Gensler and its time for full transparency.

In a press release yesterday about a November request known as the “SEC Off Platform Letter”, House Financial Services (HFS) Committee Chair Patrick McHenry (R, NC), House Judiciary Committee Chair Jim Jordan (R, OH) and House Oversight and Accountability Committee Chair James Comer (R, KY) “identify significant concerns with Chair Gensler’s potential failure to comply with federal record keeping laws, while slamming Gensler’s inadequate response to a previous inquiry regarding the matter.”

In a new letter addressed to Chair Gensler and dated this past Wednesday,  the three House Republican Chairs (three corresponding Democratic Ranking Members are “cc’d”) drill down much further and call into question, for example, whether Congress has been provided relevant communications from digital apps such as Signal, WhatsApp, Teams, and Zoom.

Also, proper recordkeeping around meetings with lobbyists such as Better Markets and Healthy Markets are questioned.

The letter concludes in part, “Your failure to adequately respond to the SEC Off Platform Letter, combined with the potential recordkeeping matters described above, continue to raise troubling questions about the SEC’s compliance with applicable federal laws. They also raise disturbing questions regarding your own commitment to holding the SEC accountable to the same standards you seek to impose on the individuals and entities you regulate.”  See the letter.

A response to the letter’s many requests is due by July 17.

Part of the effect of this letter may be to build momentum around other current recordkeeping requests of the SEC such as:

    • The inquiry about the April Investor Advisory Committee (IAC) letter on digital assets by Sen. Bill Hagerty (R, TN) and Rep. French Hill (R, AR) on May 24.
    • On June 15, Blockchain Association made a FOIA request of the SEC related to the approval of Prometheum’s digital assets registration.
    • On February 10, HFS Chair McHenry and HFS Subcommittee on Oversight and Investigations Chair Rep. Bill Huizenga (R, MIrequested SEC communications around the time of the initial arrest of former FTX CEO Sam Bankman Fried.

Administration divide

In a hopeful article for the prospects of crypto legislation in the United States, crypto news publication DL News suggests that House Financial Services (HFS) Committee Ranking Member Rep. Maxine Waters’ (D, CA) is frustrated by the intransigence of fellow Democrat and SEC Chair Gary Gensler and his dismissive views on crypto. Her June 23 letters to Treasury and the SEC may be a sign of the frustration.

Each Waters’ letter asks for an opinion on the market structure bill by today, June 30.

Referring to a growing opinion among lobbyists, DL News writes, “Normally, such missives would amount to little more than legislative housekeeping. But Waters’ request has raised eyebrows because she is focusing on an inconsistency between the Administration’s two most powerful financial regulators.” Read more.

Administration optionality

The buzzy premise is that SEC Chair Gary Gensler must work with Congress – Republicans and Democrats – rather than being a roadblock.

An unspoken truth also seems conceivable: if the Biden Administration told Chair Gensler – a loyal Democrat and former CFO to Hillary Clinton’s presidential campaign among other Dem roles over the years – to back off and/or work with Congress, he would.

Although there appears to be a disconnect between Gensler and Yellen on the need for crypto legislation, it could be a “good cop, bad cop” strategy which provides the Administration needed flexibility as the general election approaches in 2024. 

That said, the HFS Republican majority has had no interest calling Chair Gensler to testify on the stablecoin or market structure bills which Ranking Member Waters has publicly noted. Republicans know Chair Gensler would likely use the pulpit to promote his current views which decry crypto and could derail the current bills’ momentum.

The letters are a way for Waters to go around Republicans and get senior, Democratic, financial system leadership to publicly opine on the Republican digital assets agenda.

Or put still another way, Waters’ letters are a way for the Biden Administration to insert itself more directly into the debate on crypto legislation.

Royal Crypto

King Charles has given his blessing to crypto. Well, kinda. But, the King’s “Royal Assent” was the final, procedural step in the approval process for the “Financial Services and Markets Bill.” The new United Kingdom bill is a forward-looking vision for the country’s financial system and, among other things,  “enables the regulation of cryptoassets to support their safe adoption in the UK; establishes ‘sandboxes’ that can facilitate the use of new technologies such as blockchain in financial markets.” Read the statement.

FX Street describes the news: “The United Kingdom became part of the list of nations that have officially brought regulations to cryptocurrencies and digital assets. The move by Great Britain and Northern Ireland has placed it ahead of the United States in terms of acceptance despite having a significantly smaller user base than the US.” Read more.

more tips

Britain could see crypto-specific regulation in the next 12 months, top lawmaker says (April) – CNBC

global non-compliance

The Financial Action Task Force (FATF), a global intergovernmental agency formed to combat money laundering and terrorist financing, issued a new report this week looking “at the global implementation of the FATF Standards to prevent criminal and terrorist misuse of virtual assets and virtual asset service providers,” according to FATF on Twitter.

Download “Targeted Update On Implementation Of The FATF Standards On Virtual Assets And Virtual Asset Providers (PDF).”

The FATF press release says with some urgency that countries need to get compliant on Virtual Asset requirements suggested by the global body: “FATF’s report finds that jurisdictions continue to struggle with fundamental requirements such as undertaking a risk assessment, enacting legislation to regulate [Virtual Asset Service Providers – VASPs], and conducting a supervisory inspection. Based on 98 FATF mutual evaluation and follow-up reports since the revised [FATF’s Recommendation 15 and its Interpretative Note] was adopted, 75% of jurisdictions are only partially or not compliant with the FATF’s requirements. In addition, jurisdictions have made insufficient progress on implementing the Travel Rule, which is a key AML/CFT measure.”

more tips:

What is the Travel Rule? – FinTech Global

still more tips

Mastercard Is Piloting Tokenized Bank Deposits in New UK Testbed – CoinDesk

Worldcoin launches in Germany and integrates with Okta’s Auth0 platform – The Block

Another one: Fidelity Joins Spot-Bitcoin ETF Race With Fresh SEC Filing – Bloomberg

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