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state law, then federal
Local news outlet Cowboy State Daily reported last week that Senator Cynthia Lummis (R, WY) “will try again for a national [digital assets] regulatory framework that would make at least some of Wyoming’s framework national.” As she said at the Milken conference two weeks ago, Lummis promises an updated version of her Responsible Financial Innovation Act (RFIA) originally introduced in the 117th Congress and co-sponsored by Senator Kirsten Gillibrand (D, NY). Lummis notes, “(Wyoming’s laws) are yet another example of how states are incubators of innovation. (…) And certainly, when it comes to the world of digital assets, the Wyoming Legislature has truly been way ahead of the rest of the nation, including Congress, in its vision.” Read it.
March 29 hearing
Late Friday, House Financial Services Chair Patrick McHenry (R, NC) and Ranking Member Maxine Waters (D, CA) announced a hearing for March 29 focused on the demise of Silicon Valley Bank (SVB) and Signature Bank. Federal Deposit Insurance Corporation (FDIC) Chair Martin Gruenberg and
Federal Reserve Vice Chair Michael Barr are scheduled as witnesses. Read the release.
No doubt the cryptocurrency on-ramp at Signature Bank will come up and whether or not federal regulators made a decision to shut down Signature (or SVB for that matter) based on a desire to eradicate digital assets from any bank in the U.S. financial system – read late Friday’s op-ed from the Wall Street Journal editorial board, “Signature Bank’s Crypto Execution.” Senate Banking and other Congressional Committees will be scheduling their hearings in the near future, too.
Tip #1: This hearing and others like it could accelerate digital assets legislation -especially if the U.S. government and its regulators are perceived to be operating outside the rules set up by Congress.
Tip #2: On the other hand, the hearing on the 29th, and the banking crisis in general, may have moved back digital assets legislation (such as stablecoins) as Congressional priorities shift.
Tip #3: See yesterday’s interview with Rep. Patrick McHenry on Face The Nation.
Republican Commissioner Hester Peirce of the Securities Exchange Commission (SEC) appeared on the Bankless podcast last week.
Among the highlights, Peirce said, in general, she’s discouraged about the lack of progress, but remains “optimistic that we can make progress”:
On advice for the crypto industry: “We’re in a bad place. We all acknowledge that the SEC is lashing out by bringing lots of enforcement actions. Again, there’s a place for enforcement actions – and there’s a place for enforcement actions. We all know there’s a lot of fraud and we’ve seen a lot of that come out. (…) But then the industry is looking at the situation and saying, ‘It doesn’t benefit us to talk to the SEC.’ I still think we have to have those conversations. I’m trying to push from inside for us to have more conversations with the industry. But I think that needs to come from people in the industry and people who use crypto and want a better regulatory framework around it.”
On her recent dissents and breaking the 3-2 deadlock along party lines on the Commission: “My other colleagues have open minds, too. Commissioner [Caroline] Crenshaw has expressed a real interest in meeting with people from the crypto community, for example. I’m sure Commissioner [Jaime] Lizárraga, the newest commissioner, I’m sure that he does as well. People can change their minds. We can’t give up on people – and then if there are 3 (out of five Commissioners), then we’ve got a different ballgame here.”
On stablecoin legislation: “I think at this point it makes sense for us to wait for Congress to tell us what we should do in the [stablecoin] space. With everything going on over the past week, whether Congress is going to turn its to crypto or focus more on banking, we’ll see.”
On decentralization: “What I do worry about is [the regulators] really want everything to be centralized. And so, we [the regulators] are going to be playing that up, and pushing centralization. I think people need to be pushing in the opposite direction of decentralization to show that we truly are dealing with something different here.”
Hear the podcast (subscribers only now; publicly available today or tomorrow)
Durbin blames crypto
Bank failures are being blamed on crypto. On the Senate floor last Thursday, Senator Dick Durbin (D, IL) noted the demise of Silvergate and Signature Bank and said, “For months, I have been sounding the alarm on crypto. Yes, I am a crypto skeptic. The Senate Agriculture Committee, on which I serve, has held multiple hearings in recent months on cryptocurrency and proper regulation of the industry. At those hearings, I warned about the contagion and risk if crypto was more fully integrated into the broader financial system. This weekend proved that those fears were not unfounded. The fears were confirmed by the failure of these two banks.” Read more in the Congressional record.
Tip: Back in early February, Durbin delivered a lengthy speech against cryptocurrencies on the Senate floor. Last Thursday’s comments were less voluminous, but even more pointed by suggesting crypto caused the banking crisis.
Citadel almost buys Circle
The Wall Street Journal that in the depths of the banking crisis 10 days ago, stablecoin issuer Circle was looking for solutions to the deposits trapped at Silicon Valley Bank before the government stepped in – and along came Citadel and its CEO Ken Griffin. “Mr. Griffin’s hedge-fund firm, which has a history of profiting from assets it buys from failed firms, sent Circle a term-sheet on Sunday, hours after a Circle adviser approached Citadel to discuss Circle’s situation,” reports The WSJ. Read more.
Gensler speaks again
Financial markets publication Capitol Account scored an interview with the ubiquitous SEC Chairman Gary Gensler and asks if he believes tough regulation for crypto will force innovators to leave the United States. Chair Gensler doesn’t buy it, “I would note this: our securities laws have been pro-economic growth for 90 years…I really believe it is part of our economic success for 90 years that you have to have full, fair and truthful disclosure to the public when you raise money from the public. (…)The securities law is pro innovation.” Read it.
SEC’s Hotel California
“There’s no path to registering. We’ve tried, and there’s just no way to do it. And in fact, we’ve submitted a petition with the SEC back in June where we enumerated the specific issues that the agency would have to resolve for crypto platforms to be able to come in and register,” says Coinbase’s Head of Public Policy Faryar Shirzad in an interview with Yahoo Finance. You can check in at the SEC, but you can never check out.
Nevertheless, Shirzad believes digital assets regulation led by Congress is imminent. Read it.
Paris Blockchain Week
Touting the attendance of 10,000+ attendees, Paris Blockchain Week takes place this week as France and the wider European Union flex their burgeoning pro-blockchain regulatory framework known as MiCA or Markets in Crypto-Assets.
Among the “Summit” discussions which begin Wednesday, “MiCA: How is the EU Regulating Crypto?” features European innovators, lawyer-types and Gundars Ostrovskis, Team Leader Digital Finance at the EU Commission, who is “involved in the analytical work on crypto-assets including decentralized finance and central bank digital currencies, as well as leads the unit’s policy work on open finance.” See the Summit agenda.
tokenized deposits vs. payment stablecoins
In a Twitter thread, Circle’s Head of Global Policy Dante Disparte breaks down the differences “between bank-issued deposit tokens (a.k.a tokenized deposits) and payment stablecoins like USDC (a.k.a. tokenized cash or what the EU’s #MiCA framework would call e-money tokens).” A nice summation – it begins here.
- See: Macroprudential Considerations for Tokenized Cash – Circle on SSRN
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