Nothing New From SEC’s Gensler At Senate Banking Hearing; Emmer Re-Introduces CBDC Bill

Chair Gensler and Senate Banking

SEC oversight hearing

Yesterday, Securities Exchange Commission Chair Gary Gensler spent two hours in front of the Senate Banking Committee for an oversight hearing covering a broad range of topics: from the SEC’s robust rule-making pace to artificial intelligence to digital assets -and more. See Chair Gensler’s statement here.

A rough estimate: Crypto came in around fifth place in terms of importance as measured by Senators’ questions of Chair Gensler. When it was over, FoxBusiness reporter Eleanor Terrett tweeted about the hearing, “Partisanship seems to be at an all-time high.” Other than enforcement, crypto legislation was not mentioned.

At the start, Senate Banking Chair Sen. Sherrod Brown (D, OH) used a large part of his opening statement on crypto which helped set the tone for Democrats and perhaps some Republicans such as Senator Mike Rounds (R, SD) who signed on to Sen. Jack Reed’s (D, RI) CANSEE Act in July. Brown concluded in part, “…bad actors keep flocking to crypto. They use it to launder money, evade sanctions, fund crime and human trafficking and terrorism.” Read his statement. Between the lines, Brown’s message: “Chair Gensler, keep up the good work on crypto.”

Mixing in allusions to the FTX implosion, Ranking Member Sen. Tim Scott (R, SC) made it clear in his opening statement that the Republican caucus had a broader approach than just digital assets for the hearing with SEC Chair.  He said, “The regulations the SEC has proposed under your leadership are unjustified and are sowing discord and confusion for industry and market participants alike.” Read his statement.

In the Q&A, Chair Brown had one crypto question for Chair Gensler, a video of which Senate Banking Democrats linked to on Xnote what happens here.

Sen. Brown: “If crypto markets lived up to the investor protection principles we have in other markets, would that help protect Americans from the crypto abuses that cost consumers billions?” Continue reading “Nothing New From SEC’s Gensler At Senate Banking Hearing; Emmer Re-Introduces CBDC Bill”

SEC Oversight Hearing With Chair Gensler Today; Stabenow, Boozman Talk Crypto Legislation

Senate Banking Hearing Today

SEC oversight today

Securities and Exchange Commission (SEC) Chair Gary Gensler will appear at an oversight hearing in front of the Senate Banking Committee today at 10 a.m.  Video will be here.

In preparation, cryptocurrency platform company Coinbase – which has been charged by the SEC with operating an unregistered securities exchange – published a blog post critical of the SEC and its Chair titled, “Just the facts: A regulation by enforcement only approach is hurting American leadership, jobs, and innovation.” See it.

Coinbase makes the case that jurisdictions are rapidly developing crypto regulatory frameworks around the world including the G20 (which the U.S. is a part of), UK, UAE, Japan, Brazil, Hong Kong, Australia and Canada. Read more.

Late yesterday, Chair Gensler seemingly responded to the Coinbase hearing-pre-emptive strike with his prepared testimony for today’s hearing: “As I’ve previously said, without prejudging any one token, the vast majority of crypto tokens likely meet the investment contract test,” a refrain he has, indeed, previously said, but what token isn’t, and what token is a security remains a question that he and his agency has never answered. Read the Chair’s remarks (PDF).

And, read a summary on Decrypt.

Continue reading “SEC Oversight Hearing With Chair Gensler Today; Stabenow, Boozman Talk Crypto Legislation”

Senate Finance Gets Digital Assets Tax Comments; Rep. Emmer Targets SEC Enforcement

Senate Finance on digital assets taxes

request for taxes

The deadline for Senate Finance Committee Chair Ron Wyden’s (D, OR) and Ranking Member Mike Crapo’s (R, ID) request for comment on digital assets taxation came and went on Friday.

Back in July, the two Senators set out “to address uncertainties surrounding the tax treatment of digital assets with an open letter seeking input from experts, stakeholders and interested parties.”

And then on August 25, U.S Treasury inserted itself into the digital assets tax discussion with proposed rulemaking that was seen as draconian by some industry participants and House Republicans including Financial Services Committee Chair Patrick McHenry (R, NC). Treasury’s rules will presumably overlap with Senate Finance’s efforts as well as McHenry’s “Keep Innovation In America Act” [H.R.1414].

request for taxes – comments

Among those announcing their submission of comments to the Finance Committee on Friday was the Crypto Council of Innovation (CCI). CCI’s letter does not hesitate to criticize Treasury’s August 25 tax proposal: “The overbroad proposed definitions of ‘broker’ and ‘digital assets’ would include certain decentralized finance (DeFi) protocols, self-hosted wallet products, nonfungible tokens, and also not differentiate between digital assets used as payments and digital assets used as investments.”  And then, the industry organization provides a list of recommendations. See the letter. Continue reading “Senate Finance Gets Digital Assets Tax Comments; Rep. Emmer Targets SEC Enforcement”

Vice Chair Michael Barr Discusses New Novel Activities Program At Federal Reserve

Michael Barr

In a fireside chat at Day 2 of the Seventh Annual Fintech Conference at the Federal Reserve Bank of Philadelphia on Friday,  Federal Reserve Vice Chair Michael Barr participated in a fireside chat moderated by Sunayna Tuteja, the Federal Reserve System’s Chief Innovation Officer.

Before he answered questions, Barr delivered a speech entitled, “The Federal Reserve’s Role in Supporting Responsible Innovation,” (read it here) where he discussed the Fed’s ongoing exploration of Central Bank Digital Currencies (CBDCs), the launch of FedNow as well as where stablecoins or “private money,” as Barr termed it, may fit in the U.S. financial system.

He said, “I remain deeply concerned about stablecoin issuance without strong federal oversight.” Nevertheless, Barr stressed the importance of financial innovation and that it was “absolutely essential for our economy.”

Below is an edited transcript of Vice Chair Barr’s discussion with the Fed’s Sunaya Tuteja.

on payments innovation and financial inclusion

Vice Chair Michael Barr: “…The payment system is one of these aspects of finance that is so critical for people’s everyday lives. Most of us can take for granted that we can get paid, we can store money and we can pay bills in a pretty seamless way if you’re in the higher socio-economic classes of people who have access to these kinds of financial services. But if you’re a low or moderate income person payment services actually can be a real problem. It can be hard to receive your income. A lot of people still get paid by check and have to get that check cashed somewhere. A lot of low income people 5% of Americans are outside the banking system and don’t have a bank account at all. 15% of Americans according to the FDIC are underbanked that is they have a bank account but they still use expensive alternative financial services.” Continue reading “Vice Chair Michael Barr Discusses New Novel Activities Program At Federal Reserve”

Global Stability Plans For Crypto Introduced; CFTC ‘Attacks’ DeFi

IMF FSB on Stability

global stability recommendations

The International Monetary Fund (IMF) and the Financial Stability Board (FSB) came out with new recommendations for financial system participants, i.e. banks, on how they should interact with crypto-asset products “including those associated with stablecoins and those conducted through so-called decentralised finance (DeFi).” See the press release.

As part of the policy paper announcement, which was made in advance of the G20 meeting this weekend in India, the international bodies suggest a policy implementation roadmap (see it) for members of the G20 as well as those outside its jurisdiction.

According to CoinDesk, the report “reiterated the IMF’s stance that crypto blanket bans may not help in mitigating associated risks and added that targeted restrictions might come in handy for emerging economies in particular.” Read CoinDesk’s summary.

It’s important to note that the IMF and FSB’s recommend against blanket bans of crypto. In other words, you gotta deal with crypto, it’s not going away. Specifically, the report reads, “Blanket bans that make all crypto-asset activities (e.g., trading and mining) illegal can be costly and technically demanding to enforce. They also tend to increase the incentives for circumvention due to the inherent borderless nature of crypto- assets…”

Download: IMF-FSB Synthesis Paper: Policies for Crypto-Assets (PDF) Continue reading “Global Stability Plans For Crypto Introduced; CFTC ‘Attacks’ DeFi”

Senator Hagerty Touts Need For Crypto Clarity And Stablecoin Transparency Act

Senator Bill Hagerty

Senator Bill Hagerty (R, TN), who sits on the Senate Banking Committee, spoke to Cato Institute’s Jennifer Schulp, at Cato’s “Staying Ahead of the Curve: Crypto Regulation and Competitiveness” event in Washington, D.C. today.

View video of the event here.

Senator Hagerty addressed a number of “hot button” digital assets topics in Congress today including “choke point 2.0” (popular with the Republican caucus), Securities and Exchange Commission Chair Gary Gensler, crypto and the U.S. dollar’s co-existence, innovation and digital assets legislation momentum in Congress.

Also of note, the Senator touted his own stablecoin bill – Stablecoin Transparency Act [S.3970], which was introduced in March 2022 in the 117th Congress – saying that it’s simplicity (only 2 pages) was the way forward with digital assets legislation rather than something more all-encompassing or “fulsome” as the Senator described it.

Perhaps a re-introduction of his bill is imminent? The chances of the bill ever making it to the docket of the Senate Banking Committee controlled by the Democratic majority seems slim for now. This point was not lost on the Senator. Yet, it’s clear he wants a seat at the table of any stablecoin legislation discussion.

Also, whether Senator Hagerty intended to be directly dismissive of broader, more “fulsome” bills such as the “Lummis-Gillibrand Responsible Financial Innovation Act (RFIA)” [S.2281] in the Senate or the digital assets market structure bill in the House known as the “Financial Innovation and Technology for the 21st Century Act” [H.R. 4763] was unclear.

Nevertheless, Hagerty wants to play for singles – not home runs – when it comes to digital assets and a divided Congress.

Transcript lightly edited for clarity.

on concerns about crypto innovation moving offshore

Senator Hagerty: I certainly have the concerns because of the tremendous uncertainty that’s been created by the current administration. Basically, what you have is an environment where we cannot get the regulators to come forward with any sort of clear set of requirements. You’ve got companies that are basically being regulated in arrears, if you will. They proceed according to what they think is a legitimate business practice – [and then] the SEC, for example, deems that illegal and in retrospect. It comes back and charges [companies] for something that was never on the books as being legal or illegal. It is a terrible environment for those companies who are trying to invest and expand. It’s forcing them to look overseas to more favorable regulatory environments. That’s not where we need to be right now. Continue reading “Senator Hagerty Touts Need For Crypto Clarity And Stablecoin Transparency Act”

The Fed Master Accounts Swirl; Senators Lummis And Hagerty On ETFs and Crypto

fed master accounts

Fed master accounts

The push-pull continues between states rights versus federal in the approval of master accounts at the Federal Reserve.  Wyoming is once again in the middle of it with its crypto-friendly state regulation.

On Tuesday, The Wall Street Journal highlighted the Fed’s rejection of master account applications for 4 Wyoming-charter SPDIs (special-purpose depository institutions, i.e. a crypto bank) . Very simply, the master account gives a bank – or an SPDI in this case – access to Federal Reserve payment services. CEO Caitlin Long of Wyoming-based SPDI Custodia Bank, has been a well-known critic of the Fed as her bank attempts to get its master account.

Chris Rothfuss, a Wyoming Democratic state senator and sponsor of the SPDI legislation tells the WSJ, “The idea that a state needs to be held back because we were being innovative in a way that nationally chartered banks or the federal government had not caught up with is really a slap in the face of state rights.Read more.

more tips:

Master Accounts and the Payment System (December 2022) – Congressional Research Service Continue reading “The Fed Master Accounts Swirl; Senators Lummis And Hagerty On ETFs and Crypto”

VISA Seeks Better Settlement With Stablecoins; Congress Learning Digital Assets

payment stablecoins

stablecoins and settlement

In an effort to optimize the movement of funds – and settlement – in real-time between a consumer’s bank (the issuer) and the merchant’s bank (the acquirer), payments company VISA announced it is taking the next step in the use of stablecoins  and Circle’s USDC.

According to a company press release: “Visa is expanding its stablecoin settlement capabilities to the high-performing Solana blockchain and is working with merchant acquirers (i.e. payment processors) Worldpay and Nuvei.” Read the release.

VISA details that it has been using stablecoins for settlement in various tests around the globe since 2021. The company is vague on how much is currently flowing through their stablecoin-infused, payment network today other than saying they’ve “moved millions of USDC between its partners over the Solana and Ethereum blockchain networks to settle fiat-denominated payments authorized over VisaNet.”

Nic Carter of Castle Island Ventures tweeted, “this is a huge deal. writing on the wall: stables will become defacto interbank settlement solution via card networks. even my non-crypto fintech friends are fired up about this.”

Settlement is a core use case for blockchain and crypto, in particular. More in Blockworks.

Late yesterday, the House Financial Services X account run by the Republican majority picked up the stablecoin baton and tweeted about the stablecoin bill percolating in the House, “Republicans like Rep. Mike Flood (R, NE) are advancing bipartisan legislation that includes both state and federal pathways for issuance and regulation.” Read Rep. Flood’s quote.

Ahhh, the state/federal conundrum… Democratic leadership has been guiding away from state oversight and towards federal as it relates to stablecoins. Will there be compromise this fall? Continue reading “VISA Seeks Better Settlement With Stablecoins; Congress Learning Digital Assets”