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Rep. French Hill Discusses Digital Assets Legislation Prospects at Milken Institute

Rep. French Hill (R, AR)

At last week’s “Future of Digital Assets” conference produced by the Milken Institute, Rep. French Hill (R, AR), chair of the House Financial Services’ Digital Assets, Financial Technology and Inclusion Subcommittee, spoke at length regarding digital assets legislation prospects in the 118th Congress.

Nicole Valentine, FinTech Director at Milken Institute moderated the discussion.

(Transcript edited for clarity)

On key priorities for the House Digital Assets Subcommittee…

REP. FRENCH HILL: The Digital Assets Subcommittee is a priority for the House Republicans and the House Financial Services Committee because back in 2019, we had two task forces: a task force on artificial intelligence and we had a task force on FinTech, financial technology. Those were bipartisan. It was agreed to and set up by then-Chairwoman Rep.Maxine Waters (D, CA) and then-Ranking Member Rep. Patrick McHenry (R, NC).

And digital assets and financial technology have been a priority for the committee for many years to help solve many of the challenges that the existing financial structure has and lay a framework for innovation for the future. And so it was a “natural” that when Patrick [McHenry] became the chairman of the committee that he would want to have a subcommittee on digital assets. That’s the background – it has the full jurisdictional aspects of all things FinTech, inclusion and the broader picture of digital assets.

In the House and in the Senate, you don’t have clean jurisdiction in some of these key areas. The House Agriculture committee and the Senate Agriculture Committee play a role here as well because under market regulation conditions they might be involved in the futures market or certain aspects of the currency oversight of an exchange.

Our goal is to create a regulatory framework for digital assets. And there’s no doubt in my mind that this country needs that – we’ve seen that through the willy-nilly formation, so far, with no guidance – just pure innovation out there. We’ve seen it in the malfeasance in the industry that we witnessed last year culminating in the collapse of FTX. And we see it in the competition across the globe where other jurisdictions are establishing a legal framework and regulatory framework for digital assets, whether it’s in Europe or Asia. And so that is a critical element to take into account.

And finally, the United States has been at the forefront of financial innovation in the capital markets for certainly the 20th century and into the 21st century. We want to see that continue in a digital format. This is a big agenda for this subcommittee and I look forward to leading it as its initial pioneering chairman, and it’s gonna be a fun ride this year. Continue reading “Rep. French Hill Discusses Digital Assets Legislation Prospects at Milken Institute”

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Google, Oracle and Microsoft Have Web3 Plans

INTEROP Summit

As part of the buildup to last weekend’s ETHDenver Ethereum ecosystem conference, a “satellite “conference titled INTEROP took place on February 27-28. Produced by Axelar, a cross-chain infrastructure provider,  the conference’s main focus was the Web3 developer community.

And developers are arguably what drew some of the biggest technology companies in the world who showed up to tout their Web3 wares – particularly as it relates to the cloud – including Google, Oracle and Microsoft.

The “elephant” that was not in the room: Amazon.

Below is a selection on each company’s positioning in Web3 according to their participants at INTEROP. (edited for clarity and brevity)

Rich Widmann, Global Head of Strategy, Web3, Google Cloud

“Our goal at Google Cloud is to be the default space for developers to build in Web3. I think a lot of the pain points that that we’ve observed over the last three to four years really happen at that developer level. It’s starting companies; it’s getting familiar with on-chain data; it’s standing up the infrastructure (RPC nodes, validators, etc.); and then there’s a whole host of other issues that relate to storage.”

“If you think about how to get and scale horizontally your node infrastructure – we actually just saw this this weekend with one of the [recent Solana] outages . One of the difficulties was pulling snapshots of the full ledger in order to update validators to get them back up and running and in consensus.”
Continue reading “Google, Oracle and Microsoft Have Web3 Plans”

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Senators Lummis and Gillibrand Announce Responsible Financial Innovation Act Re-Introduction

Responsible Financial Innovation Act of 2023

At the Milken Institute’s The Future of Digital Assets Symposium yesterday, Senator Cynthia Lummis (R, WY) and Senator Kirsten Gillibrand (D, NY) made their first appearance together in the new Congress touting the re-introduction of their digital assets regulation bill, the Responsible Financial Innovation Act (RFIA), in mid-April.

Below is an edited transcript of the interview conducted on-stage by Michael Piwowar, Executive Vice President at the Milken Institute.

On the re-introduction of the Responsible Financial Innovation Act in the 118th Congress:

SENATOR LUMMIS: We’re looking at mid-April to reintroduce the bill. And the changes that we’re making would be a slimmed down, better looking [version] adjusting some of the definitions. We’ve been working with the SEC staff to address some of their concerns that there might be some unintended consequences to some of the definitions, but we’ve been meeting with them and taking care of that.

SENATOR GILLIBRAND: We’re also trying to address some of the concerns that we heard through regulators and the industry to clarify different areas. So we’re going to have an ambition to try to build out some of the regulatory framework that we left for studies in the first version.

It might also be a more thorough bill than the first version because the first version was just an introduction of what a baseline framework could look like in the industry, and how you would assess what are digital securities, what are digital commodities, and how you would regulate stablecoins. We had a lot of studies [,too].

Now, we’re going to actually try to do a deep dive on stablecoin regulations. We’re going to refine a lot about digital securities based on conversations we had with Chairman Gensler and the SEC staff. And we’re also going to even broaden out DeFi because [with] DeFi we punted it to the regulators in our first draft. Because of the climate we’re in right now, we think it would be better for us to give our best assessment of what that regulatory framework might look like, as opposed to waiting on regulators since regulators seem to have their own unique opinions. And there doesn’t seem to be any certainty with given regulators. So we thought it’d be better to maybe do our own parameters.

And so those are some of the things we’re working on now. The bill is going to be stronger. It’s also going to address some of the things that happened with FTX. So that it’s very clear if [FTX] was registered as a US company, what it would have had to do and why consumers would not have been so harmed. Continue reading “Senators Lummis and Gillibrand Announce Responsible Financial Innovation Act Re-Introduction”

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Digital Assets Hearings Begin Next Week In House; Congress Sending Letters

Hearings

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hearing – digital assets

House Financial Services (HFS) Chair Patrick McHenry (R, NC) has opened the HFS subcommittee floodgates on 118th Congress hearings beginning next week with topics championed by Republicans. See them.

The first hearing of the Digital Assets, Financial Technology and Inclusion Subcommittee with its Chair Rep. French Hill (R, AR) presiding will take place on Thursday, March 9 and echoes the partisan subterfuge theme of a recent letter sent to SEC Chair Gary Gensler, a Democrat, by the HFS Committee regarding the timing of the arrest of FTX founder and CEO Sam Bankman-Fried.

The subcommittee hearing next week -“Coincidence or Coordinated? The Administration’s Attack on the Digital Asset Ecosystem” – appears to take aim at the “Operation Choke Point 2.0” theory that crypto companies are being unlawfully targeted. As of late, Senator Bill Hagerty (R, TN) on February 9 and blockchain technologist and investor Nic Carter on February 10 have suggested that the current “Operation Choke Point” operation is similar to the one which took place in 2013.

The subcommittee’s hearing information will appear here and will include the witness list and live webcast information.

Claiming the dissolution of bipartisan “vibes” when it comes to crypto legislation on the Hill, The New York Times’ DealBook blog says the “committee is having trouble getting companies to agree to participate in the hearing… Even with crypto executives calling for legislative action, few seem eager to engage in a highly political forum.” The subcommittee may want to invite the Fed, FDIC and OCC instead?

hearing – crypto commodity

The House Agriculture Committee may be dipping its toe back in the crypto end of the pool again as the full Committee announced a hearing for March 9 titled, “Rising Risks: Managing Volatility in Global Commodity Derivatives Markets.” See hearing’s event page.

(If you’re keeping score: House Ag is in the morning March 9; HFS Subcommittee on Digital Assets is in the afternoon.) Continue reading “Digital Assets Hearings Begin Next Week In House; Congress Sending Letters”

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Coinbase CEO Armstrong Throws Down; Lummis-Gillibrand Return

Coinbase CEO Brian Armstrong

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now or never

Fearing the worst, American cryptocurrency platform Coinbase is taking its case to the American people. It’s now or never.

Coinbase CEO Brian Armstrong began the day yesterday with an op-ed published on CNBC’s website expressing deep concern about regulatory momentum in the U.S. or lack thereof. At the same time, he offered hope, “By embracing crypto and other forms of digital finance, the U.S. can not only update its financial system, but also solidify its status as a geopolitical powerhouse.” Read more.

Then, during a televised appearance during CNBC’s morning show Squawk Box, Armstrong reiterated his plea for Congress to turn things around and that “new legislation is needed.” He added, “I’ve been spending more time in DC and what’s great to see is there’s strong bipartisan support for legislation. Everybody saw what happened to FTX and they said, “OK, there needs to be strong consumer protection. We also recognize that there’s innovation potential here and we don’t want this to be like 5G or the semiconductor industry that got moved offshore…'” See the interview. Armstrong identified 3 different “groups” in Congress which were actively creating crypto legislation.

Expect to see a lot of Coinbase in DC in the months ahead. This is about the company’s long-term survival. Continue reading “Coinbase CEO Armstrong Throws Down; Lummis-Gillibrand Return”

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New CFTC Enforcement Director Has NFT Interests; Republican CBDC Concerns Continue

Ian McGinley

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new NFT cop?

With all the talk about being the “cop on the beat” among regulators, the CFTC announced yesterday that it was adding a new top cop, Ian McGinley, as its Enforcement Director who is described as having “…Significant Experience in Commodity Fraud, Crypto and Cyber Enforcement.” Read the release.

Last year, McGinley was named a “Cryptocurrency/Blockchain/Fintech Trailblazer” while practicing law for Akin Gump. In an interview at the time, McGinley said, “In February 2022, I wrote the first article highlighting the rapid growth of non-fungible tokens (NFT) and the likelihood of forthcoming prosecutions in the NFT space, given the hype and amount of money pouring into the industry. Those predictions were correct, as the Department of Justice has now charged three NFT cases.” Read the Q&A. Will NFTs become a new (or renewed) focus for the CFTC?

Tip #1: “Expect indictments in the NFT space soon” (PDF) – Reuters, Feb. ’22

Tip #2: The equivalent role in the Securities Exchange Commission (SEC) would appear to be Gurbir Grewal, the Commission’s Director of Enforcement.

Republican CBDC concerns

With fellow House Republican leaders in the background, Majority Whip Rep. Tom Emmer released video of a speech he gave about central bank digital currencies (CBDCs) amidst the drumbeat of his  new bill’s introduction – the “CBDC Anti-Surveillance State Act.” Emmer says in his speech, “This kind of digital currency (CBDCs) would give the federal government access to and control over literally every financial transaction conducted by Americans.” See it. Continue reading “New CFTC Enforcement Director Has NFT Interests; Republican CBDC Concerns Continue”

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House GOP Touts Stablecoins; UK Getting Closer To Crypto

stablecoins

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stablecoin opportunity

The GOP’s House Financial Services Twitter account chimed in yesterday, “The Biden Administration’s attack on stablecoins threatens U.S. dominance of the digital economy.” The tweet promoted an op-ed by former Hill staffer to Orrin Hatch (R, UT) and others, Sam Lyman, who sounds the alarm in Fortune on the slowly dwindling opportunity for the US dollar to integrate itself within global stablecoin infrastructure.

Lyman discusses securing US Dollar supremacy for the next decade and concludes hopefully, “Stablecoins are not a problem- they are an opportunity. And with the right regulation, we can seize this opportunity to empower consumers, expand American hard power, and plant our flag in the emerging digital economy.” Read more on Fortune.

Others have posited solutions with short-term U.S. Treasuries which would support U.S. dollar supremacy longer term via the Fed’s Project Hamilton. Read more on that one from last year’s Permissionless conference.

UK – getting closer to crypto

The Prudential Regulatory Authority (PRA), which regulates banks in the U.K., is on the verge of proposing rules for issuing and holding digital assets according to a speech from the Bank of England. CoinDesk explains, “Once the Financial Services and Markets Bill becomes law, authorities will have powers to regulate the sector.” Read it.

Tips:

Continue reading “House GOP Touts Stablecoins; UK Getting Closer To Crypto”

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Montana Passing Bitcoin Legislation; Blockchain Analytics Show Sanctions Evasion

Montana on Bitcoin mining

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states – Montana mines

The Montana state legislature has passed the [Senate #178] ‘Right to Mine’ Bitcoin bill which will prevent local governments from “unfairly” using industrial zoning laws to stop crypto mining among other measures.  CoinTelegraph points out that the state’s House and Governor still need to sign off. The bill was sponsored by State Senator Daniel Zolnikov (R) who speaks about the bill from the Senate floor in this video and says, “Hey come to Montana. This is a safe place to invest in. And [the bill] insures that it’s a safe place to invest in.”

Tip: Montana’s (red state) momentum is the opposite of what is happening in New York (blue state).

compliance – sanctions evasion

A new report from blockchain analytics firm Inca Digital says that sanctioned Russian banks are still being allowed to access the services of many cryptocurrency exchange platforms such as Seychelles-based Huobi and KuCoin as well as Binance in spite of sanctions that should shut down such use. Read more from Bloomberg (on Inca’s site).

Inca Digital Chief Executive Officer Adam Zarazinski said this company plans to release their findings more widely “soon” and that “The report [includes] other troubling observations about the 62 crypto exchanges it analyzed, including that some of them do not require Russians to pass KYC checks.” Continue reading “Montana Passing Bitcoin Legislation; Blockchain Analytics Show Sanctions Evasion”