Digital Assets And The Systemically Important Financial Institution – SIFI – Designation

FSOC Hearing

The House Financial Services (HFS) Subcommittee on Digital Assets, Financial Technology and Inclusion gathered yesterday to consider the role of the Financial Stability Oversight Council (FSOC) in overseeing innovative technologies. Chair French Hill (R, AR) and Ranking Member Stephen Lynch (D, MA) presided.

The hearing’s title was “Regulatory Whiplash: Examining the Impact of FSOC’s Ever-Changing Designation Framework on Innovation” and reflected the skeptical view held by the Committee’s majority Republicans, and some Democrats, on the role of FSOC in regulation.

If you’re a nonbank entity in crypto offering some form of a bank’s functions, this hearing was for you.

In fact, from the prepared testimony of the witnesses, digital assets was top of mind along with AI and climate change when it comes to regulation and FSOC – which was established in 2010 by Dodd-Frank after the Great Financial Crisis. See hearing video.

Get witness testimony here:

Among the highlights of the prepared testimony, AEI’s Kupiec hinted at the main theme proffered by Republicans in the hearing: “Congress should reassert its authority and limit the FSOC’s ability to use its ‘systemic risk’ powers to advance a political agenda.” – i.e. the party of the chief executive in the White House.

Nevertheless, back in 2022, in response to President Joseph Biden’s Executive Order on Digital Assets, FSOC produced its opinion on regulation: “Report on Digital Asset Financial Stability Risks and Regulation.” Get it here. At the time, Janet Yellen addressed Congress in a statement, “This report provides a strong foundation for policymakers as we work to mitigate the financial stability risks of digital assets while realizing the potential benefits of innovation.” Continue reading “Digital Assets And The Systemically Important Financial Institution – SIFI – Designation”

Crypto Meets ‘Global vs. National Regulation’ With Financial System Stability At Stake

IIF AMM 2022


At the height of the Great Financial Crisis of 2008 and 2009, all anybody wanted was stability within the banking system.  Enter 2010’s Dodd-Frank legislation, a “Wall Street reform and consumer protection act,” which sought to put the banking system on a solid foundation and calm domestic and global nerves.

Accordingly, stability was a consistent thread among on-stage discussions last week at The Institute of International Finance (IIF) Annual Meeting which brought together banking titans across industry and government in Washington, D.C. Market structure dynamics, Net Zero initiatives and digital assets mixed with macro issues such as war, inflation and a post-COVID society.

And again… every topic could draw a line to the desire for stability. Yet, that didn’t stop companies within the high volatility, digital asset universe from taking its seat at the IIF table.

In the form of sponsorship for the event – and among a list of TradFi sponsor companies – FTX and Circle were there sending chief executives Sam Bankman-Fried and Jeremy Allaire, respectively, for onstage interviews that engaged a much larger financial community which will one day envelop, embrace or crush all or part of the crypto ecosystem.

BNY Mellon – America’s oldest bank – is already “embracing” as it announced crypto custody services last week after receiving approval from New York State’s financial regulator. Michael Demissie, Global Head of Digital Assets and Advanced Solutions at BNY Mellon said at the conference, “Digital assets is a much broader sector. I think crypto is really just the tip of the spear.” Beyond Bitcoin, Ether and other cryptos, he said settlement and tokenized assets enabled by blockchain technology are in its infancy, but on the way.

The IIF meeting’s exhaustive agenda (PDF) showed that crypto is clearly on the mainstream banking system’s radar but still early in its TradFi implementation. The heavily regulated banking sector’s reluctance ranges from a belief by some that crypto is a speculative “Ponzi” scheme to hesitation tied to a lack of regulation – money transmitter licenses for exchanges and the like, notwithstanding.

Continue reading “Crypto Meets ‘Global vs. National Regulation’ With Financial System Stability At Stake”