House Financial Services Holds FinTech And Illicit Financing Hearings; NDAA As Vehicle

illicit financing

digital assets hearing

For Republicans – with the (successful) election of Rep. Mike Johnson (R, LA) as House Speaker looming later in the day – yesterday’s House Financial Services (HFS) Digital Assets, Financial Technology and Inclusion Subcommittee hearing was perhaps both a distraction and a welcome respite from the politicking and drama of the past three weeks.

Titled, “Modernizing Financial Services Through Innovation and Competition” (agenda and witnesses), Chair French Hill (R, AR) noted the Subcommittee’s accomplishments on digital assets legislation in his opening statement and explained that the day’s hearing would explore the broader FinTech topic.

Ranking Member Steven Lynch (D, MA) opened by skewering his Republican counterparts about whether the hearing’s timing was appropriate considering the acute need for a House Speaker.

Moving to the day’s subject matter of financial technology, Lynch echoed themes heard from Democratic Party leadership in previous hearings on digital assets: “I believe technology does have the potential to lower costs and improve accessibility for those left out of the traditional financial services service sector. However, while remaining interested in, and really believing in, the potential of FinTech and and ‘Buy Now Pay Later’ products, I want to say that some of these are simply repackaged versions of traditional finance -but packaged in a way to evade laws and regulations under the claims of innovation.”

See the video. The hearing’s duration was 1 hour and 45 minutes.

more tips:

Rep. Hill Statement on Rep. Mike Johnson (R, LA) Elected To Speaker Of The House –

what you should know: Republicans wanted it to appear that it was “business as usual” in the House Financial Services Digital Assets Subcommittee hearing room. Yet, the House Speaker drama remained a heavy, gauze curtain on the proceedings and HFS Democrats didn’t let the majority forget it. With the new House Speaker finally decided today, Republicans will need to come hard out of the gates in the days to come to try and save face with the electorate by effectively legislating and moving forward impactful law. In turn, Democrats will likely have significant “asks” that they wouldn’t have had a chance to make a month ago. For example, in digital assets, a re-negotiation of the stablecoin bill could be on the table, which Chair McHenry seemed to originally declined during the bill’s July markup. That bill’s success (makes it to law) likely turns on the states rights versus Federal oversight of stablecoins. The Dem conundrum: Democratic leadership in D.C. supports the latter, even though Democratic states such as New York support states rights. Continue reading “House Financial Services Holds FinTech And Illicit Financing Hearings; NDAA As Vehicle”

Coinbase Builds Offshore Presence For Derivatives; Wholesale CBDCs Get A Global Test

Coinbase offshore

offshore expansion

Coinbase said yesterday that it was expanding its global product mix as its Coinbase International Exchange had “received regulatory approval from the Bermuda Monetary Authority (BMA) to enable perpetual futures for eligible non-US retail customers.” Read more.

Back in May, Coinbase had announced it was setting up shop in Bermuda and looking to fill a hole in crypto derivatives market that Bahamas-based FTX had dominated until its demise last November.

Between the lines, the challenging regulatory environment in the United States which may have forced Coinbase to move beyond its home base’s borders.

cross-border CBDCs

A new test of cross-border wholesale Central Bank Digital Currencies (CBDCs) was trumpeted yesterday by the Bank of International Settlements. Read the press release from one of the partners – the Monetary Authority of Singapore.

The test known as Project Mariana was “a proof of concept [and] successfully tested the cross-border trading and settlement of hypothetical euro, Singapore dollar and Swiss franc wCBDCs between simulated financial institutions.” Read more about Project Mariana and its findings on the BIS website here.

Many countries are undertaking a CBDC “Project” these days. In the United States, “Project Hamilton” has been a U.S. project coordinated by the Federal Reserve Bank of Boston and the Massachussetts Institute of Technology.

more tips:

Wholesale CBDCs and automatic market makers could be the perfect pair, BIS finds – Blockworks Continue reading “Coinbase Builds Offshore Presence For Derivatives; Wholesale CBDCs Get A Global Test”

Bipartisan Stablecoin Bill Update From Reps. French Hill And Jim Himes Shows Progress

Atlantic Council

In a conversation with the Atlantic Council webcast earlier today, a bipartisan update on the stablecoin bill was provided by Rep. French Hill (R, AR), Chair of House Financial Services’ (HFS) Subcommittee on Digital Assets, Financial Technology and Inclusion, and Rep. Jim Himes (D, CT), a member of the HFS Committee and also Ranking Member of the House Permanent Select Committee on Intelligence.

The discussion was led by the Atlantic Council’s Josh Lipsky and Ananya Kumar. See the interview here.

Click below (or scroll down) for several highlights from the 50-minute conversation:

The following transcript has been lightly edited for clarity.

on addressing commingling

REP. FRENCH HILL (R, AR):  “We’ve seen a lot of digital asset players that are holding themselves out as an exchange. Or, they’re creating digital assets or trying to build their digital ecosystem where they produce their own stablecoin and effectively make a market in it – where nobody knows what the value of it is, how it’s characterized, how it’s overseen.”

“And that was a big challenge in the FTX collapse. People loaned against something they didn’t even understand the value of -including a lot of sophisticated players too. So yes, it’s gonna rival the losses back in the dotcom boom when it’s all said and done. We tried to address that by defining first and foremost what is stable? How is it defined? They have to have an audit. They have monthly attestation. They have exposure of their liquidity. This is something that’s not the case in stablecoins today.” Continue reading “Bipartisan Stablecoin Bill Update From Reps. French Hill And Jim Himes Shows Progress”

House Democrats Unify Against Current House Stablecoin Bill

Stablecoin Hearing

Stablecoins finally had their hearing as the House Financial Services (HFS) new Subcommittee on Digital Assets, Financial Technology and Inclusion gathered at the Rayburn House office building for “Understanding Stablecoins’ Role in Payments and the Need for Legislation.”

The hearing proved that, for the most part, bipartisanship on Capitol Hill has rapidly dissolved on digital assets legislation. Furthermore, it appears Democrats have unified around an anti-crypto positioning. Rep. Ritchie Torres (D, NY) and Rep. Wiley Nickel (D, NC) may be the only exceptions among those who spoke during the Subcommittee’s hearing.

The prospects for new United States digital assets regulation – other than enforcement of current securities and commodities laws – could be closed for this Congress.

the hearing

The HFS memorandum for the hearing set the stage with a definition of stablecoins: “Stablecoins are a class of digital assets designed to offer price stability by being pegged to another asset’s value.” And, a witness list of mostly pro-crypto, industry representatives provided the input on not only the stablecoin and digital asset industry, but on the new stablecoin bill (PDF) first revealed over the weekend.


    • Adrienne Harris, Superintendent, New York State Department of Financial Services (prepared testimony – PDF)
    • Dante Disparte, Chief Strategy Officer and Head of Global Policy, Circle (PDF)
    • Austin Campbell, Adjunct Assistant Professor of Business, Columbia Business School (PDF)
    • Jake Chervinsky, Chief Policy Officer, The Blockchain Association (PDF)
    • Delicia Reynolds Hand, Director, Financial Fairness, Consumer Reports (PDF)

opening statements

Subcommittee Chair Rep. French Hill (R, AR) started the hearing off with his own opening comment reaffirming the interest of the HFS Committee to introduce a stablecoin bill emanating from the last Congress “when the clock ran out.” Hill named the bill “Maxine McHenry” after the Ranking Member Rep. Maxine Waters (D, CA) and Chair Rep. Patrick McHenry (R, NC).

As Hill reviewed the bill, he said that it would inhibit any possibility of a “run” and urged Members to move quickly thereby encouraging innovation, protecting consumers and move toward bringing clarity for digital assets beginning with stablecoins.

Subcommitee Ranking Member Rep. Stephen Lynch (D, MA) reviewed the need for stablecoins in his opening statement and then dropped a bomb. He suggested it’s worth reviewing whether stablecoins are even needed in wake of FedNow and a Central Bank Digital Currency. And then he revealed his disapproval of the bill given it was made pre-FTX implosion and listed his significant reservations. This was surprising – this bill had been driven by Ranking Member Waters, in part.

After a brief statement by Chair McHenry, Ranking Member Waters then spoke and clarified the Democratic position saying that the bill posted was no longer relevant given events at the end of last year (FTX), needed to be renegotiated and expressed disappointment in the way the bill has been pushed by Republicans. Continue reading “House Democrats Unify Against Current House Stablecoin Bill”

Maxine Waters Wants Stablecoin Legislation ‘As Quickly As We Possibly Can’

Maxine Waters

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stablecoins – Waters urges push

Even though the House is not in Session this week, Ranking Member Rep. Maxine Waters (D, CA) of the House Financial Services Committee was talking stablecoin legislation with Yahoo Finance.

Rep. Waters: “I believe the legislation could be passed when we get back to Congress… in [the space of] a few days. We had just about solved all of our problems. The only thing that interfered I think, with this passage (late last year) was the anticipation that the House was going to change, and it was going to be in the hands of the Republicans, and they should take charge rather than those of us on the Democratic side (…). And so I think it’s ready to go and we have resolved most of our issues, and I think we can get it done.”

On a timetable – this month, end of Spring, end of 2023?

Rep. Waters: “Well, I’m not gonna give you a timetable because there’s always uncertainty in negotiations and the way that things get done in Congress. But I want to tell you that I’m focused on it, [Chair Rep. Patrick McHenry (R, NC)] is focused on it. We have a bipartisan effort that we put on it, and we’re gonna do it as quickly as we possibly can.”

See the interview.

Tip: This is arguably the most urgency we’ve heard publicly on stablecoin legislation from anyone in the U.S. Congress – ever.
Continue reading “Maxine Waters Wants Stablecoin Legislation ‘As Quickly As We Possibly Can’”

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”

Staffers See Stablecoin Legislation And DCCPA in 2023

Staffers speak

A swirl of several hundred government relations executives and general counsels from crypto companies around the globe gathered at the Conrad Hotel this week for Blockchain Association’s first annual Policy Summit.

Even amidst the recent implosion of crypto exchange FTX, an agenda sprinkled with an impressive list of elected officials offered hope to a beleaguered audience that could be justified for wanting to update their LinkedIn profile in the past week.

In a panel titled, “Post Midterms Political Outlook: What’s On Deck for the Next Congress?,” Congressional staffers who drive policy discussion on Capitol Hill, provided a behind-the-scenes look at a range of blockchain-related issues facing Congress.

Participants reflected the bipartisan strategy of crypto policy in the House and Senate today with two Democratic and two Republican staffers – who stressed they spoke for themselves and not Members of Congress:

    • Francesco Castella, Senior Policy Advisor for Congressman Ted Budd (R, NC). Rep. Budd, a member of the House Financial Services Committee and the Blockchain Caucus, will be moving to the Senate in the next Congress. Mr. Castella appeared at DeFiCon ( in August in New York City.
    • Rashan A. Colbert, Legislative Assistant for Senator Cory Booker (D, NJ). Sen. Booker, who sits on the Senate Agriculture committee, is co-sponsoring the Digital Commodity Consumer Protection Act (DCCPA). Mr. Colbert appeared in a CFTC financial inclusion webcast about blockchain technology in August.
    • Emily German, Subcommittee Staff Director at U.S. House of Representatives Committee on Agriculture, which has jurisdiction over the Commodity Futures Trading Commission (CFTC). Ms. German serves the interests of Democrats on the House Ag Committee and its Chairman, Rep. David Scott (D, GA).
    • Tim Hite, Financial Services Counsel for Congressman Warren Davidson (R, OH). Rep. Davidson has been an active Member when it comes to cryptocurrency legislation (such as the Digital Taxonomy Act and Token Taxonomy Act) which includes his participation in the House Financial Services Committee and the Blockchain Caucus.

Ron Hammond, Director of Government Relations at Blockchain Association and a former staffer for Rep. Davidson, moderated the discussion.

FTX fallout for this Congress

With FTX’s imploding looming over the conference, Hammond didn’t waste any time by asking staff members about the FTX elephant-in-the-room particularly as it related to DCCPA and where FTX and its founder/CEO Sam Bankman-Fried had taken an active, aggressive role in lobbying efforts.

Just prior to the panel, the House Financial Services Committee announced it would convene a hearing about FTX in December.

Continue reading “Staffers See Stablecoin Legislation And DCCPA in 2023”

FTX Implosion May Be The Catalyst for Fast-Tracking Legislation

Yesterday, Binance, the largest global cryptocurrency exchange, acquired FTX’s global exchange after its founder and CEO Sam Bankman-Fried appeared to have knowingly parked unbacked, illiquid assets on a sister company’s balance sheet – the stuff regulators warn about – which brought FTX to near-insolvency.

As a result, Bankman-Fried did the only thing he could which was to sell FTX to his competitor.

It’s not a good look for crypto and its legislative champions. On the other hand, if you’re rooting for new regulation, this may be what forces Congress’ hand. Guardrails are needed ASAP if consumers are going to be protected and the industry is going to flourish.

The damage

Is the impact from this bigger than the Terra Luna stablecoin debacle in the Spring? Probably.

First, let’s review the “soft” impact…

Sam Bankman-Fried was arguably the most popular industry figure in Washington D.C., appearing multiple times in front of Congressional committees in spite of his global company’s Bahamian address. Now, his name and reputation have taken a devastating hit affecting relationships with the CFTC and Congress especially as it relates to the feedback he was providing on crypto derivatives changes and the Stabenow-Boozman Digital Consumer Commodity Protection Act (DCCPA) coming out of the Senate Ag committee.

Undoubtedly, SBF’s (as Sam Bankman-Fried is colloquially known) actions were damaging to the crypto industry itself which was already dealing with multiple scandals,  hacks and “rugs” making DC power players wonder if crypto is a positive, world-changing innovation or just a fleeting ponzi scheme that allows SEC Chair Gary Gensler to say, “I told you so.”

Moreover, the financial damage wrought by the enormous blunder is still unknown. Are all customer funds safe? Maybe. Seems so. What about FTX’s billions in funds? Likely not. How about FTX’s investors? They’re definitely holding the bag.

One important qualifier in this mess is that (the carve out within FTX which deals with US business) will remain independent from the Binance deal meaning Bankman-Fried is still in the game, so to speak – at least for now – until another shoe drops.

Continue reading “FTX Implosion May Be The Catalyst for Fast-Tracking Legislation”