New Sandbox Legislation Promises Protection For Innovation; Digital Assets AML Bills

AML bills

innovation sandbox

Yesterday, House Financial Services (HFS) Chair Patrick McHenry (R, NC) formally announced the reintroduction of the “Financial Services Innovation Act of 2024” [H.R.7440] framing the creation of new offices for financial innovation across banking regulators as “sandboxes.”

The bill was previously introduced by the Chair in December 2022 in the 117th Congress.

From the Chair McHenry press release, “Budding fintech firms currently operate in fear of heavy-handed penalties brought down by regulators that have failed to work with Congress to provide clear rules of the road. That’s why I’m reintroducing the Financial Services Innovation Act. This commonsense legislation will give entrepreneurs an opportunity to test legal and regulatory waters before taking new products and services to market. Innovators have long flocked to American markets…”

what you should know: McHenry’s bill will be up for a vote at tomorrow’s HFS markup. How Democrats will line up on the bill is unknown, but if it’s anything like the markups last July for the stablecoin [H.R.4766] and digital asset market structure [H.R.4763] bills, five to six Democrats seem possible at a minimum such as Reps. Jim Himes (CT), Ritchie Torres  (NY) and Josh Gottheimer (NJ). Continue reading “New Sandbox Legislation Promises Protection For Innovation; Digital Assets AML Bills”

Cruz Joins Emmer On Anti-CBDC Crusade; Reps. Flood And Nickel Talk SAB 121 With Consumers

CBDCs and the 2024 election

Cruz joins CBDC bill

Yesterday, Senator Ted Cruz (R, TX) brought his “upper house” seal of approval to anti-CBDC (Central Bank Digital Currency) sentiments currently being driven by Majority Whip Tom Emmer (R, MN) and his “CBDC Anti-Surveillance State Act” [H.R.5403] which includes 97 Republican co-sponsors.

Republicans see opportunity with the CBDC issue in the 2024 general election says Fox Business.

Senator Cruz, the Ranking Member on Senate Commerce, shares with Fox that he and five “Senate colleagues, including Bill Hagerty (R, TN), Rick Scott (R, FL), Ted Budd (R, NC), Mike Braun (R, IN), and Kevin Cramer (R, NC), will sponsor a new bill called the Central Bank Digital Currency Anti-Surveillance State Act.” Read more.

Treasury rumor 

Commodity Futures Trading Commission (CFTC) Commissioner Kristin Johnson may be getting a new job. Politico reported yesterday that she’s under consideration for Assistant Secretary for Financial Institutions at Treasury. Read more from Politico (subscription).

Commissioner Christy Goldsmith Romero (D) has also been rumored for the position.

Commissioner Johnson, a Democrat, has been active on issues related to digital assets including public speaking at events such as Blockchain Association’s Policy Summit last November (her remarks). When she first arrived at the Commission in 2022, she moderated a CFTC webcast titled “Digital Assets and Financial Inclusion.” Continue reading “Cruz Joins Emmer On Anti-CBDC Crusade; Reps. Flood And Nickel Talk SAB 121 With Consumers”

Anti-Crypto Loses In Court Again; Digital Assets Joins The Election Agenda

another loss

emergency loss

So much for the “emergency.”

Late Friday, the “emergency” survey of cryptocurrency miners’ energy usage to be undertaken by the Department of Energy’s Energy Information Administration (EIA) was put on a 4-week hold… at a minimum. Read more in Reuters. Another court loss for anti-crypto advocates.

It was less than a month ago that the EIA at the behest of the White House’s Office of Management and Budget (OMB) had announced that crypto mining was a threat to the energy grid, hence the need for an emergency survey.

See the EIA survey (PDF).

The public release of its results was said to be a cause for serious concern by complainants Riot Platforms and Texas Blockchain Council.

District Court Judge Alan Albright was unequivocal in his motion for a temporary restraining order (TRO): “The Court believes that Plaintiffs (i.e. TBC and Riot Platforms) are likely to succeed in showing that the facts alleged by Defendants to support an emergency request fall far short of justifying such an action. As a result, the determination likely violates the APA as ‘arbitrary, capricious, [or] an abuse of discretion.'” (h/t @lee_bratcher)

See Judge Albright’s “Order on Motion for TRO.”

Perianne Boring, CEO of industry organization Chamber of Digital Commerce said on X, “This is a victory for all proponents of freedom and rule of law.” The Digital Chamber has supported the lawsuit.

what you should know: Another day, another rules violation. Friday’s court order echoes the findings of the Government Accountability Office (GAO) last October where the Securities and Exchange Commission’s controversial Staff Accounting Bulletin 121 violated the Congressional Review Act (CRA), “which adopts the definition of rule under the Administrative Procedure Act (APA) but excludes certain categories of rules from coverage.” Continue reading “Anti-Crypto Loses In Court Again; Digital Assets Joins The Election Agenda”

Fed Governor Waller Supporting Stablecoins; White Hats Get Behind Security Alliance

stablecoins and the dollar

dollar-backed stablecoins

Federal Reserve Governor Christopher Waller, a Republican, spoke at a banking conference in the Bahamas last Thursday about the dominance of the U.S. dollar and saw a role for U.S. Dollar-backed stablecoins.

Noting decentralized finance’s (DeFi) inherent use of stablecoins, Waller writes, “About 99 percent of stablecoin market capitalization is linked to the U.S. dollar, meaning that crypto-assets are de facto traded in U.S. dollars. So it is likely that any expansion of trading in the DeFi world will simply strengthen the dominant role of the dollar.”

Waller makes note of Euro-backed stablecoins and the increasing use of the Chinese renminbi but concludes unequivocally, “I do not expect to see the U.S. dollar lose its status as the world’s reserve currency anytime soon, nor even see a significant decline in its primacy in trade and finance. Recent developments that some have warned could threaten that status have, if anything, strengthened it, at least so far.”

Read the speech (Feb. 15).

more tips:

    • U.S. Regulators Do Have Some Control Over Stablecoin Tether: JPMorgan (Feb. 17) – CoinDesk

what you should know: The Republican House Financial Services Committee X account tweeted in reaction to Waller on Friday, “The proliferation and adoption of well-regulated, dollar-denominated stablecoins will bolster the dollar’s status as the global reserve currency.” Waller’s statement is more fuel on the fire to support the “Clarity for Payment Stablecoins Act” [H.R.4766], which is awaiting a House floor vote. Continue reading “Fed Governor Waller Supporting Stablecoins; White Hats Get Behind Security Alliance”

FinCEN Hearing Sheds Light On Its Digital Assets Strategy; Closing “The Revolving Door”

FinCEN and digital assets

FinCEN hearing

Yesterday’s House Financial Services (HFS) hearing focused on U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) included attention to digital asset matters.

Republicans expressed skepticism (see Chair Patrick McHenry’s comments) about some FinCEN processes and largely focused on the unnecessary data grab and resources required by FinCEN with programs such as those enabled by the Corporate Transparency Act (CTA). The CTA requires businesses to register their beneficial owners by the end of the year. So far, according to FinCEN witnesses Treasury Undersecretary Brian Nelson and FinCEN Director Andrea Gacki, 500,000 out of 32 million have complied thus far.

Among the digital assets highlights…

Crypto gadfly Rep. Brad Sherman (D, CA) said during his Q&A time that pro-crypto advocates were trying to “de-fang” the U.S. government with cryptocurrency.

Rep. Bill Foster (D, IL) explored the efficacy of secure digital IDs and suggested that it would have “huge benefits to the federal taxpayer” in its ability to stop fraud.

Rep. Sean Casten (D, IL) explored illicit finance and digital assets during his Q&A time. He wanted Treasury’s Nelson to highlight why “bad guys like mixers” – Nelson and Director Gacki said that mixers essentially anonymize transactions that “shield illicit finance.” Casten introduced the phrase “chain hopping” and said it was a problem with illicit finance.

Majority Whip Tom Emmer (R, MN) brought up “the erroneous Wall Street Journal report” on October 10 regarding Hamas, illicit finance and crypto. He asked Undersecretary Brian Nelson about how much crypto was actually received by Hamas. Nelson demurred and said he could share info privately which the Whip took him up on.

Continue reading “FinCEN Hearing Sheds Light On Its Digital Assets Strategy; Closing “The Revolving Door””

New Letter Responds To Warren Criticism, Bill; Porter Draws Crypto PAC Attention

ex-military respond

military letter #2

Blockchain Association’s ex-military members have sent a new letter to Congress regarding the illicit finance and crypto debate currently swirling. Yesterday’s communication doubles the signatories of the previous BA letter back in November and clearly states their opposition to legislation being floated in Congress as well as related national security concerns.

The letter states in bolded text:

“The Digital Asset Anti-Money Laundering Act (DAAMLA) risks our nation’s strategic advantage, threatens tens of thousands of U.S. jobs, and bears little effect on the illicit actors it targets.”

Read the new letter.

Back in December, Senator Elizabeth Warren (D, MA), who is the author of DAAMLA,  sent a letter in response to Blockchain Association which accused the organization of, essentially, revolving door politics and undermining “bipartisan efforts in Congress and the Biden Administration to address the role of cryptocurrency in financing Hamas and other terrorist organizations” Continue reading “New Letter Responds To Warren Criticism, Bill; Porter Draws Crypto PAC Attention”

Times Change With Laser Eyes?; NFT Case Sees Industry Amicus Brief

laser eyes

laser eyes Biden

Was President Joe Biden’s “laser-eyes” tweet on X after the Super Bowl a turning of the tide in D.C. as it relates to digital assets? See it.

The tweet has received nearly 200 million views.

For the pro-crypto army, hope can “beam” eternal. Bring on the digital assets regulatory framework!

With President Biden’s age increasingly the focus of criticism, attempting to do something “hip,” and therefore in touch with a younger demographic, makes sense.  That said, given where his Administration has been with its “anti-crypto” positioning, a switch to the emerging and speculative world of digital assets and Bitcoin seems unfathomable.

Still, drastic changes may be needed with the Biden presidential campaign coming out of last week’s less-than-satisfactory news conference where he defended his age and memory.

The Super Bowl could be where everything changed.  The next shoe to drop would be agreement on a stablecoin bill that relents on the “federal floor” requirement satisfying – at a minimum – a bipartisan group of House Financial Services Committee members. Continue reading “Times Change With Laser Eyes?; NFT Case Sees Industry Amicus Brief”

Senator Vance Leads Charge Against Actions Of SEC Counsel; Crypto Criticism Is Pumping

Senator Vance

Politics and the SEC

When Securities and Exchange Commission (SEC) lawyers were pressing its case against crypto company DEBT Box late last year, many were surprised when the Agency’s counsel appeared to intentionally try and mislead a Federal court judge and thereby put themselves at risk of sanctions.

Now, Republican Senators Cynthia Lummis (WY), Bill Hagerty (TN), Katie Boyd Britt (AL), Thom Tillis (NC) and JD Vance (OH) want answers from SEC Chair Gary Gensler.

Fortune’s Leo Schwartz reports, “Wednesday’s letter from the Republican senators, led by Vance, reflects the heightened stakes of the otherwise inconsequential lawsuit. The lawmakers are using the episode to advance their complaints about Gensler’s administration, which critics argue is politically motivated, especially with crypto.” Read more.

more tips:

Letter to SEC Chair Gary Gensler regarding “enforcement proceedings against Digital Licensing Inc., also known as ‘DEBT Box'” – Vance.Senate.gov 

what you should know: It’s still possible the Judge in the case could issue sanctions against the agency and its lawyers in spite of the fact the SEC has tried to have the case dismissed while it tries to wiggle out of a mess. Continue reading “Senator Vance Leads Charge Against Actions Of SEC Counsel; Crypto Criticism Is Pumping”