Lummis and Gillibrand speed up the crypto bill

Off the chain

Rocket’s announcement that the Truebill financial app, acquired in 2021, became Rocket Money is more than just a rebrand. The news sent me down a long rabbit hole back to my earliest days in financial technology. In the 1990s, Microsoft and Intuit had dueling personal finance apps: Microsoft Money and Quicken. In a move to strengthen its business, Intuit bought a mortgage company called Rock Financial and renamed it Quicken Loans. Rock founder Dan Gilbert bought back the mortgage business in 2003. Quicken faded, and Quicken Loans—the name was under license—became Rocket Mortgage, and its parent company Rocket Companies. Intuit sold Quicken in 2016, but the logic of having a personal finance app that anchors a variety of financial businesses remains compelling. Hence Rocket Money.

– Owen Thomas (e-mail | twitter)

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Urgent, Washington style

The value of the crypto ecosystem has dropped nearly $2 trillion in a few months, and there are two separate bankruptcy proceedings where customers are fighting to get their assets back. That’s the kind of thing that gets the attention of lawmakers.

Sen. Kirsten Gillibrand, co-sponsor of a major crypto-regulation bill, said Tuesday that “there is more urgency now” to move legislation to protect consumers. Gillibrand’s colleagues on Capitol Hill “have seen that this is something that is important to do, that consumers are not being protected today,” the New York Democrat said in a video interview for Bloomberg’s Crypto Summit.

Measures may still have to wait until next year. So says Senator Cynthia Lummis, the Republican co-sponsor with Gillibrand of the Responsible Financial Innovation Act.

• “It’s a big topic,” Lummis said in the same interview. “It’s extensive, and it’s still new to many U.S. senators.”
• Parts of the bill may move forward in central committees this year. Lummis said the bill’s stablecoin provisions, which include rules on who can offer the coins and reserve requirements, could be reviewed by the Senate Banking Committee in the coming months.
• Gillibrand said provisions governing the Commodity Futures Trading Commission’s authority over coins considered commodities, likely including bitcoin, could also go before the Senate Agriculture, Nutrition and Forestry Committee this year.

The challenge is that urgency does not ensure consensus. While industry groups have offered support for the Lummis-Gillibrand bill, consumer advocates say it would undermine existing investor protections by drawing too much authority from the Securities and Exchange Commission in favor of the CFTC.

• It could be another way. In a letter to House and Senate committee chairs on Wednesday, the Chamber of Progress technology industry trade group noted that there are at least 35 crypto-related bills in Congress.
• “[W]I urge you as committee chairs to hold hearings to examine the pros and cons of pending legislation for your committee and the best path forward for crypto regulation,” the letter said.
• Without action, the letter states, “the US crypto industry will struggle to operate in an unclear regulatory environment. As the SEC tries to regulate through lawsuits and other federal agencies slowly pass new crypto rules, American crypto jobs are at risk.”

The SEC’s role in governing crypto is already a point of contention. During a congressional subcommittee hearing on Tuesday, SEC Enforcement Director Gurbir Grewal was told that the agency is taking too heavy a hand against crypto in some respects and has been too timid in others.

• Indeed, crypto companies have accused SEC Chairman Gary Gensler of “regulation through enforcement” rather than new rulemaking — including building a growing team of crypto police officers. Rep. Tom Emmer, a Minnesota Republican, said the agency has “become a power-hungry regulator, politicizing enforcement, luring companies to ‘come in and talk’ to the commission and then hitting them with enforcement actions and discouraging good faith cooperation.”
• Democratic California Representative Brad Sherman, meanwhile, said the SEC should go after crypto exchanges that offer XRP. He noted that the SEC has already sued the company Ripple for offering XRP as what the agency called an unregistered security, so why not switch?
• When Grewal said the SEC had cracked down on exchanges, Sherman countered that “it’s easier to go after the small fish than the big fish, but the big fish that run the big exchanges did many, many, tens of thousands of transactions with XRP.” The SEC may have to “take on some cases that you’re not sure you’ll win,” Sherman added.

Even that exchange showed how little agreement there is on the basics. Ripple General Counsel Stuart Alderoty hit back on Twitter that XRP as a security is far from an established fact, with the court yet to rule. “This is the pernicious effect of the SECs [regulation] by enforcement approach – harming people, markets and American innovation – with unproven claims masquerading as regulation,” he said.

Sherman, chairman of the House Subcommittee on Investor Protection, acknowledged at the hearing that more clarity on crypto and securities would be helpful. “Congress really hasn’t acted,” he said. “Courts have dealt with the Howey test, which was not focused on digital assets, as it was written in the 1940s.” Alacrity, as always, has a different definition in Washington.

– Ryan Deffenbaugh (e-mail | twitter)

On the money

Robinhood was behind a mysterious increase in Berkshire Hathaway’s trading volume last year. An academic paper published Wednesday said a change in how Robinhood reports fractional trades caused the illusion of increasing trading volumes that in 2021 confused investors (and allegedly Warren Buffett himself).