Picking Crypto’s New Boss – POLITICO

Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services’ morning newsletter, delivered to our subscribers every morning at 05.15. The POLITICO Pro platform combines the news you need with tools you can use to act on today’s biggest stories. Follow the news with POLITICO Pro.

The leaders from the Senate Agriculture Committee has filed its entry into the crypto bill.

With the summer holidays and midterm elections looming, House Speaker Debbie Stabenow (D-Mich.) and Sen. John Boozman (R-Ark.) on Wednesday dropped new legislation that would give the Commodity Futures Trading Commission direct oversight of the crypto markets.

The US has lagged behind other nations in establishing rules for digital asset markets that grew in size during the pandemic. The recent crash, which was accelerated by the bankruptcies of bank-like lending platforms, underscored how the lack of industry-specific regulatory and enforcement tools could wipe out billions of dollars worth of digital assets in a matter of weeks – leaving private investors stranded.

Leaders at both the CFTC and the SEC have outlined their respective roles in policing this marketplace, with SEC Chairman Gary Gensler arguing that most cryptoassets look like securities and that digital asset trading platforms should fall under his agency’s direct oversight.

Stabenow and Boozman’s Act positions the CFTC to take the lead. Exchanges and brokerages – especially those that trade in Bitcoin or Ether – must register with the CFTC. It also tasks the much smaller financial derivatives regulator with creating new rules to protect consumers and establish guardrails around practices such as margin trading.

Moreover, it will also clarify how tokens are categorized as securities or commodities – a hot topic in the wake of an SEC court case that identified several tokens listed on Coinbase as securities.

“One in five Americans have used or traded digital assets — but these markets lack the transparency and accountability that they expect from our financial system,” Stabenow said in a statement. “That’s why we’re closing regulatory loopholes and requiring these markets to operate under simple rules that protect customers and keep our financial system safe.”

This isn’t the first bill to give the CFTC the lead role in regulating digital assets — and it likely won’t come with the same fanfare that greeted Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand’s (DN. Y.) legislation earlier this year. That said, industry lobbyists and Hill staffers have high hopes for the measure, which puts the imprimatur of Senate leadership on efforts to give the CFTC precedence over the much larger SEC in the busiest crypto spot markets.

“It is encouraging to see the growing interest in digital assets under the leadership of the Senate Agriculture Committee and bipartisan desire to give the CFTC the clarity it needs to oversee crypto spot markets,” Blockchain Association CEO Kristin Smith said in a statement.

POLITICO reported earlier this year that CFTC staff had been coordinating with lawmakers on the bill’s framework, which also creates new funding mechanisms to support the financial regulator’s new responsibilities around digital assets.

Notably, while the bill doesn’t delineate any specific responsibilities for the SEC — that’s outside the Senate Ag’s purview — it includes language allowing the CFTC’s new digital commodity registrants to also register with the securities regulator.

It also preempts state-level registration requirements related to money transmission, virtual currency and commodity brokers — which could ruffle the feathers of Republicans who have sought to let states take the lead on crypto regulation.

“Relying solely on government regulation does not ensure that rules and regulations work for all stakeholders,” Boozman said in a statement. “Our bill would give the CFTC exclusive jurisdiction over the digital commodity spot market, which would lead to more safeguards for consumers, market integrity and innovation in the digital commodity space.”

IT’S WEDNESDAY — Send your questions, plus any tips or story ideas, to [email protected], [email protected] or [email protected].

Services and factory orders data released at 10 a.m. … Senate Republicans hold a press conference to discuss “Democrats’ tax and spending policies” at

SHOCK – The labor market is starting to soften. The Ministry of Labor announced on Tuesday that the number of vacancies fell to 10.7 million in June. While the preliminary number is still very high in historical terms — total openings never cracked 7.5 million in the year before the pandemic — it represents the lowest total in nine months. Labor will release unemployment figures for July at 8.30am on Friday

BACK- With Republicans hammering President Joe Biden and Senate Democrats over forecasts of the inflation reduction law’s tepid impact on inflation, the White House on Tuesday circulated a letter signed by 126 economists urging lawmakers to pass the climate, health care and tax bills. “This historic legislation makes important investments in energy, health care and to strengthen the nation’s tax system. These investments will fight inflation and reduce costs for American families, while laying the foundation for strong, stable and broadly shared long-term economic growth.”

THE OFT-OVERVIEWED TAX INCREASE IS ON THE BRIDGE OF BECOMING LAW— Our Brian Faler: “Underestimated by Washington, the so-called book income tax flew under the radar even as other tax proposals that were taken much more seriously fell apart. Policymakers spent months debating things like the administration’s bid to create a new global minimum tax, which now, at least as far as short-term U.S. involvement is concerned, appears dead. … Now the proposal on book income is one of the last tax increases standing.”

FORD SEEKS ILC CHARTER FROM BIDEN-ERA FDIC — American Banker’s Claire Williams: “Ford Motor Co. is again applying for an industrial lending charter, a major test for Biden administration regulators who have been leery of anything that looks like mixing banking and commerce. … Ford is the first major nonfintech to seek an ILC under the Biden administration. While ILCs for car companies are not unheard of – Toyota and BMW already have industrial banks – the application to the banking industry raises the specter of a larger company, such as Walmart or Amazon, entering the banking fray.”

ROBIN OF LOSTLY — The New York Department of Financial Services slapped Robinhood’s crypto division with a $30 million fine on Tuesday for “significant failures in the areas of bank secrecy/anti-money laundering,” the state regulator said in a statement.

This was not the only bad news to hit the stock company: From CNBC’s Ashley Capoot: “Robinhood CEO Vlad Tenev said Tuesday in a press release that the company will reduce its workforce by approximately 23%. The layoffs will primarily be in operations, marketing and program management. In the release, Tenev blamed ” deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash.”

WILL THE CIRCLE BE UNBROKEN? — From our Peter O’Brien and Bjarke Smith-Meyer: “Digital finance company Circle is convinced that the stablecoin will soon become the third largest cryptocurrency on the market, behind only Bitcoin and Ether, the largest of the established ones. Circle’s chief strategy officer, Dante Disparte, made the bold prediction in a recent interview with POLITICO, taking a swipe at the firm’s main rival and market leader, Tether, which issues the most popular stablecoin to crypto investors. Tether, as it happens, is more than up for the fight.”

LONG AND DANGEROUS ROADS — Bloomberg’s Matthew Boesler and Catarina Saraiva: “Federal Reserve officials said they want strong evidence that the hottest inflation in four decades is on a sustainable downward path before declaring victory in the fight against it. With consumer prices rising 9.1 percent in June from a year earlier, the Fed has “a long way to go” to achieve price stability around an inflation target of 2 percent, San Francisco Fed President Mary Daly said Tuesday in an interview on LinkedIn.

OR MAYBE NOT? — WSJ’s Nick Timiraos: “Chicago Federal Reserve President Charles Evans said he hopes the central bank will be able to slow the pace of rate hikes over the rest of the year as it pushes borrowing costs to levels aimed at slowing the economy.”

REPO – Reuters: “Trillion of dollars in overnight cash stashed away daily at the Federal Reserve could become a major headache for banks that could strain their balance sheets and weaken their ability to lend.”

A PROBLEM TOMORROW, TODAY — From the WSJ’s AnnaMaria Andriotis: “Inflation is at a four-decade high, and a recession may be near. Credit card issuers are not worried: They are aggressively courting new customers and trying to increase credit card balances … Major card issuers reported record credit card spending for the second quarter. At JPMorgan Chase, credit card purchases totaled $271.2 billion, the highest amount dating back to at least 2004 and 33% over the fourth quarter of 2019, before the pandemic caused spending to plummet.”

ABOUT – Reuters: “U.S. household debt rose to a record $16.15 trillion in the second quarter, driven mainly by a $207 billion jump in mortgage balances, with credit card and car loan debt also rising as consumers stepped up their borrowing to deal with soaring inflation, according to a federal news agency. The reserve report was shown on Tuesday.”

EQUIFAX — From the WSJ’s Andrew Ackerman and AnnaMaria Andriotis: “Equifax provided inaccurate credit scores on millions of U.S. consumer loan applicants during a three-week period earlier this year, according to bank executives and others familiar with the errors.”

David McDonough is now an assistant general counsel at Wells Fargo, leading the consumer and small business banking division. He was most recently assistant general counsel at the bank, which he joined in 2014. He has also previously worked at Bank of America and K&L Gates.

Rusiru Gunasena has joined The Clearing House as senior vice president of Real Time Payments product management and strategy. Gunasena was previously head of JHA PayCenter at Jack Henry. He will replace Steve Ledfordwho is retiring after 9 years at The Clearing House.

Anthony Thompson will receive a second full term on the SEC’s Public Company Accounting Oversight Board, the agency announced Tuesday. Thompson, a former Commodity Futures Trading Commission and Department of Agriculture official, is currently serving a term that expires in October. His second term runs until October 24, 2027.