Crypto’s next hot spot – POLITICO

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Coinbase, the largest US crypto exchange, has chosen Bermuda for its next major expansion. MM spoke to Coinbase CEO Brian Armstrong and Bermuda Premier David Burt about why the island is becoming a hub for the digital asset business — and why it’s also facing obstacles thanks to banking industry turmoil.

Bermuda – a longtime offshore home for international insurance companies – opened its doors to the crypto industry with a 2018 digital asset law. It now lists 17 licensed digital asset companies, with last week’s Coinbase announcement marking its biggest advance yet. Other big names include Circle and Cash App.

Coinbase is increasingly looking for investment outside the US as it clashes with Washington regulators – most prominently SEC Chairman Gary Gensler. Armstrong told MM that the company plans to launch a derivatives exchange in Bermuda as it continues to work to secure approvals for derivatives offerings in the US

Bermuda is not a large market in itself – the population is around 65,000 people – but it could serve as a base as the company looks to reach customers outside countries where it already has a large presence.

“We need to find jurisdictions that will enable us to serve the long tail of countries that are not the US, not the UK, not some of the big financial hubs,” he said.

Burt, Bermuda’s youngest premier, has become an increasingly prominent figure in the crypto world. MM asked if he had any advice on how the US could strengthen its regulatory regime for digital assets – a patchwork of rules for “TradFi” often maligned by crypto startups like Coinbase.

“I’ll be polite and say that regulatory clarity is useful for any business,” he said.

Burt wants to entice digital asset companies with something bigger than just licenses that help them serve clients off the island. He wants Bermuda’s 20 square kilometers to be a sort of test market for companies as they develop digital asset products, allowing them to kick the tires on local adoption before scaling up for the rest of the world. He sees it as a potential boost for innovation in Bermuda.

It’s a big problem, and it’s a growing problem for crypto firms writ large: the reluctance of traditional banks to serve the digital asset economy.

Burt said Bermuda faces a bottleneck because it is seen as a high-risk location for money laundering — something he attributes to its geographic location, which creates problems for correspondent banking relationships that allow the exchange of U.S. dollars.

So Bermuda is in the process of licensing a new bank that is expected to help boost local use of digital assets.

“The real question is, how do we ensure that the country can see local benefits while also positioning it as an attractive location for digital asset companies?” he said. “We see our whole island as an accelerator and an incubator.”

It is Monday — How does your company prepare for a possible breach of the debt limit? Let us know: Zach Warmbrodt, Sam Sutton.

The House will consider the GOP plan to raise the debt ceiling this week … First Republic reports earnings on Monday after the market closes … NABE releases its survey of business conditions for April on Monday (more below) … House Financial Services votes on capital markets bills on Wednesday … Experian, Equifax and TransUnion CEOs testify in Senate Banking on Thursday

This week the debt limit battle gets real — Wall Street has mostly stayed on the sidelines of the last stuck debt ceiling, but now – with the possibility of a summer default coming up – people are getting nervous. House Republicans plan to hold a vote this week on their opening game — a bill that will be DOA for most Democrats and the Senate because it would combine major spending cuts with increasing the government’s borrowing authority.

Ben White, Sam and Eleanor Mueller report that bank executives are becoming more concerned about the situation – although they are unsure how to inject themselves into the debate.

There is no backchannel between the White House and the Speaker of the House Kevin McCarthy about the issue, according to POLITICO’s Eli Stokols, but Biden’s team is confident defaults can still be avoided.

While the White House believes Biden has gained the upper hand politically, Steve Shepard reports that polls show a “mixed bag of public opinion” and that sentiment is divided over who might be to blame for an American default.

How bad was the banking collapse? Check First Republic’s earnings. – The WSJ has a preview of what investors will see when the San Francisco lender updates its public finances later this afternoon. The bank received a $30 billion megabank bailout last month, and its stock has lost about 90 percent of its value since March 8.

Biden regulators want to strengthen oversight of non-banking giants — The Financial Stability Oversight Council, a panel of top regulators led by Treasury Secretary Janet Yellen, plans to undo Trump-era guidelines that made it harder to designate nonbanks as “systemically important” and subject to stricter Federal Reserve rules. .

Victoria Guida reports that the FSOC on Friday voted to propose guidance that would give it more flexibility in how it manages financial risk. It is a move that is poised to put hedge funds and other firms outside the regulated banking sphere on alert.

Sen. Elizabeth Warren (D-Mass.), who has pushed for the changes and has called for BlackRock to be designated as systemically important, said it was “a powerfully important step to protect hard-working Americans.”

Business survey shows signs of decline — NABE’s latest survey of business conditions showed that fewer business economists reported rising employment and capital spending, although they indicated they are seeing rising sales.

First in MM: California legislature introduces DAO bill — California Assemblyman Matt Haney of San Francisco announced legislation that would set up the state’s first legal framework for digital collectives known as decentralized autonomous organizations. The legislation will allow DAOs to incorporate in the state.

Venture firm Andreessen Horowitz and the Crypto Council for Innovation support the bill.

The PE industry promotes economic impact – The American Investment Council and Ernst & Young are out with a report today that says the private equity industry employed more than 12 million workers in the United States last year and generated $1.7 trillion of GDP.

SVB’s new management “struggles to restore trust” — FT: “Silicon Valley Bank’s new owner is ‘fighting’ to repair its damaged brand, stem deposit flows and stop dozens of bankers leaving to join rivals as it tries to rebuild the US tech bank that collapsed last month, according to a of the bank’s banks. senior managers.”