It’s Time for a Crypto Stool – POLITICO

This only in: The White House is starting to strengthen its stance on crypto.

Six months after President Joe Biden signed an executive order calling for a comprehensive review of US digital asset policies, the Treasury Department and other federal agencies released a series of reports this morning that — among other things — encourage the Securities and Exchange Commission and the Commodity Futures Trading Commission to “aggressively pursue” investigations and enforcement actions against crypto-fraud, fraud and other illegal activity in the digital asset space.

“We recommend that agencies continue to strictly pursue their enforcement efforts focused on the crypto-asset sector,” Treasury Secretary Janet Yellen said during a briefing Thursday. “Agencies should use existing authorities to provide additional guidance and direction new rules to manage current and emerging risks.” (Emphasis mine.)

Market regulators have so far avoided new rules for digital asset businesses in the wake of a crypto market collapse that wiped out more than $2 trillion of crypto’s market capitalization.

While administration officials said unease was at the forefront of their minds, they stopped short of offering recommendations for specific regulations or legislation that could address their concerns.

Officials said a separate report by the Financial Stability Oversight Council will address some of those risks in the coming weeks. (This is already a focus for members of Congress, particularly on the Senate Agriculture Committee, but more on that in a bit).

There are “real challenges and risks of digital assets being used for financial services,” Yellen said. “At the same time, if these risks are mitigated, digital assets and other new technologies can offer significant opportunities.”

For now, Crypto’s potential is most evident in institutional clearing and settlement systems that are beyond the reach of Main Street consumers who have largely relied on digital assets for trading and lending and borrowing, administration officials say.

The reports also focus about the potential development of a crypto-friendly digital dollar – otherwise known as a central bank digital currency. The Treasury is recommending that U.S. policymakers encourage the use of instant payment systems — which will soon include a Federal Reserve system known as FedNow — as it heads an interagency task force to support the project.

“These reports underscore and advance our understanding of the policy implications and technical choices surrounding a potential U.S. central bank digital currency if one is deemed to be in the national interest,” National Economic Council Director Brian Deese told reporters.

IT IS FRIDAY — And it’s a beautiful day to take the train. Feel free to send tips, story ideas and feedback to [email protected].

Data from the University of Michigan on consumer sentiment was released at 10.00

SPEAKING OF CRYPTO — It was a big day in the Senate Agriculture Committee as Congress held its first hearing on a proposed rulebook for crypto markets that collapsed under the weight of their own hype earlier this year.

From me: “The bill, S. 4760, sponsored by Committee Chair Debbie Stabenow (D-Mich.) and Sen. John Boozman (R-Ark.), marks Congress’ clearest attempt to regulate a crypto marketplace that crashed amid a series of scandals and bankruptcies earlier this year. The move would give the CFTC a job as the industry’s top regulator, even as SEC Chairman Gary Gensler wants to bring high-profile digital exchanges under the agency’s jurisdiction… “This is not about us at the CFTC. It’s not about the SEC. It’s about regulations. It’s about financial markets. It’s about protecting customers,” CFTC Chairman Rostin Behnam told senators Thursday.

TRAIN STRIKE AVOIDED — POLITICO’s Ben White and Eleanor Mueller: “President Joe Biden narrowly avoided an economic and political debacle Thursday as senior administration officials helped salvage a last-minute tentative deal to avert a devastating rail strike. And it almost didn’t happen. Averting disaster required about 20 straight hours starting Wednesday that taxed Labor Department coffee supplies, kept West Wing office lights burning through the early hours and left everyone involved bleary-eyed and mostly sleepless.”

BIG CHANGE AT CFIUS — POLITICO’s Doug Palmer: “Administration officials said the first-ever presidential directive to the nearly 50-year-old Interagency Committee on Foreign Investment in the United States, or CFIUS, complements other work the administration is doing to strengthen supply chains, bolster America’s technology leadership and address risks associated with managing sensitive data.”

BATTLE OVER FINTECH REGS HEATS UP — POLITICO’s Katy O’Donnell: “Banks and consumer loan advocates are teaming up to try to get the Consumer Financial Protection Bureau to crack down on fintech companies that extend credit to consumers. The Center for Responsible Lending and the Consumer Bankers Association are jointly petitioning the CFPB to develop a rule that would expand federal oversight to include the new breed of non-deposit lenders, according to a letter the two groups sent CFPB Director Rohit Chopra on Thursday. “

GOLDMAN’S GUESS – With the market pricing in a 75 basis point rate hike next week, economists at Goldman Sachs Research have updated their estimates for the Fed’s December meeting from 25 basis points to 50 basis points, citing strength in wages and continued increases in housing, health care and education.

“We think the Fed is going to guide the market for a period — perhaps a very long period — of holding the federal funds rate steady at above neutral” after Tuesday’s CPI report, said Goldman’s Josh Schiffrin, co-head of U.S. fixed income products and global fixed income products.

NO ONE KNOWS WHAT THAT MEANS, BUT IT IS PROVOCATIVE – Bloomberg’s Vince Golle and Reade Pickert: “[Thursday’s economic] data illustrate the many economic cross-currents the Federal Reserve is navigating as it attempts a soft landing for the economy as it presses harder on the brakes on monetary policy to fend off the fastest inflation in a generation.”

RESIDENTIAL DECLINE — Also from Katy: “Mortgage rates have passed 6 percent for the first time since 2008, Freddie Mac reported Thursday, as the Federal Reserve struggles to get a handle on inflation. Mortgage rates have more than doubled over the past year as the Fed has raised borrowing costs in an effort to curb high rates.”

GOP BLASTS ESG — POLITICO’s Declan Harty: “GOP lawmakers asked SEC Chairman Gary Gensler to justify the agency’s draft rule to require publicly traded firms to release more standardized information about the climate risks their businesses pose, warning the proposal is unlikely to withstand legal challenges once completed.”

ALANIS MORISSETTE DO YOU SAY REVISION KNOWS — Also from Declan: “SEC Chairman Gary Gensler asked to speed up the timeline for kicking Chinese and Hong Kong companies off US exchanges if the firms do not allow US inspectors to review their financial audits as promised.”

A SMALL BUMP FOR FLAGGING I-BANK INCOME — WSJ’s Cara Lombardo and Dana Cimilluca: “Adobe Inc. agreed to buy collaboration software company Figma for about $20 billion, in tech giant’s largest acquisition.”

SIGN OF UNDERLINE — WSJ’s Esther Fung: “FedEx Corp. said its quarterly revenue fell short of expectations and that it was closing offices and parking planes to compensate for declining volumes of packages moving around the world.”

FIRST IN MM — Ahead of Treasury’s crypto reports, Sen. Elizabeth Warren (D-Mass.) sent a lengthy letter to Yellen warning that “the crypto ecosystem has the capacity to undermine our national security, exacerbate the climate crisis, harm consumers and retail investors, and threaten overall economic stability — all while lining the pockets of billionaires. .”

HUNDEBTER MANN/FTX BUYING NEEDED CRYPTOCASSETS — Coindesk’s Ian Allison and Tracy Wang: “Exchange giant FTX is in the lead to buy the assets of Voyager Digital, the cryptocurrency lender whose bankruptcy filing deepened this year’s industry crisis, but higher offers could still come in in the coming days, according to a person familiar with the matter .”

POST MERGER HANGOVER — Bloomberg’s Yueqi Yang and Muyao Shen: “Ether led digital assets lower after the groundbreaking software upgrade of the token’s underlying network turned into what some market observers called a ‘sell-the-news’ event.”