HODLpac Newsletter - November 30, 2021
Senate Banking's Stablecoin Letter, OCC-FDIC “Crypto-Asset” Regulation, and Sec. Yellen Responds to Sen. Toomey on Cryptocurrency
49 weeks to go to the general election.
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The Week in Crypto Policy
With Thanksgiving last week, policy-related news slowed down a bit; but there are still a few things to keep an eye on. And, as always, keep scrolling for the best writing, tweets, and podcasts on crypto-related policy.
Senate Banking Stablecoin Letter
On Tuesday of last week, the Senate Banking Committee - via Chairman Sherrod Brown (D-OH) - sent letters to major stablecoin issuers inquiring about general business practices. This comes in the wake of the recent President’s Working Group on Financial Markets’ report on stablecoins and most likely portends a Senate Banking hearing on the horizon.
The stablecoin issuers that received letters include: Coinbase, Gemini, Circle, Paxos, TrustToken, Centre, Binance US, and Tether.
See a copy of the letter to Tether below (all of the letters seemingly have uniform content):
OCC-FDIC “Crypto-Asset” Regulation
Last week, the Office of the Comptroller of the Currency (OCC), the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) released a joint statement summarizing their interagency “policy sprints” related to banks involvement in “crypto-asset-related activities” and providing “a roadmap of future planned work.”
The meat of the statement is quoted below:
Agency staff focused on quickly advancing and building on the agencies’ combined knowledge and understanding related to banking organizations’ potential involvement in crypto-asset-related activities. The focus of the sprint work included:
• Developing a commonly understood vocabulary using consistent terms regarding the use of crypto-assets by banking organizations.
• Identifying and assessing key risks, including those related to safety and soundness, consumer protection, and compliance, and considering legal permissibility related to potential crypto-asset activities conducted by banking organizations.
• Analyzing the applicability of existing regulations and guidance and identifying areas that may benefit from additional clarification.
To place the sprint work in context, staff reviewed and analyzed a number of crypto-asset activities in which banking organizations may be interested in engaging including:
• Crypto-asset custody.
• Facilitation of customer purchases and sales of crypto-assets.
• Loans collateralized by crypto-assets.
• Activities involving payments, including stablecoins.
• Activities that may result in the holding of crypto-assets on a banking organization’s balance sheet.
For now, we wait until 2022 and hope for the best - i.e. that whatever regulatory framework comes out of this work doesn’t harm the future of public blockchains and the cryptoeconomy in the United States.
However, as we often discuss in this newsletter, crypto voters in the United States can use tools like HODLpac to make sure we have allies in Congress in case the alphabet soup of regulators start making rules that we don’t like!
“US Regulators Plan to Define Legal Bank Activities Around Crypto in 2022,” Nikhilesh De, CoinDesk
Sec. Yellen Responds to Sen. Toomey on Cryptocurrency
As usual, Jerry Brito of Coin Center does a fantastic job of explaining the significance of Sec. Yellen’s response in the above thread.
Nonetheless, some context: often, Senators and members of Congress (and their staff) will send written questions to witnesses at hearings (in this case, Treasury Secretary Yellen), which, along with the witnesses’ answers, are included in the Congressional Record.
For today’s Senate Banking hearing, “CARES Act Oversight of Treasury and the Federal Reserve: Building a Resilient Economy,” Senator Pat Toomey (R-PA) sent questions on cryptocurrency to Sec. Yellen.
In her answers, Sec. Yellen confirms that the current practices/views of the Financial Crimes Enforcement Network - a bureau of the US Treasury Department - are consistent with recent guidance from the Financial Action Task Force - an intergovernmental organization focused on anti-money laundering/counter financing of terrorism (AML/CFT) - with regards to VASPs (Virtual Asset Service Providers) and thus won’t necessitate further action from the US government that could threaten the cryptoeconomy via increased AML/CFT oversight.
This is good for crypto™️.
Crypto in Congress - November 29, 2021
By Ron Hammond
It is going to be a very busy next few weeks here in DC on Capitol Hill. For crypto, the big event will be the December 8th House Financial Services Committee (HFSC) hearing on “Digital Assets and the Future of Finance”. Here is the latest…
Witnesses are still being finalized by the Committee, but it seems the targets for this hearing will be executives from large crypto companies such as exchanges, stablecoins issuers and payment providers. Should be Wednesday or so when the list will be public.
It is likely there won’t be legislation tied to this hearing. There are both good and bad connotations with this as it signals a desire to learn more about the issue from the Members of Congress before proposing legislation to solve an issue.
Conversely, there are other good bipartisan pieces of legislation like the Token Taxonomy Act, Securities Clarity Act and other that many would like to see considered by the Committee, but it seems the Committee will be taking a more fact-finding approach.
The last major crypto hearing in HFSC was the Oversight subcommittee “America on ‘FIRE’” crypto hearing in June. The difference between that hearing on the December 8th hearing is that the June one was with a smaller set of Members and focused heavily on consumer protection
It is uncertain if there will be additional hearings later that day or in later weeks on crypto. In Libra we saw a second panel of witnesses who represented academia and industry. That hearing was less covered in the media, but it was still equally important.
As details come to light over the course of this week, keep an eye on the Senate Banking Committee as they await responses from stablecoin issuers on their business practices and regulatory obligations. Those responses are due by the end of the week.
Craig Salm @CraigSalmLast night our attorneys at Davis Polk sent a letter to the SEC arguing that approval of #Bitcoin futures-based ETFs, but not #Bitcoin spot-based ETFs, like $GBTC, is “arbitrary and capricious,” and therefore in violation of the Administrative Procedure Act (APA).
Ron Hammond @RonwHammondThird is Twitter and unfortunately, this is rising in prominence in our meetings. DC has learned that the best way to understand crypto is to go to Twitter. However, many things C-suite execs and influencers say on Twitter are viewed as vitriolic or condescending to DC audiences
Cameron Winklevoss @cameronIt's been great to see Zcash mooning the past few weeks. This is still the most underrated project in crypto. Privacy is a human right.
📚 Good Reads
“Lines in the sand: US Congress is bringing partisan politics to crypto,” Mitch Eiven, CoinTelegraph
“On the Necessity and Desirability of CBDC,” David Andolfatto, MacroMania
“Let the Market Come Up With Better Money Tech,” Jim Dorn, CoinDesk
“Saving Crypto Innovation with Congressman Tom Emmer,” On the Chain Podcast
“Here’s what’s on the horizon for crypto regulation,” Lee Reiners and Meltem Demirors, CNBC “Crypto Night in America”
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