- Top Lines
United States Secretary of the Treasury Janet Yellen delivered remarks yesterday at the American University Kogod School of Business Center for Innovation on future considerations regarding digital assets. A key takeaway from the speech is how the Secretary referred to the need for “responsible innovation” in the digital asset space – and ensuring there’s a balance of “responsible innovation” with the risks when looking at the regulatory landscape.
Secretary Yellen began her statement by outlining the growth of digital assets over the past decade along with the ever-advancing financial landscape. She outlined how new technologies have, in the past, offered both opportunities and challenges to consumers, and said this is much the same for the emergence and development of digital assets. Secretary Yellen asserted that the volatility of cryptocurrencies have made widespread adoption difficult and prevented them from broad acceptance. She detailed, however, that stablecoins, or potentially a central bank digital currency (CBDC) could eventually be used as a medium of exchange. While noting the wide range of public opinion on the topic of digital assets, Secretary Yellen largely focused her comments on the guidance provided in the President’s recent Executive Order (EO) and on lessons from financial innovations in the past.
Read our summary of the event here.
Acting Comptroller of the Currency Michael Hsu discussed in a speech considerations for designing policy and the digital infrastructure for stablecoins. His remarks focused on protecting consumers and protecting the role of the U.S. dollar.
- Weekly Wrap Up
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) increased measures in response to Russia’s continued war against Ukraine.
- The Treasury Department announced sanctions against Garantex, a Moscow-based cryptocurrency exchange, and Hydra, a prominent darknet marketplace, in a crackdown on foreign online services that facilitate ransomware attacks and other criminal activity. The action comes amid rampant speculation about crypto’s utility as a tool to subvert economic restrictions imposed after Russia’s invasion of Ukraine.
- The Treasury is imposing full blocking sanctions on Sberbank, Russia’s largest state-owned bank, and Alfa-Bank, Russia’s largest private bank. The Treasury is also targeting family members of President Vladimir Putin and Foreign Minister Sergey Lavrov, as well as Russian Security Council members who are complicit in the war against Ukraine. In addition, President Biden issued an Executive Order banning new investment in the Russian Federation and the provision of certain services to any person located in the Russian Federation by U.S. persons, wherever located.
We have developed a listserv to provide updates on these sanctions and related matters. To be included in the email distribution list, please email us at publicpolicyteam@fsvector.com.
A report published by the Consumer Financial Protection Bureau (CFPB) found that few payday loan borrowers are benefiting from no-cost extended payment plans, which are required to be offered to borrowers in the majority of states that do not prohibit payday lending. The CFPB found that Instead of using the payment plans, borrowers continue to pay for costly loan rollovers. While no-cost extended payment plans are meant to help borrowers exit the cycle of rollovers and fees, the payday business model continues to depend on high rollover rates and fees, according to the agency.
Securities and Exchange Commission (SEC) Chair Gary Gensler spoke about crypto markets during an appearance at a University of Pennsylvania Carey Law School event. His comments addressed oversight of crypto trading and lending platforms, an area where he is seeking to work with the Commodity Futures Trading Commission; stablecoins; and the characterization of digital tokens, agreeing with former SEC Chair Jay Clayton’s assertion that most crypto tokens are investment contracts under the Howey Test. Notably, he concluded by saying, “We already have robust ways to protect investors trading on platforms. And we have robust ways to protect investors when entrepreneurs want to raise money from the public. We ought to apply these same protections in the crypto markets. Let’s not risk undermining 90 years of securities laws and create some regulatory arbitrage or loopholes.”
The Federal Deposit Insurance Corporation (FDIC) published a letter addressed to FDIC-supervised institutions on crypto-related activities stating that all FDIC-supervised institutions that intend to engage in, or that are currently engaged in, any activities involving or related to crypto assets (also referred to as “digital assets”) should notify the FDIC.
The Federal Reserve Bank of New York launched the Innovation Advisory Council (IAC), a new advisory group. The primary goal of the IAC is to present views and perspectives to the New York Fed on emerging issues related to financial technologies and digital innovation, the application and market impact of these technologies, and the potential impact on the New York Fed’s ability to achieve its mission. The IAC’s first meeting was held April 6, 2022.
Sen. Pat Toomey released a discussion draft of legislation that would create a new regulatory framework for stablecoins by creating a new license for stablecoins issued by bank regulators at the OCC. While license holders would be barred from other lines of business, including extending lines of credit, they’d also have access to Federal Reserve accounts and services.
The OCC today published the latest edition of its Community Developments Investments newsletter, “Partners in Recovery: Community Reinvestment and Resilience.” This edition of Community Developments Investments highlights how banks can collaborate with community development financial institutions, minority depository institutions, and other community-based groups to help rebuild communities recovering from the COVID-19 pandemic and natural disasters.
President Biden announced his intent to nominate Jaime Lizárraga and Mark Uyeda for the Securities and Exchange Commission (SEC). Jaime Lizárraga currently serves as Senior Advisor to Speaker of the House Nancy Pelosi where he oversees issues relating to financial markets, housing, international financial institutions, immigration, and small business policy. Mark Uyeda is a career attorney with the SEC and is currently on detail from the SEC to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, where he serves as Securities Counsel on the Committee’s Minority Staff.
- ICYMI
Republican lawmakers are introducing a bill – the Stablecoin Transparency Act – that would require stablecoin issuers to hold reserves in cash, repurchase agreements, or short-duration government securities, which could prevent runs on popular digital assets that fuel surging crypto markets.
The bicameral bill, which is sponsored by Sen. Bill Hagerty (R-TN) and Rep. Trey Hollingsworth (R-IN), would also compel stablecoin issuers to publish audited financial statements every 30 days.
The intent is to “try to strike the balance between promoting the industry but also recognizing that they’re dealing with something that’s really important to people — their money — and that there needs to be safe practices and safeguards in place,” Hollingsworth said in an interview.
Representatives Gregory W. Meeks (D-NY) and Michael McCaul (R-TX), respectively the Chair and Ranking Member of the House Foreign Affairs Committee, introduced the Russia Cryptocurrency Transparency Act, bipartisan legislation that would exercise oversight of the State Department’s use of cryptocurrency as part of its rewards program, as well as measures to improve the efficacy and enforcement of U.S. sanctions against Russia.
The Russia Cryptocurrency Transparency Act would:
Require the State Department to notify Congress when it pays out rewards in cryptocurrencies to ensure that the Department is not providing bad actors with additional hard-to-trace funds that could be used for illicit purposes;
Authorize the State Department to appoint a Director of Digital Currency in the State Department’s Office of Economic Sanctions Policy and Implementation, in which role the Director would assist in developing sanctions enforcement mechanisms resilient to malevolent actors’ use of digital currencies;
Require a report from the State Department, in consultation with the Treasury Department and USAID, on how blockchain usage could facilitate access to humanitarian aid administered by the United States to Ukrainian persons;
Require the State Department, in consultation with the Treasury Department, to submit to Congress a report assessing how digital currencies could impact the effectiveness and enforcement of the United States sanctions regime against Russian actors.
- Upcoming Hearings & Events
Wednesday, April 27, 2022 at 10:00AM EST: The U.S. House Committee on Financial Services will hold a hearing entitled “Consumers First: Semi-Annual Report of the Consumer Financial Protection Bureau.”
Thursday, April 28, 2022 at 10:00AM EST: The U.S. House Committee on Financial Services Task Force on Financial Technology will hold a hearing entitled “What’s in Your Digital Wallet? A Review of Recent Trends to Mobile Banking and Payments.”
Thursday, April 28, 2022 at 2:00PM EST: The U.S. House Committee on Financial Services will hold a hearing entitled “Oversight of the Financial Crimes Enforcement Network.”