February 17, 2023

The Securities and Exchange Commission (SEC) proposed a new rule to compel investment advisers to house their clients’ cryptocurrency with qualified custodians — a category of service providers that usually refers to banks and brokerages. SEC Chair Gary Gensley stated, “through this expanded custody rule, investors working with advisers would receive the time-tested protections that they deserve for all of their assets, including crypto-assets, consistent with what Congress envisioned.” Commissioner Mark Uyeda noted in his statement that “[t]his approach to custody appears to mask a policy decision to block access to crypto as an asset class. It deviates from the Commission’s long-standing position of neutrality on the merits of investments.”

Federal Reserve Governor Michelle Bowman delivered remarks at the Midwest Cyber Workshop, organized by the Federal Reserve Banks of Chicago, Kansas City, and St. Louis. Governor Bowman discussed the risk of cyberattacks and stated that “banks need to adopt new technologies to meet customer demands, to take advantage of efficiencies and cost savings, and to remain competitive in the marketplace. Although third-party relationships are one avenue for community banks to bring new technologies online, they must do so with a thorough understanding of the associated risks.”

House Financial Services Committee Chairman Patrick McHenry (R-NC) and Oversight and Investigations Subcommittee Chairman Bill Huizenga (R-MI) sent a letter to SEC Chair Gary Gensler demanding records and communications between and among both the SEC’s Division of Enforcement, the Office of the Chair, and the Department of Justice (DOJ) regarding the timing of the charges filed against FTX founder Sam Bankman-Fried and his subsequent arrest prior to his scheduled testimony before the Committee.

The New York Department of Financial Services announced it ordered Paxos, the issuer of the world’s third-largest stablecoin, Binance USD (BUSD), to stop minting new units of the token. Relatedly, the SEC issued a Wells Notice to Paxos regarding BUSD. Paxos issued a statement in which it said it “categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws.” 

Federal Reserve Governor Christopher Waller delivered remarks entitled “Thoughts on the Crypto Ecosystem at the Global Interdependence Center Conference: Digital Money, Decentralized Finance, and the Puzzle of Crypto.” Governor Waller stated that “to me, a crypto-asset is nothing more than a speculative asset, like a baseball card. If people believe others will buy it from them in the future at a positive price, then it will trade at a positive price today. If not, its price will go to zero. If people want to hold such an asset, then go for it. I wouldn’t do it, but I don’t collect baseball cards, either. However, if you buy crypto-assets and the price goes to zero at some point, please don’t be surprised and don’t expect taxpayers to socialize your losses.”

SEC Chief Accountant Paul Munter issued a statement entitled, “Accounting Standard Setting in a Rapidly Evolving Business Environment: A Focus on the Timely Delivery of Investor Priorities.” Chief Accountant Munter stated that “as FASB standard-setting projects move forward, we believe there are continued opportunities for improvement to the standard-setting process, and that constructive collaboration by preparers, investors, auditors, and other stakeholders, with a focus on timely solutions that meet investor financial reporting needs, is key to the development of high-quality accounting standards for the benefit of the financial reporting system, investors, and issuers.” Chief Accountant Munter also specifically mentioned the accounting for and disclosure of crypto-assets.

The Consumer Financial Protection Bureau (CFPB) released a report examining trends in credit reporting of debt in collections from 2018 to 2022. The report found the total number of collections tradelines on credit reports declined by 33%, from 261 million tradelines in 2018 to 175 million tradelines in 2022. The share of consumers with a collection tradeline on their credit report decreased by 20% in the same timeframe.

The Federal Deposit Insurance Corporation (FDIC) issued letters demanding two entities – CEX.IO Corp., (a cryptocurrency exchange) and Zera Financial (a non-bank financial service provider) – “cease and desist from making false and misleading statements about FDIC deposit insurance and take immediate corrective action to address these false or misleading statements.” The FDIC also directed two websites, and, to remove similar statements about the FDIC-insured status of CEX.IO.

The Federal Trade Commission (FTC) launched a new Office of Technology to “strengthen the FTC’s ability to keep pace with technological challenges in the digital marketplace by supporting the agency’s law enforcement and policy work.” The Office of Technology will have dedicated staff and resources, and will be headed by Chief Technology Officer Stephanie T. Nguyen.

FTC Commissioner, Christine Wilson, announced her plans to resign from the agency in an op-ed published in The Wall Street Journal.

Treasury Assistant Secretary for Financial Institutions Graham Steele delivered remarks before the Exchequer Club of Washington, D.C, discussing Treasury’s financial institutions agenda with a focus on recent work on fintech and BigTech, crypto-assets, and cloud service providers.

The Office of the Comptroller of the Currency (OCC) released new enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with national banks and federal savings associations.

The OCC issued the “Change In Bank Control” booklet of the Comptroller’s Licensing Manual. The revised booklet replaces the booklet of the same title issued September 2017, makes corrections, and contains updated guidance.

The House Financial Services Committee Subcommittee on Financial Institutions and Monetary Policy held a hearing featuring a panel of financial experts and banking industry executives to identify the key goals, concerns, and challenges associated with revitalizing the United States’ banking industry for the twenty-first century. 

The House Financial Services Subcommittee on Capital Markets held a hearing to discuss how the SEC defines an accredited investor and whether it limits access for non-wealthy investors.

The Senate Committee on Banking, Housing, and Urban Affairs held a hybrid hearing featuring a panel of legal and policy academic professionals to hear about the advantages, considerations, and challenges of digital asset regulation.

The Senate Committee on Banking, Housing, and Urban Affairs held a hybrid hearing to examine the contemporary elements of the housing market in the United States, featuring a panel of economic and housing experts.

The House Financial Services Committee is moving forward with consideration of financial data privacy legislation. The bill, first released as a discussion draft by Chairman Patrick McHenry (R-NC) last June, was updated this week as part of Financial Institutions Subcommittee Chairman Andy Barr’s (R-KY) hearing on ‘Revamping and Revitalizing Banking in the 21st Century.’ While the House starts the two-week Mardi Gras recess today, action on the legislation could come as soon as Members return, with plans for a committee mark-up tentatively scheduled for Tuesday, February 28.

The Securities and Exchange Commission (SEC) Division of Enforcement announced its 2023 Examination Priorities, which include: 

  • new investment adviser and investment company rules; 

  • issues under the Advisers Act, private fund advisers’ portfolio strategies, risk management and investment recommendations and allocations, and registered investment advisers to private funds with specific risk characteristics;

  • standards of conduct issues for broker-dealers and RIAs;

  • ESG-related advisory services and fund offerings;

  • broker-dealers’, RIAs’, and other registrants’ practices to prevent interruptions to mission-critical services and to protect investor information, records, and assets;

  • examinations of broker-dealers and RIAs that are using emerging financial technologies or employing new practices, including technological and online solutions to meet the demands of compliance and marketing and to service investor accounts – note this includes crypto-assets.