January 10, 2024

The Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee (TAC) Subcommittee on Digital Assets and Blockchain Technology released a report on decentralized finance (DeFi). The comprehensive report defines the characteristics of DeFi; policy objectives, benefits, and risks; issues for policymakers and industry related to DeFi; and recommendations. The report finds that government and industry should take timely action to work together, across regulatory and other strategic initiatives, to better understand DeFi. The report also presents detailed recommendations to combat illicit finance, and to mitigate risks to investors, consumers, market integrity, and financial stability.

TAC sponsor CFTC Commissioner Christy Goldsmith Romero issued a statement on the report, stating that she hopes it “can serve as a first step to facilitate a dialogue between policymakers and industry particularly because DeFi remains at the center of illicit finance risks, cyber hacks and theft.” Commissioner Goldsmith Romero also delivered an opening statement at the TAC’s January 8 meeting.

Secretary of the Treasury Janet Yellen delivered remarks at the Financial Crimes Enforcement Network (FinCEN), where she discussed the new beneficial ownership reporting requirement and stated that FinCEN is “closing a loophole and sending a clear message: The United States is not a haven for dirty money.”

The Federal Reserve Board (FRB) Vice Chair for Supervision Michael Barr participated in a fireside chat at a Women in Housing and Finance event. He discussed how regulators are not close to finishing work on the Basel 3 Endgame, and said that feedback on the Endgame proposal is critical. He added that exploratory scenarios will be added to the 2024 stress test, and said the Bank Term Funding Program may sunset in March.

The FRB announced the designation of the Chairs and Deputy Chairs of the 12 Federal Reserve Banks for 2024. The Board also updated statistical tables on its website about the gender and race/ethnicity of Reserve Bank boards of directors and the sectors represented by those directors.

FRB Governor Bowman gave a speech entitled New Year’s Resolutions for Bank Regulatory Policymakers at the South Carolina Bankers Association 2024 Community Bankers Conference. Governor Bowman discussed monetary policy, bank regulatory reforms, the evolving standards in bank supervision, and new developments in the payments system.

The FRB, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) jointly issued an overview webinar on the final rule to strengthen and modernize regulations implementing the Community Reinvestment Act (CRA). The webinar provides an overview of the new CRA rule issued on October 24, 2023, and its objectives. Additional topics in the recording include assessment areas, community development, evaluation framework, performance tests, ratings, data collection and reporting, and applicability dates.

FDIC Director Jonathan McKernan delivered remarks at the Session on Financial Regulation at the Annual Meeting of the Association of American Law Schools. Director McKernan discussed finalizing endgame reforms, investigating the “Big Three,” updating application policy, and enhancing the resolution framework.

The Consumer Financial Protection Bureau (CFPB) is adjusting for inflation the maximum amount of each civil penalty within the Bureau’s jurisdiction. The 2024 annual adjustment can be found here.

The Securities and Exchange Commission’s (SEC) X account was hacked and an unauthorized post stated the SEC had approved the listing and trading of spot bitcoin exchange-traded products. 

Senators J.D. Vance (R-OH) and Thom Tillis (R-NC), members of the Senate Banking Committee, sent a letter to SEC Chair Gary Gensler expressing concern and requesting information regarding the social media breach. Representative Ann Wagner (R-MO) said in a tweet that the alleged hack was a “clear market manipulation that impacted millions of investors.” 

The SEC announced that University of Denver law professor Stacey Bowers has been named the new director of the SEC’s Office of the Advocate for Small Business Capital Formation (OASB).

The Financial Industry Regulatory Authority (FINRA) published the 2024 FINRA Annual Regulatory Oversight Report. The report provides member firms with key insights and observations from recent activities of FINRA’s regulatory operations to use in strengthening their compliance programs. The report covers crypto asset developments; advertised volume; cybersecurity; anti-money laundering, fraud, and sanctions; Reg BI and form CRS, and the Consolidated Audit Trail (CAT).

The Conference of State Bank Supervisors (CSBS) released the latest Community Bank Sentiment Index (CBSI). The index found that while community bankers continue to hold a negative view of future economic conditions, their outlook is becoming less pessimistic. 

The California Department of Financial Protection and Innovation (DFPI) announced that it has issued a consent order against Credova Financial, LLC as part of an effort to protect consumers from hidden fees using the California Consumer Financial Protection Law (CCFPL).

Twenty Republican members of Congress submitted a comment letter in response to the CFPB’s proposed rule to define “large participants” subject to CFPB supervision within the “general-use digital consumer payment application industry,” arguing that the proposed rule’s broad scope would have significant consequences on nonbanks’ ability to offer innovative products and services.

Seven Democrat members of Congress also wrote a comment letter urging the CFPB to explain in greater detail each payments product market the CFPB intends to cover under the proposed rule and the potential risks posed to consumers by those products under the relevant existing regulatory authority. 

The Consumer Financial Protection Bureau (CFPB) published an issue spotlight on the CFPB’s oversight of student loan servicing practices in the early months of the resumption of federal student loan repayments after over three years of a payment pause due to the COVID-19 pandemic. Borrowers are encountering long hold times when trying to reach their student loan servicer, experiencing significant delays in application processing times for income-driven repayment plans, and receiving inaccurate billing statements and disclosures.

In a statement, Director Rohit Chopra said, “The report shows that there is significant variation between servicers in their ability to manage these demands. During the payment pause, many servicers made a business decision to cut costs and significantly curtail their capacity. However, loan servicers must adhere to existing law. In certain cases, the CFPB has notified servicers that they may be in violation of federal consumer financial protection law.”

The December 15 – January 4 reporting period saw the most significant expansion of sanctions against Russia in the last six months, with Congress calling for further action against Iran and China. Read more in our latest Sanctions Watch here

Need to catch up on what happened last week? Check out our January 5th End of Week Wrap Up here