January 28, 2022

Rep. Patrick McHenry (R-NC-10), the top Republican on the House Financial Services Committee, said in a letter to House Financial Services Chair Maxine Waters (D-CA-43) that Congress needs to accelerate work on digital asset rules as the Securities and Exchange Commission (SEC) and other regulators take the lead on key policies.

The SEC published on its website its forthcoming request for comment (RFC) and notice of proposed rulemaking to amend Regulation ATS with a tight 30-day comment deadline for the 654-page proposal. The SEC is seeking, among other things, to amend the definition of the term “exchange” for purposes of the federal securities laws by expanding it to include the term “communication protocol systems,” defined broadly as “a system that offers protocols and the use of non-firm trading interest to bring together buyers and sellers of securities.” Distributed ledger technology, blockchain, smart contracts, and other terms such as decentralized finance (DeFi) are not mentioned explicitly in the proposed rulemaking, however some experts believe that this RFC may have implications for entities within the blockchain ecosystem such as automated market makers (AMMs), which are protocols that power DeFi activity by bringing together buyers and sellers of digital assets. The RFC has not yet been published in the Federal Register. 

Reports indicate that The White House will issue in February an Executive Order on cryptocurrency, potentially focusing on illicit financing, national security, and interagency coordination. 

The Financial Crimes Enforcement Network (FinCEN) published a notice of proposed rulemaking on a pilot program to allow financial institutions with suspicious activity report (SAR) reporting requirements to share SARs and related information with the financial institutions’ foreign branches, subsidiaries, and affiliates to support anti-money laundering/countering the financing of terrorism (AML/CFT) objectives. Comments are due by Monday, March 28.

The Consumer Financial Protection Bureau (CFPB) published its RFC to the public concerning buy now, pay later (BNPL) products. The request for comment follows the CFPB’s blog post from two weeks ago, stating that it would seek public comment with respect to BNPL. Comments are due by Friday, March 25.

The Internal Revenue Service (IRS) will be “very focused” on taxpayers’ digital assets this tax filing season, agency Commissioner Chuck Rettig said. “We’re just seeing mountains and mountains of fraud in this area,” said Ryan Korner of the IRS’s criminal investigation division, which is tasked with probing tax crimes and related financial crimes.

SEC Chair Gary Gensler said in a speech to a virtual securities conference the agency is planning a sweeping revamp of its cybersecurity rules for Wall Street firms and other publicly traded companies. Gensler said he had asked SEC staff to make recommendations regarding companies’ cybersecurity practices and risk disclosures, as well as around whether to update disclosures to investors when cyber events occur.

Sen. Mike Crapo (R-ID), along with eight of his Republican colleagues, introduced the FDIC Board Governance Reform Act. Sen. Crapo said “actions taken by CFPB Director Rohit Chopra and Martin Gruenberg undercut the integrity of the FDIC.” In the press release accompanying the bill he said the legislation “is designed to better insulate the agency from political interference and preserve its independence.”

The New York State Senate on Tuesday confirmed Adrienne Harris to be Superintendent of the Department of Financial Services. Harris worked at the National Economic Council and Department of Treasury in the Obama Administration. Prior to her appointment as the Superintendent, she was a professor at the University of Michigan Gerald R. Ford School of Public Policy where she taught courses on financial reform, consumer protection, and fintech.

The CFPB announced a public “Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services.” According to the release from the Bureau, “The CFPB is interested in hearing about people’s experiences with fees associated with their bank, credit union, prepaid or credit card account, mortgage, loan, or payment transfers.”

The CFPB released its annual list of consumer reporting companies. 

The America COMPETES Act of 2022 was introduced, but cryptocurrency advocacy organization Coin Center, warned that the bill “would essentially give the Treasury Secretary unchecked and unilateral power” to ban cryptocurrency transactions. Treasury Secretary Janet Yellen will be able to prohibit any crypto transactions “without any process, rulemaking, or limitation on the duration of the prohibition.” 

The SEC reopened the comment period on proposed rules under the Dodd-Frank Act requiring disclosure of information reflecting the relationship between executive compensation actually paid by a company and the company’s financial performance. The public comment period will remain open for 30 days following publication of the release in the Federal Register.

CFTC Chairman Rostin Behnam gave a speech at the ABA Business Law Section Derivatives and Futures Law Committee Winter Meeting. Behnam said the agency plans to encourage innovation and enhance the regulatory experience for market participants. 

Senator Elizabeth Warren (D-Mass.) and seven other congressional Democrats on Thursday sent letters to several of the largest domestic cryptocurrency miners asking for more information about their power consumption and environmental impact.

Cornerstone Research published a report titled “SEC Cryptocurrency Enforcement: 2021 Update” analyzing SEC enforcement activities from July 2013 to December 2021. The report stated that since the first action in July 2013, the SEC has brought a total of 97 enforcement actions as of December 31, 2021. According to the report, 58 enforcement actions were cryptocurrency-related litigations and 39 were administrative proceedings. In addition, about half of the 58 litigations occurred in the state of New York. As of Jan. 3, 31 litigations had reached a resolution.

The FDIC and the National Bankers Association held an event entitled: “Advancing Diversity and Inclusion Across Financial Services”. Read our summary of the event here

February 11th-February 20th: Partner John Collins will speak at ETHDenver. 

February 20th-22nd: Partner John Collins will speak at the Conference for Community Bankers. 

February 24th: Senior Advisor Amy Friend will speak on a panel for the Alliance for Innovative Regulation’s webinar entitled “Make Money Green: Climate, ESG and Financial Regulation.” 

February 2 at 10:00 AM ET: The Subcommittee on Housing, Community Development and Insurance will convene for a virtual hearing entitled, “Housing America: Addressing Challenges in Serving People Experiencing Homelessness.”

February 3 at 10:00 AM ET: The Subcommittee on Diversity and Inclusion will convene for a virtual hearing entitled, “Building Opportunity: Addressing the Financial Barriers to Minority and Women-Owned Businesses’ Involvement in Infrastructure Projects.”

February 8 at 10:00 AM ET: The House Financial Services Committee will hold a virtual hearing entitled “Digital Assets and the Future of Finance: The President’s Working Group on Financial Markets’ Report on Stablecoins.”