July 8, 2022

The Department of the Treasury published in the Federal Register a Request for Comment (RFC) on digital assets that follows from the Executive Order on Ensuring Responsible Development of Digital Assets. Comments are due Monday, August 8.

Treasury is seeking input, data, and recommendations pertaining to the implications of development and adoption of digital assets and changes in financial market and payment infrastructures for United States consumers, investors, businesses, and for equitable economic growth. Specifically, the RFC requests information on the following topics: the adoption to date and mass adoption; opportunities for consumers, investors, and businesses; general risks in digital assets financial markets; risks to consumers, investors, and businesses; and impact on the most vulnerable populations. 

Treasury Secretary Yellen and other heads of other relevant agencies announced they delivered to President Biden a framework on digital assets for interagency engagement with foreign counterparts and in international fora as directed in the Executive Order on Ensuring Responsible Development of Digital Assets. 

Federal Reserve Board of Governors Vice Chair Lael Brainard discussed in a speech recent events in digital asset markets and how stronger regulatory guardrails could help build a resilient digital native financial infrastructure. She observed in her speech that: 1) digital asset markets, like traditional financial markets, are sensitive to market events and are vulnerable to similar risks; 2) new technology and financial engineering cannot by themselves convert risky assets into safe ones; and 3) decentralized lending, which relies on overcollateralization to substitute for intermediation, can serve as a stress amplifier by creating waves of liquidations as prices fall. To increase consumer and investor protections, she called for ensuring that the regulatory perimeter encompasses the crypto financial system and reflects the principle of same risk, same disclosure, same regulatory outcome. She also called for international coordination due to the cross-sectoral and cross-border scope of crypto platforms, exchanges, and activities.

The Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) announced that they have extended the period for issuing feedback for the U.S. global systemically important banks’ 2021 resolution plans to allow the agencies additional time to analyze them.

Secretary Yellen convened the heads and private sector leads of several of the multilateral development banks (MDBs) for a third time. This meeting follows two previous meetings in 2021 where she urged the MDBs to rapidly align their portfolios with the goals of the Paris Agreement and to redouble their efforts to mobilize significantly more private capital for climate.

Commodity Futures Trading Commission (CFTC) Commissioner Caroline D. Pham delivered a keynote address at the 18th Nasdaq Technology of the Future Conference — Reimagining Tomorrow’s Markets entitled Regulation of the Future: Building Responsible Digital Asset Markets. Commissioner Pham discussed how new technologies such as distributed ledger technology (DLT) and blockchain present opportunities and risks, and said that DLT “could change the essential nature of money, payments, and finance.” She stated that the recent volatility in the crypto market has made it “crystal clear” that we need to balance innovation with retail protection and argued for more CFTC jurisdiction to create a “clearer and more holistic regulatory framework” over digital assets. 

Treasury Under Secretary for Domestic Finance Nellie Liang delivered remarks on digital assets from the perspective of macro financial stability concerns at King’s College London’s Global Banking and Finance Conference. Under Secretary Liang stated that the policy framework has held up well and that she believes that the macroprudential framework is still highly relevant. However, she said that regulators expect vulnerabilities to evolve rapidly and that establishing the appropriate policy framework for digital assets is not a task for financial regulators alone. Instead, Under Secretary Liang argued that it requires input from central banks because of implications for a uniform currency and monetary sovereignty and from finance ministries and other parts of government because of implications for global economic leadership, national security, and social objectives. 

The Consumer Financial Protection Bureau (CFPB) issued an Advisory Opinion to highlight the Fair Credit Reporting Act’s permissible purpose requirements, which provide that under certain permissible purpose provisions, a consumer reporting agency may not provide a consumer report to a user unless it has reason to believe that all of the consumer report information it includes pertains to the consumer who is the subject of the user’s request.

The Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2022-09, Calculating Effective Income after a Reduction or Loss of Income for Borrowers Affected by Presidentially-Declared COVID-19 National Emergency. The guidance in this ML allows flexibility in calculating income for borrowers who experienced a gap in employment and/or a reduction or loss of income due to a COVID-19 related economic event, where the borrower’s effective income is now stable. These flexibilities will allow more borrowers who have recovered from a COVID-19 related economic event to be appropriately evaluated for FHA financing.

Senators Bob Menendez (D-NJ), Elizabeth Warren (D-MA), and Jack Reed (D-RI) were joined by Senate Banking Committee Chairman Sherrod Brown (D-OH) and Sens. Chris Van Hollen (D-MD), Sheldon Whitehouse (D-RI), Bernie Sanders (I-VT), and Tammy Duckworth (D-IL) in pressing seven of the nation’s largest banks regarding widespread scams and fraudulent schemes conducted through online peer-to-peer money transfer programs affiliated with these banks.

Secretary Yellen convened principals representing the President’s Working Group on Financial Markets (PWG), in addition to the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the CFPB, to discuss stablecoin risks and how legislation could contribute to the existing regulatory framework. The participants discussed developments since PWG, OCC, and FDIC released the Report on Stablecoins last October. Secretary Yellen commended the steps that individual agencies have taken within the scope of their mandates and authorities and emphasized how recent events have underscored the urgent need to ensure that stablecoin arrangements are subject to a federal framework on a consistent and comprehensive basis.

The CFPB issued an interpretive rule affirming states’ abilities to protect their residents through their own fair credit reporting laws. With limited preemption exceptions, states have the flexibility to preserve fair and competitive credit reporting markets by enacting state-level laws that are stricter than the federal FCRA.

Need to catch up on what happened last week? Check out our July 1 Newsletter here.

Wednesday, July 13th at 10:00 AM ET – The Subcommittee on Consumer Protection and Financial Institutions will convene for a hybrid hearing entitled, “Better Together: Examining the Unified Proposed Rule to Modernize the Community Reinvestment Act.”

Tuesday, July 19th at 10:00 AM ET – The Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets will convene for a hybrid hearing entitled, “Oversight of the SEC’s Division of Enforcement.”

Tuesday, July 19th at 2:00 PM ET – The Subcommittee on Oversight and Investigations will convene for a hybrid hearing entitled, “Thoughts and Prayers Are Not Enough: How Mass Shootings Harm Communities, Local Economies, and Economic Growth.”

Wednesday, July 20th at 10:00 AM ET – The House Financial Services Committee will convene for a hybrid hearing entitled, “Housing in America: Oversight of the Federal Housing Finance Agency.”