October 21, 2024
This week decoded
With 15 days remaining before the U.S. general election, members of Congress highlighted their blockchain-related legislative proposals and looked ahead to the lame duck and the incoming 119th Congress.
In its analysis of economic policy in the lame duck, Politico reported, “Retiring House Financial Services Chair Patrick McHenry is expected to make one final push to pass legislation that would overhaul how the cryptocurrency industry is regulated — a long-running, legacy-defining effort for the North Carolina Republican.”
In the executive branch, the SEC released its annual report on its examinations priorities, including sections on emerging financial technologies and crypto assets, and the FTC issued its annual report to Congress on agency actions to protect older Americans, including discussions of cryptocurrency-related fraud, scams, and investment losses. Treasury Secretary Janet Yellen gave remarks about stablecoin legislation, and Fed Governor Christopher Waller delivered a speech on defi as a complement to centralized finance.
Read more below
Congress
Hearings
- Congress is in recess until November 15.
Legislation
- Congress is in recess until November 15.
Correspondence
- House Financial Services Chair Patrick McHenry (R-NC) sent a letter to Comptroller General of the United States Eugene Dodaro requesting the Government Accountability Office (GAO) audit the Financial Crimes Enforcement Network’s (FinCEN) Beneficial Ownership Secure System (BOSS). (Letter)(Press release)
Biden-Harris Administration
Securities and Exchange Commission
- The SEC released its annual report on its examinations priorities, including sections on emerging financial technologies and crypto assets. Regarding crypto assets, the SEC states, “Examinations of registrants will focus on the offer, sale, recommendation, advice, trading, and other activities involving crypto assets that are offered and sold as securities or related products, such as spot bitcoin or ether exchange-traded products. In particular, these examinations will review whether the registrants: (1) meet and follow their respective standards of conduct when recommending or advising customers and clients regarding crypto assets with a focus on an initial and ongoing understanding of the products that have a particular focus on scenarios where investors are retail-based (including older investors) and investments involving retirement assets; and (2) routinely review, update, and enhance their compliance practices (including crypto asset wallet reviews, custody practices, Bank Secrecy Act (BSA) compliance reviews, and valuation procedures), risk disclosures, and operational resiliency practices (i.e., data integrity and business continuity plans), if required. The Division will assess registrant practices to address the technological risks associated with the use of blockchain and distributed ledger technology, including risks pertaining to the security of crypto assets.” (Report)
Federal Trade Commission (FTC)
- The FTC issued its annual report to Congress on agency actions to protect older Americans. The report includes discussions of cryptocurrency-related fraud, scams, and investment losses. (Report)
Treasury Department, Internal Revenue Service (IRS)
- The Internal Revenue Service announced the launch of the 2024 Nationwide Tax Forum Online, providing tax professionals access to 18 seminars recorded at this year’s IRS Nationwide Tax Forum, including a seminar entitled, “Digital Assets: What Tax Pros Should Know.”
Commodity Futures Trading Commission (CFTC)
- Commodity Futures Trading Commission (CFTC) The CFTC’s final rule on trading of voluntary carbon credit (“VCC”) derivative contracts includes a summary of comments related to blockchain, “Some commenters provided information regarding blockchain technology or digital assets. In general, these commenters supported the use of blockchain or similar technology for VCC-related recordkeeping to help avoid double counting.” (Federal Register)
Noteworthy Quotes and Events
Administration
Treasury Department
- In remarks at the Council on Foreign Relations in New York, Treasury Secretary Janet Yellen said, “I am concerned about stablecoins.” Yellen added that the stablecoin regulatory framework Treasury has been working with Congress in drafting “would require that any stablecoin issuer hold absolutely safe, liquid assets, 100 percent, to back stablecoins.” And “There is bipartisan legislation that’s been considered in the House Financial Services Committee — that, I think, comes close to what we would want to see.” Yellen added that stablecoins “could play a positive role in our financial system but without adequate regulation, they can suffer from runs akin to a bank run that can create a panic. We’ve seen that with a number of stablecoins that have failed and sort of broken the buck. The problems haven’t really spilled over to the broader banking system but without proper regulation, they could one day.” (PoliticoPro)(Prepared remarks)
Federal Reserve
- Fed Governor Christopher Waller delivered a speech at the Institute of Advanced Studies in Vienna, Austria, entitled, “Centralized and Decentralized Finance: Substitutes or Complements?” Waller concluded with, “When it comes to our financial plumbing, which affects every person or business in one way or another, I think a balanced view of expeditious disruption and long-term sustainability is merited. So where does that leave us? Ultimately, I believe that advances in technology have the potential to drive efficiency gains in finance, just as technological innovation has done for centuries. While there are certain services emerging through defi that cannot be provided by centralized finance, the technological innovations stemming from defi are largely complementary to centralized finance. They have the potential to improve centralized finance, thereby increasing the significant value that financial intermediaries and centralized financial markets deliver. I look forward to seeing the continued evolution of financial technology and the benefits that evolution will bring to the households and businesses served by the financial system.” (Prepared remarks)
Congress
- Rep. Tom Emmer (R-MN) tweeted, “Kamala Harris’ ignorance is on full display. Crypto is for ALL Americans” with an image from Vice President Kamala Harris’s Opportunity Agenda for Black Men stating, “Protect cryptocurrency investments so Black men who make them know their money is safe.”
- Rep. Warren Davidson (R-OH) tweeted, “Self-custody is the litmus test for digital assets. Anyone opposing self-custody wants a third party they can control to have custody and control of your assets. KeepYourCoins.”
- Davidson also tweeted, “Central Bank Digital Currency (CBDC) is the creepiest surveillance tool ever developed. It corrupts money from its proper role as a stable store of value and efficient means of exchange into a tool for surveillance, coercion, and control. BanCBDC”
- Rep. Byron Donalds (R-FL) tweeted, “This morning, I joined BlockTower in Miami for a conversation regarding digital assets. Together, we discussed support for digital assets, future legislation, US competitiveness, navigating overregulation, & attaining generational wealth. Thank you to all who joined us today.”
- Rep. Wiley Nickel (D-NC) said about incoming members of Congress, “What I know about the folks who will be coming to Congress is you’re going to have a lot more forward-looking people who understand that digital innovation is really important for our economy.”
- On the same issue, Rep. Mike Flood (R-NE) said, “There’ll be a lot more progress next year. The people that have been naysayers on crypto are going to find that there’s a lot more members that are educated on it and want to go for it.” Flood added, “If the Republicans take the Senate, it’s game on.”
About Zero One Strategies
Zero One Strategies is a boutique government relations practice dedicated to navigating the complex landscape of U.S. federal policy in emerging technologies. As advancements in technology continue to outpace regulatory frameworks, Zero One Strategies aims to provide strategic guidance and bipartisan advocacy for innovators and businesses operating at the forefront of technological development.
The practice focuses on key areas such as artificial intelligence, blockchain, decentralized technologies, cybersecurity, data, and digital infrastructure, as well as the multiple policy issues impacting these sectors, including tax and financial services.
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