February 3, 2025
This week decoded
Investment interests in digital assets were a major focus in the Senate Commerce Committee hearing to consider the nomination of Howard Lutnick for Commerce Secretary.
The CFTC announced a series of roundtables on issues including market structure and digital assets. The prudential regulators announced a public hearing on regulations pertaining to issues including consumer protections and money laundering. CFPB Director Rohit Chopra’s term at the head of the bureau concluded with a tweet.
Read more below
Congress
Hearings
- Last week
- On January 29, the Senate Commerce, Science and Transportation Committee held a hearing on the nomination of Howard Lutnick to be Commerce secretary. Digital assets were a major focus of the hearing; details below.
- On January 30, the Senate Foreign Relations Committee held a hearing on The Malign Influence of the People’s Republic of China at Home and Abroad: Recommendations for Policy Makers.
- This week
- On February 5, the Senate Banking Committee will hold a hearing on Investigating the Real Impacts of Debanking in America.
- On February 6, the House Financial Services Oversight and Investigations Subcommittee will hold a hearing on Operation Choke Point 2.0: The Biden Administration’s Efforts to Put Crypto in the Crosshairs.
- Upcoming
- On February 11, the House Financial Services Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee will hold a hearing on A Golden Age of Digital Assets: Charting a Path Forward.
Legislation
- Sens. Maria Cantwell (D-WA), Marsha Blackburn (R-TN) and Lisa Blunt Rochester (D-DE) introduced S. 257, the Promoting Resilient Supply Chains Act that would authorize the Department of Commerce to strengthen American supply chains for critical industries and emerging technologies, including blockchain. (Text)(Press release)
Correspondence
- Sen. Elizabeth Warren (D-MA) sent a letter to President Trump’s nominee for Secretary of Commerce, Howard Lutnick, asking for information about “Lutnick’s financial stake in Tether, any conversations with Trump administration officials about Tether, and whether his firm performed due diligence to confirm that Tether is in compliance with ‘Know Your Customer’ rules in the Bank Secrecy Act, international sanctions, and anti-money laundering laws.” (Press release)(Letter)
- Warren and Rep. Jake Auchincloss (D-MA) sent letters to the U.S. Office of Government Ethics (OGE), Treasury Department, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, requesting information “on how they will address the unprecedented concerns posed by the launch of the $Trump and $Melania meme coins, including the threats from consumer ripoffs, corruption and foreign influence, and President Trump’s conflicts of interest.” (Press release)(Letter)
Reports
- Sen. Cynthia Lummis (R-WY) filed an amicus curiae brief in Coinbase v. Securities and Exchange Commission in the U.S. Court of Appeals for the Second Circuit. Her public statement said, “The SEC’s approach under the Biden administration was to aggressively reinterpret case law governing Howey and investment contracts, keep those interpretations secret, and then demand compliance from digital asset exchanges. Such an approach is un-American. It is the job of Congress to provide a legislative framework that clearly draws the line between a security and a commodity.” (Press release)(Brief)
Trump – Vance Administration
Commodity Futures Trading Commission (CFTC)
- CFTC Acting Chair Caroline Pham announced a series of public roundtables on “evolving trends and innovation in market structure, including issues such as affiliated entities and conflicts of interest, prediction markets, and digital assets.” (Press release)
Prudential Regulators
- On March 6, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation will host a virtual meeting to receive public comments about regulations that may be outdated, unnecessary, or unduly burdensome. Regulations under consideration at this public meeting relate to: 1) Applications and Reporting; 2) Powers and Activities; 3) International Operations; 4) Consumer Protection; 5) Directors, Officers and Employees; and 6) Money Laundering. (Registration)
Noteworthy Quotes and Events
ADMINISTRATION
Commodity Futures Trading Commission (CFTC)
- In announcing the launch of public roundtables, CFTC Acting Chair Caroline Pham said, “As I have long said, the CFTC must take a forward-looking approach to shifts in market structure to ensure our markets remain vibrant and resilient while protecting all participants. Innovation and new technology has created a renaissance in markets that presents new opportunities that are accessible to more people, as well as risks. The CFTC will get back to basics by hosting staff roundtables that will develop a robust administrative record with studies, data, expert reports, and public input. A holistic approach to evolving market trends will help to establish clear rules of the road and safeguards that will promote U.S. economic growth and American competitiveness.” (Press release)
Consumer Financial Protection Bureau (CFPB)
- CFPB Director Rohit Chopra tweeted an image of his resignation letter to President Trump, reviewing consumer protection actions taken by the bureau and including the line, “This letter confirms that my term as CFPB Director has concluded.” Chopra tweeted, “It’s been an honor serving as your CFPB Director. Every day, Americans from across the country shared their ideas and experiences with us. You helped us hold powerful companies & their executives accountable for breaking the law, and you made our work better. Thank you.”
CONGRESS
Lutnick Confirmation Hearing
- Hearing Questions
- Sen. Maria Cantwell (D-WA): “…you’re going to be a decision maker on a lot of rules, which leads me to this next point, I am going to have a lot of questions about your involvement in the private sector in the private sector. I’m sure you play by the rules will ask you those questions. But the question is, you’re going to be on the other side of the table, now, you’re going to be the rule maker. So I’m going to want to understand the issues of Tether the issues of one to one, the issues of how we set rules, because I think the President also gave you a new responsibility as it related to the crypto rules. And I’m a fan of blockchain technology and crypto. I’m a little more on the CFTC side than I am on the SEC side. But in general, I believe that markets need rules. And I believe that people in your position are going to have to play an even larger leadership role… So now this back again to this big task on export controls and thwarting China and dealing with this AI problem and all the various interests. I mean, I do have some, you know, concerns too. I’m a big crypto person in general, as I said, CFTC oversight. But this issue about Tether and the amount of illicit market funding of Tether is the analysts who do this work now I’m for a more robust system but the analysts who do it now think that as much as $19 billion on Tether could be illicit activity by the North Koreans, the Russians, the Chinese. And so what do we do about that? What is your solution?”
- Lutnick: “So the number one instrument of the world of criminals is the U.S. dollar. The number two is the Euro. So these are just the things that people use. So Tether is the largest stable coin. So criminals use it more than Circle, which is the second largest as a ratio of the same. It’s like blaming Apple, because criminals use Apple phones. It’s just a product we don’t pick on the US Treasury, because criminals use dollars. So I think it’s just a it’s just a product. They are. And I’ve asked them to and they are signed up with all US federal law enforcement, they follow all federal law enforcement instantly.”
- Lutnick: “So in my due diligence, and Cantor Fitzgerald’s due diligence Tether did no business with anyone who wasn’t KYC appropriate. The fact that some at some point, their product was bought by someone and used it inappropriately. I think it’s important for us.”
- Lutnick: “Oh, it’s entirely secondary market. But I think, well, we can do. I think AI tools used by the US government running through the blockchain of stable coin issuers will rid the world of criminals using Blockchain. For illicit activity, our ability to oversee that blockchain and rip through it with AI tools will eliminate it.”
- Sen. Maria Cantwell (D-WA): “…you’re going to be a decision maker on a lot of rules, which leads me to this next point, I am going to have a lot of questions about your involvement in the private sector in the private sector. I’m sure you play by the rules will ask you those questions. But the question is, you’re going to be on the other side of the table, now, you’re going to be the rule maker. So I’m going to want to understand the issues of Tether the issues of one to one, the issues of how we set rules, because I think the President also gave you a new responsibility as it related to the crypto rules. And I’m a fan of blockchain technology and crypto. I’m a little more on the CFTC side than I am on the SEC side. But in general, I believe that markets need rules. And I believe that people in your position are going to have to play an even larger leadership role… So now this back again to this big task on export controls and thwarting China and dealing with this AI problem and all the various interests. I mean, I do have some, you know, concerns too. I’m a big crypto person in general, as I said, CFTC oversight. But this issue about Tether and the amount of illicit market funding of Tether is the analysts who do this work now I’m for a more robust system but the analysts who do it now think that as much as $19 billion on Tether could be illicit activity by the North Koreans, the Russians, the Chinese. And so what do we do about that? What is your solution?”
- Sen. John Hickenlooper (D-CO): “I’ve got a couple of questions around Tether. I was here earlier, when you talked about allowing when we get AI in government, we can follow up pretty quickly. But we know that Russia has used it to buy drone parts and to avoid sanctions, that one of the main financiers for Iran had $100 million moving around using Tether. It’s used in a lot of scams with Americans. What is the best way? What’s your sense? I mean, if we’re gonna try and limit and be efficient with government regulation, how do we try to crack down on these on these illicit uses of something like Tether? I mean, what’s your what’s your perspective? I’m not trying to say that you should be held accountable though, just trying to figure out how would you suggest whether it’s commerce or Congress, how do we approach that?
- Lutnick: “So we only know that illicit activity is done on the blockchain because it’s done on the blockchain meaning when these same illicit characters use dollars or euros, we don’t know about it. You remember when we went into Iraq, we found, you know, pallets of dollars of $100 bills. So the way to do it is to require that anyone who is a US backed stable coin must onboard US law enforcement, and must allow us law enforcement and our AI tools into their models so that we can go find and catch the illicit activity. Because remember, it’s a central book, that means it can be found, it can be traced, our AI tools will rip illicit activity out of stable coins, within a year or two, our technology on their blockchain will end it. And that’s what we should require. Makes perfect sense.”
- Sen. John Hickenlooper (D-CO): “I’ve got a couple of questions around Tether. I was here earlier, when you talked about allowing when we get AI in government, we can follow up pretty quickly. But we know that Russia has used it to buy drone parts and to avoid sanctions, that one of the main financiers for Iran had $100 million moving around using Tether. It’s used in a lot of scams with Americans. What is the best way? What’s your sense? I mean, if we’re gonna try and limit and be efficient with government regulation, how do we try to crack down on these on these illicit uses of something like Tether? I mean, what’s your what’s your perspective? I’m not trying to say that you should be held accountable though, just trying to figure out how would you suggest whether it’s commerce or Congress, how do we approach that?
- Sen. Elizabeth Warren (D-MA) tweeted, “Howard Lutnick is in deep with crypto company Tether — aka “outlaws’ favorite currency.” Tether financed North Korean nuclear weapons programs and Russian arms companies. Lutnick and his company made millions. I have some questions for him.”
Miscellaneous
- House Financial Services Ranking Member Maxine Waters (D-CA) appeared on the podcast Banking with Interest, in which she talked about stablecoins and her focus on the role of the Fed, her potential working relationship with committee Chair French Hill (R-AR), and Democratic priorities for digital assets, saying, “I’m not opposed to crypto. I, too, think it’s inevitable. It’s happening all over the world, but it cannot happen without guardrails and protection. If you think we’re asking too much when we say we’ve got to have guardrails, just look at the president of the United States of America. They created his own dollar sign, Trump Crypto. What is it? Is it an investment? Is it a contribution? What are those who are investing in it doing except saying we like you, president, and we want to support you in some way?” (Podcast)
- Sen. Cynthia Lummis (R-WY) tweeted, “States across the nation, including right here in Wyoming, have embraced digital asset legislation. They are not just the key to financial security, but America’s financial prosperity.”
- Rep. Bryan Steil (R-WI) tweeted, “Logical, thoughtful legislation is the best way to promote crypto innovation and development in the US.”
- Rep. Frank Pallone (D-NJ) retweeted a NY Times article, saying, “Even the crypto industry can see right through Trump’s cash grab. It’s painfully obvious that Trump is using the presidency to enrich himself and take advantage of inexperienced investors to sell meme coins that have no real value.”
- Sen. Bill Hagerty (R-TN) tweeted, “POTUS has unleashed digital assets innovation and unburdened the industry from predatory regulations.”
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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