January 13, 2025
This week decoded
The 119th Congress convened on January 3, 2025, bringing a flurry of activity as conferences, caucuses, and committees organized.
The House Financial Services Committee announced a reorganized subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence, led by Rep. Bryan Steil (R-WI) and Rep. Warren Davidson (R-OH) will chair the Subcommittee on National Security, Illicit Finance, and International Financial Institutions. Sen. Cynthia Lummis (R-WY) is expected to chair a new subcommittee on digital assets in the Senate Banking Committee, joined by Sens. Thom Tillis (R-NC), Bill Hagerty (R-TN), Dave McCormick (R-PA), and Bernie Moreno (R-OH).
The Senate kicks off confirmation hearings of President-elect Trump’s cabinet nominees this week.
Treasury and the IRS published anticipated final rules for digital assets broker information reporting in DeFi and self-hosted wallet transactions. The CFPB announced application conditions for No-Action Letters and Compliance Assistance Sandbox approvals and issued for public comment a notice of proposed rulemaking on applying the Electronic Fund Transfer Act to stablecoins and other digital currencies. FDIC Vice Chair Travis Hill delivered remarks on debanking, the Bank Secrecy Act, and the need for a “reset” in the FDIC’s approach to digital assets. CFTC Chair Rostin Behnam delivered his final official remarks in which he reflected on the ongoing need for legislation to close the gap in the regulation of digital asset commodities.
Read more below
Congress
Hearings
- Last week
- There were no relevant hearings last week.
- This week
- On January 15, the Senate Energy and Natural Resources Committee will hold a hearing on the nomination of Chris Wright to be Energy Secretary.
- On January 16, the Senate Finance Committee will hold a hearing on the nomination of Scott Bessent to be Treasury Secretary.
Legislation
- Rep. Warren Davidson (R-OH) introduced H.R. 148 To prohibit Federal agencies from restricting the use of convertible virtual currency by a person to purchase goods or services for the person’s own use, and for other purposes. (Text)
- Senate Foreign Relations Chair Jim Risch (R-ID) and Sens. Michael Bennet (D-CO), John Barrasso (R-WY), Bill Cassidy (R-LA), Dan Sullivan (R-AK), Rick Scott (R-FL), and Pete Ricketts (R-NE) introduced the Venezuela Advancing Liberty, Opportunity, and Rights Act (VALOR Act), on U.S. policy in support of a transition to democratic order in Venezuela, including codifying financial sanctions on Venezuelan cryptocurrency. (Press release)(Text)
Reports
- Senate Banking Committee Republicans released a 2024 Year-End and Oversight Report for the 118th Congress, highlighting actions regarding digital assets. (Report)
Biden – Harris Administration
Treasury Department, Internal Revenue Service (IRS)
- Treasury and the IRS issued final regulations on information reporting requirements for digital assets brokers in DeFi transactions. The rules identify trading front-end service providers interacting directly with customers as brokers required to report gross proceeds of DeFi transactions. (Press release)(Final rule)
Consumer Financial Protection Bureau (CFPB)
- The CFPB issued a notice of proposed interpretive rulemaking on “how the Electronic Fund Transfer Act, which provides consumers with protections against errors and fraud, applies to new types of digital payment mechanisms, such as those currently offered through large technology companies and video gaming platforms, as well as stablecoins and other digital currencies that are not widely used today in consumer transactions.” The comment period closes March 31. (Press release)(Notice)
- The CFPB published policy statements in the Federal Register announcing it is accepting applications with detailed conditions for No-Action Letters (NALs) and Compliance Assistance Sandbox Approvals to ensure they “promote innovations that solve unmet needs in markets for consumer financial products and services.” (NAL Notice)(Sandbox Notice)
Trump – Vance Transition
- Nomination hearings begin this week in the Senate for several of President-elect Trump’s cabinet secretary nominees.
Noteworthy Quotes and Events
ADMINISTRATION
Federal Deposit Insurance Corporation (FDIC)
- FDIC Vice Chair Travis Hill delivered remarks on Charting a New Course: Preliminary Thoughts on FDIC Policy Issues in which he addressed debanking and the Bank Secrecy Act,
- “Another area in which a reset is sorely needed is the agency’s approach to digital assets and tokenization. In 2021, the banking agencies issued a roadmap describing plans to publish various policy documents in 2022 detailing the agencies’ expectations for banks engaging in activities related to digital assets. Ultimately, this work was discontinued in early 2022 following a change in leadership at the FDIC, and instead the agencies established processes in which each institution must engage with its regulator on an individual basis before engaging in any activities related to digital assets or blockchain. I have talked in the past about how damaging this approach has been, as it has stifled innovation and contributed to a public perception that the FDIC is closed for business if institutions are interested in anything related to blockchain or distributed ledger technology. Recent disclosures that the FDIC sent “pause” letters to more than twenty banks instructing them to refrain from “all crypto-related activity” have reinforced this perception. I continue to think a much better approach would have been — and remains — for the agencies to clearly and transparently describe for the public what activities are legally permissible and how to conduct them in accordance with safety and soundness standards. And if regulatory approvals are needed, those must be acted upon in a timely way, which has not been the case in recent years.”
- “Closely related to the agencies’ recent approach to digital assets is the problem of ‘debanking.’ Over the past few years, there have been various accounts of individuals and businesses associated with the crypto industry losing access to bank accounts without explanation… Efforts to debank law-abiding customers are unacceptable, regulators must work to end it, and there is no place at the FDIC for anyone who has pushed — explicitly or implicitly — banks to stop serving law-abiding customers. While adopting a new approach to digital assets — and putting an end to any and all Choke Point-like tactics — are essential first steps, regulators also need to reevaluate our approach to implementing the Bank Secrecy Act (BSA). While we all share the goal of ensuring criminals and terrorists are not using the banking system to fund drug trafficking, terrorism, and other serious crimes, the current BSA regime creates an incentive for banks to close accounts rather than risk massive fines for inadequate BSA compliance. It is also worth reexamining the policy of requiring banks to provide adverse action notices explaining the reasons why a customer is denied a loan, while at the same time often prohibiting banks from providing any reason if a customer’s entire account is closed. These issues, along with others in the BSA realm, warrant attention and scrutiny during the next Administration.” (Prepared remarks)
Commodity Futures Trading Commission (CFTC)
- CFTC Chair Rostin Behnam delivered remarks at the Brookings Institution reflecting on his tenure leading the commission, stating,
- “Another early endeavor that has dominated every season of my tenure is addressing the gap in regulation of the cash markets for crypto or digital asset commodities. I have repeated myself often and at every opportunity. My position has not changed, and I will continue to advocate for the CFTC to fill this gap if Congress so chooses—even after I have moved on.”
- “There have been a few targeted efforts, but overall, the digital asset market has continued to integrate into traditional financial institutions without comprehensive regulatory guardrails. Concerns regarding customer protections, increasing instances of fraud and market abuse, broader market resiliency, and even financial stability are intensifying in the absence of federal legislation. We’ve seen this before in our history where we leave large swaths of finance outside of oversight and responsibility, and we have seen time and time again that it ends badly.” (Prepared remarks)
Federal Reserve
- Fed Governor Michelle Bowman delivered remarks at the California Bankers Association 2025 Bank President Seminar, saying, “Regulators should operate in a transparent way and carefully and meticulously follow administrative procedures when making revisions to the regulatory framework. We should take a similar approach to shifts in supervisory focus. Doing so promotes trust and accountability to the public and should be integral to the important work we do promoting the safe and sound operation of the banking system and financial stability. Transparency also promotes innovation in the financial system by enabling banks to understand how to engage in new activities. This is especially important as digital assets and artificial intelligence are becoming increasingly more prevalent in the financial system.” (Prepared remarks)
CONGRESS
House Financial Services Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence
- Rep. Bryan Steil (R-WI) said, “Innovation in the financial services sector provides an exciting opportunity for consumers and entrepreneurs, as technologies like financial apps, digital assets, and machine learning revolutionize our economy. I am honored to serve as the Chairman of the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence. I look forward to building on the important work this subcommittee completed under Chairman Hill as we continue to provide the rules of the road to move our economy into the future.” (Press release)
- House Financial Services Chair French Hill (R-AR) said, “Rep. Steil has been a leader in his time in Congress, both on our Committee and as House Administration Committee Chairman. As a member of the Digital Assets Subcommittee last Congress, Steil helped push forward our agenda and was instrumental in the historic House passage of FIT21 and fighting to roll back SAB 121. I am delighted he will take over my role as Digital Assets Subcommittee Chairman for the 119th Congress and be a leader in counting our work to create a regulatory framework for digital assets that will protect consumers and investors while keeping the United States a leader in innovation in the digital assets ecosystem.” (Press release)
Miscellaneous
- Sen. Sheldon Whitehouse (D-RI) retweeted a NY Times article on emissions and power demand, saying, “The unbelievably rich AI and crypto companies should pay to bring clean power to their data centers, not make it everyone else’s problem.”
- Sen. Cynthia Lummis (R-WY) tweeted a statement on the announcement of Fed Vice Chair for Supervision Michael Barr stepping down, including, “Michael Barr has completely failed to fulfill his duties as Vice Chair for Supervision at every turn, enabling Operation Chokepoint 2.0 and illegally increasing his power at the cost of Wyoming’s digital asset industry.”
- Lummis also tweeted, “Recent allegations of attacks against digital asset companies by staff at the FDIC, if true, are bone-chilling. Operation Chokepoint 2.0 is real and I will work with Senate Banking Chair Tim Scott to get to the bottom of these serious allegations.”
- Lummis also tweeted, “Looking forward to partnering with realDonaldTrump’s SBA nominee KLoeffler to jumpstart the economy and pave the way for digital asset advancement. Let’s make American strong again!”
- Senate Banking Chair Tim Scott (R-SC) released a statement on his meeting with Paul Atkins, President-elect Trump’s nominee to serve as SEC Chair, “Throughout his career, Paul Atkins has championed policies that promote capital formation and job creation, and his extensive experience in financial regulation will be critical to reversing the harm Gary Gensler has done to our capital markets. Commissioner Atkins also understands the importance of regulatory clarity for the digital assets industry and the millions of Americans who want access to this asset class. I look forward to working with my colleagues to quickly consider his nomination.” (Press release)
- Rep. Warren Davidson (R-OH) tweeted, “The people want freedom to own and transact, not SenWarren’s “War on Crypto”. More freedom. Less government. Sound money.”
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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