In a letter sent to members of Congress, Gary Gensler, Chairman of the United States Securities and Exchange Commission (SEC), promised to give “careful consideration” about spot Bitcoin Exchange Traded Products (ETPs).
Recalled that two Congressmen, Tom Emmer (MN-06) and Darren Soto (FL-09), sent a letter to Gensler back in November last year requesting to know the reason for the commission’s caution towards a spot BTC ETF product when indeed, it has approved a related product based on the futures price of the premier cryptocurrency.
“We question why, if you are comfortable allowing trading in an ETF based on derivatives contracts, you are not equally or more comfortable allowing trading to commence in ETFs based on spot Bitcoin,” the letter read at the time following the approval of ProShares futures-based Bitcoin ETF product. “Bitcoin spot ETFs are based directly on the asset, which inherently provides more protection for investors.”
In response to the inquisition, Gensler said the proposals for both a futures-based and a spot ETF are considered separately based on the provisions of the Exchange Act. While Gensler said, the commission would continue to probe whether the proposals for a spot Bitcoin ETF product are capable of preventing fraud and manipulative practices.
The fears of the SEC are compartmentalised mainly to the U.S., and other countries, including Canada, Brazil, and Germany, have fully functional spot Bitcoin ETF products trading on their public bourses. In a bid to prevent the United States from lagging behind in emerging financial innovations, Rep Emmer tweeted saying;
“This issue remains a priority for us and we will continue to oversee the SEC in its mission to maintain fair and orderly markets and facilitate capital formation.”
While the SEC Chairman reassured that the commission would continue to consider new proposals to list a spot BTC ETF, the ecosystem is hardly optimistic about the chances of anyone emerging soon.
Elad Roisman, one of the Commissioners with the United States Securities and Exchange Commission (SEC), has tendered his resignation with President Joe Biden in preparation for his quit from the agency by the end of January 2022.
Roisman currently serves as one of the five commissioners alongside Hester Peirce, well-known as Crypto Mom.
“Today, I sent a letter to President Biden, informing him that I intend to resign my position by the end of January. Serving the American people as a Commissioner and an Acting Chairman of this agency has been the greatest privilege of my professional life,” Roisman said in a statement published by the commission, “It has been the utmost honour to work alongside my extraordinary SEC colleagues. The latter care deeply about investors and our markets. Over the next several weeks, I remain committed to working with my fellow Commissioners and the SEC’s incredible staff to further our mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.”
Roisman was appointed as a Commissioner in 2018 by former President Donald Trump, and he led a successful career with the SEC. Roisman served briefly as the Acting Chairman of the commission when former Chairman Jay Clayton resigned in December 2020. During his service time with the SEC, Roisman supported the push for progressive crypto regulations.
During his time as the Chief Counsel of the U.S. Senate Banking Committee, Roisman pointed out that the SEC should “examine and re-examine its rules, regulations, and guidelines” when it came to emerging technologies, including crypto and blockchain. He was also a part of the U.S. House Committee Hearing with the SEC on Crypto and Libra back in 2019.
A few days ago, Roisman co-signed a letter alongside crypto mom, criticizing Chairman Gary Gensler’s approach for not clarifying crypto in the agency’s regulatory agenda. Roisman’s current tenure as SEC commissioner is expected to end in 2023. His departure will create a temporary vacuum that stakeholders in the crypto ecosystem can hope will be filled by another crypto-centric veteran.
The US government is close to postponing its federal default for at least a year after Congress finally approved a debt limit increase by a whopping $2.5 trillion.
With the potentially growing debt ceiling above $30 trillion and the enhanced mass printing of US dollars, which already causes surging inflation, the question arises – what about Bitcoin?
US Debt Ceiling Raised (Again)
The US House of Representatives approved the previous debt ceiling raise in October 2021 with a more “modest” $480 billion increase, which brought the borrowing limit to $28.9 trillion. Although the Republicans initially tried to oppose the bill’s acceptance due to the Democrats’ plans to enhance social and climate spendings, the legislation was quickly signed by President Joe Biden and came to effect.
It was known at the time that this particular limit increase won’t do any good for the country in the long run, as the next hearing was expected to be in December. As December arrived, the scenario repeated to a large extent, with Republicans seemingly trying to fight the bill but the Democrats emerging with the upper hand.
With a 221-to-209 vote, the bill passed Congress and is now in the hands of President Biden, who is expected to sign it soon. If he does, the bill will increase the federal government’s debt limit by $2.5 trillion to $31.4 trillion. More importantly for the world’s most powerful economy, though, it will delay the threat of a federal default until at least early 2023.
Speaker Nancy Pelosi of California praised the bill’s acceptance, saying, “the full faith and credit of the United States should never be questioned. The health of our economy should never be threatened.”
In contrast, Republican Representative Jodey Arrington was disappointed in the end result, noting that the country’s debt level will be at its highest level since World War II and “we ain’t in a war” now.
US Congress. Source: Yahoo
How Does Bitcoin Fit Into This?
With the US printing excessive amounts of its national currency in the past two years and the frequent raising of its debt limits, the consequences are already more than evident. The US inflation rates, which have historically been increasing by 3.24%, have grown by significantly larger percentages in the past six months.
This led to a 6.8% surge in November – the highest in approximately 40 years. Even the people behind some of the most crucial decisions – Fed Chair Jerome Powell and Treasury Secretary Janet Yellen – stopped referring to the rapidly increasing inflation as “transitory.”
On the other shore lies Bitcoin. It has pre-programmed inflation rates, which actually decline every roughly four years. It doesn’t have a central authority behind it to decide whether the amount of newly created bitcoins should nearly double in a few years as the dollar did. It has a limited supply, which can’t be increased by a signature from a president.
Somewhat expectedly, all of these features started to attract prominent investors from outside the cryptocurrency industry. Names like Paul Tudor Jones III, Stan Druckenmiller, Thoma Bravo, Anthony Scaramucci, and others started to pour money into BTC and frequently praise it as an investment tool against rising inflation.
$2.5 Trillion Bitcoin Ad
With the new $2.5 trillion debt limit increase awaiting just the signature of President Biden, who is a Democrat, CryptoPotato decided to reach out to some crypto insiders and experts to check out their opinion on the potential effects on BTC.
Max Keiser, the host of the Keiser report and a well-known BTC proponent, said this bill has created the “perfect conditions for Bitcoin” as the US government has “capitulated to the ravenous, insatiable dogs of hyperinflation.”
“I hate to see America collapse, but I don’t own more than a few USD, so I don’t care.” – he added.
Scott Melker, known as the Wolf of All Streets, indicated that Bitcoin is an uncorrelated asset that offers “idiosyncratic risk for a savvy investor with a long time horizen.”
“Short-term news like the inevitable increase in the debt ceiling is a small blip on the radar for Bitcoin. Everyone knows that the government will continue to print money and raise the debt ceiling whenever necessary, which is largely priced in to Bitcoin’s importance and use case – as a hedge against this very nonsense.” – he concluded.
Tyler Winklevoss, Gemini co-founder and early BTC adopter, believes the Senate’s approval will actually work as a “$2.5 trillion advertisement for Bitcoin.” Michael Saylor shared a similar opinion, replying, “it would appear that Bitcoin has government support.”
It would appear that #bitcoin has government support…
— Michael Saylor⚡️ (@saylor) December 14, 2021
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Massachusetts Senator Elizabeth Warren is leading the charge against crypto once again. In a video posted on Dec. 15, she said that stablecoins pose risks to consumers and the economy because they are “propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed.”
It is not the first time she has branded the crypto industry “shady” or similar. In July, the angry Senator said that “shadowy super coders” were behind crypto, making it a threat to the U.S. financial system.
This most recent tirade was unleashed at a Senate Committee on Banking, Housing, and Urban Affairs hearing on Dec. 14.
Stablecoins pose risks to consumers & to our economy. They’re propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed. Our regulators need to get serious about clamping down before it is too late. pic.twitter.com/hMOT1HIQgn
— Elizabeth Warren (@SenWarren) December 14, 2021
Senators on the Stablecoin Warpath
Stablecoins do threaten the traditional financial system as they were designed to. The Federal Reserve controls the dollar, and it has plunged the economy into crisis with unprecedented money printing resulting in a 40-year-high inflation rate.
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This must be what the Senator was referring to regarding consumer protection.
At the same hearing, Senator Sherrod Brown joined his compatriot and labeled crypto as “magic money.” Senator Brown opened the hearing with a tirade against stablecoins and their relationship with this “new fantasy economy.” He added that they facilitate users risking money on volatile and sometimes fraudulent cryptocurrencies.
Just a week ago, a number of crypto CEOs and executives traveled to Capitol Hill to explain the role of stablecoins and what the industry was all about in an effort to quell concerns and these sweeping statements. Those efforts appear to have fallen on deaf ears judging by the vehemence coming from these anti-crypto policymakers.
The hearing occurred the same day that Tether was hit with another lawsuit which CTO Paolo Ardoino labeled “nonsense and copycat.”
In the Crypto Corner
Six Senators have been fighting in support of the industry, however. In a letter sent to Treasury secretary Janet Yellen on Dec. 14, Senators Rob Portman, Mark Warner, Mike Crapo, Kyrsten Sinema, Pat Toomey, and Cynthia Lummis urged for crypto-specific regulations.
Their particular umbrage was the use of the term “broker” in the recently passed infrastructure bill that would see software suppliers, mining operations, and wallet providers liable for tax reporting.
“We urge the Department of the Treasury to provide information or informal guidance as soon as possible – no later than the end of the current calendar year – regarding the definition of “broker” as discussed during the legislative process.”
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Top executives representing the biggest companies in the American digital currency ecosystem appeared before Congress to testify on the state of the crypto industry.
While CEOs met with a divided House who seemed unable to agree on the approach to employ in regulating the nascent industry, demands for clear regulations were vocally spelt out.
“We need clear standards and the government’s support to create a new, more secure, more competitive financial system,” said Charles Cascarilla, CEO and co-founder of Paxos Trust Co., which provides financial services to crypto firms. “The benefits of getting this right are enormous — but so are the consequences of getting it wrong.”
SEC Chairman Gary Gensler, who seeks to regulate cryptocurrencies as securities, was notably faulted by Coinbase Chief Financial Officer Alesia Haas. The Coinbase executive advocated for a digital currency regulated future where clear definitions would be given by a governing agency other than the SEC. According to her, “it would benefit all of us in the ecosystem to have agreed-upon definitions.”
“We do believe clarity is needed,” Haas said.
Republicans were mostly on the side of the crypto executives as they expressed trust in the potentials of the technology backing the industry. While they were unable to promise an encompassing regulation as the executive was suing for, their approach seemed more favourable than Democrats’, who chose to maintain the stance that the crypto ecosystem has significant lapses that cannot be shoved aside.
“The advocates of crypto represent the powers in our society,” said Rep. Brad Sherman (D-Calif.), the industry’s most outspoken critic in Congress. “The powers in our society on Wall Street and in Washington have spent millions, and are trying to make billions or trillions in the crypto world.”
With Bank Policy Institute President and CEO Greg Baer standing in for the nation’s biggest banks at the hearing, he advocated for an equal level of regulations for financial institutions and digital currency service providers, all of whom seem to be operating on a more different rulebook, stumping competition.
Today, a major hearing took place on Capitol Hill titled “Digital Assets and the Future of Finance: Understanding Innovation in the United States.” It featured top crypto industry CEOs, including Jeremy Allaire, Sam Bankman-Fried, Brian Brooks, and more.
Here’s what some of them told financial regulators about the ideal regulatory landscape.
North Carolina Rep Patrick McHenry prefaces the hearing by asking how to ensure the crypto industry grows within the United States and not overseas. He stresses that it’s not correct to demonize the entire industry based on the actions of a few bad actors.
Acting as witnesses, each company CEO offered testimony defending their company’s actions, explaining what they offer and why they should be protected from burdensome regulations.
BitFury CEO Brian Brooks, who used to head the US Office of the Comptroller of Currency, challenges the consistency of allowing only banks to issue stablecoins while failing to grant bank charters to the major stablecoin issuers. In the US stablecoin report released last month, SEC Chairman Gary Gensler and other contributors suggested that only insured depository institutions be allowed to issue stablecoins.
Brooks also criticizes the SEC’s regulatory action thus far for driving industry players offshore. He specifically references Fidelity, which moved to Canada with their Bitcoin spot ETF product after being rejected in the US.
On stablecoins, Charles Cascarilla – CEO of Paxos – suggested the US dollar could lose its world reserve status if neither regulated USD-backed stablecoins or a US CBDC manages to take off.
Interestingly, Maxine Waters accused Cascarilla of just the same thing, moments later. Given Paxos’ partnership with Meta (Facebook), she fears the PAX dollar being used by over 3 billion monthly active users through NOVI could undermine the US dollar.
Ann Wagner – Representative of Missouri – addresses the discrepancy between Chairman Gensler’s feelings about regulatory clarity, versus that of industry participants and other congresspeople. Coinbase CFO Alesia Haas said she thought securities laws surrounding cryptocurrencies were quite clear: that blockchain tokens are not securities. In Coinbase’s view, they are either “a new form of digital property, or a new way to record ownership.”
Haas’ opinion directly contradicts Gensler’s, who believes most tokens are securities, possibly including stablecoins.
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Congresswoman Maxine Waters, Chairwoman of the House Committee on Financial Services, announced that the hearing will take place on Dec. 8.
Titled “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States,” the assembly aims to demystify some of the misconceptions lawmakers have regarding the crypto industry and its underlying technology.
It will be attended by a number of prominent crypto industry leaders, including Circle CEO Jeremy Allaire, who welcomes regulation, Sam Bankman-Fried from FTX, Bitfury boss Brian Brooks, Paxos CEO Chad Cascarilla, Denelle Dixon from the Stellar Development Foundation, and Alesia Haas, CFO at Coinbase.
Coinbase Global CEO, Brian Armstrong, is notably absent as the company was recently embroiled in a regulatory battle over its crypto lending services. There are also no representatives from Tether, the world’s most popular stablecoin, which is also in the crosshairs for policymakers.
Clarifying Crypto
Congress has taken a deeper interest in the crypto asset industry as it now cannot be ignored after surpassing $3 trillion market capitalization last month.
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On Dec. 2, Chad Cascarilla spoke on CNBC’s “Squawk on the Street” to elaborate on what the hearing may contain. He said that the first angle is how is our financial future going to be different and how this technology is changing lives. He then went on to speak about the national currency:
“Also it is going to be about the dollar, the dollar is changing and the type of product that the dollar represents is shifting. How people use it, what their daily lives look like and why its important for the U.S. to maintain its financial primacy in order to be able to adapt to the changing world.”
Crypto executives will testify before the House Financial Services Committee next week. @PaxosGlobal CEO & witness Chad Cascarilla joined us this morning to discuss the regulation he’d like to see in the space. #Bitcoin $ETH $USDP@CNBC pic.twitter.com/5YQqKkfX7N
— Squawk on the Street (@SquawkStreet) December 2, 2021
Eyes on Stablecoins
Congress has already held several meetings to address the crypto industry. In late November, head of the U.S. Senate Banking Committee Sherrod Brown sent a letter to stablecoin CEOs demanding more information on their issuance and redeeming processes.
Stablecoins have become a growing concern for U.S. regulators since their reserves and backing have yet to be officially audited. In early November, the Treasury Department recommended that stablecoins were subject to “appropriate federal oversight.”
Featured Image Courtesy of SeeNews
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Cynthia Lummis – Republican Senator for Wyoming – recently fired back at Hillary Clinton for deriding cryptocurrencies. She suggested that Bitcoin offers a hard money solution to the US dollar’s inflation problems.
Lummis Tells Clinton to Embrace The Future
Lummis’s comments follow the cautionary words of former Secretary of State Hillary Clinton earlier this week. In a panel discussion at the Bloomberg New Economy Forum in Singapore, the latter suggested that cryptocurrencies could “destabilize nations.”
Today, Lummis responded to Clinton with the opposite perspective. In a tweet, she said that Bitcoin could help “stabilize” an otherwise unstable US dollar.
“Great leaders do not fear the future. America could win the future by embracing Bitcoin as hard money that can be used to stabilize USD and undo the tailspin begun in 1971.”
Cynthia Lummis. Source: CNBC
In 1971, President Nixon entirely abolished the gold standard, putting the US money supply under the Federal Government’s control. Since then, inflation has been a far more prevalent problem, and savings rates across the Western world have massively declined. Bitcoin is often promoted as a solution to this problem due to its absolutely fixed and non-manipulable monetary policy.
The senator’s advocacy for progress is a direct jab at Clinton’s branding as a politician. Running against Donald Trump in the 2016 US election, the former first lady became an emblem of ‘establishment’ politics – which Bitcoiners generally despise. That said, Trump has proven equally fearful on the subject of crypto.
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Is Senator Lummis a Bitcoin Maximalist?
It’s unclear what Lummis has in mind when she calls for Bitcoin “stabilizing” the US dollar. She may mean that Bitcoin could “back” US dollar value, like how gold did pre-1971. Alternatively, she might simply mean that Bitcoin will force the US dollar to compete as a store of value by reducing inflation.
Either way, Lummis unflinchingly refers to Bitcoin as “money,” rather than just an “asset.” She’s shown fervent devotion to the cryptocurrency for this reason before, even thanking God for its existence in a speech to congress. Like many Bitcoin maximalists, she’s also been critical of other cryptos and meme coins, like Shiba Inu.
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Pat Toomey – Senator and ranking member of the Senate Banking Committee – is not finished fighting the infrastructure bill. He recently vowed to fix flawed language within the legislation that stirred major controversy in August. He’s also taken issue with the newly released stablecoin report, which recommends regulating their issuers like banks.
Correcting Language On “Crypto Brokers”
The senator aired his thoughts during an interview with Yahoo Finance. In conversation with Jennifer Schonberger, he said he “absolutely wants to fix” the infrastructure bill’s language on cryptocurrency brokers.
Toomey and the rest of the crypto community have taken issue with this legislation for months. In totality, the bill is a monumental investment package of $550 billion, intended to build roads, bridges, broadband, and energy systems. To raise part of the money necessary, it would implement tax reporting requirements on cryptocurrency brokers.
However, “brokers” are defined to be “anyone who effectuates transfers of digital assets.” As Brian Armstrong – CEO of Coinbase – and others pointed out, this could include anybody from miners, to validators, to developers.
Toomey said that these reporting requirements would be onerous and unfeasible to actually follow:
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“The language is badly flawed. It could impose reporting requirements on participants that have no ability to comply with [them], because they don’t have the information [they] would impose. Completely unreasonable.”
Toomey and other senators have negotiated an amendment to this language before. While all parties – including the administration – agreed on it, it never reached the bill due to what Toomey calls “a procedural problem.”
The bill currently remains bogged down in congress. Should it pass, the senator said there will still be an opportunity to fix it in subsequent legislation.
Pat Toomey. Source: Time Magazine
Toomey’s Defence For The Crypto Industry
Toomey is known to generally air on the side of the cryptocurrency industry in regulatory debates. Besides the infrastructure bill, the senator has also levied criticism at the US stablecoin report, recently unveiled by Gary Gensler.
The document suggests requiring stablecoin issuers to be “insured by depository institutions” or treated like banks. This is theoretically to prevent a “bank run” on issuers that irresponsibly manage the funds that back their tokens. However, Toomey believes this could hurt competition and innovation in the stablecoin space.
Featured image courtesy of CNBC.
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Gary Gensler – chairman of the Securities and Exchange Commission (SEC) – recently revealed the US government’s completed stablecoin report. It outlines risks associated with such tokens and provides “prudential” recommendations to congress on how to address them.
Stablecoins: Benefits and Risks
The POTUS’ Working Group on Financial Markets (PWS) produced the report in collaboration with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). It begins by describing some of the potential benefits stablecoins provide, including the use of “faster, more efficient, more inclusive payment options.”
However, it follows by detailing a number of risks stablecoins may pose to financial markets. These include their use for trading in more speculative cryptocurrencies or loss of confidence in their sufficient value backing. Tether commonly receives such criticisms.
There is also concern about their use in illicit financial operations and money laundering. To combat this risk, the report encourages international collaboration:
“A critical factor for illicit finance risk mitigation, regardless of the features of a stablecoin’s design, is that international standards for the regulation and supervision of service providers associated with stablecoins and other digital assets are effectively implemented worldwide.”
The report claims that stablecoins have the potential to scale rapidly in illegal payment networks due to their increased liquidity. Federal Reserve Chairman Jerome Powell has advised in a similar fashion in the past, calling Bitcoin a “failed currency” due to its volatility.
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Regulatory Solutions for Stablecoins
To protect against some of these concerns, the report suggests legislation that requires their issuers to be “insured by depository institutions.” It also advises that providers of custodial crypto wallets be subjected to Federal oversight. Finally, to address issues about “concentration of power,” the paper calls for restrictions of stablecoin issuer’s connections with commercial entities.
The final concern is another for which Tether has faced steep criticism, regarding its affiliation with Bitfinex. Both companies faced a $40+ million fine last month for lies relating to Tether’s stablecoin, and Bitfinex’s involvement.
The report concludes by stressing the urgency with which stablecoins must be regulated:
“Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy,” it reads.
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