house financial services committee

SEC Chief to Testify Before House Committee on Crypto Oversight

Gary Gensler, the current chairman of the United States Securities and Exchange Commission (SEC), is set to testify before the House Financial Services Committee on April 18. This hearing will mark the first time that Gensler will face questions from the committee and provide an opportunity for the committee to exercise its jurisdiction over all aspects of the U.S. financial services sector, including banking, securities, and digital assets.

During an interview with Representative Patrick McHenry, chairman of the Financial Services Committee, it was confirmed that the hearing would focus on Gensler’s approach toward the crypto ecosystem. McHenry noted that the committee would take a serious approach in laying down a regulatory sphere for digital assets and expressed concerns about Gensler’s rulemaking and approach toward crypto assets.

Gensler’s approach toward crypto has been a topic of concern for many in the industry. Some Democratic party members have voiced their concerns about his approach, which they fear could be disastrous for the party’s 2024 election campaign. Many pro-crypto and pro-Bitcoin Democrats are lining up to voice their opposition to the party’s stance. Dennis Porter, the co-founder of the Satoshi Action Fund, believes that the party’s anti-crypto stance could have negative consequences for its electoral success.

U.S. regulators have taken a hard stance on crypto in the first months of 2023. The SEC has issued Wells notices to several crypto firms, including Coinbase, and the Commodity Futures Trading Commission has filed a new lawsuit against Binance. The crypto community has always highlighted that regulations would be decided by Congress, not individual agencies.

The hearing will provide an opportunity for Gensler to clarify his approach toward crypto and provide insight into the SEC’s regulatory plans. The crypto industry has long awaited clear regulatory guidance, and this hearing could provide much-needed clarity for the industry.

In recent years, the crypto ecosystem has experienced significant growth, and as a result, the need for regulatory oversight has become increasingly pressing. The lack of clear regulatory guidance has hindered the industry’s growth and led to uncertainty for investors and traders alike. The House Financial Services Committee’s oversight hearing with Gensler could provide an opportunity for the committee to establish clear guidelines for the industry and help foster its growth in a regulated environment.

In conclusion, the SEC chief’s upcoming testimony before the House Financial Services Committee on April 18 will be a crucial moment for the crypto ecosystem. The hearing will provide an opportunity for the committee to exercise its jurisdiction over the U.S. financial services sector and lay down a regulatory sphere for digital assets. It will also provide Gensler with an opportunity to clarify his approach toward crypto and provide insight into the SEC’s regulatory plans, which could provide much-needed clarity for the industry.

Stablecoins Could Bolster U.S. Dollar and Economic Competitiveness: Circle CEO

In a compelling testimony delivered to the House Financial Services Committee, Jeremy Allaire, CEO and Co-Founder of Circle, underlined the significant role stablecoins, such as the U.S. Dollar Coin (USDC), could play in strengthening the global position of the U.S. dollar. Allaire focused on the urgent need for the United States to lead the development of regulatory frameworks that promote growth and safety in the digital assets market.

A seasoned pioneer in the technology and financial sectors, Allaire highlighted how USDC, a leading digital currency tied to the U.S. dollar, is instrumental in advocating for a technologically superior, safe, and widely accessible U.S. dollar. He pointed out that the steps taken by the U.S. government in the near future would have profound implications on the competitiveness of the dollar for the coming decades.

The Circle CEO emphasized the rising demand for secure, internet-based dollars, asserting that with a robust regulatory framework, this market could potentially serve billions of users and handle trillions of dollars in payment activity. He also drew attention to the rapid progress of alternate payment systems and technological advancements such as 6G networks, quantum computing, and artificial intelligence, which could impact the supremacy of the U.S. dollar.

Allaire’s statement to the Committee also shed light on the importance of the stablecoin bill, a key piece of legislation he deems critical to the establishment of a vibrant and secure digital asset ecosystem. He advocated for robust supervision of stablecoin issuers, stringent requirements for asset backing of digital dollars, and measures to prevent the circulation of counterfeit digital dollars.

The Circle CEO addressed four unresolved issues, which, in his view, the Committee needs to tackle. These include clarifying the roles of state and federal banking regulators, addressing reserve requirements, determining how financial institutions should manage payment stablecoins, and establishing stringent measures to prevent the proliferation of illegitimate digital dollars.

Allaire ended his testimony with an urgent appeal to lawmakers, urging them to ensure the U.S. dollar remains competitive in an era of rapidly evolving technological innovation. Highlighting the critical crossroads facing the U.S. dollar, Allaire called for regulatory decisions that will foster a secure and thriving digital currency landscape, thereby maintaining America’s economic competitiveness and international influence.

Chairman McHenry Sharply Criticizes U.S. Treasury and IRS Over Digital Asset Reporting Proposals

Chairman of the House Financial Services Committee, Patrick McHenry, has publicly voiced his concerns over the Notice of Proposed Rulemaking on digital asset reporting requirements issued by the U.S. Department of the Treasury and the Internal Revenue Service (IRS). The proposed regulations, which were announced on August 25, 2023, are part of the Infrastructure Investment and Jobs Act.

Chairman McHenry stated, “The notice of proposed rulemaking on digital asset reporting requirements is another front in the Biden Administration’s ongoing attack on the digital asset ecosystem.” He emphasized that following the passage of the Infrastructure Investment and Jobs Act, lawmakers from both parties had clearly expressed that any proposed rule should be “narrow, tailored, and clear.”

While McHenry acknowledged the delayed effective date and exemptions for other activities in the proposed rule, which he said mirrored his bipartisan bill, the “Keep Innovation in America Act,” he also pointed out its shortcomings. “However, it fails on numerous other counts. Any additional rulemakings related to the other sections from the law must adhere to Congressional intent,” he added.

The Chairman further urged the Biden Administration to cease its efforts to undermine the digital asset ecosystem in the U.S. and collaborate with Congress to establish clear regulations for the industry. He expressed his commitment to advancing his bipartisan solution, the “Keep Innovation in America Act,” to rectify these reporting requirements, safeguard the privacy of market participants, and ensure the digital asset ecosystem thrives in the U.S.

Chairman McHenry is the lead sponsor of H.R. 1414, the “Keep Innovation in America Act,” which aims to amend the digital asset reporting provisions in the Infrastructure Investment and Jobs Act. The bill has garnered support from a bipartisan group of colleagues, including Rep. Ritchie Torres (NY-15).

For context, the proposed regulations by the Treasury and IRS aim to mandate brokers to report sales and exchanges of digital assets conducted by their customers. The regulations are designed to address ambiguities surrounding digital assets, including defining brokers and introducing a new reporting form, Form 1099-DA. IRS Commissioner Danny Werfel commented on the regulations, emphasizing their design to “end confusion involving digital assets” and ensure that “digital assets are not used to hide taxable income.”

Public feedback on these proposed regulations is open until October 30, 2023, with a public hearing scheduled for November 7, 2023.

There are widespread criticisms regarding the proposed regulations, in addition to those expressed by Chairman McHenry. Chye-Ching Huang from the Tax Law Center at NYU Law voiced concerns with an article titled “U.S. Will Likely Lose Billions Due to Unacceptably Long Delay for Digital Asset Reporting Requirements”, over the “unacceptably long delay” in releasing the proposed rules. The Center pointed out the decision to postpone full implementation of these requirements until 2026, a two-year delay from the original statute. They warned of the financial implications of this delay, suggesting that the Treasury and IRS might lose out on billions due to tax non-compliance for digital asset transactions in 2023 and 2024.

The Tax Law Center further emphasized that the Treasury and IRS had other viable options to implement these reporting requirements in a timely manner, allowing for public input and system development.

Meta's Digital Assets Expansion: A Scrutiny by Maxine Waters

Congresswoman Maxine Waters, the Ranking Member of the United States House Financial Services Committee, questions Meta Platforms, Inc. (formerly Facebook) regarding its trademark applications indicative of a potential expansion in the digital assets ecosystem.

Waters’ concerns, conveyed in a letter dated January 22, 2024, to Meta’s CEO Mark Zuckerberg and COO Javier Olivan, stem from five trademark applications filed by Meta on March 18, 2022. Despite Meta’s assertion on October 12, 2023, that the company was not engaging in any digital assets work, these applications suggest otherwise. The committee is pressing Meta for clarity on any ongoing or planned blockchain or crypto-related projects.

The trademark applications cover a range of services in the crypto and blockchain sphere, including trading, exchange, payments, transfers, and the associated hardware and software infrastructure. A Notice of Allowance (NOA) for each filing indicates Meta’s applications meet registration requirements. Meta must now file a statement of use or request an extension within six months of the NOA issuance dates, which range from August 2023 to January 2024.

This inquiry isn’t Maxine Waters’ first involvement in scrutinizing tech giants’ forays into the digital assets sector. In 2019, Waters was vocal in her concerns over Meta’s Libra (later Diem) stablecoin project. Meta had announced its plans to develop the cryptocurrency and a corresponding digital wallet, Calibra. However, the project faced significant backlash from lawmakers and regulators, leading to its eventual discontinuation and the sale of its assets to Silvergate Bank in January 2022.

Waters’ letter questions the extent of Meta’s involvement in digital assets, including any plans to launch a crypto payments platform, the company’s research into stablecoins, partnerships with stablecoin projects, and the adoption of distributed ledger technology (DLT). The congresswoman is particularly concerned about the implications of big tech companies like Meta entering the digital assets space, given their access to vast amounts of user data and the lack of a federal framework for regulating such ventures.

In the broader context, Meta’s involvement in digital assets reflects a growing trend among tech giants exploring blockchain and cryptocurrency as potential new business avenues. However, this expansion raises critical questions about user privacy, data security, regulatory compliance, and the impact on traditional financial systems.