Biden fires starting gun on crypto oversight

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Mar 09, 2022 View in browser   By Kate Davidson and Aubree Eliza Weaver Editor's Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. NEW THIS MORNING — The White House today will unveil President Joe Biden's cryptocurrency executive order, which directs federal agencies to produce a series of reports over the coming months that will lay out the future of U.S. policy toward digital assets — including the possible launch of a federally issued digital dollar. The order will urge the Financial Stability Oversight Council to study the effects of digital assets on financial stability and recommend ways to close any regulatory gaps. It will also task the Commerce Department with developing a framework to ensure the U.S. remains competitive in digital assets. Other agencies will explore crypto's environmental impact and technological changes needed for further adoption. From our Sam Sutton: " The highly anticipated executive order follows months of speculation around how Biden planned to coordinate the federal government's oversight of crypto marketplaces that whipsawed between $1 trillion and $3 trillion in size during the first 14 months of his term. Lawmakers and federal agencies have struggled to develop a cohesive regulatory framework for the upstart industry, which has quickly emerged as a major force on Wall Street and on Capitol Hill." While the order stops short of setting policy , Sam says, officials framed it as a necessary first step to clarify the U.S.'s uneven approach to policing digital assets. "Without oversight, the explosive growth in cryptocurrency use would pose risks to Americans to the stability of our businesses, our financial system and our national security," one senior administration official said on a call with reporters. A top priority for the administration: A whole-of-government exploration of a digital dollar, the official said. U.S. BANS RUSSIAN OIL — Biden, facing growing pressure from Congress, announced a ban on all Russian oil, gas and energy imports Tuesday. Several factors drove Democrats to prod their own president to ban Russian oil imports with stunning speed, our Andrew Desiderio, Jonathan Lemire, Josh Siegel and Steven Overly report. But perhaps the most important was the messenger: Ukrainian President Volodymyr Zelenskyy. The move was largely symbolic : Only about 9 percent of U.S. oil imports came from Russia last year, and daily U.S. purchases amount to about 700,000 barrels a day. By comparison, Russian oil makes up about a third of European imports, or roughly 4.5 million barrels a day. Unlike previous sanctions announcements, which have been closely coordinated with U.S. allies, the White House made this move without most of its Western allies. "The United States is able to take this step because of our strong domestic energy production and infrastructure," a senior administration official said. "And we recognize that not all of our Allies and partners are currently in a position to join us." That means, at least for now, the boycott won't do much to slow the flow of energy revenue that the Kremlin is relying on to keep financing the government and paying for the war in Ukraine. U.S. gas prices, meanwhile, jumped on the news, hitting a record $4.17. "For households, rising energy and food prices resulting from shortages and supply dislocations mean larger portions of their budgets will be allocated towards these purchases, away from other spending," High Frequency Economics Chief U.S. Economist Rubeela Farooqi said in a note. Some numbers from Farooqi: In 2019, 229 million U.S. drivers consumed roughly 146 billion gallons of gasoline. Prices then averaged roughly $2.61 – implying annual gas expenditures of $1,665 per driver. At today's prices, that means annual spending would rise to about $2,660 per driver. GOP cheers, jeers: Republicans simultaneously praised the import ban, but slammed the White House over energy policies that they say have spurred higher prices at the pump. "I expect our Democratic friends will now try to blame the entire increase in prices on our effort to punish Russia, but don't be fooled," Senate Minority Leader Mitch McConnell said on the Senate floor. "It would sure be nice if America had gone into this crisis with more headroom on supply and on gas prices," he added. Biden said it's "simply not true" that his policies are holding back domestic energy production. "We're approaching record levels of oil and gas production in the United States, and we're on track to set a record of oil production next year," he said. The senior administration official put a finer point on it, aimed at Wall Street: "We need our domestic oil and gas industry to use their leases, use their permits, use financing from Wall Street to respond to price signals and continue increasing their production. This is a time for Wall Street to step up, for oil and gas companies to step up and invest in America's energy future." Reality check? Asked by reporters whether he had a message for Americans on surging gas prices, Biden offered this blunt assessment: "They're going to go up." "What can you do about it?" a reporter asked after Biden arrived on Air Force One in Texas. "Can't do much right now," he said. "Russia is responsible." IT'S WEDNESDAY — More big news out of Russia: McDonald's, Starbucks, Coca-Cola and other major U.S. consumer brands said they would shut down operations in the country amid Putin's Ukraine invasion. We're reminded of a young Moscow resident who fretted about the possibility of his beloved McDonald's shuttering in a WSJ video on what the war looks like in Russia. What does this mean for Putin's information war? Let us know what you think, and send us your story ideas, tips, and feedback at kdavidson@politico.com or aweaver@politico.com, or find us on Twitter @katedavidson or @aubreeeweaver.   A message from ExxonMobil: ExxonMobil is committed to playing a leading role in the energy transition. We're advancing climate solutions, including carbon capture and storage, hydrogen and advanced biofuels. And, by 2050, we aim to achieve net-zero emissions (Scope 1 and 2) from our operated assets. We're working with partners to achieve similar results from non-operated assets, and advocating for supportive policies to accelerate the deployment of lower-emission technologies needed to support a net-zero future. Learn more at ExxonMobil.com/Solutions   Driving the Day Sen. Jon Tester (D-Mont.), Sen. Jerry Moran (R-Kan.) and OCC's Michael Hsu speak at ABA conference at 8:30 a.m. … Peterson Institute for International Economics virtual discussion on central bank digital currencies at 9 a.m. … JOLTS data released at 10 a.m. HOUSE TO VOTE WEDNESDAY ON RUSSIAN OIL BAN BILL — The House plans to vote today on a bill banning Russian oil imports to the U.S., delaying one day after eleventh-hour objections from Republicans, our Josh Siegel and Sarah Ferris report. Speaker Nancy Pelosi had planned to hold the vote Tuesday, "but Republicans complained that the bill did not include a key trade provision, which would have revoked normal trading relations with Russia and Belarus after hesitancy from the White House about the policy's effect on U.S. allies." —Our Betsy Woodruff Swan spoke Tuesday morning with Yuriy Vitrenko, the head of Ukraine's state-owned natural gas company, who said the U.S. ban on Russian oil and gas imports is "very positive" — but that Ukraine still needs more military support from the West. ICYMI: IRS GRAPPLES WITH TAX SEASON WOES — Our Aaron Lorenzo: "Missing refunds. Angry members of Congress. Thousands of unanswered phone calls. Welcome to the 2022 tax filing season. … "Millions of taxpayers are still awaiting refunds from last year, part of a paperwork pileup that the agency is struggling to get a handle on. Veteran IRS workers have been reassigned to mail duty and the agency is about to go on a hiring binge to reduce the backlog." WYDEN: HOMELAND SECURITY GATHERED MILLIONS OF MONEY TRANSFER RECORDS — NYT's Stacy Cowley: "The Department of Homeland Security collected records on millions of money transfers between people in Mexico and four American states in what Senator Ron Wyden said amounted to a secret 'bulk surveillance' program. "The program began in 2019 and was halted in January, according to a letter that Mr. Wyden sent on Tuesday to the agency's inspector general. Mr. Wyden, an Oregon Democrat and chairman of the Senate Finance Committee, asked the inspector general to open an investigation into the program's operations and whether any laws were broken." MUSK SEEKS TO TERMINATE SEC SETTLEMENT — WSJ's Dave Michaels and Rebecca Elliott: "Tesla Inc. Chief Executive Elon Musk asked a federal judge on Tuesday to scrap a settlement he reached with securities regulators in 2018 that required some of his tweets be preapproved, a condition that has fomented an ongoing conflict with the government over whether he and Tesla have followed the rule. "In a motion filed in Manhattan federal court, Mr. Musk's lawyers argued that the Twitter oversight policy has become unworkable, while the Securities and Exchange Commission has abused the deal to make 'round after round of demands for voluminous, costly document productions, with no signs of abatement.'" NEW DATA SHOWS CONSUMERS KEPT UP SPENDING MOMENTUM IN FEBRUARY — A new report from Mastercard's SpendingPulse — out today ahead of Thursday's consumer price index report — showed retail sales excluding autos rose 8.7 percent in February from a year earlier, and were up 17.3 percent compared to 2019. That's slightly above the previous month. Categories that climbed: apparel and department store spending, furniture, restaurants and in-store spending.   A message from ExxonMobil:   Ukraine THE WEST'S HIGH-STAKES GAMBLE ON FINANCIAL WAR AGAINST RUSSIA — Julia Friedlander, director of the economic statecraft initiative at the Atlantic Council's GeoEconomics Center, writes in an op-ed for POLITICO Magazine: "The West's response is no longer just pressure — it's financial war. As opposed to previous sanctions campaigns, which sought to use pressure over time to bring a country to the table or prompt a longer-term behavior change, the goal of these Russia sanctions is to change military strategy in a war that is already happening." GERMANY CONVENES G-7 FARM MINISTERS OVER UKRAINE FOOD SUPPLY FEARS — Our Eddy Wax in Brussels: "G-7 agriculture ministers will hold an emergency meeting Friday to discuss how the war in Ukraine will impact worldwide food supplies and how rich countries could stabilize global markets." RUSSIA'S RATING CUT BUT FITCH, SEEING IMMINENT DEBT DEFAULT — Bloomberg's Maria Elena Vizcaino and Sydney Maki — Russia was downgraded to the second lowest level by Fitch Ratings, which said a bond default is "imminent" as a result of measures ushered in since the Ukraine war.   SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today.     Markets STOCKS WOBBLE LOWER — AP's Stan Choe: "Stocks closed lower Tuesday following another wobbly day of trading on Wall Street, as oil prices climbed after the U.S. banned imports from Russia. The economic fallout from its invasion of Ukraine also rocked the market for nickel, driving up its price so much that trading for the metal was shut." RUSSIA TO KEEP STOCK MARKET TRADING LARGELY SUSPENDED ON WEDNESDAY — Reuters: "Russia's central bank has decided to keep stock market trading on the Moscow Exchange largely suspended again on Wednesday, keeping only a limited range of operations, it said in a statement on Tuesday. The foreign currency market will reopen at 10 a.m., forgoing the morning session, it added. The central bank restricted stock trading all of last week after the West rolled out severe economic sanctions against Russia over the invasion of Ukraine." Jobs Report Biden has nominated Paul Rosen to be assistant Treasury secretary for investment security. Rosen is a partner at the law firm Crowell & Moring, where he co-chairs the firm's national security practice. He is an alum of the Obama Homeland Security and Justice departments, and he worked from 2006 to 2009 as counsel to then-Sen. Joe Biden on the Senate Judiciary Committee.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Fly Around Key community groups told regulators Tuesday that they aren't yet supportive of U.S. Bancorp's pending acquisition of MUFG Union Bank, as they engage in negotiations to establish a series of tangible public benefits. —American Banker's Polo Rocha The U.S. trade deficit hit a fresh record in January before the Russia-Ukraine crisis, as imports of vehicles and energy supplies increased while exports fell. —WSJ's Harriet Torry and Anthony DeBarros The head of markets for JPMorgan Chase & Co said on Tuesday that markets are too treacherous to update the firm's first-quarter outlook for trading revenue. —Reuters   A message from ExxonMobil: ExxonMobil is committed to playing a leading role in the energy transition and advancing climate solutions while continuing to power economies around the world. We're investing $15 billion in lower-emission technologies, including carbon capture and storage, hydrogen and advanced biofuels, through 2027. By 2050, we aim to achieve net-zero emissions (Scope 1 and 2) from our operated assets, backed by a comprehensive approach with detailed emission-reduction roadmaps. And where we are not the operator, we're also working with partners to achieve similar results and help them reach their emission reduction goals. We're advocating for supportive policies, such as a price on carbon, which can help reduce costs and drive new markets to accelerate deployment of key lower-emission technologies needed to support a net-zero future. Learn more about our plans and how our strategy is resilient under the International Energy Agency's Net Zero Emissions by 2050 scenario at ExxonMobil.com/Solutions     Follow us on Twitter Mark McQuillian @mcqdc Kate Davidson @KateDAvidson Aubree Eliza Weaver @aubreeeweaver Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary   Follow us

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