Rewriting crypto

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May 10, 2023 View in browser   By Zachary Warmbrodt Presented by Stop the Deficit Squawks 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. House Republicans are speeding along in a major push to overhaul rules for crypto. I spoke Tuesday with Rep. French Hill, the Arkansas lawmaker who’s helping lead the effort. Here’s a quick update on the latest. The GOP leaders of the House Financial Services and House Agriculture committees are hashing out a bill that will attempt to reset the regulatory jurisdictions of the SEC and the CFTC in the crypto space. Members and staff have been ramping up behind-the-scenes discussions, and they’re holding a rare joint hearing this morning. The SEC likely has the most to lose. Hill told me that SEC Chair Gary Gensler has taken a “sweeping view” of which digital assets should be treated as securities. “It’s too sweeping,” he said. “But there’s no regulatory framework that clearly and easily and effectively makes the distinction.” The bill will try to address that by creating new definitions for what digital assets should be treated as securities, commodities or neither (what Hill calls “an other”). When will we see the details? Hill said to expect something in a few weeks. Staff for the two committees have worked over the past few weeks to develop “guiding principles” of a regulatory framework and to draft language that reflects those principles, according to Hill. The committees have also had two member-staff roundtables. It’s unclear whether the plan — or a separate House Financial Services-led bill on the regulation of stablecoins — will attract support from Democrats and become law. My colleague Eleanor Mueller reports that House Financial Services Republicans are still building consensus among their own members on the details of both bills. But the two efforts are shaping up to be Congress’s most earnest attempt to date to revamp laws for crypto. And so even if they stall out in the House before election season heats up, the proposals would be on the shelf for the next Congress to pick up. The stablecoin bill, which is a work in progress, has been seen as the lowest-hanging fruit in part because the Biden administration and financial regulators have called for Congress to set new rules. But will leaders of the Treasury Department and the Federal Reserve accept the final product? Crypto advocates say that buy-in will be critical. Hill was cautious when I asked him whether it was a goal. “All I can say is we have carefully and routinely consulted with them for their advice and counsel as we’ve worked toward a draft,” Hill said. It’s Wednesday – Who are the most important under-the-radar players in debt limit negotiations and contingency planning? Let us know: Zach Warmbrodt, Sam Sutton.   A message from Stop the Deficit Squawks: The Committee for a Responsible Federal Budget is helping MAGA extremists push us toward a catastrophic default on U.S. debt. CRFB praised Kevin McCarthy’s Default on America bill that risks 800,000 jobs and would kick Americans off their health care, all while protecting wealthy tax cheats from paying what they owe. CRFB doesn’t care about a strong economy or fiscal responsibility – they care about their wealthy donors. There’s nothing “responsible” about CRFB.   Driving the day April CPI is out at 8:30 a.m. … The House Financial Services and Agriculture committees hold a joint crypto hearing at 9:30 a.m. … SBA associate administrator Patrick Kelley testifies at House Small Business on lending program changes at 10 a.m. … The president will travel to Valhalla, New York to talk about the debt limit What’s next after the Biden debt-limit meeting — Congressional leaders and President Joe Biden agreed Tuesday to put their staff to work this week and meet again Friday on a potential debt-ceiling resolution, but they showed no signs of being near an agreement. Speaker Kevin McCarthy said he “didn’t see any new movement” after a meeting at the White House. Biden made news when he said he has considered invoking the Constitution’s 14th Amendment to keep paying the government’s bills. But he downplayed that he would use it in this stalemate, saying it would have to be litigated. He indicated it would instead be something he’d revisit in the months ahead. McCarthy shot down a potential short-term deal. Senate Minority Leader Mitch McConnell repeatedly told reporters outside the White House that the U.S. would not default on its debt. McCarthy was notably less resolute about that scenario. “We explicitly asked speaker McCarthy to take default off the table,” Senate Majority Leader Chuck Schumer said. “He refused.” Even crypto has to brace for a U.S. default – Circle, which issues the USDC stablecoin, is prepping the reserves that back its crypto token to avoid fallout from a potential U.S. debt default. Circle CEO Jeremy Allaire told me the company no longer holds Treasurys that mature beyond early June. “We don’t want to carry exposure through a potential breach of the ability of the U.S. government to pay its debts,” he said. Bankers and asset managers who have served on the Treasury Borrowing Advisory Committee warned in a joint letter to Secretary Janet Yellen that “market participants are already undertaking significant preparations to reduce exposure in case of a possible default.”   GET READY FOR GLOBAL TECH DAY: Join POLITICO Live as we launch our first Global Tech Day alongside London Tech Week on Thursday, June 15. Register now for continuing updates and to be a part of this momentous and program-packed day! From the blockchain, to AI, and autonomous vehicles, technology is changing how power is exercised around the world, so who will write the rules? REGSITER HERE.     Campaigns Schwarzman skeptical of DeSantis — Blackstone co-founder Steve Schwarzman is holding off on giving money to Ron DeSantis because he’s unconvinced of the Florida governor’s prospects in the presidential race, according to Bloomberg.   A message from Stop the Deficit Squawks:   Economy Home prices tumble across the country — WSJ reports that home prices fell in more parts of the U.S. in the first quarter than they have in a decade, according to National Association of Realtors data. Nearly a third of metro areas saw price drops as interest rates rose.   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.     In Congress Republicans fear debt limit fight will derail farm bill — POLITICO’s Meredith Lee Hill reports that Senate GOP leaders are fretting about how the $1 trillion farm bill — a key lifeline in red states and other rural areas that Republicans want to win — could be impacted by the debt limit fight, thanks to potential delays and House Republican pressure to cut funding.   A message from Stop the Deficit Squawks: The Committee for a Responsible Federal Budget claims to be for fiscal responsibility, but their actions tell a radically different story. CRFB is helping MAGA extremists push us toward a catastrophic default on U.S. debt, risking a recession that would skyrocket unemployment, wipe out retirement savings, and increase everyday costs for families. CRFB actually praised Kevin McCarthy’s extreme demands, taking his side in this reckless hostage taking exercise. CRFB called McCarthy’s Default on America Act “reasonable” even though it risks throwing eight hundred thousand Americans out of work, and would kick Americans off their health care, and gut nutrition assistance, all while protecting wealthy tax cheats from paying what they owe. CRFB doesn’t care about a strong economy or fiscal responsibility – they care about their wealthy donors. There’s nothing “responsible” about The Committee for a Responsible Federal Budget.     Follow us on Twitter Mark McQuillian @mcqdc Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary Sam Sutton @samjsutton   Follow us

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