Elizabeth Warren’s new crypto target

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Dec 19, 2023 View in browser   By Zachary Warmbrodt Presented by 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. QUICK FIX MM has a couple newsy exclusives on crypto and artificial intelligence to kick off your day. First up is a look at Sen. Elizabeth Warren’s latest crypto target: The revolving door between the worlds of national security and digital assets. MM reported last month on how the crypto industry is flexing a small army of former nat sec, defense and law enforcement officials as it responds to growing scrutiny about the role digital currencies play in funding terrorism and other financial crimes. It got the attention of Warren, who has been rallying lawmakers to beef up anti-money laundering safeguards in the crypto market. In new letters sent Monday, she asked Coinbase, the Blockchain Association and Coin Center about the extent to which they employ former military and civilian officials, as well as ex-members of Congress — plus details on the work they’ve been doing. She cited Coinbases’s recruitment of one-time Defense Secretary Mark Esper, former Sen. Pat Toomey and former Reps. Tim Ryan and Sean Patrick Maloney, who has also been nominated to serve as the U.S. representative to the OECD. They serve on the company's Global Advisory Council. “This abuse of the revolving door is appalling, revealing that the crypto industry is spending millions to give itself a veneer of legitimacy while fighting tooth and nail to stonewall common sense rules designed to restrict the use of crypto for terror financing – rules that could cut into crypto company profits,” Warren said. “It also reveals significant gaps in the nation’s ethics laws.” Blockchain Association CEO Kristin Smith said in response that “people are drawn to work in the crypto industry because they value freedom, sovereignty of the individual, and permissionless innovation.” Coinbase head of U.S. policy Kara Calvert said the national security and law enforcement experts that the crypto exchange employs “do not deserve to be maligned as they work to keep our nation strong and safe." “Engaging like-minded experts to advocate against legislative proposals that one sincerely believes are unconstitutional and detrimental to the nation's welfare does not constitute 'undermining bipartisan efforts in Congress,'” Coin Center executive director Jerry Brito said, quoting Warren’s letter. “Rather, it is the exercise of the fundamental right to freely associate and petition the government.” Next up, MM has a first look at a new bipartisan Senate push to address potential financial risks from AI. Sens. Mark Warner and John Kennedy are introducing legislation that would require the Financial Stability Oversight Council – a panel of top regulators led by Treasury – to coordinate a response to market stability threats posed by AI, such as the use of deepfakes, and recommend ways to close regulatory gaps. The bill would also allow the SEC to pursue treble penalties for market manipulation and fraud involving AI, and it would give credit union and housing regulators authority to oversee AI service providers. Kennedy, a Louisiana Republican who sits on Senate Banking with Warner, said the bill “would help ensure that AI threats do not put Americans’ investments and retirement dreams at risk.” Warner has emerged as one of the most outspoken members of Congress when it comes to AI risks that loom for Wall Street. He has been teasing the legislation for weeks. The Virginia Democrat, a former executive and venture capitalist, told a financial regulation conference last month that he was surprised by the lack of urgency from industry when it comes to addressing the possible dangers of AI. “AI has tremendous potential but also enormous disruptive power across a variety of fields and industries – perhaps none more so than our financial markets,” he said in a statement on his bill. “The time to address those vulnerabilities is now.” It’s Tuesday — MM would love to hear from you during this pre-holiday week. Send tips to zwarmbrodt@politico.com. A message from NRF Foundation: Retail is a great place to start – and a great place to grow a career. The retail industry is the nation’s largest private-sector employer, supporting one in four U.S. jobs – 52 million working Americans. 32% of Americans’ first jobs were in retail, and more than 60% have worked in retail at some point in their careers. Learn more about how we help people get a first chance or a fresh start in retail.   Driving the day Census Bureau residential construction data for November releases at 8:30 a.m. Another Fed official signals cuts — San Francisco Fed President Mary Daly, who will become an FOMC voter next year, told the WSJ that it’s appropriate to look at lowering rates in 2024. Daly said she’s watching the effect that restrictive monetary policy has on the labor market. “We have to be forward looking and make sure that we don’t give people price stability but take away jobs,” she said. Chicago Fed President Austan Goolsbee in a CNBC interview pushed back on the idea that the Fed is actively planning on a series of rate cuts. He said the market may have misunderstood the central bank’s intended message last week. “It’s not what you say, or what the chair says. It’s what did they hear, and what did they want to hear,” he said. “I was confused a bit — was the market just imputing, here’s what we want them to be saying?” Apple scrambles to rescue watches after patent dispute — Per Bloomberg, Apple engineers are racing to implement workarounds that would allow the company to avoid a U.S. sales ban of its watches set to take effect Dec. 25. It's a $17 billion business. U.S. Steel to be purchased by Nippon Steel — AP reports that U.S. Steel, the storied Pittsburgh steel producer, agreed to be acquired for $14.1 billion by Japan’s Nippon Steel. It comes as Chinese companies dominate global steel production. “This is going to increase competition here in the United States with a great ally to the United States,” U.S. Steel CEO David Burritt said.   A message from NRF Foundation:   Crypto ICYMI: Crypto firms spend big in 2024 push — Jasper Goodman reports that a trio of pro-crypto super PACs have raised $78 million as part of a major new push to influence the 2024 elections. Their backers include Andreessen Horowitz, Coinbase, Ripple and the Winklevoss twins. The goal is to help candidates who support crypto-friendly policy at a moment when the industry is facing intense scrutiny from federal regulators. Tether responds to lawmakers — Tether CEO Paolo Ardoino told members of House Financial Services and Senate Banking that the company has been bolstering its relationships with law enforcement and taking new steps to strengthen sanctions controls. Ardoino wrote to Rep. French Hill and Sen. Cynthia Lummis after the Republican lawmakers urged Attorney General Merrick Garland to take action against the stablecoin’s use in financial crime. Tether is one of the world's largest cryptocurrencies. In response, Lummis said “it is past time Tether agrees to meet its significant compliance obligations," our Eleanor Mueller reports. “I hope it will back up these new efforts with hard data and proactive surveillance, as required by the law,” Lummis said in a statement. “I will continue to work with my colleagues to conduct oversight to weed out bad actors in the space.” Economy Washington may become ‘ground zero’ in office market bust — Per Bloomberg, the U.S. capital region has passed San Francisco for the highest share of office buildings with loans at risk of default, as government employees continue to work remotely. Loans of concern for Washington offices rose to 72 percent in the third quarter, up from 38 percent at the end of last year. Home builders are feeling better — A new industry survey found that home builder confidence improved in December as mortgage rates continued to fall, CNN reports. The mood soured earlier this year as rates broke 7 percent. “The housing market appears to have passed peak mortgage rates for this cycle, and this should help to spur homebuyer demand in the coming months,” said Robert Dietz, chief economist at the National Association of Home Builders. Climate Tennessee sues BlackRock — Tennessee AG Jonathan Skrmetti filed a lawsuit accusing the world's largest asset manager of deceiving consumers as it pushes environmental, social and governance principles across its investment portfolio, our Jordan Wolman reports. The lawsuit requests a jury trial and asks that the court penalize BlackRock as necessary “to disgorge the net profits and ill-gotten gains.” A BlackRock spokesperson said the company will “vigorously contest” the claims. A message from NRF Foundation: Retail careers are life-changing careers. As the nation’s largest private-sector employer, the retail industry supports one in four U.S. jobs – 52 million working Americans. 32% of Americans’ first jobs were in retail, and more than 60% have worked in retail at some point in their careers. With only 2-5 years of experience in the industry, earnings increase 54%. Those who stay in retail for more than 5 years can expect a staggering 122% increase in compensation. Retail careers also enable faster role advancement, with upward role advancements occurring every 14.5 months. To learn more about how we help people get a first chance or a fresh start in retail, visit nrffoundation.org.     Follow us on Twitter Mark McQuillan @mcqdc Zachary Warmbrodt @Zachary Victoria Guida @vtg2 Declan Harty @ @declanharty Eleanor Mueller @eleanor_mueller Katy O'Donnell @katyodonnell_ Sam Sutton @samjsutton   Follow us

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