Donald Trump, crypto savior?

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Jan 08, 2024 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 The crypto lobby in the Biden era clashes daily with Washington in an almost existential fight for legitimacy. If Donald Trump returns to power, Republicans predict a dramatic pendulum swing. Our Jasper Goodman has a new piece that begins to flesh out the GOP agenda for crypto if Trump and his party return to power. It illustrates how the upcoming election is the most consequential in the emerging industry’s history. Republican lawmakers and some Trump administration alumni expect he would usher in personnel and policy that would likely boost digital asset firms. It would be a big shift from the skeptical-to-hostile approach taken by leading Democrats under President Joe Biden. House Majority Whip Tom Emmer, one of Capitol Hill’s top crypto proponents, told Jasper that Trump “will be a lot more friendly to the crypto industry.” Brian Brooks, a veteran crypto executive who also served as a Trump bank regulator, said Trump’s appointees “are much more likely to at least be crypto-open, if not overtly crypto-friendly, than this administration.” “The general thrust of Republican opinion on this is, we should have proper consumer protections without destroying a very nascent industry,” Sen. J.D. Vance said. Why is this happening? Trump as president derided bitcoin and other digital currencies, warning in a 2019 tweet that they were “based on thin air.” But many Republican leaders in the ensuing years have warmed up to and even courted the crypto faithful as a way to tap into broader concerns about government overreach. “At the moment, in the populist movement on the right, there’s more fear about the Fed manipulating monetary policy, there’s more fear about central bank digital currencies, which would tend to drive you in a crypto-friendly direction,” Brooks said. A likely target to shift course on crypto would be to shake up the SEC, which has taken a tough approach going back to the Trump years. Republicans are floating the names of potential SEC chairs seen as less antagonistic toward the industry, including Brooks, SEC Commissioner Hester Peirce and former SEC Division of Investment Management director Dalia Blass. For crypto advocates, the warm embrace of the GOP is a big opportunity but also a big risk as they seek bipartisan support to open up a lasting regulatory pathway. Ron Hammond, director of government affairs at the Blockchain Association, pushed back on the idea that crypto policy has gotten more partisan. He said he isn’t taking for granted that Trump would pursue a friendly approach, given national security concerns among GOP defense hawks. In other crypto policy news, our Eleanor Mueller has a new story this morning digging into the digital asset politics around the race to succeed Rep. Patrick McHenry as the top Republican on House Financial Services. McHenry has been one of the crypto world’s most powerful champions, and the industry is eyeing Rep. French Hill as a reassuring replacement. Hill has told MM he’s no “crypto evangelist” – going as far as urging DOJ to take action against Binance and Tether – but he’s a known quantity for the crypto lobby. As digital asset subcommittee chair, he’s played a lead role in advancing McHenry’s sweeping legislation to carve out a new regulatory regime for crypto. The surprise retirement of Rep. Blaine Luetkemeyer, a potential frontrunner who would have been even more of a crypto wildcard, has scrambled the McHenry succession dynamics in recent days. The outcome could hinge on who the House Republican leader is heading into 2025. Happy Monday – Who do you think would be calling the shots on crypto and financial policy under Trump or Biden 2.0? Send tips and speculation to zwarmbrodt@politico.com.   A message from Electronic Payments Coalition: CREDIT UNIONS & COMMUNITY BANKS IN All 50 STATES OPPOSE THE DURBIN-MARSHALL CREDIT CARD BILL: Local credit unions and community banks serve an essential role in supporting Main Street. So, when 9,600+ credit unions and community banks throughout the country oppose the Durbin-Marshall credit card bill, Congress should pay attention. Durbin-Marshall lines the pockets of corporate mega-stores by shifting costs and risks to credit unions, community banks, and their 135 million customers. Click here to learn more.   Driving the Week The House will consider bills on China, Taiwan and Russia … Monday … Treasury Secretary Janet Yellen discusses beneficial ownership reporting requirements and corporate transparency at FinCEN’s offices in Virginia at 1:30 p.m. … Tuesday … Fed Vice Chair for Supervision Michael Barr talks bank regulation at a Women in Housing and Finance event at noon … Wednesday … House Financial Services holds hearings on the DOL fiduciary rule at 10 a.m. and FSOC’s designation framework at 2 p.m. … Thursday … December CPI is out at 8:30 a.m. … House Financial Services has a HUD and FHA oversight hearing at 10 a.m. … Senate Banking has a hearing on legislation to address fentanyl trafficking at 10 a.m. … The U.S. Chamber of Commerce holds its 2024 State of American Business event at 11 a.m. Friday … December PPI is out at 8:30 a.m. … Driving the day Shutdown update — Congressional leaders struck a deal on budget totals that could enable a compromise on government funding, which is at risk of lapsing in two phases on Jan. 19 and Feb. 2. The funding levels are far higher than fiscal conservatives would like, spelling potential trouble for Speaker Mike Johnson and raising the possibility that resistance from the right may trigger a shutdown. MM first look: CFTC targets DeFi – Declan Harty reports that a CFTC advisory committee today is poised to approve a landmark report that would call on the government to address looming risks in decentralized finance, or DeFi. The CFTC Technology Advisory Committee, sponsored by CFTC Commissioner Christy Goldsmith Romero, includes officials from other agencies, major companies, academia and consumer advocacy. The pending report, a potential precursor to what could be the government’s latest front on crypto policy, urges policymakers to grapple with questions around who bears responsibility in a decentralized financial system and how to enact know-your-customer and anti-money laundering rules. DeFi has attracted attention over illicit finance concerns from lawmakers on both sides of the aisle as well as the Treasury Department.   A message from Electronic Payments Coalition:   Regulatory Corner The 2024 outlook — Federal Financial Analytics, led by veteran consultant Karen Petrou, is out today with its forecast of how the biggest battles in banking regulation will play out this year. It has a detailed breakdown of how regulators will likely scale back capital rules for big banks. Another tidbit that some may not be anticipating: FedFin expects the agencies to propose new crypto-asset and stablecoin capital standards. Gorman’s exit — James Gorman, who stepped down as CEO of Morgan Stanley this month, said in an interview with the WSJ that he’s “still working on the cleanup” when it comes to regulatory scrutiny over whether the bank tipped off hedge fund clients on large share sales. He’s now serving as executive chairman. “I promised [new Morgan Stanley CEO Ted Pick] I would do that. I think it’s important he gets as clean a plate as possible to start this job.” Overdraft pushback — The Consumer Bankers Association is launching a website touting the benefits of bank overdraft services, ahead of an expected CFPB crackdown. The agency said in a report last month that many consumers are being hit with unexpected overdraft fees. CBA President and CEO Lindsey Johnson in a statement warned against regulation that would limit access to “one of the few emergency safety net products remaining today in the well-regulated banking system.” Markets Carta controversy — The FT reports that Carta, a software company that startups use to track their investors, is facing accusations that it has been trying to trade its customers’ shares without consent. One of Carta’s business lines is a trading platform for private shares. Carta CEO Henry Ward said in a Medium post Sunday night that the company had an “internal policy violation” that affected three companies. He also said Carta may need to "reevaluate" its share marketplace, known as CartaX.   A message from Electronic Payments Coalition: CREDIT UNIONS & COMMUNITY BANKS IN All 50 STATES OPPOSE THE DURBIN-MARSHALL CREDIT CARD BILL: The Durbin-Marshall credit card bill would create new government mandates on credit cards that would put consumer data and access to credit at risk. The bill would benefit corporate mega-stores, like Walmart and Target, at the expense of Main Street and the 135 million Americans who rely on credit unions and community banks. The threat of Durbin-Marshall to small financial institutions is so clear that 9,600+ credit unions and community banks in America are opposed to the bill. They also see through the so-called “carve out” for smaller banks which is a hoax to try and buy their support. Their message to Congress is simple: on behalf of credit unions and community banks in all 50 states, commit to actively opposing the Durbin-Marshall credit card bill. Click here to learn more.     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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