Crypto crashes Capitol Hill’s stock ban talks

Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy.

Jun 21, 2024 View in browser   By Eleanor Mueller and Declan Harty 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 rise of crypto is triggering a new fight in Congress. At issue in the conflict is whether bipartisan legislation to restrict lawmakers’ stock trading should also apply to digital assets. The question is dividing Reps. Abigail Spanberger, a Virginia Democrat, and Chip Roy, a Texas Republican, who are spearheading the stock ban proposal. Their bill would force lawmakers to place individual stocks they own into blind trusts, in a bid to curtail the temptation for members to trade based on privileged information. Spanberger and ethics watchdogs, as well as one key drafter of a previous stock trading crackdown, say the bill should treat crypto assets the same as stocks. But Roy is pushing back. “It's a little different,” Roy told MM. “Because allowing people to hedge against the dollar that's getting destroyed on a regular basis, I'm not sure if I want to completely preclude people's ability to do that.” The emerging spat is the latest test of the crypto market’s pull in Washington. While just a handful of lawmakers have disclosed owning digital assets in the last few years, the crypto industry just notched a series of big, bipartisan legislative victories and is gearing up to spend more than $160 million on the 2024 elections. Crypto’s influence is particularly strong on the right, with former President Donald Trump pledging to give the industry a boost if he’s reelected. Spanberger told MM that crypto and stocks are similar because they can both be highly speculative and influenced by the words and actions of lawmakers. “We must enact legislation that eliminates even the potential conflict of interest that lawmakers could have if their votes affect their financial portfolios — whether that be through individually held stocks or cryptocurrency,” said Spanberger, who has never traded crypto, according to an aide. Sen. Jon Ossoff, the Georgia Democrat who introduced a similar bill last year alongside Arizona Democrat Sen. Mark Kelly, echoed Spanberger. “I don’t think members of Congress should be trading crypto while making policy about crypto," Ossoff told MM. For Ty Gellasch, a former Democratic Senate aide who helped write 2012 restrictions on congressional insider trading, it’s a timely debate to have as Congress ramps up work on setting up a new regulatory framework for crypto. Last month in the House, 208 Republicans and 71 Democrats passed landmark, industry-backed legislation that would revamp how the SEC and CFTC police the market. Spanberger and Roy supported the bill, which would extend existing congressional trading restrictions to digital assets. “Crypto assets are financial assets, and they should be treated the same as others,” said Gellasch, who now leads the Healthy Markets Association. “The conflicts of interest are particularly acute for crypto right now, given that Congress isn't talking about rewriting a whole new rule book for stocks. They are for crypto.” The crypto conundrum comes as Spanberger and Roy consider easing some of the bill’s other requirements to shore up support in the face of huge political hurdles. Roy said he supports reworking it to let lawmakers sell assets “with transparency.” Sen. Cynthia Lummis, one of the Hill’s most active crypto legislators, said that she put her digital asset holdings into a blind trust but doesn’t think lawmakers should be forced to do so. The Wyoming Republican said it would end up “hurting people of ordinary means.” “The reason that we did it, that I put mine in a blind trust, is I'm so outspoken on this subject,” she said. IT’S FRIDAY — Happy almost weekend. Don’t forget to send all your takes and scoops from the Hill to Eleanor at emueller@politico.com and, on the SEC and CFTC front, to Declan at dharty@politico.com. And as always, send MM tips and suggestions to Sam at ssutton@politico.com or on Signal at 925.216.7576.   THE GOLD STANDARD OF FINANCIAL SERVICES POLICY REPORTING & INTELLIGENCE: POLITICO has more than 500 journalists delivering unrivaled reporting and illuminating the policy and regulatory landscape for those who need to know what’s next. Throughout the election and the legislative and regulatory pushes that will follow, POLITICO Pro is indispensable to those who need to make informed decisions fast. The Pro platform dives deeper into critical and quickly evolving sectors and industries, like financial services, equipping policymakers and those who shape legislation and regulation with essential news and intelligence from the world’s best politics and policy journalists. Our newsroom is deeper, more experienced, and better sourced than any other. Our financial services reporting team—including Zach Warmbrodt, Victoria Guida and Declan Harty—is embedded with the market-moving legislative committees and agencies in Washington and across states, delivering unparalleled coverage of financial policy and the financial services industry. We bring subscribers inside the conversations that determine policy outcomes and the future of industries, providing insight that cannot be found anywhere else. Get the premier news and policy intelligence service, SUBSCRIBE TO POLITICO PRO TODAY.     Driving the day World Bank economists talk Latin America at the Hudson Institute at 10 a.m., SEC’s Stacey Bowers participates in a Brookings Institution discussion on Black-owned businesses at 10 a.m., and Sen. Mark Warner (D-Va.) weighs in on affordable housing at George Mason University at 2 p.m. Biden’s FDIC pick makes her rounds — Christy Goldsmith Romero met with senators on both sides of the aisle this week ahead of a confirmation hearing next month, Eleanor reports. The current CFTC commissioner won moderate Sen. Jon Tester’s likely backing, he told reporters Thursday and connected with supportive Democratic Sens. Tina Smith and Tim Kaine, those lawmakers said in interviews. She also spoke with Sen. Mike Rounds, the South Dakota Republican said, including about crypto — but he’s still withholding judgment. "I'll be following up with some additional questions," Rounds said. "I won't make up my mind till we have a full committee hearing." Senate Banking Chair Sherrod Brown announced late Thursday that the hearing will be held on July 11, Michael Stratford reports. As the job market cools, housing stays hot — The S&P hit a record high Thursday as markets reacted to higher-than-expected total jobless claims — and worse-than-anticipated housing data, Reuters’ Echo Yang reports. In fact, new home construction last month hit the slowest pace in four years, Bloomberg’s Michael Sasso reports, “as higher-for-longer interest rates sap the housing industry’s momentum from earlier this year.” The White House is paying attention. National Economic Council Director Lael Brainard called out housing prices at an Urban Institute event Thursday as one area where “we’re simply not seeing enough progress” despite “every reason to expect continued progress” on inflation. Where the Federal Reserve nets out remains to be seen. Minneapolis Fed President Neel Kashkari told the Michigan Bankers Association Convention that he sees “some softening” — but still anticipates “a year or two” to get back to the central bank’s 2 percent inflation target. The Bank of England voted to hold its rates Thursday, CNBC’s Jenni Reid reports (though hinted at cuts later this year). The Swiss National Bank voted to make its second cut of the year, per CNBC’s Ruxandra Iordache. Don’t miss Victoria Guida’s latest column out today on why you should care about a former Italian prime minister’s forthcoming report on how the European Union can stay competitive in an “increasingly cutthroat” global economy. Justices reject bid to fend off wealth tax — In a 7-2 decision, the Supreme Court turned down a conservative-backed Washington state couple’s challenge of a 2017 tax that they feared could allow lawmakers to set up a wealth tax, Brian Faler reports. The justices ruled that the tax was on income, not property, as the couple had argued. At the regulators Wind up those wind-down plans — In the latest response to the spring 2023 banking crisis, the FDIC has finalized a new rule requiring large banks to craft and submit “more robust resolution plans,” Michael Stratford reports. FDIC Chair Martin Gruenberg said “the need for strength and resolution plans for institutions in this category is compelling” following the blow-up of Silicon Valley Bank. New sanctions — Treasury Secretary Janet Yellen on Thursday rolled out new economic sanctions against eight people linked to a Mexican drug cartel as well as guidance intended to help U.S. banks identify transactions involving Mexican drug cartels or other parts of the fentanyl supply network, Michael also reports. On the Hill Pence’s foundation wades into tax fight — Former Vice President Mike Pence’s Advancing American Freedom has launched a $10 million campaign to extend 2017 tax cuts that will expire next year, the Associated Press’s Lisa Mascaro reports. “Washington has a spending problem, not a revenue problem,” Pence said in a statement. “Our national debt is out of control, and taxing the American people more is not the solution.” CRYPTO CORNER The Winklevoss twins back Trump — Crypto pioneers Cameron and Tyler Winklevoss are throwing their support behind former President Donald Trump in this year’s election, the duo posted Thursday on X. The Winklevoss brothers both said they had donated $1 million worth of bitcoin to Trump, who will, as Cameron posted, “put an end to the Biden administration’s war on crypto.” Crypto comes to Wall Street? — Shares in privately held crypto companies like Circle, Kraken and Chainalysis are becoming a growing attraction for investors ahead of what is expected to be a potential rush of digital asset-related IPOs, Bloomberg’s Olga Kharif reports. In the markets Another day, another decline — Shares of Trump’s social media startup plunged more than 14 percent Thursday after the company reported that the SEC had cleared the way for certain investors to cash out if they want, Declan reports. Trump himself, however, can’t quite yet. The presumptive GOP nominee and company’s largest shareholder is still subject to a lock-up period, as are other insiders. Jobs report Antonio White, a former Treasury official in both the Biden and Obama administrations, has joined the Federal Housing Finance Agency as director of the Office of Congressional Affairs and Communications.   JOIN US ON 6/26 FOR A TALK ON AMERICA’S SUPPLY CHAIN: From the energy grid to defense factories, America’s critical sites and services are a national priority. Keeping them up and running means staying ahead of the threat and protecting the supply chains that feed into them. POLITICO will convene U.S. leaders from agencies, Congress and the industry on June 26 to discuss the latest challenges and solutions for protecting the supply lines into America’s critical infrastructure. REGISTER HERE.       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

To change your alert settings, please log in at https://login.politico.com/?redirect=https%3A%2F%2Fwww.politico.com/settings This email was sent to rouf@idiot.cloudns.cc by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA Unsubscribe | Privacy Policy | Terms of Service