Casey Wagner

Banks need more regulatory oversight, President Biden said during an address Monday morning about the recent closure of Silicon Valley Bank and Signature Bank.&nbsp;



The government has taken control over these institutions and no losses will be put on taxpayers, Biden said during the roughly four-minute <a href="https://www.youtube.com/watch?v=dLVbVqqsXF8" target="_blank" rel="noreferrer noopener">speech</a>. 



“Every American should feel confident that their deposits will be there, if and when they need,” Biden said. “Second, the management of these banks will be fired.”&nbsp;



Investors and banks will not be protected, according to Biden.&nbsp;



“They knowingly took a risk,” he said. “When the risk didn&#8217;t pay off, investors lose the money. That&#8217;s how capitalism works.”&nbsp;



There are “important questions” about how SVB and Signature found themselves in this position, the president said — problems his administration has signaled they’re working on addressing.&nbsp;



Biden did not take questions, leaving the podium as one press member asked for more clarity about why this crisis happened. The live feed was then cut.&nbsp;



The speech comes a day after US Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and FDIC Chair Martin Gruenberg said Sunday they are <a href="https://blockworks.co/news/signature-silicon-valley-bank-made-whole">taking action to protect the US economy</a> by strengthening public confidence in the banking system.



The failure of Silicon Valley Bank, located in Santa Clara, California, is to be resolved in a way that will fully protect all depositors, who will be granted access to their money starting from March 13, the regulators said in a <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm" target="_blank" rel="noreferrer noopener">statement</a> Sunday evening.



“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors,” the statement said.&nbsp;



The closure of the banks prompted widespread fear across the crypto industry. Stablecoin <a href="https://blockworks.co/price/usdc" target="_blank" rel="noreferrer noopener">USDC</a> dropped to its lowest price ever over the weekend, more than 10 cents below its dollar peg. Circle said Sunday its “$3.3B USDC reserve deposit held at Silicon Valley Bank, about 8% of the USDC total reserve, will be fully available when U.S. banks open Monday morning.” 



“Trust, safety and 1:1 redeemability of all USDC in circulation is of paramount importance to Circle, even in the face of bank contagion affecting crypto markets,” co-founder and CEO of Circle Jeremy Allaire said in the <a href="https://www.circle.com/en/pressroom/3.3-billion-of-usdc-reserve-risk-removed-dollar-de-peg-closes" target="_blank" rel="noreferrer noopener">statement</a>. 



“We are heartened to see the U.S. government and financial regulators take crucial steps to mitigate risks extending from the banking system.”



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Biden: SVB, Signature Executives Will Be Fired

Bessie Liu

President Joe Biden’s 2024 Fiscal Year budget will propose tax changes on cryptoasset transactions to eliminate wash trading.



As cryptoassets are not classified as securities, existing cryptocurrency traders are able to claim tax-deductible losses on failed cryptoasset losses and allow them to buy back into the same investments.&nbsp;



Congress has previously considered changing the status of cryptoassets, but any bill is far from passage in the divided legislature.



This latest change in tax requirements for cryptocurrencies is expected to raise $24 billion for the Treasury, <a href="https://www.wsj.com/articles/biden-budget-to-propose-saving-hundreds-of-billions-by-cutting-drug-prices-fraud-5fa0f927">according to the Wall Street Journal</a>.



In addition to applying the same rules to crypto traders as investors in the stock market — the Biden administration is also planning to increase tax rates for America’s wealthiest 0.01% to a minimum of 25%.



Individuals making more than $400,000 a year would see an increase in their taxes from 37% to 39.6% and corporations would see their taxes go up from 21% to 28%.



Currently, cryptocurrencies are considered a digital asset and according to the Internal Revenue Service (IRS) are taxable if they generate a gain or loss, including but not limited to:



<ul>
<li>Sales for fiat currency</li>



<li>Exchange for goods and services&nbsp;</li>



<li>Airdrops&nbsp;</li>



<li>Minting and staking activities</li>
</ul>



The budget is expected to be released today, but will need to be approved by the House of Representatives and the Senate before receiving final sign-off from the President.



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Biden Budget Takes Aim at Crypto Wash Trading

Ben Strack

<div id="highlights-block_6328925cda601" class="highlights">
 <ul>
 <li>More than half of respondents say a US CBDC would increase risks to privacy and security</li>
 <li>Survey was published the same day the White House released its first crypto framework</li>
 </ul>
 
</div>



As the federal government continues mulling how to best regulate crypto, a recent poll found that 55% of those surveyed said traditional banking regulations make them trust the industry more than the digital assets space.



The poll, published Friday by the Independent Community Bankers of America (ICBA), indicated that 71% believe investing in crypto is risky. Thirty-five percent of respondents are unaware that traditional banking sector laws do not apply to the segment.



The survey was released the same day that the White House shared <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-responsible-development-of-digital-assets/" target="_blank" rel="noreferrer noopener">its first “comprehensive framework”</a> for the crypto segment. The report came roughly six months after <a href="https://cms.blockworks.co/biden-signs-crypto-executive-order-promoting-responsible-innovation/" target="_blank" rel="noreferrer noopener">the Biden Administration’s executive order</a> in March that tasked government agencies with creating a pathway for regulating crypto and identifying the risks and potential for innovation within the space.



Reports so far gathered by President Biden recommend that agencies, such as the SEC and Commodity Futures Trading Commission (CFTC), should “aggressively” look to combat crypto-related crime, according to the framework published Friday.&nbsp;



Some industry watchers <a href="https://cms.blockworks.co/white-houses-latest-crypto-framework-lacks-clarity-some-say/" target="_blank" rel="noreferrer noopener">told Blockworks</a> Friday that the White House’s framework lacked specifics and leaned too heavily on the message of regulating by enforcement. 



The White House’s report said that the May crash of Terra’s algorithmic stablecoin and subsequent insolvencies that wiped out about $600 billion of investor funds highlights the need for more crypto education.



The Financial Literacy Education Commission (FLEC) will lead efforts to help investors understand crypto risks, identify fraudulent practices and learn how to report misconduct.



The ICBA poll also discovered that more than half of those surveyed — including a bipartisan majority — say the establishment of a US central bank digital currency (CBDC) would increase the risk of their personal financial privacy and security being breached.



While the Biden administration believes a CBDC could be beneficial, further research and development on the technology that would support a digital form of the dollar is needed, according to the framework.



“Policymakers should prioritize protecting national security amid catastrophic developments in the crypto markets while collaborating on a comprehensive regulatory framework that utilizes more effective alternatives to a US CBDC — including the <a href="https://www.frbservices.org/financial-services/fednow/about.html" target="_blank" rel="noreferrer noopener">FedNow</a> instant payments service,” ICBA President Rebeca Romero Rainey said in a statement.



The ICBA poll was conducted by Morning Consult last month and surveyed roughly 2,000 registered voters.



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Americans Understand Crypto Risks, but Not Regulations, Survey Finds

Shalini Nagarajan

<div id="highlights-block_62cfdf59a8cbe" class="highlights">
 <ul>
 <li>Michael Barr played advisor to the embattled Ripple Labs in 2015</li>
 <li>Fed chief Jerome Powell has said Barr’s role is “charged with setting the regulatory agenda”</li>
 </ul>
 
</div>



The Senate has confirmed former Ripple advisor Michael Barr as a top banking watchdog at the US Federal Reserve, after he received bipartisan support on Tuesday.



President Joe Biden <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/04/15/statement-from-president-biden-on-his-intent-to-nominate-michael-barr-to-serve-as-vice-chair-for-supervision-of-the-federal-reserve/" target="_blank" rel="noreferrer noopener">nominated</a> Barr to the role of vice chair for supervision of the Federal Reserve in April owing to his career in consumer protection and his role in shaping the 2010 Dodd-Frank Act following the 2008 financial crisis. 



Barr, once <a href="https://www.wsj.com/articles/biden-is-expected-to-tap-michael-barr-as-comptroller-of-the-currency-11611196272" target="_blank" rel="noreferrer noopener">pegged</a> to serve as comptroller of the currency, was also a top Treasury Department official during former President Barack Obama’s administration. He secured a 66-28 vote by the Senate, exceeding the simple majority of 50 votes required for confirmation.&nbsp;



“Today’s confirmation of Michael Barr as Vice Chair for Supervision of the Federal Reserve is important progress for my plan to tackle inflation and for sound oversight as we transition to steady and stable growth,” Biden said in a <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/07/13/statement-from-president-biden-after-senate-confirmation-of-michael-barr-to-the-federal-reserve/" target="_blank" rel="noreferrer noopener">statement</a>.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Confirmed, 66-28: Executive Calendar #976 Michael S. Barr to be Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System for a term of four years.&mdash; Senate Cloakroom (@SenateCloakroom) <a href="https://twitter.com/SenateCloakroom/status/1547307273072017410?ref_src=twsrc%5Etfw">July 13, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



In 2015, Barr became an <a href="https://ripple.com/ripple-press/ripple-labs-names-michael-s-barr-as-advisor/" target="_blank" rel="noreferrer noopener">advisor</a> to Ripple Labs — which is at the center of a major lawsuit with the Securities and Exchange Commission that argues the company sold XRP tokens worth <a href="https://www.sec.gov/news/press-release/2020-338" target="_blank" rel="noreferrer noopener">$1.3 billion</a> as unregistered securities. He’s no longer listed as an advisor, and it isn’t clear when he left as he hasn’t listed professional experiences on <a href="https://www.linkedin.com/in/msbarr/" target="_blank" rel="noreferrer noopener">LinkedIn</a>. Ripple didn’t respond to Blockworks’ request for comment by press time.



In any case, the Fed will now have a full board for the first time since 2013, at a time when the US tackles its <a href="https://cms.blockworks.co/inflation-surges-again-in-june-bitcoin-slides-stocks-open-lower/" target="_blank" rel="noreferrer noopener">worst inflation</a> in 40 years. Barr&#8217;s role had been vacant since late 2021 after Fed governor Randal Quarles <a href="https://www.reuters.com/world/us/feds-randal-quarles-resign-end-december-2021-11-08/#:~:text=His%20term%20as%20head%20of,for%20supervision%20expired%20in%20October." target="_blank" rel="noreferrer noopener">stepped down</a> in October.&nbsp;



As a US central bank supervisor, Barr is expected to scale daily oversight of both the biggest lenders and smaller financial firms that play a part in the overall economy. He’ll also be in charge of developing regulatory policies for cryptocurrencies and stablecoins, which have been <a href="https://cms.blockworks.co/biden-signs-crypto-executive-order-promoting-responsible-innovation/" target="_blank" rel="noreferrer noopener">priorities</a> for the Biden administration.



The Fed’s chairman Jerome Powell <a href="https://www.rev.com/blog/transcripts/fed-chair-jerome-powell-press-conference-transcript-september-22-market-update" target="_blank" rel="noreferrer noopener">said</a> last year that he would accept the authority of the person in the supervision role as it is “charged with setting the regulatory agenda.”



Barr, who joins the Fed from the University of Michigan’s Gerald F. Ford School of Public Policy, <a href="https://www.banking.senate.gov/imo/media/doc/Barr%20Testimony%205-19-22.pdf" target="_blank" rel="noreferrer noopener">said in a May hearing</a> that he’s committed to softening inflation to the Fed’s 2% target and ensuring the financial system is “robust and resilient.”&nbsp;



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Former Ripple Advisor Michael Barr Will Supervise the Federal Reserve

<div id="highlights-block_6245bcca4f9c0" class="highlights">
 <ul>
 <li>A direct-to-consumer CBDC could be used as a “financial surveillance tool” by the federal government, according to Cruz</li>
 <li>Rep. Tom Emmer, R-Minn., introduced a House bill proposing the same objective in January</li>
 </ul>
 
</div>



Sen. Ted Cruz has proposed a bill echoing one introduced in the House in January, in an attempt to maintain the dollar’s dominance without competing with the private sector.



The latest <a href="https://www.cruz.senate.gov/imo/media/doc/cbdc.pdf" target="_blank" rel="noreferrer noopener">planned legislation</a>, introduced by the Republican senator from Texas, would prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals.



A direct-to-consumer CBDC could be used as a “financial surveillance tool” by the federal government, similar to what is happening in China, according to Cruz.



“The federal government has the ability to encourage and nurture innovation in the cryptocurrency space, or to completely devastate it,” Cruz said in a statement.



<blockquote class="wp-block-quote">“This bill goes a long way in making sure big government doesn’t attempt to centralize and control cryptocurrency so that it can continue to thrive and prosper in the United States.”</blockquote>



CBDCs differ from decentralized currencies such as bitcoin, as they are issued and backed by a government and transact on a centralized permissioned blockchain.&nbsp;



President Joe Biden signed an executive order earlier this month that calls on a variety of government agencies to study the “responsible development” of digital assets. It also mentions “placing urgency” on the research and potential development of an American CBDC.



Industry watchers <a href="https://cms.blockworks.co/bidens-crypto-executive-order-may-be-watershed-moment-despite-lack-of-specifics/" target="_blank" rel="noreferrer noopener">previously told Blockworks</a> that though the order is an important step in the policymaking process, concrete legislation could take years.



Rep. Tom Emmer, R-Minn., <a href="https://cms.blockworks.co/us-rep-tom-emmer-proposes-bill-to-shape-cbdc-plans/" target="_blank" rel="noreferrer noopener">introduced a House bill</a> that would prevent the Fed from issuing a CBDC to individuals in January.



The Federal Reserve <a href="https://cms.blockworks.co/fed-opens-debate-on-cbdc-takes-no-policy-stance/" target="_blank" rel="noreferrer noopener">issued a report</a> that month that expressed potential interest in a CBDC that is “identity-verified” but did not take any policy stance. The agency is soliciting public comments through May 20.



“I’m glad Senator Cruz has agreed to offer a Senate companion to my legislation limiting the Fed’s authorities,” Emmer said in a statement. “The Fed must only craft a CBDC framework that is open, permissionless and private — meaning any digital dollar must be accessible to all, transact on a blockchain that is transparent to all and maintain the privacy elements of cash.”



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Ted Cruz’s Senate Bill on CBDCs Replicates January House Proposal

<div id="highlights-block_6234b7c7b19c3" class="highlights">
 <ul>
 <li>National Security Advisor Jake Sullivan and National Economic Council Director Brian Deese will coordinate the executive order’s implementation</li>
 <li>Treasury Secretary Janet Yellen and Attorney General Merrick Garland are tasked with various analyses around digital asset implications</li>
 </ul>
 
</div>



In his executive order last week, President Joe Biden called on a swathe of government agencies to work together to study the “responsible development” of digital assets.



But who is in charge of what, and when exactly will these efforts conclude?



Biden notes in the executive order that the assistants to the president for national security affairs and for economic policy “shall coordinate the executive branch actions necessary to implement this order.”



Jake Sullivan, a national security advisor for President Biden since January 2021, was previously the deputy assistant to former President Barack Obama, a national security advisor to Biden during his tenure as vice president, and deputy chief of staff to Hillary Clinton at the State Department.



Brian Deese serves as the director of the National Economic Council (NEC). Between 2009 and 2015, he was a special assistant for economic policy to Obama, deputy director of the NEC, and acting director of the Office of Management and Budget. He also served as a senior advisor to Obama from 2015 to 2017.



Before his latest appointment, Deese worked as the global head of sustainable investing for BlackRock, the world’s largest asset manager.



“We are clear-eyed that ‘financial innovation’ of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk,” Sullivan and Deese said in a statement published alongside the executive order.



<blockquote class="wp-block-quote">“This history underscores the need to build robust consumer and economic protections into digital asset development.”</blockquote>



John Collins, partner at advisory firm FS Vectors and former policy head at Coinbase, called Sullivan and Deese “incredibly smart and well respected.”



“Their positions as leaders here is a really good indication of where [the government’s] head is at,” he told Blockworks.



<h3>Which agencies are involved?</h3>



The interagency process that Sullivan and Deese lead shall include the following entities, Biden notes in the order:



<ul><li>the secretaries of state, treasury, defense, commerce, labor, energy and homeland security; </li><li>the attorney general;</li><li>the administrator of the Environmental Protection Agency;</li><li>the director of the Office of Management and Budget; </li><li>the director of National Intelligence; </li><li>the director of the Domestic Policy Council;</li><li>the chair of the Council of Economic Advisers; </li><li>the director of the Office of Science and Technology Policy; </li><li>the administrator of the Office of Information and Regulatory Affairs; </li><li>the director of the National Science Foundation; and </li><li>the administrator of the United States Agency for International Development.</li></ul>



“Governments alone cannot solve these problems, and definitely not a government that operates in silos,” Sullivan and Deese said in the statement.



Officials from other agencies may be invited to attend interagency meetings, Biden adds in the order, including representatives from:



<ul><li>the Board of Governors of the Federal Reserve System;</li><li>the Consumer Financial Protection Bureau;</li><li>the Federal Trade Commission (FTC);</li><li>the Securities and Exchange Commission (SEC);</li><li>the Commodity Futures Trading Commission (CFTC);&nbsp;</li><li>the Federal Deposit Insurance Corporation (FDIC); and</li><li>the Office of the Comptroller of the Currency (OCC).</li></ul>



A report by bitcoin company NYDIG argued that the executive order “notably excluded strong input from financial regulators such as the SEC, CFTC and OCC.”



<h3>When are the deadlines?</h3>



The <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/" target="_blank" rel="noreferrer noopener">executive order</a> focuses on crypto regulation around consumer protection, financial stability, risk mitigation, the US’s financial leadership, financial inclusion and responsible innovation.



Biden has tasked Treasury Secretary Janet Yellen to submit a report on the implications of digital asset adoption and the changes in financial market and payment system infrastructures within six months.



She is to convene the Financial Stability Oversight Council (FSOC) within seven months to outline financial stability risks and regulatory gaps posed by digital assets and offer recommendations to address them.



Yellen is also expected to produce a report about the future of money and payment systems within six months. The report should include the potential implications of a US central bank digital currency (CBDC), the executive order states.



Federal Reserve Chair Jerome Powell is encouraged to research and report on the extent to which CBDCs could improve the efficiency and reduce the costs of existing and future payments systems. He has been asked to detail the steps for the potential launch of a CBDC.&nbsp;



In its January <a href="https://cms.blockworks.co/fed-opens-debate-on-cbdc-takes-no-policy-stance/" target="_blank" rel="noreferrer noopener">Central Bank Digital Currency report</a>, the Federal Reserve declined to make policy recommendations.



Attorney General Merrick Garland is to assess whether legislative changes would be necessary to issue a US CBDC within six months. He will also issue a report in that timeframe on the role of law enforcement agencies in detecting, investigating and prosecuting criminal activity related to digital assets.



Other planned research includes distributed ledger technology’s impact on the environment, which Dr. Alondra Nelson, director of the Office of Science and Technology Policy, will submit within six months.



Commerce Secretary Gina Raimondo shall establish a framework for enhancing the country’s economic competitiveness in, and leveraging of, digital asset technologies.



The Senate Committee on Banking, Housing and Urban Affairs <a href="https://cms.blockworks.co/impossible-for-russia-to-evade-sanctions-with-crypto-fincen-rep-says/" target="_blank" rel="noreferrer noopener">held a meeting Thursday</a> addressing the role of digital assets in illicit finance.



Up to 90 days after illicit finance risks are submitted to the Congress of the National Strategy for Combating Terrorist and Other Illicit Financing, Yellen, Garland and Secretary of State Antony Blinken, among others, may offer additional views on the topic.



Yellen shall then develop a coordinated action plan based on the strategy’s conclusion within 120 days, the executive order notes.



Additionally, Biden has ordered Garland to analyze how to strengthen international law enforcement cooperation for detecting, investigating and prosecuting <a href="https://cms.blockworks.co/impossible-for-russia-to-evade-sanctions-with-crypto-fincen-rep-says/" target="_blank" rel="noreferrer noopener">criminal activity</a> related to digital assets.



Though <a href="https://cms.blockworks.co/bidens-crypto-executive-order-may-be-watershed-moment-despite-lack-of-specifics/" target="_blank" rel="noreferrer noopener">industry watchers said</a> the executive order was an important step in the policymaking process, they said legislation could take years.



“We may not like every single policy proposal that’s put forth six months from now,” Blockchain Association Executive Director Kristin Smith previously told Blockworks. “But at least we can think methodically about this and engage with the government.”



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