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Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By Kate Davidson, Victoria Guida and Aubree Eliza Weaver | Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s 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. | | | U.S. financial regulators issued their highly anticipated report Monday on the risks of stablecoins, calling on Congress to require companies that issue certain types of the digital currency to become banks. As our Victoria Guida reports , regulators already have the authority to grant a traditional bank charter to stablecoin issuers, but the proposed legislation would essentially require the firms to obtain one to distribute their tokens. “The report stresses the importance of having consolidated oversight of the entire company behind a stablecoin, which — as with existing banks — would most likely mean supervision by the Federal Reserve. The SEC and CFTC would still have the authority to regulate stablecoins to the extent that they are deemed to be securities, commodities or derivatives, the regulators said, but the issuers themselves should be subject to prudential supervision.” The report is part of a broader effort to ramp up supervision of the virtual tokens, amid worries over the consumer and financial stability risks that could crop up if the assets become a widely used payment method. For progressives who would rather see market regulators take the lead on oversight of stablecoins and map out stronger regulatory actions using their existing authority, the report was a letdown. "I doubt this Congress would be able to enact legislation narrowly tailored to the report's recommendations,” said Todd Phillips at the Center for American Progress. “It's likely that having the SEC regulate stablecoins as money market funds is preferable to what could make its way out of the Senate." Ty Gellasch, executive director of the Healthy Markets Association, put it more succinctly: “This report is going to pay for a lot of new beach houses for crypto lobbyists.” Gellasch said the report, which was drafted by the Fed, SEC, CFTC, FDIC and Office of the Comptroller of the Currency, appeared to be focused less on consumer protection and financial stability, and more on ensuring the banking regulators have some say in how the new digital assets will be regulated. Nellie Liang, Treasury’s undersecretary for domestic finance, pushed back on that idea after the report’s release, saying the regulators are collectively aiming to fill a regulatory gap, not infringe on one another’s turf. “Obviously, the market regulators on their own are focused heavily on investor protection, and market integrity,” she said at a virtual event hosted by the Stanford Graduate School of Business. “And the banking regulators, of course, are focused more on the use of stablecoins for payments and the uses and the integrity of the financial and the payment system. So I would say, yes, of course, there are different perspectives, but that's to be expected." For his part, SEC Chair Gary Gensler said the report recognized that “the use of stablecoins presents a number of public policy challenges with respect to protecting investors” and pledged to use “the full protections of the federal securities laws … where applicable.” What’s next: All eyes are now on the Fed, which is expected to release its report on the prospects of a central bank digital currency in a couple weeks. IT’S TUESDAY — Are you a regulator focused on cryptocurrencies? Do you talk with the Biden administration about digital assets? Are you DAVID MILLS, associate director in the Federal Reserve’s division of reserve bank operations and payment systems? We want to hear from you: kdavidson@politico.com, aweaver@politico.com, or DM on Twitter: @katedavidson. We’ll keep you anonymous. | | | | JOIN TODAY FOR A TALK ON THE FUTURE OF SUSTAINABLE AIR TRAVEL: As delegates descend on Glasgow for the COP26 global climate summit, reducing carbon emissions in the aviation sector will play a critical role in the progress of fighting climate change. Join POLITICO for a deep-dive conversation that will explore the increased use of sustainable aviation fuel, better performance aircraft, and other breakthroughs in to cut greenhouse gas emissions and meet broader sustainability goals. REGISTER HERE. | | | | | | | | The Fed begins its two-day policy meeting … House Financial Services subcommittee holds hearing on “buy now, pay later” products at 10 a.m. … Senate Banking holds a hearing on the LIBOR transition at 10 a.m. … Acting Comptroller Michael Hsu speaks at the Consumer Bankers Association leadership summit at 3 p.m. SIFMA ANNUAL MEETING: The Securities Industry and Financial Markets Association holds its virtual annual meeting today: Deputy Treasury Secretary Wally Adeyemo speaks at 9:15 a.m. with SIFMA CEO Ken Bentsen; Gensler speaks at 9:45 a.m. about regulating innovative capital markets; House Ways and Means Chair Richard Neal (D-Mass.) talks with Bentsen at 1:30 p.m. CRYPTO Q&A: Our colleague Kellie Mejdrich chatted with Stuart Alderoty, general counsel of Ripple, the firm at the center of one of the biggest regulatory battles in the world of cryptocurrency. The SEC sued the firm last December, alleging that its sale of a digital asset known as XRP was an illegal securities offering. Ripple fought back, and the case is still playing out in court. He has a message for regulators: don’t kill crypto. SEC REJECTS BID TO CURTAIL DATA BREACH LAWSUITS AROUND TRADE TRACKER: Kellie again: “Trade groups representing Wall Street banks and broker-dealers on Monday praised the SEC for dismissing a proposal by stock exchanges to limit their legal liability for potential cyber breaches of a market-wide trading database under development for years.” FHFA NAMES CHARLES YI SENIOR LEGAL ADVISER: Our Katy O’Donnell: “Federal Housing Finance Agency acting Director Sandra Thompson has tapped Charles Yi, former FDIC general counsel and Senate Banking Committee staff director, to be a senior adviser for legal affairs and policy, the agency said Monday.” MANCHIN WON’T COMMIT TO BACKING BIDEN’S $1.75T SPENDING BILL: From our colleagues Burgess Everett and Sarah Ferris: “Joe Manchin knocked President Joe Biden’s agenda further off its axis on Monday, refusing to endorse a White House-blessed $1.75 trillion social spending bill framework. “The West Virginia Democrat also rejected House Democrats’ gambit to win his vote, which involves holding up a bipartisan infrastructure bill he helped write. He told reporters at an unusual news conference that he would not be pressured into supporting his party's more progressive social spending bill and decried the ‘shell games, budget gimmicks’ used in writing it.” POWELL WATCH: Treasury Secretary Janet Yellen said Monday that she told Biden he should nominate “somebody who is experienced and credible” to lead the Federal Reserve when Chair Jerome Powell’s term expires in February. Is that person Powell? “I think that Chair Powell has certainly done a good job,” she told CNBC’s Ylan Mui. — A pitch for Brainard: MIT professor Simon Johnson, a former chief economist at the IMF, writes in Project Syndicate that Fed Governor Lael Brainard is a better fit to lead the central bank given the tasks ahead: “She is a professional economist who has helped shape US monetary policy by convincing Republican colleagues to follow her lead both before and during the COVID-19 crisis. She also cares deeply about better worker outcomes, sensible financial regulation, and addressing climate change, and helped save the Community Reinvestment Act, which supports lending to low-income communities. On all of these issues, her values are fully aligned with Biden’s.” He adds: “It is in no way a politicization of the Fed to pick the best available experienced official to be in charge of handling what we expect to happen next.” HAT TIP FOR YELLEN ON GLOBAL TAX DEAL: Former Treasury Secretary Larry Summers and Yellen might be at odds over inflation, but he applauded her efforts to secure an international tax agreement endorsed by the Group of 20 economies last weekend. “This agreement is arguably the most significant international economic pact of the 21st century so far,” he wrote in a Washington Post op-ed, adding, “At a time of much cynicism about government, this agreement is a triumph of American leadership, for Treasury Secretary Janet L. Yellen and her colleagues.” TRANSITIONS: Gregg Gelzinis, a former policy analyst at the Center for American Progress, has joined the Consumer Financial Protection Bureau as an adviser to Director Rohit Chopra on Financial Stability Oversight Council and FDIC matters. FIRST LOOK: OMAROVA ENDORSEMENT: More than 60 progressive groups sent a letter to Senate Banking Chair Sherrod Brown (D-Ohio) today in support of Biden’s pick to lead the OCC, professor Saule Omarova. “It is past time for a new era of regulation that is serious about bridging racial and economic divides, preventing financialized plunder of Main Street by Wall Street, and addressing the systemic risks presented by climate change,” wrote the groups, including Americans for Financial Reform, AFL-CIO, Center for Responsible Lending, Public Citizen and Sierra Club. “Professor Omarova is exactly the woman to achieve these crucial goals.” | | | | BECOME A GLOBAL INSIDER: The world is more connected than ever. It has never been more essential to identify, unpack and analyze important news, trends and decisions shaping our future — and we’ve got you covered! Every Monday, Wednesday and Friday, Global Insider author Ryan Heath navigates the global news maze and connects you to power players and events changing our world. Don’t miss out on this influential global community. Subscribe now. | | | | | | | | RECENT RETIREES DELAYED SOCIAL SECURITY — From WaPo’s Andrew Van Dam: “For better-off Americans, the pandemic economy created some of the strongest incentives to retire in modern history, with generous federal stimulus, incredible market gains, skyrocketing home values and health concerns drawing many Americans into early retirement. The surprising twist? Many of these retirees also opted to put off claiming Social Security benefits, an exclusive Washington Post analysis shows. By delaying their benefits, these retirees can expect to collect higher monthly checks in the future.” BANKS THAT ONCE TRIED TO KILL CRYPTO NOW EMBRACE IT — NYT’s Emily Flitter: “Instead of warning regulators away from cryptocurrencies, banking industry representatives now complain that regulators have not acted quickly enough and that their inaction is costing banks valuable time in their mission to compete.” TREASURY BOOSTS QUARTERLY BORROWING ESTIMATE TO $1T — Bloomberg’s Liz McCormick: “The U.S. Treasury increased its estimate of federal borrowing needs for the three months through December after it ran down its stockpile of cash more than it previously anticipated. The Treasury’s projections, released in Washington Monday, come as longer-term borrowing needs depend on the fate of two fiscal packages being finalized in Congress.” POLL: AMERICANS SOUR ON ECONOMY AMID INFLATION WOES — AP’s Ken Sweet and Emily Swanson: “Americans’ opinions on the U.S. economy have soured noticeably in the past month, a new poll finds, with nearly half expecting economic conditions to worsen in the next year. Just 35 percent of Americans now call the national economy good, while 65 percent call it poor, according to a poll by The Associated Press-NORC Center for Public Affairs Research.” | | | | Follow us on Twitter | | | | Follow us | | | | |  |
