Choosing crypto's new boss

By Sam Sutton , Kate Davidson 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 .

The leaders of the Senate Agriculture Committee have filed their entry in the crypto bill bonanza.

With the summer recess and midterm elections looming, Chair Debbie Stabenow (D-Mich.) and Sen. John Boozman (R-Ark.) on Wednesday dropped new legislation assigning the Commodity Futures Trading Commission direct oversight of crypto markets.

The U.S. has lagged other nations in establishing rules for digital asset markets that ballooned in size during the the pandemic. The recent crash, which was accelerated by the bankruptcies of bank-like lending platforms, underscored how the dearth of industry-specific regulation and enforcement tools could erase billions of dollars worth of digital asset deposits in a matter of weeks — and leave retail investors holding the bag.

Leaders at both the CFTC and SEC have been staking out their respective roles in policing that marketplace, with SEC Chair Gary Gensler claiming that most crypto assets look like securities and that digital asset trading platforms should fall under his agency’s direct supervision.

Stabenow and Boozman’s bill positions the CFTC to take the lead. Exchanges and brokerages — particularly those trading Bitcoin or Ether — would have to register with the CFTC. It also tasks the much-smaller financial derivatives regulator with creating new rules to protect consumers and establish guardrails around practices like margin trading.

What’s more, it would also clarify how tokens are categorized as securities or commodities — a hot topic in the aftermath of an SEC court filing that identified several tokens listed on Coinbase as securities.

“One in five Americans have used or traded digital assets—but these markets lack the transparency and accountability that they expect from our financial system,” Stabenow said in a statement. “That’s why we are closing regulatory gaps and requiring that these markets operate under straightforward rules that protect customers and keep our financial system safe.”

This isn’t the first bill to grant the CFTC the top role in digital asset regulation — and it likely won’t arrive with the same level of fanfare that greeted Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand’s (D-N.Y.) legislation earlier this year. With that said, industry lobbyists and Hill staff have high expectations for the measure, which puts the imprimatur of Senate leadership on efforts to give the CFTC primacy over the much-larger SEC in the most highly trafficked crypto spot markets.

“It is encouraging to see the growing interest in digital assets within the leadership of the Senate Committee on Agriculture and the bipartisan desire to give the CFTC the clarity it needs to oversee crypto spot markets,” said Blockchain Association Executive Director Kristin Smith in a statement.

POLITICO reported earlier this year that CFTC staff had been coordinating with lawmakers on the bill’s framework, which also creates new funding mechanisms to support the financial regulator’s new responsibilities around digital assets.

Notably, while the bill doesn’t delineate any specific responsibilities for the SEC — that’s outside Senate Ag’s purview — it does include language that allows the CFTC’s new digital commodities registrants to also register with the securities regulator.

It also preempts any state-level registration requirements related to money transmission, virtual currency, and commodity brokers — something that could ruffle feathers among Republicans who have sought to let states lead on crypto regulation.

“Relying solely on state regulation does not ensure that rules and regulations work for all stakeholders,” Boozman said in a statement. “Our bill will empower the CFTC with exclusive jurisdiction over the digital commodities spot market, which will lead to more safeguards for consumers, market integrity and innovation in the digital commodities space.”

IT’S WEDNESDAY — Send your questions, plus any tips or story ideas, to kdavidson@politico.com , ssutton@politico.com or aweaver@politico.com .

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today .

Services and factory orders data released at 10 a.m. … Senate Republicans hold a news conference to discuss the “Democrats’ tax and spending policies” at noon

JOLTS — The jobs market is starting to soften. The Labor Department on Tuesday announced that the number of job openings declined to 10.7 million in June . While that preliminary tally is still very high in historical terms — total openings never cracked 7.5 million in the year prior to the pandemic — it represents the lowest total in nine months. Labor will release July unemployment data on Friday at 8:30 a.m.

PUSHBACK — With Republicans hammering President Joe Biden and Senate Democrats over forecasts on the Inflation Reduction Act’s tepid impact on inflation, the White House on Tuesday circulated a letter signed by 126 economists urging lawmakers to pass the climate, health care and tax bill. “This historic legislation makes crucial investments in energy, health care, and in shoring up the nation’s tax system. These investments will fight inflation and lower costs for American families while setting the stage for strong, stable, and broadly shared long-term economic growth.”

THE OFT-MALIGNED TAX INCREASE ON THE VERGE OF BECOMING LAW — Our Brian Faler: “Underestimated by Washington, the so-called book income tax flew under the radar even as other tax proposals taken much more seriously fell apart. Policymakers spent months debating things like the administration’s bid to create a new global minimum tax, which now, at least insofar as near-term U.S. involvement goes, appears dead. … Now, the book income proposal is one of the last tax increases standing.”

FORD SEEKS ILC CHARTER FROM THE BIDEN-ERA FDIC — American Banker’s Claire Williams: “Ford Motor Co. is again applying for an industrial loan company charter , a major test for the Biden administration regulators who have been skeptical of anything that looks like mixing banking and commerce. … Ford is the first major nonfintech to seek an ILC under the Biden administration. Although auto company ILCs aren't unheard of — Toyota and BMW already have industrial banks — the application for the banking industry raises the specter of a larger company, such as Walmart or Amazon, entering the banking fray.”

ROBIN OF LOSTLY — The New York Department of Financial Services hit Robinhood’s crypto division with a $30 million fine on Tuesday for “ significant failures in the areas of bank secrecy act/anti-money laundering ,” the state regulator said in a statement.

This wasn’t the only bad news to hit the stock app company: From CNBC’s Ashley Capoot: “Robinhood CEO Vlad Tenev said Tuesday in a press release that the company will reduce its headcount by approximately 23% . The layoffs will be primarily in operations, marketing and program management. In the release, Tenev blamed ‘deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash.’”

WILL THE CIRCLE BE UNBROKEN? — From our Peter O’Brien and Bjarke Smith-Meyer: “Digital finance company Circle is confident that its stablecoin will soon become the third largest cryptocurrency on the market, behind only Bitcoin and Ether, the biggest of the incumbents. Circle’s chief strategy officer, Dante Disparte, made the bold prediction in a recent interview with POLITICO, taking a swipe at the firm’s main rival and market leader, Tether, which issues the most popular stablecoin to crypto investors. Tether, as it happens, is more than up for the fight.”

LONG AND WINDING ROAD — Bloomberg’s Matthew Boesler and Catarina Saraiva: “Federal Reserve officials said they want strong evidence that the hottest inflation in four decades is on a sustainable downward path before declaring victory in their fight against it. With consumer prices rising 9.1 percent in June from a year earlier, the Fed has ‘ a long way to go ’ on reaching price stability around a 2 percent inflation target, San Francisco Fed President Mary Daly said Tuesday in an interview on LinkedIn”.

OR MAYBE NOT? — WSJ’s Nick Timiraos: “Chicago Federal Reserve President Charles Evans said he is hopeful the central bank will be able to slow its pace of rate rises over the remainder of the year as it pushes borrowing costs to levels aimed at slowing the economy.”

REPO — Reuters: "The trillions of dollars in overnight cash tucked away daily at the Federal Reserve could turn into a major headache for banks that could squeeze their balance sheets and impair their ability to lend."

INTRODUCING POWER SWITCH: The energy landscape is profoundly transforming. Power Switch is a daily newsletter that unlocks the most important stories driving the energy sector and the political forces shaping critical decisions about your energy future, from production to storage, distribution to consumption. Don’t miss out on Power Switch, your guide to the politics of energy transformation in America and around the world. SUBSCRIBE TODAY .

A TOMORROW PROBLEM, TODAY — From WSJ’s AnnaMaria Andriotis: “Inflation is at a four-decade high, and a recession could be near. Credit-card issuers aren’t worried: They are aggressively courting new customers and trying to increase credit-card balances … Big card issuers reported record levels of credit-card spending for the second quarter. At JPMorgan Chase credit-card purchases totaled $271.2 billion, the highest amount dating back to at least 2004 and 33% above the fourth quarter of 2019, before the pandemic caused spending to plunge.”

SPEAKING OF — Reuters: “U.S. household debt increased to a record $16.15 trillion in the second quarter, driven mostly by a $207 billion jump in mortgage balances, with credit card and auto loan debt also rising as consumers lifted their borrowing to deal with soaring inflation, a Federal Reserve report showed on Tuesday.”

EQUIFAX — From WSJ’s Andrew Ackerman and AnnaMaria Andriotis: “Equifax provided inaccurate credit scores on millions of U.S. consumers seeking loans during a three-week period earlier this year, according to bank executives and others familiar with the errors.”

David McDonough is now deputy general counsel at Wells Fargo, leading the consumer and small business banking division. He was most recently an assistant general counsel at the bank, which he joined in 2014. He also worked previously at Bank of America and K&L Gates.

Rusiru Gunasena has joined The Clearing House as senior vice president for Real Time Payments product management and strategy. Gunasena was previously the head of JHA PayCenter at Jack Henry. He’ll replace Steve Ledford, who is retiring after 9 years at The Clearing House.

Anthony Thompson will receive a second full term on the SEC’s Public Company Accounting Oversight Board, the agency announced on Tuesday. Thompson, a former official with the Commodity Futures Trading Commission and Department of Agriculture, is currently filling a term that will expire in October. His second term will run until October 24, 2027.

Follow us on Twitter

Mark McQuillian @mcqdc Kate Davidson @KateDAvidson Aubree Eliza Weaver @aubreeeweaver Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary Sam Sutton @samjsutton

Follow us

To change your alert settings, please log in at https://www.politico.com/_login?base=https%3A%2F%2Fwww.politico.com/settings

This email was sent to by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA

Please click here and follow the steps to .