What the Supreme Court’s EPA ruling could mean for crypto

From: POLITICO's Morning Money - Monday Aug 15,2022 12:01 pm

Aug 15, 2022

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 crypto industry can prod Washington regulators for tailored rules and regulations all it wants. It won’t be on terra firma until there’s a digital asset law on the books.

That’s the lesson crypto and Web3 lobbyists should be taking from a Supreme Court ruling that stripped the Environmental Protection Agency’s ability to regulate greenhouse gas-spewing power plants under the 52-year-old Clean Air Act, says Tomicah Tillemann, a former State Department official who’s the chief policy officer at Haun Ventures.

The June 30 decision has been interpreted as a rebuke to federal agencies that have developed new rules for industry without getting an explicit green light from Congress. With the SEC seeking to regulate the crypto exchanges and Web3 startups through wide-reaching securities laws, Tillemann — whose firm is a major investor in digital asset businesses — is contending that the crypto lobby needs to direct its efforts toward securing the passage of digital asset legislation.

“Successful statutes from the past are not the only roadmap for the future, particularly when it comes to web3, nor is piecemeal rulemaking and enforcement the path to mission-critical policy for the next generation of the internet,” he wrote in a think piece with Haun’s General Counsel James Rathmell and attorney JP Schnapper-Casteras. “Ultimately, we'll need new rules to help govern these new tools.”

It’s the latest example of how crypto’s Washington endeavors are evolving in pursuit of a new rulebook that’s less rigid than existing frameworks for traditional securities like stocks and bonds. Given Haun’s growing footprint — the firm launched a $1.5 billion debut fund to invest in new digital asset businesses earlier in the year — it’s also an indication of how crypto-native financiers plan to influence policymakers in the coming months.

“It is still the case, obviously, that there is room for narrower rulemaking on the part of the administrative agencies,” Tillemann said in an interview. “But it's undeniably true that in the current legal environment, legislation is going to carry substantially more weight and have substantially more impact than anything that the agencies are going to be able to do on their own.”

The digital asset lobby has started to notch some successes on the Hill, even as the industry withstands a barrage of scandals following a market crash that obliterated several high-flying lending startups and left millions of retail customers in the lurch.

New legislation from Senate Agriculture Chair Debbie Stabenow (D-Mich.) and Sen. John Boozman (R-Ark.), which would give the Commodity Futures Trading Commission direct authority over popular exchanges where Bitcoin and Ether are traded, is the clearest and most recent indication that industry associations and top crypto trading platforms are getting their message across to lawmakers.

With the SEC trying to corral digital asset exchanges into registering as national securities exchanges — a classification that would subject those platforms to hard rules that affect everything from investor protections to their operation of internal trading desks — industry leaders have pushed for new laws that would put them in the much-smaller CFTC’s remit.

Lawmakers are taking note that they’re more or less united on this front.

“Almost all [of industry] feel like the regulator should be the CFTC,” Boozman told reporters in a virtual press briefing earlier this month. “The fact they’re fairly united on that makes it easier on members.”

IT’S MONDAY — And Kate is back in the saddle. Have a tip, story idea or other feedback for any of us? Hit us up at 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.

DRIVING THE WEEK

Arkansas Gov. Asa Hutchinson and Rep. French Hill (R-Ark.) are slated to speak at a three-day fintech conference in Little Rock that kicks off today … The National Association of Home Builders releases data at 10 a.m. … Housing starts and building permits data out Tuesday … Federal Reserve Governor Michelle Bowman speaks on Wednesday … Federal Open Market Committee minutes released on Wednesday … The Labor Department hosts a conference on labor market data in Philadelphia on Wednesday … Philadelphia Fed manufacturing data out Thursday … SEC holds a closed session meeting on Thursday

SUMMER OF SUMMERS — Our Ben White: “When the White House sought help crafting crucial tax-raising portions of the health care, climate and tax bill, one man was often on the other end of the phone line and email chains: Larry Summers. When Democratic lawmakers needed a final push to convince Sen. Joe Manchin that the Inflation Reduction Act would in fact reduce inflation, they also turned to Summers. And when administration aides worry about how TV pundits will view their economic plans, the first person they think of is usually the former Treasury secretary.

Summers’ quiet but deep involvement in White House economic planning is remarkable since he has been among the sharpest critics of President Joe Biden’s spending policies almost from the beginning — a position that has earned him praise from Republicans and scorn from progressives. Yet Democrats’ eagerness to gain his support for Biden’s latest massive legislation is a testament to how they cannot ignore him."

A SPRITZ OF ‘NOVEMBER FRAGRANCE’ ON THE COLLAR — POLITICO’S Sarah Ferris and Jordain Carney: “Democrats have notched their biggest victory since taking full control of Washington 19 months ago. The November fragrance of their late political bloom remains to be seen. Every House Democrat on Friday evening gave final approval, along party lines, to a health care, climate and tax bill, delivering on a key campaign promise of Joe Biden’s presidency and capping more than a year of talks on the Hill.”

WALL STREET LIKES IT — WSJ’s Amrith Ramkumar: “The climate-and-energy legislation that Congress just passed includes spending for both renewables startups and fossil-fuel producers— a broad, even if seemingly contradictory, strategy that many on Wall Street are already pursuing.”

NEW ROLE — WSJ’s Jon Hilsenrath: “With two bills advanced through Congress in recent weeks, the Biden administration has grown the federal government’s imprint on major sectors of the U.S. economy —including semiconductors, energy and health—and further buried the idea once widely held in Washington that private markets should be left alone, without government involvement.”

FIRST BUYBACKS AND NOW THIS — Our Declan Harty: “A group of lawmakers led by Sen. Elizabeth Warren is backing the Securities and Exchange Commission’s plans to address a long-standing point of concern on Capitol Hill: corporate executives’ stock trades.”

Economy

WATCH THIS SPACE — WaPo’s David Lynch: “Wheat is now less expensive than when the war began. Brent crude oil, the global benchmark, hovers around its mid-February level of $97 per barrel. And the price of urea fertilizer, which almost doubled in the war’s first weeks, is back to its prewar level. Yet, markets could again reverse course, and they are likely to remain volatile into next year, analysts have said.”

MARKETS — WSJ’s By Akane Otani: “Stocks reached another milestone in their comeback last week, with the Nasdaq Composite rising more than 20% from its mid-June low to end its longest bear market since 2008. The rally has stirred a familiar debate: Will the rebound continue ?”

AND DOES IT MAKE SENSE? — AP’s Stan Choe: “Wall Street’s big gains this summer have been spread widely across industries. The profit growth helping to underpin those gains? Not so much. Roughly 90% of the companies in the S&P 500 have reported their second quarter results, and their earnings per share are nearly 8% higher from year-ago levels in aggregate … A closer look shows investors are bidding up prices on all stocks, not just the ones with strong profits .”

CHECK PLEASE — WSJ’s Gwynn Guilford: “As anyone who has lost luggage or waited half an hour for a restaurant check can tell you, America needs way more workers in some parts of the economy. Economists think so too. Many of them see the imbalance in labor supply and demand as at the heart of the U.S.’s current economic challenges . They say that fixing it is critical to achieving a so-called soft economic landing, in which the highest inflation in four decades comes down without unemployment rising enough to trigger a recession.”

DELISTED — Declan Harty again: A handful of China’s largest state-owned firms will voluntarily delist from the New York Stock Exchange in the coming weeks, marking the latest fallout of Washington and Beijing’s standoff over financial auditing requirements.”

Fed File

FED MINUTES — Bloomberg’s Matthew Boesler: “An account of the debate at the Federal Reserve’s July policy meeting, set to be published after two weeks of whiplash on Wall Street, will probably offer clues as to what would push the central bank to go big with tightening yet again in September.”

NOT SO FAST — Bloomberg’s Vildana Hajric and Michael Regan: “The chief investment officer of Morgan Stanley Wealth Management has a warning for investors who are chasing the latest rally in stocks: Don’t get too excited about a potential peak in inflation after the consumer-price index cooled off a bit in July.”

Crypto

UP 14% THIS MONTH — Bloomberg’s Joanna Ossinger: “Bitcoin briefly surpassed $25,000 for the first time since mid-June, as momentum continued from a cooler-than-expected US inflation data and progress toward Ethereum’s big upgrade.”

GOING GREAT — The Block’s Tom Matsuda: “Acala Network, the decentralized finance hub of Polkadot, has been breached and its stablecoin depegged from the dollar mark. Early this morning, Acala's Twitter page posted that it noticed configuration issues regarding the Honzon protocol, which affects its stablecoin aUSD, leading to a vote to pause operations on Acala while it investigated the issue.”

REDDITORS, MOUNT UP — Bloomberg’s Olga Kharif: “Reddit, Telegram and Twitter helped drive the meme-stock craze, and now users on the sites are channeling that same energy into campaigning courtside on several crypto bankruptcy cases, including Celsius and Voyager Digital Ltd. They are tapping into the huge social media communities that already exist for both platforms, urging users to write letters to the judge overseeing Celsius’s case, pooling funds for legal representation as well as sharing news and advice.”

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.

Fly Around

Anshu Jain, Cantor Fitzgerald’s president who was known for his time leading Deutsche Bank traders into the lender’s investment banking heights, died five years after being diagnosed with duodenal cancer. He was 59. — Bloomberg’s Sonali Basak

Saudi Aramco, the giant oil producer, said on Sunday that its second-quarter profit jumped 90 percent over the same period a year ago, reaching $48.2 billion. It is the latest energy producer to report bumper earnings on the back of a surge in the price of oil. — NYT’s Kevin Granville

Follow us on Twitter