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Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By 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 6 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. | | | Crypto goes to Washington — Cryptocurrency has come a long way in the last few years, going from quirky novelty to something that lots of retail investors are putting money into. A sign of the times: Coinbase, the biggest U.S. crypto exchange, is set to go public on Wednesday. With money comes attention, and policymakers are likely to soon start working on more of a regulatory framework for crypto. Gary Gensler, who has particular expertise in this space, is expected to be confirmed as chairman of the Securities and Exchange Commission this week, and Republican SEC Commissioner Hester Peirce told MarketWatch she’s optimistic about what that will mean for crypto. So far, “our approach has been much more of a say no and tell people to wait approach,” she said. Neeraj Agrawal, communications director at Coin Center, argued that crypto technology is only going to grow in importance. “We want to see the U.S. approach cryptocurrency in a way that satisfies policy objectives while still respecting Americans’ privacy and allowing enough room for it to thrive,” he said. The question, as with any financial regulation, is who benefits and how. After all, it’s not just crypto exchanges and other technology firms that care about rules in this space; major Wall Street firms are also getting involved in the business, particularly after the Office of the Comptroller of the Currency made it easier for banks to serve clients that hold crypto. Lobbying has intensified accordingly. On top of existing groups like the Blockchain Association, a new lobbying shop with a global focus cropped up this month, called the Crypto Council for Innovation, which represents Fidelity, Square, Coinbase and Paradigm, a San Francisco-based investment firm that convened the group. “I have sympathy for regulators in the U.S. because they’re trying to apply rotary phone-era laws to the newest of new technology,” said Gus Coldebella, chief policy officer at Paradigm. “Sometimes it fits, and sometimes it doesn’t.” The most closely watched issue is whether the SEC will finally approve an exchange-traded product linked to Bitcoin, which could open up a new channel of regulating the granddaddy of crypto coins at the agency. A precedent-setting lawsuit from the SEC is also pending against Ripple over its involvement with XRP, which the regulator claims was being sold as an unregistered security. But an entire universe of decentralized finance, or “DeFi,” has also blossomed from the cryptocurrency platform Ethereum, which allows for “smart contracts” where a transaction is completed once certain conditions are met. In finance terms, this means new avenues for loans and derivatives, without the same sort of big intermediaries that exist in traditional finance, raising difficult questions about how rules should be enforced. There are also lurking anti-money laundering questions. The Treasury Department’s Financial Crimes Enforcement Network late last year proposed requiring banks and crypto exchanges to report more information on virtual currency transactions involving anonymous users, in an effort to better track illicit activity. In practice, that rulemaking could have made it more complicated for crypto-focused apps to operate, causing a freak out from the industry. The FinCEN proposal, which originally had a 15-day comment period, has since given the industry much more time to give input; time will tell whether the rule ultimately breaks in a more crypto-friendly way. IT’S TUESDAY — Ben White is off this week. Please send any MM pitches to Katy O’Donnell at kodonnell@politico.com, who is taking the helm next, and Aubree Eliza Weaver at aweaver@politico.com, as well as the rest of the crew: vguida@politico.com and zwarmbrodt@politico.com. | | | | SUBSCRIBE TO "THE RECAST" TO JOIN AN IMPORTANT CONVERSATION: Power is changing, in Washington and across the country. More people are demanding a seat at the table, insisting that all politics is personal and not all policy is equitable. Our twice-weekly newsletter "The Recast” breaks down how race and identity are shaping politics and policy in America and we are recasting how we report on it. Get fresh insights, scoops and dispatches on this crucial intersection from across the country and hear from important new voices that challenge business as usual. Don't miss out, SUBSCRIBE . Thank you to our sponsor, Intel. | | | | | | | | YELLEN PLANS TO SPARE CHINA FROM CURRENCY MANIPULATOR STATUS — Bloomberg’s Saleha Mohsin: “Treasury Secretary Janet Yellen will decline to name China as a currency manipulator in her first semiannual foreign-exchange report, according to people familiar with the matter, a move that allows the U.S. to sidestep a fresh clash with Beijing. The report, which is not yet finalized, is due on Thursday, although it is unclear when the department will release it. During the Trump era, the Treasury Department was accused of politicizing the report after it abruptly designated China a manipulator in mid-2019 outside its usual release schedule, only to lift the label five months later to win concessions in a trade deal.” BIDEN BEGINS INFRASTRUCTURE NEGOTIATIONS — WSJ’s Andrew Duehren and Catherine Lucey: “President Biden and a bipartisan group of lawmakers discussed how to pay for his $2.3 trillion infrastructure package during a meeting with at the White House Monday, according to attendees. “During the roughly two-hour discussion, Republicans said they remain opposed to raising taxes on corporations and pushed for a narrower package. Mr. Biden showed an openness to breaking his proposal into smaller parts and considering different ways to pay for it, according to lawmakers who attended the meeting.” CHINA TIGHTENS GRIP OVER ANT GROUP — NYT’s Raymond Zhong: “China’s fast-moving campaign to curb the power of internet giants has hit its latest mark: Ant Group, the fintech sister company of the e-commerce behemoth Alibaba. Ant announced on Monday that it would undertake a sweeping, government-ordered overhaul of its business to allay regulators’ concerns about the way it competes with rivals, its large-scale collection of user data and the risks its business may pose to the wider financial system.” IMF LEADER SEES ALIGNMENT ON CLIMATE DISCLOSURE — Our Zach Warmbrodt: “The IMF’s No. 2 official on Monday said he expects governments to converge on standards for requiring companies to report their climate-related activities, as the U.S. prepares to pursue disclosure rules in the footsteps of the EU. “In a briefing with reporters, IMF First Deputy Managing Director Geoffrey Okamoto said he is optimistic that gaps can be closed. International coordination has become an urgent issue now that the U.S. is accelerating work on climate-focused financial regulations after lagging behind other jurisdictions during the Trump era.” WATERS FACES RIFT WITH MCHENRY OVER FLOOD INSURANCE — Zach again: “Partisan tensions over President Joe Biden's $2 trillion infrastructure plan are threatening to derail work on an issue that had recently united Democrats and Republicans — flood insurance rate reform. “The new fight is unfolding in response to a draft five-year National Flood Insurance Program reauthorization bill that House Financial Services Chair Maxine Waters (D-Calif.) began circulating the last few days without buy-in from the panel's top Republican, Rep. Patrick McHenry of North Carolina. The move suggests that Waters wants her proposal to be in Biden’s infrastructure package.” STUDY FINDS AI USED BY FINTECH COMPANIES DISCRIMINATES AGAINST WOMEN — There’s a gender problem in banking — and it may not be what you think. According to a new study from Women’s World Banking, the credit scoring artificial intelligence systems used by financial technology companies to determine creditworthiness are likely to discriminate against women and in turn, contribute to the $17 billion gender credit gap and the approximately 1 billion women who remain “unbanked.” The study found that the algorithms used in these technologies have biases because the individuals who create them often have unconscious biases that make their way into the code. Additionally, the datasets themselves may reflect biases. For example, many digital credit companies collect data on smartphone use like GPS location and network connections — but because women are more likely to have unpaid care responsibilities, they’re also statistically less likely to own a smartphone or be connected to the internet, which is then reflected in the datasets used in the algorithms. | | | | YOUR GUIDE TO THE BIDEN ADMINISTRATION: As the Biden administration closes in on three months in office, what are the big takeaways? Will polls that show support for infrastructure initiatives and other agenda items translate into Republican votes or are they a mirage? What's the plan to deal with Sen. Joe Manchin? Add Transition Playbook to your daily reads for details you won't find anywhere else that reveal what's really happening inside the West Wing and across the executive branch. Track the people, policies and power centers of the Biden administration. Subscribe today. | | | | | | | | ‘DR. DOOM’ BLASTS FROM PAST TO PRESENT — Our Kellie Mejdrich: “Henry Kaufman, nicknamed Dr. Doom during his 26 years at Salomon Brothers, has a new warning. In his latest book, ‘The Day the Markets Roared: How a 1982 Forecast Sparked a Global Bull Market,’ he argues the influence of central banks has increased to the point that it might present its own risk to the financial system. “‘We’re moving to an environment, which I call statism, in which the federal government and the Federal Reserve dominate the economic and financial system. And that, at times, used to occur in wars. Not in peacetime,’ Kaufman said in an interview. ‘There is a risk as a result of this, that the private sector eventually loses more power, and … the federal government increases its power. That also has a great effect on our local governments, states and municipalities and so on, because under that kind of scenario they become more dependent on the federal government. And that is not what the Founding Fathers had in mind when they put together our country.’” DEUTSCHE BANK TO OFFER VACCINATIONS — German-owned Deutsche Bank says it is partnering with Premise Health to begin offering coronavirus vaccines to its employees in New York and “eligible dependents” on April 20, subject to vaccination availability from the state. “As far as we know we’re the first and only Wall Street bank to be offering employees + dependents vaccine appointments from the office,” spokesman Dylan Riddle told MM. The first wave is reserved for full-time staffers currently approved to work at the bank’s office at 60 Wall Street. KEY PLAYER BEHIND THE PROJECT FORMERLY KNOWN AS LIBRA LEAVES — Zach Warmbrodt, one more time: “Dante Disparte has left his position as Diem Association executive vice president to be chief strategy officer and head of global policy at cryptocurrency exchange operator Circle. Disparte had been one of the key public-facing leaders of the Diem Association – earlier known as the Libra Association – as Facebook and other backers stood up the organization to launch new global digital currencies.” A LOOK AT FED DIVERSITY — Per a new Brookings Institution report on the history of Federal Reserve regional bank boards: “They are overwhelmingly white, overwhelmingly male, and overwhelmingly drawn from the business communities within their districts, with little participation from minorities, women, or from areas of the economy—labor, nonprofits, the academy—with important contributions to make to Fed governance. … It appears suggestive at least that the 1977 law prohibiting discrimination had little effect in changing the racial composition of these boards.” GOLDMAN RISK GROUP EXAMINES 2021 MARKET EVENTS FOR LESSONS — Reuters’ Elizabeth Dilts Marshall: “Goldman Sachs Group Inc. executives are examining how well the bank navigated several major market events this year that caused extreme volatility, people familiar with the matter told Reuters. The review will include a market-wide fire sale of stocks triggered by Archegos Capital Management’s default on margin calls at banks including Goldman, the sources said.” AGENCIES QUICKLY REVERSE WALL STREET-FRIENDLY RULES — Reuters’ Katanga Johnson: “U.S. President Joe Biden’s interim regulators are wasting no time unraveling Wall Street-friendly measures introduced under former Republican President Donald Trump, using quick-fix legal tactics. They have spiked or stalled more than a dozen contentious Trump-era measures that critics said eroded consumer protections, weakened enforcement, and curbed investors’ ability to push for environmental, social and governance changes.” STOCKS SLIP AHEAD OF BUSY EARNINGS WEEK — WSJ’s Joe Wallace: “U.S. stocks inched lower Monday at the start of a busy week of corporate earnings and economic data. Investors said they were positioning for the start of earnings season, as well as data that will help to gauge whether a coming burst of inflation will prove transitory. Among the reports expected this week are those from JPMorgan Chase, Bank of America and Wells Fargo —and companies ranging from Delta Air Lines to PepsiCo to UnitedHealth Group. Meanwhile, inflation data due on Tuesday are expected to show consumer prices picked up in March.” | | | | Follow us on Twitter | | | | Follow us | | | | |  |
