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Presented by MFA: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Zachary Warmbrodt and Victoria Guida | | | 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.
| | DAVOS, Switzerland — The cryptocurrency industry is experiencing a moment of resurgence in the Swiss Alps. Its presence at this year’s World Economic Forum is no doubt diminished compared to the more heady days of crypto hype, following a dramatic price crash and the tectonic implosion of the FTX exchange in 2022. But some of the biggest crypto players left standing cruised into Davos this week with a powerful wind at their backs. Just days before the elite confab, the U.S. Securities and Exchange Commission approved the trading of investment funds backed by bitcoin. It was one of crypto’s biggest Washington victories, after years of clashes with regulators and skeptical lawmakers. “We all feel that the products and services we are providing have now firmly woven into the fabric of financial services,” Grayscale Investments CEO Michael Sonnenshein said of the big crypto firms present in Davos. His company spearheaded litigation that triggered the SEC’s approval of the bitcoin investment funds. It underscores how crypto is moving toward a level of global credibility despite the cloud of fraud, mismanagement and reckless speculation that’s hung over the space in the last few years. The approval of bitcoin investment funds in the U.S. – a push supported by some of the heaviest hitters on Wall Street — is just one example of moves by governments around the world to grant legitimacy to digital asset offerings. It’s a sign that the hangover from Sam Bankman-Fried — the FTX founder convicted of cheating customers and investors out of billions of dollars — is passing. “The funeral dirge is over,” financier and crypto advocate Anthony Scaramucci said in a Davos interview. “This is a Lazarus year.” The crypto talk around the World Economic Forum is about how digital assets can integrate even further into traditional finance and how the underlying blockchain technology – essentially a souped-up spreadsheet – can be used to track more traditional assets. To be sure, artificial intelligence is eclipsing crypto on the Davos agenda. AI is dominating the conversation among business leaders. It’s all over the corporate branding that adorns shops along the main Davos promenade, like crypto once was. “There’s an AI house every block, whereas historically there was a blockchain foundation or a web3 house or a crypto house,” Circle chief strategy officer Dante Disparte told POLITICO. “I take that to mean the technology stack has arrived, when the technology can sort of recede to the background.” Many crypto executives don’t mind taking a more low-profile approach in the wake of Bankman-Fried's dramatic rise and fall. As Ripple global head of public policy Rob Grant said: “Boring is good.” While crypto continues to battle with SEC Chair Gary Gensler and Sen. Elizabeth Warren (D-Mass.) over consumer protection and financial crime concerns, industry executives at Davos say the environment at the WEF is much more inviting. It’s an opportunity for them to pitch the benefits of digital assets to other world leaders who may be more open-minded. Coinbase chief policy officer Faryar Shirzad said Monday that the crypto exchange had meetings scheduled with three prime ministers and 10-15 ministers. “The governments that we're interested in talking to, the level of interest on their side is typically quite high,” he said. “It’s not as though the Elizabeth Warren attack on us defines how we engage with most governments.” IT’S THURSDAY — Anyone still sticking with their New Year’s resolutions? Drop us a line at zwarmbrodt@politico.com and vguida@politico.com.
| | | | A message from MFA: Managed Funds Association — now MFA — unveiled the next evolution of its brand, which recognizes its global leadership role in the alternative asset management industry. MFA’s mission remains unchanged — advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries, including pensions, foundations, and endowments. MFA helps its members get connected, stay informed, and shape the future of alternative asset management. Learn more at MFAalts.org. | | | | | First day of the annual meeting of the American Bar Association’s Banking Law Committee … Acting Comptroller of the Currency Michael Hsu speaks on bank liquidity and mergers at Columbia Law School at 9:30 a.m. … FHFA Director Sandra Thompson speaks at National Fair Housing Alliance event on artificial intelligence at 9:10 a.m. … Treasury official Graham Steele speaks at George Washington University Law School at 10 a.m. … the House Financial Services Oversight and Investigations Subcommittee holds a hearing on the SEC’s climate disclosure rule at 10 a.m. … the Senate Banking Committee holds a hearing on technology and China at 10 a.m. … The House Small Business Committee holds a hearing on capital access at 10 a.m. … Exclusive: Steele’s swan song — Graham Steele, whose tenure as assistant Treasury secretary for financial institutions ends this week, in a speech today will run through the department’s accomplishments during his tenure under “the seven Cs”: community, climate, cybersecurity, cryptocurrency, capital, competition and consumers. But he also will provide thoughts on what still needs to be done, particularly on financial regulation. He suggests, for example, expanding restrictions on how banks are allowed to treat unrealized losses. Other quotes:
- “There are important questions that remain about whether the current prudential framework sufficiently addresses the risks that arise from the rapid growth in a bank’s assets in a timely manner.”
- “The capital requirements for large regional banks are also relatively static, meaning that many of the largest U.S. non-global systemically important banks have the same risk-based capital requirements as much smaller and less complex banks.”
- “The application and calibration of the various liquidity requirements for large, regional, and midsize banking institutions could likely be updated based upon recent experience, including by revising the treatment of both uninsured and brokered deposits.”
- “It is worth considering whether regulatory frameworks should provide more comparable treatment for large regional banking organizations with a holding company and those without one.”
- “For crypto-assets, policymakers have a chance to act before a crisis to adopt high standards that support responsible innovation. At the same time, it is critical that any legislative proposals not undermine the already robust regulatory foundations that apply to financial institutions and capital markets.”
| | | | JOIN 1/31 FOR A TALK ON THE RACE TO SOLVE ALZHEIMER’S: Breakthrough drugs and treatments are giving new hope for slowing neurodegenerative diseases like Alzheimer’s disease and ALS. But if that progress slows, the societal and economic cost to the U.S. could be high. Join POLITICO, alongside lawmakers, official and experts, on Jan. 31 to discuss a path forward for better collaboration among health systems, industry and government. REGISTER HERE. | | | | | Late breaking — Mike Pyle, the Deputy National Security Advisor for International Economics at the White House National Security Council, will soon step down from his post, our Gavin Bade scoops, dealing a blow to Biden’s already teetering global trade agenda. Dimon’s new Trump praise — Five years after Jamie Dimon talked about beating Donald Trump in a race for the White House, the JPMorgan CEO came out with a new message Wednesday: The Republican frontrunner wasn’t all that bad the first time around. “Just take a step back and be honest,” Dimon said during a CNBC interview in Davos. “He was kind of right about NATO, kind of right about immigration, he grew the economy quite well, tax reform worked, he was right about some of China … and I don’t like how he said things about Mexico, but he wasn’t wrong about some of these critical issues.” The outspoken chief executive of the nation’s largest bank made a big push late last year to build support behind Nikki Haley as a Trump alternative. But Dimon wouldn’t quell backing Trump at the time. “He might be the president, I have to live with that too,” he said at the 2023 DealBook Summit. In the meantime, Dimon pressed Democrats on Wednesday to quit bashing MAGA voters. It could be hurting President Joe Biden’s chances in November, he said. — Declan Harty The latest on crypto — Republicans on the House Financial Services and Agriculture Committees are quietly shopping revised text of landmark legislation that would dictate how the SEC and CFTC oversee cryptocurrencies, our Eleanor Mueller scoops. US, Chinese officials set to huddle — Treasury officials will meet with their Chinese counterparts Thursday, in Beijing for the first time, following November’s summit between Joe Biden and Xi Jinping, the FT reports. A Treasury official told the paper that the two sides would discuss financial stability, cross-border data regulations, capital markets, sustainable finance, anti-money laundering, terrorism financing and IMF policies.
| | | | A message from MFA:   | | | | | Basel feels the heat — Banking agencies have received a flurry of feedback from lawmakers on their proposal to raise capital requirements. The verdict? Members of Congress from across the ideological spectrum have concerns, which suggests that the scope of changes to the draft rule could be quite broad. (Although the Federal Reserve and its fellow independent bank regulators don’t answer to Congress, these elected officials represent many industries and geographies.) In one letter — signed by over 50 House Democrats from Joyce Beatty (Ohio) to Bill Foster (Ill.) to Ayanna Pressley (Mass.) to Jim Clyburn (S.C.) to Josh Gottheimer (N.J.) – they urge agencies not to reduce access to credit for homebuyers and small businesses and warn that operational risk capital charges are too high. Thirteen Democratic senators led by Chris Van Hollen (Md.) in a letter first reported by MM said they were supportive of the regulators’ work to make banks safer but worried that provisions of the draft rule would make it a lot more expensive for banks to finance clean energy projects using tax credits. Sen. Joe Manchin (D-W.Va.) raised a similar issue in his own letter. A smaller group led by Foster called on the agencies to “further clarify and demonstrate the effects of the proposal for public consideration.” “We implore you to engage with consumer advocates, industry professionals, academics, and other relevant stakeholders in a collaborative and transparent way,” they added. Sens. Kyrsten Sinema (I-Ariz.) and Mike Crapo (R-Idaho) expressed reservations about provisions that would raise capital requirements on derivatives transactions. Eleanor also reported on a letter from Republicans and Democrats on the House Financial Services Committee that warned of adverse effects on capital markets. That missive was led by Rep. Brad Sherman (D-Calif.), Ann Wagner (R-Mo.), Foster and Andy Barr (R-Ky.), who were joined by 11 other committee members.
| | | | YOUR GUIDE TO EMPIRE STATE POLITICS: From the newsroom that doesn’t sleep, POLITICO's New York Playbook is the ultimate guide for power players navigating the intricate landscape of Empire State politics. Stay ahead of the curve with the latest and most important stories from Albany, New York City and around the state, with in-depth, original reporting to stay ahead of policy trends and political developments. Subscribe now to keep up with the daily hustle and bustle of NY politics. | | | | | Notable: Fed Gov. Michelle Bowman said in a speech Wednesday that she is “cautiously optimistic that policymakers can work toward a reasonable compromise, one that addresses two of the most critical shortcomings of the proposal: over-calibration and the lack of regulatory tailoring.” She added: “Public feedback has also assisted in identifying the aspects of the proposal that result in the most severe unintended consequences.” Forgot about SPACs? The SEC didn’t — Long after the latest boom and bust of blank-check companies on Wall Street, the SEC is about to finalize new rules for special purpose acquisition companies, according to an agency notice. The agency will vote next Wednesday on the final version of a nearly two-year-old proposal aimed at beefing up the disclosures from SPACs, our Declan Harty reports. The investment vehicle du jour of 2021, SPACs are essentially publicly traded skeleton companies that are built to combine with a privately traded entity that can take over its spot on NYSE or Nasdaq.
| | | | A message from MFA: MFA has more than 175 member fund managers, including traditional hedge funds, credit funds, and crossover funds, that collectively manage over $3.2 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.
With offices in Washington, DC, New York, Brussels, and London, MFA is the leading voice on public policy issues affecting the alternative asset management industry. Visit MFAalts.org to learn how MFA helps its members get connected, stay informed, and shape the future of alternative asset management. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
