This Week in Policy (9/12)
မင်္ဂလာပါ fintech ဝါသနာရှင်များ!
Beautiful script, right? It is also the official language of a Southeast Asian country that witnessed a recent coup d'état and whose ousted government is seeking to use frozen funds to issue the first-ever “revolutionary” central bank digital currency (CBDC; yes, a CBDC of a “central bank in exile” that will support “revolutionary efforts”)!
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Close followers of crypto news on social media must have seen the outcry on Twitter about an upcoming ban in the U.S. on the Proof-of-Work (PoW) consensus model, the mechanism used to validate transactions and mine new tokens (units) of major cryptocurrencies, primarily Bitcoin. The story began on September 8th when the White House Office of Science and Technology released a report on the environmental impact of blockchain consensus mechanisms. Various outlets posited that a prohibition of Bitcoin and other cryptocurrencies that use PoW might be upcoming, causing a stir among users of digital assets. Yet a careful reading of the report shows that a complete ban was discussed as a last-resort option that could be used if all other possible technological and regulatory solutions fail. The report is the first of a series of interagency policy reports that were mandated by President Biden's executive order of March 9th and are expected this month.
To what extent do you rely on Twitter versus other news outlets as a source of crypto news?
In other news that has to do with the CBDC-stablecoin competition, the Vice Chair for Supervision of the Federal Reserve (Fed) Michael Barr called upon Congress to regulate stablecoins in a speech on the safety and fairness of the financial system, which he delivered at the Brookings Institution on September 7th. The same call was made by the Fed Board Chair Jerome Powell in an interview with the heads of the Cato Institute. Meanwhile, Republicans on the House Financial Services Committee, led by the Committee's ranking member Rep. Patrick McHenry (R-NC), wrote a letter to Vice Chair of the Board of Governors of the Fed Lael Brainard asking for information about how the Fed would potentially launch a U.S. CBDC. “In your opinion” the letter asked, “does support mean an explicit law from Congress authorizing the Fed to issue a digital currency?” While we await an official answer, Jerome Powell explained the Fed’s position in the interview with the Cato Institute: “We do not intend to proceed with the issuance of a CBDC without clear support from both the executive branch and Congress, ideally in the form of a specific authorizing law.”
In your opinion, can the Fed move ahead with a CBDC with “less-than-ideal” Congressional support? What are the arguments for and against such a move?
What else do you need to know this week?
The Securities and Exchange Commission will establish a new office for cryptocurrency filings with the Division of Corporation Finance's Disclosure Review Program, which reviews disclosures by publicly traded firms. The creation of the new office will entail no changes to disclosure rules and only aims to improve the review of filings involving crypto assets. Also, six plaintiffs, including several employees of crypto exchange Coinbase and users of the crypto mixer Tornado Cash, are taking the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) to a federal court in Texas to challenge OFAC’s sanctions against Tornado Cash. The plaintiffs brought the legal action in their personal capacity, but Coinbase is financially backing the lawsuit.
See you next week!