| | | | |  | | By Sam Sutton, Katy O'Donnell 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 subscribers 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. Dueling bills — More major crypto legislation is coming. This time, Senate leadership is attached. Senate Agriculture Chair Debbie Stabenow (D-Mich.) and Sen.John Boozman of Arkansas, the committee's top Republican, are writing a bill that would give the Commodity Futures Trading Commission more power to oversee crypto markets. Details of the bill are still being hammered out and draft language isn't being circulated, but the emergence of another crypto bill — this time from two top Senate lawmakers — is expected to throw more weight behind efforts to anoint the CFTC as Washington's top crypto regulator, according to interviews with more than a half-dozen lobbyists, Hill staffers and industry leaders. Many, including consumer advocacy organizations and financial watchdog groups, have argued that it's a role better suited for the much-larger Securities and Exchange Commission. Both agencies have been laying claim to different elements of the new investment sector, whose growth has been driven by trading platforms and digital assets that don't fit — or deliberately skirt — the rules that govern traditional securities and commodities markets. CFTC Chair Rostin Behnam, a former Stabenow aide who worked on Senate Agriculture, has been pushing Congress to grant his agency direct authority to surveil digital markets and monitor nascent crypto trading platforms since his confirmation hearing last year. He has also argued that the most widely traded digital assets, Bitcoin and Ether, carry the hallmarks of financial assets that have traditionally fallen under his agency's jurisdiction. Those arguments are resonating with lawmakers, particularly after crypto markets were rocked after a popular online lending platform and algorithmic stablecoin collapsed earlier this year. "Recent events underscore the need for mandatory federal regulation of the crypto marketplace," Stabenow said in a statement to POLITICO. "It is critical that the CFTC has the proper tools to make this emerging market safe for customers. My committee has examined the risks and the importance of commonsense regulations, and I am working closely with Ranking Member Boozman on what a responsible regulatory framework would look like." Stabenow, who also chairs her caucus's policy and communications committee, and Boozman began exploring ways to expand the CFTC's remit earlier this year, when they joined with their counterparts on House Agriculture to ask what the agency would need to better police volatile spot markets that ping-ponged between $1.2 trillion and $3 trillion in value in the last year. Senate staff have been consulting with agency officials on what that framework should look like, according to three sources. Behnam teased the likely arrival of another bipartisan crypto bill at a Washington Post event earlier this week. "There's more coming from the chair and ranking member of the Agriculture Committee," he said. The new bill – along with recent legislation introduced by Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) — "are the types of things that I think will preserve American exceptionalism, will preserve the market in the U.S. and keep this conversation moving forward in a thoughtful way," Behnam said. Many expect that Stabenow and Boozman's bill will be narrower in scope than what was proposed by Lummis and Gillibrand; focusing only on the CFTC's authority to monitor digital commodities in spot markets where billions of dollars are transacted daily. Lummis and Gillibrand's high-profile legislation was criticized by investor protection and consumer advocacy groups who've been wary of crypto industry-led efforts to sideline the SEC — a much larger agency led by former CFTC Chair Gary Gensler. Gensler, for his part, has said that most digital assets and exchanges should fall under his agency's jurisdiction. With the midterms, there's little chance that lawmakers will coalesce around any major crypto proposal this year. Still, given Stabenow and Boozman's status on the Hill, legislative staff and lobbyists say the latest attempt to shape digital asset policy will probably have considerable bearing on how the next Congress approaches crypto. IT'S FRIDAY. You made it. Have a tip or a story idea? Let us know at ssutton@politico.com, kodonnell@politico.com, kdavidson@politico.com and aweaver@politico.com
| | | | A message from Grayscale: With an eight-year track record of working proactively and collaboratively with the SEC, Grayscale is committed to serving its investors. Grayscale's proposal to convert Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF is a chance to make history, while enhancing the fairness and accessibility of the market, so investors can decide what product works best for them. Learn more. | | | | | | Consumer Price Index data released at 8:30 a.m. PRICES EXPECTED TO REMAIN HIGH — The Labor Department's report on May inflation today is likely to show consumer prices are at or near four-decade highs. Treasury Secretary Janet Yellen on Thursday said the economy is on solid footing despite rising prices and that a strong labor market and healthy household finances should hold up consumer spending. "There's nothing to suggest a recession is in the works," Yellen said at an event hosted by The New York Times. The Times has more here. HOUSEHOLD WEALTH DROPS — Reuters: "U.S. household wealth declined for the first time in two years in the first quarter of 2022 as a drop in the stock market overwhelmed continued gains in home values, a Federal Reserve report on Thursday showed. Household net worth edged down to $149.3 trillion from a record $149.8 trillion at the end of last year, the Fed's quarterly snapshot of the national balance sheet showed." SEC INVESTIGATING UST STABLECOIN BLOWUP IN FRESH THREAT TO TERRA — Bloomberg's Matt Robinson: "The U.S. Securities and Exchange Commission is investigating whether the marketing of the TerraUSD stablecoin before it crashed last month violated federal investor-protection regulations, according to a person familiar with the matter." REMEMBERING ARNIE COHEN — Kate Davidson writes: A friend of MM emailed with the sad news that Arnie Cohen, a longtime financial services professional who began his career in Washington working for then-House Speaker Tip O'Neill, died over Memorial Day weekend. Arnie was a beloved figure in Washington financial services circles, of which he'd been a part for more than 40 years. His friends remembered him as always being in the middle of the action — he lobbied for the savings and loan industry during the S&L crisis, and later worked at the Office of Thrift Supervision. He served most recently as a congressional affairs specialist in the Office of the Comptroller of the Currency's congressional relations office, before retiring in December 2020. He was also a friendly face to young reporters, including your MM host, who remembers him fondly from many long Dodd-Frank hearings in 2009 and 2010. May his memory be a blessing to his family and friends.
| | | | A message from Grayscale:   | | | | | | ECB TO HIKE RATES IN JULY, FIRST TIME IN 11 YEARS — From POLITICO Europe's Johanna Treeck: "The European Central Bank will end its bond buys early next month and plans to lift interest rates for the first time in over a decade by 25 basis points at its July meeting, with inflation projected to top the central bank's 2 percent target until at least 2024, it said Thursday. In a statement released after its policymakers met in Amsterdam, the central bank said it also "expects" to raise rates in September by a "larger increment" if the current inflation outlook doesn't improve. The strong signal of a larger interest rate hike in September comes as a hawkish surprise, given that ECB chief economist Philip Lane recently described 25-basis-point moves as "benchmark pace." Other central banks are doubling down against inflation, too — Reuters: "Major central banks are racing to ditch post-pandemic stimulus and picking up the pace of interest rate hikes to get on top of surging inflation. The Reserve Bank of Australia on Tuesday became the latest to deliver a hawkish surprise with a half-point rate hike, following in the footsteps of the United States, Canada and New Zealand."
| | | | 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. | | | | | | | | Eduardo Gallardo has joined law firm Paul Hastings as global co-chair of mergers and acquisitions in its New York office. Gallardo was previously a partner at Gibson Dunn & Crutcher, where he was both head of global M&A and chair of the firm's shareholder activism defense group. Annette Capretta has been named chief counsel of ICI Global. Capretta has served as an associate general counsel at the Investment Company Institute since 2020. She worked previously as deputy managing director of the Independent Directors Council, and was a senior risk adviser at the SEC.
| | | | A message from Grayscale: As other countries approve spot Bitcoin ETFs, America is falling behind. With its proposal to convert Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin ETF, Grayscale has a proven solution. GBTC is the world's largest Bitcoin investment vehicle, and there is no other product on the market with the size* or operational track record that is better suited to make this transition. Spot Bitcoin ETFs could promote financial accessibility and safety, giving more people access to an increasingly digital global economy which could allow investors to benefit more fully from their investment. America is ready for a spot Bitcoin ETF, and Grayscale Bitcoin Trust was made for the job. Literally. Learn more.
*based on AUM as of June 2022 | | | | | | HOW SCOTUS' UPCOMING RULING COULD DEFANG WASHINGTON —From our Alex Guillen and Sarah Owermohle: "The Supreme Court is expected to issue a ruling this month hobbling the Biden administration's efforts to rein in greenhouse gases — but its impact could weaken Washington's power to oversee wide swaths of American life well beyond climate change. "The upcoming decision on the Environmental Protection Agency's climate oversight offers the conservative justices an opportunity to undermine federal regulations on a host of issues, from drug pricing and financial regulations to net neutrality. Critics of the EPA have clamored for the high court to do just that, by declaring it unlawful for federal agencies to make "major" decisions without clear authorization from Congress." STOCKS STUMBLE — AP's Damian J. Troise and Stan Choe: "Stocks on Wall Street tumbled Thursday following the latest reminder that central banks now care more about fighting inflation than propping up markets. The S&P 500 sank 2.4 percent, putting it on track for its ninth losing week in the last 10. The Dow Jones Industrial Average fell 1.9 percent, and the Nasdaq composite lost 2.7 percent. Wall Street's losses accelerated as the closing bell for trading approached, with traders scrambling to get in last moves ahead of a highly anticipated report on U.S. inflation due Friday morning." JOBLESS CLAIMS RISE TO HIGHEST LEVEL SINCE JANUARY — WSJ's Bryan Mena: "New applications for unemployment benefits rose last week above their prepandemic average for the first time since January, adding to signs the hot labor market could be starting to cool a little. Initial jobless claims, a proxy for layoffs, increased by 27,000 to 229,000 last week from the previous week's revised level of 202,000, the Labor Department said Thursday." TOOMEY PRESSES KC FED ON LOSING ACCESS TO PAYMENT RAILS — From our Victoria Guida: "The Federal Reserve Bank of Kansas City has revoked access to the central bank's payment rails for Colorado-based firm Reserve Trust, according to Sen. Pat Toomey (R-Pa.), the latest development in an ongoing saga that helped sink one of President Joe Biden's nominees. "Reserve Trust's master account, which gave it the ability to transfer money without going through a bank, came under the spotlight earlier this year because Fed nominee Sarah Bloom Raskin sat on its board from 2017 to 2019. Republicans implied, without clear evidence, that Raskin had acted improperly by helping the firm in its account application and pressed for more information. Eventually, they refused to show up to a committee vote on her, citing lack of information on her role." JUMP IN MORTGAGE RATES COULD ADD $100K TO HOUSING COSTS — NYT's Gregory Schmidt: "The recent rise in U.S. mortgage rates could bump up the average mortgage payment by hundreds of dollars each month, potentially adding more than $100,000 in costs over the lifetime of a typical loan, a new study shows. The report, compiled by the online lending marketplace LendingTree, compared the average monthly payments on 30-year, fixed-rate mortgages across the nation in January, when the average rate was 3.79 percent, and April, when it hit 5.25 percent. It found that in states where housing prices were the highest, new borrowers could expect to see bigger increases in costs."
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