News : Conservatives eye CBDC vote

Thursday, March 28, 2024

Conservatives eye CBDC vote

Mar 28, 2024

Presented by

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.

QUICK FIX

For House Financial Services Chair Patrick McHenry’s crypto bills, there is yet another bump in the road: House conservatives floating a vote on a central bank digital currency alongside other digital asset legislation.

The issue picked up momentum last month when the Heritage Foundation’s political arm announced it would grade members on their support for a bill from Rep. Tom Emmer (R-Minn.) that would block the Federal Reserve from issuing a CBDC to consumers, either directly or through banks, out of concerns over privacy.

"We do not want to emulate the Chinese Communist Party, who are using central bank digital currency — the digital yuan — to literally surveil their population," Emmer told the American Bankers Association earlier this month. "It's outrageous."

Now, half a dozen lawmakers, aides and lobbyists say House conservatives are discussing a vote on the legislation alongside McHenry’s flagship crypto bills, which would govern stablecoins and the broader crypto industry.

One proposed plan? Move Emmer’s CBDC legislation to the House floor at the same time as one or both of the crypto bills, said one House Republican lawmaker granted anonymity to discuss closed-door conversations. The thinking is that without it, any Republican not on the House Financial Services Committee will shy away from voting “yes” on crypto out of concerns like those Heritage raised.

“There’s a growing understanding that a CBDC will have to be addressed alongside any crypto bill,” said one industry executive granted anonymity to speak candidly.

McHenry declined a request for comment.

If the bills are combined, it would risk isolating the few Democrats who are supportive of McHenry’s other legislation. Not a single member of the minority voted to approve Emmer’s measure in September.

“It’s ridiculous,” Rep. Stephen Lynch (D-Mass.), the top Democrat on House Financial Services’ crypto panel, said in an interview. With more than 130 countries exploring their own CBDCs, “sticking our head in the sand is not an option here.”

Attaching language like Emmer’s could scare away moderate Democrats like Reps. Josh Gottheimer of New Jersey, Jim Himes of Connecticut, Wiley Nickel of North Carolina, Brittany Pettersen of Colorado and Ritchie Torres of New York. And with a one-vote majority come April 19, Republicans need their help.

“It just gives Democrats another excuse to walk away,” said a crypto lobbyist granted anonymity to speak candidly.

In the meantime, the talks are more proof that a digital dollar is becoming a key issue for conservatives who see it as an "inherent threat to civil liberties," to use Heritage’s phrasing. Former President Donald Trump in January swore to block any Fed effort to develop a central bank digital currency. And Sen. Ted Cruz (R-Texas) in February introduced a Senate companion bill to Emmer’s.

“Preventing Central Bank Digital Currencies (CBDC) continues to be a major area of focus for House Republicans,” Rep. French Hill (R-Ark.) said in a statement. “Members on both sides of the aisle are advancing this legislative objective and it remains a key part of our digital asset agenda.”

Federal Reserve Chair Jerome Powell told lawmakers earlier this month that the central bank would not issue a digital dollar without congressional approval.

It’s Thursday — Send tips to zwarmbrodt@politico.com and follow Eleanor (@Eleanor_Mueller) and Jasper (@Jasper_Goodman).

SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, the newsletter taking you inside pivotal discussions at the most influential gatherings in the world, including WEF in Davos, Milken Global in Beverly Hills, to UNGA in NYC and many more. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW.

Driving the Day

Former cryptocurrency king Sam Bankman-Fried will be sentenced in federal court in New York at 9:30 a.m. … University of Michigan consumer sentiment data for March is out at 10 a.m. … ABA’s economic advisory committee will release its economic forecast at 10:30 a.m.

Yellen sounds alarm on China — Treasury Secretary Janet Yellen said Wednesday she plans to press China during her upcoming trip over the impact of the country’s heavily subsidized energy exports.

“There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen told host Andrea Mitchell on MSNBC. She added that she thinks “China’s desire is to really have global domination over” the clean energy sector.

“I intend to talk to the Chinese when I visit about overcapacity in some of these industries and make sure that they understand the undesirable impact that this is having — flooding the market with cheap goods — on the United States but also on many of our closest allies,” she said.

Bridge collapse fallout — Yellen also said she expects insurance payments to cover at least some of the reconstruction of the Francis Scott Key Bridge that collapsed in Baltimore this week.

“My expectation would be that ultimately there’ll be insurance payments, in part, to cover this, but we don’t want to allow worrying about where the financing is coming to hold up reconstruction,” she said on MSNBC. She added that funding from the bipartisan infrastructure law passed by Congress in 2021 “could potentially be helpful.”

Her comments come as supply chains are beginning to feel the impact of the deadly collapse and investigators are starting to examine what caused it. Moody’s analyst Ted Hampton said replacing the collapsed bridge “will likely take months or even years, but in the near term, quick resumption of port functions in Baltimore would help stem economic damage.”

“As long as the Port of Baltimore remains closed, re-routing of automotive and other cargo shipments to alternate east coast locations will erode the port’s competitive advantage as the Atlantic port located closest to markets in the Midwest,” he said.

A message from Electronic Payments Coalition:

CRS: NO EVIDENCE THAT DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP CONSUMERS OR SMALL BUSINESSES The independent Congressional Research Service (CRS) is the latest organization to release a report questioning whether the Durbin-Marshall Credit Card Bill would help consumers or small businesses. CRS echoed an earlier report by the Richmond Fed noting that consumers failed to see any meaningful cost savings because of similar legislation imposing routing mandates and price caps on debit card interchange. Learn more HERE.

Crypto

SEC notches win in Coinbase fight — Our Declan Harty reports that a federal judge largely rejected Coinbase's bid to throw out the SEC's case against the cryptocurrency giant on Wednesday — a win for the agency's crackdown on the market.

In an 84-page ruling, Judge Katherine Polk Failla of the Southern District of New York wrote that the majority of the SEC's charges against Coinbase can proceed. The regulator sued the company last year, alleging that Coinbase is illegally operating an unregistered securities exchange, broker and clearing agency.

On the Hill

Durbin delays swipe fee hearing — Eleanor scoops that Senate Judiciary Chair Dick Durbin (D-Ill.) will postpone a hearing on credit card swipe fee legislation until after April 9.

Durbin said last week that Visa, Mastercard, and airlines CEOs had declined his invitation to testify that day. He indicated in an interview Friday that he did not plan to subpoena the executives — a move that would require sign-off from the committee’s ranking member or a majority of its members.

A message from Electronic Payments Coalition:

Artificial Intelligence

Treasury outlines AI risks — Treasury on Wednesday rolled out a series of recommendations for how the financial industry can manage the fraud and cybersecurity risks that stem from rapidly evolving artificial intelligence technology, our Michael Stratford reports. The agency's ideas were included in a report ordered last fall as part of President Joe Biden’s sweeping executive order on the federal government’s approach to AI.

Banks are supportive of the AI initiative. Chris Feeney, vice president of the Bank Policy Institute, which represents the largest U.S. lenders, said in a statement that the group is “encouraged” by Treasury’s efforts.

“Today's report acknowledges AI's remarkable potential, the importance of ongoing public-private partnerships and the comprehensive regulatory regime already applied to banks,” said Feeney, who leads BPI’s tech policy division. “It also illustrates the industry's existing ability to effectively manage technology risks and benefit customers through innovative new products and services.”

Climate

Biden’s uneasy energy empire — Our Ben Lefebvre has a look at how Biden has gotten the closest to an “all of the above” energy economy since presidential candidates from both parties started using the phrase in the 2000s. But the result has hardly been an era of untroubled bliss for the president.

A message from Electronic Payments Coalition:

CRS QUESTIONS WHETHER DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP ANYONE AT ALL Every member of Congress should read the CRS analysis which discusses the impact the Durbin-Marshall Credit Card Bill could have on small businesses and American families. Report after report has plainly demonstrated that consumers and small businesses did NOT save any money when Congress passed the 2010 Durbin Amendment, imposing new mandates on debit cards. Now, a decade later, why would anyone assume a monumental restructuring of our nation’s secure, worry-free credit card system would yield different results? After considering the facts, the only logical solution would be to strongly OPPOSE the Durbin-Marshall Credit Card Bill. Click HERE to learn more.

Fly Around

Former OCC chief to lead mortgage broker — Former Trump administration banking regulator Brian Brooks will take over as CEO of the commercial mortgage broker Meridian Capital Group, Bloomberg reports. Brooks, who served as acting comptroller of the currency under Trump, previously worked as a crypto executive at several firms including Coinbase and Binance.US.

Happy Opening Day — David Rubenstein is officially the new controlling owner of the Baltimore Orioles after MLB owners voted unanimously to approve him yesterday. But don’t expect the co-founder of the Carlyle Group to take the heavy-handed approach that fellow Wall Street tycoon Steve Cohen has employed with the New York Mets.

“My job is to help with the business side of the organization,” Rubenstein told The Athletic. “My modus operandi is to do that as opposed to saying, ‘Hey, this player isn’t good, you should trade for this guy.’”

Access New York bill updates and Congressional activity in areas that matter to you, and use our exclusive insights to see what’s on the Albany agenda. Learn more.