May 4: This week in crypto federal policy
DC Decentralized: A weekly newsletter on digital assets and blockchain federal policy
This week decoded
In the ongoing bipartisan negotiations on market structure legislation, Sens. Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) released final text of their compromise agreement on stablecoin yield. The deal bans rewards “on a payment stablecoin balance in a manner that is economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit” and would allow “rewards or incentives based on bona fide activities or bona fide transactions that are not economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.”
Banking Republicans indicated they could achieve unified partisan support for the committee’s market structure bill at a yet-unscheduled markup in May.
While bipartisan agreement has been reached on stablecoin yield, Alsobrooks emphasized that other issues, including language around illicit finance and ethics, needed to be worked out in negotiations before Democrats could support a markup.
House Republicans attached an anti-CBDC measure to the Foreign Intelligence Surveillance Act (FISA) reauthorization bill, but the Senate stripped it out and sent the FISA bill back to the House for final passage.
I’ll be at Consensus in Miami this week. DC Decentralized will return on May 18.
Read more below
Congress
Hearings
Last week
On April 29, the House Financial Services Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity Subcommittee hearing on “Examining Derivatives’ Role in the Treasury Market.”
Upcoming
On May 19, the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions holds a hearing on “Modernizing the BSA for Financial Crime in the 21st Century”
On May 20, the House Financial Services Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee holds a hearing on “Partnering for Innovation: How Bank-Fintech Collaborations Enhance Financial Infrastructure.”
Legislation
The Senate unanimously passed a measure banning Senators and staff from participating in prediction markets.
Sens. Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) released final text of their compromise agreement on stablecoin yield. (Punchbowl)
Correspondence
Senate Banking, Housing, and Urban Affairs Committee Ranking Member Elizabeth Warren (D-MA) and Senate Committee on Finance Ranking Member Ron Wyden (D-OR) sent a letter to Commerce Secretary Howard Lutnick and Tether CEO Paolo Ardoino requesting information about a reported loan from Tether to a trust benefiting Secretary Lutnick’s four children. (Letter to Commerce) (Letter to Tether)
Trump Administration
Federal Reserve
On May 8, Federal Reserve Board Governor Lisa Cook will deliver remarks “Perspectives on Tokenization and Implications for the Financial System” at the Central Bank of West African States Conference on Digital Assets.
Commodity Futures Trading Commission (CFTC)
The CFTC filed lawsuits against New York and Wisconsin in response to the states’ lawsuits against CFTC-regulated prediction markets. (Press release)
CFTC Chair Mike Selig published an op-ed in the Wall Street Journal entitled “Prediction Markets Aren’t a New Vegas,” saying “Claims that “insider trading is rampant,” and that our insider trading rules are “fuzzier” than others are simply untrue. I’ve made it clear time and time again that anyone who engages in insider trading will be found and prosecuted to the full extent of the law. The agency has a proven track record in preventing and enforcing actions against insider trading. During my first 100 days leading the agency, we strengthened and modernized our strategies to address any bad actors in these markets and have brought enforcement actions against those who violated federal laws.” (Op-Ed)
Noteworthy Quotes and Events
ADMINISTRATION
Commodity Futures Trading Commission (CFTC)
CFTC Chair Mike Selig posted “Markets are evolving, and the CFTC is evolving with them. We’re developing fit-for-purpose rules, supporting innovation, and strengthening oversight. Our focus is clear: markets that set the global standard.”
Selig also posted “Claims that “insider trading is rampant” in prediction markets because the CFTC’s antifraud rules are “fuzzier” than others are simply untrue. During my first 100 days leading the agency, we’ve strengthened and modernized our strategies for detecting illicit activity and taken legal action against bad actors. Read my full letter to WSJ correcting the record”
Selig said, “We can certainly allow for a broad range of financial products and instruments to trade in our markets, but make sure that we tailor rules and regulations to protect investors and protect customer funds.”
Selig posted “Innovation is rooted in the freedom to challenge convention and pursue new ideas. In the US, economic freedom is foundational and continues to drive our markets forward as we define the next frontier in finance.”
Selig also posted “The government’s job is to embrace innovation and adapt regulations accordingly, not strangle it through neglect or over-enforcement. I’m committed to developing policies that help ensure innovation takes root on American soil, under American law, in service of American investors, businesses, and consumers.”
Selig said, “As Chairman of the CFTC, I established an Innovation Task Force to engage directly with innovators in the digital asset space to support innovation, not stifle it. ITF works with industry stakeholders and other government officials to build a durable and collaborative foundation that keeps digital asset innovation onshore.”
Selig posted “Self-custody must be protected. The United States was founded on the principle of private property, and the seizure of assets is something we must guard against. At the CFTC, that means protecting Americans’ ability to hold and control their own digital assets.”
Selig also posted “Prediction markets are derivatives regulated exclusively by the CFTC. We’re not a merit policeman that picks and chooses which contracts people should or should not be able to trade. Exchanges are free to list for trading any contract that complies with federal law and regulations.”
Selig also posted “Prediction markets provide measurable value to market participants who use them to hedge and speculate on event outcomes as well as the public at large, which benefits from more reliable information about current events. The CFTC is committed to setting the gold standard for regulation of these markets.”
CONGRESS
Market Structure Stablecoin Yield Compromise
Sen. Thom Tillis (R-NC) said of the stablecoin yield compromise text, “It is locked. Any time somebody can articulate a clear and present danger — not, ‘I think this is bad,’ but a clear and present danger — I’ll consider that for markup or after it moves onto the floor.” (Politico)
On banking industry opposition, Tillis said, “Let’s do a wayback machine and just eliminate Tillis-Alsobrooks, and then ask them, have we made any progress? The industry, that knows I’ve worked very hard to support them, needs to understand that I believe that we’re close. And the fact that they think we’re so far away — they haven’t done a good job of articulating exactly why.” (Politico)
Sen. Angela Alsobrooks (D-MD) said, “Everybody’s going to be unhappy.” (Politico)
On the release of compromise language, Alsobrooks said she is “proud of our bipartisan compromise, which will reduce the risk of deposit flight and deceptive marketing while preserving genuine rewards and innovation for payment stablecoins.” (Politico)
Sen. John Kennedy (R-LA) said, “It’s hard to gauge and hard to discuss metrics when you’re talking about pissed off-ed-ness, I know there are many crypto folks that are pissed. I can tell you the banking guys are setting new records.” (Politico)
Market Structure
Sen. Bernie Moreno (R-OH) said, “Every Republican is fully united to get this across the finish line.” (Politico)
On his potential opposition, Sen. John Kennedy (R-LA) said he couldn’t “comment on a bill intelligently without reading it — especially not something this important and this complicated.” (Politico)
Anti-CBDC Surveillance State Act
On House passage of the Anti-CBDC Surveillance State Act as attached to the Foreign Intelligence Accountability Act, Rep. Tom Emmer (R-MN) released a statement saying, “House Republicans and President Trump recognize the threat a CBDC poses in the United States. CBDCs stand against everything we love in this country - privacy, freedom, and free market competition. We must never allow this weaponized surveillance tool to be adopted here. The House has done its job; it’s time for the Senate to pass our CBDC ban.” (Politico)
On Senate Majority Leader John Thune rejecting the House’s FISA extension bill that included a ban on a central bank digital currency, Rep. Warren Davidson (R-OH) said, “He didn’t even bring this to the floor for a debate. He keeps throwing up excuse after excuse. Anyone can find an excuse. Leaders find a way. And it’s time for John Thune to do that or step aside.” (Punchbowl)
Rep. Bill Huizenga (R-MI) said he wants a CBDC ban “probably more than a lot of folks do… people are not necessarily using the proper time, proper place.” (Politico)
Sen. Mike Rounds (R-SD) said, “I understand if there is a fear out there on it, but right now we’ve got some other fish to fry, and we need their help to get these other issues done. Let’s take the wins that we can get.” (Politico)
Rep. Keith Self (R-TX) posted “Warrantless spying via FISA, Government purchase of Americans’ data, Flock cameras, Automobile kill-switches, Central Bank Digital Currency (CBDC). The surveillance state is alive, well, and growing. Americans have had enough. Our Fourth Amendment is not up for grabs!”
Self also posted “If our Founding Fathers heard about CBDCs, kill switches, FISA, and geofences, they would probably overthrow the government all over again. Protect the Fourth Amendment at ALL costs.”
Self also posted “Current state of the U.S. Senate: Refuses to pass CBDC ban, the SAVE America Act, FULL DHS funding, or anything of actual importance. Either enforce the talking filibuster or NUKE the zombie filibuster. We have a country to save.”
Self also posted “The Senate keeps rejecting the House’s legislation, sticking their noses in the air, and skipping town when it matters. They’ve done it with the SAVE America Act and now they are doing it with the Central Bank Digital Currency (CBDC) ban we just passed. The Senate needs to get a grip and get to work. The American people demand it.”
Self also posted “Americans do not want to be spied on by their own government. Americans do not want the government telling them what they can or cannot buy. Americans want privacy. Americans want their Fourth Amendment protected. Reform FISA and ban Central Bank Digital Currency (CBDC).”
Rep. Nick Begich (R-AK) posted “Americans built the strongest economy in the world on the foundation of free markets, private enterprise, and individual liberty, not government control. Central Bank Digital Currencies (CBDC) pose a serious threat to those values. The federal government has no business inserting itself between Americans and their financial freedom. Tonight, the House acted to defend the Constitution and advanced the Anti-CBDC Surveillance State Act. Now, it’s time for the Senate to act.”
Rep. Anna Paulina Luna (R-FL) posted “Attention America: John Thune has said he will not support a CBDC ban in any of the legislation we send over. He also has said No Save America.”
Luna also posted “I voted no on FISA this evening. There was no SAVE America attached and the Senate said they wouldn’t pass the anti-CBDC language. Reforms were no good.”
Rep. Michael Cloud (R-TX) posted “A Central Bank Digital Currency would be the ultimate surveillance tool. Last night’s vote on FISA presented the best opportunity to force the Senate to address CBDC. As one of the primary members pushing for the inclusion of a ban on CBDC, I supported the passage of FISA with the ban on a CBDC out of the House.”
Cloud also posted “The sleepy Senate had hoped to send us a FISA extension with no changes that would be passed by UC to an empty House chamber. Today, we forced a vote on the Senate’s ‘clean’ FISA extension that ignored our House bill that included a ban on a CBDC — I voted No. And so, even in our “loss,” the battle is not over, and we are forcing the fight in the right direction. We now have 45 days to continue to work for 1) a permanent ban on a Central Bank Digital Currency, 2) FISA warrant protections, and 3) the 4th Amendment not-for-sale protections (to stop the mass-purchasing of your data by intel agencies). And with the extra time, we should open up the FISA discussion beyond 702 to include reforms to Title 1 (where much of the previous bad actions have occurred).”
Rep. Warren Davidson (R-OH) posted “Who can resist the one ring to rule them all? Central Bank Digital Currency (CBDC) corrupts money into a dystopian tool for surveillance, coercion, and control. Ban CBDC!”
Prediction Markets
On the House considering a prediction market ban, House Majority Leader Steve Scalise (R-LA) said, “We’ll surely take a look at it.” (Semafor)
House Administration Committee Chair Rep. Bryan Steil (R-WI) said, “We’ve been working on that. I want to make sure we get the language right.” (Semafor)
On passage of the Senate bill, Rep. Nikki Budzinski (D-IL) said of her companion bill with Rep. Adrian Smith (R-NE), “I think this will push leadership in the House to do the right thing and get even more Republicans inclined to support our bill.” (Semafor)
Smith said, “I’m hoping to move forward on that approach.” (Politico)
Miscellaneous
Sen. Elizabeth Warren (D-MA) posted “WLF, the Trump family crypto company, reportedly partnered with a crypto venture tied to the same people recently sanctioned for scamming Americans. As the Trump family puts themselves first, Congress needs to ensure that digital asset legislation protects our national security.”
Sen. Dick Durbin (D-IL) posted “Cryptocurrencies are volatile and untested—the exact opposite of an asset you want backing a mortgage. I joined SenWarren and SenJeffMerkley to demand that FHFA Director Pulte explain why Fannie Mae decided to accept crypto-backed mortgages when it will be taxpayers holding the bag if these risky loans fail.”
Sen. Cynthia Lummis (R-WY) posted “Kevin Warsh has the vision to execute fundamental reforms at the Federal Reserve that are long overdue. I urge my colleagues to confirm him so the Fed can finally become a partner in sound digital asset policy & put an end to the weaponization of banking regulators once & for all.”
What I’m Reading This Week
AI Agent Forms its Own Company, Gets Ready to Trade Crypto, Olivier Acuna, CoinDesk.
About Zero One Strategies
Zero One Strategies is a specialized government relations practice dedicated to navigating the complex landscape of U.S. federal policy in emerging technologies. As advancements in technology continue to outpace regulatory frameworks, Zero One Strategies aims to provide strategic guidance and bipartisan advocacy for innovators and businesses operating at the forefront of technological development.
The practice focuses on key areas such as artificial intelligence, digital assets, blockchain, decentralized technologies, cybersecurity, data, and digital infrastructure, as well as the multiple policy issues impacting these sectors, including tax and financial services.
Contact us at Stacey@ZeroOneStrategies.com
