The Treasury Department released three reports President Biden asked for in an executive order issued in March — The Future of Money and Payments; Crypto-Assets: Implications for Consumers, Investors and Businesses; and Action Plan to Address Illicit Financing Risks of Digital Assets. (These three reports on crypto from Treasury were part of the nine reports generated from other agencies in response to the executive order.) The White House had promised a whole-of-government approach to maximizing the benefits of digital assets while minimizing risks to consumers. Sept. 19 it announced the steps that approach will take:

• The SEC and Commodity Futures Trading Commission will aggressively pursue investigations and enforcement actions against unlawful practices.
• The Consumer Financial Protection Bureau and Federal Trade Commission will redouble efforts to monitor consumer complaints and enforce laws against unfair, deceptive, or abusive practices.
• The White House is encouraging agencies to issue guidance on current emergent risks, to collaborate with law enforcement on acute digital asset risks, and to share data on consumer complaints.
• The Financial Literacy Education Commission will lead a public awareness campaign to help consumers understand the risks involved with digital assets.

The White House acknowledged digital assets’ potential to facilitate faster payments, but noted the Federal Reserve will launch FedNow next year to operate alongside The Clearing House’s Real Time Payments system. Agencies will encourage the adoption of these instant payment systems and will use those systems for their own transactions where appropriate.

The President said he would also consider agency recommendations to create a federal framework to regulate nonbank payments. Agencies will prioritize work to improve the efficiency of cross-border payment systems, and the National Science Foundation will back research on how best to make digital asset ecosystems available to all.

Recognizing the importance of responsible innovation in financial technology, the White House announced that it would foster this through regulatory guidance and a new Digital Assets Research and Development Agenda sponsored by the Office of Science and Technology Policy and the National Science Foundation. The Department of Commerce will consider establishing a permanent forum to convene federal agencies, industry, academics, and members of the public to discuss federal regulation and standards.

The White House announcement did not mention legislative changes, but it was a topic of considerable discussion on Capitol Hill.

Senate examines new financial products: Innovations in the financial services industry include new acronyms as well, and the Senate Banking Committee discussed three of them: BNPL, EWA and TRAP — financial products gaining popularity that are designed to help users manage cash flow. “Buy now, pay later” (BNPL) allows customers to make multiple interest-free payments for a purchase over time. Earned wage access (EWA) is an employer-sponsored advance on a worker’s paycheck. Training Repayment Agreement Provisions (TRAP) recoup a company’s cost of training workers if and when the workers move to other jobs. Chairman Sherrod Brown (D-OH) compared TRAP to “indentured servitude,” and said that BNPL too often came with hidden fees and lacked transparency. Sen. Pat Toomey (R-PA), the committee’s ranking member, said bank partnerships with fintech companies and other competition from nonbank service providers were generating more and cheaper options for consumers who need short-term funding, and should not be stifled.

Megabank CEOs face House, Senate grilling: The CEOs of the nation’s seven largest consumer-facing banks (Bank of America, Citigroup, JPMorgan Chase, PNC Financial, Truist, U.S. Bancorp, and Wells Fargo) spent a full day on Capitol Hill, testifying before the House Financial Services Committee and the Senate Banking Committee. The bank money-transfer service Zelle came under fire, particularly on the Senate side, where senators Robert Menendez (D-NJ) and Elizabeth Warren (D-MA) berated bank CEOs for not providing detailed information about the extent of fraud on the platform. The bank CEOs expressed concern about inflation and said higher capital requirements would curtail lending. J.P. Morgan Chase CEO Jamie Dimon criticized the Biden administration’s initiative to cancel student loan debt, saying it did nothing to address the underlying problems of underwriting and rising tuition.

Reported by GrayRobinson and the IPA (the Institute for Portfolio Alternatives). Additional regulatory information can be found on the IPA website.