Weekly Roundup

Gensler vs. AI: During a speech at the Securities Industry and Financial Markets Association’s annual meeting, SEC Chair Gary Gensler defended the agency’s recent regulatory proposals aimed at stemming the proliferation of AI in financial services. The industry has criticized his Predictive Data Analytics proposal as overly broad, extending beyond AI systems to excel spreadsheets, and chilling to innovation.

Looming Government Shutdown: At a Subcommittee on Financial Institutions and Monetary Policy hearing, Congresswoman Maxine Waters (D-CA) spoke about the consequences a shutdown would have on the financial markets, “Given the global nature of our financial system, it is important that our regulators engage through international organizations, like the Basel Committee, to ensure that the U.S. is providing leadership on strong safeguards to avoid a global race to the bottom,” said Waters.

Treasury’s Crypto Focus: Deputy Treasury Secretary Wally Adeyemo this week stated the need for Congress to grant the Department of the Treasury new powers to reduce the spread of illegal cryptocurrency use. As part of his call to action, Adeyemo emphasized the need for cooperation between the Treasury Department, Congress, and the cryptocurrency industry to address digital asset flows believed to be connected to Hamas and other bad actors throughout the international community.

FTX Bankruptcy Fallout: In the aftermath of its recent bankruptcy case and the sentencing of founder and former CEO Sam Bankman-Fried, Crypto exchange FTX has asked the U.S. bankruptcy court of Delaware to allow the company to sell its trust assets, which reportedly include Grayscale and Bitwise funds worth around $744 million. Sector experts believe the move is aimed at preparing for forthcoming creditor distributions and facilitating an efficient sale of their assets.

Optimism in Crypto Market: Bloomberg ETF analysts James Seyffart and Eric Balchunas suggest that there is an eight-day window, from November 9 to November 17, during which the SEC could potentially approve all 12 pending spot Bitcoin ETF applications, including Grayscale’s conversion of its GBTC trust product. The anticipation of a Bitcoin ETF approval has fueled optimism in the crypto market, contributing to Bitcoin’s 30% price gain in the last three months.

Risky Treasury Market Rules: BNY Mellon has strongly suggested that the SEC implements its proposed central clearing rule for the Treasury market over an extended period of time, as it could cause major issues and disrupt the market function. The proposed rule would require trades to go through a clearing house, potentially raising trading costs and scaring off investors. 

In the Mix: This Week’s Top FinTech Thought Leader

  • Ken Griffin, founder of Citadel, spoke with the Financial Times abut the SEC’s proposed Treasury market regulations that are aimed at reducing risks by classifying hedge funds as the broker-dealer arms of banks. “If the SEC recklessly impairs the basis trade, it would crowd out funding for corporate America, raising the cost of capital to build a new factory or hire more employees,” said Griffin. “It would also increase the cost of issuing new debt, which will be borne by US taxpayers to the tune of billions or tens of billions of dollars a year.”

  • Rep. Patrick McHenry (R-NC), chairman of the House Financial Services Committee, categorized the Consumer Financial Protection Bureau’s proposal efforts to regulate digital wallets and payment applications as forced removal of consumer choice that will lead to diminished development of innovative technology. “Congress and regulators must work toward a regulatory environment that embraces innovation in our payments system. The action announced by Director Chopra today is a step in the wrong direction,” said McHenry.