Weekly Roundup

Crypto Trading Volumes Exceed Expectations: Trading volumes for various digital assets have beaten industry expectations in 2023, reaching a collective $3.61 trillion figure in November. Although numerous stablecoins experienced significant growth this year, Tether stood out as the platform reached the $90 billion mark for its overall market cap. While some traditional financial institutions, such as JP Morgan, are still wary of the digital asset space, numerous sector experts have noted that Bitcoin’s current performance indicates an early (rather than late-stage) bull market and have expressed optimism for continued growth in 2024 due to Bitcoin ETF’s possible regulatory approval.

CAT Concerns: U.S. Reps. Ann Wagner (R-MO) and Bill Huizenga (R-MI) sent a letter to SEC Inspector General Deborah Jeffrey to ask for an examination of the Consolidated Audit Trail’s (“CAT”) budget “to determine whether there are significant inefficiencies and waste.” The letter, also noting privacy concerns of CAT, was referenced during a House Financial Services Committee, Capital Markets Subcommittee hearing this week.

New Treasury Clearing Rules: The SEC this week approved new rules to address systemic risks in the U.S. Treasury market. Specifically, the reforms aim to increase transparency and reduce market volatility by requiring certain cash Treasury and repurchase agreements to be centrally cleared. The updated regulations, which will take effect by June 2026, target hedge funds and proprietary trading firms to regulate their debt-fueled “basis trades” that have raised concerns about potential market strain.

AI Scrutiny: The SEC announced that they will be launching  a targeted investigation into the use of AI by investment advisers. Regulators from the agency will be taking a closer look at details surrounding how these firms deploy AI related to their marketing documents, algorithmic models managing client portfolios, third-party providers, and compliance training to determine if there is a pattern of misconduct.

Warren’s Crypto Bill Gains Support: U.S. Senator Elizabeth Warren’s (D-MA) office announced that five additional senators, including Raphael Warnock (D-GA), Laphonza Butler (D-CA), Chris Van Hollen (D-MD),John Hickenlooper (D-CO), and Ben Ray Luján (D-NM), have agreed to cosponsor her Digital Asset Anti-Money Laundering Act. The bill is aimed at reducing cryptocurrency use by organized criminal and terrorist organizations through illicit channels. While critics of the bill argue that the government’s focus should be on the bad actors themselves rather than the technology, Senator Warren reiterated her claim that approximately half of North Korea’s missile program is funded via digital assets.

Fight Against Buyback Disclosure Rule: Various business groups are urging the U.S. Chamber of Commerce to dismiss an SEC rule requiring companies to provide more timely disclosures on stock buybacks. The groups pointed to the 5th U.S. Circuit Court of Appeals’ criticism of the SEC for acting “arbitrarily and capriciously” and failing to conduct a proper cost-benefit analysis when creating the rule. Because the SEC did not follow the Court’s guidance to rework the rule within 30 days, the organizations stated that they were compelled to request the Court to issue a final judgment vacating the rule.

SEC vs. Credit Suisse: Credit Suisse Securities agreed to pay over $10 million following charges brought by the SEC for allegedly providing certain prohibited services by acting as an underwriter and investment adviser to mutual funds. These actions were ruled to be in violation of a New Jersey court ruling prohibiting such actions.

Updated Federal Defense Bill: Numerous industry experts have noted that two key crypto provisions were removed from the joint version of the National Defense Authorization Act. The provisions specifically aimed to establish an anti-money laundering examination standard for crypto assets and mandate a report on the use of privacy coins and “anonymity-enhancing technologies” in the digital assets space. Although the Senate version of the bill included these provisions, they were omitted in the House-Senate conference version of the bill.

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

  • The SEC’s former Chief Economist, Mark Flannery, spoke to the Wall Street Journal this week about the aggressive pace of SEC Chair Gary Gensler’s regulatory agenda, which has led to various lawsuits to be filed against the Commission. “The combination of an aggressive agenda and a high workload inside [the agency] makes it at least possible that this is the beginning of a pattern,” said Flannery. “We’ll know in a couple more months, I suppose.”

  • FIA Principal Traders Group published an essay calling for Congressional oversight over CAT’s funding, noting that the Trail’s entire costs will currently be passed on to market participants. Without this additional oversight, the report stated that the CAT will be “essentially an additional tax on all purchase and sales of equities and listed options securities.”