In This Newsletter
Future of Digital Assets Symposium
A Conversation with US Representative French Hill
A New Regulatory Framework for Digital Assets Built Upon Innovation, Transparency, and Consumer Protection: A Conversation with US Senators Kirsten Gillibrand and Cynthia Lummis
Crypto Policy and CBDCs
FinTech, National Security, and Community Resilience
Building on Black America’s Legacy of Resilience: A FinTech Blueprint
Future of Digital Assets Symposium
Earlier this month, the Milken Institute FinTech program hosted the Future of Digital Assets Symposium in partnership with the Kenan-Flagler Business School at the University of North Carolina Chapel Hill, Rethinc. Labs, and the Fuqua School of Business at Duke University. Thought leaders, policymakers, business leaders, experts, government officials, researchers, scholars, and other key stakeholders gathered for the Future of Digital Assets Symposium, a two-day event focused on the latest issues impacting the digital asset ecosystem. The first day, programmed by the Institute’s FinTech program, focused on issues facing policymakers and practitioners with conversations on how to move forward with digital assets based on use cases to responsible regulation and legislation. In this newsletter, we are highlighting some key sessions and insights from the event.
A Conversation with US Representative French Hill, Chairman of US House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion
The Symposium opened with a conversation with US Representative French Hill, Chairman, US House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion. Nicole Valentine led a conversation with the congressman on the agenda he is laying out for his new subcommittee. Hill said he plans to work in tandem with the House and Senate Agriculture Committee to address jurisdictional ambiguity and develop a regulatory framework for digital assets. He also addressed how his subcommittee will consider the question of US competitiveness in light of other regulatory regimes emerging in Europe and Asia, saying “the United States has been at the forefront of financial innovation in the capital markets for certainly the 20th century and into the 21st century. We want to see that continue in a digital format.”
On the issue of Central Bank Digital Currency (CBDC), Congressman Hill stated his view that the Treasury and the Federal Reserve should continue to study and evaluate CBDC to see how it might be used and if it can be successful. Hill also shared his view that legislators should follow the spirit of 1996 as they build frameworks for digital assets, referencing the light touch applied to internet companies in the Telecommunications Act of 1996 that has been credited for the boom of internet innovation the US has seen over the past 25 years. Finally, the congressman turned to the issue of public equity markets, financial inclusion, and the need to democratize the modern investment ecosystem for retail investor participation, citing its domination by private equity and accredited investors.
A transcript of the Hill’s full comments are available at the Blockchain Tip Sheet. CoinDesk and the Block have published articles on what a partnership with the House Agriculture Committee on digital asset legislation will look like.
A New Regulatory Framework for Digital Assets Built Upon Innovation, Transparency, and Consumer Protection: A Conversation with US Senators Kirsten Gillibrand and Cynthia Lummis
Michael Piwowar led a discussion with Senators Kirsten Gillibrand and Cynthia Lummis about the Responsible Financial Innovation Act, which they plan to reintroduce in April. Although they introduced the initial version of the bill in June 2022, the new version will include some changes to definitions and feature policy that responds to the compounding crises that plagued the digital asset industry last year.
On the issue of stablecoin, the bill will build on the senators’ stablecoin bill from this December, incorporating a total ban on algorithmic stablecoin in response to last year’s Terra Luna crash. They are also considering the question of who can issue stablecoin. The senators would like to see a dual banking system that incorporates state regulators to charter stablecoin issuers that leans on the Office of the Comptroller of Currency (OCC). They said that the new bill will include provisions addressing decentralized finance in order to provide regulators with a greater degree of certainty when dealing with the industry. Senators Gillibrand and Lummis are also in conversation with Gary Gensler, chair of the US Securities and Exchange Commission (SEC), and the SEC staff about appropriate definitions.
Senators Gillibrand and Lummis hope that the bill will create an opportunity to lead the conversation in the Senate and encourage other legislators to weigh in. They are interested in having the bill read and marked up by the finance committee in consultation with the agriculture committee on definitions, and the banking committee on stablecoins.
Senator Lummis also voiced her opposition to direct-to-consumer CBDCs, stating that the retail-facing role should be delegated to stablecoins or banks out of data privacy and surveillance concerns. A US CBDC, she said, should be studied as a tool for the Federal Reserve to interface with banks.
A full transcript of the conversation is available on Blockchain Tip Sheet. For further reading, Blockworks, Fox Business, and American Banker have published articles on the senators’ comments.
Crypto Policy and CBDCs
The session, Crypto Policy: New Rules for a New Paradigm, featured speakers Scott Bauguess, VP of global regulatory policy for Coinbase; Jonathan Jachym, global head of policy for Kraken; Brian Quintez, head of policy for a16z Crypto; Sandra Ro, CEO of the Global Blockchain Business Council; and moderator Brian Brooks, CEO of BitFury. Panelists discussed recent statements by SEC Chairman Gary Gensler that all digital assets except for Bitcoin could be considered a security. Blockworks reported on Coinbase and Kraken’s discussion about their positions on the question of whether digital assets are securities. The panel also spoke about international regulation. Panelists cited regulatory frameworks adopted in Brazil, Switzerland, the UK, Singapore, and Hong Kong as drawing investment and talent to those justifications.
During the session, Privacy and Central Bank Digital Currencies, panelists responded to many of the concerns voiced throughout the day about the privacy and surveillance implications of a CBDC. The panelists emphasized the need for intentional design in the roll out of a US CBDC that would safeguard the rights of US consumers and businesses against the risks illustrated by the digital Yuan. They noted that these policy concerns should not prevent the US from studying and implementing a CBDC. The technology is still in early developmental stages and its design will be in the hands of American policymakers. The discussion featured Jennifer Lassiter, executive director of the Digital Dollar Project; Alexandra Steinberg Barrage, partner at Davis Wright Tremaine; Mark Young, chief risk officer/data advisor at ConsenSys; and moderator Sarah Wynn, reporter for the Block.
FinTech, National Security, and Community Resilience
This February, the FinTech Advisory Council heard from guest speaker Jaret Riddick, senior fellow at Georgetown University’s Center for Security and Emerging Technology. Riddick shared his and the center’s work and perspective on the vital role that emerging tech can play to revitalize and sustain marginalized communities in the United States.
Riddick discussed the importance of emerging tech like robotics and AI to the future industrial base in response to the recent revitalization of industrial policy in last year CHIPS and Science Act and Inflation Reduction Act. He emphasized that as modern industrial sectors develop in the US, they will need to include and uplift a diverse geographically dispersed talent base.
Riddick contended that exclusionary economic development posed a national security threat, as marginalized communities are at greater danger of exposure to malicious propaganda, interference, and misinformation about political, public health, social issues from near peer advisories. He suggested that cyberspace is a new border and that the state will not be able to safeguard against great power competitors without resilient communities on the ground. To address this concern the US Department of Defense (DoD) included a mandate to extend prosperity in the US to its broader definition of national security in its 2022 National Defense Strategy.
A key example that Riddick highlighted of the DoD facilitating community development with investment emerging was the Lawrenceville neighborhood in Pittsburgh which houses Carnegie Mellon University’s National Robotics Center. Riddick highlighted how the DoD was able to repurpose the rusted-out steel mills along the Allegheny River to create new industrial space. That project has spurred other DoD initiatives in the Pittsburgh area, like Hazelwood’s Advanced Robotics for Manufacturing Institute and the Army Artificial Intelligence Integration Center. Riddick argues that initiatives like these in Pittsburgh and in other Rust Belt communities throughout the Unites States can transform distressed communities by creating distributed tech hubs that can innovate to solve local problems with next generation technology.
The council highlighted the role that community banks, Minority Depository Institutions (MDIs), Community Development Financial Institutions (CDFIs), and credit unions could play in facilitating the roll out of this development strategy because community development is a key pillar of these financial institutions’ mandates. Riddick also noted that the legacy infrastructure of the modern financial system makes it vulnerable to shocks and attack.
Riddick identified an intersection of university systems, defense, innovative finance, and community resilience that can build new hubs for technology, industry, and prosperity.
Building on Black America’s Legacy of Resilience: A FinTech Blueprint
Building on the theme on community resiliency, FinTech Director Nicole Valentine authored an op-ed in February’s Worth magazine entitled, “Building on Black America’s Legacy of Resilience: A FinTech Blueprint.” In the piece, Valentine underscores how Black institutions in the United States have historically enabled community resilience despite systemic racism, poor provision of health care and education, and broader economic shocks. She contends that there is an essential role that Black institutions can play in facilitating financial inclusion by adopting and incorporating financial technology. She discusses how if America is ever to achieve tangible change in financial access, then systemic innovation is a necessary part of the process.