How a top Democrat lost faith in crypto

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Tail. Don Beyer, The Democrat from Virginia who chairs the joint House and Senate Economic Committee started 2022 like many Americans — open-minded and curious about the promise of cryptocurrency.

He was by no means a crypto evangelist. When he chaired a hearing in November 2021 on “demystifying crypto” and introduced legislation to regulate the market a few months earlier, he warned of significant risks.

But he also emphasized the goals of promoting innovation and jobs in the US while providing legal certainty to the market.

He thought cryptocurrencies “might have a role to play in the financial fabric of our country” and so “let’s make sure they’re well managed and well regulated — not overly regulated, but to protect people as needed.”

Crypto’s very bad 2022 changed his mind.

“I’m much more bearish about it now,” he told MM this week. “We have seen frauds, disappointments, falls. … There’s also a sense that it’s not real, that it’s just a mathematical idea. Other than that, there is no reality.”

Why it matters: Beyer’s change is another indication that the tide in Washington is turning against the digital assets industry, which entered the year with more lobbying and political influence than ever before.

Now, “there’s a lot more skepticism” on Capitol Hill, said Beyer, whose Northern Virginia district is not far from Washington.

He sees “very little value” in crypto in light of the fact that “governments are moving to digitize their own legitimate currencies.”

How bad it got: One of Beyer’s last acts as chairman of the Joint Economic Committee is a new report detailing cryptocurrency failures over the past year, including a $2 trillion market decline since last fall.

One risk highlighted in the report is the adoption of cryptocurrency by low-income Americans. It challenges arguments by the industry, and even some Democrats, that digital currency empowers individuals left behind by the traditional banking system.

“I would compare it more to buying lottery tickets,” he said. “A tax on the poor. Crypto is the same way. You have people who don’t have the sophistication or sometimes even access to the banking system, but then they become victims.”

His meeting with another Bankman-Fried: Beyer said he never met FTX founder Sam Bankman-Fried, but his younger brother Gabe sought him out and met with him. Gabe founded the non-profit organization Guarding Against Pandemics with financial support from Sam.

“There were no questions. It was like, why are you coming to us? It was more in the context of his desire to support Democratic candidates,” Beyer said. “When you leave the meeting, think about what it was about?”

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Driving day … Omnibus is the main event …

The latest in the omnibus — The House of Representatives is expected to pass a nearly $1.7 trillion funding bill Friday and send it to President Joe Biden for his signature. The government closes at midnight.

SBF was released on bail — Sam Bankman-Fried was released Thursday in New York on $250 million bail while awaiting trial on fraud charges. His bail conditions require him to surrender his passport and stay at his parents’ home in Palo Alto, California.

The economy has fared better than expected in recent months — Several indicators released Thursday showed the strength of the economy.

— The Commerce Department revised its estimate of economic growth in the third quarter to 3.2 percent from 2.9 percent, thanks to stronger consumer spending.

— New claims for jobless benefits rose by 2,000 last week, but were in line with pre-pandemic levels, according to the Labor Department.

Biden sets inflation expectations — Biden in a Yahoo News op-ed: “[I]It will take time for inflation to return to normal levels, and we may see setbacks along the way.”

Meet the Republicans vying for a key Wall Street board — Our Eleanor Mueller has a look at nearly a dozen House Republicans vying for seats on the Financial Services Committee, which will play a major role in setting cryptocurrency rules and investigating Biden’s financial regulators.

A senior House GOP aide told Eleanor there could be about 11 vacancies. The list of hopefuls — a mix of current and new members from across the country — includes:

Tail. Young Kim California — A former aide to former Rep. Ed Royce, who was a senior member of the committee, points out the lack of West Coast GOP representation on the panel. She would also bring gender diversity to the Republican side of the committee, where Rep. Ann Wagner of Missouri is the only woman.

Tail. Dan Meuser from Pennsylvania — Meuser ran a manufacturing company and served as the state’s secretary of revenue before joining Congress.

Tail. Byron Donalds Florida — The former financial adviser’s priority next session, according to a spokesman, is to make sure “our financial services institutions work for the people” and “reduce the heavy bureaucratic hand of government that stifles growth and opportunity in our financial markets.”

Tail. Mike Flood from Nebraska — A former state lawmaker, who wrote legislation allowing banks to take custody of cryptocurrencies, cited the presence of local financial firms, including Nebraska-based Pacific Life and Mutual of Omaha.

Newly elected George Santos of New York — A new lawmaker is facing accusations that he fabricated his resume, including claims that he worked at Citigroup and Goldman Sachs.

What about the Democrats? — Eleanor reports that the Democratic representatives. Sean Casten from Illinois and Jake Auchincloss from Massachusetts are seeking new board assignments. Casten wants energy and trade and Auchincloss wants ways and means.

Dan Berkovitz is leaving the SEC — SEC General Counsel Dan Berkovitz will step down at the end of next month, after just over a year at the agency.

Berkovitz’s hiring was a big deal last year. Prior to joining the SEC, he served as CFTC Commissioner and CFTC General Counsel under then-Chairman (now SEC Chairman) Gary Gensler during the implementation of Dodd-Frank.

Berkovitz is also a former staff member of former Senator Carl Levin on the Senate Permanent Subcommittee on Investigations.

Berkovitz said in a statement Thursday that “after 34 years of public service, it is time for me to take on new and different challenges and opportunities.”

SEC Principal Deputy General Counsel Megan Barbero will become the agency’s general counsel when Berkovitz leaves.

Maxine Waters is asking the FTC to investigate the Intercontinental Exchange contract — House Financial Services Chair Maxine Waters called on FTC Chairwoman Lina Khan to investigate Intercontinental Exchange’s planned takeover of mortgage data firm Black Knight, citing concerns about potential costs to the housing market.

JPMorgan says the energy crisis is derailing its climate goals — FT: “JPMorgan … has failed to stay on track to meet its climate change goals, blaming the energy crisis for forcing clients to ramp up fossil fuel production. …

“Reporting these targets for the first time on Thursday, the bank said the intensity of its financed emissions related to fuel sold by its oil and gas clients rose by 1 percent between the end of 2020 and June 2022, while the intensity measure for their operating emissions remained unchanged instead of falling as planned.

“Global efficiency gains in oil and gas operations have materialized more slowly than expected, the bank said, partly due to volatility in commodity markets.”

The Senate is investigating the automaker’s ties to Chinese forced labor— WSJ: “The Senate Finance Committee has opened an investigation into whether automakers, including Tesla Inc. and General Motors Co., parts and materials produced by forced labor in China’s Xinjiang region.”

The CEO of Florida’s state-backed insurance company is stepping down — POLITICO: “The CEO of a Florida property insurer of last resort announced Thursday that he will step down, and the company’s board of directors will find a replacement by March.”

Excerpt from Trump’s taxes: The IRS is ill-equipped — NYT: “[The House] committee reports released this week underscore how weakened the IRS has become over the past decade as Republicans cut funding. They also show how the agency is becoming increasingly unable to crack down on wealthy taxpayers who skirt legal limits to lower their tax bills and have the means to defend themselves against audits if caught.”

The Brookings Institution appoints a new economics editor — University of California professor Jón Steinsson is the new co-editor of the Brookings Papers on Economic Activity.

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