Welcome to The Vault. Every week you’ll find a sample of FedFin opinion and analysis on the most recent issues facing financial services firms. Check back frequently to see what’s new. Click here to contact us.

26 09, 2022

Karen Petrou: Nonbanks Win Big

2022-09-27T10:49:12-04:00September 26th, 2022|The Vault|

As our in-depth reports detailed, Treasury took the President’s policy edicts to heart when crafting a new digital-finance policy for the U.S.  Treasury could have ducked some hard decisions via laudatory rhetoric, but it chose instead to recommend specific policies that cut a new path to a U.S. CBDC and crypto regulation.  Our reports detail key policy decisions and what’s soon to be done with them, but one warrants even more immediate attention:  Treasury’s decision to adhere not just to the President’s executive order on crypto-finance, but also to another on increasing financial sector competition.  This puts banks on notice that not all have yet taken.

Overlooked in much analysis of Treasury’s sweeping reports is its call to break up what Treasury clearly sees as the monopoly banks have long enjoyed over payment-system access.  Treasury for example argues that many banks have exited retail remittances even though these are critical to financial inclusion and leaves the market ill-served.  Indeed, it wants nonbanks to obtain overall instant-payment access, saying:

Network effects support the adoption of instant payment systems: Widespread use makes it more likely that a payor can use an instant payment system to make a payment to a payee, increasing the system’s value. …  Broadening the range of financial institutions that are eligible to participate in instant payment systems, as certain foreign jurisdictions have done, could help to enhance speed and efficiency, competition, and inclusion in payments, including for cross-border payments.

The problem with Treasury’s call for payment-system …

23 09, 2022

FedFin on: Digital Asset AML/CFT Compliance

2022-09-30T12:01:32-04:00September 23rd, 2022|The Vault|

Treasury is seeking comments on issues raised by the President’s executive order (EO) on digital assets to guide further work curbing illicit-finance and national-security risks in this sector.  The request includes no policy discussion beyond introductory comments about the risks identified in Treasury’s reports, but the range of questions suggests openness to at least some industry-supported compliance and reporting systems that …

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

22 09, 2022

FedFin on: The Cryptoverse Has A Big Black Hole

2022-09-30T12:03:14-04:00September 22nd, 2022|The Vault|

In this report, we follow our earlier analysis of Treasury’s CBDC recommendations and housing finance  with an analysis of another Treasury report in response the President’s executive order focused on the overall construct of cryptoassets in the U.S.  Treasury here makes its views even clearer than it did when favoring a CBDC.  It simply sees no “natural use case” for…

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

21 09, 2022

FedFin on: Can You See CBDC?

2022-09-30T12:09:12-04:00September 21st, 2022|The Vault|

In this analysis, we drill down in Treasury’s high-impact reports to the President on the future of digital assets to identify key considerations and strategic implications for housing finance.  We start with an assessment of central bank digital currency (CBDC), turning in subsequent reports to other critical strategic questions surrounding the….

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

21 09, 2022

FedFin Analysis: Treasury Sees Few Crypto Benefits, Much Risk to Contain and Control

2022-09-30T12:11:23-04:00September 21st, 2022|The Vault|

We follow our prior in-depth analysis of Treasury’s CBDC and payments report (see Client Report CBDC14) with a detailed assessment of the Department’s assessment of overall cryptoasset policy.  We noted on Friday key recommendations and turn here to a more in-depth assessment of Treasury’s reasoning, recommendations, and likely action.  This section of the response to the President’s executive order (see Client Report CRYPTO26) is notably uncharitable to cryptoassets, observing that broader use cases beyond trading and lending within the crypto verse have yet to materialize and may never do so….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

12 09, 2022

Karen Petrou: When Crypto Arrogance is Criminal Contempt

2022-09-12T13:20:48-04:00September 12th, 2022|The Vault|

Bankers are often said to live in isolated splendor.  There’s truth to this, but banker insularity is nothing compared to the astonishing effrontery of cryptoasset executives who think their self-assured brilliance puts them above not just the law, but even concern for the public good.  Nothing argues more compellingly for immediate, stringent crypto regulation than the outrage with which crypto companies have greeted Treasury’s demands – request failed to work – that they cease facilitating the kind of dark-money transactions that fund Russian war crimes, North Korean nuclear-obliteration threats, and webs of human trafficking, narcotics smuggling, and general evil around the world.  These companies clearly cannot govern themselves and they must thus be quickly and sharply made to do so for everyone else.

What brought this issue to a head is the self-righteous fury with which crypto companies view Treasury’s efforts to make them comply with the same sanctions rules demanded of anyone dealing in any other form of money.  Somehow, money in digital form is money that can do no wrong because, we are told, those who use crypto-currency – apparently unlike users of any other form of a medium of exchange — have a right to do so as they wish.

This omnipotent perspective is clearly evident in last week’s Coinbase suit against the U.S. Treasury on grounds that sanctioning a crypto “mixer”, Tornado Cash, trampled on so many First Amendment rights that press stories giving its side of the case had space only to list a few.  …

7 09, 2022

FedFin: The Big Squeeze

2022-09-07T16:27:39-04:00September 7th, 2022|The Vault|

Reinforcing the sharp turn-around in housing markets evident since the Fed surprised markets with its first 75 bps hike, a new working paper from the San Francisco Fed provides the first hard evidence of how monetary-policy shocks in the U.S. hit listing prices hard and fast….

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

1 09, 2022

FedFin on: Centenarians Get a Face Lift

2022-09-01T15:22:37-04:00September 1st, 2022|The Vault|

As seems always the case, FHFA Director Thompson is as good as her word to Congress earlier this summer, announcing yesterday a review of the extent to which the Home Loan Banks and their System meet the mission assigned to them and, regardless, if that mission still makes sense. Building on our initial assessment of FHFA’s plans, we here turn to what the System, its allies, and reformers are likely to say and what FHFA and/or Congress will then do about it.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

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