August 11, 2022
Illustration: Christopher T. Fong/Protocol
Well hey there, and welcome to Protocol Fintech. This Thursday: Warren and Sanders target crypto bank rules, another Coinbase investigation is underway and the CFPB fines a personal finance app.
A group of progressive lawmakers led by Sen. Elizabeth Warren is calling on the Office of the Comptroller of the Currency to withdraw legal guidance that allows chartered banks to make some forays into crypto.
The request — detailed in a Wednesday letter — highlights an ongoing debate in crypto. Some banking industry groups say the regulated institutions can bring stability to the volatile sector. But the lawmakers fear that without strict guardrails, crypto could introduce systemic risk to the broader banking system.
The guidance dates back to the final months of the Trump administration. Signed in late 2020 and early 2021, it gives nationally chartered banks clearance to provide crypto custody service, hold cash reserves backing stablecoins and use blockchain technology to verify bank-to-bank payments.
Banking industry groups say lawmakers are focusing their energy in the wrong place. Before the senators' letter was published Wednesday, the American Bankers Association made a separate argument to the Treasury Department that well-regulated banks are being kept from the space, while other companies operate with little oversight.
Warren certainly has not opposed the idea of stricter regulation for the rest of the crypto industry. But in the meantime, the letter says, lawmakers need "to mitigate crypto’s risks to the financial system and consumers."
The lawmakers want regulators to put their heads together for a better plan. The senators’ letter calls on the OCC to take up a new process with the Federal Deposit Insurance Corp. and Federal Reserve to clarify how the banks they oversee can engage with crypto.
The OCC declined to comment on the letter directly, instead sharing previous comments from Hsu describing the agency’s “careful and cautious” approach to crypto. Hsu defended the agency's approach last week to Bloomberg, which first reported that Warren was circulating the letter within the banking committee. “I think we’re doing a pretty good job," Hsu told the outlet. "See exhibit A: a whole bunch of stuff just happened, and the banking system is in pretty good shape, knock on wood. I think part of that is the actions we’ve taken."
A version of this story appeared on Protocol.— Ryan Deffenbaugh (email | twitter)
They created Digital People. Now they've made celebrities available as Digital Twins: Soul Machines co-founder and CEO Greg Cross and his co-founder Mark Sagar, Ph.D., FRSNZ are leading their Auckland and San Francisco-based teams to create AI-enabled Digital People to populate the internet, at first, and soon the metaverse.
On Protocol: Coinbase said the SEC is looking into different aspects of the crypto company’s business, including “existing and intended future products.”
Ripple is eyeing Celsius’ assets. A company spokesman told Reuters that it may bid for the assets of the crypto lender, which filed for bankruptcy last month.
Hedge funds may soon report digital asset exposure. A Securities and Exchange Commission proposal would require large hedge funds to report their cryptocurrency exposure through a confidential filing known as Form PF.
A top-ranking Democrat is seeking stiffer penalties for Equifax. Rep. Maxine Waters, chair of the House Financial Services Committee, asked the Consumer Financial Protection Bureau to stop Equifax from selling credit scores to lenders until the credit-reporting firm can prove it has the controls in place to ensure its scores are correct.
Crypto exchange CoinFlex has filed for restructuring in a Seychelles court. The company said it’s attempting to resolve a shortfall due to a counterparty failing to make a margin call.State bank regulator releases guide to cybersecurity exams. The Conference of State Bank Supervisors released new tools for nonbank financial services companies to prepare for cybersecurity exams conducted by regulators.
The CFPB said Wednesday it imposed a $2.7 million fine on Hello Digit, an app that claims to help users put aside money for rainy days but that the regulator said messed up their finances. The regulator said Hello Digit, which was acquired by Oportun Financial Corporation in 2021, used a “faulty algorithm” that led to “overdrafts and overdraft penalties for customers."
In addition to the fine, Hello Digit was ordered to pay redress to affected customers. An Oportun spokesperson said a company investigation found that the Hello Digit app’s “success rate” was “better than 99.99%.”
“While we disagree with the CFPB on this matter, we are happy to have it settled,” the company said.
Read the full story on Protocol.— Benjamin Pimentel (email | twitter)
Danny Greene has joined Yuga Labs as a brand lead for the Meebits NFT collection. Greene was most recently the GM of the MeebitsDAO.
Bryan Zhang has been named chair of a U.K. working group focused on open banking. Zhang is co-founder and executive director of the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School.
David Sinsky has joined banking-as-a-service company Unit as vice president of lending. Sinsky was previously director of product, new products, at Opendoor.Lauren Hargraves and Bryan Hubbard joined the advisory board of digital asset firm Metallicus. Hargraves was a Federal Reserve banker, and Hubbard previously worked at the Office of the Comptroller of the Currency.
They created Digital People. Now they've made celebrities available as Digital Twins: Soul Machines is at the cutting edge of AGI research with its unique Digital Brain, based on the latest neuroscience and developmental psychology research.
Thanks for reading — see you tomorrow!