Cynthia Lummis Accuses Powell And Biden Of Conducting A ‘Coordinated Attack’ On The Digital Asset Industry

Forbes Breaking News

During Wednesday’s Senate Banking Committee hearing, Sen. Cynthia Lummis (R-WY) questioned Fed Chair Jerome Powell about the digital asset industry.

Transcript

00:00Senator Lummis. Thank you, Mr. Chairman, and thanks, Chairman Powell, for being here today.

00:07As you know, what always vexes me and has for the last four and a half years about the Federal

00:14Reserve is the bank supervision function as opposed to the monetary policy function.

00:19So I'm going to focus on bank supervision. First of all, I do want to thank you and Vice Chair

00:26Mickey Bowman for ensuring reputation risk has been removed from the bank supervision process.

00:35It was very arbitrarily used by those who were supervising. On January 27th, 2023,

00:48I'd call it the high watermark for Operation Chokepoint 2.0. The Federal Reserve Board,

00:54in coordination with President Biden's White House, executed a coordinated attack to isolate the

01:01digital asset industry from the banking system. And while the Fed has taken steps to adopt a more

01:10balanced approach to digital assets, which I appreciate, the legacy of January 27th, 2023,

01:17remains with us today. So I'd like you to look at this quote. It says, issuing tokens on open,

01:26public, and or decentralized networks or similar systems is highly likely to be inconsistent with

01:35safe and sound banking practices. So my first question is, do you recognize this quote?

01:42Yes. Not super clearly, but yes, I do. Because it's from the Federal Reserve Board's policy statement

01:53on Section 913 of the Federal Reserve Act, which is formally adopted by the board on January 27th,

02:0123. So now, Chairman Powell, I want to show you another statement. And I'm sorry if you can't see it

02:09clearly. I'll read it to you. It's from the Genius Act, which just passed the Senate by a vote of 68 to 30

02:17last week. And it takes the opposite position to the board's policy statement on issuing stable coins

02:24on an open, public, distributed ledger. So my question is, what has changed about the risk

02:34of stable coins since the board adopted its policy in 2023? And now that the Congress has weighed in,

02:46at least the Senate has weighed in and sent the Genius Act to the House, does the board plan to

02:52withdraw the policy statement on Section 913?

02:56So I think what has changed is, if you go back, that's a couple years ago, that was the period of

03:03high profile failures and fraud and that kind of thing. And what's happened is, I think, you know,

03:11the industry is maturing, our understanding of it is improving. And in a sense, it's becoming much

03:17more mainstream. So all of us are revisiting, you know, the things that were done during that era.

03:24And, you know, I think the current view is that, you know, that it's appropriate for,

03:31it's always been appropriate for banks to choose their customers and to be able to undertake activities

03:35as long as they're safe and sound. In terms of, I think, I have to get back to you on 913. I think

03:41it's a broader thing that has nothing to do with crypto, but that was a piece of it. We are

03:49looking at and withdrawing many of our pieces of crypto guidance from that era, though, as you know.

03:55And I appreciate that. I hope that by withdrawing the guidance, that you're also

04:04instructing and admonishing your bank's supervisors to, when there, when there are

04:15efforts to regulate banks that provide too much discretion to bank regulators to pick winners

04:27and losers from among the customer lists, the loan portfolios of banks.

04:32It's antithetical to the American system of banking. And I do think that there was that kind of

04:47discretion unleashed on banks. And it had a negative impact, a real chilling impact on banks as they

04:57selected and banked certain industries, and then debanked other industries and other people during the last four years.

05:09So taking the guidance documents and policy statements out is important, but also guiding the people

05:22that there are changes now and that they can no longer use their own subjective biases towards DEI and ESG

05:35and other things in supervising the banks is also a critical component of bank regulation.

05:45I agree completely. And as you know, Vice Chair Bowman is actually a former bank supervisor. So she's

05:54very well placed to, you know, make that happen.

05:58And I realize that she, as Vice Chair, is more directly involved in bank supervision.

06:06I hope that you will use your row to punctuate the importance of those changes within the bank

06:16supervision function at the Fed. We're going to have to move on.

06:19Thank you. I'm assuming your answer is yes. Senator Smith.

Category

Transcript

Recommended