Manchin deals bank reporting proposal a blow; regulators prepare crypto guidance

The Washington Wrap is a weekly recap of financial regulation, news and chatter from around the capital. Send tips and ideas to alison.bennett@spglobal.com and tim.weatherhead@spglobal.com.

On the Capitol Hill

Sen. Joe Manchin, D-W.Va., dealt a controversial bank reporting proposal a major setback earlier this week when he publicly announced his staunch opposition to the measure.

Manchin, who has played a critical role in the outcome of President Joe Biden's massive social spending and climate bill due to his moderate fiscal stance, disclosed in a public appearance that he told the president that the proposal, which would require banks to report account flows to the Internal Revenue Service, was "screwed up" and that the president agreed with him.

Later in the week, that proposal, which Democrats previously argued would help pay for the bill and reduce the tax gap, was dropped, according to a CNBC report.

At the Regulators

Federal Deposit Insurance Corp. Chairman Jelena McWilliams said Oct. 25 that the interagency cryptocurrency sprint team comprised of the Office of the Comptroller of the Currency, the Federal Reserve and the FDIC would soon issue recommendations for banks looking to participate in crypto-related financial services.

McWilliams said the regulators are studying how to allow banks to hold cryptocurrencies as custody assets. They are also exploring how to perceive crypto as collateral for lending, as price fluctuations become an issue in underwriting when assessing the value of the underlying asset, she said.

The most challenging issue is whether to allow banks to hold crypto on their balance sheets, and if so, how to form capital liquidity requirements accordingly, McWilliams said.

On the issue of regulating stablecoins — cryptocurrencies designed to have a stable price often by pegging them to a commodity or currency — U.S. regulators will have to balance the need for greater security against the risk of stifling innovation in a fast-growing corner of the cryptocurrency market.

The market for stablecoins has grown to about $130 billion, according to data from Coin Metrics and The Block. The surging growth of stablecoins has prompted calls for issuers to be regulated like banks.

At Treasury

The U.S. Treasury Department appointed Janis Bowdler its first counselor for racial equity, responsible for identifying and mitigating barriers that communities of color may face when attempting to access the department's benefits.

Bowdler most recently served as president of JPMorgan Chase & Co. Foundation.

At the CFPB

The Consumer Financial Protection Bureau plans to closely scrutinize the payment structures of the nation's biggest technology companies with an eye on the improper use of information, newly confirmed Director Rohit Chopra told the House Financial Services Committee and the Senate Banking Committee this week.

The new director cited orders to firms including Amazon, Google, Facebook and Apple, that seek detailed information on how they get and use data from their customers.

"There are some real questions about how the tech companies are harvesting this data," Chopra said Oct. 28 during the Senate committee hearing. "What are they using it for? How are they monetizing it?"

The CFPB also has concerns about competition with traditional financial institutions, which typically do not have access to the same payment and information-gathering structures as these newer companies, Chopra said.

At the Fed

Markets are prepping for the Fed to detail its long-awaited plan to bring one of its pandemic-era economic support measures to a close.

Following the conclusion of the two-day Federal Open Market Committee hearing on Nov. 3, investors expect Fed Chairman Jerome Powell to outline how and when the central bank will begin to wind down its $120 billion in monthly securities purchases.