Page 27 - GS230202

CoverStory

post. The FTC Act empowers the agency to take down Senator Tim Scott, R-S.C., countered that regulators
companies that engage in unfair or deceptive activities (notably the Securities Exchange Commission) have had
affecting consumers and commerce. the authority to oversee these markets but have dropped
the ball. "To date, the SEC has failed to take any meaningful,
Junk fees in crosshairs preemptive action to ensure this type of catastrophic
There's also a campaign brewing in Washington to curtail failure does not happen again," he said.
junk fees. President Biden, in his Feb. 7, 2023 state of the
union address, called on Congress to pass legislation Senator Elizabeth Warren, D-Mass., a vocal critic of
that would limit extraneous fees in consumer-facing the crypto industry, said she is working with Senator
businesses. "There's certainly going to be a lot of pressure Roger Marshall, R-Kan., on a bill to tighten anti-money
on financial institutions when it comes to these kinds of laundering rules around crypto. Warren noted that in 2021,
fees," Davis said. $14 billion in digital assets were transferred to criminals
and individuals evading sanctions.
The CFPB began scrutinizing junk fees in the consumer
finance sector last year—fees like those charged for late "With strong rules and enforcement from tough regulators,
bill payments, out-of-network ATM access and NSFs. we can give the crypto industry a chance to prove whether
On Feb. 1, the bureau published a proposal to rein in it can deliver on its promises of innovation without
"excessive" credit card late fees, and suggested other fee- robbing investors or laundering funds for drug traffickers
related regulatory proposals were planned. and terrorists," Sen. Warren said.

"It will be interesting to see how [the campaign against] SRM's Davis pointed out that a regulatory framework "for
junk fees trickles into our industry," Huber said. digital assets will help bring it into the mainstream.
Patti Murphy, senior editor at The Green Sheet, has spent more than
Reining in crypto
40 years reporting on the legislative and regulatory landscape for
The dramatic fall in crypto's market value—from a peak financial institutions and financial technologies. A self-described pay-
of about $3 trillion in late 2021 to about $1 trillion now— ments maven of the fourth estate, she also co-hosts the Merchant Sales
prompted renewed calls for regulations specific to digital Podcast, www.greensheet.com/podcasts.php.
assets. In a January briefing paper, the White House
said it had instructed financial regulators to "ramp up
enforcement" of crypto firms.

Bank regulators got the message and quickly issued a
joint bulletin on crypto-asset risks to financial institutions
they oversee. They stated they had "significant safety
and soundness concerns with business models that are
concentrated in crypto-asset-related activities or have
concentrated exposures to the crypto-asset sector."

The White House is against the idea of traditional FIs
playing in the crypto world. "In the past year, traditional
financial institutions' limited exposure to cryptocurrencies
has prevented turmoil in cryptocurrencies from infecting
the broader financial system," the White House paper
stated. "It would be a grave mistake to enact legislation
that reverses course and deepens the ties between
cryptocurrencies and the broader financial system."

A bipartisan proposal to regulate the crypto industry was
floated in Congress last year. But that legislation, written
with help from disgraced crypto executive Sam Bankman-
Fried, isn't expected to resurface.
During a Feb. 14 hearing before the Senate Banking
Committee, Senator Sherrod Brown, D-Ohio, chair of
the panel, described cryptocurrencies as "speculative
products run by reckless companies" that need a regulatory
framework.

27