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A record-breaking budget request is filed by the SEC, a federal crypto bill is reintroduced to the US Senate, the FCA shows tough love to UK crypto firms, and Binance terminates a World Cup-winning sponsorship deal.
The head of the US Securities and Exchange Commission (SEC) has given his support to a presidential budget request that would see his agency receive almost $2.5bn in 2024.
Speaking to the US Senate Appropriations Committee, SEC chair Gary Gensler said his agency needs the extra budget to respond to the “tremendous growth” of the US capital markets.
From 2017 to 2022, registered investment advisors grew their total client base from 34m to 57m, while average daily trading volume on US equity markets more than doubled, from 30m to 77m transactions.
Gensler also said the extra budget is necessary to tackle the “wild west” of crypto, which he described as a “highly speculative asset class” and “rife with non-compliance”.
“Technology is rapidly transforming our markets and business models, and such growth also means more possibility for wrongdoing,” he said.
“As the cop on the beat, we must be able to meet the match of bad actors. Thus, it makes sense for the SEC to grow along with the expansion and increased complexity in the capital markets.”
Last week, the Senate approved a bill that would grant the SEC a budget of $2.364bn for FY2024, but according to Gensler, this would only allow the agency to maintain its current size, rather than expand.
Instead, Gensler said his preferred budget would be $2.436bn for SEC operations, plus another $40m for real estate spending.
Last year, the number of SEC positions funded by Congress was 5,303 and, in FY2024, Gensler is seeking funding for an additional 170 positions.
If granted, the amount requested would mean that the SEC’s budget has more than doubled since 2011, when it was less than $1.2bn.
Among those who pushed back against Gensler’s request was Senator John Kennedy (R-LA), who asked the SEC chair why his agency had “allowed the FTX fraud to happen”.
Gensler responded by drawing attention to the 140+ actions that he and his predecessor have taken against crypto entities, including high-profile targets such as Do Kwon, creator of the TerraUSD stablecoin.
Lummis-Gillibrand bill back for a second time
In the past week, Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) reintroduced a major crypto bill after its first attempt stalled in 2022.
If adopted, the Lummis-Gillibrand Responsible Financial Innovation Act will provide a comprehensive federal framework for the regulation of digital assets.
The bill seeks to provide clarity as to the jurisdiction of regulatory agencies and would require that crypto exchanges register with the Commodity Futures Trading Commission (CFTC) rather than the SEC.
Depository institutions would be allowed to issue payment stablecoins that are fully backed and redeemable on a one-to-one basis at all times.
The bill also includes a section on "Ensuring FTX Never Happens Again", with provisions that include mandatory segregation and third-party custody of assets, limits on crypto lending and a ban on rehypothecation.
Introduced prior to last week’s partial court victory by Ripple over the SEC, Lummis said the bill follows the same logic that secondary sales of crypto-assets on public exchanges are unlikely to be investment contracts or securities transactions.
‘We want clean markets here,’ says FCA
In a Treasury Committee hearing this week, the head of the Financial Conduct Authority (FCA) was asked why so few crypto firms succeed in becoming registered in the UK.
In the last 12 months, as covered by VIXIO, more than 90 percent of applications from crypto firms to register under anti-money laundering/counter-terrorism financing (AML/CTF) rules in the UK have been unsuccessful.
While talking in general terms about the financial industry’s response to the Financial Services and Markets Act (FSMA), effective since last month, FCA chief executive Nikhil Rathi shared some observations with the committee.
Rathi said that financial service firms will try to frame “every” regulatory intervention as a threat to competition, so that they can continue to take risks without adequate protections for customers.
Raising the example of crypto, Rathi said the FCA has made sure that larger firms cannot bully their way into engaging in risky practices or obtaining special treatment from the regulator.
“On crypto, we went through a very tough period with the industry over the last 18 months to two years, because we turned down applications from some of the largest crypto firms in the world,” he said.
“And we did that not because we were anti-innovation: it's because we were given a job to make sure money laundering standards were met, and they could not convince us that they were meeting them.”
The biggest name in crypto to be rejected by the FCA was Binance in 2021. However, due to Binance’s offshore structure, the exchange could still be accessed by UK customers after the rejection (although Binance did agree to stop offering derivatives in the UK from 2022 onwards).
“We turned the application down because we want clean markets here,” said Rathi.
Binance axes sponsorship deal with Argentinian national team
Finally, Binance has announced that it has terminated its sponsorship deal with the Argentine Football Association (AFA), which owns the rights to the FIFA World Cup-winning Argentinian national team.
Although the five-year contract began in January 2022, Binance said the AFA had failed to “meet its contractual obligations” and had undermined Binance’s “business values and association principles”.
