digital dollar

‘Nothing is a coincidence with the government,’ claims US lawmaker on Operation Choke Point 2.0

Speaking at the NFT.NYC 2023, United States congressman Byron Donalds hurled criticism at recent crypto regulatory initiatives.

United States Congressman Byron Donalds criticized the country’s regulatory agencies on April 12 at the NFT.NYC 2023 conference in New York. According to Donalds, agencies like the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and others are being used to activate “Operation Choke Point 2.0” by limiting crypto business access to banking services. 

Operation Choke Point 2.0 describes the U.S. government’s alleged coordinated effort to discourage banks from working with crypto firms under the guise of ensuring safety and stability. Crypto industry commentators believe government attempts to restrict access to the crypto sector have ramped up in 2023. 

“What I’ve seen in my short time in Congress is that nothing is a coincidence with the government agency,” the legislator said during a keynote speech, referring to the U.S. government’s recent crackdown on crypto. “They are talking across lines a lot more than they ever used to. They are finding various ways to squeeze an outcome that they want.”

Along with efforts to limit the banking system’s exposure to crypto, Donalds believes the Federal Reserve is “laying the foundation for a CBDC,” or central bank digital currency, with recent enforcement actions being part of plans for a digital dollar.

U.S. congressman Byron Donalds and Marc Beckman at the NFT.NYC 2023 

The Floridan congressman also noted that the U.S. government doesn’t have enough knowledge about the crypto industry to regulate it properly, and through its agencies, is relying on a “legacy framework of 100 years” to create rules and regulations for today’s needs. “To bring us into lay terms, […] This will be like asking a sixth-grade basketball player to ref the NBA finals,” he said before urging an updated regulatory environment for digital assets. 

Donalds also labeled SEC chair Gary Gensler as “a very arrogant individual,” claiming that “He believes he is the smartest person in every room.” Donalds continued:

“Old Washington, which is basically Washington today, loves having the alphabet soup agencies […] They’re all relics of a time when you had to fax in before fax machines. This is when the regulatory agencies were built. Old Washington, like anybody else, doesn’t like moving off the thing that they created.” 

Helping regulators understand the nuances of digital assets, blockchain and crypto more generally are necessary for a better crypto environment in the country, according to the congressman.

United States authorities appear to have resurrected past enforcement tactics to impose restrictions on cryptocurrency firms and banks serving them. The alleged strategy consists of isolating the traditional financial system from the crypto market by relying on “multiple agencies to discourage banks from dealing with crypto firms,” with the goal of leading crypto businesses to become “completely unbanked,” sources told Cointelegraph in early February.

Recent reports reveal that the U.S. arm of global crypto exchange Binance has faced challenges in establishing a new bank partner to serve as a fiat on-ramp and off-ramp for its clients in the country. The recent failures of Silvergate and Signature Bank left Binance.US without banking services, depending on middleman banks to store funds on its behalf.

Magazine: Best and worst countries for crypto taxes — plus crypto tax tips

‘Nothing is a coincidence with the government,’ claims US lawmaker on Operation Choke Point 2.0

Speaking at NFT.NYC 2023, United States Congressperson Byron Donalds hurled criticism at recent crypto regulatory initiatives.

United States Congressperson Byron Donalds criticized the country’s regulatory agencies on April 12 at NFT.NYC 2023 conference in New York. According to Donalds, agencies such as the Securities and Exchange Commission, the Commodity Futures Trading Commission and others are being used to activate “Operation Choke Point 2.0” by limiting crypto business access to banking services. 

Operation Choke Point 2.0 describes the U.S. government’s alleged coordinated effort to discourage banks from working with crypto firms under the guise of ensuring safety and stability. Crypto industry commentators believe government attempts to restrict access to the crypto sector have ramped up in 2023. 

“What I’ve seen in my short time in Congress is that nothing is a coincidence with the government agency,” the legislator said during a keynote speech, referring to the U.S. government’s recent crackdown on crypto. “They are talking across lines a lot more than they ever used to. They are finding various ways to squeeze an outcome that they want.”

Along with efforts to limit the banking system’s exposure to crypto, Donalds believes the Federal Reserve is “laying the foundation for a CBDC,” or central bank digital currency, with recent enforcement actions being part of plans for a digital dollar.

U.S. Congressperson Byron Donalds and Marc Beckman at NFT.NYC 2023. 

The Floridian congressperson also noted that the U.S. government doesn’t have enough knowledge about the crypto industry to regulate it properly and, through its agencies, is relying on a “legacy framework of 100 years” to create rules and regulations for today’s needs. “To bring us into lay terms, […] This will be like asking a sixth-grade basketball player to ref the NBA finals,” he said before urging an updated regulatory environment for digital assets. 

Donalds also labeled SEC Chair Gary Gensler as “a very arrogant individual,” claiming, “He believes he is the smartest person in every room.” Donalds continued:

“Old Washington, which is basically Washington today, loves having the alphabet soup agencies […] They’re all relics of a time when you had to fax in before fax machines. This is when the regulatory agencies were built. Old Washington, like anybody else, doesn’t like moving off the thing that they created.” 

Helping regulators understand the nuances of digital assets, blockchain and crypto more generally are necessary for a better crypto environment in the country, according to the congressperson.

U.S. authorities appear to have resurrected past enforcement tactics to impose restrictions on cryptocurrency firms and banks serving them. The alleged strategy consists of isolating the traditional financial system from the crypto market by relying on “multiple agencies to discourage banks from dealing with crypto firms,” with the goal of leading crypto businesses to become “completely unbanked,” sources told Cointelegraph in early February.

Recent reports reveal that the U.S. arm of global crypto exchange Binance has faced challenges in establishing a new bank partner to serve as a fiat on-ramp and off-ramp for its clients in the country. The recent failures of Silvergate and Signature Bank left Binance.US without banking services, depending on intermediary banks to store funds on its behalf.

Magazine: Best and worst countries for crypto taxes — Plus crypto tax tips

US lawmaker introduces bill aimed at limiting Fed’s authority on digital dollar

If passed, the legislation could prohibit the Fed from issuing a digital dollar “directly to anyone”, as well as bar the bank from implementing monetary policy based on a CBDC.

Minnesota Representative Tom Emmer has introduced legislation in the United States House of Representatives that could limit the Federal Reserve from issuing a central bank digital currency, or CBDC.

In a Feb. 22 announcement, Representative Emmer said he had introduced the ‘CBDC Anti-Surveillance State Act’ in an apparent effort to protect Americans’ right to financial privacy. According to the Minnesota lawmaker, the bill could prohibit the Fed from issuing a digital dollar “directly to anyone”, bar the central bank from implementing monetary policy based on a CBDC, and require transparency for projects related to a digital dollar.

“Any digital version of the dollar must uphold our American values of privacy, individual sovereignty, and free market competitiveness,” said Emmer. “Anything less opens the door to the development of a dangerous surveillance tool.”

If passed in both the House and Senate and signed into law by President Joe Biden, the bill would amend the Federal Reserve Act to limit the Fed’s authority with respect to CBDCs. Emmer is the Majority Whip for the House, where Republicans currently hold a majority of seats. Cointelegraph reached out to Representative Emmer’s office, but did not receive a response at the time of publication.

Many on social media lauded the bill as a step in the right direction. Bitcoiner Dan Held applauded Emmer’s actions, with others citing financial privacy as one of the reasons they supported the legislation.

Source: Twitter

Emmer introduced a similar bill in January 2022, during the last session of Congress when Republicans held a minority in the House. At the time, the U.S. lawmaker cited “China’s digital authoritarianism” in limiting the Fed’s authority on a digital dollar — China had announced its digital yuan would be available to foreign athletes at the Beijing 2022 Winter Olympics, and continues to move forward with the project.

Related: US senator calls on SEC’s Gensler to answer for ‘regulatory failures’

During much of his recent time in office, Representative Emmer has been considered a crypto-friendly lawmaker calling for the government to scale back regulation in order to promote innovation in the industry. In December, he requested Securities and Exchange Commission chair Gary Gensler appear before Congress to “answer questions about the cost of his regulatory failures”.

US lawmaker introduces bill aimed at limiting Fed’s authority on digital dollar

If passed, the legislation could prohibit the Fed from issuing a digital dollar “directly to anyone,” as well as bar the bank from implementing monetary policy based on a CBDC.

Representative Tom Emmer has introduced legislation in the United States House of Representatives that could limit the Federal Reserve from issuing a central bank digital currency, or CBDC.

In a Feb. 22 announcement, Emmer said he had introduced the “CBDC Anti-Surveillance State Act” in an apparent effort to protect Americans’ right to financial privacy. According to the Minnesota lawmaker, the bill could prohibit the Fed from issuing a digital dollar “directly to anyone,” bar the central bank from implementing monetary policy based on a CBDC, and require transparency for projects related to a digital dollar.

“Any digital version of the dollar must uphold our American values of privacy, individual sovereignty, and free market competitiveness,” said Emmer. “Anything less opens the door to the development of a dangerous surveillance tool.”

If passed in both the House and Senate and signed into law by President Joe Biden, the bill would amend the Federal Reserve Act to limit the Fed’s authority with respect to CBDCs. Emmer is the Majority Whip for the House, where Republicans currently hold a majority of seats. Cointelegraph reached out to Representative Emmer’s office but did not receive a response at the time of publication.

Many on social media lauded the bill as a step in the right direction. Bitcoiner Dan Held applauded Emmer’s actions, with others citing financial privacy as one of the reasons they supported the legislation.

Source: Twitter

Emmer introduced a similar bill in January 2022, during the last session of Congress when Republicans held a minority in the House. At the time, the U.S. lawmaker cited “China’s digital authoritarianism” in limiting the Fed’s authority on a digital dollar — China had announced its digital yuan would be available to foreign athletes at the Beijing 2022 Winter Olympics and continues to move forward with the project.

Related: US senator calls on SEC’s Gensler to answer for ‘regulatory failures’

During much of his recent time in office, Representative Emmer has been considered a crypto-friendly lawmaker calling for the government to scale back regulation in order to promote innovation in the industry. In December, he requested Securities and Exchange Commission Chair Gary Gensler appear before Congress to “answer questions about the cost of his regulatory failures.”

Project Hamilton has concluded, weeks after legislators’ enquiry, according to Boston Fed

The two-year project produced a white paper in February. Research results will continue to appear, with the Fed’s partner at MIT scheduled to make a research report in January.

Project Hamilton, the research project of the United States Federal Reserve Bank of Boston and Massachusetts Institute of Technology, announced its conclusion in the run-up to Christmas. The two-year project looked at the technical aspects of a hypothetical United States digital dollar central bank digital currency, or CBDC.

“Project Hamilton took critical early steps toward a deeper understanding of how money might work better for all,” Boston Fed Executive Vice President Jim Cunha said in a statement announcing the conclusion of the project.

In February, the technologically “agnostic” project released a white paper and open-source research software called OpenCBDC in two versions, only one of which used distributed ledger technology. At the time, organizers promised that continuing research would look at “privacy, auditability, programmability, interoperability, and more.”

In its Dec. 22 announcement, the Boston Fed stated:

“Researchers at the Boston Fed and MIT said they plan to release additional retrospectives on Project Hamilton’s findings in the coming months.”

MIT’s Digital Currency Initiative (DCI) — the organization that had partnered with the Boston Fed — is expected to hold a “research release” on Jan. 12, 2023.

The Fed also hinted that work had continued on OpenCBDC, noting that it had reached a throughput rate of 1.84 million transactions per second. That is presumably on the non-blockchain version, which had reached 1.7 million transactions per second as of February. The blockchain version processed 170,000 transactions per second as of that time.

Project Hamilton was the subject of a letter from nine U.S. legislators, headed by Representative Tom Emmer, addressed to Boston Fed President Susan Collins on Dec. 1. The Congressmembers wrote:

“There has been insufficient visibility into the interaction between Project Hamilton and the private sector.”

The letter’s authors asked about the involvement of private firms in the research and expressed concern about unfair advantages for research participants in future CBDC development. They also asked about the project’s approach to privacy. They requested written responses without suggesting a deadline.

The letter did not name specific private firms associated with the project. The white paper did not acknowledge any private involvement.

Related: US Federal Reserve bank at the helm of CBDC research effort appoints new president

Emmer is an opponent of CBDCs and introduced legislation in January to prohibit the Fed from issuing a U.S. CBDC directly to consumers.

Since February, the DCI has picked up new partners. The Bank of England and Bank of Canada both entered into 12-month research projects with the DCI in March.

Clearing company tests out securities transaction settlements on blockchain networks

The Digital Dollar Project and the Depository Trust & Clearing Corporation have trialed a potential settlement system using tokenized securities and central bank digital currencies.

The Digital Dollar Project (DDP) and the Depository Trust & Clearing Corporation (DTCC) released the results of their Security Settlement Pilot project Nov. 30. The project tested a simulated digital U.S. dollar in transactions with tokenized securities on a blockchain network under real-world conditions. 

The project was designed “to better understand the implications of a U.S. central bank digital currency (CBDC) on post-trade settlement,” especially on a type of securities settlement that ensures transfers take place simultaneously or nearly simultaneously with payment. These settlements are known as DvP (delivery versus payment) settlements, or atomic settlements. No U.S. CBDC has been developed or even authorized yet.

DTCC managing director Jennifer Peve wrote in her company’s foreword:

“These efforts, which are detailed in this white paper, simulate future settlement functionalities while ensuring optionality for clients as well as the same – or higher – levels of safety and security as DTCC’s existing settlement solutions.”

The pilot used a third-party “orchestrator” between DTCC’s Digital Settlement Network prototype and the Digital Dollar Network to execute instructions and eliminate counterparty risk. This is because the parties in a transaction may have different settlement banks that will not have full visibility into both networks. Assets were encumbered on both networks during transactions.

In addition, the pilot project used “an algorithmic encumbrance mechanism to enforce conditions on the release of assets, which leveraged smart contracts to control the asset rather than a third party.” Transactions in the test system take a total of 12 steps.

The pilot system allowed for a variety of netting and settlement options that encompassed T2, T1 and T0 intraday and end-of-day.

U.S. settlement practices differ significantly from the rest of the world. Results of the settlement trial were evaluated by participating banks, which included Bank of America, Citi, Nomura, Northern Trust, State Street, Virtu Financial and Wells Fargo.

This was the first of five planned pilot projects. The Digital Dollar Project was created in 2020 by the Digital Dollar Foundation and technology consulting firm Accenture. It created a technical sandbox in September. The DTCC handles the vast majority of securities transaction settlements in the United States.

NY Fed launches 12-week CBDC pilot program with major banks

Banking giants including BNY Mellon, Citi, U.S. Bank and Wells Fargo will be issuing tokens and settling transactions through simulated central bank reserves as part of the pilot.

The Federal Reserve Bank of New York’s Innovation Center, or NYIC, announced that it would be launching a 12-week proof-of-concept pilot for a central bank digital currency, or CBDC.

In a Nov. 15 announcement, the New York Fed said the program would explore the feasibility of an “interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger” on a regulated liability network. Banking giants including BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo will be participating in the pilot by issuing tokens and settling transactions through simulated central bank reserves.

“The NYIC looks forward to collaborating with members of the banking community to advance research on asset tokenization and the future of financial market infrastructures in the U.S. as money and banking evolve,” said NYIC Director Per von Zelowitz.

The proof-of-concept project will test the “technical feasibility, legal viability, and business applicability” of distributed ledger technology, as well as simulate tokens and explore regulatory frameworks. The NY Fed said the project could “potentially be extended to multi-currency operations and regulated stablecoins.”

Related: US lawmaker lays out case for a digital dollar

The launch of the NYIC pilot project followed the center releasing research on its wholesale central bank digital currency program on Nov. 4. The first phase of the CBDC trial, dubbed Project Cedar, tested foreign exchange spot trades to determine whether a blockchain solution could improve “speed, cost, and access to cross-border wholesale payments.”

Federal regulators in the United States have not reached any consensus on whether to launch a digital dollar in the country, but agencies and those in the private sector have been exploring the possibility. Following U.S. President Joe Biden issuing an executive order aimed at establishing a framework on digital assets, some lawmakers questioned what Congress’ role might be in passing legislation in support of a CBDC and how a digital dollar might curtail similar innovations from the private sector.

Republican lawmakers call for answers on digital dollar from Fed vice chair

The House members asked for clarification on whether the Fed may be considering an “intermediated model” for a digital dollar that could require authorization from Congress.

Members of the House Committee on Financial Services have called for Federal Reserve vice chair Lael Brainard to clarify her position on a central bank digital currency ahead of deadlines set by United States President Joe Biden’s executive order on digital assets. 

In a Wednesday letter addressed to Brainard, 24 Republican lawmakers including ranking member Patrick McHenry requested the Fed vice chair provide answers as to whether the central bank sought to “curtail the use of digital assets and other private sector innovative payment methods” by releasing a digital dollar. They also inquired as to what Congress’ role might be in passing legislation in support of a U.S. central bank digital currency, or CBDC.

Brainard addressed the committee in May on the benefits and risks of a digital dollar, suggesting at the time that placing limits on CBDC holdings and not offering interest on accounts with digital dollars could help preserve the role of credit unions and maintain some aspects of traditional banking. The Republican House members asked for clarification on whether the Fed may be considering an “intermediated model” for a digital dollar that could require “direct authorization from Congress” to establish, as well as what role the White House could play:

“Please describe what ‘strong support’ from the executive branch looks like? Is it in the form of a letter or Executive Order?”

Related: CBDCs require governments to put a special focus on security

Lawmakers and regulators from both sides of the aisle have expressed concerns about the Fed introducing a CBDC. Fed chair Jerome Powell previously suggested there was no rush in the U.S. to release a digital dollar despite countries like China moving forward with their own. Connecticut Representative Jim Himes also released a white paper in June proposing Congress “begin the process of considering and ultimately passing authorizing legislation for the issuance of a U.S. CBDC.”