September 21, 2022
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Cannabis banking co-sponsors in talks on compromise Senate bill

Lead co-sponsors of legislation to allow legal cannabis-related businesses to access banking services said they are working with key senators to advance the House-passed bill in the Senate.
Ed Perlmutter (D-Colo.) and Sen. Jeff Merkley (D-Ore.)—with the support of fellow co-sponsor Sen. Steve Daines (R-Mont.)—said they are working with Senate leaders to fully pass the SAFE Banking Act, which would establish a cannabis banking safe harbor in states where cannabis is legal.
The lawmakers said they are negotiating an expanded version of the SAFE Banking Act to satisfy Senate Democrats who have introduced a broader bill to end federal cannabis prohibitions. Unlike the SAFE Banking Act, the broader bill lacks bipartisan support and is unlikely to pass the Senate—potentially paving the way for a compromise bill in the Senate.
During the press conference, Perlmutter cited ICBA’s newly released poll showing two-thirds of voters (65%) support cannabis banking access. According to the poll conducted by Morning Consult:
  • 71% agree that allowing banking access would help reduce the risk of robbery and assault at cannabis-related businesses.
  • 63% agree that allowing these businesses to access the banking system would help improve public safety.
  • 55% say that with some cannabis-related businesses owned and led by people of color, women, and the LGBTQ community, allowing for cannabis banking would help these underserved communities.
  • 58% say a Senate vote on establishing a cannabis banking safe harbor is important.
Community bankers can use ICBA’s Be Heard grassroots action center to call on their senators to support the House-passed legislation.
Source: ICBA
Congress works to finalize stablecoin bill as regulators plea for urgent action

Just a week after senior officials from the Federal Reserve and the U.S. Department of Treasury renewed calls for lawmakers to set up a legal framework to regulate stablecoins, one legislator said such a measure could reach the finish line by year-end.

"I think we can get stablecoin legislation done before the end of the year," Ranking Member on the U.S. House Financial Services Committee Patrick McHenry, R-N.C., said at a congressional caucus
Such a measure would provide relief to regulators, who just renewed calls for Congress to set up a legal framework for stablecoins at a conference hosted by The Clearing House and the Bank Policy Institute last week.

"We have seen that the crypto financial system has all the same risks that we're very familiar [with] from traditional finance: run risk, liquidity risk, maturity transformation risk and lots of risk to investors, particularly retail investors," Lael Brainard, vice chair of the Federal Reserve, said.

The collapse of the algorithmic stablecoin pair TerraUSD and Luna in May caused a broad crash in cryptocurrency prices and a liquidity crisis across industry players that included the bankruptcy of cryptocurrency lenders Voyager Digital Ltd. and Celsius Network Ltd.
Late last year, the government issued a report recommending legislation that would limit stablecoin issuers to insured depository institutions and restrict affiliation with commercial entities.

Stablecoin risks can easily spill into the main, core financial system, Brainard said. Concerns include the possibility of fire sales of reserve assets used to back stablecoins that could disrupt critical funding markets.

The Department of Treasury, which helped produce the report last year, views stablecoins as a rapidly emerging risk to financial stability that demands legislation as soon as possible, said Jordan Bleicher, senior adviser to the undersecretary for domestic finance at the Treasury Department.

"The Treasury's goal is not necessarily to drive out stablecoins," Bleicher said on a panel at the BPI conference. "It is to ensure that stablecoins are appropriately regulated."

Brainard said she expects there to be a number of stablecoins in operation in the future. She added that a potential central bank digital currency could serve as "a neutral settlement layer that would enable commercial bank money, stablecoins to interoperate and coexist and provide some resilience to that system."

In July, The Wall Street Journal reported movement on a bipartisan agreement for legislation that would impose stringent rules on the stablecoin industry. The action came amid concerns that current laws do not provide comprehensive standards for the assets, viewed by some as a potential risk to financial stability. However, the measure failed to make progress.

Asked why there has not been more progress on legislation yet, Brainard said, "I think it's genuinely difficult to legislate for highly dynamic emerging financial areas. But boy, it does seem like a really important area to put some clear rules in place."

Michael Barr, the Fed's new vice chair for supervision, also said stablecoin regulation is one of his priorities.

"I believe Congress should work expeditiously to pass much-needed legislation to bring stablecoins, particularly those designed to serve as a means of payment, inside the prudential regulatory perimeter," he said.
Source: S&P Global Market Intelligence
Bill would bar Fed from issuing CBDC

Sen. Mike Lee (R-Utah) introduced legislation to prohibit the Federal Reserve from issuing a central bank digital currency.
The No CBDC Act would bar the Fed or any other agency from implementing a direct-to-consumer or intermediated CBDC model. Lee said a U.S. CBDC would centralize the government’s control over the economy, pose risks to consumer privacy and liberty, and convert banks to wallets instead of private lending institutions.
The House Financial Services Committee is deliberating legislation on stablecoins, with congressional authorization of a U.S. CBDC among the provisions under consideration. The committee decided not to consider the stablecoin bill at a July markup after ICBA expressed concerns that it was not publicly vetted, as reported by The Wall Street Journal, Politico, and Reuters.
 Source: ICBA
Poll suggests consumer skepticism of digital assets

New polling conducted for ICBA by Morning Consult indicates consumers support a regulatory framework for digital assets and are skeptical of the creation of a U.S. central bank digital currency.
The Treasury and Justice department reports—which respond to President Joe Biden’s executive order on responsible innovation—include several recommendations to bring digital assets within the regulatory perimeter. For instance, the reports encourage federal regulators to target unlawful activity in the crypto sector and to use existing authorities to issue guidance and rules to address crypto risks, even as Congress debates new crypto laws.
The Treasury report also encourages policymakers to continue to advance work on a possible U.S. CBDC, in case it is determined to be in the national interest. Meanwhile, it encourages the use of instant payment systems, such as FedNow, and responsible payments innovations—alternatives that could obviate the need for a CBDC.
Responding to the reports’ release, ICBA said its polling conducted by Morning Consult points to consumer skepticism with cryptocurrencies and CBDC. According to the polling:
  • 71% of voters say investing in cryptocurrency is risky, including more than three in five (62%) who own or have owned crypto.
  • 55% of voters say regulations in the traditional banking industry make them trust it more.
  • 46% of voters say they are aware that cryptocurrencies are not subject to the same regulations as the traditional banking sector—with 35% unaware.
  • More than half of voters (51%), including a bipartisan majority, say the establishment of a U.S. CBDC would increase the risk of their personal financial privacy and security being breached.
  • Nearly two-thirds of voters (64%), including a bipartisan majority, say they would rather have their personal bank account with a private commercial bank than with the Federal Reserve.
Source: ICBA
Outstanding PPP loan amounts down more than 90%

Industrywide, the total value and number of Paycheck Protection Program loans on the books of commercial banks have plummeted, according to S&P Global Market Intelligence data.

Aggregate outstanding PPP loan amounts as a whole were down 94.6% from peak amounts, and total PPP loan numbers were down by 90.8% as of June 30. The information only reflects activity at banks and thrifts and not at institutions such as credit unions and nonbanks.

First enacted in April 2020 and closed in May 2021, the PPP allowed banks to lend up to $10 million to businesses in need of help, with the ability to get those loans forgiven over time.

Source: S&P Global Market Intelligence
Tiny ATM card skimmers

Financial institutions in and around New York City are reporting super-thin “deep insert” skimming devices that fit inside the mouth of ATM slots, according to KrebsOnSecurity.
The security blog reports that the slim card skimmers—which are about half the height of a dime—are paired with tiny pinhole cameras disguised as part of the ATM. These skimmers are designed to access cardholder data stored in the magnetic strip on the back of many U.S.-issued payment cards.
Source: ICBA
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With the exception of official announcements, the Arkansas Community Bankers Association Board of Directors, Officers and staff disclaim any responsibility for opinions expressed and statements made in articles published in Arkansas Community Bankers NewsWatch 2022.
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