Carta Policy: Weekly Brief for September 16 | Carta

Carta Policy: Weekly Brief for September 16

Author: The Carta Policy Team
Read time: 8 minutes
Published date: 16 September 2022

The Topline

Macro matters

Congress faces a truncated calendar and copious to-dos

Finally back in force from the August recess, the House and Senate have only two full weeks of legislating before they break for most of October in the lead-up to the midterm elections. We’re also rapidly closing in on the government funding deadline of Sept. 30. Lawmakers still need to pass a continuing resolution to push the funding cliff into November, and will also seek to pass the National Defense Authorization Act and retirement security package sometime before the end of the year.

Inflation report shakes markets ahead of Fed meeting

The consumer price index (CPI) increased 0.1% in August, marking an 8.3% increase year-over-year and upending predictions that inflation would fall slightly at the close of summer. The startling CPI report signals the Federal Reserve will likely approve a 75 bps interest rate hike when it meets next week; a smaller segment of analysts are speculating that inflation’s continued growth could provoke a full 1% increase.

Biden signs CFIUS EO, holds off on outbound investment actions

The Biden Administration issued an Executive Order (EO) related to the Committee on Foreign Investment in the United States (CFIUS), which is an interagency committee that reviews—and can nix—foreign investment in the U.S. The order does not change the existing process, but further directs the committee to assess five factors as part of its consideration, including the investment’s impact on the U.S. supply chain, U.S. persons’ sensitive data, as well as technology such as microelectronics, AI, biotech, and clean energy.

Capital markets

Gensler testifies before Congress on SEC agenda

The SEC’s increasingly divisive agenda was on display this week as Chair Gary Gensler testified before the Senate Banking Committee, which largely focused on the SEC’s climate disclosure proposal and on digital assets. Democrats largely praised Gensler’s leadership on ESG and strong enforcement, while Republicans criticized Gensler for pursuing a political agenda that largely falls outside of the SEC’s expertise, authority, and mission.

Crypto & digital assets

Senate Ag discusses framework for digital commodities market

The Senate Agriculture Committee took a major step toward creating a regulatory framework for digital commodities this week by considering S. 4760, the Digital Commodities Consumer Protection Act, in a hearing featuring testimony from CFTC Chair Rostin Behnam and crypto industry leaders. This bipartisan legislation, introduced by the leaders of the Committee, would give the CFTC resources and authority to regulate the digital commodities markets— including bitcoin and ether— while preserving the SEC’s authority to regulate digital assets that are securities and related intermediaries.

Ethereum merge could draw SEC scrutiny

This week, the long-awaited Ethereum merge was completed, as the second-biggest blockchain moved from a proof-of-work to the more energy-efficient proof-of-stake model. This move is expected to reduce energy use by 99.95%. Previous SEC leadership has suggested ether was not a security, and bipartisan legislation would deem it a commodity subject to CFTC oversight. SEC Chair Gensler, who continues to assert most digital assets are securities, has suggested that the SEC will be taking a look at its new “staking” model.

SEC announces new crypto disclosure office

The SEC announced plans to create a new office devoted to disclosure review for crypto businesses. Chair Gensler has pressed the industry to work with SEC staff to get their tokens registered and regulated, and the Office of Crypto Assets will help provide more specialized support for crypto assets.

Agencies weigh in on the crypto debate in series of reports

Agencies are releasing their crypto findings and recommendations in reports mandated by President Biden’s Executive Order on Ensuring Responsible Development of Digital Assets. The Treasury Department published three reports focusing on the future of money, consumer implications, and addressing illicit financing risks of digital assets.

Banking & financial products

Banking Republicans foreshadow renewed scrutiny of CFPB

The CFPB issued a report outlining the rapid growth and risks to consumers with Buy Now, Pay Later (BNPL) financing. Although the CFPB does not currently oversee BNPL companies, it is expected to issue guidance or regulation to align the industry with the credit card sector.

Taxation & accounting

Economic blueprint doubles down on old priorities, including carried interest

The White House released an economic blueprint that expressed Biden’s support for a series of tax policy changes focused on taxing high-income earners and treating carried interest as ordinary income for tax purposes.

Antitrust, privacy, & technology

DOJ strengthens antitrust bench ahead of enforcement actions

The Department of Justice’s Antitrust Division is continuing to hire Big Law attorneys to compete with the extensive legal teams retained by companies facing legal challenges.

Upcoming events

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