Rep. Waters Solicits Feedback on Market Structure Bill; Digital Euro Proposal; FATF Report

Ranking Member of House Financial Services Committee Solicits Feedback on Market Structure Bill

What Happened?

This week Ranking Member Maxine Waters (D-CA) of the U.S. House Financial Services Committee (HSFC), has solicited feedback on the recently proposed Digital Asset Market Structure bill from the U.S. Treasury Department and the U.S. Securities and Exchange Commission (SEC). In letters sent to Treasury Secretary Janet Yellen and SEC Chair Gary Gensler, Ranking Member Waters requests that both agencies share their analysis on the draft legislation and stand ready to brief HSFC members on their respective agency’s recommendations.

The draft bill, released by the HSFC majority earlier this month, seeks to provide clarity, fill regulatory gaps, foster innovation, and provide adequate consumer protections in the digital asset ecosystem. As mentioned in last week’s Weekly Update, the HSFC is set to vote on the draft bill after lawmakers return from the July 4th recess.

What Does This Mean?

The letters may well have implications on the upcoming Committee vote. In them, Ranking Member Waters requests responses by June 30th, which is well in advance of the HSFC vote that, as of now, is set to take place in mid-July. Accordingly, the responses and recommendations from the Treasury and SEC could shape subsequent iterations of the bill.

Moreover, any such responses and recommendations are likely to influence the views and voting decisions of HFSC minority members, whose support will be crucial to moving the bill out of Committee..

The European Commission advances forward with the digital euro

What happened?

On Wednesday,, the European Commission published a draft legislative proposal on the digital euro. The proposal seeks to formally establish the legal bases for the European Central Bank (ECB) to launch a digital euro catered towards retail payments. The proposal also addresses operational aspects such as the distribution framework, underlying technology, and the establishment of Anti Money Laundering and Combating the Financing of Terrorism (AML/CFT) requirements.

The draft proposes the integration of digital identification tools. European Digital Identity Wallets, or eIDs, would facilitate digital transactions by enabling authentication, identification, and the exchange of attributes including licenses and certificates. Other notable elements include the mandatory acceptance by merchants with few exceptions, and significant authority being delegated to ECB, allowing it to undertake price interventions to balance the costs imposed on merchants and Payment Service Providers (PSPs).

What does this mean?

While the draft proposal establishes the digital euro as legal tender, concerns surrounding privacy have been underlined by the centralization of authority within the ECB. It will be essential to carefully address and balance those concerns to ensure the preservation of individual privacy.

The FATF Standards and Crypto Space: An Overview of the 'Virtual Assets: Targeted Update' Report What Happened? On Tuesday, the Financial Action Task Force (FATF) has unveiled an update concerning the enforcement of its guidelines on virtual assets and virtual asset service providers (VASPs). These rules were widened to envelop the crypto realm four years ago, yet according to the recent update, over 70% of jurisdictions have not fully complied with these guidelines. This partial compliance is notably observed in relation to the FATF's "Travel Rule”—which requires financial institutions to provide specific information about the originator and beneficiary of certain transfers.

FATF also references regulators’ challenges with the burgeoning DeFi sector and the utilization of unhosted wallets, which, by nature, lack central authority and complicate traditional regulatory oversight.

What does it mean?

The report mostly deals with the lack of compliance to its past guidelines and implores jurisdictions to comply. With regards to DeFi, the report simply recommends that jurisdictions continue to monitor and assess the risks involved and share their findings with others in the global network.