U.S. House Financial Services Committee Chairman Patrick McHenry and two congressional lawmakers sent a letter to Federal Reserve Chairman Powell, collectively condemning him for undermining the progress Congress has made in legislating a regulatory framework for payment stablecoins and preventing banks from entering the cryptocurrency ecosystem. lock up. The U.S. Securities and Exchange Commission (SEC) also made a rare move to identify non-fungible tokens (NFTs) as "securities." It issued a cease and desist order to the U.S. company Impact Theory for the first time, accusing the NFTs it launched of violating the 1993 Securities Act.

U.S. lawmakers collectively condemned Powell: preventing banks from entering the crypto ecosystem

Mike Henry's joint letter also includes the signatures of French Hill, chairman of the Financial Technology and Inclusion Subcommittee, and Bill Huizenga, chairman of the Oversight and Investigations Subcommittee. They stated in the letter: “We object to the regulatory letters SR 23-7 and SR 23-8 issued by the Federal Reserve on August 8. We are concerned that these actions are intended to undermine Congress’ progress in establishing a regulatory system for payment stablecoins. In addition, if these The letters remain, and they will undoubtedly deter financial institutions from participating in the crypto-asset ecosystem.”

(Source: US Financial Services Comittee)

The letter states that the U.S. Congress recognizes the need to provide clear regulation for stablecoins and the broader digital asset ecosystem, and that the regulatory framework it is establishing will also better protect consumers and provide certainty to market participants, " The introduction of the Payment Stablecoin Clarity Act is the result of this effort.

The three lawmakers also said: “The U.S. House Financial Services Committee’s approach is intended to create a clear and permissible framework for regulated institutions to issue stablecoins, including banks under the jurisdiction of the Federal Reserve. The legislation imposes restrictions on all stablecoin issuers. Strict standards are imposed on reserves, disclosures, redemptions, liquidity and risk management to ensure the integrity of stablecoins.”

“However, instead of working with Congress to establish a workable system, the Fed went against the grain and issued two regulatory letters, SR 23-7 and SR 23-8,” they collectively condemned.

McHenry and others also emphasized in the letter that the Federal Reserve plans to impose additional regulatory burdens on banking institutions’ participation in crypto-assets and provide the Federal Reserve with additional tools to reject or block activities related to crypto-assets.

Simply put, what the joint letter wants to express is that the regulatory letters SR 23-7 and SR 23-8 issued by the Federal Reserve actually prevent banks from issuing stablecoins or participating in the stablecoin ecosystem.

“While oversight of the non-objection process is disguised as guidance on the process by which these activities may be permitted, it is clear that the Fed does not intend to permit any such activity, at least as it relates to public, permissionless blockchains,” they noted. the purpose behind.

Finally, they emphasized that SR 23-7 and SR 23-8 were not issued in accordance with the notice and comment process required by the U.S. Administrative Procedure Act, which represents the Fed’s intention to formulate policies without accountability to market participants and the public. They protested strongly, saying it was unacceptable.

Rare enforcement by the U.S. Securities and Exchange Commission: NFT is recognized as a security and a cease and desist order is issued to U.S. companies

Impact Theory is a Los Angeles-based company that produces entertainment and educational content, including multiple online podcast channels. It is reported that the company raised nearly $30 million through the sale of NFTs called Founder's Keys, which are divided into three levels.

According to the SEC, the company "encourages potential investors to consider the purchase of a founder's key as an investment in the business" and emphasized that it is "trying to build the next Disney" and, if successful, it would be the primary purchase for the founders. bring tremendous value.

After investigation, the U.S. Securities and Exchange Commission determined that the NFT promoted by Impact Theory were investment contracts and therefore were deemed to fall into the category of "securities." The company violated the 1933 Securities Act by selling these NFTs without registration. The regulator issued a cease-and-desist order, which Impact Theory agreed to.

Under the SEC's order, the company was ordered to pay disgorgement, prejudgment interest and civil penalties totaling more than $6.1 million, without admitting or denying the agency's findings. In addition, a fund will be created to return funds to investors of founders’ key NFTs. Impact Theory will destroy all founder keys it owns or controls, post order notifications on its website and social media channels, and will not receive royalties from future sales of NFTs on the secondary market.

Just over the weekend, the Founder's Keys founder's NFT was last sold for $1,468, making it one of 10 sales last week, according to NFT Statistics. The supply of tokens for this NFT project is 13,572 and there are 4,620 owners. It is worth noting that Founder's Keys is just one set of NFTs provided by the company.

SEC Commissioners Hester Peirce and Mark Uyeda wrote in their dissent to the action that this is the regulator’s first enforcement action involving NFTs. "NFTs are not company shares and will not generate any type of dividends for purchasers," they stressed to investors.

They noted: “We are concerned that this hype will induce people to spend nearly $30 million to purchase NFTs, but they do not seem to understand how they will use, enjoy or profit from the NFTs.”

The commitments made by Impact Theory, and cited in the SEC order, "are not commitments constituting an investment contract." SEC commissioners compared promises about NFTs to statements from collectible sellers, and they went on to propose a list of nine questions the agency should consider before pursuing an NFT case.

“Whatever one thinks of the Howey Test analysis, this issue raises larger questions that the Commission should address before bringing more NFT cases,” they wrote.