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QUICK FIX

Sen. Elizabeth Warren’s anti-cryptocurrency crusade is facing pressure from her own party.

Dozens of Democrats, including Senate Majority Leader Chuck Schumer, have broken with her in recent days and supported an effort to undo SEC guidelines that critics say discourage banks from holding digital assets. The Democrats not only defied Warren, but also President Joe Biden, who is threatening to veto the rollback. The rift may grow further next week when the House takes up sweeping, industry-backed legislation to incorporate crypto trading into federal financial regulations.

The sudden burst of support for crypto priorities, following waves of scandals and the skeptical posture generally taken by the Biden administration, is rattling some Democrats who see looming risks to consumers and the financial system.

“It scares the dickens out of me,” said Rep. Sean Casten of Illinois, who with Warren has tried to warn colleagues about money laundering risks in the industry.

The party’s Capitol Hill clash over crypto policy comes as the issue is becoming more prominent in the 2024 campaign. Former President Donald Trump is courting crypto fans, though they may represent a minority of the electorate, and signaling that he’d rein in the SEC’s crackdown on the industry. Crypto super PACs are poised to spend more than $80 million to influence control of Congress and secure friendlier policy. It’s leaving Democrats at odds over whether to follow Warren’s push to clamp down on crypto firms or to take a friendlier approach.

A total of 32 Democrats voted with Republicans in recent days to send the SEC crypto rollback to Biden’s desk. Lawmakers were motivated by a mix of crypto advocacy, bank lobbying and deep frustration with the SEC under Chair Gary Gensler. Schumer said in a statement that he supported undoing the SEC guidance because "New York State already has a strong law on the books, and they weren’t consulted on this regulation.”

This month marks the first time the House and Senate have devoted floor time to standalone crypto bills, giving lawmakers a platform to pick a side.

“I wanted to send a message,” Sen. Cory Booker, who was one of 11 Senate Democrats who supported the SEC repeal, said in an interview. “I’m frustrated because we haven’t had a chance to debate any of the real [crypto] bills.”

Warren told MM Thursday she is “concerned about anyone in Congress who is not worried about the threat posed by Iran and North Korea and their use of crypto,” but declined to address the differences in her party.

House members will have to go on the record again next week. Republicans have scheduled a vote on legislation from Financial Services Chair Patrick McHenry and Agriculture Chair G.T. Thompson that would divvy up crypto trading oversight between the SEC and the CFTC. Some Democrats expect even greater bipartisan support.

“There's still some big names on the Democratic side who haven’t made their thoughts known,” Rep. Wiley Nickel of North Carolina said.

Key Democrats are still resisting the effort. Rep. Maxine Waters, the top Democrat on House Financial Services, and Rep. Stephen Lynch plan to rally opposition to the legislation on the floor next week, aides said.

But it’s not clear how other senior Democrats may come down. House Democratic leadership has yet to decide whether to whip against the crypto legislation scheduled for the floor next week, said another aide granted anonymity to discuss closed-door conversations.

The votes are giving the industry’s campaign arms a clear look at where lawmakers stand as crypto super PACs begin to spend tens of millions of dollars on the 2024 elections. The goal is to elect allies and eliminate critics.

A spokesperson for the largest crypto super PAC network, Josh Vlasto, said in a statement that the group, Fairshake, is “committed to supporting elected officials and candidates on both sides of the aisle who want to get things done and keep tech jobs in America.”

Crypto lobbyists and industry-friendly Democrats are working to shore up support for the big House crypto bill ahead of next week. In addition to Nickel, they include Reps. Ritchie Torres of New York and Ro Khanna of California.

“The advice I’m giving to Democrats is this: We cannot hand this issue to Republicans,” Nickel said.

Happy Friday — Send tips to [email protected].

Driving the day

Fed Governor Christopher Waller gives a speech in Minneapolis on payments at 10:15 a.m.

The CFPB is here to stay — A motley crew of liberal and conservative Supreme Court justices ruled that the way the CFPB receives funding is constitutional, neutralizing an existential threat against the consumer watchdog.

Thursday’s decision is a big loss for Republican lawmakers and finance industry interests who’ve argued that the CFPB has escaped accountability because it’s not subject to the congressional appropriations process. The arrangement has helped shield the watchdog from some political and lobbying interference. House Republicans want to take up legislation to rein in the bureau, but it’s going to be DOA if they pass it.

What’s bothering Jamie Dimon — The JPMorgan Chase CEO told Bloomberg Television that the U.S. economy is still facing significant price pressures and that borrowing costs may stay elevated longer than many expect. He sees “a lot of happy talk” in the markets.

“Stocks are very high, and I think the chance of inflation staying high or rates going up are higher than people think,” he said. “My view is whatever the world is pricing in for a soft landing, I think it’s probably half of that. I think the chances of something going wrong are higher than people think.”

As for everyone else? The Dow reached an intra-day high of 40,000 Thursday, amid renewed optimism for interest rate cuts.

Gruenberg hangs on — Michael Stratford reports that Democrats stood by FDIC Chair Martin Gruenberg Thursday when he testified before Senate Banking, despite concerns about widespread misconduct at his agency.

“Your resignation would do nothing to improve the toxic culture at the FDIC, but it would give Republicans a veto over bank policy,” Warren told Gruenberg.

Crypto

First in MM: Crypto firms rally for House bill — Around 60 crypto companies and industry organizations sent a letter to House leadership in support of the digital asset trading bill that will be on the floor next week.

The letter organized by the Crypto Council for Innovation includes signatures from a16z, Block, Coinbase, Circle, Kraken and Paxos. The legislation, which will be the first comprehensive crypto policy passed by a chamber of Congress, would revamp jurisdictional lines between the SEC and CFTC.

The bill isn’t universally loved by the crypto world. But it marks a big lobbying victory for firms that have been pushing for years for a more bespoke regulatory framework and greater official legitimacy.

“We recognize that [the bill] FIT 21 will introduce new compliance challenges for digital assets companies, but regulatory clarity is indisputably more responsible, safer for consumers and preferable to the status quo,” the crypto organizations say in the letter.

Crypto Council CEO Sheila Warren told MM that for some crypto players “these kinds of things feel scary” and “sometimes that feels existential.”

“This is not a perfect bill — that is hopefully extraordinarily obvious, no bill is,” she said. “But when it moves so far toward clarity, you do have to ask yourself, what is it specifically that I’m holding out for?”

Some decentralized finance (DeFi) exchanges, venture capital firms and token issuers have raised concerns over where the bill draws the line between SEC and CFTC oversight, according to lobbyists.

BANKS

Coming soon from Mark Warner — The Virginia Democrat says he plans to introduce legislation that would press banks to embrace the Federal Reserve’s discount window. Warner argues it’s a way to address the emergence high-speed bank runs, like what was seen in Silicon Valley Bank’s collapse.

Warner said at a Senate Banking hearing Thursday that his bill would require lenders to do discount window “test borrowing” and allow regulators to give credit to banks that demonstrate they can use the funding backstop.

Fly Around

People moves — Paul Cellupica will be the Investment Company Institute’s general counsel, after serving as PIMCO’s executive vice president and deputy general counsel for U.S. regulatory matters.