The Federal Reserve Bank of New York announced yesterday that it will join a variety of financial companies in a 12-week digital money pilot project advised by Sullivan & Cromwell LLP. The Fed aims to use this opportunity to explore the feasibility of “an interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multientity distributed ledger.” The project is called the Regulated Liability Network U.S. Pilot.

The Consumer Financial Protection Bureau has released a bulletin “that highlights complaints the CFPB received related to crypto-assets. Consumers most commonly reported being victimized by frauds, theft, account hacks, and scams. Consumers also had issues with executing transactions and transferring assets between exchanges. Many consumers had issues with accessing funds in their account due to outright platform failures, identity verification issues, security holds, or because of technical issues with platforms. Poor customer service is a common theme across crypto-related complaints.” CFPB Chair Rohit Chopra said that complaints suggest that bad actors are using digital assets to harm consumers.

The Federal Reserve Bank of New York issued a report regarding the Phase I results of Project Cedar, the project that the New York Innovation Center is undertaking to develop a technical framework for a theoretical CBDC. The report’s key findings include that cross-border payments supported by blockchain can deliver faster and safer payments.

The Office of the Comptroller of the Currency announced that it will create a new agency, the Office of Financial Technology, early in 2023. This will incorporate the existing Office of Innovation and help to deepen the OCC’s understanding of fintech. Acting OCC head Michael Hsu said, “Financial technology is changing rapidly and bank-fintech partnerships are likely to continue growing in number and complexity. To ensure that the federal banking system is safe, sound, and fair today and well into the future, we need to have a deep understanding of financial technology and the financial technology landscape. The establishment of this office will enable us to be more agile and to promote responsible innovation, consistent with our mission.”

CFTC Commissioner Christy Goldsmith Romero said at a crypto conference hosted by the International Swaps and Derivatives Association in New York that “Cryptocurrencies have not served as a hedge or to diversify traditional investment exposures,” and instead could “unexpectedly amplify risk, heightening financial stability concerns.” She called for regulators to “be careful in allowing bespoke treatment that could increase financial stability risks.”

Sens. Elizabeth Warren (D-MA) and Sheldon Whitehouse (D-RI) and Reps. Alexandria Ocasio-Cortez (D-NY), Rashida Tlaib (D-MI), and Chuy Garcia (D-IL) sent letters to the SEC, CFTC, Federal Reserve, FDIC, CFPB, and Treasury asking each agency to respond to a series of questions by November 7 about efforts to “stop the revolving door” between financial regulators and the cryptocurrency industry.

22 percent of the CFTC’s 82 enforcement actions in 2022 were related to cryptocurrency according to the agency’s annual enforcement report published on October 20.

Mastercard announced that it is creating a new program called Crypto Source to enable financial institutions to bring cryptocurrency trading capabilities and services to their customers. It is being launched in cooperation with Mastercard’s existing partner Paxos Trust Company and is expected to launch in Q4 of this year.

Sen. John Hickenlooper (D-CO) has sent a warning letter to SEC Chair Gary Gensler, marking the first time a Senate Democrat has publicly expressed concern about the SEC’s “regulation by enforcement.” In the letter, he said that the SEC needs to regulate crypto securities in “a transparent notice-and-comment regulatory process.” He specified that the SEC should take action to 1) define what types of digital assets are securities, 2) address listing and issuing digital securities, 3) determine necessary disclosure requirements, 4) establish a registration regime, and 5) set rules for trading and custody.