  How policy and regulation impact the crypto world – and the other way around By Nikhilesh De Managing Editor, Global Policy & Regulation May 18, 2021 Sponsored by  If you were forwarded this newsletter and would like to receive it, sign up here.
Hey folks,
Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De. You’re probably here because you signed up, but in case you're not a fan, you can unsubscribe here.
Federal Reserve Governor Lael Brainard has been one of a handful of prominent regulators addressing crypto over the past five years, from warning regulators to pay attention to crypto in 2016 to addressing central bank digital currencies three years ago to announcing the Fed’s research into a central bank digital currency last year.
Programming note: Next week is CoinDesk’s Consensus 2021. State of Crypto will be published a few days late (next week only!) and as a reminder, I’m moderating sessions with Brad Garlinghouse and Brian Brooks. If you have any questions for either CEO, email nik@coindesk.com, subject line “Consensus question.”
—Nik
Studying a digital dollar  Federal Reserve Governor Lael Brainard has addressed crypto-related issues while in her role at the U.S. central bank over the past five years. (Mark Kauzlarich/Bloomberg via Getty Images) The narrative Three years ago, Federal Reserve Governor Lael Brainard declared that she saw “no compelling demonstrated need for a Fed-issued digital currency.” Then came Libra, and later COVID.
Facebook’s unveiling of a global stablecoin project worried regulators worldwide. Brainard was among those criticizing the effort, revealing in February 2020 that the Fed had already begun researching digital payments and determining what issues may exist around them. The pandemic appeared to accelerate those efforts.
Americans slowed down their spending in the early days of the pandemic, only to increase their spending once stimulus checks began rolling out, Brainard said in another speech last August about the need for a modern, efficient payments system. In that same speech, Brainard announced that the Boston Fed was working with MIT to study different technology bases for a possible digital dollar, which could use “innovative technologies” to boost financial inclusion and lower payment costs.
And shortly, Brainard, who will speak next week at CoinDesk's Consensus 2021, went from a skeptic of the idea of a virtual greenback to one of its most prominent champions in Washington.
“The COVID-19 crisis is a dramatic reminder of the importance of a resilient and trusted payments infrastructure that is accessible to all Americans,” Brainaid said in August, explaining why the Boston branch of the Fed was now examining different technologies and how the U.S. central bank can take advantage. Why it matters A former Treasury Department under secretary for international affairs, Brainard has reportedly been in the running for Treasury Secretary and remains an influential government official who has been studying the cryptocurrency sector for years – while in office. Unlike many recent high-profile government officials who recently entered public service after spending some time at private cryptocurrency companies or researching the technology, Brainard has been in her role at the Fed since 2014, giving speeches on crypto as long ago as 2016, when she said regulators should engage in the sector. Breaking it down “We have been conducting in-house experiments for the last few years, through means that include the Board's Technology Lab, which has been building and testing a range of distributed ledger platforms to understand their potential opportunity and risk,” Brainard said in her August speech.
Officials at the Fed later confirmed that this was not just a surface-level drive-by look. The central bank branch was deeply examining up to 40 different technology stacks to see which would best meet its policy goals.
(A spokesperson for the Fed pointed CoinDesk to Brainard’s August 2020 speech but declined to make her available for an interview.)
“Given the dollar's important role, it is essential that the Federal Reserve remain on the frontier of research and policy development regarding CBDCs,” Brainard said.
The speech and subsequent research set Brainard apart as one of the few high-ranking U.S. government officials engaging in digital currency beyond just giving speeches. Others include SEC Commissioner Hester Peirce, former CFTC Chairs Chris Giancarlo and Heath Tarbert, CFTC Commissioner Brian Quintenz and Acting OCC Comptroller Brian Brooks.
Brainard has a long history of being the lone dissenting voice on Fed policy, a 2019 profile by American Banker noted. At the time of the article’s publication, she had dissented on six different votes. Today, that number is 23, according to a review of public records, with three abstentions.
Notably, Brainard’s dissents tend to come with links to statements explaining the policymaker’s reasoning.
Fed Vice Chair Randal Quarles seemed to say that Brainard’s dissents in particular may result in “sharpening the resulting proposal,” according to the American Banker piece.
All this points to a likelihood that if and when Brainard announces the results of the Boston Fed’s research into CBDCs, we’ll have a better understanding of just how the U.S. would design a digital dollar.
The same Fed spokesperson referred CoinDesk to comments Chairman Jerome Powell made last month at the Federal Open Market Committee. The chair said the U.S. isn’t in a hurry to issue a digital dollar, but would rather “get it right.”
“Central bank digital currencies are now possible, and we're going to see some of them around the world. And we need to understand whether that's something that would be a good thing for the people that we serve,” Powell said, referencing the work the Boston Fed is currently conducting into the technology. 
The big three (plus one) The head of the Federal Deposit Insurance Corporation (FDIC), Chair Jelena McWilliams, said the federal agency is about to publish a request for information to learn how banks are currently interacting with the cryptocurrency sector, how they might interact with crypto in future and what, if anything, the FDIC should be doing.
The actual RFI went live yesterday, giving the general public until mid-July to respond. It asks questions around use cases for digital assets, compliance management, deposit insurance, supervision and other issues.
This comes on top of: The Office of the Comptroller of the Currency (OCC), which is issuing trust charters to cryptocurrency companies and dangling the possibility of treating a crypto firm as a bank and the Federal Reserve, which is looking into allowing fintech companies and other entities with novel forms of bank charters access to its master accounts.
That’s the game right there. The three main federal banking regulators in the U.S. are either actively letting crypto companies tap into the national banking system or looking into how they might enable crypto-related activities.
The Fed regulates the bank holding companies and certain state-chartered banks, the OCC regulates the actual national banks and the FDIC regulates state chartered banks that aren’t members of the Fed and provides deposit insurance to all these financial institutions.
It’s entirely possible that, at some point in future, we may have a crypto bank regulated by the different federal regulators that can a) help other crypto and fintech firms gain banking services (which is an ongoing problem, if somewhat less of an issue than it was in years past) and b) provide customers with some comfort if the they’re looking to transact with are regulated and insured financial institutions.
There’s also the National Credit Union Administration (NCUA), which recently posted a job listing for an individual who would deal with cryptocurrencies. The posting comes after Vice Chair Kyle Hauptman floated the idea of the NCUA following in the OCC’s footsteps in allowing its regulated entities interact with crypto.
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The Biden Bunch Changing of the guard  Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated) Michael Hsu, acting comptroller at the U.S. Comptroller of the Currency, has appointed Benjamin McDonough as senior deputy comptroller and chief counsel. Like Hsu, McDonough comes from the Fed, where he served as associate general counsel. Also like Hsu, McDonough has experience in the bank supervision sector.
Perhaps more pertinent, McDonough will succeed current Senior Deputy Comptroller and Chief Counsel Jonathan Gould, whose name and signature appear on numerous pieces of guidance the OCC issued granting federally-regulated banks permission to interact with the cryptocurrency space. Gould will move back to the private sector, according to the OCC’s announcement.
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Elsewhere 
C21: State of Crypto: Are We There Yet? The Quest for Crypto Legal Clarity 
With a new U.S. presidential administration and new crypto regulations coming into play in Europe, crypto legal matters are more critical than ever in 2021.
Next week at Consensus by CoinDesk, our virtual big-tent conference, we explore new legislation and policy debates around the Travel Rule, stablecoins, unhosted wallets, consumer protection and other critical issues.
Join our Explorations track "Are We There Yet? The Quest for Crypto Legal Clarity" with FinCEN Acting Director Michael Mosier, Michelle Harding of the OECD, Rebecca Rettig of Aave and more at Consensus by CoinDesk, May 24-27. Register today.
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