Return of the Roaring Kitty
Spot Ethereum ETPs and Tokenization's New Momentum
FIT21 Passes the House
Global Capital Markets Program Roundtable on Digital Assets
Welcoming New FinTech Advisory Council Members
Michael Piwowar, EVP MI Finance, joined CNBC Worldwide Exchange host, Frank Holland, and Former E*TRADE CEO, Karl Roessner, to discuss the sudden return of Keith Gill (aka Roaring Kitty) from a three-year "cat nap" and his impact on GameStop shares, meme stocks, market regulations, and the changing face of retail investing.
The return of Roaring Kitty and meme stocks brings a new spotlight on how social media and mobile investing platforms enable retail investors to participate in financial markets.
In our 2023 FinTech Advisory Council Report, Chester Spatt discussed the GameStop short squeeze and issues surrounding payment for order flow. The short squeeze sparked multiple congressional hearings in early 2021 as lawmakers questioned the payment for order flow (PFOF) model. While PFOF has enabled a new era of zero-commission retail trading through online brokers and exchanges, it also potentially creates distortions in the trading process that can ultimately harm those same retail traders.
Regulators are also considering whether coordination among retail investors on forums like Reddit’s “Wall Street Bets” constitutes market manipulation. Speaking to CNBC, Piwowar said, “I have no doubt that the SEC is already looking at this, investigating it as possible market manipulation. But here’s the key point, there’s nothing obvious about what he’s doing that is illegal under the current rules.”
Fortune reports that Roaring Kitty’s holdings in GameStop were projected to surpass one billion dollars in early June before the company’s announcement of an additional stock issuance sent the shares down 15 percent. However, it is extremely unlikely that Roaring Kitty would realize his gains should he close his GameStop holdings, given the asset’s extreme volatility.
Coming on the heels of the Securities and Exchange Commission’s (SEC) approval of spot Bitcoin exchange-traded funds (ETFs) this January, the SEC has approved spot Ethereum exchange-traded products (ETPs). The decision paves the way for future ETFs for new tokens and potentially baskets of tokens while creating new opportunities for institutional capital to enter crypto markets, CryptoNews reports.
Cap Hill Crypto reports that the SEC approved regulatory filings for eight spot Ethereum ETPs. The SEC approved applications for BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton to issue spot Ethereum ETPs. The SEC still must approve the issuers' S-1 filings, which include disclosures about key investment information, like risk factors, investment objectives, and pricing information. The approval of ETFs and ETPs tied to digital asset spot markets lays the groundwork for how tokenized real-world assets might interact with capital markets within existing legal frameworks.
This month, the Subcommittee on Digital Assets, Financial Technology and Inclusion of the House Committee on Financial Services held a hearing on the “Next Generation Infrastructure: How Tokenization of Real-World Assets Will Facilitate Efficient Markets,” which explored how tokenization may take shape in the US financial system and the benefits and risks of public versus private ledgers and permissioned versus permissionless ledgers. Witnesses identified tokenization as useful in markets that lack modern standardized digital infrastructure, superfluous intermediaries, limited accessibility, and limited liquidity, such as private capital markets. The testimony highlighted tokenization projects already underway by BlackRock, Hamilton Lane, and KKR.
The Financial Innovation and Technology for the 21st Century Act (FIT21 Act) passed in the House this May. Nicole Valentine, FinTech director, released a statement following the bill’s passage, calling it “a welcome step to build our next generation of financial infrastructure.”
She continued, “Regulatory certainty and clarity for financial innovation are critical to the United States financial system’s growth, competitiveness, and resilience. The FIT21 Act supports the responsible innovation of digital assets and provides the clarity and guidelines necessary to innovate, build, and invest with a degree of certainty. We see promise in the growth of digital assets and blockchain technology to promote financial inclusion and economic mobility. The US House passage of the FIT21 Act signals to the world that the United States is ready to take the lead in setting global standards in this evolving frontier of finance.”
FIT21 is Congress’s first attempt to provide clarity over which digital assets fall under SEC or Commodity Futures Trading Commission. Last summer, the FinTech program released a letter of comment on a discussion draft of FIT21, in which we highlighted the importance of digital asset taxonomy, harmony between regulators, responsible and transparent financial innovation, and the need for rules that promote financial inclusion and education as Congress builds a market structure for digital assets.
On other legislative fronts, the House of Representatives passed a bill banning the Federal Reserve from issuing central bank digital currency, which is unlikely to advance in the Senate, CoinDesk reports. Additionally, two stablecoin bills are under consideration, one in the House and one in the Senate.
This April, the IFC-Milken Institute Capital Markets Program hosted a roundtable in Washington, DC, moderated by Michael Piwowar. The roundtable brought together African policymakers and the digital asset industry for a conversation titled “Financial Inclusion at the Frontier: Exploring the Landscape of Digital Asset Regulation in Africa.”
Delegates from think tanks, such as the African Union’s African Institute for Remittances, the Africa Dialogues, the African Center for Economic Transformation, and from governments, including Madagascar, Kenya, Zambia, and Nigeria, discussed effective and inclusive digital asset regulations that can support investment and innovation in the sector while advancing national development priorities and transforming the future of finance for Africa.
Industry leaders and investors, including Global Blockchain Business Council, Alliance for Innovative Regulation, Bank of International Settlements London Innovation Hub, Women’s World Banking, Circle, Coinbase, Coin Metrics, Stellar Development Foundation, International Finance Corporation, Lion's Head Global Partners, MiDA Advisors, and Tofino Capital, gained a better sense of policy priorities and perspectives in Africa to help inform corporate strategy and responsible business practices. Read a summary of the roundtable.
Matt Cameron, head of public policy and government affairs at Remitly, joined our FinTech Advisory Council recently. Remitly provides cross-border digital financial services. Cameron also serves on the boards of the Money Services Business Association and the Financial Technology Association. He comes to the council with policy experience from Amazon, start-ups, and the Consumer Financial Protection Bureau.
Jeffrey Stoltzfoos, head of government and regulatory affairs at Chime, also joined our FinTech Advisory Council. Chime is a financial technology company that provides affordable basic mobile banking services. Stoltzfoos brings over a decade of financial service policy knowledge to the council from Wells Fargo; Venable LLP; GE Capital; the US Senate Committee on Banking, Housing, and Urban Affairs; and the US Department of Treasury.
