SUMMARY
Two unrelated developments near or after the close yesterday demonstrate the speed at which investors and residential consumers may access the new energy law, and the viability of crypto as an asset class:
Electric Vehicles
We were struck by the speed of guidance related to the energy provisions in the Inflation Reduction Act the president signed into law yesterday which we are still reviewing but thought we’d share. Agencies issued the following:
As an aside, confirmation of the energy law gaining attention among institutional investors was seen yesterday in the headline that Cantor Fitzgerald has formed a new power and energy group. Political winners from policy developments are an interesting news cycle, but ten-year incentives to allocate capital help create longer-lasting capital markets winners. EV charging stations in the US are well behind other countries; we continue to see names like EVGO and Tritium as long-term winners from a policy perspective.
Cryptocurrency
A recurrent theme in our analysis of the policy impact broadly on digital assets but particularly crypto and stablecoins is that rules enable, help direct private capital allocation. A rational rulebook would affirm crypto as a separate asset class, separate serious players from opportunists (which the market has also delineated with force) and promote consumer choice. The crypto shakeout beginning last November, international rule maker guidelines (the Financial Stability Board, and the International Organization of Securities Commissions, and the Bank of International Settlements, for example), and sector M&A all point to regulators facilitating the digital asset space.
As we’ve written many times over the past year, and as validated by the Fed’s August 16 letter to its banking supervisors, incumbents will compete robustly in this space. The Board details the basic safety, soundness, and financial stability risk mitigation standards to its supervisors overseeing US banks, bank holding companies and foreign banking organizations operating in the US. Basic guardrails enable this activity without disfavoring new entrants (including fintechs). It seems fair to write that digital assets and regulation increasingly coexist broadly benefitting capitalists and consumers. Goldilocks is a fairy tale, but these developments are generally constructive.
We haven’t quite finished our read of the white paper also published yesterday by Brookings Hutchins Center, but its premise that stablecoins can be regulated via existing law is another supportive development. As we wrote to those signed up to our short policy e-blasts:
Tim Massad, former CFTC chair, is one of the three authors. We see the proposal as a policy development, not a market event. Sector impact might happen but only after federal regulators respond publicly to the paper’s findings. That day might come on September 14 when the House Financial Services Committee is scheduled to markup cryptocurrency legislation. We believe it unlikely a bill passes Congress this year but legislators’ comments about the viability of stablecoins regulation through existing authority likely will be discussed.
On September 13, Tim will join our 22V client macro webinar to update his broad views on the digital assets space, and specifically discuss the paper’s findings and implications. Other speaker that morning will cover the midterms and 2023 DC policy outlook, and China. We will send an email with details for the webinar and of our entire policy line up soon.
