Policy newsletter

Carta Policy: Weekly Brief for May 13

May 13, 2022
The Carta Policy Team


  • Yellen calls for more federal regulation of digital assets after steep market declines, and Gensler criticizes crypto platforms 

  • Bedoya confirmed as FTC commissioner, giving Dems majority power to pursue antitrust and privacy agenda

  • Yielding to pressure from industry and policymakers, SEC extends comment periods on key rulemakings; Gensler to testify before Congress next week

  • Inflation rises 8.3% over 12 months & Fed signals it will raise rates 1% over next two meetings

Macro Matters

FSOC annual report, Fed fund rate, and inflation

The Consumer Price Index—the measure for inflation—rose 8.3% over the last 12 months. Public equity markets continue to decline. And the value of many digital assets has dropped. Within that context, Treasury Secretary Janet Yellen presented the Financial Stability Oversight Council’s annual report to Congress. Its focus: economic vulnerabilities exacerbated by the pandemic and the conflict in Ukraine, efforts to improve the resiliency of Treasury markets, and climate-related financial risks. Federal Reserve Chair Jerome Powell signaled that the central bank intends to raise its policy rate 1% over the next two meetings, bringing the Fed funds rate to a range of 1.75%-2%. Meanwhile, state lawmakers from New Mexico to New York are pursuing ways to ease inflation costs by providing permanent or temporary tax cuts.

Noms, noms, noms

The Senate confirmed Jerome Powell as chair of the Federal Reserve Board, as well as Fed Governors Philip Jefferson and Lisa Cook—who will be the first Black woman to serve in that role. The Senate also confirmed Alvaro Bedoya to the Federal Trade Commission, providing Democrats a working majority to push their agenda forward. Next week, the Senate Banking Committee will hold confirmation hearings for Jaime Lizarraga and Mark Uyeda, who have been nominated to serve as SEC commissioners, in addition to Michael Barr, who has been nominated to serve as the Fed’s vice chair of supervision. All are expected to be confirmed by the Senate this summer.

Congressional calendar

Policymakers are negotiating the Bipartisan Innovation Act,which is intended to strengthen America’s ability to compete with foreign jurisdictions such as China and to boost U.S. semiconductor manufacturing. The conference has just begun and may drag through fall. Carta continues to work to strip a provision that directs the SEC to revamp certain rules around raising capital in private markets. We are also assessing whether an R&D tax credit will be included (more below).

Capital markets

SEC extends time for public to comment on controversial rule proposals

After intense pushback from lawmakers and the industry—including Carta—the SEC has extended the opportunity for public comment on some of its more controversial and impactful regulatory proposals. These include a proposal that would fundamentally change the regulatory framework for the private fund industry as well as its climate disclosure proposal, which is likely to add millions in compliance costs for public companies and have potential downstream effects in the private markets. The SEC also reopened the comment period for its proposed changes to the statutory definition of “exchange,” which many in the crypto industry believe could be read broadly to include crypto trading platforms, an area that SEC Chair Gensler has been focused on regulating. The brevity of the SEC comment windows has been a source of contention under Gensler’s leadership, especially given the number of significant proposals the agency has advanced in a short period of time. The new comment deadline for the climate proposal is June 17, and the comment period for the private fund adviser and exchange proposals will close June 13. 

SEC advisory committee examines climate and SPAC rules

The SEC’s Small Business Capital Formation Advisory Committee met to discuss the SEC’s climate disclosure and SPAC rulemaking proposals, with a focus on the impact to small business. The potential burdens of the climate disclosure proposal were a top concern; they included the costs associated with the proposal’s audit requirements and the challenges of broad data collection. The committee adopted a number of recommendations to the SEC, including: to more closely consider impacts on small businesses, expand safe harbors, allow more time for emerging growth companies and smaller reporting companies to comply with the rule, and consider including industry-specific requirements. On SPACs, the committee recommended a safe harbor for projection disclosures, earlier disclosures to prevent information asymmetry, and for the SEC to enable the continued viability of SPACs, among other requests. 

Crypto & digital assets

Crypto crash

The collapse of TerraUSD, an algorithmic stablecoin, ripped through digital asset valuations, which have seen broad declines. In her testimony this week, Yellen noted that risks to financial stability are a major concern with the growth of stablecoins. She specifically referenced Terra and called for a comprehensive regulatory regime to guard against risks. Current law does not provide comprehensive standards for stablecoin issuers, and the Biden administration has pressed Congress to pass legislation that would regulate the issuers of such assets similarly to banks.

Gensler criticizes crypto; Peirce criticizes Gensler’s approach to crypto

The SEC Chair also continued in his criticism of the crypto industry by focusing on crypto platforms that offer multiple services, such as custody, market-making, and trading services. According to Gensler, this commingling of services may not be in the customer’s best interest, since they could allow platforms to front-run or trade ahead of their customers and dodge rules that apply to traditional exchanges designed to prevent such behavior. He also reiterated his position that most crypto tokens are securities, and any swap based on such is a security-based swap. Gensler highlighted SEC enforcement cases in this space and suggested there would be more to come. The SEC Chair will testify before Congress next week.

On the flip side, SEC Commissioner Peirce criticized the SEC’s approach to crypto regulation, arguing the agency is leading with enforcement instead of providing a productive path to compliance for the industry to follow. Peirce wants the SEC to use its broad exemptive authority to work with the industry to appropriately balance regulatory objectives with innovation.

Fidelity moves forward with crypto offering

Following Fidelity’s announcement that it would make Bitcoin an investment option for 401(k) plan sponsors—a move that the Department of Labor (DoL) has criticized—Sens. Elizabeth Warren and Tina Smith questioned why the company was still moving forward with its plans, arguing that the price volatility of crypto makes it unsuitable as an asset class for retirement accounts. For their part, Republicans have proposed restricting the DoL from prohibiting self-directed retirement accounts from investing in alternative assets, including crypto.


Senate supports restoration of R&D tax credits 

The Senate signaled bipartisan support to include an R&D tax credit for small businesses and restore the immediate expensing of R&D costs into the final Bipartisan Innovation Act. This provision would repeal a law enacted by the Tax Cuts and Jobs Act (TCJA) that requires companies to amortize their R&D costs over five years beginning in 2022. However, it remains unlikely that Democrats would provide this tax break to businesses while allowing extensions of the child tax credit and the earned income tax credit to stall in the Build Back Better Act.

TIGTA recommends IRS prioritize e-filing for business compliance

A report by the Treasury Inspector General for Tax Administration (TIGTA) detailed that the IRS’s pandemic-related backlog was so severe that the agency chose to destroy 30 million unprocessed information returns (including Forms 1099-MISC) that were paper-filed. The report highlights a lack of an agencywide plan to further develop e-filing options for business tax returns, even though it costs the IRS an estimated $30,196 per year to process paper returns—compared to $3,405 for e-filed returns. In response, the IRS has agreed to create a strategy to further enable business e-filing. Carta and industry leaders have requested the IRS allow e-filing of sec. 83(b) elections to help ease the burden of taxpayer compliance because the current paper filing election process is labor intensive.

NYC’s new pass-through entity tax offers a SALT cap workaround

New York City enacted a new elective tax that provides pass-through entities, or PTEs (partnerships, limited liability companies, and S corporations), a workaround to the state and local tax (SALT) cap that applies to individual taxpayers. Added by the TCJA for tax years 2018 through 2025, the SALT cap put in place a $10,000 per year limit on itemized deductions for state and local tax payments related to property tax, income tax, or sales tax. If an eligible business pays the city PTE tax, NYC-based owners can receive a dollar-to-dollar refundable credit for PTE taxes paid on their New York State income tax returns, potentially boosting your deduction above existing SALT caps. NYC’s SALT workaround is effective for tax years beginning on or after January 1, 2023 and is not to be confused with the New York state PTE tax.

Antitrust, privacy, and technology

Bedoya confirmed as FTC Commissioner

The Senate confirmed Alvaro Bedoya to the Federal Trade Commission, where he intends to focus on privacy issues, including data and facial recognition. Importantly, his confirmation gives Democrats a 3–2 working majority, empowering Chair Khan to pursue her agenda for the first time. Kahn has signaled that the FTC will be looking at data privacy—as both a consumer protection and a competition issue—while seeking to rein in data abuse in the tech industry. Khan is also interested in rewriting guidelines that would expand what kind of mergers the FTC has the power to challenge and is likely to examine the handling of AI that may violate consumer protection statutes and labor agreements.

Upcoming events

Notable SEC proposed rules and comment deadlines

SPAC reform


*60-day comment period after publication on SEC website or 30 days after publication in Federal Register, whichever is longer

**Re-opened comment period

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