Carta Policy: Weekly Brief for July 1

Carta Policy: Weekly Brief for July 1

Author: The Carta Policy Team
Read time:  8 minutes
Published date:  June 30, 2022
Congress pushing to finalize Bipartisan Innovation Act & BBB while GOP Leader McConnell signals Dems cannot have both bills.

Executive summary

  • IMF forecasts decelerating U.S. growth—projects just 0.8% growth rate for 2024

  • Carta data shows spike in remote hiring as companies compete for top tech talent

  • House Financial Services Committee scrutinizes lack of diversity in VC

  • SEC & CFTC work together on “one rulebook” for crypto while SEC provides guidance on crypto custody assets

Happy 4th of July weekend. Given the holiday, Carta’s Policy Weekly will be taking next week off. But as always, let us know if you have any questions.

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Macro matters

Prices are rising and the economy is contracting. The Supreme Court term is ending after divisive opinions and the swearing in a new justice, Ketanji Brown Jackson. And the Secret Service prefers that former President Trump not drive the car. These are the issues dominating headlines and driving a more polarized political environment, all while Congress seeks to reach a deal on the Bipartisan Innovation Act and Build Back Better.

Congressional agenda

Lawmakers have a small respite for July 4 recess but will return July 11 trying to pass the Bipartisan Innovation Act before the August break. The once-sprawling bill to bolster U.S. competitiveness will be trimmed substantially: It will likely not include a tax title to expand the R&D tax credit; the amendment Carta has opposed, directing the SEC to rewrite rules around private market capital formation; and H1-b visa modernization. The bill still may include some form of export controls for investments and offshoring into certain regions. 

As the title implies, the Bipartisan Innovation Act has support from both sides. But Minority Leader Mitch McConnell has signaled that Republicans will oppose the effort unless Democrats abandon Build Back Better. Majority Leader Chuck Schumer and Sen. Joe Manchin had been negotiating a modified $1 trillion bill that would have close to $2 trillion in offsets to reduce the deficit, but it is not clear how McConnell’s comments will impact the effort. 

Economic conditions

Controlling inflation takes priority, even if it means a recession, Fed Chair Jay Powell has acknowledged. The perspective reflects the Fed’s actions: It raised the target fed funds rate 75 basis points last meeting and signaled it may do so again in July. Economic headwinds continue. The International Monetary Fund (IMF) just concluded its assessment of the U.S. market, projecting a declining growth rate, falling from 5.7% in 2021 to a projected nadir of 0.8% in 2024, at which point it will begin to climb back to 1.7% in 2025. As for inflation, the IMF expects it to peak this year, rising 5.4% Q4 2021/Q4 2022. 

Carta compensation report

As policymakers tilt against economic headwinds, companies are reassessing their approaches to compensation. To help employees, companies, and investors understand the talent and compensation landscape, Carta published its first data report focused on talent and compensation trends. Released this Wednesday, The state of startup compensation, H1 2022 details headcount by valuation, median salary trends across roles, terminations, and more. 

One interesting takeaway: remote hiring is growing, with 35% of new hires based remotely in 2019 ballooning to 62% this year. Around 84% of companies geo-adjust compensation based on employee location. 

The data show there are now four Tier 1 cities for tech talent setting the upper boundary for compensation. Meanwhile, pay for tech talent across the country is converging towards those top markets—it’s likely the result of some employees keeping their salary levels despite geographic relocation during the pandemic. Remote work may also be forcing companies to compete for talent across the country. 

Carta comp data can assist companies as they navigate the growing push by policymakers across the country to increase compensation transparency. The most notable example is New York City, which adopted a law requiring employers with four or more employees to publish a pay range (the position’s minimum and maximum salary or hourly wage at the time of hire). Other states are pushing similar rules, and companies will need to know how to comply; adopt a compensation philosophy; and attract, retain, and grow talent. Having accurate comp data is an important first step.

Capital markets

HFSC examines obstacles to increasing diversity among startups

The House Financial Services Committee examined demographic trends in the fintech sector and policies to increase diversity, equity, and inclusion in the venture capital ecosystem. As a solution, Democrats suggested increasing disclosures around diversity and submitting public diversity scorecards for venture capital funds and limited partners to the SEC. Other suggestions include policies Carta supports, such as bolstering access to capital for small and emerging funds and lowering barriers to entry—including by providing more education resources throughout the ecosystem and expanding retail access to private market investments.

Crypto & digital assets

Gensler makes case for SEC crypto regulation; SEC denies another bitcoin ETF

SEC Chair Gary Gensler continues to defend the SEC’s turf on crypto regulation in light of recent market turmoil and momentum from policymakers to provide the CFTC with primary oversight responsibilities. Notably, Gensler said he has been working with CFTC to develop a formal agreement for “one rulebook” to regulate crypto trading to safeguard investors against fraud, manipulation, and front running, as securities and commodities are intertwined in the current trading environment. Gensler reiterated his view that most digital assets are securities and that bitcoin is a commodity, noting that many tokens are potentially noncompliant with securities law. It is unlikely policymakers will coalesce around a framework this year. In the meantime, the SEC will continue to assert its jurisdiction to protect investors—an argument bolstered by falling prices and suspended redemptions. 

One area the SEC asserted its jurisdiction is in refusing to approve a bitcoin exchange-traded fund (ETF), a stance that Commissioner Peirce has expressly criticized. While the CFTC has approved bitcoin future products, the SEC has denied a number of spot bitcoin ETFs in recent years. The latest disapproval came this week with the SEC’s rejection of Grayscale Investments’ proposal to list a spot bitcoin ETF under the grounds that Grayscale had not met standards to prevent fraud and manipulative acts and practices. In response, Grayscale filed a lawsuit claiming the SEC is failing to apply consistent treatment to bitcoin investment products in violation of the Administrative Procedures Act and Exchange Act. Regulatory approval of a spot ETF would be a major milestone for wider crypto adoption and could increase liquidity for the broader crypto market, so this case will be one to watch. 

Treasury and IRS may delay crypto reporting requirements

A 2021 infrastructure bill created reporting requirements for financial institutions and crypto brokers that receive $10,000 or more in digital assets in a single or related transactions. Generally, taxpayers are expected to provide transaction details to the IRS and FinCEN within 15 days after the cash is received, a practice they would like to extend to digital assets. Failure to file the form could result in criminal penalties. However, Treasury and the IRS may delay implementation of the new crypto transaction rules, originally scheduled to take effect January 2023, because they have yet to provide guidance on proper reporting and compliance. The crypto industry opposes what it believes to be overly broad requirements. Tellingly, if the IRS delays the implementation of crypto related filings, it would set back its efforts to collect billions in taxes from traders.

Traditional financial institutions push back against SEC’s guidance on custodying crypto

The SEC issued guidance on how crypto trading platforms (and other companies safeguarding customer digital assets) should properly account for risks. The guidance recommends the custodian record both a liability and a corresponding asset for the entire value of the asset. This would push institutions to move the crypto-asset onto its balance sheet. Industry leaders assert that traditional bank custodians—subject to a comprehensive range of safety regulations and risk management—have the supervisory frameworks in place to offer digital asset custody services, and the SEC guidance would undermine that ability. Expect continued industry pushback and efforts to enlist federal banking regulators to help resolve how digital assets are held and reflected on the balance sheet.

EU agrees to AML rules on crypto

The European Union reached a deal on an anti-money laundering (AML) framework for crypto and digital assets that requires service providers to collect and store information identifying the parties in a transaction. There is no minimum size of covered transaction and for transactions over 1000 euros, the service provider would need to verify the identity of the private wallet owner. The rule applies to an unhosted wallet when it interacts with a wallet hosted by a service provider, but not in a P2P transfer where neither wallet is using a service provider. The crypto industry had raised objections when earlier iterations applied to transactions between two unhosted wallets. Although regulators eliminated that requirement in this final agreement, many are still leery. Policymakers are working through technical details of the text, which still needs to be approved by relevant committees and the European Parliament as a whole.

Banking and financial products

CFPB scrutiny of rent-a-banks

In a keynote address at a consumer group conference, CFPB Deputy Director Zixta Martinez called for a review of lending partnerships between banks and nonbanks. Martinez cited “unusually high default rates” on these loans, “which raise questions about whether their products set borrowers up for failure.” Last year, Congress repealed the Trump-era true lender rule, which required any bank that signs a loan document be considered its true lender for regulatory purposes, even if the loan is serviced by or sold to a high-interest lender. Martinez’s comments suggest that the CFPB will join state attorneys general and state financial services regulators in asserting “true lender” claims against the nonbank parties in these relationships.


IRS expected to change R&D credit forms

The IRS has long struggled with R&D credit documentation requirements. Recently, after years of performing costly and lengthy audits on R&D credit refunds, the Service issued procedural guidance to set out extensive new criteria for information that must be included in a valid R&D refund claim. Tax professionals and businesses have asked for a delay, as they are critical of the new requirements, and of pending IRS form changes to collect more information from taxpayers—but the IRS does not appear willing. Timing on implementation of the new R&D reporting is uncertain, but we expect to see draft forms and instructions that will allow for public review and comment.

Notable SEC proposed rules and comment deadlines

Fund names


*60-days after publication in the Federal Register, which has not occurred


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The Carta Policy Team
Carta’s Policy Team aims to connect the policymaking community and venture ecosystem to build an ownership economy and advance policies that support private companies, their employees, and their investors.