Banking and Finance Law Daily Deputy Treasury Secretary gives overview of Treasury’s priorities and securities market
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Tuesday, September 24, 2019

Deputy Treasury Secretary gives overview of Treasury’s priorities and securities market

By Donielle Tigay Stutland, J.D.

Treasury’s priorities include housing finance reform, CFIUS reform, digital taxation, and cryptocurrency, notes Deputy Secretary Justin Muzinich, at the 2019 Treasury Market Structure Conference, while also discussing Treasury plans to begin releasing aggregated post-trade Treasuries securities volumes data.

On Sept. 23, 2019, Justin Muzinich, Deputy Secretary of the U.S. Treasury, spoke at the 2019 U.S. Treasury Market Structure Conference, hosted at the Federal Reserve Bank of New York. He began his remarks highlighting the Treasury’s broad priorities, within domestic and international finance, including housing finance reform, CFIUS reform, digital taxation, and cryptocurrency, and concluded his speech with an overview of the market for U.S. Treasury securities.

Housing finance reform plan. Muzinich began his discussion of the Treasury's priorities by addressing housing finance reform, noting that on Sept. 5, 2019, the Treasury released its Housing Finance Reform Plan. In describing the plan, he stated, "Treasury is committed to reforms that will protect taxpayers, promote competition, and support affordable housing. Our plan includes nearly 50 recommended legislative and administrative reforms that are incremental, realistic, and balanced, and aim to preserve widespread and affordable access to the 30-year fixed-rate mortgage." He also noted that Fannie Mae and Freddie Mac continue to be an integral part of the economy, however, they have not been fully addressed since the financial crisis, and that in their current itineration, "Treasury’s continued financial support leaves taxpayers exposed to future bailouts."

Cryptocurrencies. Additionally, when addressing broad topics in his remarks, Muzinich noted that cryptocurrency is a topic that the Treasury is keeping tabs on. Muzinich described two types of concerns in this growing arena—private sector concerns and government concerns. Speaking about government concerns, Muzinich noted that there are concerns of cryptocurrencies being used to evade existing legal frameworks, such as those governing taxation, anti-money laundering and countering the financing of terrorism. Muzinich reaffirmed that such legal frameworks apply to digital currencies as well. He noted that Treasury’s Office of Foreign Assets Control has clarified that the obligation to comply with U.S. sanctions is the same, regardless of whether a transaction is denominated in traditional fiat currency or digital currency and Treasury’s Financial Crimes Enforcement Network also issued further guidance and an advisory this year.

In addition to legal and regulatory compliance concerns, the government must also consider additional questions, such as cryptocurrencies’ effects on financial stability, the monetary base, consumer protection, and privacy. He indicated that governmental bodies are taking a hard look at issues pertaining to cryptocurrencies. Internationally, Treasury and U.S. regulators are discussing these issues in the G7, the Financial Stability Board, and other forums. Domestically, the Financial Stability Oversight Council established a working group to take a cross-government look at these public policy issues.

Regulations on foreign investments. Muzinich’s remarks touched briefly on new regulations regarding foreign investments. The Committee on Foreign Investment in the United States (CFIUS), whose authority was delineated by Congress in 2018, just recently published regulations which address issues like what types of personal data foreign entities acquire, and the types of sales of real estate around sensitive sites that CFIUS should review. Muzinich encouraged participants to comment on the proposed regulations. He also commented that the review process for foreign investments has become more efficient in the last year—twice as many cases are clearing during the first stage of review as compared to a year ago. By letting parties know quickly, transitions can proceed at a faster rate, provided that there are no security risks.

International tax system. Muzinich also indicated that Treasury is focused on the international tax system, and finding a solution to disproportionate taxation of digital businesses on U.S. firms. The Treasury is actively seeking a multilateral approach on this issue.

U.S. Treasury security market. Muzinich concluded his remarks with commentary on the U.S. Treasury securities market. Of note, Muzinich commented on the goal of leveling the playing field. He indicated that the Treasury Department will work with the Financial Industry Regulatory Authority to begin releasing aggregated post-trade Treasuries securities volumes data available on a weekly basis starting next year. This release will ensure that all market participants have access to the same comprehensive data.

Companies: Fannie Mae; Freddie Mac

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