CFS Monetary Measures for February 2022

Today we release CFS monetary and financial measures for February 2022. CFS Divisia M4, which is the broadest and most important measure of money, grew by 5.0% in February 2022 on a year-over-year basis versus 5.1% in January.

For Monetary and Financial Data Release Report:

For more information about the CFS Divisia indices and the data in Excel:

Bloomberg terminal users can access our monetary and financial statistics by any of the four options:

3) ECST –> ‘Monetary Sector’ –> ‘Money Supply’ –> Change Source in top right to ‘Center for Financial Stability’
4) ECST S US MONEY SUPPLY –> From source list on left, select ‘Center for Financial Stability’

Senate Banking Committee Considers Implications of Digital Assets for Illicit Finance

The Senate Committee on Banking, Housing, and Urban Affairs considered the implications of digital assets for illicit finance, terrorism, and other forms of criminal activity.


Senator Sherrod Brown, Chair of the Senate Banking Committee, emphasized crypto’s role as a tool used by criminals to facilitate ransomware attacks and finance terrorism. Senator Brown contrasted crypto with the dollar, stating that the latter “has safeguards to protect against crime and illicit activity” because companies that use real money are required to “know their customers, and report suspicious transactions.” Senator Brown argued that (i) “[c]rypto allows money launderers and terrorists to do things they never could have done with dollars,” and (ii) in the absence of the safeguards around dollars, “lax rules and little oversight” are giving criminals more opportunities to “hide and move money in the dark.”

Senator Brown also said that President Biden’s recent executive order on digital assets will “jumpstart a coordinated strategy from law enforcement and regulators to fight bad actors who want to use crypto.” He added that without such regulatory and law enforcement action “cybercriminals, rogue regimes [and] terrorists . . . [would] create a shadow financial system that works for them.”

Ranking Member Patrick J. Toomey’s emphasized the need for “regulatory clarity” with respect to digital assets. Senator Toomey argued that criminals have always “tried to utilize new technologies for nefarious gain . . . [b]ut that is not a reason to stifle new technological developments.” He went on to say that cryptocurrencies were being used both by Russia to evade sanctions and by Ukraine which raised over $100 million in donations.

Witness Testimony

Jonathan Levin, Co-Founder and Chief Strategy Officer of Chainalysis, Inc. emphasized that (i) “the transparency of blockchains enhances the ability of policymakers and law enforcement to detect, disrupt, and ultimately, deter illicit activity” and (ii) a financial system founded on the use of blockchain technology “can enhance the effectiveness of financial regulation more broadly.” He provided several short-term recommendations aimed at reducing the risk of sanctions evasion through digital assets, as well as long-term recommendations aimed at improving detection, disruption and deterrence of broader illicit uses of digital assets.

Mr. Levin’s short-term recommendations include:

  • authorities using digital asset wallet addresses as identifiers;
  • OFAC potentially sanctioning those digital asset exchanges and crypto entities that facilitate sanctions evasion; and
  • expanding information sharing.

His long-term recommendations include, among other things:

  • financial regulators and other law enforcement investing in “blockchain intelligence and analytics capabilities . . . that will enhance their ability to detect, disrupt, and deter illicit uses of digital assets”;
  • improving and promoting interagency coordination through the creation of a Virtual Asset Coordination Center; and
  • greater legal clarity over financial digital assets (e.g., commodities and securities).

Michael Mosier, Former Acting Director, Deputy Director/Digital Innovation Officer at FinCEN, stated that policymakers should focus not only on “chas[ing] bad actors,” but also on preventing exploitation of the vulnerable “from the start.” His recommendations include: (i) expanding the AML and Kleptocracy whistleblower programs to explicitly include “sanctions evasion and any violation of money laundering laws not just BSA violations”; (ii) providing the Kleptocracy Whistleblower Program with “dedicated funds and much higher caps” for those whistleblowers under autocratic regimes; and (iii) reducing global regulatory arbitrage, in part through Congress pressing U.S. FATF representatives to “focus on standardizing licensing across jurisdictions.”

Shane Stansbury, Senior Lecturing Fellow in Law and Robinson Everett Distinguished Fellow in the Center on Law, Ethics, and National Security at Duke University School of Law, detailed the challenges that cryptocurrency presents for law enforcement, including (i) deciphering who is responsible for the criminal activity, (ii) lack of regulation, and (iii) tracing digital assets. He stated that even with the latest blockchain analytics, “investigations can take years to complete.”


While President Biden’s Executive Order on digital assets has been interpreted by some to reflect an open-mindedness on digital assets, recent statements by federal regulators and legislative representatives appears to be moving in a contrary direction – with Senator Brown’s statement being the most aggressively example. (See also Statement of SEC Commissioner LeeDOL Warns Plan Fiduciaries of the Substantial Risks of Cryptocurrency InvestmentsSEC Warns Investors of Risks Associated with Interest-Bearing Crypto Accounts.) Senator Brown echoed a phrase used to describe the Executive Order, saying that the “whole of government” must be put to the service of fighting the the problem of crypto. As to the Senate Banking Committee hearing, the “whole of government” is about amping up regulation.

One potentially interesting exception to the negative take on digital assets is the suggestion in the Executive Order that the Administration is open to considering the introduction of a USD-Central Bank Digital Currency. Perhaps the Administration considers private alternatives to a governmental CBDC as being undesirable and unwelcome competitors. A governmental CBDC, in which all transactions are ultimately routed through the banking system, could afford significant government transparency into spending.  

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Primary Sources

  1. Senate Banking Committee Hearing: Understanding the Role of Digital Assets in Illicit Finance

On China’s Financial System and Property Markets: Aliber and Walter

We are delighted to share work presented in recent days by two good friends of the CFS: Robert Z. Aliber and Carl E. Walter.

Carl discussed his forthcoming book The Red Dream: the Chinese Communist Party and the financial deterioration of China. Red Dream analyzes 1) the build-up of leverage throughout the system, 2) how regulators have worked to generate strong performance metrics while sloughing off unwanted assets, 3) the health of the financial system, as well as 4) the present within the context of prior financial stressors in the U.S., Japan and China itself.

Bob offers his latest thoughts on China’s property market, Evergrande, and future economic prospects more broadly. He first discussed these dynamics in the epilogue of the seventh edition of Manias, Panics and Crashes: A History of Financial Crises.

Carl recently served as an independent director of a major Chinese bank. For many years, Carl worked in China, where he last served as JP Morgan’s China COO and CEO of its banking subsidiary. He is now a visiting scholar at the Stanford Shorenstein Asia Pacific Research Center.

Bob is professor emeritus of International Economics and Finance at the University of Chicago. He has written extensively about the prices of currencies, international investment flows, banking issues, the multinational firm, international monetary arrangements, and financial crises.

To view Carl’s slides on China’s financial system:

To view Bob’s “The Ponzi Bubble in China’s Property Market is Deflating”:

As these topics are complex and challenging, we look forward to any comments you might have.

President Biden Signs Executive Order on Digital Assets

President Joseph R. Biden signed an “Executive Order on Ensuring Responsible Development of Digital Assets,” which outlined a “first ever, whole-of-government approach” to address the risks and potential benefits of digital assets.

In an accompanying Fact Sheet, the White House identified seven key priorities:

  1. The protection of U.S. consumers, investors and businesses. The President directed Treasury to assess and develop “policy recommendations to address the implications of the growing digital asset sector and changes in financial markets for consumers, investors, and businesses, while promoting equitable economic growth.”
  2. The protection of U.S. financial stability and mitigation of systemic risk. The President directed the Financial Stability Oversight Council to “identify and mitigate systemic risks posed by digital assets and to develop recommendations to address any regulatory gaps.”
  3. The mitigation of illicit finance and national security risks. The President directed all relevant U.S. Government agencies to give an “unprecedented focus of coordinated action” in order to mitigate all risks associated with digital assets.
  4. The promotion of U.S. leadership in the global financial system. The President directed the Department of Commerce to establish a framework for Government agencies to use to promote U.S. technology and economic competitiveness.
  5. The promotion of equitable access to safe and affordable financial services. The President directed the Secretary of the Treasury to produce a report on digital money and payment systems that would include the “implications for economic growth, financial growth and inclusion,” including as to “the risk of disparate impact to communities who have a long standing history of insufficient access to safe and affordable financial services.”
  6. The support of the U.S. Government to ensure technological advances and the responsible development of digital assets. The President directed government agencies to take definitive steps to develop and implement digital asset systems while prioritizing the data privacy, security and exploitation of investors.
  7. The exploration of a U.S. Central Bank Digital Currency (“CBDC”). The President directed U.S. Government agencies to analyze the “technological infrastructure and capacity needs for a potential U.S. CBDC in a manner that protects Americans’ interests.”

Issuance of the Executive Order was accompanied by supportive statements from numerous senior U.S. government and regulatory officials including Treasury Secretary Janet Yellen; National Economic Council Director Brian Deese and National Security Advisor Jake Sullivan; Senate Banking Committee Chair Sherrod Brown; CFTC Chair Rostin Behnam; and CFPB Director Rohit Chopra.


According to the Executive Order, digital assets have implications for climate change, financial growth, financial inclusion, illicit finance, international engagements, democratic values, global competitiveness, and much more. The Executive Order tells us that the United States must be a “global leader [in the] development and adoption of digital assets and related innovation” but we must also develop very substantial regulatory systems.

In light of the above, the President is requiring the involvement of at least eight different Cabinet members, numerous agencies, and every federal financial regulator, among others, to formulate policies. Given the sheer number of agencies to be involved, the complete diversity of interests to be considered, and the absence of any prioritization of those interests, the Executive Order does not actually provide much in the way of direction.  

While a possible interpretive theory is that this Executive Order will move the United States to develop a more digital-friendly regulatory system, it is equally possible that the Order signals very significant additional regulation. (See, e.g. SEC Commissioner Lee’s recent description of the digital asset industry as one that has grown by “largely def[ying] existing laws and regulations,” suggesting many new regulatory proposals to come.) Further, the Order’s frequent references to climate change may be understood as just “politics as usual,” or as many expect, a precursor to regulation on energy usage for mining.  

The Executive Order does seem to indicate federal movement toward the development of a Central Bank Digital Currency. Section 4 of the Executive Order is devoted to this topic and there are numerous other references to the issue throughout the Order. It would seem that some more specific proposal is likely imminent on this topic. 

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Primary Sources

  1. Executive Order on Ensuring Responsible Development of Digital Assets
  2. FACT SHEET: President Biden to Sign Executive Order on Ensuring Responsible Development of Digital Assets
  3. White House Press Brief: Background Press Call by Senior Administration Officials on the President’s New Digital Assets Executive Order
  4. Statement by Secretary of the Treasury Janet L. Yellen on President Biden’s Executive Order on Digital Assets
  5. Statement by NEC Director Brian Deese and National Security Advisor Jake Sullivan on New Digital Assets Executive Order
  6. Brown Applauds President Biden’s Crypto Executive Order
  7. CFTC Public Statement: Statement of Chairman Rostin Behnam on the President’s Executive Order on Digital Assets
  8. CFPB Director Chopra Statement on President Biden’s Digital Assets Executive Order