Davis Polk Hits Capitol Hill to Shape Crypto, Bank Regulation

Lawyers from an elite Wall Street firm with deep ties to the banking industry testified before Congress four times in the last month on regulating digital assets and financial institutions.

Davis Polk & Wardwell lawyers appeared before the House Financial Services Committee and House Agriculture Committee. They were invited by the Republican leaders of those panels, as lawmakers consider responses to meltdowns in the crypto and regional banking spaces.

The firm, a go-to legal adviser during the recent banking crisis, counts JPMorgan Chase and Morgan Stanley among its clients. It also advises major crypto players like Galaxy Digital Holdings Ltd.and Grayscale Investments.

“We’re there to help make good policy,” said Davis Polk partner David Portilla, who went before the House Financial Services Committee on May 18. “If we weren’t viewed in that way, I don’t think they would ask us,” he said.

Portilla worked as a Treasury Department official in the Obama administration. He recently joined Davis Polk from rival Cravath Swaine & Moore.

He testified May 18 in a House Financial Services subcommittee hearing on legislation governing stablecoins, whose value is tied to an asset like the US dollar. The collapse of the TerraUSD stablecoin has drawn scrutiny from lawmakers and regulators.

The federal government should establish a regulatory framework now, before scale makes change more difficult, Portilla said in his opening statement before the committee.

He was among three partners invited to testify by Rep. Patrick McHenry (N.C.), Republican chair of the House Financial Services Committee. Another partner testified at a House Agriculture subcommittee hearing.

The pace of the firm’s appearances is “unusual,” said Margaret Tahyar, head of Davis Polk’s financial institutions practice.

Tahyar was a key figure in deals designed to limit the impact of the collapses. She led a Davis Polk team advising JPMorgan on its purchase of First Republic Bank, Signature Bank in its March sale of assets to New York Community Bancorp’s Flagstar Bank, and Silicon Valley Bridge Bank in its sale to First Citizens Bancshares Inc.

She testified at House Financial Services Committee hearing on the federal response to the recent regional bank failures. Tahyar underscored the need for independent, non-partisan investigation of the recent bank failures, as well as a look at resources challenges among bank examiners.

The implosion of crypto exchange FTX also has prompted calls to ratchet up digital asset regulation.

Joseph Hall, head of the Davis Polk’s ESG practice, testified at a House Agriculture subcommittee hearing on digital asset regulatory gaps. He was invited by Rep. Glenn Thompson (R-Pa.), the committee’s chairman.

Washington-based partner Zachary Zweihorn appeared before a House Financial Services subcommittee to discuss the regulatory gaps in digital asset market structure.

The FTX saga “demonstrated that there’s a potential for real consumer harm, unless there’s clear rules of the road in place,” Portilla said.