blockchain tipsheet

right on cue

Just before the SEC Enforcement hearing by the House Financial Services (HFS) Capital Markets Subcommittee yesterday, Securities and Exchange Commission (SEC) Chair Gary Gensler appeared on CNBC’s airwaves with Squawk Box host Andrew Ross Sorkin.

See the interview.

Gensler began by openly complaining that Sorkin was asking too many questions about crypto given its diminutive size in comparison to the traditional stock and bond markets.

Sorkin bulled ahead anyway as Gensler largely continued his mantra that digital assets remained a lawless wasteland.

On whether Ethereum was a security or commodity and whether there would be an Ethereum ETF, Gensler demurred (as he did to HFS Chair Patrick McHenry (R, NC) back in April 2023). He said yesterday:

“… to me, the fundamental question is, how do we ensure that the American investor is protected and right now they’re not getting the required or needed disclosures and the intermediaries in the center of this rather centralized market generally are conflicted and doing things we would never allow the New York Stock Exchange to do.”

more tips:

• • Gary Gensler Says It’s Our Fault the SEC Appears So Focused on Crypto – Decrypt

Continue reading “Two Peas In Two Pods: NYDFS Superintendent Harris And SEC Chair Gensler”

enforcement – Robinhood

Publicly-traded Robinhood Markets has received a Wells Notice after a face-to-face meeting between the Securities and Exchange Commission (SEC) Chair Gary Gensler and Robinhood CEO Vlad Tenev in January.

For a company offering crypto products and services, a Wells Notice signifies that an enforcement action by the SEC is on its way.

Robinhood explained in its required notice to investors yesterday:

“On May 4, 2024, [Robinhood Markets] received a ‘Wells Notice’ from the Staff of the SEC (the ‘Staff’) stating that the Staff has advised RHC that it made a ‘preliminary determination’ to recommend that the SEC file an enforcement action against RHC alleging violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934, as amended. The potential action may involve a civil injunctive action, public administrative proceeding, and/or a cease-and-desist proceeding and may seek remedies that include an injunction, a cease-and-desist order, disgorgement, pre-judgment interest, civil money penalties, and censure, revocation, and limitations on activities.”

See Robinhood’s 8-K filing (PDF) with the details.

more tips:

• • Crypto lawyers say SEC is ‘abusing’ the Wells process as part of ‘carpet bombing campaign’ against crypto – The Block

what you should know: With H.J.R 109 on the docket for a House Floor vote this week, the SEC led by its Democratic majority and Chair Gary Gensler may be gearing up for more actions to counter the “overreach at the SEC” narrative being driven by Republicans in the House.

enforcement – reaction

House Majority Whip Tom Emmer (R, MN) reacted on X to the Robinhood news yesterday by saying, “Regulation by intimidation” and then later adding, “These Wells notices seem to be Gary Gensler’s desperate, last-ditch attempts to intimidate and antagonize digital asset innovators.”

Commenting on X, Rep. John Rose (R, TN) said, “The [SEC] exceeded its mandate to protect investors and maintain fair, orderly markets by issuing a Wells Notice to [Robinhood], a precursor to enforcement action.   I’m proud to help lead the effort to provide clarity by passing the FIT for the 21st Century Act so that rogue regulators like [Gary Gensler] can focus on their mandate to protect investors and not disrupt innovation.”

Robinhood CEO Vlad Tenev said on X last night, “Over the last three years, we’ve reached a state of regulatory onslaught that is harmful to American companies and consumers. The SEC’s continued attack on crypto, coupled with recent rule proposals like the one related to predictive data analytics, mark yet another improper attempt by the administrative state to stifle innovation…” Read Tenev’s tweet thread.

Later, Coinbase CEO Brian Armstrong commented on Tenev’s tweet, “Welcome to the club – you’re in good company 🙂 The courts will help get clarity – but the right solution longer term is we need to elect pro-crypto candidates. This is why Coinbase has supported Fairshake superpac, and StandWithCrypto[.]org. Hope y’all can join us!”

Continue reading “Robinhood Awaits Latest SEC Enforcement Action; Rep. Flood Presents SAB 121 Resolution”

Coinbase – earnings review

Earnings for cryptocurrency platform Coinbase outpaced Wall Street’s expectations for the first quarter of 2024 as the company reported earnings of $4.40 per share last Thursday, more than tripling analysts projections, with total revenue of $1.64 billion which more than doubled the revenue from the same period a year ago.

Nevertheless, Wall Street analysis was a mixed bag. Cannacord said “the quarter underscored the company’s ability to gain market share in hot and cool crypto market environments” while Goldman Sachs said “the risk-reward for Coinbase stock will largely be a reflection of volatility in crypto prices going forward, without a long-term plan in the broader crypto market according to Investor Business Daily. Read more.

Coinbase currently has a market cap of $54 billion. 

more tips:

• • Coinbase First Quarter 2024 Shareholder Letter
  • Earnings Webcast
  • Earnings Call Transcript
  • Analyst Call Transcript
  • 10-Q

Coinbase – elections, dual banking

On the conference call with analysts, Coinbase CEO Brian Armstrong noted how growing revenue, crypto utility and regulatory clarity were his company’s three big priorities. Fairshake Super PAC, “which already had a great impact in the market primaries in California, Texas, and Alabama” also was mentioned by Armstrong.

Expect more of the same on election contributions leading up to November appeared to be the message.

Citi analyst Peter Christiansen asked the Coinbase team about stablecoin legislation during the earnings call. Christiansen claimed “press reports are indicating potentially that Lummis-Gillibrand [Payment Stablecoin Act – S.4155] could hit the floor at some point next week. And part of that Bill, as you likely probably know is the dual banking system debate and whether or not states can issue their own stablecoins independently of the government — the federal government. I’m just curious how you see state-issued stablecoins kind of playing in the market. Is that potentially an opportunity for Coinbase? I’m just curious for your thoughts around that dynamic.” Continue reading “Coinbase Earnings Reviewed With Elections, Regulation In Focus; Russia And Iran Working On CBDC”

rescinding SAB 121 – review

A new filing for the Congressional record by House Financial Services (HFS) Chair Patrick McHenry (R, NC) provides a complete history on H.J.109, the resolution intended to rescind the Securities and Exchange Commission’s infamous Staff Accounting Bulletin 121 (SAB 121).

The resolution was introduced by Rep. Mike Flood (R, NE) and co-sponsored by Reps. Wiley Nickel (D, NC), French Hill (R, AR), Darren Soto (D, FL) and Majority Whip Tom Emmer (R, MN).

So far, HFS approved the resolution out of Committee in a February markup and awaits a House Floor vote.

In the Senate, Senator Cynthia Lummis (R, WY) has been unable to breakthrough with the Senate version due to the Democratic-controlled Congress and key committee Democrats such as Senate Banking Chair Sherrod Brown (D, OH), who has been largely anti-crypto.

The HFS report includes both sides of the SAB 121 argument which, at its core, prevents the custody of crypto by the regulated, U.S. financial system.

Of interest to SAB 121 aficionados may be the listing of organizations who opposed the resolution…. the banking sector was not among them: “Americans for Financial Reform (AFR); Better Markets; Public Citizen; Consumer Federation of America (CFA), United States Public Interest Research Group (US PIRG); NJ Citizen Action; Demand Progress; Institute for Agriculture and Trade Policy; Texas Appleseed; 20/20 Vision; Hilary J. Allen, Professor of Law at American University; Lee Reiners, Lecturing Fellow at Duke University.”

See the report.

Continue reading “The SAB 121 House Joint Resolution Report; Letter From Sen. Warren Decries Digital Assets Again”

Sen. Warren’s race

Titled “Crypto comes for Elizabeth Warren,” Boston Globe editorial writer Shira Schoenberg provided local readers an overview of the race for Sen. Elizabeth Warren’s (D, MA) seat yesterday.

It’s an even-handed look which includes Sen. Warren and two Republican candidates – John Deaton and Ian Cain – who bring a pro-crypto platform.

Schoenberg notes Warren’s anti-money laundering crusade adding “…But in a state known for its high-tech industries, Warren’s opponents say she is stifling innovation. Cain is the founder of the Quincy-based QUBIC Labs, an incubator for blockchain technology. (…) Cain says the technology has broad uses beyond cryptocurrency. For example, he worked with MassTech Collaborative to explore ways governments can use blockchain, whether to streamline permitting or issue municipal bonds.”

Read the article .

what you should know: The Massachusetts Republican primary is September 3.

stablecoin bill updates

The “Lummis-Gillibrand Payment Stablecoin Act” is now available on Congress.gov.

S.4155, as it is now known, has been referred to Senate Banking. See it here. Continue reading “Senator Warren’s Race With Two Republican Candidates; DOJ Seeking More Crypto Powers”

stablecoin bill – FAA

The McHenry/Waters stablecoin bill will probably not be added to the FAA Reauthorization according to a CoinDesk report yesterday afternoon.

CoinDesk’s Jesse Hamilton wrote, “A Democratic aide familiar with the negotiation said House and Senate leaders are insisting on a clean FAA reauthorization that wouldn’t allow the attachment of a stablecoin bill.”

Read more.

Later yesterday, Senate Banking Chair Sherrod Brown (D, OH) was apparently not giving up hope on getting “stablecoin + cannabis” into the FAA Reauthorization according to Politico’s Eleanor Mueller.  Mueller also reports that New York Department of Financial Services Superintendent Adrienne Harris had been encouraging Majority Leader Chuck Schumer (D, NY) to move forward with the stablecoin bill. Read more (subscription). Dual banking rights, for the win?

what you should know: Whenever the stablecoin bill eventually passes, assuming it does, Harris’s support seems to indicate that she’s getting dual banking rights for her state agency which she has advocated for in the past. That’s big – that’s reportedly been the major sticking point between McHenry, Waters and the White House.

Continue reading “McHenry Accuses Gensler Of ‘Intentional Attempt’ To Mislead; Report: Stablecoin Bill Stopped”

ETH is/was a security

On April 18, 2023, while appearing at a House Financial Services (HFS) oversight hearing, Securities and Exchange Commission Chair Gary Gensler waffled as HFS Chair Patrick McHenry tried to get Gensler to say whether Ether was a commodity or security.

Apparently 5 days earlier, on April 13, 2023, SEC’s head of enforcement Gurbir Grewal, who reports to the Chair, said Ether was a security and put it in writing in a “Formal Order.” So says a new, unredacted filing of the Consensys lawsuit against the SEC according to Leo Schwartz at Fortune.

Contradicting itself (given the assertion in the Consensys unredacted brief) even further, the SEC let Ether futures “go live” in October 2023.

House Majority Whip Tom Emmer (R, MN) reacted to the news last night on X saying, “This regulatory dishonesty is reprehensible – it’s tainting our great capital markets, harming investors, and threatening U.S. global leadership.” Next step, a Congressional letter -and a hearing?

more tips:

• • Consensys Software Inc. v. Gensler et al – Justia.com

what you should know: Chair Gensler’s lie of omission took place just 6 months after the FTX implosion -an event which steered the Biden Administration toward crystallizing an anti-crypto position. Continue reading “SEC Said ETH Was A Security In 2023; Stablecoin Bill In FAA Reauthorization Mix”