Senate Banking – tomorrow
Tomorrow’s Senate Banking hearing, “An Update from the Treasury Department: Countering Illicit Finance, Terrorism and Sanctions Evasion,” with Deputy Treasury Secretary Wally Adeyemo could rekindle a series of bills which are intended to address relevant digital assets anti-money laundering (AML) shortcomings.
See tomorrow’s hearing page. Proceedings begin at 10 a.m. ET.
To be clear, digital assets has yet to be announced as a main focus of the hearing. But given the past history of Ayedemo and the Banking Committee’s Democratic leaders, a digital assets discussion seems inevitable.
Bills from Democratic Banking panel members who have been critical of crypto include:
Banking Chair Sherrod Brown (D, OH), who may have an AML bill of his own, said back in January that his committee would look back into the AML/digital assets issues again. Still, movement on the bills has slowed and this is in spite of the fact that that financing of terrorist organization Hamas and the October 7 terrorist attack in Israel had seemingly given the AML bills new momentum. (See Sen. Warren’s letter on “crypto-financed terror” signed by 100 Dems in October.)
Chair Brown – like many lawmakers – has likely been bogged down by his own re-election campaign.
what you should know: Also in play will be the use of sanctions and its effectiveness against terrorists using crypto. As she did in January on X, Senator Warren may cite the Government Accountability Office’s (GAO) report which was published out of the blue in January, “The Effectiveness of Economic Sanctions At Risk from Digital Asset Growth.” See it.
Senate Banking – Republicans
Republican members of the Senate Banking Committee include Senator Bill Hagerty (R, TN) and co-sponsor Senator Cynthia Lummis (R, WY), who introduced “Preventing Illicit Finance Through Partnership Act” [S.3603] in January.
According to a press release at the time, the bill targets illicit finance “by fostering communication between federal law enforcement agencies and private companies.” Read more.
what you should know: Hagerty and Lummis appeared to be trying to find the bill some breathing room by sending it to the Senate Judiciary Committee in January rather than Banking. Hagerty’s bill is considered to be more industry-friendly, but that doesn’t mean Senate Republicans aren’t taking an aggressive approach to digital assets and illicit finance. The bills from Senators Warren, Reed and Warner all have Republican co-sponsors (e.g. Rounds (MT), Romney (UT) and Marshall (KS)).
Senate Banking Ranking Member Tim Scott (R, SC) has said very little about digital assets in his tenure – will this be the moment?
election memes
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- If elections were settled with memecoins, Biden would win by a landslide – Blockworks
- What Trump and crypto tell us about facts vs feelings – Financial Times
mixers – code versus culpability
In a coordinated release of three (3) amicus briefs in support of Tornado Cash developers Roman Storm and Roman Semenov, DeFi Education Fund, Coin Center and Blockchain Association, each group takes a crack at different parts of the developers’ defense in the case brought by the U.S. Department of Justice in August of 2023. See the DOJ’s press release at the time.
From the DOJ perspective, the case accuses the developers of knowingly enabling money laundering and going around U.S. government sanctions by creating a crypto mixing service which anonymizes identity for crypto token transfer.
In 2022, U.S. Treasury had sanctioned Tornado Cash. At the time, current Majority Whip Tom Emmer (R, MN) responded with a letter to U.S. Treasury and outlined his dissatisfaction with sanctions on X, “The growing adoption of decentralized technology will certainly raise new challenges for OFAC. Nonetheless, technology is neutral and the expectation of privacy is normal.” See the letter and Treasury’s Jan. 2023 response.
mixers – amicus briefs
On Friday, Amanda Tuminelli, legal counsel for DeFi Education Fund, announced her organization’s brief on X saying, “…the government’s theory underlying each of the three counts in the indictment is that software developers are criminally liable for a third party’s later illicit use of their software . . . even when there was no direct or active engagement between the software developer and the third party. That is a massive expansion of the law…. We focused our brief on the charges alleging a conspiracy to launder money and a conspiracy to violate IEEPA (sanctions-related statute)..” Read Ms. Tuminelli’s thread.
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- Brief of the DeFi Education Fund As Amicus Curiae in Support of Defendant Roman Storm’s Motion To Dismiss The Indictment – Defi EducationFund
Peter Van Valkenburgh of industry advocate Coin Center also annouced his group’s amicus brief in support of the Tornado Cash developers saying on X, “Our brief clarifies Tornado Cash’s operation. (…) We compare the UI to TurboTax, entirely optional software that can help you do your taxes but that leaves it to you to file them correctly and pay.” Read his thread.
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- Coin Center files court brief in defense of Tornado Cash developer – Coin Center
Blockchain Association’s head of legal Maria Tashman Coppel explains that BA’s “brief focuses on the [Department of Justice’s (DOJ)] unlicensed money transmitter charge. DOJ departs from established law as well as their own guidance – such departure would result in serious consequences.” Read her tweet thread.
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- BA Files Amicus Brief In DOJ’s Case Against Tornado Cash Developers – Blockchain Association
what you should know: Mixers were the subject of a rulemaking proposal in October by Financial Crimes Enforcement Network (FinCEN). Comments were due in January. Read about it. There was also a February oversight hearing for FinCEN and the Office of Terrorism and Financial Intelligence by House Financial Services -mixing was one of many topics discussed. From a use case perspective, the flip side of mixers is that they are privacy-preserving and potentially very useful for vulnerable populations looking to transfer funds.
Congressional staff turnover
Data released in mid-March from D.C. contact database Legistorm, which bemoaned that House staff turnover is close to “decade-high” levels, is making the rounds. Read the original March 18 article from Legistorm. Last week, an op-ed in Newsweek – inspired by Legistorm’s data – expanded on the findings with a discussion about the turnover among Members of Congress. Read that one.
But on X over the weekend, current Congressional staffer Tim Hite provided a different “take” on the data saying, “I don’t believe this is as straightforward as ‘congressional staff don’t stay longer than 5 years and that’s a bad thing.’ To start, working for Congress is a privilege and should not be viewed as an entitlement where one stays as long as they want.” Read his thread.
SEC wins, Coinbase defense
The Wall Street Journal looks at the “wins” the Securities and Exchange Commission (SEC) is collecting in crypto across such cases as the one against Do Kwon, Terraform Labs and Luna. The WSJ ties the victories to the prospects for the agency’s seminal complaint regarding securities and crypto against Coinbase.
A former senior official at the SEC and current Stanford Law lecturer, Marc Fagel, tells the WSJ that in the recent Motion-To-Dismiss decision for the Coinbase case, Judge Katherine “Failla took a ‘broad swipe at some of their legal defenses and seemed a lot more welcoming of the SEC’s legal theories than the Ripple court was. (…) It looks harder for Coinbase because the judge knocked out some of their defenses, but they can still win on the merits.’”
more tips:
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- New York Jury Finds Do Kwon, Terraform Labs Liable for Fraud in SEC Case – CoinDesk
DeFi – 2 Trillion USD
Uniswap launched a Dune Analytics dashboard last week showing the Uniswap protocol’s – and the crypto industry’s – expansion in decentralized finance (DeFI). According to the company’s math on Dune, the Uniswap protocol has surpassed 2 trillion USD in “all-time protocol volume” on Friday morning ET with 24-hour volume reaching over $1.7 billion.
tangential legislation
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- Committee Chairs Rodgers, Cantwell Unveil Historic Draft Comprehensive Data Privacy Legislation (yesterday) – House Energy & Commerce and Senate Committee on Commerce, Science and Transportation Committees
still more tips
Circle Promotes Permissionless Blockchain with Global Regulators – Circle blog
Bitcoin Mining’s Boon for Small Town America – CoinDesk
Commissioner Johnson Announces Agenda for April 9 Market Risk Advisory Committee Meeting – CFTC.gov
Galaxy Digital Plans to Launch $100 Million Crypto Venture Fund: Report – Unchained
Non-Fungible Tokens Education and Emerging Practices: Call for Public Comment – The Digital Chamber