Senator Concerned About Binance; New York and California Making Crypto Moves

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Binance and stablecoins

Reuters reported Paxos CEO Charles Cascarilla told employees over the weekend that the company is “in discussions with the SEC” over allegations the Paxos’ Binance USD stablecoin should have been registered as a security. Apparently, Paxos has now “severed” its relationship with Binance.

Last week, New York Department of Financial Services (NYDFS) had required that Paxos stop “minting” BUSD. Also, Paxos had been reportedly sent a Wells Notice which meant SEC was about to bring an enforcement action against the company. Read a bit more on Axios. Binance has become increasingly toxic in the regulatory schema.

Binance and DC

In the wake of recent regulatory actions and its involvement in the implosion of FTX, Binance is stepping up its DC presence reports Politico’s Sam Sutton. None too soon as Politico quotes Senator Bill Hagerty (R, TN), “I have deep concerns about Binance. (…) They’re moving aggressively all over the world right now and they are very opaque.’ Read more.

Learn more about Binance and its founder:

gov employees need crypto

You can’t regulate what you can’t own argue Katie Biber and Amy Aixi Zhang of Web3 investment firm Paradigm. “Imagine designing an FAA safety protocol without ever seeing a plane, or legislating lightbulb efficiency without ever flipping a switch. It may be possible, but it certainly won’t yield sensible policy,” say Biber and Zhang. As their chart shows, Congress can own crypto but with certain restrictions, and the SEC and CFTC cannot. Read “You Can’t Regulate What You Can’t Understand: The Case for Modernizing Government Ethics Rules“.

states – NY regulator upgrading

Yesterday, the superintendent of the NYDFS, Adrienne Harris, announced that her unit has beefed up its ability to detect fraud within the virtual currency ecosystem. She didn’t offer specifics in the press release but is quoted, “The new enhancements will provide the Department with additional capabilities to detect potential insider trading, market manipulation, and front-running activity associated with Department-regulated entities’ and applicants’ exposure or potential exposure to listed virtual currency wallet addresses.” Read more.

The NYDFS points out that this builds on previous upgrades and clarifications related to:

    1. Blockchain analytics (2022)
    2. Stablecoins (2022)
    3. Investor protections (2023)
    4. Fraud prevention (2018)

states – California legislature

Today’s California legislature hearing – Harmful Innovation: What FTX’s Collapse Means for Consumers and California’s Approach to Crypto – shines a light on the increased scrutiny of the cryptocurrency landscape by the States while Federal regulation languishes. Crypto Council of Innovation tweets that its CEO Sheila Warren will appear at the joint “Oversight Hearing”.

staking and commodities

Industry organization Proof of Stake Alliance (PoSA) makes the case on why “staking” should be considered a function of digital commodities rather than securities in two new white papers. Staking was at the heart of the recent enforcement action against crypto exchange Kraken. Mara Schmiedt of Alluvia Finance, a member of the PoSA working group along with Lido and Wilkie Farr, summarizes on Twitter on Liquid Staking Tokens (LSTs) for digital commodities:

    • “Should not be considered investment contracts”
    • “Evidence ownership similar to warehouse receipts”
    • “Should not be considered swaps under commodity law”
    • “Should not be taxable upon conversion to a LST receipt”

Read the two white papers:

Finally, the PoSA provides an overview blog post which recommends in part that those providing Liquid Staking Protocols “refrain from providing investment advice.See all the recommendations.

Microsoft, Google, Amazon, oh my

Cloud services are seeing opportunities with blockchain technology as Microsoft’s  Azure cloud said yesterday it was partnering with Ankr to provide cloud services for blockchain node infrastructure. Rashmi Misra, Microsoft General Manager AI & Emerging Technologies, Microsoft, says in the release, “Together with Ankr, we are building a strong Web3 infrastructure layer whether you’re a developer building the next big decentralized application (dApp) or an established enterprise exploring Web3.” Read Ankr’s blog post.

Similarly, in January, Google announced that Google Cloud was active in the Web3 space with companies such as Dapper Labs, Theta Labs and Hedera. Read that blog post. Amazon Web Services has been feeling the Web3 fever, too.

code is king (or law)

The Wall Street Journal takes a closer look at the circumstances of the Mango Markets enforcement action in January by the Commodity Futures Trading Commission (CFTC). The CFTC alleges that Avi Eisenberg manipulated the price of the Mango token, but Eisenberg thinks what he did is legal. The WSJ writes, “Mr. Eisenberg’s trades are an extreme example of the belief of some crypto enthusiasts that software should determine what is allowable and what isn’t – in other words, code is king.” Read more.


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