new WSJ story
The Wall Street Journal reporting team added another chapter to crypto’s responsibility in terrorist financing. In a follow up to its October 10 story which had caused the publication to issue a correction, yesterday the paper revealed new sources including Israeli blockchain analytics firm BitOK and Israel’s National Bureau for Counter-Terror Financing (NBCTF). The two organizations affirmed the $93 million in crypto used to finance terrorism in the WSJ’s original story and added still more: “Digital wallets identified by the NBCTF in two of these orders as being connected to the exchanges had received $41 million in crypto, according to research by Tel Aviv-based analytics and software firm BitOK.” Read more.
new WSJ story – reaction
Riot Platforms’ policy executive Sam Lyman, who wrote last week’s Forbes rebuttal of the WSJ findings, said on X of the new WSJ piece, “Another day, another hit piece on crypto. A reminder that these numbers more likely reflect the total volume of crypto that flowed between entities with links to Hamas—not the actual amount of money raised by the organization. Stripped of this context, you get Senators sending panicked letters to the White House with erroneous claims that Hamas had raised ‘over $130 million in crypto.'”
Fortune reporter Leo Schwartz noted a new wrinkle in yesterday’s WSJ article saying on X, “Important distinction – according to WSJ reporting, Hamas crypto usage has shifted from Bitcoin to Tether on Tron.”
what you should know: Make sure to read it. Gotta say – it’s hard to follow and it will be interesting to see if there is more access to the data used for the piece. Also, there is an anonymous quote from an “ex-NBCTF Official”: “It’s a drop in the ocean” regarding the known vs. unknown use of crypto in terrorist financing. This conflicts with the on-the-record testimony of former Chair of Israel’s AML authority Dr. Shlomit Wagman at the October 27 Senate Banking hearing who indicated crypto’s impact was limited in the financing of terrorism and urged more sanctions. But, she did not discount that crypto should be monitored.
Editorial boards of major newspapers are steadily planting their flags on digital asset regulation (WSJ, WaPo). On Friday, the Chicago Tribune’s editorial board expressed its POV in an opinion titled, “SBF made crypto suffer. Now the industry must turn the page.”
The midwestern paper smells a rat in the criticism of crypto.
The Board writes, “We remember when East Coast critics in the 1980s were saying much the same about the financial futures entrepreneurs along LaSalle Street and Wacker Drive who were turning Chicago’s exchanges into world beaters. SBF’s brand of fraud wasn’t peculiar to cryptocurrencies, but rather was the same shameful, garden-variety fraud that could occur (and has occurred) just about anywhere in the world of finance.”
“We’re typically reluctant to call for more government regulation, but not in this case,” continues the Trib, which concludes, “Once the dust clears from the [Sam Bankman-Fried] legal saga, and the other cases now underway, we urge the industry, its regulators and Congress to find common ground for the stronger, better-fitting rules that crypto needs to fulfill its potential.” Read the editorial.
what you should know: This is a “blue state” city and state’s paper challenging national Democratic leadership’s current anti-crypto position. Not nothing.
use case – KYC service
Coinbase launched Coinbase Verifications, built on Coinbase’s layer-2 Base, which it says provides identity verification on the chain protocol level and will increase security and transparency. If you need to add Know-Your-Customer (KYC) capabilities in Web3, this is the service -that’s the pitch. Blockworks Casey Wagner delves into the use case further: “The service is expected to help particularly with Sybil attacks, which is when hackers use a single node to create many fake identities.” Read more.
what you should know: Privacy and identity remain a crucible for government technology policy. In a future of deep fakes, for example, being able to separate the fake from the real seems ideal for the immutable blockchain.
The much-discussed (over 123,000 public comments) proposal has been unanimously maligned by pro-crypto voices who see the regulations creating an untenable overreach by the agency and crippling reporting requirements on crypto software developers for wallets, decentralized finance (DeFi) and more.
Today’s IRS hearing will include the presence of counsel with the IRS, attorneys with Treasury’s Office of Tax Policy and at least 12 scheduled witnesses including Coinbase, crypto tax provider Cointracker, Blockchain Association and National Taxpayers Union Foundation (NTPU).
In its published comment, the NTPU sees harm for both the industry and taxpayers with the proposed regulation. On the latter, the NTPU says, “The Proposed Regulations place a burdensome taxation scheme on taxpayers. The proposed regulation for when digital assets are exchanged for other digital assets is not practical in the volatile, unregulated cryptocurrency market. Additionally, the Proposed Regulations categorize cryptocurrency as a security when it may also function as cash. Finally, the proposed fair market value evaluation standard for services provided raises legal issues and increases the risk of litigation.”
what you should know: Where this IRS proposal collides with Congress remains to be seen. The efforts of Senate Finance Chair Ron Wyden (D, OR) and Ranking Member Mike Crapo (R, ID), whose own digital asset tax comment period ended in September, appear to be the most likely source of a Congressional response, if not legislation.
Senator Cynthia Lummis (R, WY) came out in support of Riot Platforms’ policy executive Sam Lyman’s article in Forbes on misinformation about digital assets resulting from the October 10 Wall Street Journal article on crypto and terrorist financing. The Senator retweeted the article on X and wrote on Friday (before the new Sunday WSJ piece): “Crypto accounts for < 1% of all illicit finance activity and would be even less if we created a regulatory structure to allow the crypto industry to operate in America instead of unregulated foreign markets. Crypto is not the problem, bad actors that exist in every industry are.” See the tweet.
implementation, not (more) regulation
The European Union’s much-heralded Markets in Crypto-Asset Regulation is being given a critical eye by some EU officials.
The message is: enough regulation, “let the industry breathe.”
According to crypto publication DL News, Ondřej Kovařík, a lawmaker who was helped create the EU’s Markets in Crypto-Assets regulation in European Parliament. “We should really, instead of proposing more and more new legislation, take our time and focus on proper implementation.” Read more in DL News.
Russia recently issued a small fine against Coinbase, according to Crypto Times, for a “data localization breach.”
But, Coinbase’s Chief Legal Officer Paul Grewal was unapologetic about the news on X, “Not exactly a hard call. We will not localize our customer data in Russia. Rozkomnadzor is a sanctioned actor and their demands won’t change our stance. Protecting your information and keeping it secure has and will always be a key priority for Coinbase.” Read it.
what you should know: Centralized crypto marketplaces are, and will, have to choose sides – as in their market of choice – in order to grow a successful business alongside local governments.
still more tips
The CFTC’s union files grievance against Republican Commissioner Caroline Pham; Pham’s office sees retaliation – Capitol Account
Justin Sun-Owned Exchange Poloniex Hacked for At Least $126 Million – Decrypt
Public Comment Re: Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker‐Dealers and Investment Advisers – Cato Institute
JPMorgan just added ‘holy grail’ to its $1 billion per day crypto network – The Street
Key Witness at Sam Bankman-Fried Trial to Launch New Crypto Exchange – The Wall Street Journal