Correction Issued On Crypto And Terrorist Financing Article; SEC’s Peirce Derides LBRY Decision

article correction

It wasn’t a retraction of the story run on October 10 connecting crypto to terrorist financing in the Wall Street Journal, but there was confirmation by the reporting team that interpretation of the data was incorrect.

A new correction posted Friday begins: “Palestinian Islamic Jihad and Hezbollah may have exchanged up to $12 million in crypto since 2021, according to crypto-research firm Elliptic. An earlier version of this article incorrectly said PIJ had sent more than $12 million in crypto to Hezbollah since 2021, citing Elliptic’s research.”

Scroll to the bottom of the article for the “Corrections and Amplifications” section.

article correction – reaction

Crypto venture capitalist Nic Carter observed the change in a tweet thread on X, “…while it’s great that WSJ acknowledged they’d made mistakes, the correction is still very weak.” Coinbase’s Chief Legal Officer Paul Grewal weighed in on X, “[The WSJ’s] lede still maintains that the funding supported Hamas attacks hinged on ‘One answer: cryptocurrency.’ There’s no evidence of that, and WSJ knows it.” Read that thread.

Given the fire the article started in Congress as shown by elements of terrorist financing hearings in the House and Senate last week, the stakes remain high regarding the actual data.

Meanwhile, the “crypto and terrorist financing” narrative has continued to propagate in the media. In an interview on CNN with Deputy Treasury Secretary Wally Adeyemo last week, the lower-third graphic for the interview reads, “U.S. Warns Crypto Firms Against Financing Hamas, Terror Groups.” See it.

more tips:

“Put simply, it now seems the initial reporting was exaggerated as the Wall Street Journal issued a correction today to address some of the issues…” – tweet thread from Cato Institute’s Nick Anthony on X 

what you should know:  Last week’s Senate Banking hearing did not seem like the “slam dunk” Senate Banking Democrats were looking for in regards to support for their digital asset AML legislation. The digital asset AML legislative “race” right now is between Senator Elizabeth Warren’s  (D, MA)  Digital Asset Anti-Money Laundering Act and the digital assets NDAA amendment being driven by Senators Cynthia Lummis (R, WY) and Kirsten Gillibrand (D, NY) as a lighter bill that begins to explore beefed up regulation. Senator Jack Reed’s (D, RI) CANSEE Act feels like a distant third, currently.

scorched earth

In an “overdue dissent” published on Friday, Republican Securities and Exchange Commission (SEC) Commissioner Hester Peirce was finally able to vent about what she saw as the troubling outcome to the LBRY token enforcement action by the SEC. LBRY announced that it was shutting down its business due to the decision.

In her note, Peirce accused her own Commission of an unnecessary “scorched earth” approach. Peirce concludes, “What could I do to help prevent another group of people with a big idea for changing the world from going through what LBRY has over the past several years?” I have not come up with an answer to that question; however, I urge people who have suggestions about how the Commission can right its course on crypto and innovation more broadly, to send them my way.” Read it.

more tips:

LBRY ends operations, cites feud with SEC and mounting debt – Blockworks

what you should know: The three Democratic commissioners led by SEC Chair Gary Gensler continue to carry out a strategy focused on dismantling or disrupting digital asset businesses in the United States while the two Republican commissioners (Peirce and Mark Uyeda) watch with no power to overturn the majority.

DeFi and Europe

Jonathan Galea of European crypto consultants BCAS published a review of recent European Securities and Markets Authority guidance (PDF) on decentralized finance (DeFi) and how it will work in the EU’s new crypto framework, MiCA. In linking to his company’s blog post, Galea writes on X, “The industry has to pull its pants up and work on instilling the true meaning of ‘DeFi’ in projects, without eating the very cake it is having.”

See the post titled, “The meaning of fully decentralised under MiCA.”  (h/t @BillHughesDC)

what you should know:  It’s still early days for DeFi and proponents are worried it all turn into CeFi (centralized finance) if they’re not careful about educating appropriate authorities about the development of DeFI products

conduct claims

According to Capitol Account, there is unhappiness with Commissioner Caroline Pham (R) among members of the Commodity Futures Trading Commission union due to a recent incident.  Sources tell the DC financial publication that “Pham dressed down an enforcement lawyer at a closed-door meeting last week. Witnesses called the episode a ‘diatribe,’ and it prompted the labor union president to send out an email complaining about ‘unprofessional conduct.'” No word on the exact subject matter of the disagreement due to the meeting’s “closed-door” nature. Both Chair Rostin Behnam (D) and Commissioner Christy Goldsmith Romero (D) reportedly tried to diffuse the situation.  Read more.

what you should know: Commissioner Pham has been a consistent and strong supporter of a regulatory framework for digital assets.

offline CBDCs

On Thursday, as part of its ongoing research, the Bank for International Settlements (BIS) published a guide for offline payments with central bank digital currencies (CBDCs). See it.

When you think of an offline CBDC, think cash as the BIS explains in its guide, “The drivers for offline payments with CBDC vary by jurisdiction. Some common motivations are supporting inclusion, offering cash-like features such as enhanced privacy, and increasing payments.”

The BIS project is research-in-progress and Google has popped up among the vendor participants. Ledger Insights explains, “By piggybacking on top of Google Pay’s large user base, central banks reduce the friction of consumer adoption. Additionally, because offline CBDC solutions are new, most offerings are not battle tested. If Google integrates with a CBDC, a big chunk of the technology is already proven, making it a low risk option.” Read more.

what you should know: Other than government, big tech is the only entity that can reach everyone – hence, a potential solution for facilitating a CBDC. CBDCs already have been rejected by Republicans. The “big tech” angle could add bipartisan fuel to the anti-CBDC fire.

still more tips:

Kraken Warns Users: Your Bitcoin Trading Data Is Headed to the IRS – Decrypt

2nd comment letter in response to SEC’s proposed safeguarding (custody) rules (PDF) – Blockchain Association

Crypto Memes Kick Back Into High Gear After Bitcoin ETF Frenzy – Bloomberg

The Hunt for Crypto’s Most Famous Fugitive. ‘Everyone Is Looking for Me.’ – The Wall Street Journal

Inside the Vaping, Gambling, and Jeering Wildness of the SBF Overflow Rooms – New York Magazine

“An interview with CZ, crypto’s last man standing” (podcast) – The Economist