emergency loss
So much for the “emergency.”
Late Friday, the “emergency” survey of cryptocurrency miners’ energy usage to be undertaken by the Department of Energy’s Energy Information Administration (EIA) was put on a 4-week hold… at a minimum. Read more in Reuters. Another court loss for anti-crypto advocates.
It was less than a month ago that the EIA at the behest of the White House’s Office of Management and Budget (OMB) had announced that crypto mining was a threat to the energy grid, hence the need for an emergency survey.
The public release of its results was said to be a cause for serious concern by complainants Riot Platforms and Texas Blockchain Council.
District Court Judge Alan Albright was unequivocal in his motion for a temporary restraining order (TRO): “The Court believes that Plaintiffs (i.e. TBC and Riot Platforms) are likely to succeed in showing that the facts alleged by Defendants to support an emergency request fall far short of justifying such an action. As a result, the determination likely violates the APA as ‘arbitrary, capricious, [or] an abuse of discretion.'” (h/t @lee_bratcher)
See Judge Albright’s “Order on Motion for TRO.”
Perianne Boring, CEO of industry organization Chamber of Digital Commerce said on X, “This is a victory for all proponents of freedom and rule of law.” The Digital Chamber has supported the lawsuit.
what you should know: Another day, another rules violation. Friday’s court order echoes the findings of the Government Accountability Office (GAO) last October where the Securities and Exchange Commission’s controversial Staff Accounting Bulletin 121 violated the Congressional Review Act (CRA), “which adopts the definition of rule under the Administrative Procedure Act (APA) but excludes certain categories of rules from coverage.”
SAB 121 has slowed traditional finance firms’ moves into the crypto space with arguably onerous requirements for the custody of digital assets. A bicameral “joint” Congressional resolution to overturn SAB 121 is pending.
emergency loss – Congress
In reaction to the TRO, Senator Cynthia Lummis (R, WY) was quick to offer her thoughts on X late Friday: “As I’ve said for years, bitcoin mining is GOOD for America’s energy grids and the development of new/stranded energy resources. Glad to see EIA temporarily suspend its intrusive and ill advised survey. PS: #BTC miners, we’d love to have you in Wyoming!”
Just prior to the court order, last Tuesday, Majority Whip Tom Emmer (R, MN) had sent a letter (see it) to OMB Director Shalanda Young saying her agency’s request was bogus in that Bitcoin mining was not a “threat to public safety.” In his letter, Emmer demands answers to a series of questions on the reasoning behind the “emergency” EIA request.
Young is a former staff director on House Appropriations and was formally appointed by President Joe Biden in 2022.
Whip Emmer tells Fox Business’ Eleanor Terrett, “The OMB’s abuse of its emergency powers demands an explanation.” Read that one.
more tips:
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- “Talking Administrative Law Abuses” with Peggy Little of New Civil Liberties Alliance – Capitol Account
House Financial Services
On Friday, House Financial Services Chair Patrick McHenry (R, NC) officially introduced a new bill titled, “Financial Services Innovation Act of 2024” [H.R.7440]. The bill seeks to create a new “Financial Services Innovation Office” (FSIO) across a group of agencies including the Office of the Comptroller of the Currency, the Federal Reserve, Department of Housing and the Securities and Exchange Commission (SEC). The bill states that a new designate will be installed in each of these offices and charged with promoting “financial innovation” in their respective agency. See it on Congress.gov.
Notably, the Commodity Futures Trading Commission (CFTC) is not included in the Act. Perhaps the pro-innovation stance of Chair Rostin Behnam (D) has something to do with it? The CFTC is already bubbling with technology-related committees.
In other HFS news on Friday, Majority Whip Tom Emmer‘s “CBDC Anti-Surveillance State Act” [H.R.5403] added 2 more Republican co-sponsors: Reps. Andrew Garbarino (NY) and Buddy Carter (GA).
letter – crypto taxes
Punchbowl News reports on a February 14 Congressional letter from members of the House Ways and Means Committee to Treasury Secretary Janet Yellen. The letter gives no love to Sec. Yellen’s department and the IRS for its tax treatment of digital asset brokers with its August 2023 proposed rule-making. See the letter.
The “2021 Infrastructure and Jobs Act” is the original seed of this discontent as Reps. Suzan Del Bene (D, WA) and Claudia Tenney (R, NY) lead the letter. Punchbowl’s Laura Weiss reports: “The lawmakers say the rules that Treasury proposed fail to account for the size or nature of crypto transactions, so they’ll sweep up small exchanges with negligible tax implications.” Read more (subscription).
Policy executive Alexander Grieve at venture firm Paradigm whips up a related tweet thread on X saying, “These Members, who sit on the House tax-writing committee, [House Ways and Means Committee], will be key votes should the bipartisan Keep Innovation in America Act ([legislation] focused on fixing broker rule) come up for a [committee] markup.”
the crypto issue
On Friday, Politico’s Morning Money covered the ongoing efforts of crypto-financed PACs and their possible effects on the 2024 general election.
Bernie Moreno, a Republican vying for the seat of Senator Sherrod Brown (D, OH), the Senate Banking Chair, offers Politico a rarely seen quote on crypto from the candidate: “The reason specifically they’re so anti-crypto is because they hate individual responsibility and freedom.” Moreno continues, “We will absolutely take ’em to task on this issue.” Read all about it.
more tips:
what you should know: How many single-issue crypto voters there are in the state of Ohio is unknown. But, candidates surely love support for their campaign coffers.
lawsuit against the SEC
Last Wednesday, crypto company LEJILEX and Texas-focused industry organization Crypto Freedom Alliance of Texas (CFAT) announced a lawsuit against the Securities and Exchange Commission (SEC), challenging “the agency’s unlawful assertion of regulatory authority over practically all digital asset transactions in Texas and the United States.”
LEJILEX describes itself in the announcement’s press release as “a Texas-based, for-profit company that has developed a novel digital asset platform called the Legit.Exchange, a non-custodial digital asset trading platform that allows users to trade digital assets.”
Delving into the complaint, Cap Hill Crypto’s George Leonardo breaks down the particulars on the lawsuit and observes, “Plaintiffs are asking the court to issue a declaratory judgment clarifying that LEJILEX is not operating as an unregistered securities intermediary because secondary market sales of digital assets – like the ones that would occur on LEJILEX’s exchange – are not sales of securities.” Read Cap Hill Crypto.
The courts and law remain the sole recourse for industry while the executive and legislative branches stall on digital assets.
more tips:
what you should know: Also of note, there is currently only one employee on LinkedIn associated with the company LEJILEX. So… build a company to make your case? Perhaps, so. It’s a strategy reminiscent of crypto platform Prometheum which seems to have little business but has played an outsized role in advocating for cryptos as securities – a POV shared by Dem leadership and SEC Chair Gary Gensler.
Senator Warren – DAAMLA
Chamber of Digital Commerce sends Senate Banking Chair Sherrod Brown (D, OH) letter regarding Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act (DAAMLA) (Feb. 20) – Chamber of Digital Commerce
Opinion: “Petty legislation is crypto’s greatest enemy” by Rep. Byron Donalds (R, FL) (Feb. 19) – Blockworks
Senator Warren – campaign
Marine veteran John Deaton (R) to challenge Sen. Elizabeth Warren (Feb. 20) – Marine Corps Times
Who is John Deaton, the man running against Elizabeth Warren in Massachusetts? (Feb. 20) – WBZ News
stabilizing the stablecoin
Circle, issuers of the U.S. dollar-backed USDC stablecoin, announced (Feb. 20) USDC will no longer function on the TRON blockchain after February 2025 with issuance on TRON stopping immediately. The company cited its “risk management framework” as the reason behind the move.
TRON is becoming increasingly radioactive. The use of the stablecoin Tether on the TRON blockchain was implicated as a source of illicit finance back in November by The Wall Street Journal.
Tether, the world’s largest U.S. dollar-backed stablecoin, accounts for nearly all the stablecoin volume on the TRON blockchain, which is largely driven by African continent transactions according to Ledger Insights. Read that one.
more tips:
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- Is USDC preparing for a Justin Sun sanction? (Feb. 21) – Protos
what you should know: The “Clarity For Payment Stablecoins Act” [H.R.4766] pending in the House could unlock a new age for the U.S. dollar. A U.S. digital dollar for the blockchain – or dollar-backed stablecoins – would be brought under tighter regulation with the new law and presumably provide improved safety, soundness and stability. All of this leads to further strengthening the U.S. dollar’s worldwide hegemony at the core of American power. At least, that’s the pitch. Circle wants to be a part of this future so it’s cleaning up the ship in preparation for new regulation and its own initial public offering.
states regulating – Illinois
On X, Consensys counsel Bill Hughes raises up a new bill in the Illinois State Senate titled, “the Digital Assets Regulation Act” and worries that software developers who support non-custodial, digital asset SaaS platforms but “don’t actually exchange, transfer, or store digital assets,” could run afoul of the new law, if passed. Hughes tweets on Feb. 20 that the new regulation “would likely result in Illinois just being excluded via geo-fence in many instances.”
See Illinois State Senate Bill 3666 introduced on February 9.
still more tips
The real story of the SEC’s suit against Kraken, and why Kraken is moving to dismiss the case (Feb. 22) – Kraken
Reddit Adds Bitcoin and Ether to Its Treasury (Feb. 22) – The Wall Street Journal
Defend American Jobs PAC is being funded by a whole host of private equity including crypto companies and executives (Feb. 21) – Punchbowl News
Opinion: Why end-to-end encryption is the next battlefield for tech justice (Feb. 22) – The Hill
a16z invests in EigenLayer (Feb. 22) – a16z crypto
Nigeria blocks access to crypto exchanges in effort to curb currency slide (Feb. 22) – Financial Times