important dates – January 10
Approval of a swarm of Bitcoin spot ETF (exchange-traded fund) applications including financial industry giant BlackRock is expected in early January.
Bloomberg analyst James Seyffart, who has been breathlessly covering the Bitcoin spot ETF application process for months, said on X (Dec. 21), “…we still think this is happening by January 10. Some issuers may be left behind. (…) But base case i’m expecting approvals January 8-10…”
To that end, Fox Business reporter Eleanor Terrett reported on X (Dec. 24), “Confirming the date for final amendments to all S-1s by Friday the 29th. The [the Securities and Exchange Commission (SEC)] has told issuers that applications that are fully finished and filed by Friday will be considered in the first wave. Anyone who is not will not be considered. In addition, the filings cannot mention in-kind creation or they will be rejected.”
what you should know: Approvals seem inevitable given anecdotes ranging from the Grayscale decision in August to BlackRock’s entrance into the Bitcoin spot ETF application process in June. Nevertheless, will SEC Chair Gary Gensler pull a rabbit out of his regulator ‘hat’ and delay the approvals?
important dates – January 14
Senator Elizabeth Warren (D, MA) wants answers by January 14 on former government officials who are working for industry organizations Blockchain Association (letter) and Coin Center (letter) as well as Coinbase (letter). She claims egregious examples of revolving door politics at work in the digital assets industry. All of this as she tries to build support for her Digital Asset Anti-Money Laundering Act (S.2669) while terrorist financing via crypto concerns pulse on both sides of the aisle.
Coinbase has already responded – on December 22 – just four days after Senator Warren’s original letter. Coinbase policy executive Faryar Shirzad summarized the Company’s letter on X saying in part, “Any suggestion that we are hiring these people to stop legislation is ridiculous. In fact, [Coinbase] has been consistently advocating for legislation like [the Financial Innovation and Technology for the 21st Century (FIT21) Act (H.R.4763)] that would create clear rules for the industry and consumers here at home.”
Read Coinbase’s response letter here.
what you should know: A Senate Banking hearing regarding these letters seems likely given the Senator’s position on the Banking Committee and previous support from Senate Banking Chair Sherrod Brown (D, OH) on the topic. Sen. Warren wants to keep up the drumbeat on her DAAML. Meanwhile, both sides of the aisle have expressed concerns about terrorist financing via digital assets. Compromise legislation coming? Proponents of FIT21 would say their bill is the solution for AML and CFT in digital assets.
important dates – January 17
Of all the dates in ALL of 2023 with digital assets implications, this one could be the biggest if it swings in Coinbase’s favor. This is the day the court will hear oral arguments (and potentially approve) Coinbase’s August 7 motion-to-dismiss (MTD) the case brought by the SEC against the company in June. A win by Coinbase would signal the need for bespoke digital assets law or rules (see Coinbase’ previous mandamus petition) and throw serious cold water on efforts to ban digital assets in the United States.
Crypto lawyer John Deaton commented on X last Fall: “January 17, 2024 is an important date. It is the Oral Argument for the Coinbase MTD. Often times, judges won’t schedule an oral argument on a MTD. Most of the time, a MTD is denied on the papers alone. This motion is different, however, and Judge [Katherine] Failla is giving it the attention it deserves.” Read it on X.
what you should know: To date, no one has seriously and publicly expressed that a dismissal is possible other than Coinbase. That doesn’t mean it couldn’t happen. Ironically, a favorable decision for Coinbase could have a bigger impact on the price of Bitcoin than the approval of Spot Bitcoin ETFs by the SEC (which may be priced in). Digital assets would finally have a regulatory path in the United States -and a place in the U.S. financial system. “Number go up” and the retail consumer’s dinner table conversations would presumably mean digital assets and its effective regulation would have an even bigger role in next November’s U.S. presidential election, too.
important dates – January 29
District Judge Jed Rakoff said last Thursday that the Securities and Exchange Commission (SEC) case against Terraform Labs and its founder, Do Kwon, will move forward. See the decision on Court Listener (PDF). Rakoff had previously denied Terraform’s attempt to dismiss the lawsuit last August.
The company is accused of not registering TerraUSD and Luna currencies as securities. Both of the cryptos imploded in May 2022. Summarizing the news, Reuters reports that Judge “Rakoff also denied summary judgment to both sides on the SEC’s fraud claims… [and he] dismissed SEC claims that the defendants illegally offered security-based swaps.” Read more on Reuters.
The jury trial will begin January 29.
Regarding Rakoff’s decision, a16z Crypto’s general counsel Miles Jennings commented on X last week: “The SEC’s victory over Terraform Labs (…) shouldn’t surprise anyone. Applying the Howey test to public sales of tokens is straightforward. This is a good reminder of well established and critical rules of the road for token launches…”
“(1) Don’t sell tokens to U.S. persons for fundraising purposes.
(2) Even if you aren’t selling tokens, don’t ever market/hype them as an investment opportunity.
(3) Don’t prioritize/emphasize secondary market liquidity or listings.
(4) Decentralization matters.
(5) Communication matters.”
more tips:
“The facts are so bad in Terraform that it’s hard to say how Judge Rakoff’s decision helps the SEC….” – read crypto lawyer Mike Selig’s thread on X
what you should know: Like Jennings said – no surprise unless you forgot about the case. But, the negative “aura” of this trial will loom around digital assets as House floor vote efforts proceed in Congress in the first calendar quarter for stablecoins and market structure and, in the Senate, DAAML attempts to gain more traction.
Congress and SBF donations
Arriving at 6 p.m. on the Friday before the New Years holiday (let the conspiracy theories begin!), Southern District of New York Attorney Damian Williams informed the courts that there would be no second trial for FTX CEO Sam Bankman-Fried (SBF) – a trial that would have covered his donations across campaign coffers in the Congressional elections of 2022. Many in Congress who received SBF’s toxic largess – particularly on the Democratic side – likely breathed a sigh of relief.
Williams said in his court letter, “As explained below, much of the evidence that would be offered in a second trial was already offered in the first trial and can be considered by the Court at the defendant’s March 2024 sentencing.” See the letter and explanations. And, read a summary in Reuters.
ICYMI:
Here is an example published in October on the effects of SBF-related donations: “Texts Reveal Why Crypto Exec Backed Balint Over Gray in U.S. House Race” – Vermont’s Seven Days
more tips:
“A few thoughts on the DOJ’s decision not to pursue campaign finance charges against SBF. Tl;dr: I think it’s a mistake.” – Paul Grewal, Chief Legal Officer, Coinbase on X
what you should know: SBF’s campaign donations was one of the main reasons, if not the main reason, many in Congress distanced themselves from their previous support of digital assets legislation – see the now defunct Digital Commodity Consumer Protection Act (DCCPA) or the dormant Congressional Blockchain Caucus. With no future trial concerning campaign donations, a window may be opening for some to return to the digital assets bandwagon.
looming ahead
Big Battles Loom in SEC’s War on Crypto (published on Dec. 28) – The Wall Street Journal
Crypto fight looms in 2024 race that could flip Senate (Dec. 21) – Politico
Elections, SEC Cases, DOJ Cases: What Crypto Regulation May Bring in 2024 (Dec. 27) – CoinDesk
Legislative outlook: What headwinds does crypto legislation face in 2024? (Dec. 25) – The Block
looming behind
The Year In Crypto Policy – 2023 (published on Dec. 22) – Cap Hill Crypto
2023 End of Year rundown on the biggest Web3 legal developments (Dec. 27) – Birdnals on X
That’s a Wrap: Themes and Intriguing Moments in Financial Regulation 2023 (Dec. 23) – Capitol Account
The Uniswap 2023 recap (Dec. 21) – Uniswap Labs
what Congress said
Republican members of the House Financial Services Committee have been active in supporting their digital assets position during the Holiday recess…
“Digital assets aren’t the enemy. They are a tool for trust, transparency, and individual liberty.” (Dec. 24) – Majority Whip Tom Emmer (R, MN)
“Web3 and blockchain and tokenized digital payments are the future – not only of finance – but of the development on the Internet. And the United States needs to be a leader in this technology just like we’ve been a leader for the past three decades in the Internet and everything that’s occurred for good in commerce on the Internet… So, we need a regulatory framework that facilitates digital asset innovation and investment in the United States, but we do that in a safe and sound way -that investors, consumers and inventors know what the rules of the road are -and that in the financial sector, those are in compliance with things like anti-money laundering and the Bank Secrecy Act…” (Dec. 22 – video) – Rep. French Hill (R, AR) on Fox Business via X
“Central Bank Digital Currency (CBDC) poses an existential threat to western civilization. Sound money serves as a stable store of value and an efficient means of exchange. CBDC consummates the corruption of money into a dystopian tool for coercion & control. Ban them.” (Dec. 26) – Rep. Warren Davidson (R, OH) on X
growing global
Circle Secures Conditional DASP Registration and Appoints Head of French Operations (Dec. 21) – press release
Coinbase secures crypto license in France, pushing deeper in Europe amid rift with the SEC (Dec. 21) – CNBC
Nigerian central bank lifts ban on crypto trading (Dec. 23) – Reuters
HKMA chief: Stablecoins could become interface between traditional finance and crypto (Dec. 27) – The Block
regulatory agencies
SEC ‘Deeply Regrets’ Errors, Asks Court Not to Impose Sanctions in Crypto Fraud Case (Dec. 22) – Unchained
Mark Uyeda (R) was reappointed as a Commissioner of the SEC for a term expiring June 5, 2028 (Dec. 20) – Congress.gov
Commissioner Christy Goldsmith Romero’s (D) Technology Advisory Committee Meeting on January 8 – CFTC.gov
still more tips
NY attorney general’s office touts Gemini and DCG lawsuit in renewed push for expanded crypto role (Dec. 18) – Fortune (on Yahoo)
To stem North Korea’s missiles program, White House looks to its hackers (Dec. 22) – Politico
“… a case study in how Chinese nationals can move money from China to the United States without drawing the attention of authorities in either country.” (Dec. 25) – The New York Times
Crypto industry steps up political donations as mood in Washington sours (Dec. 24) – Financial Times