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how to manage risk
In an article titled, “Regulators get tough on crypto funds after FTX collapse,” The Financial Times reviews crypto winter including FTX’s implosion and the onslaught of Securities and Exchange Commission (SEC) crypto-related enforcement actions.
The article lands on the possibilities which a crypto ETF could afford, such as Grayscale’s ETF. Ilan Solot, who helps drive the digital assets business at London-based finserv company Marex, tells the FT, “If you’re new to crypto, managing your own private key [to hold currencies directly] may be riskier than having an ETF in your trading account. If someone wants exposure to bitcoin, using an ETF gives them a less efficient product but they’re paying for the convenience of not having to hold their own crypto.” Read more.
John Reed Stark, a former SEC enforcement chief and crypto critic, commented on Twitter, “Big Crypto may not like the rules but just like seatbelt laws, sometimes people need protection from themselves.”
new stablecoin draft
PunchBowl News’ Brendan Pedersen tweeted yesterday afternoon that House Financial Services Committee Republicans have released a new discussion draft of stablecoin legislation for the 118th Congress. Read the tweet. And, see the bill (PDF).
Alexander Grieve of government relations firm Tiger Hill took a look and tweeted, “A lot of similarities to the full cmte draft, but a couple changes: 1) algo ban is nixed, 2) gives greater power to state regulators. (A lot of the extra ‘stuff’ – studies etc – stripped out too).” Read more.
expanding the global footprint
Coinbase CEO Brian Armstrong is determined to continue business as usual while the Securities and Exchange Commission eventually fulfills on its Wells Notice and brings a lawsuit against the publicly-traded cryptocurrency platform company. On plans to launch a new derivatives exchange in Bermuda, Armstrong tells Politico, “We need to seek out jurisdictions that will enable us to serve the long tail of countries that are not the U.S., not the U.K., not some of the major financial hubs.” Read more.
This is not an example of a U.S. company leaving the U.S. due to inadequate domestic regulation – yet.
Meanwhile, Decrypt reports that Coinbase is asking a U.S. court to force the SEC to clarify crypto regulations. Read it.
Sheila Warren, CEO of industry organization Crypto Council of Innovation, trumpets a new bill from California state legislator, Rep. Matt Haney, a San Francisco Democrat, that brings new legal guardrails for DAOs (decentralized autonomous organizations) to his state. Warren tweets that the bill “proposes a new pathway for DAOs to overcome legal challenges, options for decentralization, and an improvement over existing options. Importantly, it is technologically agnostic, and it leaves room for future refinement.” Read the thread.
In a short tweet thread of his own, Haney says, “We are entering the next era of the internet, Whatever you call this new technology—blockchain, web3, or crypto—we know that it’s a big part of the the future of tech and of our economy.” Read that one.
AB-1229 Unincorporated associations: decentralized nonprofit associations – legislature.ca.gov
central bank forcing a CBDC?
Resembling the debate in the United States around a Central Bank Digital Currency (CBDC), the European Union may roll out a CBDC by year end unless politicians say “no” in spite of the European Central Bank (ECB) saying its ready. ECB board member Fabio Panetta said yesterday, “If that call [not to go ahead] is done at the political level…, I cannot see any chance of the ECB deciding autonomously or independently to progress.” Read more in CoinDesk. Panetta added that any digital assets regulatory framework should be able to accept inclusion of a CBDC into the payment system.
No mention of privacy concerns by the ECB in the interview. But, there is mention of inclusion and giving everyone access to digital euros under the EU’s CBDC plan. This may one of the conundrums in the United States between Republicans and Democrats on CBDCs. Republicans fear a surveillance state with everyone’s payments trackable and Dems admire a CBDC’s ability to extend the banking system and reach under-served populations. That said, both sides would likely unite on a strategy if national security and the U.S. dollar as the world’s reserve currency were threatened.
50 ways to leave your lover
The CFTC is celebrating Financial Literacy Month and offers its “14 Digital Asset Risks to Remember” as a souvenir. Leading the list: “Unsupervised trading. Over-the-counter cash-market trading platforms—where you can buy or sell digital assets for dollars—are not supervised by regulators like other exchanges, banks, or brokers.” Make a new plan, Stan (PDF).
virtual currency and sanctions
The U.S. Treasury announced the sanctioning of three North Korean individuals who helped the country collect virtual currency through scams, hacking and even performing IT work for unsuspecting international corporations. The North Koreans efforts have supported their country’s “unlawful weapons of mass destruction and ballistic missile programs.” Read the release.
Two of the three individuals sanctioned served as OTC (Over-The-Counter) virtual currency traders on behalf of North Korea and helped facilitate the conversion of virtual currency, i.e. crypto, into fiat currency, says U.S. Treasury.
Oliver on regulation
In a 24-minute segment for his HBO show, John Oliver takes apart the cryptocurrency landscape using examples such as FTX, Terra and Celsius who represent the “confidence game” which Oliver says is being played in cryptocurrency markets today. Oliver concludes, “The truth is in a financial system where the only real currency is confidence, scammers are going to thrive” and adds that perhaps the best idea of all is to not regulate crypto which would provide it “more legitimacy.” See it on YouTube.
hearings Thursday, 2 pm
Good luck on Thursday.
- “The Future of Digital Assets: Identifying the Regulatory Gaps in Spot Market Regulation,” 2 pm – House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development
- “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure,” 2 pm – House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion
- “Oversight of the Financial Crimes Enforcement Network (FinCEN) and the Office of Terrorism and Financial Intelligence (TFI),” 2 pm – House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions
Blockchain Association’s Ron Hammond provides a Twitter thread reviewing the hearings and sees the seeds of a “market structure” bill. Hammond says about the two “Future of Digital Assets” hearings, “Both Ag and Financial Services will need to work together if a market structure bill has a chance. It won’t work if one goes ahead without the other. Both committees understand this, hence the same-day hearings. Unlike stablecoins, there isn’t a bill draft or principles out.” Read it.
still more tips
Tomorrow’s stablecoins – Axios
CFTC Chairman Behnam and Commissioner Pham to Participate at the Milken Institute’s 2023 Global Conference (see agenda) on May 1 – Milken Institute
Ex-OpenSea manager’s trial kicks off in first NFT insider trading case – Reuters
Blockchain Summit 2023, April 28 – University of Illinois’ Gies College of Business
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