SEC Said ETH Was A Security In 2023; Stablecoin Bill In FAA Reauthorization Mix

ETH is/was a security

On April 18, 2023, while appearing at a House Financial Services (HFS) oversight hearing, Securities and Exchange Commission Chair Gary Gensler waffled as HFS Chair Patrick McHenry tried to get Gensler to say whether Ether was a commodity or security.

Apparently 5 days earlier, on April 13, 2023, SEC’s head of enforcement Gurbir Grewal, who reports to the Chair, said Ether was a security and put it in writing in a “Formal Order.” So says a new, unredacted filing of the Consensys lawsuit against the SEC according to Leo Schwartz at Fortune.

Contradicting itself (given the assertion in the Consensys unredacted brief) even further, the SEC let Ether futures “go live” in October 2023.

House Majority Whip Tom Emmer (R, MN) reacted to the news last night on X saying, “This regulatory dishonesty is reprehensible – it’s tainting our great capital markets, harming investors, and threatening U.S. global leadership.” Next step, a Congressional letter -and a hearing?

more tips:

    • Consensys Software Inc. v. Gensler et al –

what you should know: Chair Gensler’s lie of omission took place just 6 months after the FTX implosion -an event which steered the Biden Administration toward crystallizing an anti-crypto position.

stablecoin – bill competition

House Financial Services Chair Patrick McHenry (R, NC) and Ranking Member Maxine Waters (D, CA) efforts to attach the “Clarity for Payment Stablecoins Act” to the FAA Reauthorization must-pass are not the only add-on bills trying to beat the May 10 deadline.

Punchbowl News’ Anthony Desiderio doesn’t addresss stablecoins directly but described the FAA state of play on X yesterday, “FAA [reauthorization] is one of the last must-pass bills this [year]. Senate will need a time agreement to finish before May 10, so senators have leverage on amendment votes, [including] on unrelated bills.” Desiderio add that there’s a potential for the FAA Reauthorization to become “a ‘Christmas tree’ vehicle to jam the House.” Read more on Punchbowl here.

stablecoin – Senate Republicans

Late yesterday, Politico’s Eleanor Mueller tweeted on X that Senate Republicans were pushing back on adding the cannabis banking AND stablecoin bills to the FAA Reauthorization. For Republicans, led by Senate Minority Leader Mitch McConnell (R, KY), the sticking point was cannabis banking. He’s not a fan.

Mueller reported on Politico, “Though Schumer discussed such a plan at a recent closed-door meeting, it was previously unreported that he supported the idea. Doing so evidences his desire to enact both measures — and as a package.” Read more (subscription).

more tips:

    • Last night: “HFSC Ranking Member Maxine Waters says tonight she does not yet have a final deal yet with Chair Patrick McHenry to regulate stablecoins…” – Brendan Pedersen, Punchbowl News on X

what you should know: The final negotiation appears to be dual banking (supported by Republicans) vs. Cannabis banking (supported by White House).

new Congressional letter

According to The Wall Street Journal, a new Congressional letter sent last Friday by Senators Elizabeth Warren (D, MA) and Roger Marshall (R, KS) questions the Treasury Department, Defense Department and White House about the use of the Tether stablecoin in money laundering on behalf of Russia, Iran and North Korea.

Sens. Warren and Marshall are co-sponsors of Digital Asset Anti-Money Laundering Act [S.2669].

WSJ’s Angus Berwick goes into the letter’s details in the short piece. Read it here.

You may recall that Berwick wrote an April 1 piece on Russian illicit finance via crypto as well as a semi-retracted piece on crypto and Hamas on October 10 amidst other recent crypto coverage.

Quoting the Senators’ letter, he writes: “Tether has become the cryptocurrency of choice for sanctions evaders and other bad actors.”

what you should know: Although a copy of the letter was not made available at press time, the argument made by Sen. Warren in an April 9 Senate Banking hearing regarding the use of validators is likely in play.   Sanctioned countries could be making money by merely operating as a crypto network validator, which she says violates today’s U.S. money laundering laws.

crypto is the Wild West

In an interview with Roll Call, Rep. Frank Lucas (R, OK), who is running for the Republican leadership position on House Financial Services in the 119th Congress, says he’s all for digital assets regulation but remains suspicious of its “Wild West” aspects.

Lucas tells Roll Call, “I have constituents who come to my public town hall meetings who are very enthusiastic about crypto because they view it as a way to move their resources, their wealth, their money, however you want to describe it, around in a way that neither the banks, nor the Treasury, nor the IRS can keep track of… That same principle also creates opportunities for nefarious people. So there has to be some form of regulation.” Read more.

what you should know: With Rep. French Hill (R, AR), Rep. Andy Barr (R, KY) and Rep. Bill Huizenga (R, MI) also running, Lucas still seems in fourth place in the race for the HFS Republican leadership position. But, he’s been excellent at attracting the press.

Venezuela, oil, crypto

Experts, politicians call for scrutiny of Venezuela’s use of cryptocurrency – Reuters

anti-CBDC saber rattle

“Banning Central Bank Digital Currency unites Republicans and divides Democrats. Congress needs to VOTE so that the American people know who defends freedom and who plans tyranny.” – Rep. Warren Davidson (R, OH) on X last night

community banks and crypto

Community bankers are in DC this week for their annual DC lobbying conference. HFS Subcommittee for Digital Assets, Financial Technology and Inclusion Chair French Hill is scheduled to speak in front of the Independent Community Bankers of America (ICBA) this morning along with Sen. Jon Tester (D, MT).

The ICBA has advocated that government keep digital assets outside of the U.S. financial system in the recent past. As part of its conference agenda last year, the ICBA stated, “inadequate oversight of non-bank financial firms, including financial technology and cryptocurrency firms (…) pose significant risk to the broader financial system.”

At the same conference last year, Federal Reserve Governor Michelle Bowman (R) delivered a speech warning about the stability risks inherent in innovation and crypto (and perhaps trying to allay any fears that the U.S. was moving quickly toward a digital assets future). Bowman said, “It is absolutely critical that innovation not distract banks and regulators from the traditional risks that are omnipresent in the business of banking, particularly credit, liquidity, concentration, and interest rate risk. These more traditional risks are present in all bank business models but can be especially acute for banks engaging in novel activities or exposed to new markets, including crypto-assets.” Read that one from March 2023.


Opinion: What Crypto CPAs Should Know About Form 1099-DA – Sean Stein Smith, CUNY, on Forbes

Opinion: Stablecoin Legislation Must Respect the Dual-Banking System – Cato Institute on CoinDesk

Sudden DOJ charges against non-custodial wallet developers challenge long-standing U.S. policy on money transmission. It is regulation by criminal enforcement. – Coin Center


Paradigm Files Comment Letter on ESMA’s Financial Instruments Consultation – Paradigm

Comment letter to the Department of Commerce on the U.S. Bureau of Information Security’s “proposed rulemaking affecting U.S. Infrastructure-as-a-Service (IaaS) providers and the global blockchain ecosystem” (PDF) – Digital Chamber

still more tips

Circle’s USDC overtakes Tether’s USDT in stablecoin transactions according to Visa – Cointelegraph

Stablecoin Issuer Tether Invests $200 Million in Brain-Computer Interface Company – Bloomberg

How Lazarus Group laundered $200M from 25+ crypto hacks to fiat from 2020–2023 – ZachXBT on Mirror

Nigeria freezes over 1,100 bank accounts of crypto traders amid broader regulatory crackdown – DL News

Bitcoin ETFs Expected to Launch on Australia’s ASX Exchange in 2024 – Decrypt