Ether The Security May Debut This Week; House Republican Margin Complicates Crypto Bills

Prometheum week

Prometheum co-CEO Aaron Kaplan let the world know in early February that his SEC-approved (with a “special purpose broker-dealer license) digital assets trading platform would likely roll out custody for Ether “security” tokens at the end of March. Well, here we are. And, Congress has left town. What a convenient moment for the SEC and its Chair Gary Gensler to nudge the little-known platform forward with its ETH “security” designation which would directly contradict the ETH “commodity” token overseen by the Commodity Futures Trading Commission (CFTC) and its Chair Rostin Behnam.

Both Behnam and Gensler are Democrats, but are representative of their caucus split when it comes to digital assets.

Generally speaking, Gensler is anti-crypto and seeks a strict securities agenda for digital assets whereas Behnam is pro-crypto and sees more nuance with digital assets beginning with unequivocal support for Bitcoin AND Ether as commodity tokens.

An early March House Agriculture Committee CFTC Oversight hearing led to a choreographed exchange between House Ag Chair Glenn “GT” Thompson (R, PA) and Chair Behnam which sounded the alarm that a Prometheum securities designation for Ether would bollocks up the works of the CFTC where it treats the token as a commodity.

So the question this week – the last week of March – is.. will Prometheum roll out its ETH security token custody? And also.. who will be the first client?

slim margin for digital assets

The Republican majority in the House is slipping once again as Rep. Mike Gallagher (R, WI) is expected to leave Congress for a job in the private sector (Palantir) says Puck News’ Teddy Schleifer on X.

Every time another Republican leaves the House, presumably, the closer the digital assets agenda adopted by Republicans at the beginning of the 118th Congress moves toward an end on the floor of the House. Yes, there are plenty of House Democrats who support the digital assets legislation, but not at the leadership level which controls the overall Democratic agenda.

Meanwhile, Republican House Speaker Mike Johnson (R, LA) has not had a chance to show interest in House Floor votes for any digital asset legislation as delays have mounted across all policymaking due to the urgency of funding the government.

what you should know: At Coinbase’s “Update The System Summit” event in DC last week, House Financial Services Chair Patrick McHenry (R, NC) appeared to admit that he expected floor votes to have occurred at the end of 2023 except for the fact former House Speaker Kevin McCarthy (R, CA) was ousted out of the blue. McHenry said:

“When I designed this (digital assets legislation) plan, I didn’t anticipate that we were going to have the motion to vacate the Speaker in the fall…. that I would end up in the Speaker’s chair for three weeks…. all these various things that blew up the end of the year where I thought we were gonna move our products. I didn’t anticipate the final four months of the year getting so jacked up – which they got very jacked up. And then it’s taken us three months to get our footing back. In those seven months, that’s when I wanted to have all of our actions taken care of.”


Yesterday: “That [Lummis-Gillibrand stablecoin bill] effort is nearing showtime just as long-running negotiations pick up between House Financial Services Committee Chair Patrick McHenry (R, NC) and Ranking Member Maxine Waters (D, CA).” – Punchbowl News’ The Vault (subscription)

Bitcoin Investor Day

On Friday at the inaugural Bitcoin Investor Day in New York City, BlackRock’s Head of Digital Assets Robert Mitchnick expressed that his company can envision the future with the merging of digital assets and traditional finance. According to Fox Business’ Eleanor Terrett, Mitchnick said, “Eventually we expect there will be a convergence where the best of the old system and the new technology will become fused into a new infrastructure system in finance.”

And on the possibilities for future crypto products by BlackRock, Terrett quotes Mitchnick saying, “For our clients, Bitcoin is overwhelmingly the number one priority. And then a little bit ethereum, and very little everything else.”

what you should know: BlackRock CEO Larry Fink said in 2018 he wasn’t interested in Bitcoin due to customer apathy.  And now, BlackRock has the biggest Bitcoin spot market ETF on the plant. So, take the lack of interest beyond Bitcoin with a grain of salt. Fink ultimately wants to get ahead of competitors rather than telegraph his company’s every move beforehand.

regulators’ crypto budget

CoinDesk’s Jesse Hamilton and Nikhilesh De cover the requested budget increases largely encompassing increased enforcement and monitoring capacity for the cryptocurrency industry at U.S. Treasury, the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC). For example, CoinDesk reports that the SEC plans to add “another 23 people in its examinations division, in part to address ‘evolving risks’ that include crypto activity, according to the $2.6 billion overall spending plan.”

Read CoinDesk’s comprehensive, yet breezy (compared to the actual proposals) overview.

more tips:

EU and  self-custody

According to Cointelegraph, the European Union (EU) has officially adopted new rules which put some limits on anonymous, self-custodied crypto wallets. Cointelegraph says, “This update is a component of the region’s newly implemented Anti-Money Laundering (AML) regulations.” Read more.

One of two lawmakers to oppose the new regulation, European Parliament member Patrick Breyer, decried the new rules in a letter last week and said (translated from German), “Banning anonymous payments would at best have a minimal impact on crime, but would deprive innocent citizens of financial freedom.” See the letter.

But, Circle’s European policy director Patrick Hansen sought to straighten out the misinformation on the new EU rule which was not nearly as draconian as the media and crypto Twitter (X) were making it out to be. He said on X over the weekend, “First things first: The AMLR (Anti-Money Laundering Regulation) is not a crypto regulation. It’s a broad AML/CFT framework that applies to institutions, so called ‘obliged entities’ (OEs). All financial institutions, including CASPs (crypto-asset service providers), are OEs. But also non-financial institutions…”

Hansen continues, “As such, the AMLR applies only to OEs/service providers and explicitly excludes obligations for providers of hardware and software or providers of self-custody wallets that don’t have access/control over the crypto-assets (e.g. Metamask, ledger)….”

There’s more – a lot more. Read his informative thread.

what you should know: This new rule echoes what Democrats such as Rep. Bill Foster (D, IL) have advocated – an identifying “license plate” for all digital wallets. Foster tried to add his idea to the digital asset market structure bill during the House Financial Services markup last July. His amedment was unsuccessful.

NYDFS digital assets charter

In a press release on Friday, investment management company and Bitcoin sport market Exchange-Traded Fund (ETF) purveyor, Wisdom Tree, announced that it had received a coveted digital assets charter from the New York State Department of Financial Services (NYDFS).

The company shared its plans saying it will provide digital asset products “to customers as part of the WisdomTree Prime ecosystem. Specifically, WisdomTree Digital Trust Company will issue the WisdomTree Gold Token and the WisdomTree Dollar Token available in WisdomTree Prime and maintain reserves for those assets under a DFS-approved framework. This charter will also allow WisdomTree to offer New York retail customers access to WisdomTree Prime, set to be available in the coming weeks.” Read the release.

The company said WisdomTree Prime is available as an app the Apple App Store and on Google Play.

Blockworks analyzes the news and gets an optimistic response from Wisdom Tree head of digital assets Will Peck who says, “We believe long-term legislative and regulatory trends are likely to favor or require the use of highly regulated organizations, like New York limited purpose trust companies, for issuing tokenized products and providing related services.” Read that one.

what you should know: Another step forward for TradFi in the world of digital assets. Or is it the other way around?

still more tips

Crypto billionaire Chris Larsen of Ripple showers cash on SF Mayor London Breed—and scorn on her foes – The San Francisco Standard

Accused crypto laundering mastermind dreamt of being a Buddhist goddess – Financial Times

Sumitomo Mitsui Leasing trials tokenizing real estate, equipment with Vertalo – Ledger Insights

Gearing up for Sam Bankman Fried’s (and CZ’s) reckoning – Axios