Here’s today’s blockchain tipsheet… prefer it by email? Sign up here.
EU – MiCA regulation
In a vote of 27-0, the European Union’s Economic and Financial Affairs Council, which is comprised of the member states’ finance ministers, unanimously approved the continent’s ground-breaking Markets in Crypto-Assets legislation.
A statement fro the Council reads: “The new rules cover issuers of utility tokens, asset referenced tokens and so-called ‘stablecoins’. It also covers service providers such as trading venues and the wallets where crypto-assets are held. This regulatory framework aims to protect investors, preserve financial stability, while allowing innovation and fostering the attractiveness of the crypto-asset sector.” Read it all.
It’s hard to imagine the United States this far along.
The next and final step is for the bill to be published in the Official Journal of the European Union. Thereafter, MiCA will take effect in the middle of next year. Read more on the bill’s implications from Cointelegraph.
Landmark crypto rules make exchanges liable for customer losses in EU – Ars Technica
EU – crypto taxes
Building on the MiCA legislation, the finance ministers also approved new legislation aimed at transparency in taxation of crypto assets beginning in 2026. “The Directive will improve Member States’ ability to detect and counter tax fraud, tax evasion and tax avoidance, by requiring all crypto-asset providers based in the EU – irrespective of their size – to report transactions of clients residing in the EU. Moreover, the updated Directive has been extended in scope to include reporting obligations of financial institutions regarding e-money and central bank digital currencies and the automatic exchange of information on advance cross-border rulings used by natural persons,” says a statement on the European Commission’s website. Read it.
Politico notes the other side of the crypto tax law – the EU wants to identify crypto users: “The new disclosure framework will help regulators understand where and whose money is circulating throughout the crypto market, as well as make it harder for Europeans to hide tax assets in said market.” Read more.
digital assets scapegoat
At yesterday’s Senate Banking hearing with witnesses from Signature Bank and Silicon Valley Bank, Senator Cynthia Lummis (R, WY) wasn’t buying the use of digital assets as the cause of recent U.S. bank collapses.
According to a press release from her office, “Lummis questioned the former bank executives on why they tried to scapegoat digital assets for Signature Bank’s collapse despite the fact that all evidence points to their own failure to adequately manage liquidity risks within the bank.” See the questioning (video).
Senate Banking Chair Sherrod Brown (D, OH) also didn’t appreciate the tone coming from the witnesses, “They blamed anybody they could, but taking responsibility themselves.” See his post-hearing video.
Senators Blame SVB, Signature Management for Banks’ Failures – The Wall Street Journal
stablecoins – two drafts
Tomorrow’s stablecoin hearing – “Putting the ‘Stable’ in ‘Stablecoins:’ How Legislation Will Help Stablecoins Achieve Their Promise” led by Chair Rep. French Hill (R, AR) and his Subcommittee on Digital Assets, Financial Technology and Inclusion – will be a tale of two drafts of legislation.
One draft is from House Financial Services Chair Rep. Patrick McHenry (R, NC); and the other is from Ranking Member Rep. Maxine Waters (D, CA).
A difference in the bills is partially revealed in their titles. The Democrats are looking to include research for a “digital dollar” a.k.a. Central Bank Digital Currency (CBDC) in their legislation. (Republicans have been spraying Congress with anti-CBDC legislation as of late.)
The text for the CBDC portion of the draft includes:
“The Board of Governors of the Federal Reserve System, in consultation with the Federal payment stablecoin regulators (…) with respect to paragraphs (…) and the Financial Crimes Enforcement Network, shall carry out a study on the impact of a U.S. central bank digital currency (herein after referred to as a “digital dollar”), including…” Read more.
stablecoins – drafts reaction
On the Republican draft, Digital Chamber’s VP of Policy Cody Carbone tweeted yesterday: “Overall, changes reflect a desire to empower state-regulatory independence and lessen Fed’s authority to regulate/supervise/enforce actions against state-regulated issuers.”
On the Democrats’ draft, Alexander Grieve of government relations firm Tiger Hill tweeted, “[Ranking Member] Waters now has her own stablecoin bill too! Despite saying a month ago that Congress needed to ‘start over’, this new bill is nearly identical to the December draft, though it adds additional constraints around commingling assets, gives Fed veto authority over non-bank issuer licenses, and prevents non-bank issuers from accessing Fed programs (master accts, etc).”
The question remains how sincere this effort is by Democrats. Time will tell. Senate Banking and, therefore, bicameral approval is a challenging hurdle ahead to say the least.
On the bright side, these are important topics that will educate Congress and will help with law when the stars finally align.
stablecoins – witnesses
The House Financial Services Committee Memorandum prepared by the Majority Republicans for Thursday’s hearing also includes an overview on stablecoins and the hearing’s purpose. See it (PDF).
Currently, five witnesses will join the Subcommittee on Thursday including:
Matt Homer, an Executive in Residence at venture firm NYCA, former Executive Deputy Superintendent, New York Department of Financial Services (NYDFS) and senior advisor at FS Vector, a fintech advisory firm. His NYDFS experience appears to be just prior to the appointment of current Superintendent Adrienne Harris in August of 2021. See testimony (PDF).
David Portilla, Partner, Davis Polk & Wardwell LLP. According to his bio, Portilla is a former Financial Stability Advisory Council (FSOC) advisor and he currently assists “non-U.S. and U.S. banking organizations and nonbank financial institutions on a range of M&A, regulation, policy, enforcement and governance matters – including the full gamut of the prudential regulatory framework.” See testimony (PDF).
Robert Morgan, CEO, USDF Consortium which according to the marketing on USDF’s website is…: “The Bank-Delivered Digital Dollar: Bringing blockchain innovation to the real world through the creation of bank minted USDF tokenized deposits.” Morgan was also a senior executive at the American Bankers Association for 11+ years according to his LinkedIn profile. See testimony (PDF).
Delicia Reynolds Hand, Director, Financial Fairness, Consumer Reports will return to the hearing room after joining last month’s Subcommittee stablecoin hearing. Hand was a ten year veteran of the Consumer Financial Protection Bureau (CFPB) including, most recently, as the Deputy Associate Director and Acting Associate Director for the CFPB’s Consumer Education & External Affairs Division.
use case – tokenizing infrastructure
Ledger Insights looks at a 2023 World Bank report about how blockchain is being used for infrastructure projects including roads, power plants and renewable energy projects. See it – a 57 page PDF.
Seeing two different ways that blockchain can work with infrastructure and its funding, Ledger Insights says: “One is to help with the funding gap by tokenizing infrastructure securities, either debt or equity. Using blockchain might reduce the costs of issuances, although a special purpose vehicle will still be required. It could possibly democratize access by making it more accessible to a wider range of investors.” Read the other.
The article provides a revealing take on how blockchain technology can lead to inclusion of under-represented communities.
still more tips
Michael Lewis Talks To The New York Times About His New Book And Sam Bankman-Fried – The New York Times
SEC Can’t Seal Docs Tied to Hinman’s Ether Speech, Judge in Ripple Suit Rules – CoinDesk
Ledger Hardware Wallet Launches Seed Phrase Recovery Service For Passports and IDs, Concerns Raised – Decrypt
Crypto bank runs in 2022 catalyzed by institutional withdrawals: Research – Cointelegraph
The digital euro: a solution seeking a problem? – Financial Times
If you would like this delivered as a newsletter, please sign up here.