Hinman Documents Released; Market Structure Bill Seeks Bipartisan Support

Hinman on crypto -or not

At long last, “certain documents” from William Hinman, the former director of the U.S. Securities and Exchange Commission (SEC)’s Division of Corporation Finance from 2017 to 2020, have been released. Amidst the Ripple lawsuit by the SEC, pro-Ripple forces believe his public statements around what makes a cryptocurrency a security were misguided and, indeed, disputed internally at the SEC.

The story starts with a speech Hinman made in 2018 at a “Yahoo Finance All Markets Summit: Crypto.” See it.

“Prior to making the speech, Hinman said in an email to multiple SEC employees that the speech suggests ‘we do not need to see a need to regulate Ether, as it is currently offered, as a security,'” according to The Block, which concludes, “The public release of the Hinman documents may ignite a significant debate about the classification of cryptocurrencies as securities…” Read more.

The upshot of the Hinman notes from pro-crypto forces: Congress needs to step up with regulation.

Hinman on crypto – reaction

Ripple Chief Legal Officer Stuart Alderoty was unequivocal yesterday about the release of Hinman-related details tweeting, “We now can all see Hinman ignored multiple warnings that his speech contained made-up analysis with no basis in law, was divorced from the Howey factors, exposed regulatory gaps, and would create not just confusion, but ‘greater confusion’ in the market.”

In response to the release, Ripple CEO Brad Garlinghouse unleashed a blistering Twitter thread yesterday: “Seeing the depth to which the SEC has essentially weaponized the lack of regulatory clarity through enforcement actions since this speech was given – it’s no surprise that we can call bluff on their claims to ‘just come in and register’ as nothing but in bad faith.”

Chief Legal Officer Paul Grewal saw impact for his company, Coinbase, on the newly-released Hinman documents tweeting, “‘The regulatory gap.’ Proof from the Hinman emails of what we’ve been saying to the Third Circuit, to Congress and to the SEC itself: that the securities laws are incomplete when it comes digital assets, that securities law aren’t meant to rule over all digital assets, and that many digital assets are not securities.”

market structure

Yesterday’s House Financial Services (HFS) hearing which included review of the market structure bill may be of interest to the committee’s Democrats. HFS Democrats tweeted after the hearing, “[HFS Dems] are taking a very serious & thoughtful approach in analyzing the Republicans’ market structure bill. This means, Committee Democrats need additional time to review in order to move forward in a bipartisan manner.” But, the graphic attached to the tweet includes several cynical takes including a question which could pre-empt any hope of bipartisan passage, “Do we really need this bill?” 

Nevertheless, HFS Committee member Rep. Wiley Nickel (D, NC) may have had the quote of the day according to a tweet from Tiger Hill’s Alexander Grieve:  “‘Whether you love crypto or hate crypto— you should support market structure legislation. Inaction is not an option.’ – Rep. Wiley Nickel.” 

Ron Hammond, Director of Government Relations at the Blockchain Association offered his thoughts on the hearing on Twitter:
“The major takeaways from today’s hearing were: 1) Stablecoin legislation seems more bipartisan and feasible than a few months ago; 2)  The [HRS Democrats] are starting to align more with their Democrat colleagues on [the House Agriculture Committee] on need for a market structure bill. Not all, but many.”

Binance TRO slowed

D.C. District Court Judge Amy Berman Jackson refused to issue a temporary restraining order (TRO) yesterday that would have frozen Binance.US assets – the SEC’s goal. CoinDesk reported on the proceedings saying, “At times, the judge seemed frustrated by the responses she was hearing when asking whether any Binance.US customer funds had actually left the U.S., after multiple SEC attorneys said they were mainly concerned about the fact that Binance’s global platform controlled enough private key shards to move funds.” The judge encouraged both sides to continue to hash out a compromise. Read more.

a definition too far

It appears that House Republicans believe SEC Chair Gary Gensler has overstepped his jurisdiction with the latest SEC exchange definition proposal. Blockworks reports that House Financial Services (HFS) Committee Chair Rep. Patrick McHenry (R, NC) and HFS Digital Assets, Financial Technology and Inclusion Subcommittee Chair Rep. French Hill (R, AR) fired off a letter saying the new rule would stifle innovation. See the letter (PDF). And, read about it in Blockworks.

still more tips

“A few minutes ago, the SEC filed its response to last week’s Third Circuit…” – Paul Grewal, CLO, Coinbase on Twitter

Opinion: London, and the UK, must seize the opportunity to lead in crypto regulation – Andrew Griffith, Economic Secretary to the Treasury, United Kingdom – City A.M.

DeFi Group Found Liable Under Commodities Law, but Getting It to Pay May Be Tricky – The Wall Street Journal

UK Regulators Give Green Light to Bitstamp, Interactive Brokers—First Approvals in Six Months – The Block

Opinion: The US regulatory crackdown on crypto may create room for a different kind of token, something that banks can easily provide – Bloomberg

Circle Comments on SEC Proposal for DeFi Oversight – Circle blog

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