Ripple – market structure bill
Rep. Glenn “GT” Thompson (R, PA), Chair of the House Agriculture Committee, sees new hope in the District Court Judge Analisa Torres ruling last week in the SEC vs Ripple lawsuit.
According to Bloomberg, Chair Thompson said to reporters, “The Ripple decision has highlighted what we’ve been saying all along — there’s confusion about how digital assets are treated under the securities laws, and it’s up to Congress to step in and provide both certainty and clarity.”
Furthermore, Thompson said this could help Democrats come aboard the new market structure bill “and even co-sponsor the bill” which is currently shepherded by House Ag and the House Financial Services (HFS) Committee. Read it.
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Blockchain Association’s Ron Hammond published a Twitter thread noting there is currently one Republican version of the market structure bill, no Democratic version. He explains, “However, the Ripple case changes this. Some hate the outcome, others praise it. Regardless of one’s takeaway, there is a common theme of confusion after the fact and legislation is the only clarifying force.” Read it. Will Democrats engage?
Senate alliance
Senate bipartisan momentum for digital assets legislation begins with an amendment to the National Defense Authorization Act (NDAA)? Maybe so.
S.Amdt.712 has been submitted as an amendment to the NDAA by Senator Cynthia Lummis (R, WY) on behalf of herself, Senator Kirsten Gillibrand (D, NY), Senator Elizabeth Warren (D, MA) and Senator Roger Marshall (R, KS).
The Senators represent a legislative spectrum on digital assets: the Responsible Financial Innovation Act (Lummis-Gillibrand, the act is generally seen as pro-crypto) and Digital Asset Anti-Money Laundering Act of 2022 (Warren-Marshall, the act is generally seen as anti-crypto). It’s also interesting to note that this amendment uses the word “crypto” and not the words “digital assets,” perhaps allowing for more focus on financial transactions.
There’s a lot in this amendment which appears to lay ground work for digital assets as it relates to Anti-Money-Laundering (AML) and Know-Your-Customer (KYC) requirements.
It involves agencies and departments such as Treasury, FinCEN, the SEC and CFTC. One snippet: “Not later than 120 days after the date of the enactment of this Act, the Secretary of the Treasury shall adopt guidance clarifying the sanctions compliance responsibilities and liability of an issuer of a payment stablecoin with respect to downstream transactions relating to the stablecoin that take place after the stablecoin is first provided to a customer of the issuer.” Read it all.
Meanwhile, according to Politico, Sen. Elizabeth Warren (D, MA) is leading efforts by a group of Democrats on an amendment to the National Defense Authorization Act (NDAA) “that would crack down on Russian use of cryptocurrency.” Read more.
letter to SEC – Hill, Johnson
Building on momentum from last week’s Ripple decision, the chairs of the key digital assets subcommittees on the House Financial Services and House Agriculture Committees, Rep. French Hill (R, AR) and Rep. Dusty Johnson (R, SD), have sent a letter this morning to Securities and Exchange Commission (SEC) Chair Gary Gensler asking his agency for engagement on new legislation rather than the agency’s current regulation by enforcement approach.
The Members write, in part, “This approach does not result in compliance and customer protection, but instead creates further confusion, as demonstrated by the recent summary judgement. This concern is exacerbated by certain Commission actions, seemingly timed to coincide with related Congressional activity, which appears calculated for maximum publicity and political impact.”
They continue, “This approach does not protect the public. Legislation would do far more to prevent future collapses of digital asset firms than enforcement actions. A statutory framework would establish a process for firms to come into the regulatory parameter and comply with consumer protections, rather than relying on enforcement actions to punish a bad actor after the damage has already been done. (…)” Read the letter (PDF).
letter to SEC – Torres
Rep. Ritchie Torres (D, NY), a member of the House Financial Services Committee, followed up last week’s letter to the SEC on Prometheum with a new missive yesterday on the Ripple decision.
“… in the wake of the resounding decision out of the SDNY Ripple case (… ) the SEC must reassess its continued assault on the crypto industry,” tweeted Rep. Torres.
In the letter to Chair Gary Gensler, Torres concludes, “I hope the SEC will find its self so chastened by the Court’s decision it will concentrate the Commission’s enforcement energies where it belongs: on the bonafide bad actors who perpetrate serious transgressions like fraud, market manipulation and the misappropriation of customer funds. I look forward to finding out how the SEC will reassess its regulatory assault on crypto assets in light of the [Judge Analisa] Torres Doctrine.” See the letter.
Coinbase Chief Legal Officer Paul Grewal responded to Torres statement re-tweeting out the letter and adding, “‘The Torres Doctrine.’ A remarkably cogent summary of Judge Torres’ jurisprudence from Representative Torres. Thank you Congressman.”
accounting rule review
Buried in the House Appropriations Committees 2024 recommendations filed on Monday is a request to address the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121).
SAB 121 added complication for public companies interested in mixing with digital assets products (as in custody – like BNY Mellon) and assets.
The House Appropriations’ Monday filing, whose agenda is controlled by the majority Republicans, the filing explains : “Asset Accounting Standards – The SEC issued SAB 121, new regulatory guidance relating to the accounting treatment of digital assets for public companies. The SEC is directed to consult w/ prudential regulators to determine how SAB 121 affects insured depository institutions and revise SAB 121 to conform with existing prudential standards on insured depository institutions for the custody of digital assets.”
Last July, in speaking to Capitol Account’s Rob Schmidt, SEC Chair Gary Gensler said regarding SAB 121 (keep in mind, this is pre-FTX implosion):
“So you said this was ‘Staff Accounting Bulletin 121’ – that’s because there’s been 120 before this over 50 years. So you could do the math. That’s two to three a year. I think there’s been two of them since I’ve been Chair.”
“Paul Munter, our chief accountant, leads that and this was consistent with what we’ve done on the other 120 of them. And this is the same process that we’ve gone into before and and gives issuers – public company issuers – advice, and in this case, we had a number of companies coming to us saying, ‘How do you think this should be accounted for?'”
“It’s very different than other parts of the market. Custody – what does custody mean? What custody in crypto often means is that the public no longer has ownership of their Bitcoin or cryptocurrency.”
“In fact, if the wallet provider or the crypto exchange or crypto lending platform goes bankrupt – and we’ve had a number of go bankrupt in the last two months, Rob (Chair Gensler emphasizes interviewer’s first name) – when they go bankrupt, guess what? – The customers are just in line at bankruptcy court.”
“So, we’ve had a lot of problems over the years with companies trying to push things off balance sheet. Just reference the 2008 financial crisis if you wish. And so Paul and his team took this up and thoughtfully put out a staff accounting bulletin that the custody arrangements aren’t well enough developed and that crypto is sufficiently different than custody for stocks and bonds. That this should be on balance sheet.”
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Staff Accounting Bulletin No. 121 – SEC.gov
CFTC and DeFi
At yesterday’s meeting of the Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee titled, “Responsible AI in Financial Services, DAOs and Other DeFi & Cyber Resilience,” CFTC Commissioner Christy Goldsmith Romero discussed one of the featured topics of the day in her opening statement – decentralized finance or DeFi. “[The Technology Advisory Committee] also continues its deep dive examination of regulatory issues related to DeFi. This examination has become increasingly important as more of the digital asset market is shifting to DeFi, and Congress is considering additional legislation that includes DeFi. As I said at the start of TAC’s examination of DeFi, the central issue is accountability. We will continue that examination today. Financial regulators are used to central actors. Today, we continue the discussion about what decentralization means, and the sliding scale that is often DeFi.”
The CFTC’s Tony Biagioli, the trial attorney in the Ooki DAO case, Justin Slaughter of Paradigm, Ben Milne, CEO of Brale and professor Dan Awrey all presented.
more tips:
DeFi is eating finance – Bankless
funding the metaverse
After having rolled up “11 metaverse infrastructure and content companies into one,” Futureverse announced a $54 million round of financing yesterday The goal is not small as the company aims to deliver “the essential components for constructing any metaverse application, while forming one of the world’s largest metaverse communities powered by digital collectibles” – read “interoperability.”
New Zealander Aaron McDonald leads the company along with L.A.-based co-founder Shara Senderoff.
Futureverse claims strategic partnerships with organizations such as FIFA, Authentic Brands Group, Mastercard, Wimbledon, Death Row Records, Wētā Workshop, Snoop Dogg, Timbaland, Keanu Reeves and Alexandra Grant. Read the release.
The funding round was led by 10T Holdings and includes Ripple, issuer of the XRP token, as an investor. Also, read an interview with VentureBeat.
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Coinbase to Pause Staking in Four States After Regulatory Crackdown – The Wall Street Journal
Deadlines for U.S. Spot Bitcoin ETF Approvals Come Into Sight – CoinDesk