SEC Closes Utah Office After DEBT Box Debacle; Today’s Tokenization Hearing

SEC closes Utah office

With the Securities and Exchange Commission (SEC) sanctioned by U.S. District Court in Utah for its handling of the DEBT Box case, which also resulted in the SEC paying $1.75 million to DEBT Box, appears to have led to the closing of the regulator’s Utah office.

A brief SEC press release yesterday states, “The [Salt Lake Regional Office (SLRO)] has long been the SEC’s smallest regional office and recently has experienced significant attrition.” Read the release.

Three SEC lawyers and/or employees involved in the DEBT Box case resigned in April and May. Read even more in The Wall Street Journal.

what you should know: Ouch. The SEC made the argument yesterday that the agency is just consolidating due to “attrition.” Unfortunately, it was self-imposed.

House Approps + SAB 121

Former SEC Deputy Director Anne-Marie Kelly “digs up” a new SEC budget proposal from House Appropriations which says that if the SEC continues to  move forward with its Staff Accounting Bulletin 121, it will no longer receive funding for that work.

She shared a screenshot of the proposal on X and said, “The work around to a Veto? Appropriation. Prohibiting the use of appropriations for specific actions is a great check on SEC actions like SAB 121. The reduction of $144 million also coincides with the FY22 shortfall to match 31 fees and the FY22 Appropriation. To quote Pres. James Madison, “power over the purse may, in fact, be regarded as the most complete and effectual weapon”.” Read it.

what you should know: Fox Business’ Eleanor Terrett confirms the news and says that it’s all part of today’s House Appropriations markup which starts this morning at 8:30 a.m. ET. This will make it out of the Republican-controlled House, but can it make it through the Democratic-controlled Senate?… let alone receive the signature of the President? Doubtful.

SEC Commissioner – sandbox

Adding more fuel to the fire of her statement last week encouraging a shared “sandbox” of innovation between the United States and the United Kingdom, Securities and Exchange Commission (SEC) Commissioner Hester Peirce emphasized the benefits of her plan to US innovation yesterday. “Part of what I envision is a domestic sandbox that facilitates small-scale, temporary experiments by innovators–not just crypto-innovators–with the goal of working toward permanent relief,” said Peirce on X.

On the SEC’s website, the Commissioner further explains details of the “Proposed Micro-Innovation Sandbox.” Though the original proposal is for UK-US co-operation,  Peirce outlines how this could work in/for the United States. Read about it.

today’s hearing – tokenization

House Financial Services’ Subcommittee on Digital Assets, Financial Technology and Inclusion led by Chair French Hill (R, AR) will be holding a hearing on tokenizaation today beginning at 9 a.m. ET.

Visit hearing page for livestream and info.

Titled, “Next Generation Infrastructure: How Tokenization of Real-World Assets Will Facilitate Efficient Markets,” witnesses include (click name for prepared testimony):

In his prepared testimony, Carlos Domingo, whose company recently accepted investment from (and gave a board seat to) BlackRock, offers details on what he sees as a framework needed for tokenized securities. At the top of Domingo’s list is “clarity” on what constitutes a digital asset security. He writes, “The failure by regulators to differentiate among types of digital assets is impeding the development of the ecosystem for tokenized securities.”

Senate Ag bill

Senate Agriculture Chair Debbie Stabenow (D, MI) and Ranking Member John Boozman (R, AR) are currently working on a new crypto oversight bill according to Politico’s Eleanor Mueller.

Mueller quotes Sen. Boozman in a Capitol Hill hallway yesterday, “It is a team effort… We’re working with [Chair Stabenow] now, and in the process of visiting stakeholders, trying to get a product that protects the public [and that] industry can live with.” Read more  (subscription).

what you should know: DCCPA is back! (?) Where the new bill intersects with the Financial Innovation and Technology Act for the 21st Century (FIT 21) remains to be seen.

detained in Nigeria

If you are not familiar with the story of Binance employee Tigran Gambaryan, read this CoinDesk op-ed from last week outlining the detention of the former IRS criminal investigator.

His detention by the Nigerian government has now caught the eye of Congress led by Rep. Rich McCormick (R, MD) and 15 House Republicans who are demanding that the Biden Administration ensure that Gambrayan,  who now reportedly has malaria, be allowed to return to the United States.

See the letter via Fox Business’ Eleanor Terrett on X.

what you should know: Gambaryan’s detention appears highly undeserved – he went to Nigeria to help, after all. Considering the politics of digital assets in DC currently, this could become a much bigger deal quickly.

tokenized MMFs

Christopher Perkins, who is president of venture firm Coinfund and a member of CFTC Commissioner Caroline Pham’s Global Markets Advisory Committee (GMAC), reports that he’s working on a recommendation for tokenized money market funds (MMFs) being placed under CFTC jurisdiction.

(The GMAC met yesterday in New York City.)

It’s all part of Perkins’ membership – and others – in GMAC’s Digital Asset Markets Subcommittee. He adds on X,  “The wrapper should not matter, but the capital and operational efficiencies, coupled with the risk mitigation delivered through near real time settlement should be not only permitted—but encouraged!” See it.

what you should know: View the Digital Asset Markets Subcommittee presentation beginning at 2:56:46 in the video. There is an “aggressive schedule” regarding the creation of five recommendations for digital assets beginning with NFTs.

Considering the detail of the subcommittee’s work, Commissioner Pham and her team may create a digital assets framework whether Congress comes up with one or not.

podcast – agency for crypto

In the June 4 episode of “Unchained” podcast, former Commodity Futures Trading Commission (CFTC) chair Chris Giancarlo and former CFTC chief innovation officer Daniel Gorfine share their opinions with host Laura Shin on recent digital assets legislation and, in particular, the acute need for addressing the stablecoin markets (spoiler: solidifying the US Dollar in a digital age which includes crypto rails).

Chair Giancarlo reiterates his belief that the CFTC is best-suited to oversee digital asset spot markets which the Financial Innovation for Technology for the 21st Century (FIT 21) helps codify. He makes his case: “In fact, the CFTC already does regulate some spot markets (…) in retail transactions and foreign exchange, the CFTC does have some spot authority. So, it’s not like the spot world is foreign. Also, the CFTC does have enforcement authority in spot markets.”

Giancarlo continues, “And, I can tell you the CFTC has teams that monitor activity in spot markets already in place. The only thing that would be necessary to be done would be setting the rules for the exchange operation and others. It has a great deal of experience of that in the futures market. It’s not a perfect fit [for the CFTC] -but there is no perfect fit in Washington. The SEC would be a less perfect fit because it has no experience in Bitcoin whatsoever which the CFTC has been monitoring since 2015 when we declared it a commodity.”

Listen to the podcast.

what you should know: At the end of the podcast, Giancarlo discusses what he knows about the Chinese CBDC – the Digital Yuan. He sees a “white label” version of the Digital Yuan on its way and warns on the surveillance capabilities of such a CBDC.  Ultimately, this will set up differentiation among other digital currency competitors (i.e. the U.S. Dollar) based on “values.”

podcast – White House

In “The Scoop” podcast from The Block, host Frank Chaparro talks to Skybridge Capital’s Anthony Scaramucci, a former member of the Trump Administration, and Blockchain Association’s Kristin Smith about the latest digital asset machinations.

The podcast is filled with Scaramucci’s pithy quotes including one on whether the White House is “waking up to the crypto voter.” He says, “I know the campaign is, I can’t say the White House is. In talking to members of President Biden’s campaign, they have had their bell rung…” Later, he says, “Nobody (in government) wanted Uber..  (…) but the people wanted Uber and that’s the same thing with crypto.”

Hear the podcast.

international – wholesale CBDC

The bank for central banks – The Bank for International Settlements (BIS) – rolled out “Project Rialto,” which it says will provide a testing environment for a wholesale Central Bank Digital Currency (CBDC). Adding more specifics, the press release explains the new project will “explore how instant cross-border payments could be improved using a modular foreign exchange (FX) component combined with settlement in wholesale central bank digital currencies (wCBDC).” Read the release.

On the countries and currencies involved, Ledger Insights reports, “Rialto is a collaboration between the BIS Innovation Hubs in Singapore and the Eurosystem. They haven’t yet shared which central banks are involved. Given the G20 initiative to make cross-border payments cheaper and faster, the focus on FX (foreign exchange) is essential…” Read that one.

what you should know: The wholesale or bank-to-bank CBDC doesn’t have the surveillance implications of a retail CBDC. Or at least, that’s the argument. Anti-CBDC advocates remain wary of any attempt to seed a CBDC. Last December, House Majority Whip Tom Emmer (R, MN) said in an interview with blockchain tipsheet that he wanted more information on wholesale CBDCs before ever thinking about moving forward: “… on the bank-to-bank CBDC, again I want to see it. So much of this is semantics because we talk about digital assets – we already have essentially everybody using their cards bank-to-bank. You don’t have cash anymore. They’re doing it digitally already.”

still more tips

India Springs Election Surprise, Sends Equity Market Crashing With Uncertain Implications for Crypto – CoinDesk

Deutsche Bank ties up with Bitpanda in ‘cautious’ crypto shift – Reuters

Mike Novogratz: “Crypto shouldn’t be partisan” (video) – Bloomberg

Dapper Labs settles NBA Top Shot Moments lawsuit for $4 million – The Block