Montana Passing Bitcoin Legislation; Blockchain Analytics Show Sanctions Evasion

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states – Montana mines

The Montana state legislature has passed the [Senate #178] ‘Right to Mine’ Bitcoin bill which will prevent local governments from “unfairly” using industrial zoning laws to stop crypto mining among other measures.  CoinTelegraph points out that the state’s House and Governor still need to sign off. The bill was sponsored by State Senator Daniel Zolnikov (R) who speaks about the bill from the Senate floor in this video and says, “Hey come to Montana. This is a safe place to invest in. And [the bill] insures that it’s a safe place to invest in.

Tip: Montana’s (red state) momentum is the opposite of what is happening in New York (blue state).

compliance – sanctions evasion

A new report from blockchain analytics firm Inca Digital says that sanctioned Russian banks are still being allowed to access the services of many cryptocurrency exchange platforms such as Seychelles-based Huobi and KuCoin as well as Binance in spite of sanctions that should shut down such use. Read more from Bloomberg (on Inca’s site).

Inca Digital Chief Executive Officer Adam Zarazinski said this company plans to release their findings more widely “soon” and that “The report [includes] other troubling observations about the 62 crypto exchanges it analyzed, including that some of them do not require Russians to pass KYC checks.”

Meanwhile, blockchain analytics firm Elliptic shared findings of a report of its own that found pro-Ukraine causes received $200M+ in crypto donations in the last year, with $80M+ sent directly to Ukraine’s government; Russian entities received ~$5M in spite of sanctions. Read more in The Financial Times.

Tip: See an Inca Digital report from a year ago titled “How Russians Use Tether To Evade Global Sanctions” in which Huobi and KuCoin were also implicated.

compliance – blockchain biz

Introduced annually in the House for years by congressmen such as (was Representative) current Senator Ted Budd (R, NC), The FinCEN Modernization Act of 2023, was introduced again in January by Rep. Byron Donalds (R, FL). It’s purpose reads in part: to “ensure that FinCEN has the necessary technology to monitor cryptocurrencies and other emerging financial technologies for their potential use in money laundering and cyber and data security breaches.” See H.R.370. Chainalysis, Elliptic, Inca Digital and other blockchain analytics/compliance solutions must love this.

Same could seem to be said for Rep. Stephen Lynch’s (D, MA) [H. R. 1164] “OFAC Outreach and Engagement Capabilities Enhancement Act” introduced last Friday.

Tip: What is FinCEN? OFAC?

OH(io) crypto

On Friday, Politico’s Morning Money discusses the Federal Reserve/FDIC/OCC triumverate and their two statements this year (1, 2) emphasizing the risk of crypto assets for traditional banks. Senate Banking Chair Sherrod Brown (D, OH) reacted in a statement of his own saying, “This is the right step to provide more clarity to banking organizations and protect people’s hard-earned money as we continue to consider a comprehensive regulatory framework for digital assets.” Read more.

Brown arguably holds the future of crypto legislation in the 118th Congress. His influence – and seniority – is felt across the entire Democratic caucus and especially in the Democratically-controlled Senate. He wouldn’t let anything get to President Biden’s desk without executive branch vetting either. 

Meanwhile, Rep. Warren Davidson (OH) tweeted his interest late last week in the “CBDC Anti-Surveillance State Act” introduced by fellow Republican and Majority Whip Tom Emmer (MN) on Wednesday. “The Fed must focus on its dual mandate rather than eradicating financial autonomy. A retail CBDC would essentially allow the government to mediate all transactions, which would mirror what we see in China.”

Tip: See “Crypto firms brace for ‘carpet-bombing moment’ in U.S. as Europe beckons” from Politico yesterday

EU – digital Euro

Digital Euro adoption appears to be top of mind for the European Central Bank (ECB). Coindesk reports that “other uses such as paying taxes, receiving welfare payments, or even paying in physical stores would only follow in a later, second tranche of developments for the central bank digital currency (CBDC).” Read more.

Tip: Download the ECB’s “Rollout Approach to the Digital Euro (PDF).”

stablecoiners speak

Anxious crypto: Circle CEO Jeremy Allaire, whose company issues the USDC stablecoin, appeared on CNBC’s Squawk Box last Friday and said about U.S. crypto regulation, “There is an anxiousness around what the rules will be (…) The U.S. is one of the last to move on providing legislation (…) There is a very clear path towards regulatory framework.” See a 4-minute clip of the interview.

AML in the EU: Circle’s Patrick Hansen notes in a tweet that there’s a battle heating up for cities wanting to be chosen as the European Union’s AMLA – Anti-Money Laundering Authority and adds that the winner will end up hosting “several thousand EU employees by 2026.” See Frankfurt’s promotional website. Hansen says Madrid, Vienna and Madrid are also among the possiblitiies.

Gensler versus SEC labor

A complex drama is unfolding at the Securities and Exchange Commission (SEC) between Chair Gary Gensler and his agency’s unionized team members. Capitol Account says that as Chair Gensler has required managers and then subordinates return to in-person work post-Covid, this has created friction with the SEC union. SEC union chief Greg Gilman reportedly said, “Gensler’s inflexibility set the tone for what ultimately proved to be an extremely contentious and difficult process.”

Tip: Read “Securities Regulators Have a Union” from July 2000

Hacker Hacked

Hackers are fair game for hacking. Blockworks recounts
the “Wormhole exploit” which resulted in the loss of 120,000 ETH (about $325 million at the time) in February 2022 -and then last week it appears Jump Trading – the hacked – got back all the Ether from the exploiter. Read more.

Crypto critic Molly White breaks down what happened in detail and suggests that the “good news” shows DeFi is remarkably centralized.  White concludes, “As it turns out, true trustlessness, decentralization, and censorship-resistance is hard. Many so-called defi projects sacrifice these ideals to varying degrees in exchange for ease of development and other benefits. However, a lot of people simply aren’t aware that these tradeoffs are being made, and are not cognizant of their resultant risk exposure — particularly when it comes in the form of counterparty risk that is a degree or two removed.” Read this one.

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