blockchain tipsheet

house ag hearing – Prometheum

All the pleasantries of a House Agriculture Committee CFTC oversight hearing aside, yesterday signaled a new – or more transparent – war between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) and the pro- and anti-crypto interests they represent.

House Ag Chair Glenn “GT” Thompson (R, PA) chose to highlight the CFTC-SEC battle at the beginning of his Q&A with Chair Rostin Behnam, a Democrat, who said that a decision by crypto securities platform Prometheum to custody Ether could throw off the whole crypto derivatives market which the CFTC manages -let alone set an unwanted precedent of Ether (ETH) as a security.

The CFTC Chair firmly believes ETH is a commodity.

See the video of Chair Behnam discussing Prometheum and the conflict with the SEC at the hearing (1:38).

The Special Purpose Broker-Dealer license which enables Prometheum’s product capabilities such as ETH custody was issued in May 2023 by the SEC and its Chair Gary Gensler, also a Democrat.

Digital assets proponents – House Ag Republicans, in particular – used the battle as justification for the new digital assets market structure bill known as “Financial Innovation and Technology for the 21st Century Act” [H.R. 4763] or “FIT 21,” as it is known.

Whether yesterday’s House Ag theater will lead to the Senate Agriculture Committee re-entering the digital assets regulation discussion led by Chair Debbie Stabenow (D, MI) and Ranking Member John Boozman (R, AR) remains to be seen.  But, Behnam was senior counsel for Chair Stabenow prior to joining the CFTC and the re-ignition of Senate Ag in digital assets may be inevitable.

In his opening statement, Chair Behnam reiterated what he’s said before: “The lack of legislation addressing the regulatory gap over the digital commodity asset spot market has not hindered the public’s enthusiasm for digital assets, and I continue to believe Congress must act…” Read more.

See full hearing video. Continue reading “CFTC And SEC Collide Over Prometheum; House Ag Pushes Market Structure Bill”

Super Tuesday crypto

In a piece titled, “‘Playing politics to win’: Crypto spends big on Super Tuesday,” Politico’s Jasper Goodman brings together recent news about crypto PAC’s funding of pro-crypto candidates and efforts.

Goodman digs into Senate candidate Rep. Adam Schiff’s (D, CA) record and finds a nugget, “Schiff, who has never tweeted the word crypto or made it a focus as a House member, includes a section in his ‘affordability agenda’ that calls for ‘comprehensive regulatory frameworks’ that ensure crypto firms stay in the U.S.” Another pro-crypto Democrat for the Senate? Schiff is leading in the polls. Read more.

Arizona – fund managers, crypto

The Arizona State Senate has opened the door for fund managers in regards to crypto-backed investments within Individual Retirement Accounts (IRAs). Blockworks’ Casey Wagner reports on a resolution which seeks “to ‘encourage’ the Arizona State Retirement System (ASRS) and the Public Safety Personnel Retirement System (PSPRS) to monitor these new investment vehicles and consider adding exposure.”

Read the article. Continue reading “Super Tuesday Reveals New Crypto Candidate Agendas; Prudential Regulators And Digital Assets”

Senate Dems accused

In an ironic twist on X last Friday, Rep. Brad Feinstad (R, MN), a member of the House Agriculture Committee, appeared to accuse Senate Agriculture Chair Debbie Stabenow (D, MI) of paying too much attention to crypto legislation.

Feinstad tweeted, “Senate Dems have made their priorities clear. They would rather kick the can down the road on the Farm Bill and focus on crypto. The farmers and rural communities I represent in #MN01 understand the importance of a Farm Bill reauthorization & I will continue fighting for them.”

Before last week’s news of Chair Stabenow’s renewed interest in crypto, it would have been unthinkable to say any Senate Dem was interested in crypto legislation other than Senator Kirsten Gillibrand (D, NY).

Rep. Feinstad hails from the southern Minnesota “01” district and is on House Ag. He presumably took part of in the House Ag markup on the digital asset market structure bill [H.R.4763] which was moved forward by voice vote last July.

“FIT 21” – as the bill is known – may now be in the hands of Chair Stabenow given her role on Senate Ag.

Meanwhile, House Majority Whip Tom Emmer (R, MN) represents the nearby, central Minnesota “06” district. Whip Emmer is one of crypto’s strongest advocates in Congress and sits on House Financial Services.

Too early to say if Feinstad is showing a rift in the House Republican caucus regarding digital assets, but it’s something to keep an eye on. Continue reading “Farm Bill Collides With Crypto Interests; Prometheum Poaches TradFi Executive”

HFS markup – SAB 121

At yesterday’s abbreviated House Financial Services markup (video is here), the Committee sent two digital asset-related bills to the House floor.

The House Joint resolution rescinding the Securities and Exchange Commission’s (SEC) controversial Staff Accounting Bulletin 121 (SAB 121) sponsored by Reps. Mike Flood (R, NE) and Wiley Nickel (D, NC) was approved by a final tally of 31-20… all Republicans and 3 Democrats (Rep. Nickel, Rep. Ritchie Torres (NY), Rep. Josh Gottheimer (NJ)) voted for the bill.

From the Majority press release:

• • “H.J.Res.109, providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Securities and Exchange Commission relating to “Staff Accounting Bulletin No. 121,” offered by Rep. Mike Flood (NE-01), overturns the SEC’s SAB 121. By overturning SAB 121, the Resolution will ensure consumers are protected by removing roadblocks that prevent highly regulated banks from acting as custodians of digital assets.”

Video of Rep. Flood’s hearing comments are here as he makes a detailed case for the bill with Members.

Jake Chervinsky, formerly of Blockchain Association and currently Chief Legal Officer of Variant Fund, was heartened by the “good news” of the bill’s passage out of committee but noted on X,  “Bad news: that’s likely the end of the story in Congress. Getting repeal done is nearly impossible. Lawsuit or bust.”

Chervinsky doesn’t see the bill taken up by the Democrat-controlled Senate or signed into law by the White House.

what you should know: It will be interesting to see the strategy employed in the Senate by the joint resolution’s sponsor Senator Cynthia Lummis (R, WY). Is there a sympathetic Democrat who can help? Perhaps. Senate Finance Chair Ron Wyden (D, OR) partnered on a Congressional letter regarding the SEC X account hack with Sen. Lummis in early January. Continue reading “SAB 121 Joint Resolution Approved By Financial Services; New Amicus Brief For Kraken”

innovation sandbox

Yesterday, House Financial Services (HFS) Chair Patrick McHenry (R, NC) formally announced the reintroduction of the “Financial Services Innovation Act of 2024” [H.R.7440] framing the creation of new offices for financial innovation across banking regulators as “sandboxes.”

The bill was previously introduced by the Chair in December 2022 in the 117th Congress.

From the Chair McHenry press release, “Budding fintech firms currently operate in fear of heavy-handed penalties brought down by regulators that have failed to work with Congress to provide clear rules of the road. That’s why I’m reintroducing the Financial Services Innovation Act. This commonsense legislation will give entrepreneurs an opportunity to test legal and regulatory waters before taking new products and services to market. Innovators have long flocked to American markets…”

what you should know: McHenry’s bill will be up for a vote at tomorrow’s HFS markup. How Democrats will line up on the bill is unknown, but if it’s anything like the markups last July for the stablecoin [H.R.4766] and digital asset market structure [H.R.4763] bills, five to six Democrats seem possible at a minimum such as Reps. Jim Himes (CT), Ritchie Torres  (NY) and Josh Gottheimer (NJ). Continue reading “New Sandbox Legislation Promises Protection For Innovation; Digital Assets AML Bills”

Cruz joins CBDC bill

Yesterday, Senator Ted Cruz (R, TX) brought his “upper house” seal of approval to anti-CBDC (Central Bank Digital Currency) sentiments currently being driven by Majority Whip Tom Emmer (R, MN) and his “CBDC Anti-Surveillance State Act” [H.R.5403] which includes 97 Republican co-sponsors.

Republicans see opportunity with the CBDC issue in the 2024 general election says Fox Business.

Senator Cruz, the Ranking Member on Senate Commerce, shares with Fox that he and five “Senate colleagues, including Bill Hagerty (R, TN), Rick Scott (R, FL), Ted Budd (R, NC), Mike Braun (R, IN), and Kevin Cramer (R, NC), will sponsor a new bill called the Central Bank Digital Currency Anti-Surveillance State Act.” Read more.

Treasury rumor 

Commodity Futures Trading Commission (CFTC) Commissioner Kristin Johnson may be getting a new job. Politico reported yesterday that she’s under consideration for Assistant Secretary for Financial Institutions at Treasury. Read more from Politico (subscription).

Commissioner Christy Goldsmith Romero (D) has also been rumored for the position.

Commissioner Johnson, a Democrat, has been active on issues related to digital assets including public speaking at events such as Blockchain Association’s Policy Summit last November (her remarks). When she first arrived at the Commission in 2022, she moderated a CFTC webcast titled “Digital Assets and Financial Inclusion.” Continue reading “Cruz Joins Emmer On Anti-CBDC Crusade; Reps. Flood And Nickel Talk SAB 121 With Consumers”