blockchain tipsheet

Politics and the SEC

When Securities and Exchange Commission (SEC) lawyers were pressing its case against crypto company DEBT Box late last year, many were surprised when the Agency’s counsel appeared to intentionally try and mislead a Federal court judge and thereby put themselves at risk of sanctions.

Now, Republican Senators Cynthia Lummis (WY), Bill Hagerty (TN), Katie Boyd Britt (AL), Thom Tillis (NC) and JD Vance (OH) want answers from SEC Chair Gary Gensler.

Fortune’s Leo Schwartz reports, “Wednesday’s letter from the Republican senators, led by Vance, reflects the heightened stakes of the otherwise inconsequential lawsuit. The lawmakers are using the episode to advance their complaints about Gensler’s administration, which critics argue is politically motivated, especially with crypto.” Read more.

more tips:

Letter to SEC Chair Gary Gensler regarding “enforcement proceedings against Digital Licensing Inc., also known as ‘DEBT Box'” – Vance.Senate.gov 

what you should know: It’s still possible the Judge in the case could issue sanctions against the agency and its lawyers in spite of the fact the SEC has tried to have the case dismissed while it tries to wiggle out of a mess. Continue reading “Senator Vance Leads Charge Against Actions Of SEC Counsel; Crypto Criticism Is Pumping”

‘Ether is a security’

Prometheum CEO Aaron Kaplan re-appeared on the media landscape yesterday with his company’s imminent launch of crypto custody services for Ether (ETH) “securities.” Read more in CoinDesk.

Last year was a busy year for Mr. Kaplan.

He earned the wrath of Senator Tommy Tuberville (R, AL) among others for Prometheum’s ties to Chinese investors. And then, he endured a very public questioning at a June House Financial Services (HFS) hearing which included Rep. Mike Flood (R, NE) trying to get Kaplan (see it) to answer whether certain crypto was a security or commodity.

Mysteriously, Kaplan’s company had just received a rare, crypto-related seal of approval from the Securities and Exchange Commission (SEC) – a special purpose broker-dealer license – based on the idea that nearly all crypto are securities.

Kaplan says his company will start taking custody of Ether by the end of next month and tells CoinDesk’s Jesse Hamilton emphatically, “The CFTC is not our regulator…. When the SEC says to us, ‘It’s not a security,’ then we’ll be troubled.”

In reaction to the Prometheum news, Willkie Farr crypto counsel Mike Selig said on X: “SEC has effectively conceded ETH isn’t a security multiple times, but left ambiguity. Prometheum need only reasonably believe ETH is a ‘crypto asset security’ to custody it. SEC permitting Prometheum to custody ETH as a security [because] of this ambiguity won’t make ETH a security.”

more tips:

SEC may be forced to declare Ethereum a security after controversial new launch – Fortune on Yahoo Continue reading “Senate Banking FSOC Hearing Could Highlight Illicit Finance Bills; Prometheum Re-Emerges”

we gave you legislation

Coming out of yesterday’s House Financial Services (HFS) hearing with U.S. Treasury Secretary Janet Yellen (see more), HFS Chair Patrick McHenry (R, NC), House Ag Chair Glenn “GT” Thompson (R, PA), Rep. French Hill (R, AR) and Rep. Dusty Johnson (R, SD) want to know… what’s going on??? Read the release.

In a press release and Congressional letter, the quartet note that digital asset legislation has been created by Congress in the form of the digital asset market structure bill or “FIT 21.” But, FSOC and Secretary Yellen aren’t helping in spite of making the call for Congressional legislation to fill regulatory “gaps” in the first place.

The Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) continue to wrestle over jurisdiction with SEC Chair Gary Gensler asserting that nearly all crypto assets are securities, which has further muddied the regulatory waters. Read the letter.

Congress wants answers to its five questions by February 20. Continue reading “House Republicans Question FSOC About Their Interests In Digital Asset Market Structure”

Secretary Yellen – SAB 121

The annual report of the Financial Stability Oversight Council (FSOC) will bring U.S. Treasury Secretary Janet Yellen (D) in front of the House Financial Services Committee today and the Senate Banking Committee on Thursday.

The HFS Committee Majority Republicans made clear yesterday on the hearing’s web page that Staff Accounting Bulletin 121 (SAB 121) – slammed by the GAO on October 31 and now under pressure from a bicameral Congressional Review Act resolution introduced last week – will be a topic of discussion with the Secretary today.

The joint resolution signed by HFS Committee member Rep. Mike Flood (R, NE) is available for download along with the hearing’s memo.

Last week, Rep. Flood and Senator Cynthia  Lummis (R, WY) and Rep. Wiley Nickel (D, NC) introduced the unsigned, bicameral joint resolution.

The hearing starts at 10 a.m. ET in the Rayburn House Office Building – livestream here.

more tips:

• • 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”. – Congress.gov
  • S.J.Res.59 – A joint resolution 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”. – Congress.gov

what you should know: The argument goes that the inability for “stable” and well-regulated traditional finance institutions to custody crypto due to SAB 121 has led to instability for crypto. And that’s fine for many anti-crypto advocates who would like to see digital assets go away. Continue reading “Hearing With Secretary Yellen To Include SAB 121 Joint Resolution; Fake IDs And Blockchain”

custody rule concerns

Politico’s Eleanor Mueller learned late last week that new letters were sent to Rep. Andy Barr (R, KY) from the Office of the Comptroller of the Currency’s  (OCC) Acting Comptroller Michael Hsu and Federal Reserve Chair Jerome Powell which “voiced concerns over the SEC’s proposed rule (Feb, 15, 2023: ‘Safeguarding Client Assets’ – 432 pages!) that would expand custody regulations to crypto and said they’d conveyed those to the agency. ” Read more (subscription).

Barr is Chair of the House Financial Services Subcommittee on Financial Institutions and Monetary Policy.

At a House Financial Services (HFS) Oversight hearing of the prudential regulators in November, Hsu and Vice Chair Michael Barr first suggested they had issues with the proposed rule. (See 1:05:25 of the November HFS oversight hearing. Originally flagged by Punchbowl News Brendan Pedersen in November.)

more tips:

• • See Chair Gary Gensler‘s statement last February 15 about the proposed rule here.
  • See SEC Commissioner Hester Peirce‘s statement of concerns about the rule last February 15 here.

what you should know: This is NOT the same as  Staff Accounting Bulletin 121 (SAB 121) which blew up last week when Senator Cynthia Lummis (R, WY) and Reps. Wiley Nickel (D, NC) and Mike Flood (R, NE) introduced a Congressional Review Act resolution to overturn SAB 121. Rather, the “Safeguarding Client Assets” rule as it is known is yet another vector meant to keep crypto custody (and arguably, crypto in general) out of the traditional financial system and prevent instability according to anti-crypto advocates. Continue reading “Prudential Regulators Getting Nervous About SEC Rulemaking; Bitcoin Mining Scrutiny Ramps Up”