FinCEN Hearing Sheds Light On Its Digital Assets Strategy; Closing “The Revolving Door”

FinCEN and digital assets

FinCEN hearing

Yesterday’s House Financial Services (HFS) hearing focused on U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) included attention to digital asset matters.

Republicans expressed skepticism (see Chair Patrick McHenry’s comments) about some FinCEN processes and largely focused on the unnecessary data grab and resources required by FinCEN with programs such as those enabled by the Corporate Transparency Act (CTA). The CTA requires businesses to register their beneficial owners by the end of the year. So far, according to FinCEN witnesses Treasury Undersecretary Brian Nelson and FinCEN Director Andrea Gacki, 500,000 out of 32 million have complied thus far.

Among the digital assets highlights…

Crypto gadfly Rep. Brad Sherman (D, CA) said during his Q&A time that pro-crypto advocates were trying to “de-fang” the U.S. government with cryptocurrency.

Rep. Bill Foster (D, IL) explored the efficacy of secure digital IDs and suggested that it would have “huge benefits to the federal taxpayer” in its ability to stop fraud.

Rep. Sean Casten (D, IL) explored illicit finance and digital assets during his Q&A time. He wanted Treasury’s Nelson to highlight why “bad guys like mixers” – Nelson and Director Gacki said that mixers essentially anonymize transactions that “shield illicit finance.” Casten introduced the phrase “chain hopping” and said it was a problem with illicit finance.

Majority Whip Tom Emmer (R, MN) brought up “the erroneous Wall Street Journal report” on October 10 regarding Hamas, illicit finance and crypto. He asked Undersecretary Brian Nelson about how much crypto was actually received by Hamas. Nelson demurred and said he could share info privately which the Whip took him up on.

Continue reading “FinCEN Hearing Sheds Light On Its Digital Assets Strategy; Closing “The Revolving Door””

New Letter Responds To Warren Criticism, Bill; Porter Draws Crypto PAC Attention

ex-military respond

military letter #2

Blockchain Association’s ex-military members have sent a new letter to Congress regarding the illicit finance and crypto debate currently swirling. Yesterday’s communication doubles the signatories of the previous BA letter back in November and clearly states their opposition to legislation being floated in Congress as well as related national security concerns.

The letter states in bolded text:

“The Digital Asset Anti-Money Laundering Act (DAAMLA) risks our nation’s strategic advantage, threatens tens of thousands of U.S. jobs, and bears little effect on the illicit actors it targets.”

Read the new letter.

Back in December, Senator Elizabeth Warren (D, MA), who is the author of DAAMLA,  sent a letter in response to Blockchain Association which accused the organization of, essentially, revolving door politics and undermining “bipartisan efforts in Congress and the Biden Administration to address the role of cryptocurrency in financing Hamas and other terrorist organizations” Continue reading “New Letter Responds To Warren Criticism, Bill; Porter Draws Crypto PAC Attention”

Times Change With Laser Eyes?; NFT Case Sees Industry Amicus Brief

laser eyes

laser eyes Biden

Was President Joe Biden’s “laser-eyes” tweet on X after the Super Bowl a turning of the tide in D.C. as it relates to digital assets? See it.

The tweet has received nearly 200 million views.

For the pro-crypto army, hope can “beam” eternal. Bring on the digital assets regulatory framework!

With President Biden’s age increasingly the focus of criticism, attempting to do something “hip,” and therefore in touch with a younger demographic, makes sense.  That said, given where his Administration has been with its “anti-crypto” positioning, a switch to the emerging and speculative world of digital assets and Bitcoin seems unfathomable.

Still, drastic changes may be needed with the Biden presidential campaign coming out of last week’s less-than-satisfactory news conference where he defended his age and memory.

The Super Bowl could be where everything changed.  The next shoe to drop would be agreement on a stablecoin bill that relents on the “federal floor” requirement satisfying – at a minimum – a bipartisan group of House Financial Services Committee members. Continue reading “Times Change With Laser Eyes?; NFT Case Sees Industry Amicus Brief”

Must-Pass And Terrorism Financing Prevention Act Amendment; SEC’s Uyeda On Crypto ‘Mistakes’

must-pass amedment from Senator Mark Warner of Virginia

must-pass amendment

Sen. Mark Warner (D, VA) and his co-sponsors Sens. Mike Rounds (R, MT), Jack Reed (D, RI) and Mitt Romney (R, UT) appear to be trying to add at least a part of their “Terrorism Financing Prevention Act” (S.3441) to a “must-pass” bill [H.R.815] “RELIEVE Act” which supports the Veterans Community Care program and is sponsored by Rep. Cathy McMorris Rodgers (R, WA), Chair of the House Energy and Commerce Committee,

Warner first introduced his bill in December which aims at sanctioning any firm that is facilitating payments to “Foreign Terrorist Organizations” rather than the current limits of the law which focuses on Hezbollah. The legislation also includes a piece of Sen. Reed’s CANSEE Act which gives “FinCEN authority to restrict transactions with ‘primary money laundering concerns’ that do not involve a U.S. correspondent bank account.” Senator Warner’s December press release explains, “This provision will provide FinCEN with appropriate tools to address threats involving digital assets and non-traditional finance networks, just as they currently can where correspondent accounts are involved.”

Congress.gov notes that the amendment was submitted this past Friday and currently includes nearly all of the original text of S.3441.  Warner is trying to attach his amendment to the Senate amendment [S.Amdt.1388].

what you should know: Warner’s bill received a lukewarm reception from Secretary Yellen during a Q&A with the Senator at last week’s FSOC hearing.

Commissioner criticizes SEC

Continue reading “Must-Pass And Terrorism Financing Prevention Act Amendment; SEC’s Uyeda On Crypto ‘Mistakes’”

Senator Vance Leads Charge Against Actions Of SEC Counsel; Crypto Criticism Is Pumping

Senator Vance

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”

Senate Banking FSOC Hearing Sees Some Crypto Discussion

Senate Banking

The Senate Banking Committee hearing titled, “The Financial Stability Oversight Council Annual Report to Congress,” took place with U.S. Treasury Secretary Janet Yellen taking questions from members on behalf of FSOC, which she leads.

See the recorded video.

Secretary Yellen’s prepared opening testimony included remarks on digital assets asking for Congress to act on creating a regulatory framework, which largely reflected her digital assets testimony at the House Financial Services FSOC hearing earlier in the week.

“… the Council is focused on digital assets and related risks such as from runs on crypto-asset platforms and stablecoins, potential vulnerabilities from crypto-asset price volatility, and the proliferation of platforms acting outside of or out of compliance with applicable laws and regulations. Applicable rules and regulations should be enforced, and Congress should pass legislation to provide for the regulation of stablecoins and of the spot market for crypto-assets that are not securities. We look forward to continuing to engage with Congress on this.”

Chair Sherrod Brown (D, OH) guided the day’s agenda on behalf of the Majority Democrats. Ranking Member Tim Scott (R, SC), a possible candidate for Vice President on former President Donald Trump’s 2024 ticket, led the Minority Republicans. Continue reading “Senate Banking FSOC Hearing Sees Some Crypto Discussion”

Senate Banking FSOC Hearing Could Highlight Illicit Finance Bills; Prometheum Re-Emerges

FSOC and illicit finance

‘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”

House Republicans Question FSOC About Their Interests In Digital Asset Market Structure

FSOC and legislation

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”