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Rep. Mike Flood Reflects On Efforts To Rescind The SEC’s SAB 121, Next Steps

Rep. Mike Flood on SAB 121 next steps

Rep. Mike Flood (R, NE), a freshman Member of the House Financial Services (HFS) Committee, has led a relentless charge in the 118th Congress to rescind the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121. And, in spite of the recent veto override setback, he still sees opportunity.

“SAB 121,” as it is known, precludes traditional finance firms from offering custody services for crypto due to arguably, onerous reserve requirements courtesy of the SEC.

Put another way, the bulletin effectively prevents regulated banks from touching digital assets and, consequently, prevents digital assets from being under the U.S. financial system umbrella.

In May, Rep. Flood’s  joint resolution [H.J.R.109] passed both Houses of Congress with bipartisan support in a watershed moment for digital assets only to be vetoed by President Biden. Earlier this month, the veto override vote in the House failed…

So now what?

Yesterday, blockchain tipsheet caught up with Congressman Flood on SAB 121:

    • Initial reaction to the veto
    • Efforts to increase Dem support, post-veto
    • Next steps for rescinding SAB 121
    • On the SEC working on one-off basis with TradFi companies
    • House Appropriations line item on SAB 121
    • State of bipartisanship in the 118th Congress
    • The next Congress and digital assets legislation
    • Flyover Fintech event on October 21

The interview has been lightly edited for clarity.

blockchain tipsheet: What was your reaction to the veto of House Joint Resolution 109 rescinding the SEC’s SAB 121?

Rep. Mike Flood: Well, I wasn’t surprised.

During the debate on the Floor, before we actually voted for it [on May 9], the White House put out a preemptive notice that they intended to veto it and Ranking Member Maxine Waters (D, CA) was waving that around during the debate and trying to remind our Members that the President intended to veto it.

Nevertheless, it got 21 votes from Democrats in the House and 12 votes in the Senate – one of them being Majority Leader [Chuck] Schumer (D, NY).

I think the support from Congressman Wiley Nickel (D, NC) and others shows that this does not need to be a partisan issue, and it clearly is NOT partisan.

There should be a path forward where Republicans and Democrats could agree on – not just repealing this – broader regulatory certainty for digital assets.

I think that during that debate, one of the criticisms that the Ranking Member had was, “Well, maybe this isn’t the right way to take down SAB 121 using the Congressional Review Act.”

Okay. Then, why isn’t my other bill moving? -I had a bill to change it in the Federal code and repeal it…

But, I wasn’t surprised with the veto. Continue reading “Rep. Mike Flood Reflects On Efforts To Rescind The SEC’s SAB 121, Next Steps”

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Illicit Finance Bill Passes The House -Again; Senator Lummis Promises Surprise For Bitcoin Audience

Rep. Zach Nunn

House Floor – illicit finance

The “Financial Technology Protection Act” [H.R.2969] sponsored by Rep. Zach Nunn (R, IA) and co-sponsored by Rep. Jim Himes (D, CT) easily passed the House yesterday afternoon by voice vote.

The Senate version of this bill [S.1340], sponsored by Senator Ted Budd (R, NC) and co-sponsored by Senator Kirsten Gillibrand (D, NY), sits idly in Senate Banking currently.

what you should know: In that the bill establishes a working group within government and establishes a public-private partnership to study the use of digital asset in illicit finance, it seems likely that Senate Banking Chair Sherrod Brown (D, OH) would perceive S.1340 as an “industry bill” given its limited elements even though it’s been around since 2018. Considering Chair Brown’s past pronouncements on industry bills, it appears unlikely to ever make it to a markup in the 118th Congress.

big things

Senator Cynthia Lummis (R, WY), who is scheduled to appear at this week’s Bitcoin 2024 conference said on X yesterday, “₿ig things are in store this week. Stay tuned!” Continue reading “Illicit Finance Bill Passes The House -Again; Senator Lummis Promises Surprise For Bitcoin Audience”

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Tornado Cash And Crypto Mixing Today: An Interview With DEF’s Amanda Tuminelli

for staff: tornado cash

In Congress, crypto mixing and its privacy-enhancing use of blockchain technology has been a troubling innovation for some Members. Case and point: crypto mixer Tornado Cash has been front-and-center in illicit finance deliberations within the U.S. government and was sanctioned in 2022 by U.S. Treasury.

Last Friday, blockchain tipsheet sat down with Amanda Tuminelli, Chief Legal Officer of decentralized finance advocacy firm DeFi Education Fund (DEF). We discussed both the latest and the “basics” in crypto mixing as well as the Department of Justice’s indictment in August 2023 of Tornado Cash software developers Roman Storm and Roman Seminov.

Roman Storm is currently in custody and his case has been delayed until later in the year in the Southern District of New York. Roman Seminov remains at large.

Also, last October, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a Notice of Proposed Rule Making (NPRM) – see it – that identified crypto mixer transactions as a source of money laundering. DeFi Education responded with a formal comment (PDF).

With lawmakers and their staffs in mind, blockchain tipsheet’s interview with Ms. Tuminelli covered:

    • why crypto mixers are controversial
    • the lawful purpose of mixers
    • balancing AML regimes and mixers
    • crypto wallets and identifiers
    • overview on indictment of Storm and Seminov
    • Dutch court convicts Tornado Cash developer Alexei Pertsez
    • scenarios pending U.S. court decisions
    • unlicensed money transmitting
    • crypto mixing 5-10 years from now

The transcript has been lightly edited for clarity.

blockchain tipsheet: Why have crypto mixers become controversial?

Amanda Tuminelli: I think that many lawmakers are concerned that “mixing” automatically means unlawful conduct or a national security concern. And it has become fraught with national security issues because of the DPRK (North Korea) using Tornado Cash or the allegations that various terrorist groups are using mixing services in order to fund their activities. I think that is happening. And we absolutely are not here to support that in any way.

But, there is a disproportionate focus on those groups using mixers. And I think their focus should be more properly on the technology: what is mixing and what is it really going on under the hood, and who in the mixing tech stack is the appropriate person to regulate. Continue reading “Tornado Cash And Crypto Mixing Today: An Interview With DEF’s Amanda Tuminelli”

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President Biden Opts-Out Of Re-Election Bid; Trump To Appear At Bitcoin Conference This Week

Biden opts-out

President Biden

President Joe Biden formally announced his intention to step away from running for another term as President yesterday. He stated his intention to remain in office through the end of his term in January.

See the letter.

Republican leadership, such as House Majority Whip Tom Emmer (R, MN) who called him “unfit,” asked that the President step down immediately yesterday.

what you should know: The opportunity for substantive policy discussions on any topic before the election in November would seem to be even more unlikely. But, Brendan Pedersen delivers some hopium to the crypto universe in yesterday’s Punchbowl News’ The Vault newsletter as House Agriculture digital assets subcommittee chair Rep. Dusty Johnson (R, SD) tells him, “I wouldn’t want us to pull the shades on the 118th quite yet.”

Bitcoin conference Thursday

If having former President Donald Trump as a speaker isn’t enough, Bitcoin 2024 conference organizers on Friday suggested they’re about to unveil yet another surprise (speaker) as Fox Business’ Eleanor Terrett prognosticated on X that it could be entrepreneur Elon Musk, a prolific “donatoor” to the former President’s campaign. Continue reading “President Biden Opts-Out Of Re-Election Bid; Trump To Appear At Bitcoin Conference This Week”

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Presidential Veto Override Vote Fails, But Bipartisan Support Remains; Noms Hearing Drama

override vote

veto override fails

Yesterday, the House voted again to rescind the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 via House Joint Resolution 109 sponsored by Rep. Mike Flood (R, NE) -and *this time* proponents had to override President Joe Biden’s veto in late May, too.

A vote with a 2/3 majority of House members was required for override – 275 total votes.

The vote was over and done in a few minutes and failed with 228 votes in favor to override the President’s veto and 184 against overriding the veto.

    • 21 votes *for* override were Democrats. Some Dems switched sides from the May vote. More below.
    • All 184 Republican votes were *for* override except for Rep. Drew Ferguson (R, GA) (Rep. Ferguson erred on his vote and later corrected it. He voted for the resolution in May and also sponsored a digital asset tax bill with Rep. Wiley Nickel (D, NC) in April).

See the override’s final tally on the House Clerk’s website.

In May, there were two fewer Members of Congress voting and the resolution passed the House 228-182.

See the May tally on the House Clerk’s website. Continue reading “Presidential Veto Override Vote Fails, But Bipartisan Support Remains; Noms Hearing Drama”

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SAB 121 Resolution Veto Override Vote Delayed; Nomination Hearing Brings Potential Fireworks

Noms

SAB 121 resolution delayed

The H.J.R. 109 veto override vote was delayed in the House last night until today at 10:30 a.m. (or later). You can watch it here.

In the interim, you can read House Financial Services (HFS) Chair Patrick McHenry’s (R, NC) remarks during yesterday’s debate time on the House Floor titled, “This Administration Would Rather Play Politics and Side with Power Hungry Bureaucrats Over the American People.” Read it.

HFS Ranking Member Maxine Waters (D, CA) responded with her own remarks titled, “This Resolution Is Part of a Long List of Efforts by Industry and Its Allies to Attack the Good Work of the SEC, Which Has Made Significant Progress in Protecting Investors, Maintaining Fair, Orderly, and Efficient Markets, and Facilitating Capital Formation.” Read that one.

Debate video can be found on the House Clerk’s website here.

If the veto override is successful in both houses of Congress, H.J.R.109 would remove certain reserve requirements – instigated by the SEC’s Staff Accounting Bulletin 121 (SAB 121) – on crypto custody for regulated banks.

what you should know: In advance of yesterday’s almost-vote, HFS Chair McHenry appeared on CNBC and challenged Dems to vote to override. See it.
Continue reading “SAB 121 Resolution Veto Override Vote Delayed; Nomination Hearing Brings Potential Fireworks”

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Senate Agriculture Returns To Digital Assets Today; Dems Chastised About Crenshaw Nomination

CFTC and legislation

Senate Ag today

It’s been a while since Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam has appeared in front of Senate Agriculture regarding digital assets. But, today’s hearing titled “Oversight of Digital Commodities” could be the start of a digital assets legislative sprint before the August recess.

Live video will be here beginning at 10 a.m. ET.

According to Politico’s Eleanor Mueller, Senate Ag “Chair Debbie Stabenow gathered committee Democrats for a private meeting Monday night to strategize on crypto legislation.” Senator Kirsten Gillibrand (D, NY) told Ms. Mueller later that things “went well” and she’s “optimistic.” Read more.

Senator Gillibrand is a member of Senate Ag and is keeping her proverbial foot in the door for her and Senator Cynthia Lummis’ (R, WY) “Responsible Financial Innovation Act” (RFIA) [S.2281] which may or may not be a part of whatever digital assets legislation Chair Stabenow is cooking up.

what you should know: Rumors abound of a new iteration of Chair Stabenow’s and Ranking Member John Boozman (R, AR) “Digital Commodities Consumer Protection Act” (DCCPA) [S.4760] –but without the FTX baggage.

No doubt Stabenow’s former staff counsel – Chair Behnam – is *in* on whatever next steps may be. Politico notes that Ranking Member Boozman hasn’t seen whatever Stabenow is working on which raises the question: How serious is this presumed legislative effort especially considering the dwindling schedule and divided Congress? Or, is this more about shining a positive light on congressional Democrats with pro-crypto voters (and donations!) who have previously viewed Democrats and Democratic leadership, in particular, as anti-crypto? Continue reading “Senate Agriculture Returns To Digital Assets Today; Dems Chastised About Crenshaw Nomination”

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GOP Platform Adds Crypto To Its Innovation Agenda; SAB 121 Veto Override Vote Tomorrow

GOP Platform

GOP platform

The campaign website for former President Donald Trump published a Republican platform doc yesterday in advance of next week’s GOP convention in Milwaukee, Wisconsin.

See blog post on Trump campaign website.

And, get the platform doc here (PDF).

Under a chapter titled, “BUILD THE GREATEST ECONOMY IN HISTORY, ” bullet #5 (on page 9 of 16 pages) tilts toward digital assets:

“5. Champion Innovation
Republicans will pave the way for future Economic Greatness by leading the World in Emerging Industries.

Crypto
Republicans will end Democrats’ unlawful and unAmerican Crypto crackdown and oppose the creation of a Central Bank Digital Currency. We will defend the right to mine Bitcoin, and ensure every American has the right to self-custody of their Digital Assets, and transact free from Government Surveillance and Control.”

Blockchain Association’s Ron Hammond commented on X regarding the platform release:  “…the Republican convention is next week and while crypto wasn’t a ‘top 25’ policy issue, it did make its way into the party’s policy platform…”

what you should know: For the “pro-crypto” crowd, this will be more fuel to the fire of support that has increasingly burned for the former President. Will Democrats try to fight fire with their own platform in Chicago next month? Continue reading “GOP Platform Adds Crypto To Its Innovation Agenda; SAB 121 Veto Override Vote Tomorrow”