blockchain tipsheet

Rep. Emmer on national debt

Speaking just prior to the House Speaker vote at the U.S. Capitol, Majority Whip Rep. Tom Emmer (R, MN) made his case for at a at PGP For Crypto event in Washington, D.C.

Rep. Emmer’s case for digital assets has different elements, but he made clear one benefit, in particular.

He said: “You [have] $33 trillion in debt -we have no way to pay for it right now. We’re not even thinking about how we pay for it. We’re bleeding about a trillion and a half a year.”

“The only hope in my mind we have is… much like the Internet when it exploded back in the 90s – it was allowed to explode. We had something in this country called ‘the boom’ – 25 years of the largest wealth creation in history. Now, some of us believe that the ‘pie’ is just *this* big and we [have] to divvy up the ‘pie’. Others of us believe this is just the beginning. And if we keep this here [in the U.S.] – we allow this innovation to grow here, we allow the 21st century economy and opportunity to be here in the United States of America.”

“And when we start to make some better decisions on how we pay our bills – and what we’re putting money into – we can grow this economy to the point where we can pay that off. That’s the future for the United States of America. And I would argue to my friends on the Senate side [and] my house colleagues that are playing this political game… we gotta stop [and] figure out how to work with the technology and the entrepreneurs that are creating it so it stays right here. This is where it belongs. This is where I think we benefit dramatically from it.”

See the full video of Rep. Emmer at the PGP for Crypto event on YouTube.

Continue reading “Digital Assets To Address National Debt Says Majority Whip Emmer; Fed’s Bowman Wants Regulatory Framework”

protect DeFi

Blockchain industry advocates led by DeFi Education Fund are promoting the new “protectDeFi.org” website, which aspires to protect the interests of decentralized finance particularly as it relates to new digital asset tax rules proposed by U.S. Treasury and the Internal Revenue Service (IRS) on August 28.

The origins of industry pushback is the Infrastructure Investment and Jobs Act of 2021 as Blockchain Association CEO Kristin Smith explains in a tweet thread on X.  And on the new Treasury proposal, she adds, “…the proposal includes software developers who might have worked on a front-end interface to a DeFi protocol, and [because] they did so, the IRS may consider them ‘in a position to know’ about future activity on that protocol.. These developers would then have to furnish 1099s and abide by other reporting requirements… This is untenable + would force those persons to stop work or move to more welcoming jurisdictions. As it stands, if this updated definition is adopted by the IRS, it would result in a decimation of the digital assets industry in the U.S.” Read it.

Consensys counsel Bill Hughes joins the industry chorus on X, “… the cost and time required by reporting obligations would cripple most start-up software development projects. And IRS is gravely underestimating those costs (which is typical for agencies during rulemakings).” View more on X.

Final feedback to Treasury and the IRS is due on October 30. The protectDeFi.org website offers an artificial intelligence tool for interested parties who wish to create a letter for feedback purposes.

protect DeFi – Congress

In Congress, the Keep Innovation In America Act co-sponsored by House Financial Services (HFS) Committee Chair Patrick McHenry (R, NC) and Rep. Ritchie Torres (D, NY) among many others (see H.R. 1414) is a bipartisan Congressional effort introduced in March to fix the IRS issue created in the Jobs Act. So far, the bill has not made it out of Committee.

Continue reading “DeFi Meets Treasury And IRS Proposal; Offshore Momentum In Hong Kong And Australia”

sanctions evasion

The chances of Congress taking up terrorist financing – whether through hearings or legislation or both – appear to be increasing.

On Friday, reporter Angus Berwick of The Wall Street Journal again chronicles an example of sanctions evasion where crypto is the middleman for “Criminal Gangs, Rich Russians and a Hamas-Linked Terror Group.” At the center of the storm is a Moscow-based exchange called Garantex which the WSJ says allows a rubles-to-crypto-to-dollar transfer. Mr. Berwick draws a connection to his previous article which used blockchain analytic firm Elliptic’s data saying, “Garantex’s growing role as a global conduit for illicit funds was underscored this month by evidence that Palestinian militants in part financed their operations through crypto in the lead-up to the Oct. 7 attacks in Israel.” Read Friday’s WSJ article on Garantex.

Back in March, Haaretz reported that Hamas was no longer using “Bitcoin Cryptocurrency” due to its trackability by government authorities. Read more.

Congress reacts

Meanwhile, Politico picked up the baton on Congressional reaction to sanctions evasion using crypto with more concerns expressed by Senator Elizabeth Warren (D, MA). The Senator tells Politico’s Jasper Goodman, “The danger of crypto-financed terrorism is real and should be an urgent priority for Congress… There’s a growing bipartisan coalition of senators who are committed to passing this bill and fighting back against terrorism worldwide by choking off the financing.” Read more. Her bill – “The Digital Asset Anti-Money Laundering Act” [S.2669] – now has 15 co-sponsors including 2 Republicans and 1 Independent. Continue reading “Crypto Illicit Financing Concerns Grow In Senate; California Approves Regulatory Framework Path”

Peirce on digital assets

The agenda for yesterday’s Security Trader Association conference in Washington, D.C., included another regulator who discussed digital assets regulation. Securities and Exchange Commission (SEC) Commissioner Hester Peirce (R) participated in an on-stage interview and covered a range of crypto-related topics that built on the need for digital assets legislation outlined by Commodity Futures Trading Commission Chair Rostin Behnam (D) the previous day.

On a question about innovation leaving the United States, Commissioner Peirce said, “I think the idea that you are comfortable driving an entire set of innovation outside the US is really a concern. And people will say to me, ‘Well, projects aren’t actually moving out of us. Look, you just were in San Francisco, you met with a ton of projects.’ But, what they’re telling me is that – yes, they’re in the U.S., but they’re they’re not letting any U.S. persons participate in any anything they’re doing. It’s all happening overseas. And, that’s the problem. I think we don’t know which pieces of it will last and end up changing the way we do things, but I suspect some of it will and I would rather have that innovation happen here.”

The Commissioner’s next response recalled themes of the Q&A grilling by Rep. Ritchie Torres (D, NY) of SEC Chair Gary Gensler at the House Financial Services Committee SEC Oversight two weeks ago. Gensler admitted Pokemon cards were not securities – though tokenized Pokemon cards gave him pause.

Yesterday, rather than Torres’ use of Pokemon cards, Peirce chose chinchillas.

Continue reading “SEC’s Hester Peirce On Innovation, Chinchillas And ETFs; McHenry As Speaker Rumors Instensify”

CFTC Behnam on legislation

Speaking at yesterday’s Security Traders Association conference in Washington, D.C., Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam participated in a fireside chat and said that he remains optimistic – but realistic – about digital asset legislation prospects given the election cycle.

He said, “So, it’s been a tough ride over the past couple of years because there are, in fact, opponents. But there’s been a number of legislative efforts in both the House and the Senate. Obviously, it took a little bit of a pause last year with a number of failures and bankruptcies in the crypto space. This, to me, feels like something that’s inevitable. When it happens, as we’re approaching, obviously, 2024 in an election year, remains to be seen -obviously a lot going on on The Hill right now: shutdowns, elections and whatnot.”

Behnam continued, “But, this remains a priority of a number of members of Congress on both the House and Senate side, and it’s just a matter of process: the friction of partisanship and debate and policymaking that hopefully we’ll come up with a sound policy that gives us additional authority over the commodity markets and, of course, gives the SEC what it needs to regulate the securities market.”

letter – crypto tax

Bloomberg’s Allyson Versprille reported yesterday on X that a group of senators led by Sen. Elizabeth Warren (D, MA) and Sen. Angus King (I, ME) are requesting that the date be moved up two years for crypto exchanges and brokerages to report client transactions to the federal government. Bloomberg’s headline says that the goal is to “Snag Crypto Tax Cheats.”

See the Congressional letter dated October 10 which was sent to Treasury and the IRS. Five other Democratic Senators signed on including Sen. Richard Blumenthal (CT), Sen. Bernie Sanders (VT), Sen. Brian Schatz (HI), Sen. Sheldon Whitehouse (RI) and Sen. Gary Peters (MI). Continue reading “CFTC Chair Behnam Optimistic About Legislation; Senators Make Urgent Crypto Taxation Request”

legislation complication

CoinDesk’s Jesse Hamilton opines on the House speaker mess and its effect on digital assets legislation momentum. He observes a range of roadblocks from Rep. Patrick McHenry (R, NC) new role as temporary House Speaker to a looming government shutdown in mid-November. Hamilton concludes, “Because this is only the first year of the two-year congressional session, the end of the calendar isn’t a death sentence for any of the legislation. However, January starts a presidential election year when the political stakes increase on everything and the partisan fight gets bloodier, so moving legislation becomes more complicated.” Read more.

Will a new speaker appear by the end of the day today from the House Republican conference? And – could House Democrats play a role in selecting a speaker if Republicans are deadlocked for an extended period?

terrorist financing

The Wall Street Journal reported yesterday that terrorist organization Hamas has received $41 million in crypto funds between 2021 and June of this year – not to mention other terrorist organization which more than double the funding amount. Israeli police tell the WSJ that they “froze further crypto accounts used by Hamas to solicit donations on social networks, part of a continuing effort to locate the ‘financial infrastructure in cryptocurrencies used by terror entities to fund their activities.'”

For transactions, the article reports that the stablecoin Tether was the main way terrorists moved funds. Data was sourced from blockchain analytics firm Elliptic. Read more.

more tips:

Israel Police freezes Hamas crypto accounts on Binance – Calcalist

Continue reading “Legislation Complication As Speaker Selection Process Begins; Terrorist Financing Comes Into Focus”

digital asset custody

Industry association GBBC Digital Finance (GDF) and the International Securities Services Association (ISSA) announced the publication of a primer on digital asset custody (DAC) yesterday.  In a press release, the associations explained, “This report is a primer to help move the knowledge of DAC forward by bringing to the forefront, the opportunities and barriers DAC providers have to successfully navigate moving to these new digital technologies and ways of working.”  The target market is traditional finance and financial service professionals.

On the regulation front, the associations see three key challenges for DAC globally: 1) the differences in asset definition; 2) the location-specific regulatory compliance obligations; and, 3) the overall impact of regulatory incompatibilities or inconsistencies between jurisdictions.”

Download the primer – 66 pages (PDF).

Download “key takeaways” from the primer – 11 pages (PDF).

The Staff Accounting Bulletin 121 from the SEC, which focuses on custody and has drawn the ire of Congress, is listed as a resource for the primer. Continue reading “New Digital Asset Custody Report; Real-Time Enforcement From FCA”

Speaker morass

With the Speaker role in limbo in the House (and an election(s) starting Wednesday says Roll Call), so too are the prospects for digital assets legislation.

From a pro-crypto perspective, a near-term slowdown with legislation in the United States may not be critical. “Macro” events such as approval of Bitcoin spot market ETFs could continue to drive retail and institutional interest. Favorable decisions in court cases (Coinbase, Ripple, etc.) could continue to push digital assets into the mainstream. And longer term, there are international efforts which could ultimately be seen as a threat to the U.S. dollar, its primacy and, therefore, national security – always a galvanizing force for Congress.

Meanwhile, anti-crypto advocates likely see a swing further right by Republicans with the House Speaker role as inhibiting the current digital assets agenda led by a House Republican leadership which has sought to build bipartisan momentum essential to law-making success in a divided government.

The House drama isn’t helping Democratic crypto advocates such as Senator Kirsten Gillibrand (D, NY) either. The Senator has openly expressed hope in growing her caucus’ interest in crypto legislation and remains a co-sponsor of the sole, comprehensive market structure bill in the Senate [S.2281] along with Senator Cynthia Lummis (R, WY).

Digital assets law will likely come in a negotiation between the House and Senate (especially stablecoins [H.R. 4766]), but not if the House becomes sidelined by politics and House Republicans render themselves impotent.

Overall, Republicans understand that the Speaker drama has been bad for business. Read one example on that topic from House Financial Services committee member Rep. Mike Flood (R, NE) in speaking to local media.

more tips:

Temporary Speaker Patrick McHenry Steers House on the Fly – The Wall Street Journal

Continue reading “Speaker Morass And The Digital Assets Pendulum; Tokenizing Treasuries”