blockchain tipsheet

Fed master accounts

The push-pull continues between states rights versus federal in the approval of master accounts at the Federal Reserve.  Wyoming is once again in the middle of it with its crypto-friendly state regulation.

On Tuesday, The Wall Street Journal highlighted the Fed’s rejection of master account applications for 4 Wyoming-charter SPDIs (special-purpose depository institutions, i.e. a crypto bank) . Very simply, the master account gives a bank – or an SPDI in this case – access to Federal Reserve payment services. CEO Caitlin Long of Wyoming-based SPDI Custodia Bank, has been a well-known critic of the Fed as her bank attempts to get its master account.

Chris Rothfuss, a Wyoming Democratic state senator and sponsor of the SPDI legislation tells the WSJ, “The idea that a state needs to be held back because we were being innovative in a way that nationally chartered banks or the federal government had not caught up with is really a slap in the face of state rights.” Read more.

more tips:

Master Accounts and the Payment System (December 2022) – Congressional Research Service Continue reading “The Fed Master Accounts Swirl; Senators Lummis And Hagerty On ETFs and Crypto”

stablecoins and settlement

In an effort to optimize the movement of funds – and settlement – in real-time between a consumer’s bank (the issuer) and the merchant’s bank (the acquirer), payments company VISA announced it is taking the next step in the use of stablecoins  and Circle’s USDC.

According to a company press release: “Visa is expanding its stablecoin settlement capabilities to the high-performing Solana blockchain and is working with merchant acquirers (i.e. payment processors) Worldpay and Nuvei.” Read the release.

VISA details that it has been using stablecoins for settlement in various tests around the globe since 2021. The company is vague on how much is currently flowing through their stablecoin-infused, payment network today other than saying they’ve “moved millions of USDC between its partners over the Solana and Ethereum blockchain networks to settle fiat-denominated payments authorized over VisaNet.”

Nic Carter of Castle Island Ventures tweeted, “this is a huge deal. writing on the wall: stables will become defacto interbank settlement solution via card networks. even my non-crypto fintech friends are fired up about this.”

Settlement is a core use case for blockchain and crypto, in particular. More in Blockworks.

Late yesterday, the House Financial Services X account run by the Republican majority picked up the stablecoin baton and tweeted about the stablecoin bill percolating in the House, “Republicans like Rep. Mike Flood (R, NE) are advancing bipartisan legislation that includes both state and federal pathways for issuance and regulation.” Read Rep. Flood’s quote.

Ahhh, the state/federal conundrum… Democratic leadership has been guiding away from state oversight and towards federal as it relates to stablecoins. Will there be compromise this fall? Continue reading “VISA Seeks Better Settlement With Stablecoins; Congress Learning Digital Assets”

EU’s big CBDC plans

In a speech yesterday titled “Shaping Europe’s digital future: the path towards a digital euro” and delivered to a committee of the European Parliament, European Central Bank (ECB) executive board member Fabio Panetta made the ECB’s case in support of the next phase of the digital euro – i.e. a European Central Bank Digital Currency (CBDC) – currently under Parliament’s consideration.

Panetta, who will become Italy’s central bank governor on November 1, said the ECB believes new private stablecoin efforts, including PayPal’s PYUSD, are “threats” to plans for the digital euro: “Private providers of payment services, including PayPal, have no incentive to limit the take-up of their stablecoins or the range of services they provide. Quite the opposite: their objective is to expand their customer base and gain market share.”

Turning to other “hot button” concerns, such as privacy and a CBDC, Panetta said “…the issuance of a digital euro represents an opportunity, not a risk, for the European financial sector. We are designing it as a safe payment tool in order to preserve the role of public money – that is, money backed by the state – while balancing innovation in payments with the stability of the financial sector and guaranteeing privacy.”

Interestingly, Panetta also mentioned how the digital euro (The EU’s CBDC) will not only co-exist with cash but have the ability to be used offline.

And then he concluded saying a digital euro “will strengthen our autonomy and resilience by relying on a European infrastructure and reducing our dependence on a handful of non-European providers.” Or, put another way, no need for the U.S. dollar. 

Similar to the United States, nothing will happen on the digital euro front unless Europe’s legislative body (Parliament) approves a CBDC, which still seems a couple of years away at best.

Read the speech by the European Central Bank’s Fabio Panetta.

 

Continue reading “European Central Bank On Private Stablecoin ‘Threat’; London Stock Exchange Tokenizing”

crypto courts – victory

The court system was in no mood for a summer vacation this week.

Following Tuesday’s decision in favor of Grayscale and its efforts to convert its Bitcoin Trust investment vehicle into a Bitcoin ETF, a fraud class-action lawsuit brought by 6 individual investors against the Uniswap protocol, was dismissed according to a court filing late Tuesday.

A short summary of the decision: a dismissal is a victory for Uniswap and digital assets, in general, as the courts slowly layout guardrails where it can and where Congress has not.

In the Uniswap decision, the same judge who is presiding over the Securities and Exchange Commission (SEC) complaint against Coinbase, Judge Katherine Polk Failla, begins by embracing decentralization and not the plaintiff’s claims.

Judge Failla says:

“Plaintiffs claim that they lost money after investing in what turned out to be various ‘scam tokens’ that were issued and traded on the Protocol (the ‘Scam Tokens’ or ‘Tokens’). Due to the Protocol’s decentralized nature, the identities of the Scam Token issuers are basically unknown and unknowable, leaving Plaintiffs with an identifiable injury but no identifiable defendant.”

Among the defendant’s absolved of the lawsuit’s claims are venture investors Paradigm and Andreessen Horowitz (a16z) as well as Uniswap Labs and its foundation.

Read a summary of the news on Cointelegraph. Continue reading “Crypto Court Decisions Point Toward Congressional Action; SEC Hearings In September”

Grayscale defeats SEC

In a long-anticipated, court case decision, Grayscale won its “Bitcoin ETF” case in a 3-0 vote among judges of the U.S. District Court of Appeals in D.C.

Read the transcript (PDF).

The Court did not mince words about the The Securities and Exchange Commission’s (SEC) efforts – or lack thereof –, “The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs (Exchange-Traded Products) but not Grayscale’s proposed bitcoin ETP. In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful,” according to CNBC. Read more.

The Commission had been trying to prevent the conversion of Grayscale’s Bitcoin Trust into a Bitcoin Exchange-Traded Fund (ETF). Bloomberg Intelligence analyst James Seyffart tweeted on X about the text from the decision saying, “This is a complete and utter rebuke of all the SEC’s spot Bitcoin ETF denial orders. There is no wiggle room — basically all of the SEC’s arguments are shot down here.”

Seyffart points out that next steps for the SEC and the Biden Administration is to continue to make efforts to scuttle any approval of a Bitcoin ETF by wrapping the SEC argument around custodial inadequacies. Read his Tweet thread.

more tips:

Opinion: The Real Reasons the Grayscale Bitcoin ETF Decision Matters – CoinDesk Continue reading “Grayscale Wins ETF Court Case Against SEC; Congress On Biden Administration Crypto Tax Rules”

crypto tax proposal

The U.S. Treasury delivered a new proposal for comment on Friday that could raise the bar for crypto business interests dealing in crypto. They’ll need to deliver tax reporting information to the consumer and the government.

The U.S. Treasury press release reads: “Under current law, taxpayers owe tax on gains and may be entitled to deduct losses on digital assets when sold, but for many taxpayers it is difficult and costly to calculate their gains. These proposed rules require brokers to provide a new Form 1099-DA to help taxpayers determine if they owe taxes, and would help taxpayers avoid having to make complicated calculations or pay digital asset tax preparation services in order to file their tax returns. These regulations align tax reporting on digital assets with tax reporting on other assets, and, as a result, avoid preferential treatment between different types of assets.” Read the release.

The new rules which would take effect for the 2025 tax year will be under a comment period until the end of October. The Biden-Harris Administration’s implementation of the bipartisan Infrastructure Investment and Jobs Act (IIJA) is used as the catalyst for the new rules as well as the need to address “tax cheats” and, on the other hand, the unique complexity consumers encounter with digital asset tax reporting.

The Wall Street Journal reports, “The long implementation timeline for the new rules means the government is giving up on some revenue in 2023 and 2024 while allowing exchanges time to build the required tax-compliance systems. Officials said they also want input from industry officials and investors; the rules ask for comment on 51 separate items.” Read the WSJ coverage.

crypto tax proposal – reaction

Continue reading “Crypto Taxes Come Into Focus With U.S. Treasury”

battling lobbies

Better Markets, which is run by former senior Democratic Hill staffer Dennis Kelleher, who is considered by some as one of D.C.’s most influential people, is attracting attention from the blockchain lobby in DC as a House floor vote on key digital assets legislation beckons this fall.

Back on July 11, in a letter addressed to Chair Patrick McHenry (R, NC) and Ranking Member Maxine Waters (D, CA) of the House Financial Services (HFS) Committee and Chair Glenn “GT” Thompson (R, PA) and Ranking Member David Scott (D, GA) of the House Agriculture Committee, Kelleher expressed a list of reservations about the digital asset market structure bill which eventually became “Financial Innovation and Technology (FIT) for the 21st Century Act.”

Kelleher concluded at the time about the makings of the bill, “Unfortunately, the Discussion Draft would seem to be creating new market structures that are not well-regulated if regulated at all.” Read the 9-page letter.

battling lobbies – response

Yesterday, the Chamber of Digital Commerce’s Cody Carbone, who is a former Republican Hill staffer, addressed a letter to the same list of HFS and House Ag leaders, and took issue with  Kelleher’s views including the involvement of the Commodity Futures Trading Commission in oversight of digital assets. Continue reading “Lobbies Collide Over Digital Assets Legislation; Central Banks Advise Emerging Markets”

Coinbase invests in Circle

Coinbase announced after markets closed yesterday that it had acquired a stake in Circle, which issues the stablecoin USDC. In a post on the Coinbase blog co-authored by Coinbase CEO Brian Armstrong and Circle CEO Jeremy Allaire, the two said, “The nature of the investment means that Coinbase and Circle will now have even greater strategic and economic alignment on the future of the financial system. Coinbase is committed to the long term success of the stablecoin ecosystem and USDC, specifically.” Read more.

The Wall Street Journal notes that Coinbase and Circle co-founded USDC in 2018 which included a “revenue sharing agreement on the interest income earned from reserves backing the stablecoin.”

The Centre Consortium, which was a consortium used for a form of self-governance of USDC, will now be disbanded due to “growing regulatory clarity for stablecoins in the U.S. and around the world,” said the CEOs.

Circle’s USDC had been under pressure from old (Tether) and new competitors (PayPal) alike and the new partnership with Coinbase will include the launch of “USDC on six new chains in the coming months to help increase adoption, although the company declined to provide specifics,” according to Fortune. Read more. Continue reading “Coinbase Invests In Circle; On Digital Assets Legislation In Congress This Fall”