Posts

Posted on

Bitcoin and Ether Get Commoditized At Senate Ag Hearing

DCCPA Hearing

The Digital Commodities Consumer Protection Act (DCCPA or S.4760) took centerstage at a 2-1/2 hour hearing of the Senate Committee on Agriculture, Nutrition, and Forestry featuring many of its committee members including Senators Debbie Stabenow (D, MI), Chairwoman, and John Boozman (R, AR), Ranking Member.

Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam, a former Stabenow staffer, led off testimony on DCCPA which he helped create in partnership with the Committee.

Back in February, shortly after Behnam was sworn in as CFTC Chair, a Senate Ag hearing on digital assets laid the groundwork for themes of the bipartisan bill which will classify the cryptocurrencies Bitcoin and Ethereum as commodities and therefore within the jurisdiction of the CFTC.

Senator Boozman stressed during the hearing that DCCPA is not meant to erode the jurisdiction of the SEC over securities.

    • Video of today’s hearing is available here.
    • Behnam’s testimony is here which includes a section titled, “The CFTC: The Right Regulator.”

Self-subsidized

Overall, there were few surprises in the Senate Ag hearing – after all, it’s a bipartisan bill co-sponsored by the Democratic Chair and the Republican Ranking member.

Continue reading “Bitcoin and Ether Get Commoditized At Senate Ag Hearing”

Posted on

Coming This Fall, New SEC Office of Crypto Assets

SEC Office of Crypto Assets

On Friday, The Securities and Exchange Commission (SEC) announced that rather than having everyone in the SEC understand how crypto assets should be treated across their company filing review organization – known as the Division of Corporation Finance’s Disclosure Review Program (DRP) – they’ll create an office to specialize in it.

From the release:

“The Office of Crypto Assets will continue the work currently performed across the DRP to review filings involving crypto assets. Assigning companies and filings to one office will enable the DRP to better focus its resources and expertise to address the unique and evolving filing review issues related to crypto assets.”

Concentrating knowledge with specialists may help improve the agency’s expertise in the growing blockchain industry. At the same time, there was no mention of how many full-time employees will be assigned to the office. As of September 12, 2022, there were four open positions listed on USAjobs.gov for the SEC’s Disclosure Review Program although not explicitly for crypto.

Continue reading “Coming This Fall, New SEC Office of Crypto Assets”

Posted on

The Fed Wants A Stablecoin Law From Congress

The Fed Wants A Stablecoin Law

Stablecoin legislation is on the minds of DC policymakers this fall as it remains among the lowest of the low-hanging legislative initiatives in crypto which could ultimately result in a law.

Given the widespread agreement on its need, the only question seems to be – is it this year or next?

As Congress began its return from recess last week, The U.S. Federal Reserve brought its lens to stablecoins. Fed Chair Jerome Powell and its new Vice Chair for Supervision, Michael S. Barr, participated in D.C. think tank events.

Mr. Barr presented at the Brookings Institution conference and provided a broad overview of his priorities which center on maintaining the stability of the U.S. banking system which seemingly puts him front-and-center in the stablecoin debate.

The Vice Chair position Barr now holds was originally established due to passage of the Dodd-Frank Act and addressed the need for a financial watchdog given the extreme risk-taking by banks that led to the Great Financial Crisis of 2008.

Prior to joining the Fed, Barr was in academia as dean of the University of Michigan. He’s also very familiar with crypto having served as an advisor in 2015 to Ripple Labs.

Stablecoins

In his speech, Barr aligned himself with the urgent calls in favor of stablecoin rulemaking saying, “Stablecoins, like other unregulated private money, could pose financial stability risks. History shows that in the absence of appropriate regulation, private money is subject to destabilizing runs, financial instability, and the potential for widespread economic harm.”

Vice Chair Barr added that he believed Congress needs to work quickly on legislation that brings stablecoins “inside the prudential regulatory perimeter.”

Continue reading “The Fed Wants A Stablecoin Law From Congress”

Posted on

SEC Commissioner Uyeda Challenges Gensler’s Regulation by Enforcement

SEC Commissioner Uyeda

One of the new Securities Exchange Commisssion (SEC) commissioners appointed last May, Mark Uyeda, said at this week’s “SEC Speaks 2022” conference that regulation by enforcement is not in the public’s interest for creating effective guardrails for crypto.

By doing so, Uyeda joins fellow SEC commissioner Hester Peirce in taking issue publicly with Chair Gary Gensler’s current approach for regulating cryptocurrency.

His view isn’t a total surprise given the politics. Gensler is part of the 3-2 Democrat majority on the SEC’s Commission. Uyeda is a Republican along with Peirce.

Nevertheless, Uyeda is not new to the inner-workings of the SEC having worked on its staff since 2006 as an advisor to Chairman Jay Clayton among others as well as serving a securities counsel to the Senate Committee on Banking, Housing, and Urban Affairs’ minority staff and as an advisor to House Speaker Nancy Pelosi (D, CA) according to Bloomberg.

The speech

Uyeda’s speech on crypto zeroed in on the potential loss of innovative firms in the United States. Just yesterday, Chair Gensler stated in answer to a related question by former Commerce Secretary Penny Pritzker at NYC Summit that innovation only occurs in the public sector with the help of academics and “tinkerers.” It was an awkward moment considering the room full of entrepreneurs gathered in front of him. Risk-taking entrepreneurs are often considered the heart of innovative products and companies in crypto or any industry.

Continue reading “SEC Commissioner Uyeda Challenges Gensler’s Regulation by Enforcement”

Posted on

Defiant or Defensive, SEC Chair Gensler Unleashes PR Blitz On Crypto

SEC Chair Gary Gensler at NYC Summit

Spinning out of the Labor Day holiday, U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler unleashed a public relations blitz about cryptocurrency and its regulation.

His position mostly reinforced what the Chair has said before: crypto companies should “come in” and connect with the SEC to ensure regulatory compliance, the Howey Test is the unquestionable arbiter of all things securities-related and Bitcoin is a commodity.

Putting his many appearances together such as SEC Speaks 2022, The Wall Street Journal and CoinDesk, Chair Gensler appears either increasingly defiant or defensive in relation to the crypto hordes depending on your point-of-view.

The least publicized of his media appearances on Wednesday was his 10-minute taped interview (see the video) with former Commerce Secretary Penny Pritzker for NYC Summit. Ms. Pritzker’s firm Inspired Capital co-hosted the New York City entrepreneurial ecosystem event along with Primary Capital.

Gensler’s role as head of the CFTC (2009-2014) overlapped six months with Pritzker’s Commerce Secretary role (2013-2017) during the Obama administration.

Interview highlights

Among the questions, Ms. Pritzker inquired about “Bitcoin or other cryptocurrencies” and how the Chair saw them evolving from a regulatory standpoint. Chair Gensler avoided mentioning any cryptocurrency by name other than Bitcoin:

(lightly edited for clarity)

“This is a bit of innovation that came along, whomever Satoshi Nakamoto, whoever she was, or he, this innovation. And the investing public got interested – certainly by five, six years ago – got pretty interested. I think that it’s similar to what I said earlier. I think the investing public benefits from disclosures, understanding what a group of entrepreneurs might be doing, and, frankly, that most of the tokens and there’s five or 10,000 tokens to buy most of the tokens have a group of entrepreneurs and the public is trying to invest in those projects and get a better future. Well, those are the attributes of a security. And those are things that the SEC does well. I’ve said come in, talk to us, help get the the intermediaries registered, the crypto exchanges, the crypto lending platforms, the crypto broker dealers, registered we can use exemptive authority to to where we can to tailor this but also the disclosures around the tokens.”

Continue reading “Defiant or Defensive, SEC Chair Gensler Unleashes PR Blitz On Crypto”

Posted on

Rep. Krishnamoorthi Makes Case for ‘Seat at the Table’ of Crypto Legislation

Rep. Raja Krishnamoorthi (D, IL), who represents Illinois’ 8th Congressional District – a large part of the northwest suburbs of Chicago, asked on August 30 that key financial regulators and digital asset exchanges turn around by Monday, September 12, what they are doing to prevent fraud in the crypto markets.

Another letter from Congress, another deadline unfulfilled?

What it means

Federal agencies may need to prioritize their responses given the expected delivery of reports pertaining to the President’s Executive Order on blockchain technology and cryptocurrency this coming week. For executives at the exchanges, it could be an opportunity to connect with a pro-blockchain industry congressman. Krishnamoorthi is a member of the bipartisan Congressional Blockchain Caucus.

Also, with fall elections ahead and a potential for House committee chairmanships flipping from Democrat to Republican, this may be an effort by Krishnamoorthi to use his perch as Chair of the Subcommittee on Economic and Consumer Policy while he’s got it.

Last but not least, the timing of the release – the week before Labor Day Weekend – helped amplify coverage during a notoriously slow news week and perhaps reinforced the congressman’s goal of having a “seat at the table” in future distributed ledger technology regulation discussions.

Continue reading “Rep. Krishnamoorthi Makes Case for ‘Seat at the Table’ of Crypto Legislation”

Posted on

Letters on the Edge of Regulation

Letters from Congress

When it comes to disagreements over crypto and its regulation, DC policymakers have consistently chosen the humble “letter” as an impactful device.

Often signaling a disagreement of some sort between the sender and the receiver, a Congressional letter is like publishing a press release, but with more personalization and a purposeful lack of discretion.

With 4 months still remaining in the calendar year, 2022 has gotten off to a prodigious start among DC letter writers with crypto on their minds. Here is a sample of what we’ve seen thus far in reverse chronological order:

August 23, 2022
From: Rep. Tom Emmer (R, MN)
To: US Treasury
Subject: DeFi application Tornado Cash

Rep. Tom Emmer wrote in an open letter to the U.S. Treasury Department and Secretary Janet Yellen, an appointee of Democratic President Joseph Biden and member of his Cabinet, requesting clarifications about the sanctioning of mixing service Tornado Cash on August 8. A “senior official” summarized Treasury’s case in a quote for The Wall Street Journal: “Mixers are basically an automated money-laundering service.”

Effectively, The Office of Foreign Assets Control (“OFAC”) under the auspices of Treasury had for the first time ever sanctioned code rather than a person or entity. Emmer’s letter identified 7 questions for which he wanted answers including guidance on how OFAC determines that a wallet address might be sanctioned. The congressman’s pithy conclusion offered that the decentralized Tornado Cash mixer may have been used for illicit services, “Nonetheless, technology is neutral and privacy is normal.”

The four-page letter signed by Rep. Emmer was released in a tweet. The Congressman is co-Chair of the Congressional Blockchain Caucus, a U.S. House Financial Services committee member and Ranking Member of its Task Force on Financial Technology,

Continue reading “Letters on the Edge of Regulation”

Posted on

Congress Sees Opportunity for Crypto To Close The Wealth Gap

CFTC roundtable

What could the emergence of cryptocurrency and blockchain technology provide to underserved communities?

Increasing access to financial services.

Achieving “The American Dream.”

Closing the wealth gap.

These were the hopeful themes from the Commodity Futures Trading Commission (CFTC) recent roundtable on “Digital Assets and Financial Inclusion.” CFTC Commissioner Kristin Johnson led a wide-ranging discussion that included key Democratic staffers from the offices of Senator Debbie Stabenow (D, MI), Senator Cory Booker (D, NJ) and Rep. David Scott (D, GA), each of whom is involved in current blockchain legislation.

The 1-hour, 10-minute video of the event became publicly available late last week on YouTube along with a statement by Commissioner Johnson.

The roundtable itself was produced the Commission’s Office of Minority and Women Inclusion (OMWI),  a requirement of Dodd-Frank legislation signed into law by President Obama after the 2008 financial crisis which crushed many investors including those in minority communities. Beginning in 2010, OMWI offices were established across federal agencies including the US Treasury, SEC and CFTC in order to promote voices which may now be critical to the evolution of blockchain technology and cryptocurrency in the U.S. economy and government.

protecting the consumer

In most crypto regulatory discussions, consumer protections are a paramount concern and the roundtable was no different.

Continue reading “Congress Sees Opportunity for Crypto To Close The Wealth Gap”