blockchain tipsheet

ETH ‘securities’

Prometheum rolled out its first Ether-as-a-security product on Friday according Fortune’s Leo Schwartz: “The custody launch appears to validate the position of [Securities and Exchange Commission (SEC)] Chair Gary Gensler, who has countered the broader crypto industry’s position by saying the existing regulatory regime is adequate and effective.” And yet, Gensler has never confirmed Ether is a security in the eyes of the SEC. Is this that moment? Read more.

The crypto platform was awarded a controversial special purpose broker-dealer (SPBD) license for crypto securities which purportedly adheres to SEC guidelines in May 2023.

what you should know: Big picture… this is the first of several potential salvos this week by anti-crypto advocates within Democratic leadership as they look to counter pro-crypto forces who are pushing for passage of the “Financial Technology and Innovation Act for the 21st Century” [H.R.4763] or “FIT 21” in the House this week. Ironically, the confusion created by Prometheum and its SPBD speaks to the need for a regulatory framework. FIT 21 looks to divide digital asset responsibilities between the CFTC and SEC.

Votes – FIT 21, CBDC

In preparation for House Floor votes this week, the House Rules Committee will hear about FIT 21 and Majority Whip Tom Emmer’s (R, MN) Central Bank Digital Currency (CBDC) bill known as “CBDC Anti-Surveillance State Act” [H.R.5403] at 4p.m. ET today.

There are 31 amendments listed for FIT 21 and a mere five for the CBDC bill. Continue reading “Prometheum Intros Ether Securities As FIT 21 Vote Looms; Dem Leadership Leans On Caucus”

FIT 21 – floor vote

The Congressional calculus will be a bit different this week for the “Financial Innovation and Technology for the 21st Century Act” [H.R.4763] or “FIT 21.”

On Friday, Majority Leader Steve Scalise (R, LA) put FIT 21 – a.k.a. the digital asset market structure bill – on the House Floor calendar for a vote this week – looks like either Wednesday or Thursday.

See:

• • The schedule.
  • The May 10 (latest) version (PDF) of the bill

The last two weeks saw the resolution rescinding the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121) sail through both Houses of Congress and land on President Biden’s desk for signature (more on this in a bit). Pro-crypto advocates have started feeling momentum for the first time since the President’s Executive Order in March 2022.

FIT 21 will most likely not be taken up by the Democrat-controlled Senate even though House Financial Services (HFS) Chair Patrick McHenry (R, NC) said last week he believes a strong showing for FIT 21 could tip the scales toward a vote in the Senate.

Regardless, the vote on FIT 21 will provide an opportunity to see how many House Democrats are willing to break with a Democratic leadership which has expressed only contempt for the bill.

more tips:

• • “I’m proud to be a cosponsor of [FIT21] to prevent the next FTX and bolster U.S. national security and competitiveness.” – Rep. Wiley Nickel (D, NC) Bloomberg TV via X

FIT 21 – Securities Clarity Act

Continue reading “FIT 21 And CBDC Floor Votes In House This Week; Ryan Selkis And Crypto Politics”

rescinding SAB 121 – passage

The Senate passed Rep. Mike Flood’s (R, NE) House Joint Resolution 109 rescinding the SEC’s Staff Accounting Bulletin 121, which effectively forbids the regulated financial system from offering custody products for digital assets. The final Senate vote was 60-38.

See the voting record on Senate.gov.

As expected, the long-dormant Democratic “pro-crypto” support in the Senate came out of the woodwork to join all of the Senate’s voting Republicans. Among the 12 Democrats who voted for the resolution – and snubbed the threat of President Joe Biden’s veto – Senate Majority Leader Chuck Schumer (NY), Senate Finance Chair Ron Wyden (D, OH) and Sen. Kirsten Gillibrand (D, NY).

Notable among Democrats who voted “no” was Senate Agriculture Chair Debbie Stabenow (D, MI), who led the charge on the Digital Commodity Consumer Protection Act (DCCPA) prior to the implosion of FTX. That didn’t stop fellow Michigander and Democrat Sen. Gary Peters from voting “yes” on the resolution.

Sens. Robert Menendez (D, NJ) and Josh Hawley (R, MO) did not vote.

more tips:

• • U.S. Senate Votes to Kill SEC’s Crypto Accounting Policy, Testing Biden’s Veto Threat – CoinDesk

what you should know: Schumer and Wyden’s “yes” votes are the most telling within the Democratic caucus. As leaders in the Democratic Party, the two Senators are telling Democratic leadership – which starts in the White House – that they’re wrong.

This May 10 tweet from Messari’s Ryan Selkis was an indication on how yesterday’s vote would go: Schumer and Wyden aren’t buying at least some of Dem leadership’s strategy towards digital assets.

rescinding SAB 121 – reaction

Congressional Republicans took a victory lap once the Senate vote on rescinding SAB 121 was completed.

House Joint Resolution 109 sponsor Rep. Mike Flood (R, NE) said on X after the vote, “This is a landmark result for digital asset regulation. Both the House and Senate – including Majority Leader Schumer in the Senate – have delivered a clear, bipartisan message to the SEC that SAB 121 needs to go. It is clear there is overwhelming opposition to SAB 121, and I urge [POTUS] to reconsider his previous statement of intent to veto the resolution.” He urged President Biden to sign the resolution. Read his thread. Continue reading “Senate Passes Bill Rescinding SEC’s Crypto Custody Rule, The President’s Desk Is Next”

pro-crypto platform wins?

On Tuesday, in a Democratic primary battle for the U.S. Senate seat held by retiring Sen. Ben Cardin in Maryland, Angela Alsobrooks trounced three-term Congressman Rep. David Trone by 12 points. She’ll meet former Maryland governor Larry Hogan in November. Read more.

Did crypto have an impact on the results?

Back in March, Politico chronicled the pro-crypto inclinations of both Alsobrooks and Trone and the potential influence of the crypto lobby in the race. See more.

But, Rep. Trone took what could be described as an “anti-crypto” stance last week by following Democratic leadership and it may have cost him. He voted against the House resolution which rescinded the SEC’s SAB 121. Trone had been leading the race just a month ago according to polls.

Consequently on Tuesday night, digital asset supporters on X were quick to proclaim Alsobrooks’ triumph a victory for the pro-crypto POV.

what you should know: There is no sign of spending by crypto lobbies on the Maryland Senate race –yet. See OpenSecrets.org.

letter – saving Joe Biden

A new Congressional letter from North Carolina Democrat Rep. Wiley Nickel asks Securities and Exchange Commission (SEC) Chair Gary Gensler to withdraw the regulator’s controversial guidance Staff Accounting Bulletin 121. SAB 121 and the custody of crypto.

See the letter.

Nickel’s reasoning for the withdrawal is novel. Continue reading “Crypto Votes In Maryland Senate Race; Rep. Nickel Wants To Save Joe Biden On Digital Assets”

crypto mixer – developer convicted

Can a coder be convicted of money laundering even if all he did was the coding for a crypto mixing service?

In the Netherlands, the answer is “yes.” In the U.S., we’ll see.

Alexey Pertsev, one of the developers of Tornado Cash, a crypto mixer, was sentenced yesterday in a Netherlands’ courtroom to a prison term of five years and four months for laundering $2.2 billion in crypto assets. According to DL News, Judge Henrieke Slaar said, “Tornado Cash in its nature and functioning is a tool intended for criminals…The criminal user is fully facilitated.” Read more.

more tips: 

• • The ruling against Pertsev, in Dutch, is here.

crypto mixer – reaction

Coin Center’s Peter Van Valkenburgh commented on X, “I’m sad for Alexey and angry that the money laundering laws in the Netherlands have such a low threshold for intent, essentially mere negligence.”

Given there is a case currently pending  in U.S. courts against the developers of Tornado Cash brought by the Department of Justice, he added, “Nothing in this ruling should prejudice or carry weight in Roman Storm‘s case in the [Southern District of New York].” Read Van Valkenburgh’s tweet thread.

In early April, Coin Center, DeFi Education and Blockchain Association brought three separate briefs supporting the Tornado Cash developers.

Meanwhile, Treasury and Congress has taken note of the crypto mixer challenges.

Last October, Treasury proposed a new rulemaking “that identifies international Convertible Virtual Currency Mixing (CVC mixing) as a class of transactions of primary money laundering concern.” Read more. Continue reading “Crypto Mixer Developer Gets 5 Years In Netherlands Court; SAB 121 Vote Today In Senate”

this week – prudential hearings

Prudential regulators – the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board of Governors (Fed), the Federal Deposit Insurance Corporation (FDIC) – will be meeting with the House Financial Services (HFS) Committee on Wednesday and Senate Banking on Thursday.

There are no digital assets topics on the HFS Committee’s memo (PDF), but the prudential group has been active in the digital assets discussion with the Committee in the past.

In March 2023 (letter) and then again in November 2023 (letter), HFS Chair Patrick McHenry (R, NC), and Senator Cynthia Lummis (R, WY) spearheaded an effort to get the prudential regulators to admit that SAB 121 was a bad idea, in so many words.

The House passed a resolution last week rescinding SAB 121 – the Senate, and then the President will be next.

Scheduled to appear on Wednesday at the HFS hearing are:

• • Michael Barr, Vice Chair, Federal Reserve
  • Martin Gruenberg, Chair, FDIC
  • Michael Hsu, Acting Comptroller, OCC

what you should know: The literal “elephant in the room” for both hearings will be FDIC Chair Martin Gruenberg and his resignation which Republicans want and Dem leadership does not want (such as Senate Banking Chair Sherrod Brown (D, OH) – read) over the recent sexual harassment scandal at the FDIC. Read about it in the WSJ.

more: DOJ, money transmission

Following up on news from Punchbowl on Sunday, Senator Cynthia Lummis’ (R, WY) office published a press release yesterday about the Congressional letter penned by the Senator and Senate Finance Chair Ron Wyden (D, OR) expressing concerns to Attorney General Merrick Garland. The Senators say that the DOJ’s recent interpretation of what constitutes a money transmitter – rules originally set up by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) – are troubling. Continue reading “Prudential Regulators Join Oversight Hearings This Week; Tornado Cash Decision Today”

bills this month – FIT 21

According to a statement Friday, the digital asset market structure bill  – a.k.a. “Financial Innovation and Technology for the 21st Century Act” or FIT 21 [H.R.4763] – from House Agriculture and House Financial Services (HFS) will finally reach the House floor later this month after getting approved in separate markups last July.

HFS Chair Patrick McHenry (R, NC) said, “For far too long, the U.S. digital asset ecosystem has been plagued by regulatory uncertainty that has stifled innovation and left consumers unprotected… This comprehensive market structure legislation—the Financial Innovation and Technology for the 21st Century Act—is the culmination of years of bipartisan efforts to finally provide clarity. This includes an unprecedented joint effort by the House Financial Services and Agriculture Committees…” Read the HFS statement.

According to the Floor schedule, FIT 21 will come up the week of May 20 with amendments due this Thursday, May 16.

what you should know: Politico’s Eleanor Mueller reports on X that Majority Whip Tom Emmer’s (R, MN) Securities Clarity Act [H.R.3572] has been added to a revised version of the bill among other edits for the bill.

Like H.J.R.109, the vote for FIT 21 will be a view into the crypto “soul” of the Democrat caucus.  Already in the HFS markup last July (House Ag’s markup was a voice vote), six Democrats voiced support for FIT 21: Rep. Ritchie Torres (D, NY), Rep. Wiley Nickel (D, NC), Rep. Josh Gottheimer (D, NJ), Rep. Steven Horsford (D, NV), Brittany Pettersen (D, CO) and Rep. Jim Himes, (D, CT).  And, since the markup, Republicans have been working with various Dems to add more edits and amendments to grow support.

FWIW, Rep. Himes, Horsford and Pettersen did not support H.J.R.109.

Therefore, will even more Dems support FIT 21 than the 21 Democrats who supported rescinding the SEC’s Staff Accounting Bulletin 121?

(By the way.. 21.. crypto’s lucky number?) Continue reading “FIT 21 To Get House Floor Vote – How Many Dems Will Follow?; Blockchain Bills Heading To Floor, Too”

Senate and SAB 121

With the House passing the joint resolution to rescind the SEC’s Staff Accounting Bulletin on Wednesday – with an unexpected 21 House Democrats joining the Majority Republicans – the ball is now in the Senate’s court.

Yesterday, Senator Cynthia Lummis (R, WY), who is guiding the Senate version of the resolution – S.J.Res.59, tweeted, “I am proud the House passed the bipartisan SAB 121 CRA led by [Rep. Mike Flood (R, NE)] and [Rep. Wiley Nickel (D, NC)]. We cannot allow the administration to regulate tools for financial freedom out of existence. Time for the Senate to swiftly overturn this misguided rule.” See the tweet.

what you should know: And swiftly they must. It appears possible that the “privileged” resolution could reach the Senate floor next week. Assuming Senate Republicans will unify and vote “no” as their colleagues did in the House, the difference of opinion on digital assets among Senate Democrats will be in full view. It will only take a few to put the resolution on the President’s desk.

will Biden veto?

Does President Biden use his veto power – as he threatened on Wednesday – on something as relatively small as rescinding SAB 121 which could potentially raise crypto up as even more of an issue in the 2024 general election?

The halcyon days of the Executive Order on Digital Assets of March 2022 have been replaced at the White House (FTX and Sam Bankman-Fried didn’t help) into defensive posturing, if not hostility, when it comes to crypto. Dem leadership appears to believe being “anti-crypto” is a winning issue in November. And the veto would make Democrats very publicly “own it.” Continue reading “Trump Embraces Crypto, Taunts Gensler, Biden; Senate And SAB 121 Next Week?”