blockchain tipsheet

ETH is/was a security

On April 18, 2023, while appearing at a House Financial Services (HFS) oversight hearing, Securities and Exchange Commission Chair Gary Gensler waffled as HFS Chair Patrick McHenry tried to get Gensler to say whether Ether was a commodity or security.

Apparently 5 days earlier, on April 13, 2023, SEC’s head of enforcement Gurbir Grewal, who reports to the Chair, said Ether was a security and put it in writing in a “Formal Order.” So says a new, unredacted filing of the Consensys lawsuit against the SEC according to Leo Schwartz at Fortune.

Contradicting itself (given the assertion in the Consensys unredacted brief) even further, the SEC let Ether futures “go live” in October 2023.

House Majority Whip Tom Emmer (R, MN) reacted to the news last night on X saying, “This regulatory dishonesty is reprehensible – it’s tainting our great capital markets, harming investors, and threatening U.S. global leadership.” Next step, a Congressional letter -and a hearing?

more tips:

• • Consensys Software Inc. v. Gensler et al – Justia.com

what you should know: Chair Gensler’s lie of omission took place just 6 months after the FTX implosion -an event which steered the Biden Administration toward crystallizing an anti-crypto position. Continue reading “SEC Said ETH Was A Security In 2023; Stablecoin Bill In FAA Reauthorization Mix”

stablecoin optimism – Waters

Speaking to stablecoin legislative momentum in a Bloomberg TV interview last Wednesday, House Financial Services (HFS) Ranking Member Maxine Waters (D, CA) was optimistic saying that “We’re on our way to getting a stablecoin bill in the short run.” Emphasis: short run,  as in soon.

In addition to the close co-ordination with HFS Chair Patrick McHenry, she also mentioned the involvement of Senate Majority Leader Chuck Schumer (D, NY) and Senate Banking Chair Sherrod Brown (D, OH).

what you should know: Her tone was a far cry from the July 2023 stablecoin markup where the Dem leader attempted to put the breaks on the “Clarity for Payment Stablecoins” [H.R.4766] bill on behalf of the White House -and then adding in August 2023 that the bill had “No chance.”

stablecoin optimism – FAA

10 days to go!

FAA Reauthorization is the odds-on-favorite to be the the must-pass that the stablecoin bill rides on – last mentioned publicly by Sens. Cynthia Lummis (R, WY) and Kirsten Gillibrand (D, NY) on CNBC on April 18, who have their own stablecoin bill out there that earns the Senators a “seat” at the stablecoin “table” at the very least.

FAA’s funding runs out on May 10 so there are only 10 days to go until the reauthorization must revisit Congress for a vote. Of course… there will be other must-pass opportunities if the timing doesn’t work. Right?

Nevertheless, Ranking Member Waters seemed resolute in her efforts to get the bill over the finish line in concert with Chair McHenry. She told Bloomberg, “We’ve been working on this for 22 months. We have put together a legislation – with a few more tweaks that we may have to put to it – that I think is going to bring everyone together.” Continue reading “Ranking Member Waters Promotes Stablecoin Legislation As May 10 Deadline Looms”

stablecoin bill – criticism

Former House Financial Services (HFS) and Senate Banking Committee witnesses – with both pro- and anti-crypto POVs – issued sharp criticism of the “Lummis-Gillibrand Payment Stablecoins Act” introduced yesterday by Senators Cynthia Lummis (R, WY) and Kirsten Gillibrand (D, NY).

Columbia University professor and Zero Knowledge Consulting founder Austin Campbell, who appeared as an industry witness at the April 2023 HFS Digital Assets Subcommittee hearing “Understanding Stablecoins’ Role in Payments and the Need for Legislation”, sees problems with the Lummis-Gillibrand stablecoin bill.

On X, Campbell begins with the “nerdy” issue of the bill’s stablecoin reserve requirements which including physical cash, bank deposits, “90 day or less T-Bills, and repurchase agreements of up to 7 days,” according to Campbell.

He then breaks out at least four areas of concern beginning with: “First, we have a serious technical problem, which is applying the limitation to specific T-bills instead of the portfolio: always do the portfolio people! You don’t want someone going all the way out to 90 days with everything. 60 day or less weighted average maturity for the entire portfolio, please.”

Read Campbell’s tweet thread. Continue reading “New Stablecoin Bill Attracts Criticism; Fed Releases CBDC Research -With A Footnote”

Senate stablecoin bill

Yesterday, the long-rumored stablecoin bill from Senators Cynthia Lummis (R, WY) and Kirsten Gillibrand (D, NY) was revealed with a robust public roll-out. PunchBowl News’ Brendan Petersen importantly noted about the purpose of the bill, “It’s a move designed in part to nudge along separate negotiations in the House.” Read Punchbowl’s coverage.

Called “the Lummis-Gillibrand Payment Stablecoin Act,” the bill is different than the stablecoin section of the Senators’ much broader “Responsible Financial Innovation Act.” [S.2281].

Politico reported yesterday that the Lummis-Gillibrand stablecoin bill uses an updated version of the House’s stablecoin bill before it hit a political tripwire. Read that one.

Sen. Lummis issued a detailed, press release in support of the bill explaining key points of the bill such as:

• • “Protects consumers by requiring stablecoin issuers to maintain one-to-one reserves and prohibiting unbacked, algorithmic stablecoins.”
  • “Prevents illicit or unauthorized use of stablecoins by issuers and users.”
  • “Creates federal and state regulatory regimes for stablecoin issuers that preserves the dual banking system.”

more tips:

• • Sen. Lummis’ release: “Lummis, Gillibrand Introduce Bipartisan Landmark Legislation To Create Regulatory Framework For Stablecoins.”
  • The bill’s text via Punchbowl.

what you should know: In a Congressional version of “Bad Boys 2” starring Sens. Lummis and Gillibrand, “Stablecoins just got real… (video).”

It’s time to land the plane.

Continue reading “New Stablecoin Bill From Lummis-Gillibrand; FAA Reauthorization Is Stablecoin Goal”

ransomware hearing

Vice Chair Elaine Kim (R, CA) took over for an ailing Chair Blaine Leutkemeyer (R, MO) yesterday at the “Held for Ransom: How Ransomware Endangers Our Financial System” hearing under the auspices of House Financial Services National Security, Illicit Finance, and International Financial Institutions Subcommittee.

See the hearing page including video.

With testimony that included phrases such as “payment killchain” and “big game hunting,” Members received a 2-hour barrage on the latest in cybersecurity and its intersection with ransomware.

See witness’ opening, prepared testimony (click name for PDF):

• • Ms. Jacqueline Burns Koven, Chainalysis
  • Mr. Daniel Sergile, Palo Alto Networks
  • Ms. Megan Stifel, Institute for Security and Technology
  • Ms. Kemba Eneas Walden, Paladin Global Institute

Though not discussed in detail, the looming centerpiece of the hearing was the “Ransomware and Financial Stability Act” co-sponsored by Chair Patrick McHenry (R, NC) and Rep. Brittany Pettersen (D, CO). See it (PDF).

Concerns about the risk to national security due to ransomware were voiced by multiple Members on both sides of the aisle.  In general, digital assets and crypto were not the main focus of the hearing, nor were they seen as the root cause of ransomware.

During the Q&A, Vice Chair Kim began Member questioning by asking about “the level of coordination [among law enforcement] required to respond to the ransomware attacks?”

Chainalysis’ Jacqueline Koven answer was hopeful -due to crypto’s traceability:

“Yes. From reported incidents involving cryptocurrency addresses, law enforcement is able to understand the entire ransomware supply chain. We can understand the malware used,  the access and even where they launder their funds. It’s an incredible lead to understanding these networks better and being able to disrupt not only where they cash out, but the other entities involved in the supply chain.

More observations:

• • Rep. Andy Barr (R, KY) noted the need to grown a cybersecurity workforce.
  • Rep. Bill Foster (D, IL) raised his “license plate” idea again -an idea which he tried to insert into last July’s markup for digital wallets as part of the digital asset market structure bill. This time, Foster advocated for a nationwide, secure digital identity.
  • With one of his questions, Rep. Zach Nunn (R, IA) brought to light the “ransomware-as-a-service” business that allows “people with a very minimal skill set to perpetrate something that’s very dangerous to all of us.”
  • Rep. Monica De La Cruz (R, TX), like other Members, emphasized the concerning, negative, impact ransomware has on small business.

Continue reading “Ransomware Hearing Highlights Challenges For Businesses; Dems Take Heat On Crypto”

BlackRock on illicit finance, crypto

“This is a technology that presumably could actually decrease the utility for illicit finance,” says Samara Cohen in reference to blockchain technology. She should know as a BlackRock senior managing director and the company’s chief investment officer of its ETF & Index Investments -which includes the recent launch of the company’s Bitcoin spot market ETF.

Cohen appeared on Bloomberg’s “Masters in Business” podcast with host Barry Ritholtz this week and had pointed remarks on regulation and the surprising “take” – compared to some in Congress – on illicit finance and the benefits of crypto’s underlying technology. During the course of the podcast, it’s obvious that BlackRock has a committed, long-term view on digital assets.

Highlights include: (lightly edited for clarity)

On why it took so long for a Bitcoin spot market ETF to appear :

Ms. Cohen: “First, I think the narrative from investors really grew over the past few years. The infrastructure in the crypto world was also evolving, but regulation and policy has been evolving as well and still has a long ways to go. So I think regulators needed to – and the SEC, in particular – needed to hear from investors [and] work through the operating model. And then also remember, (…) this SEC has a very ambitious equity market structure agenda on their plate. And that’s really been their priority. But, ultimately, investor demand and desire or access in an ETF won out.”

On what investors are looking for with a crypto ETF:

Ms. Cohen: “The convenience of ETFs is incredibly compelling for investors. They understand the ecosystem. Now, importantly, with Bitcoin ETFs, the institutional grade custody is really important for investors as well.”

“To your question about the the crypto ecosystem separate from ETFs, I think there are a lot of questions there around how that evolves. In terms of what we’ve seen so far. Is it the technology that’s created it? Or is it really the fact that there have been no guardrails around the ecosystem that is built around it? I would say the technology has a lot of promise in terms of its transparency and auditability. This is a technology that presumably could actually decrease the utility for illicit finance (51:52). However, we would really need a regulatory and policy environment supporting it. And I think that’s where there are a lot of questions, particularly in the US around future direction.”

Hear the podcast on Apple Podcasts. Continue reading “Crypto Tech ‘Decreases Utility’ For Illicit Finance – BlackRock; Warren Challenges CFTC Behnam”

crypto caucus – Senate

The Senate version of the House’s dormant Congressional Blockchain Caucus awakened last week with a revealing photo op. Known as the “Financial Innovation Caucus,” it was originally founded by Sen. Cynthia Lummis (R, WY) and Kyrsten Sinema (I, AZ) – see the Caucus landing page.

The Caucus’ X account announced in a tweet on Friday that senators had gathered together with a16z crypto venture investor Chris Dixon, who released a new web3 book at the beginning of the year called, “Read, Write, Own”:

“This week, [Chris Dixon] joined the Financial Innovation Caucus for a bipartisan discussion about the importance of crypto assets and the need for the U.S. to be a world leader in regulatory clarity for crypto assets.”

Sen. Lummis office confirmed to blockchain tipsheet:

“Since she arrived in the Senate in 2021, Senator Lummis has been committed to helping educate her colleagues on a host of issues related to bitcoin, crypto, web3 and blockchain in general. Mr. Dixon recently published a new book on the evolution of the internet as well as the role blockchain technology can play in countering the overreach of big tech, so Senator Lummis invited him to meet with her colleagues to discuss.”

“The overreach of big tech” – that’s something that appeals to both sides of the Senate aisle

Senators who were present for the Caucus meeting included:

• • Sen. Lummis and Sen. Kirsten Gillibrand (D, NY) who co-sponsor the Lummis-Gillibrand Responsible Financial Innovation Act (RFIA) [S.2281]
  • Rep. Wiley Nickel (D, NC) – A member of House Financial Services, Nickel has supported both the stablecoin [H.R.4766] and digital asset market structure [H.R.4763] bills awaiting votes on the House Floor.
  • Sen. Ted Budd (R, NC) – He supported digital assets legislation consistently as a Member of House Financial Services and became a Senator in the 118th Congress.
  • Sen. John Thune (R, SD) – co-sponsor of the now-defunct Digital Commodity Consumer Protection Act (DCCPA) [S.4670] from the 117th Congress. Thune is also the Senate Minority Whip.
  • Sen. John Cornyn (R, TX) – considered pro-crypto and has sponsored introduction of legislation dealing with crypto’s use on the Dark Web [S.1728].
  • Sen. John Barrasso (R, WY) – Sen. Lummis fellow Wyoming Senator. Member of the Senate Finance Committee where Lummis-Gillibrand’s RFIA is currently assigned. Also, he’s Ranking Member of Senate Energy and Natural Resources.
  • Sen. Ron Johnson (R, WI) – Member of Senate Finance Committee.
  • Sen. Roger Marshall (R, KS) – Member of Senate Agriculture with Sen. Gillibrand. See more below.

Continue reading “Senate Crypto Caucus Convenes; Reviewing Oil Versus Digital Assets Sanctions”