Tag: blockchain

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Senate Ag Committee Attempts To Resuscitate DCCPA, Distance From FTX

Senate Ag hearing

With the collapse of cryptocurrency exchange FTX not even a month old, the first FTX hearing commenced on Capitol Hill with the Senate Agriculture Committee questioning Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam yesterday in Washington D.C.

Overall, the hearing seemed to be a theater of positioning by Senate Ag intended to address…

    • Urgency – Senate Ag and the CFTC appeared to believe the Digital Commodity Consumer Protection Act (DCCPA) has more urgency than ever in light of the FTX collapse.
    • Overcoming the conflict of interest – Senate Ag and the CFTC endeavored to distance themselves from FTX and its founder Sam Bankman-Fried (SBF). The unspoken message is that FTX did not influence the creation of the DCCPA. On that note – and grasping for transparency, for example – CFTC Chair Behnam’s calendar in the past year was under the microscope which included 10 FTX meetings largely related to its subsidiary LedgerX and its DCO application – not DCCPA.
    • Refinement– Chair Rostin Behnam and Committee members urged that learnings from FTX’s implosion be incorporated into the new bill. In some ways, the refinement appears to be finding a way to bring companies like FTX onshore, which would have required the company to adhere to regulations that would have prevented the implosion in the first place.
    • Pause – In spite of the urgency, the need for refinement requires pause. DCCPA won’t be heading for a vote on the Committee or Senate floor until next year at the earliest. Chair Behnam advocated as much.

Hearing context

On its face, D.C. appears to be in soul-searching mode as it gropes for answers on how the FTX collapse occurred even though the company was based in the Bahamas. The krux of the concern, though, stems from the humiliation endured by unsuspecting lawmakers who had been courted and cajoled by FTX founder and CEO Sam Bankman-Fried.

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Congress and Industry Attempt Reset After FTX Debacle

FTX and Congress

FTX CEO Sam Bankman-Fried would appear to not have any friends left in Washington, D.C. after his company’s implosion earlier this week.

Members of Congress and industry trade organizations are trying to build a protective wall around legislation still in its embryonic stages – such as the Digital Commodity Consumer Protection Act (DCCPA) – while distancing themselves from any perceived influence Bankman-Fried had on the process.

Meanwhile, Bankman-Fried’s global company has had its assets frozen by authorities in the Bahamas where FTX global operations are based. And, it appears that FTX’s US operations are also under pressure with perhaps only enough money for another week of payroll for employees according to Bloomberg. Customers are being asked to remove their assets from the US-based exchange with assurances around the exchange’s liquidity in the interim. (Update: Bankman-Fried has resigned and his company has declared bankruptcy. Read more.)

And last but not least, the SEC and CFTC are rumored to be starting investigations. Could it get any uglier?

Senate speaks

Back in Congress, leaders from the Senate Agricultural Committee expressed urgency and made clear that their still-in-committee DCCPA is alive and well despite FTX’s fall from grace.

Chairwoman and Senator Debbie Stabenow (D, MI) tweeted: “The recent collapse of a major cryptocurrency exchange reinforces the urgent need for greater federal oversight of this industry. Consumers continue to be harmed by the lack of transparency and accountability in this market. It is time for Congress to act.”

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Congressional Blockchain Caucus Collides With Midterms, Partisan Risk

Congressional Blockchain Caucus

The U.S. House of Representative’s Congressional Blockchain Caucus, a key vehicle for driving blockchain interest in Congress,  may be on the precipice of significant change with midterm elections looming next week.

Among the Caucus’ 39 members, seven are retiring (4 Democrats, 3 Republicans). The remaining 32 members are expected to win their elections. See below.

According to polls for the seven retiring seats, only one is expected to flip to another party: Tennessee’s 5th District where Andy Ogles (R) is expected to win the seat for Republicans replacing retiring Democrat Rep. Jim Cooper. Interest in blockchain tech – let alone the Caucus – by any of these newcomers is unknown at this time.

Caucus before-and-after totals look like this:

    • 117th Congress: 22 Republicans and 17 Democrats
    • 118th Congress: 19 Republicans and 13 Democrats

Next year’s membership seems poised to grow – if its leaders want it to – given Congressional momentum for blockchain legislation. Amidst this backdrop is the original purpose of many caucuses: bringing Members together across party lines on a particular area of interest. The Congressional Blockchain Caucus would appear to be no exception with an aim to both educate and promote to all Members.

Bipartisanship 2023

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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.

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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,

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Senator Booker May Co-Sponsor RFIA Bill; Stablecoin Bills are “Meld”-ing

Senators Gillibrand and Lumis

This morning at Bloomberg’s Crypto Summit in New York City, Senator Cynthia Lummis (R, WY) and Senator Kirsten Gillibrand, (D, NY) continued their outreach to the blockchain industry with a 15-minute, recently recorded fireside chat on the Responsible Financial Innovation Act (RFIA) with Bloomberg’s Allyson Versprille. The chat featured familiar talking points as well as a deeper discussion on timelines and attainable milestones for their bill and components of it.

The Highlights

Senator Lummis said specifically that the stablecoin part of the bill could “go through” the Senate Banking Committee on which she sits this year led by Senator Pat Toomey (R, PA).

The total RFIA bill will likely take until and through next year said Senator Lummis. Senator Gillibrand emphasized bi-partisan participation on behalf of Democrats noting Senator Wyden’s (D, OR) participation on tax provisions as well as overall participation by Democrats in the Senate Banking and Agriculture Committees.

Continuing to address RFIA’s momentum, NIST‘s cybersecurity piece could move forward on the Intelligence Committee of which Senator Gillibrand is a member. Gillibrand added that she and Senator Lummis are actively educating Congress on their bill. Senator Lummis emphasized bi-partisan education on Senate Banking as well as keeping Republican leadership informed on timelines. She also said, on the House side, that Maxine Waters (D, CA) and Patrick McHenry (R, NC) are “coalescing” on thoughts related to RFIA.

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The Bi-Partisan Slay, SEC and CFTC Need Help, DC Versus Davos

DC Blockchain Summit

It was a remarkable week for the blockchain technology community last week: there were conferences where blockchain was top of mind, congressional and regulatory superstars were involved and engaged, and even some humble pie was served.

Let’s review.

The Bi-Partisan Slay

In a country starved for something-we-can-all-agree-upon, along comes blockchain technology guided by its community and successful in its appeal across gender, race and both sides of the U.S. Congressional aisle. In the process, and appearing in one conference, Congressmen Soto (D, FL) and Emmer (R, MN), Senators Lummis (R, WY) and Gillibrand (D, NY), and Senators Daines (R, MT) and Booker (D, NJ) have dashed to the blockchain rooftop like Santa’s strongest reindeer.

Slay…

Can you imagine this in 2017? How about 2020? Me neither. And yet it’s happening in 2022. The bi-partisan/non-partisan rhetoric achieved new heights at the DC Blockchain Summit with Senator Cory Booker saying emphatically that he sees an opportunity to close the wealth gap in minority communities with the growing blockchain technology industry.

This bipartisan, non-partisan thing is the secret sauce for the blockchain community.

DC vs Davos

Blockchain dollars flowed into Davos, Switzerland, and the World Economic Forum for its delayed annual gathering last week. Given the event’s unspoken positioning as a watering hole for global elites – Davos gives attending companies and organizations a branding element that says they’re global players, too.

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In Spite of Terra, No Stablecoin Regulation Before End of Year

Permissionless 2022

Up-to-the-minute regulatory prognostications attracted strong attendance to a Permissionless 2022 panel discussion in Palm Beach, Florida last Wednesday.

Coming only a week after the TerraUSD and LUNA stablecoin debacle, everyone agreed that decentralized finance (DeFi) is receiving a brighter spotlight than ever. And in the wide-ranging discussion titled, “Regulatory Clouds on the Horizon,” industry advocates addressed the clouds which could rain potential regulation as well as who or what should ultimately be in charge of jurisdiction for the wider crypto ecosystem: the SEC, CFTC or a self-regulatory body.

Panelists included:

Quotes are lightly edited for clarity.

Moderator Jordan Nof of Tusk Venture Partners immediately began with the Terra elephant-in-the-room as Chamber of Digital Commerce’s Perianne Boring revealed that her association’s members are wondering how Terra will affect regulatory momentum, but noted the unique properties of Terra’s product saying:

“What’s interesting about Terra in particular is that it’s an algorithmic stablecoin. For those who have been following stablecoin policy closely, the President’s Working Group (PWG) on financial markets put out a set of recommendations for stablecoins last November – and that [group] included the chair of the SEC, the chair of the CFTC, the Fed, and Treasury. Treasury Secretary Yellen led this effort. The group had a number of recommendations for new regulations for stablecoins -essentially, Congress is going to need to implement these recommendations. The scope of that report and the recommendations was limited to stablecoins that are backed one-to-one to the dollar reserves in a bank account.  Algorithmic stablecoins were outside of that scope. So when Secretary Yellen pointed to Terra recently and said, ‘Look, this is why we need to push stablecoin recommendations forward.’ -to me, I didn’t think that was productive because the recommendations didn’t include algorithmic stablecoins. And I think it gives a lot of fuel to the SEC.

For those who remember SEC Chairman Gensler’s remarks, he started using a different vernacular. He started calling them ‘stable value funds’ (instead of stablecoins), essentially trying to put forward the argument that these are securities and they should be under the SEC’s jurisdiction. So, I think that the SEC could pretty easily say, ‘Look, this is why it should be within our jurisdiction.’

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