Tag: cryptocurrency

Senate Banking – tomorrow

Tomorrow’s Senate Banking hearing, “An Update from the Treasury Department: Countering Illicit Finance, Terrorism and Sanctions Evasion,” with Deputy Treasury Secretary Wally Adeyemo could rekindle a series of bills which are intended to address relevant digital assets anti-money laundering (AML) shortcomings.

See tomorrow’s hearing page. Proceedings begin at 10 a.m. ET.

To be clear, digital assets has yet to be announced as a main focus of the hearing. But given the past history of Ayedemo and the Banking Committee’s Democratic leaders, a digital assets discussion seems inevitable.

Bills from Democratic Banking panel members who have been critical of crypto include:

• • Senator Elizabeth Warren’s (D, MA) Digital Asset Anti-Money Laundering Act (DAAML) [S.2669]
  • Senator Jack Reed’s (D, RI) Crypto-Asset National Security Enhancement Act (CANSEE) [S.2355]
  • Senator Mark Warner’s (D, VA) Terrorism Financing Prevention Act [S.3441]

Banking Chair Sherrod Brown (D, OH), who may have an AML bill of his own, said back in January that his committee would look back into the AML/digital assets issues again. Still, movement on the bills has slowed and this is in spite of the fact that that financing of terrorist organization Hamas and the October 7 terrorist attack in Israel had seemingly given the AML bills new momentum. (See Sen. Warren’s letter on “crypto-financed terror” signed by 100 Dems in October.)

Chair Brown – like many lawmakers – has likely been bogged down by his own re-election campaign.

what you should know: Also in play will be the use of sanctions and its effectiveness against terrorists using crypto. As she did in January on X, Senator Warren may cite the Government Accountability Office’s (GAO) report which was published out of the blue in January, “The Effectiveness of Economic Sanctions At Risk from Digital Asset Growth.” See it. Continue reading “Anti-Money Laundering Bills May Get New Life; Tornado Cash, Code And Culpability”

illicit finance hearing

Next Tuesday’s Senate Banking hearing titled, “An Update from the Treasury Department: Countering Illicit Finance, Terrorism and Sanctions Evasion” led by Chair Sherrod Brown (D, OH) will likely include discussion on digital assets.

The sole witness will be the ubiquitous Wally Adeyemo, Deputy Secretary of the Treasury,  an articulate anti-crypto advocate of Dem leadership. Back in November, Adeyemo had sent letters requesting more power over crypto to Senate Banking and House Financial Services. The next day, Adeyemo challenged the crypto industry in a speech at the Blockchain Association’s Policy Summit which included a discussion about the tools U.S. Treasury is seeking – and why. Read that speech.

See the hearing page.

what you should know: Will Democrats like Chair Brown and  Senator Elizabeth Warren (D, MA) use the hearing as a launchpad for their own illicit finance bills targeting digital assets? If they do not use it as a launchpad, it seems fair to wonder if the effects of crypto campaign dollars and pro-crypto candidates running against each Senator have re-configured existential priorities.

The Hester Peirce SEC

In a keynote speech at Tuesday’s annual “SEC Speaks” conference connecting the legal community with the Securities and Exchange Commission (SEC), SEC Commissioner Hester Peirce (R) provided another pointed commentary on the direction of her Commission especially as it relates to digital assets and  broader recommendations to the SEC and the securities community it encompasses.

Read the speech – this could be seen as a potential plan – and pitch – for an SEC under Commissioner Peirce if the White House changes parties this fall.

Peirce cited guidance from the controversial Staff Accounting Bulletin 121 (SAB 121) as a particularly “pernicious weed.” and suggested, “Rules of such broad effect should be set by the full Commission, not by staff answering only to the Chairman.” Chairman in the case of SAB 121 is Gary Gensler who oversaw the instatement of the rule beginning in April of 2022. Continue reading “Senate Banking Hearing On Illicit Finance With Treasury; Hester Peirce Challenges SEC Dem Majority”

financing terrorism

Yesterday, The Wall Street Journal revisited terrorism-financing-via-crypto themes echoed in previous pieces (1, 2) as well as last week’s Bloomberg article showing Russian cryptocurrency exchange Garantex continues to thrive in spite of sanctions.

Payments using the stablecoin Tether are at the root of both stories as Brian Nelson, U.S. Treasury’s undersecretary for terrorism and financial intelligence, tells the Wall Street Journal in a statement, “Russia is increasingly turning to alternative payment mechanisms to circumvent U.S. sanctions and continue to fund its war against Ukraine.” Read the WSJ article.

what you should know: There appear to be two key areas of concern for the crossroads of digital assets and money laundering: Russia and Hamas.

At a House Financial Services (HFS) hearing about FinCEN (Financial Crimes Enforcement Network) in mid-February, Nelson appeared as a witness where House Majority Whip Tom Emmer (R, MN) reminded Nelson of a November letter he and a bipartisan group of members had sent to the White House and U.S. Treasury regarding getting data on digital assets involvement in Hamas and terrorist financing. 

The Majority Whip said to Nelson at the hearing: “Treasury has the data to paint the correct narrative” on digital assets and Emmer openly wondered why Treasury didn’t offer a more informed opinion.  Nelson seemed to claim they did offer an informed opinion. More highlights from the hearing are here.  

financing terrorism – Tether 

Tether, the company, didn’t respond to the reporters for the WSJ article yesterday, but did synchronize its release of Tether’s “Completion of System Organization Control (SOC) 2 Type 1 Audit.” The company made a case for cleaning up its anti-money laundering act by explaining in a blog post about the new audit: “The SOC 2 Type 1 audit examination is a gold standard in security compliance developed by the American Institute of Certified Public Accountants (AICPA), and underscores Tether’s position as an industry leader committed to delivering a secure experience.” See the blog post. Continue reading “Terrorism, Crypto And Russian Sanctions in WSJ; Rep. Nickel Growing Dem Support”

stablecoin and money laundering

Last week, anonymous sources tell Bloomberg that U.S./U.K. authorities are investigating $20 billion in crypto transfers of the Tether stablecoin through Russian crypto exchange Garantex. Bloomberg says, “The transfers have taken place since Garantex was sanctioned by the US and UK on suspicion of enabling financial crimes and illicit transactions in Russia.” Read more.

Last October, the Wall Street Journal reported that Garantex – in spite of sanctions issued in 2022 – had a booming business which included potential involvement in the funding of terrorism and, in particular, Hamas. Read that one from October 13.

more tips:

• • Treasury Sanctions Russia-Based Hydra, World’s Largest Darknet Market, and Ransomware-Enabling Virtual Currency Exchange Garantex (April 2022) – U.S. Treasury

what you should know: Is this latest news more fuel to the fire of anti-money laundering bills such as Senator Elizabeth Warren’s (D, MA) Digital Asset Anti-Money Laundering (DAAMLA) bill or Senator Jack Reed’s (D, RI) CANSEE Act? Or maybe Rep. Sean Casten (D, IL) will finally be able to find a Republican partner for the House version of DAAMLA? Continue reading “Stablecoin Runs Afoul Of Sanctions; Anti-CBDC Bill Could Ride Along Any Digital Asset Bills”

Coinbase MTD – decision

Yesterday, District Judge Katherine Failla rendered her decision on Coinbase’s motion-to-dismiss (MTD), which was filed last August, in the enforcement action the Securities and Exchange Commission (SEC) brought against the company last June.

See Judge Failla’s filing (PDF).

You may recall that Judge Failla dismissed the Uniswap case last fall – a fraud class-action lawsuit brought by 6 individual investors against the Uniswap protocol. Her decision at the time showed an embrace of principles of decentralization.

And even though the tone of January’s MTD hearing seemed to bode well for Coinbase and its MTD, the case was allowed to proceed except for one part where Judge Failla said, “…the Court agrees with Defendants that they are entitled to dismissal of the claim that Coinbase acts as an unregistered broker by making its Wallet application available to customers.”

Coinbase MTD – Coinbase reaction

Coinbase chief legal officer Paul Grewal said about the decision, “Today, the Court decided that our SEC case will move forward on most of the claims, but dismissed the claims against Coinbase Wallet. We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation…” Read his thread on X.

Grewal concluded on X: “Looking ahead, we remain confident in our legal arguments, we look forward to proving we’re right, we are eager for the opportunity to take discovery from the SEC for the first time, and we appreciate the Court’s continued consideration of our case…” Continue reading “Coinbase Case Continues Says Judge Failla But DeFi Gets New Momentum”

Prometheum week

As we first discussed on Monday, it’s “Prometheum Week” on Capitol Hill even if many Members may be working from home.

Yesterday, Republican leaders on the House Agriculture and House Financial Services (HFS) Committees came out swinging in anticipation of a potential blow-up – ignited by digital asset securities platform Prometheum – between the SEC and the CFTC over the classification of the Ethereum token (ETH) as a security versus a commodity.

In a letter sent to the SEC Chair Gary Gensler, House Ag Chair Glenn “GT” Thompson (R, PA) and HFS Chair Patrick McHenry (R, NC), Reps. French Hill (R, AR), Dusty Johnson (R, SD), House Majority Whip Tom Emmer (R, MN), and Rep. Warren Davidson (R, OH) headlined a list of 48 House Republicans wanting an explanation:

“Despite your insistence that most digital assets are ‘digital asset securities,’ that term continues to be undefined. Other regulators, intermediaries, and market participants disagree with your assertions, and have struggled to identify which digital assets are digital asset securities.”

The Members ask a series of questions trying to get to the bottom of the SEC’s and its Chair’s thinking on digital assets such as: “Is ETH a digital asset security? (…) If ETH is a digital asset security, please answer the following additional questions…”

Read the letter. Answers are due by April 9.

Democrats are nowhere to be found in the press release or the letter.  Prometheum is a threat to the House Republicans digital assets agenda, which Democratic leadership – from the White House to HFS Ranking Member Maxine Waters (D, CA) – likely knows. Read the press release.

what you should know: The April 9 deadline likely lands just in front of the rumored HFS SEC Oversight hearing next month (Politico). If the SEC Chair doesn’t supply adequate responses, will this be the moment for HFS Chair McHenry to use the subpoena card on Gensler that he threatened last October? Continue reading “House Republicans Try To Pre-empt Ether Securities Designation By SEC; Sanctions, Enforcement Highlights”

lawsuit pre-empts SEC

Here’s a novel, industry approach to the Securities and Exchange Commission’s  (SEC) “regulation by enforcement” approach to digital assets: sue the SEC before they sue you.

Amanda Tuminelli, Chief Legal Officer of DeFi Education Fund, announced yesterday that her organization along with a digital assets and apparel startup Beba had formally sued the Securities and Exchange Commission.

Tuminelli said on X, “Today, DeFi Education Fund and Beba Collection
sued the SEC. It has everything to do with airdrops + stopping the SEC’s regulation by enforcement crusade against our industry.” See the complaint.

The complaint notes the startup’s beginnings and the two brothers, originally from East Africa, who had started a business in Waco, Texas, which featured local artisans and incorporated the use of digital asset tokens.

Axios covers the news and explains, “The [lawsuit] is part of an evolving legal strategy for the crypto industry that strikes back at what it believes is an unlawful pattern of enforcement actions, and seeks to compel the regulator to create a clear set of rules.” Read more.

what you should know: It’s a long road to hoe but this is another element of industry strategy in the United States: hammer out a regulatory framework through the courts if Congress and regulators aren’t cooperating. Continue reading “DeFi Education Fund Tries Pre-Empting The SEC; Unlocking Democratic Congress For Crypto”