Tag: cryptocurrency

warning crypto lawyers

At a continuing legal education event run by the American Bar Association last Thursday, Securities Exchange Commission (SEC) Chair Gary Gensler participated in an interview where he offered his view on lawyers involved with crypto clients.

Fintech policy publication Capitol Account, which covered the event, reported that a show of hands revealed roughly 40% of the audience’s lawyers were working in crypto.  Gensler responded, “That’s your field, if those are your clients…without pre-judging any one of them. And the public if they lose trust in this little area (crypto), this little corner of the market, and you as gatekeepers facilitate that? That hurts the rest of the market, too.” Read more in Capitol Account.

more tips:

Crypto publication CoinDesk named Chair Gensler to its 2023 Most Influential list last week. In appreciation, the Chair responded on X on Friday, “Thank you @CoinDesk, I guess?”

what you should know: The message coming from Democratic leadership – including Chair Gensler – to industry remains, “If you touch crypto, stop touching.” Its message to voters is “We are going to stop crypto in the U.S.” The big question: will voters care enough to make it a needle-mover in the 2024 general election one way or the other?

SEC sanction update

“The [Securities and Exchange Commission] wants more time to respond to a judge’s accusation that it made ‘materially false and misleading representations’ in a lawsuit against the crypto company DEBT Box.” Fortune reporter Leo Schwartz on X Continue reading “Crypto Lawyers Get Warning From SEC Chair; McHenry Talks 2024 Agenda”

Terrorism Financing Prevention

Punchbowl News’ Brendan Pedersen reported yesterday that Senator Mark Warner (D, VA) is introducing a new piece of legislation aimed at sanctioning any firm that is facilitating payments to “Foreign Terrorist Organizations” rather than the current limits of the law which focuses on Hezbollah. Read more.

Known as the “Terrorism Financing Prevention Act,” co-sponsors include the CANSEE Act [S.2355] team of Senators: Mike Rounds (R, SD), Jack Reed (D, RI) and Mitt Romney (R, UT). CANSEE takes aim at money laundering within decentralized finance or DeFi.

Pedersen provides a copy of the bill here.

Later in the day, a press release from Sen. Warner’s office was issued with more details… “The bill also contains a key provision from the Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Act the senators previously introduced, giving FinCEN authority to restrict transactions with ‘primary money laundering concerns’ that do not involve a U.S. correspondent bank account.  This provision will provide FinCEN with appropriate tools to address threats involving digital assets and non-traditional finance networks, just as they currently can where correspondent accounts are involved.” Read the release.

what you should know: Since the terrorist attacks in Israel on October 7, anti-money laundering and terrorist financing legislation related to crypto has reached a new level of urgency.  Whether a bill such as Senator Warner’s can pass both houses while digital assets remains a key part of the House Financial Services’ agenda remains a question.

updating BSA

Senator Elizabeth Warren (D, MA) continued her media campaign in support of her Digital Assets Anti-Money Laundering Act [S.2669] and appeared on CNBC’s Squawk Box.  CNBC’s Andrew Ross Sorkin asked Warren if she supported approval of a Bitcoin Spot market ETF by the SEC and its implications for Americans who would invest.  She demurred but wanted to focus on the law enforcement aspects of crypto and the Bank Secrecy Act (BSA), specifically, which hasn’t been amended since the 70s according to the Senator. She added, “What we need to do is we need to update [the BSA] again.”  See the clip on X. Continue reading “AML Legislation Keeps Rolling In Senate; New Terrorism Financing Prevention Act From Senator Warner, Others”

close it down

Yesterday’s Senate Banking hearing brought together leaders of the traditional financial system of the United States for an annual oversight hearing (video). Senators took the opportunity to ride various hobby horses of the moment.  Senator Elizabeth Warren (D, MA) used her 5-minute Q&A to promote her Digital Asset Anti-Money Laundering legislation [S.2669] while questioning JP Morgan CEO Jamie Dimon, a well-known critic of all things crypto.

Dimon may hate on crypto, but his bank is full-steam ahead on using blockchain rails for his own projects such as JPM Coin.

The Warren Q&A included the following:

Senator Warren: “Today’s terrorists have a new way to get around Bank Secrecy Act: cryptocurrency. Last year, an estimated $20 billion in illicit crypto transactions funded every kind of dangerous criminal. North Korea has funded at least half its missile program, including nuclear weapons, using the proceeds of crypto crime. And Israeli officials have confirmed that Hamas received millions of dollars through crypto transactions including ‘large sums from Iran.’ Mr. Dimon, you’ve been CEO of JP Morgan for almost two decades. Can you explain why crypto is such an attractive financial tool for terrorists, drug traffickers and rogue nations?” Continue reading “Senate Banking Hearing Gets Warren-Dimon Treatment; NDAA Amendment Flames Out”

McHenry exits

Shortly after the news was leaked, House Financial Services Chair Patrick McHenry (R, NC) announced on X that the jig was up: “I will be retiring from Congress at the end of my current term. I believe there is a season for everything and—for me – this season has come to an end. I look forward to what comes next for my family and me.”

In a press release, McHenry expressed confidence that his departure after 20 years, Congress was in “good hands” with the Members who remain and are to come: “I truly feel this institution is on the verge of the next great turn. Whether it’s 1974, 1994, or 2010, we’ve seen the House evolve over time. Evolutions are often lumpy and disjointed, but at each stage, new leaders emerge. There are many smart and capable members who remain, and others are on their way. I’m confident the House is in good hands.” Read the statement.

McHenry exits – reaction

Politico’s Eleanor Mueller reported on X that fellow HFS Committee member Rep. Jim Himes (D, CT), who supported both the stablecoin and digital asset market structure bills during the HFS markup, was “devastated” by McHenry’s decision: “He’s one of the real voices of sanity around here. This institution is gonna be a lot weaker for his absence.”

Proving that McHenry impact reached across TradFi and decentralized finance advocates, the American Bankers Association tweeted in appreciation of Chair McHenry and “for his years of dedicated service to the people of North Carolina and his ongoing efforts in the House [Financial Services Committee] to ensure our banking system remains the envy of the world. ABA looks forward to working with you as you serve out your term.” And, Crypto Council of Innovation CEO Sheila Warren said on X that Chair McHenry’s “consistent approach to coalition building, willingness to work in a bipartisan nature, and constructive engagement with industry. He will be deeply missed when he leaves Congress.”

According to Punchbowl News’ Brendan Pedersen, former Speaker Kevin McCarthy (R, CA) said that “McHenry’s done a ‘tremendous’ job… ‘When Rep. [Steve Scalise (R, LA)] was shot, doing the whip job — I don’t think there’s a better whip than Patrick. I think he would have been a great speaker…”

DeFi Education Fund said in a statement on X, “Chairman McHenry’s level-headed, bipartisan leadership and receptiveness to the idea that novel technologies require fit-for-purpose regulations has been (and will continue to be over the next year) a great service, and we wish him all the best in his future endeavors.”

Coinbase CEO Brian Armstrong chimed in on X to McHenry’s tweet saying, “Thank you for your service to the country!” Continue reading “House Financial Services Chair McHenry Announces Retirement; What’s Next”

events – today

Today’s House Energy and Commerce Committee Full Committee Markup begins at 2 p.m. ET at Rayburn House Office Building.  Chair Cathy McMorris Rodgers (R, WA) and Ranking Member Frank Pallone (D, NJ) will preside as 44 bills will be considered including two bipartisan bills with blockchain technology implications. [Hearing announcement; live video]

Also today, the House Financial Services (HFS) Subcommittee on Digital Assets, Financial Technology and Inclusion will hold a hearing titled: “Fostering Financial Innovation: How Agencies Can Leverage Technology to Shape the Future of Financial Services.” The hearing – led by Subcommittee Chair French Hill (R, AR) and Ranking Member Stephen Lynch (D, MA) – begins at 10 a.m. at Rayburn House Office Building. [Hearing landing page; Committee memorandum]

Judging from the memo, the HFS Digital Assets Subcommittee hearing looks to be an efficient way to understand at a high level what each U.S. financial services regulator is doing to address innovation or “novel activities” – i.e. do they have their own office of innovation; do they address it within existing infrastructure; what does that approach look like; and so on. The Consumer Financial Protection Bureau, run by Democratic appointee Rohit Chopra, may attract criticism from the Republican Members of the Committee due to the CFPB’s move away from an innovation-specific office in the past couple years.

more tips:

HFS Digital Assets Subcommittee prepared testimony for Michael Gibson, Director, Division of Supervision and Regulation, Federal Reserve – Federal Reserve

offshore – El Salvador Bitcoin

Good news for El Salvador President Nayib Bukele who tweeted yesterday that after the most recent Bitcoin price rally, his country’s horde of Bitcoin is now “in the black.”  See his tweet on X with a graphic showing his country’s $130 million + in Bitcoin holdings. He wants a retraction from journalists who questioned his strategy. Continue reading “Blockchain Hearings Today In Congress; Hamas And The Stock Market”

deceptive regulator

A federal judge may be close to sanctioning lawyers with the Securities and Exchange Commission (SEC) for allegedly lying to the Court about a request to seize assets without informing the defendant. Fortune’s Leo Schwartz and Jeff John Roberts reported on Friday,  “In his Thursday order, U.S. District Judge Robert Shelby explained he had agreed to grant the SEC’s request because the agency’s lawyer, Michael Welsh, had said the crypto company was actively closing bank accounts—including 33 in the last 48 hours—as part of a bid to move the firm to Abu Dhabi and beyond the reach of U.S. regulators. This turned out to be untrue, however.” Read more. Shelby was nominated by President Barack Obama in 2011.

what you should know: Does this speak to a wider initiative within the SEC and government (i.e. Choke Point)? This anecdote looks like a “lay up” for further exploration by Congress – Senate Banking and House Financial Services, in particular.

alert to Hill staffers: New Congressional letters appear imminent. Can a hearing or investigation on this alleged SEC over-step be far behind given scrutiny around the Federal Deposit Insurance Corporation’s (FDIC) harassment scandal and the Office of the Comptroller of the Currency (OCC) fintech hiring mishap?

blockchain markup

The Energy & Commerce Committee led by Chair Cathy McMorris Rodgers (R, WA) and Ranking Member Frank Pallone (D, NJ) has a full markup hearing scheduled for tomorrow involving at least two bipartisan bills with blockchain technology implications among the 44 bills to be considered.

Read the E&C announcement.

“H.R. ___, Deploying American Blockchains Act” from Reps. Larry Bucshon (R, IN) and Lisa Blunt Rochester (D, DE). The seeds of this bill was discussed at an E&C hearing in September.

• • The stated purpose of the bill is to enable the Secretary of Commerce to “promote the leadership of the United States with respect to the use of blockchain technology.” The bill lists examples of policies and recommendations that could arise such as “the issues of decentralized identity, cyber security, key storage and security systems, artificial intelligence, fraud reduction, regulatory compliance, e-commerce, health care applications, and supply chain resiliency.”

Continue reading “SEC Lawyers May Be Sanctioned In Crypto Case; Blockchain Legislation Gets Energy And Commerce Markup”

Quotes of the day

Today’s edition of blockchain tipsheet includes a selection of quotes from Members of Congress at yesterday’s Blockchain Association Policy Summit.

Rep. Ritchie Torres (D, NY) discussed next, possible steps for digital assets legislation: “In my view, the courts cannot provide you with the kind of comprehensive regulatory framework that you would need – only a statute can. But the courts can prompt legislative action. If either the Court of Appeals or the Supreme Court were to uphold the decision in the Ripple case, then that could create a powerful incentive for Congress to step in and to legislate a regulatory framework. But there needs to be a judicial rejection of ‘The Gensler Doctrine’ in order to prompt Congress to act legislatively -that’s my assessment of where the politics lies at the moment.”

Reacting to the Policy Summit’s featured keynote the day before – U.S. Treasury Deputy Secretary Wally Adeyemo (D) -, House Majority Whip Tom Emmer (R, MN) shared his thoughts yesterday on Treasury’s request for power over crypto: “Beware of the self proclaimed savior that rides in on the white horse and tells you, ‘I’m here to protect you.’”

Rep. Jim Himes (D, CT) says digital assets needs a better use case to help with legislative prospects: “Until the industry does a better job really showing that ‘we can take remittance fees down from 8% to two basis points,’ or show us any positive, world-improving application – the industry is not going to have the benefit of the doubt. The reason you need that is because – not so much on our side of the Capitol (House) – but on the other side of the Capitol (Senate), the ‘weather’ is uglier and people just need to start hearing about how this stuff is gonna make people’s lives better.”

And, New York Department of Financial Services (NYDFS) Superintendent Adrienne Harris (D) spoke to crypto’s challenges from the state purview: “… the two areas where the crypto and digital asset space continues to falter the most are around illicit finance and cybersecurity. That’s where we see the compliance apparatus really being its most immature. And we continue to work with companies through supervision, our exams and enforcement to make sure that those areas get up to snuff very quickly.”

more tips:

Republicans’ Leadership Squabbles Delayed U.S. Crypto Bills Until 2024, Key Lawmakers Say – CoinDesk

SEC’s Hester Peirce doesn’t know what her agency is trying to accomplish – Blockworks

Continue reading “Congress Talks Digital Assets Legislation At Policy Summit; Treasury’s Power Grab Turns Heads”

another offshore USD stablecoin

Stablecoin issuer Paxos took another step with its global stablecoin strategy backed by US dollars and cash equivalents. The New York City-based company  said yesterday it had received “In-Principle Approval” (IPA) for US dollar and other currency-backed stablecoins from the United Arab Emirate’s Financial Services Regulatory Authority (FSRA). The next step will be “full approval” – no timetable was given. Walter Hessert, Paxos Head of Strategy, said in a press release, “Our IPAs from the FSRA, on the heels of our IPA from the Monetary Authority of Singapore, solidify our commitment to pursuing international growth through regulated frameworks.”

what you should know: Pressure is building on U.S. Treasury and the Biden Administration – whether they like it or not – to address the growing offshore stablecoin market and bring that business onshore. In spite of the dispute between the White House and lawmakers around parallel (states) versus pre-emptive (federal) rights, this news lurches the U.S. another step closer to stablecoin law.

Treasury – stablecoins

In his opening remarks at Blockchain Association’s Policy Summit, Deputy Secretary of the Treasury Wally Adeyemo summarized three ways Treasury is looking to address digital assets and the challenges which it says exists with illicit financing: better sanctioning tools, illicit finance “authorities” and an updated regulatory approach for the international Financial Action Task Force (FATF). Treasury wants Congress’ help in all this.

Notably, Treasury is seeing a threat with the offshore movement of stablecoins, too, as Adeyemo said,  “We cannot allow dollar-backed stablecoin providers outside the United States to have the privilege of using our currency without the responsibility of putting in place procedures to prevent terrorists from abusing their platform.” Read the remarks.

what you should know: Keep in mind, Paxos is based in New York State – the center of the storm when it come to the states rights versus federal pre-emption debate in stablecoins. Continue reading “Paxos To Launch USD Stablecoin In UAE; Treasury Worried About Offshore Stablecoins”