Tag: cryptocurrency

important dates – January 10

Approval of a swarm of Bitcoin spot ETF (exchange-traded fund) applications including financial industry giant BlackRock is expected in early January.

Bloomberg analyst James Seyffart, who has been breathlessly covering the Bitcoin spot ETF application process for months, said on X (Dec. 21), “…we still think this is happening by January 10. Some issuers may be left behind. (…) But base case i’m expecting approvals January 8-10…”

To that end, Fox Business reporter Eleanor Terrett reported on X (Dec. 24), “Confirming the date for final amendments to all S-1s by Friday the 29th. The [the Securities and Exchange Commission (SEC)] has told issuers that applications that are fully finished and filed by Friday will be considered in the first wave. Anyone who is not will not be considered. In addition, the filings cannot mention in-kind creation or they will be rejected.”

what you should know: Approvals seem inevitable given anecdotes ranging from the Grayscale decision in August to BlackRock’s entrance into the Bitcoin spot ETF application process in June. Nevertheless, will SEC Chair Gary Gensler pull a rabbit out of his regulator ‘hat’ and delay the approvals?

important dates – January 14

Senator Elizabeth Warren (D, MA) wants answers by January 14 on former government officials who are working for industry organizations Blockchain Association (letter) and Coin Center (letter) as well as Coinbase (letter). She claims egregious examples of revolving door politics at work in the digital assets industry. All of this as she tries to build support for her Digital Asset Anti-Money Laundering Act (S.2669) while terrorist financing via crypto concerns pulse on both sides of the aisle. Continue reading “Big Dates Loom For Digital Assets And Washington; SBF Trial Is Cancelled”

letter – terrorist financing

Senator Shelly Moore Capito (R, WV) sent a letter to the U.S. Treasury’s Under Secretary for Terrorism and Financial Intelligence Brian Nelson last Thursday expressing her concerns and asking a series of questions around terrorist financing via crypto assets and products such as mixers.  Read her press release.

Her first question to Nelson is: “Has Treasury begun an independent and comprehensive investigation into the extent FTOs (foreign terrorist organizations) are reportedly avoiding sanctions through the use of digital assets, particularly actors funding Hamas and affiliated organizations?”

The tone of Capito’s letter is reminiscent of the October 26 letter from Senator Cynthia Lummis (R, WY) and Rep. French Hill (R, AR) which also addressed concerns on terrorist financing including the use of crypto exchange Binance and the Tether USD stablecoin. At the time, Lummis was also trying to push through her NDAA amendment – a compromise of sorts – which would have required “federal regulators to enact strong examination standards that will help prevent the utilization of cryptocurrencies in illegal activities” according to an October 23 press release.

more tips:

Capito’s in-state colleague/rival – Senator Joe Manchin (D, WV) – is a co-sponsor of Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act (S.2669).

what you should know: The public message is clear on both sides of the aisle in Congress: terrorist financing and money laundering concerns need to be rooted out in crypto. Neither party wants to look like they approved of terrorist financing and money laundering via digital assets. But, the pro-crypto forces don’t want draconian regulation to harm U.S. opportunity in digital assets. Whereas, the “anti-crypto army” wants digital assets to be severely restricted if not altogether prevented from accessing the U.S. financial system. Continue reading “Letters From Capito, Warren Intensify Crypto Concerns; PAC Eyes 2024 Election”

SEC denies Coinbase

To no one’s surprise, a rulemaking petition filed by Coinbase was denied by the Securities and Exchange Commission (SEC) on Friday as its Democratic majority prevailed in a 3-2 decision led by Chair Gary Gensler. The rulemaking would have presumably created a path for rules for digital assets and companies operating in the sector.

In a statement, SEC Chair Gary Gensler explained his support for the denial with three reasons: “First, existing laws and regulations apply to the crypto securities markets. Second, the SEC addresses the crypto securities markets through rulemaking as well. Third, it is important to maintain Commission discretion in setting its own rulemaking priorities.”

more tips:

U.S. SEC Denies Coinbase’s Push for Crypto Regulations as ‘Unwarranted’ – CoinDesk

what you should know: This decision was not a surprise. The SEC was the judge, after all. And given Chair Gensler’s past decisions and statements on crypto, he will continue to shoot down anything that gives digital assets hooks into his agency unless the courts intercede (see Grayscale) -or Congress finally, and successfully, enters the picture.

SEC denies Coinbase – reaction

Willkie Farr counsel Justin Browder noted on X a “slight retreat” in Gensler’s statement whereas crypto assets used to be assumed as securities, now crypto assets are securities when “offered and sold as a security.”

Hester Peirce and Mark Uyeda, the Republican minority on the SEC’s commission, expressed resignation that the SEC was unwilling to engage in the rulemaking with Coinbase but held out a fig leaf to industry by saying in a statement, “While we are disappointed that the Commission is not hosting these important conversations, we will have an open ear for conversations that others host and the ideas that emerge from those conversations.” Continue reading “Coinbase Rulemaking Denied By SEC; GAO Delivers NatSec Report On Digital Assets”

Nickel to step aside

Rep. Wiley Nickel (D, NC) will not run for re-election in the 119th Congress. Like his state colleague, House Financial Services Chair Patrick McHenry (R, NC), 2024 will be Nickel’s last year in the House. He has been an important Democratic voice in support of digital assets as a member of House Financial Services and voted in favor of the stablecoin and market structure bills in July’s Committee markup.

Citing redistricting as the cause, Nickel explained on X:

“Republicans have rigged the system to favor themselves and I don’t have a path to run for re-election in the 13th District. But I’m not giving up and neither should you. Next year, I’m going to be working to elect North Carolina Democrats up and down the ballot in 2024. Then, in January I’m going to look to flip our U.S. Senate seat blue. Phil Berger and Legislative Republicans can’t gerrymander a statewide election.” Read more from NBC News.

what you should know: How Nickel uses his last year in Congress will be of interest especially if he runs for the Senate. More Democratic advocates in the Senate would no doubt be welcomed by the pro-crypto “army.” Senator Thom Tillis (R, NC), Nickel’s potential 2026 adversary, has expressed interest in digital assets policy and sponsored a bill designed to prevent the co-mingling of customer funds called “Proving Reserves of Others Funds (PROOF) Act” [S.3087]. Senator John Hickenlooper (D, CO) is a co-sponsor. But, Nickel represents the other side of the generational divide. Continue reading “Democrat Nickel To Leave House, Aims At 2026 Senate; Senate Stablecoin Bill Update”

letter – OCC blunder

Republican members of the House Financial Services (HFS) Committee have sent a letter to the Office of the Comptroller of the Currrency’s Acting Comptroller Michael Hsu (D) demanding answers for his agency’s recent hiring blunder. The OCC hired a new Deputy Comptroller and Chief Financial Technology Officer in April, but his resume was discovered to be falsified and he was quietly let go over the summer and replaced by an OCC insider – read about it in The Information.

In a Congressional letter dated December 7, Rep. Andy Barr (R, KY), Rep. Bill Huizenga (R, MI), and Rep. French Hill (R, AR), who is Chairman of the Digital Assets, Financial Technology and Inclusion Subcommittee, ask for more info on OCC hiring practices and note that “To date, there has been no clarification provided by the OCC surrounding the reports regarding the agency’s prior Deputy Comptroller and Chief Financial Technology Officer. During the hearing at which you testified on November 15, 2023, it was made clear by Chair [Patrick McHenry (R, NC)]: ‘the stakes are too high to take your eyes off the ball.’” The Members ask for a response by December 21.

Read the letter. And, read the House Financial Services press release.

what you should note: At a November HFS prudential regulator hearing, the OCC’s Hsu expressed surprising “concerns” about the Securities and Exchange Commission’s (SEC) bank custody rules and carrying digital assets on a bank’s balance sheet. Will Republicans “go hard” on a Democrat who has expressed a dissenting opinion to Democratic leadership’s (including SEC Chair Gary Gensler)?

AML/CFT compromise

In Punchbowl News, House Financial Services (HFS) Chair Patrick McHenry (R, NC) participated in another interview discussing his 2024 agenda. With the Senate looking to to address anti-money laundering (AML) and countering the financing of terrorism (CFT) in digital assets, the Chair saw opportunity for compromise with his bicameral colleagues saying, “We want to identify workable policies for [Bank Secrecy Act]-AML as it relates to digital assets. We want to make sure that the regime works and is effective. And I think we need a broader policy effort to make that work.” Read more.

Also of note, McHenry is not conciliatory on stablecoin legislation – i.e.  the Fed isn’t getting any power over state-issued stablecoins. Continue reading “Congress Sends Letter On OCC Hiring Blunder; Crypto Advertising Door Cracks Open”

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”