Tag: cryptocurrency

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New York – legislation

New York State Attorney General Letitia James (D) announced new legislation called “Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act” on Friday. AG James said in the release, “Rampant fraud and dysfunction have become the hallmarks of cryptocurrency and it is time to bring law and order to the multi-billion-dollar industry.”

Three overall goals for the legislation are listed including “1) Stop Conflicts of Interest 2) Require Public Reporting of Financial Statements and 3) Bolster Investor Protections.” And there’s this: “The bill would also strengthen the New York State Department of Financial Services’ (NYDFS) regulatory authority of digital assets.” Next steps for the bill will include submission by the Office of the Attorney General “to the State Senate and Assembly for their consideration during the 2023 legislative session” which currently runs through June 8.

An impressive list of 25 different, supportive quotes from state Democratic politicians and special interests are included in the announcement and none more prominently than former NYDFS Superintendent, Maria Vullo. Vullo served as superintendent of the NYDFS from 2016 to 2019 and briefly ran for the Attorney General position in 2021 while James considered running for New York State governor. Vullo talks in the release about the need to “codify” the New York BitLicense – New York State’s digital assets framework.

Policy professional Justin Slaughter of Paradigm looks through the entire bill and delivers a comprehensive tweet thread here. He notes, “How the new legislation interacts with the BitLicense regime isn’t clear – the legislation doesn’t appear to mention it. Presumably this bill won’t pass without some discussion of how this either complements or replaces the BitLicense though.”

more tips:

The Bill: Legislative Bill Drafting Commission 10985-04-3 (PDF) – ag.ny.gov Continue reading “New York Attorney General Legislating On Crypto With CRPTO; Market Structure Hearing Wednesday”

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distributed ledger thumbs up

The Biden Administration released a new “national standards strategy” which could be construed positively for distributed ledger technology and digital assets yesterday. The broad framework aspires to bolster “U.S. engagement in standards for critical and emerging technology (CET) spaces will strengthen U.S. economic and national security.”

The Fact Sheet for the CET report explains the strategy’s four pillars: Investment, Participation, Workforce, Integrity/Inclusivity. And, the CET report lists all the areas where standards are needed (see pages 6 and 7) including: “Digital Identity Infrastructure and Distributed Ledger Technologies, which increasingly affect a range of key economic sectors.”

This is the most hopeful statement about blockchain tech since the President’s digital assets Executive Order in March 2022. But, it doesn’t signal the end of the anti-crypto army.

more tips:

FACT SHEET: Biden-⁠Harris Administration Announces National Standards Strategy for Critical and Emerging Technology – WhiteHouse.gov

United States Government National Standards Strategy For Critical And Emerging Technology (PDF) – WhiteHouse.gov

Coinbase still pulsing

Cryptocurrency platform company Coinbase reported its Q1 2023 earnings yesterday and beat estimates.

According to Marketwatch, “The company reported a first-quarter net loss of $78.9 million, or 34 cents a share, compared with $429.7 million, or $1.98 a share, in the same quarter last year. Revenue fell to $772.5 million, compared with $1.17 billion in the prior-year quarter. Trading volumes came in at $145 billion. Analysts polled by FactSet expected Coinbase (COIN) to report a per-share loss of $1.45, on revenue of $655 million. They expected trading volume of $147.7 billion.” Read more. Continue reading “Distributed Ledger Gets Boost By White House; Coinbase Reports Q1 Ahead Of Estimates”

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consolidating the lobby

Industry trade organization Blockchain Association (BA) is consolidating its New York offices into its Washington base. BA’s CEO Kristin Smith said in a statement provided to CoinDesk, “Blockchain Association is shifting resources out of New York State to focus on federal policy – and we continue to hire and build out our full-time staff in Washington. Our mission remains the same: to advance the future of crypto in the United States.” Read more.

crypto out, CBDCs in

In a new research report titled “Crypto is Out, CBDCs are In,” Morgan Stanley analyst Sheena Shah sees Central Bank Digital Currencies (CBDCs) coming on fast particularly due to new momentum in the European Union.

She writes, “We expect more digital (tokenised) government bonds and equities to be launched in the Eurozone in coming years, which could be settled using the CBDC. Depending on the type of CBDC introduced, they have the potential to have major implications for the current banking and payments system. We also expect more regulated euro stablecoins to be issued as MiCA (crypto regulation) provides a framework for their issuance.”

Another snippet from the report distills feedback from payment companies and the limited demand they’re seeing from merchants who are looking to accept crypto: “Fiat-crypto on- and off-ramps are also being limited by US banks, and the regulators’ current approach to perceived risk in this market suggests it is going to get even more difficult. Worldpay estimates that crypto payments amounted to ~0.2% of global e-commerce transaction value in 2022 ($11.6bn). We continue to see barriers to crypto payment acceptance due to: 1) regulatory and tax treatment uncertainty; 2) complexity; 3) lack of payment chargeback/dispute processes; 4) price volatility and 5) transaction costs. Merchants that do accept crypto favour existing payment processors, avoiding direct integrations with the crypto ecosystem. It is notable that Adyen, one of the largest e-commerce acquirers, has indicated that it doesn’t plan to accept crypto partly due to low merchant demand, while Worldline has introduced a crypto service but only for Swiss merchants initially.” Continue reading “Consolidating The Lobby; Crypto Out, CBDCs In Says Morgan Stanley”

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now leaving the country

Is this the next step to leaving the United States? Cryptocurrency platform Coinbase continues full-steam ahead with its global product plans as the company announced Coinbase International Exchange. Read the details on the Coinbase blog.

The company says the newly-announced futures product is already in motion, “Coinbase International Exchange listed BTC and ETH perpetual futures contracts earlier today. All trading is settled in USDC; no fiat on-ramps required. The contracts initially offer up to 5x leverage. Direct access trading via API is available to institutional clients in eligible, non-US jurisdictions.

The company will be using Bermuda and its regulatory framework to facilitate international trading (no U.S.) as The Block notes that Coinbase and fellow competitor Gemini (see their news yesterday) are busy filling the international void left by FTX implosion in the perpetual futures space. Read more.

Coinbase just received a license in Bermuda two weeks ago.

more tips:

One effect of the news – and not lost on Coinbase – is the pressure a non-U.S. launch puts on U.S. regulators and Congress as innovative U.S. companies move abroad amid regulatory dysfunction. Expect more Coinbase openings internationally.

DAME it

The Biden Administration is proposing an exorbitant, new tax to reign in crypto mining according to a new blog post yesterday from the White House’s Council of Economic Advisors. Titled “The DAME Tax: Making Cryptominers Pay for Costs They Impose on Others,” the Council post explains that the Digital Asset Mining Energy (DAME) excise tax would impose on miners “a tax equal to 30 percent of the cost of the electricity they use in cryptomining” and would raise $3.5 billion in new revenue over 10 years. Read the post. Continue reading “Coinbase Quickly Launches International Exchange; Biden Administration Pushing Crypto Tax”

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mainstream Choke Point

A New York Magazine article yesterday takes “Choke Point 2.0” mainstream and re-hashes evidence suggesting the Biden Administration and government regulators may be trying to suppress crypto.

New York Mag’s Jen Wieczner isn’t totally convinced, “Whether one buys the crypto industry line of a stealth war, or the official administration line of various regulators just doing their jobs, there are objectively several fronts where the sector is facing much more intense scrutiny.” Still, Wieczner spends a lot of time reconstructing the finer points of the Choke Point 2.0 argument. I mean A LOT of time.

It was only back in February that New York Magazine ran a piece titled, “Can Gary Gensler Survive Crypto Winter?” which was arguably supportive of the Securities and Exchange Commission (SEC) Chair’s position and which some saw as a way for Gensler to reach out NY Mag’s strong, Democratic party base.

UK crypto consult comment

In a letter sent to the UK Treasury on April 29 by venture capital firm a16z as part of the government’s request for comment,  the firm asks that a “more nuanced” regulatory approach occur with cryptocurrency.  Miles Jennings, General Counsel at a16z, tweeted yesterday, “This weekend, we filed a letter applauding 👏 the UK’s efforts to provide regulatory clarity and enhance consumer protections in web3.”

Brian Quintenz, the venture firm’s head of policy, added a thread of his own on Twitter that condemned the SEC’s way of doing business and said in part, “The UK’s suggested approach looks to ensure similar regulatory outcomes for crypto and doesn’t assume that superficially related activities automatically create the same legacy financial risks and require the exact same regulatory rules.” Read more on The Block.

more tips:

HMT crypto consultation response (PDF) – a16zcrypto Continue reading “Choke Point 2.0 Theme Hits Mainstream Media; UK Crypto Consult Comment”

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Consensus – no Democrats

Democratic politicians were nowhere to be seen on CoinDesk’s Consensus stages last week as 15,000 attendees gathered in Austin according to organizers – arguably the world’s largest conference devoted to cryptocurrency.

The effects of FTX’s implosion and Sam Bankman-Fried’s malfeasance continue to ripple through the Democratic caucus.

Nevertheless, on Friday, Republicans attended as House Financial Services Chair Rep. Patrick McHenry (R, NC) joined (via Zoom) Senator Cynthia Lummis (R, WY) in a digital assets discussion at the conference. They both invoked the name of Senator Kirsten Gillibrand (D, NY) several times as the necessity of bipartisanship looms in a divided Congress.

Gillibrand’s co-sponsorship of the Responsible Financial Innovation Act (RFIA) – still not introduced in the 118th Congress – is something pro-crypto Republicans continue to hang their bipartisan “hat” on in the wake of FTX. Gillibrand reiterated her support of the legislation in an appearance at a Milken Institute conference in early March. But, a re-introduction of RFIA expected in mid-April has yet to materialize.

Consensus – legislation prospects

On stage, McHenry took the bait in answer to a question about whether there will be digital assets legislation signed by the President in the next 12 months. He answered without hesitation, “Yes.”

And then, he backpedaled a bit:

“Now, the odds of anything happening in Congress are low so it’s always a challenge to legislate something new into existence, and to legislate complicated policy, and to build up members understanding about the trade-offs necessary to make sound policy.” Continue reading “Chair McHenry Sees Signed Digital Assets Legislation; Senator Sinema Introduces Ads Bill”

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Market Structure – House Agriculture

It was a day of cooperation among Republicans yesterday as the House Republican majority convened two simultaneous hearings that began their quest for more and better market structure in digital assets.

Rep. Dusty Johnson (R, SD), Chairman of the House Agriculture’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development, said in his opening statement, “[There]’s plenty of work for our regulatory agencies to do, including the CFTC, the SEC, and our state and federal banking regulators.”

In his statement, House Ag Chair Rep. Glenn “GT” Thompson (R, PA) reiterated his Committee’s partnership with Chair Rep. Patrick McHenry (R, NC) and the House Financial Services (HFS) Committee. See the House Ag Subcommittee hearing video and list of witnesses who participated here.

more tips:

Urgency appears to be the message from Republicans on digital assets, as House Ag and HFS said they will partner again next month on digital assets legislation in a combined hearing according to a release. Read more from Financial Services Committee (Majority).

Market Structure – HFS

Meanwhile, Chair Rep. French Hill (R, AR) guided the market structure hearing on HFS Subcommittee on Digital Assets, Financial Technology and Inclusion. The hearing’s Committee Memorandum read in part, “Committee Republicans seek to establish a digital asset market structure framework appropriate for the unique characteristics of digital assets. This framework would provide digital asset firms with regulatory certainty and prevent the regulatory turbulence created by jurisdictional infighting and punitive enforcement actions.”

See the hearing video and list of five witnesses which included Marta Blecher, President of Filecoin and Hilary Allen, a previous Senate Banking witness and law professor from American University.

Democrats were not interested in the pursuit of market structure if HFS Ranking Member Rep. Maxine Waters’ (D, CA) opening statement was any indication. She pointed to the SEC’s “success” to this point and said, “[We] do not need to create an entirely new and special framework for crypto—we already have one. Rather, crypto firms, like other tech companies before them, must recognize that they are not exceptional; they need to comply with the laws of the land. To the extent there are actual gaps in our laws, such as limitations on the SEC’s reach overseas, we should focus on those, and not on creating more complexity through a whole new regulatory framework.” Read the statement.

more tips:

“SBF’s ‘ghost is still in this room,’ congressman [Rep. Brad Sherman (D, CA)] says at digital asset hearing” – The Block Continue reading “Market Structure Hearings For House Ag and Financial Services; Coinbase’s Ire”

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Choke Point 2.0 – Republicans

It’s official. The “Choke Point 2.0” battle is on.

“Today, we are seeing the resurgence of coordinated action by the federal prudential regulators to suppress innovation in the United States,” read the press release from the Republican-controlled House Financial Services Committee yesterday.

House Financial Services (HFS) Committee Chair Rep. Patrick McHenry (R, NC) has chosen to officially amp up the “Choke Point 2.0” accusation of federal agencies by sending new letters to the heads of the Federal Deposit Insurance Corporation (FDIC), Federal Reserve and Office of the Comptroller of the Currency (OCC).

Read them (PDFs):

Federal Reserve Chair Jay Powell
FDIC Chair Martin Gruenberg
OCC Acting Director Anthony Hsu

 HFS Subcommittee of Oversight and Investigations Chair Rep. Bill Huizenga (R, MI) and Rep. French Hill (R, AR), Chair of the Digital Assets, Financial Technology and Inclusion Subcommittee are co-signers which explicitly accuse the agencies of coordinated action similar to the original Operation Choke Point in 2013.

Republicans ask for a huge amount of data from the three officials – including communications – be delivered by May 9. One can imagine recurring hearings on this topic throughout the 118th Congress driven by Republicans.

Jerome Powell, a Republican, may be thinking, “Why me?”

Choke Point 2.0 – Democrats

Democrats no doubt saw this coming with the Republican majority in the House and probably have a few options here.

Pro-crypto Democrats in the House can just watch, wait and maybe participate. These Dems include Representatives Ritchey Torres (R, NY), Josh Gottheimer (D, NJ) and even freshman Wiley Nickel (D, NC) (who just came aboard as yet-another-co-sponsor of Chair McHenry’s “Keep Innovation in America Act”). Continue reading “Choke Point 2.0 Digital Assets Battle Forms In Congress; Former Libra Executive Sees Crypto Regulation Lacking”