Tag: cryptocurrency

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Centralization Villain Gets More Hearings While Decentralization Watches

Hearings on FTX

With FTX continuing to burn like a sun that never sets, Congress is undertaking its review of the cryptocurrency exchange’s implosion with two hearings this week – one quotable,  the other that checks a box.

Hearing #1 – likely very quotable

On Tuesday, December 13 at 10:00a, Chairwoman Maxine Waters (D, CA), Ranking Member Patrick McHenry (R, NC) and the House Financial Services Committee convene a hearing titled  “Investigating the Collapse of FTX, Part I.” (Live stream)

The scheduled witness list for the House Financial Services hearing is exactly who you’d want, at a minimum, for a one-day hearing: the current CEO and the former one:

      • John J. Ray III, current Chief Executive Officer, FTX Group
      • Sam Bankman-Fried (SBF), Founder and Former CEO, FTX Group

Read the HFS Committee’s hearing memorandum here.

Mr. Ray is well-known for his work in corporate disasters such as Enron and Nortel where Mr. Ray led teams of lawyers to find the best way out possible for shareholders, creditors and customers alike. Read this profile from Ray’s hometown paper for more.

The ignominious FTX founder, SBF, created still more drama around “will he” or “won’t he” appear for the Committee in recent Twitter banter (1, 2, 3, 4) with Chairwoman Waters. As of this writing, he says he’ll appear -likely by video. Rumors had swirled whether Chairwoman Waters would use her subpoena powers to compel SBF to testify. Complicating matters was SBF’s Bahamian location.

It was only one year ago – almost to the day – that  SBF was throwing bouquets to House Financial Services after a Committee appearance and tweeting, “A huge thanks to @MaxineWaters, @PatrickMcHenry, and the whole House Financial Services Committee for having us today to talk about the future of digital assets. The meeting was productive and I’m really grateful for the engagement and thoughts from policymakers.”

With Chairwoman Waters and Ranking Member Rep. Patrick McHenry’s work on stablecoin legislation waiting in the wings, it would seem tough questions will be prepared for Mr. Bankman-Fried.

Top 10 questioners to watch on HFS:
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Where Are We: SBF on Wednesday, Senate Ag Committee on FTX This Thursday

Where Are We for Monday, November 28, 2022

As the United States comes spinning out of the Thanksgiving holiday, the fallout from crypto exchange FTX’s implosion continues and another week of drama unfolds for the blockchain technology industry in D.C. and elsewhere.

Where we are….

SBF to speak on Wednesday

The NY Times Dealbook Summit, which is guided by DealBook reporter and CNBC anchor Andrew Ross Sorkin, will include – incredibly – a “live” interview with Sam Bankman-Fried (SBF). The FTX founder announced in a tweet that he’ll be speaking on Wednesday -via video from the Bahamas.

Bankman-Fried’s appearance will come in the wake of last week’s FTX bankruptcy hearing where new CEO John Jay Ray III said that “the mess at FTX was the worst he had seen in his career,” and that included the bankruptcy of notorious energy, trading and services company Enron says The New York Times.

Meanwhile, SBF published a note on an internal FTX Slack channel suggesting that he reluctantly caved into “coordinated” pressure to file for bankruptcy.

Thursday: Senate Ag hearing

On Thursday, December 1 at 10 a.m., the first hearing on the FTX debacle will begin on Capitol Hill courtesy of the Senate Agriculture Committee. Watch the live video of “Why Congress Needs To Act: Lessons Learned From The FTX Collapse” here.

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Crypto Meets ‘Global vs. National Regulation’ With Financial System Stability At Stake

IIF AMM 2022

Stability.

At the height of the Great Financial Crisis of 2008 and 2009, all anybody wanted was stability within the banking system.  Enter 2010’s Dodd-Frank legislation, a “Wall Street reform and consumer protection act,” which sought to put the banking system on a solid foundation and calm domestic and global nerves.

Accordingly, stability was a consistent thread among on-stage discussions last week at The Institute of International Finance (IIF) Annual Meeting which brought together banking titans across industry and government in Washington, D.C. Market structure dynamics, Net Zero initiatives and digital assets mixed with macro issues such as war, inflation and a post-COVID society.

And again… every topic could draw a line to the desire for stability. Yet, that didn’t stop companies within the high volatility, digital asset universe from taking its seat at the IIF table.

In the form of sponsorship for the event – and among a list of TradFi sponsor companies – FTX and Circle were there sending chief executives Sam Bankman-Fried and Jeremy Allaire, respectively, for onstage interviews that engaged a much larger financial community which will one day envelop, embrace or crush all or part of the crypto ecosystem.

BNY Mellon – America’s oldest bank – is already “embracing” as it announced crypto custody services last week after receiving approval from New York State’s financial regulator. Michael Demissie, Global Head of Digital Assets and Advanced Solutions at BNY Mellon said at the conference, “Digital assets is a much broader sector. I think crypto is really just the tip of the spear.” Beyond Bitcoin, Ether and other cryptos, he said settlement and tokenized assets enabled by blockchain technology are in its infancy, but on the way.

The IIF meeting’s exhaustive agenda (PDF) showed that crypto is clearly on the mainstream banking system’s radar but still early in its TradFi implementation. The heavily regulated banking sector’s reluctance ranges from a belief by some that crypto is a speculative “Ponzi” scheme to hesitation tied to a lack of regulation – money transmitter licenses for exchanges and the like, notwithstanding.

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Jamie Dimon Likes Blockchain, His Stablecoin – Not Crypto

JP Morgan CEO Jamie Dimon

This afternoon at a session of the Institute for International Finance (IIF) Annual Meeting in Washington, D.C., JP Morgan CEO Jamie Dimon pleased the crowd with his increasingly legendary response to the efficacy of cryptocurrency.

He wasn’t the only one talking crypto at the conference. The IIF brings together the top leaders in traditional finance to help coordinate a global approach in financial policies. Crypto and digital assets was among the meeting’s hottest topics.

The IIF’s Tim Adams teed up Dimon asking: “You’ve had strong opinions in the past on digital currencies, speculative currencies, stablecoins… still have strong views?”

Dimon, clearly reveling in the moment, “Yeah. [audience laughter] But, I’ll clarify them.”

He explained that “blockchain technology is real” and that JP Morgan deploys it in many places through their Onyx coin system. Using distributed ledger technology, it’s a business-to-business system that enables a stablecoin backed by US dollar deposits at JP Morgan which purports to efficiently clear assets between banks.

Dimon said, “My issue is …. what you guys call cryptocurrency – which I call a crypto token – that doesn’t do anything.”

Invoking Voltaire (not a type-o), he said he respected people’s right to do what they want,  but Dimon saw crypto as a “decentralized Ponzi’ scheme hyped around the world and responsible for “fraud, stealing, sex trafficking, drugs, ransomware, tax avoidance – it’s extraordinary.”

He continued, “There’s no real use for it other than speculation, and it’s also dirty and expensive and volatile.”

Finally, he equated crypto to Beanie Babies.

The bright side

For crypto supporters, the fact the JP Morgan CEO never made a tulip bulb reference could be seen as a limited win.

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6 Takeaways from Circle’s Converge22

Converge22

With an estimable blizzard of content in the rear view mirror, here’s a selection of key takeaways from Circle’s Converge22 conference in San Francisco.

Circle is the maker of USDC, among the most widely used stablecoins today, which is nearing a market capitalization of $50 billion according to Coinmarketcap.

Takeaways include:

#1 – dreamforce for crypto

#2 – stablecoin legislation

#3 – the “p” word

#4 – learn by doing

#5 – regulatory advocacy

#6 – expression of the dollar

Read them all…

Takeaway #1 – dreamforce for crypto

The positioning for the conference as stated by Circle executives was “Dreamforce for internet finance” not “Dreamforce for crypto.” But, last week in San Francisco felt like a conference with a largely crypto audience. Still, this comparison – crypto vs internet finance – reveals the core of Circle’s ambition and the potential it sees with crypto innovation.

For their first-ever “ecosystem conference,” Circle programmed a three-day multi-track agenda featuring topics related to key strategic areas  for the company such as stablecoin uses, regulation, privacy/identity, compliance, lending, financial inclusion and more.

Circle CEO Jeremy Allaire stated that over 2,600 attendees made the trip to San Francisco and added, “We always thought of USDC as a protocol that people can build on.” And now the event will exhibit the different dimensions of what people and companies are doing with that protocol, he said.

Takeaway #2 – stablecoin legislation

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Defiant or Defensive, SEC Chair Gensler Unleashes PR Blitz On Crypto

SEC Chair Gary Gensler at NYC Summit

Spinning out of the Labor Day holiday, U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler unleashed a public relations blitz about cryptocurrency and its regulation.

His position mostly reinforced what the Chair has said before: crypto companies should “come in” and connect with the SEC to ensure regulatory compliance, the Howey Test is the unquestionable arbiter of all things securities-related and Bitcoin is a commodity.

Putting his many appearances together such as SEC Speaks 2022, The Wall Street Journal and CoinDesk, Chair Gensler appears either increasingly defiant or defensive in relation to the crypto hordes depending on your point-of-view.

The least publicized of his media appearances on Wednesday was his 10-minute taped interview (see the video) with former Commerce Secretary Penny Pritzker for NYC Summit. Ms. Pritzker’s firm Inspired Capital co-hosted the New York City entrepreneurial ecosystem event along with Primary Capital.

Gensler’s role as head of the CFTC (2009-2014) overlapped six months with Pritzker’s Commerce Secretary role (2013-2017) during the Obama administration.

Interview highlights

Among the questions, Ms. Pritzker inquired about “Bitcoin or other cryptocurrencies” and how the Chair saw them evolving from a regulatory standpoint. Chair Gensler avoided mentioning any cryptocurrency by name other than Bitcoin:

(lightly edited for clarity)

“This is a bit of innovation that came along, whomever Satoshi Nakamoto, whoever she was, or he, this innovation. And the investing public got interested – certainly by five, six years ago – got pretty interested. I think that it’s similar to what I said earlier. I think the investing public benefits from disclosures, understanding what a group of entrepreneurs might be doing, and, frankly, that most of the tokens and there’s five or 10,000 tokens to buy most of the tokens have a group of entrepreneurs and the public is trying to invest in those projects and get a better future. Well, those are the attributes of a security. And those are things that the SEC does well. I’ve said come in, talk to us, help get the the intermediaries registered, the crypto exchanges, the crypto lending platforms, the crypto broker dealers, registered we can use exemptive authority to to where we can to tailor this but also the disclosures around the tokens.”

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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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Can Senator Toomey Get Stablecoin Legislation Passed Before He Leaves?

Senator Patrick Toomey

There’s an opening for the passage of stablecoin legislation this year.

No, really.

Even though crypto critiques rage and bankruptcies blare while crypto prices swirl around the drain, this is the moment for Senator Patrick Toomey (R, PA) to deliver a first-of-its-kind law on stablecoins before he leaves office in January.

Complicating matters, narratives have changed in the past several months:

    • Pre-“crypto winter” narrative: “Legislation is coming to help support innovation and grow the blockchain industry.”
    • “Crypto winter” narrative: “Legislation needs to save us from the contagion that blockchain technology could ignite in the financial system.”

Yet, with either narrative, there’s an acute need for stablecoin legislation.

And so the table is set for Senator Toomey, who could steward narrowly-defined legislation in an expedited process that builds on his Stablecoin TRUST Act. In fact, the Senator said 2022 passage was possible only a month ago when speaking at the Consensus conference in Austin:
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