Tag: cryptocurrency

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House GOP Touts Stablecoins; UK Getting Closer To Crypto

stablecoins

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stablecoin opportunity

The GOP’s House Financial Services Twitter account chimed in yesterday, “The Biden Administration’s attack on stablecoins threatens U.S. dominance of the digital economy.” The tweet promoted an op-ed by former Hill staffer to Orrin Hatch (R, UT) and others, Sam Lyman, who sounds the alarm in Fortune on the slowly dwindling opportunity for the US dollar to integrate itself within global stablecoin infrastructure.

Lyman discusses securing US Dollar supremacy for the next decade and concludes hopefully, “Stablecoins are not a problem- they are an opportunity. And with the right regulation, we can seize this opportunity to empower consumers, expand American hard power, and plant our flag in the emerging digital economy.” Read more on Fortune.

Others have posited solutions with short-term U.S. Treasuries which would support U.S. dollar supremacy longer term via the Fed’s Project Hamilton. Read more on that one from last year’s Permissionless conference.

UK – getting closer to crypto

The Prudential Regulatory Authority (PRA), which regulates banks in the U.K., is on the verge of proposing rules for issuing and holding digital assets according to a speech from the Bank of England. CoinDesk explains, “Once the Financial Services and Markets Bill becomes law, authorities will have powers to regulate the sector.” Read it.

Tips:

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Montana Passing Bitcoin Legislation; Blockchain Analytics Show Sanctions Evasion

Montana on Bitcoin mining

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states – Montana mines

The Montana state legislature has passed the [Senate #178] ‘Right to Mine’ Bitcoin bill which will prevent local governments from “unfairly” using industrial zoning laws to stop crypto mining among other measures.  CoinTelegraph points out that the state’s House and Governor still need to sign off. The bill was sponsored by State Senator Daniel Zolnikov (R) who speaks about the bill from the Senate floor in this video and says, “Hey come to Montana. This is a safe place to invest in. And [the bill] insures that it’s a safe place to invest in.”

Tip: Montana’s (red state) momentum is the opposite of what is happening in New York (blue state).

compliance – sanctions evasion

A new report from blockchain analytics firm Inca Digital says that sanctioned Russian banks are still being allowed to access the services of many cryptocurrency exchange platforms such as Seychelles-based Huobi and KuCoin as well as Binance in spite of sanctions that should shut down such use. Read more from Bloomberg (on Inca’s site).

Inca Digital Chief Executive Officer Adam Zarazinski said this company plans to release their findings more widely “soon” and that “The report [includes] other troubling observations about the 62 crypto exchanges it analyzed, including that some of them do not require Russians to pass KYC checks.” Continue reading “Montana Passing Bitcoin Legislation; Blockchain Analytics Show Sanctions Evasion”

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House Financial Services Due Date Arrives for SEC’s Communications About SBF

due date

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due date – SBF comms

Due no later than 5 p.m. today, the Securities and Exchange Commission has been asked to deliver all of its communications about Sam Bankman’ Fried (SBF) from November 2, 2022 to February 9, 2023. The request was made by letter two weeks ago by House Financial Services Chair Rep. Patrick McHenry (R, NC) and Subcommittee on Oversight and Investigations Chair Rep. Bill Huizenga (R, MI).

Republicans are hoping to unlock manipulative malfeasance at the SEC run by its Democratic Chair Gary Gensler. Specifically, why SBF was arrested the day before he was scheduled to appear in front of the House Financial Services Committee then chaired by Rep. Maxine Waters (D, CA).

Tip: Read yesterday’s “Can Gary Gensler Survive Crypto Winter? D.C.’s top financial cop on Bankman-Fried blowback” from New York Magazine

due date – will it happen

Will the SEC deliver as partisanship gets amplified in the crypto capital? It seems unlikely given the partisanship involved here, but this will be yet another sticking point to be addressed when SEC Chair Gary Gensler finally visits the Hill again… in September? … sooner?

Congress is back in session next week (see calendar) – there will be more tweets at a minimum.

bank regulators – crypto risks

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CBDC Anti-Surveillance State Act; Stablecoins and Securities

Majority Whip Tom Emmer

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CBDC Anti-Surveillance State Act

Majority Whip Rep. Tom Emmer (R, MN) will introduce new legislation which seeks to limit the U.S. Federal Reserve’s ability to roll out a Central Bank Digital Currency (CBDC). Titled “CBDC Anti-Surveillance State Act,” Punchbowl News’ Brenden Pedersen reports there is broad support among Republicans – especially on the House Financial Services Committee. But he adds, “even with slim odds of passing in a Democratic Senate for now, we think it would be a mistake to wave this off as a simple messaging bill from House Republicans.” Among concerns for Republicans with CBDCs is giving government the ability to see consumer transaction data, i.e. no privacy. See a copy of the bill (PDF).

Rep. Emmer summarized the bill’s key points on Twitter:

    1. “Prohibits the Fed from issuing a CBDC directly to anyone.”
    2. “Bars the Fed from using a CBDC to implement monetary policy and control the economy.”
    3. “Requires the Fed’s CBDC projects to be transparent to Congress and the American people.”

Punchbowl’s Pedersen tweeted later, “Some folks like to imagine the GOP could come around to a US digital dollar for [National Security] reasons. We’re not there yet!”

The tug of war between private stablecoins and CBDCs is taking another step as US Dollar dominance as the World’s reserve currency hangs in the balance.

CBDCs “yes,” stablecoins “no”

Speaking in Singapore, Bank for International Settlements  (BIS) General Manager Agustín Carstens said, “Many crypto proponents argue that stablecoins should be the future of money. But what this view forgets is that what sustains fiat money is not the application of novel technologies but all the institutional arrangements and social conventions behind it. And it is precisely these arrangements and conventions that make money reliable for the public.” Carsten argues that the power of the ledger for CBDCs is very compelling. Read the speech.

Tip: What is BIS? (Wikipedia) Continue reading “CBDC Anti-Surveillance State Act; Stablecoins and Securities”

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Senator Concerned About Binance; New York and California Making Crypto Moves

Senator Concerned About Binance

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Binance and stablecoins

Reuters reported Paxos CEO Charles Cascarilla told employees over the weekend that the company is “in discussions with the SEC” over allegations the Paxos’ Binance USD stablecoin should have been registered as a security. Apparently, Paxos has now “severed” its relationship with Binance.

Last week, New York Department of Financial Services (NYDFS) had required that Paxos stop “minting” BUSD. Also, Paxos had been reportedly sent a Wells Notice which meant SEC was about to bring an enforcement action against the company. Read a bit more on Axios. Binance has become increasingly toxic in the regulatory schema.

Binance and DC

In the wake of recent regulatory actions and its involvement in the implosion of FTX, Binance is stepping up its DC presence reports Politico’s Sam Sutton. None too soon as Politico quotes Senator Bill Hagerty (R, TN), “I have deep concerns about Binance. (…) They’re moving aggressively all over the world right now and they are very opaque.’ Read more.

Learn more about Binance and its founder:

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Congressional Research Releases Digital Asset Overviews; Japan Evolves CBDC

Digital assets research

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research #1 – crypto

Congress’ on-demand research team, Congressional Research Service (CRS), released two new papers on the digital assets industry last week. In “Cryptocurrency: Selected Policy Issues (PDF),” the 33-page tome written by Paul Tierno, a former member of the San Francisco Federal Reserve Bank (according to LinkedIn), provides extensive definitions and even-handed coverage of where policy stands today specifically on cryptocurrency.

CRS writes on page 23, “The regulation of cryptocurrency is unsettled and evolving. Currently, there is not a comprehensive framework for regulating the range of cryptocurrencies, other digital assets, and trading platforms that parallels regulation of securities or commodities. Neither Congress nor federal regulators have created new comprehensive rules specific to crypto.” Everyone on Capitol Hill may end up reading this research. It’s a good one.

You’ll also want “Crypto and Banking (PDF)” released by CRS earlier in February.

research #2 – digital assets

CRS also released a broader version of the crypto reports above called “Capital Markets: Overview and Selected Policy Issues in the 118th Congress (PDF)” with a 14-page discussion on digital assets beginning on page 41.  Topics include… “Stablecoins resemble certain investment funds. Stablecoins often have reserve asset portfolios that hold assets backing the coins’ values. Many industry observers and some regulators believe that the general mechanisms involved in creating, distributing, and redeeming stablecoins – and the means by which stablecoins aim to maintain their pegs with a reference asset – resemble similar mechanisms employed by MMFs and ETFs, which are regulated by the SEC. Some commentators have thus argued that stablecoins should be regulated as investment companies by the SEC.”

CBDC – Japan

The Bank of Japan announced on Friday that the it plans to launch a Central Bank Digital Currency pilot program in two months (April). According to analyst firm Fundstrat, “The program’s two goals are to test the technical feasibility of a digital currency and to utilize the experience of existing industry leaders for expertise in designing and implementing the potential new currency.” This is actually the third phase of a series of proof of concepts (PoCs) the Bank has undertaken since 2020.

According to the Bank of Japan, it is moving ahead cautiously, “At present, we do not assume any actual transactions to take place among retailers and consumers; only simulated transactions will be settled in the test environment. We will continue to communicate externally, with high transparency, in sharing topics including the specifics of the pilot program and updates on progress made.” Read the English-language press release.
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Congressional Staff To Research EU Digital Asset Regs; Terraform Labs Charged

Europe Trip

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regulation is global – EU trip

Politico reports a bipartisan delegation including staffers from the offices of congressional committee leaders Rep. Patrick McHenry (R, NC), Sen. John Boozman (R, AR) and Sen. Sherrod Brown’s (D, OH) will be heading to Brussels and Paris for digital asset regulation consultations with European Commission “bigwigs and industry representatives.” Read more (subscription).

Understanding how the EU put together its recent digital assets legislation such as MiCA will likely be on the list. Unspoken is the tension of the US maintaining the Dollar as the world’s reserve currency while the EU is moving ahead with digital asset benefits that hopefully accrue to the Euro.

Politico’s Bjarke Smith-Meyer tweets that European Union’s ambassador in DC “helped organize the trip, as they have done before, which usually focuses on specific policy issues. This time it’s all about [crypto] (and a crash course in how the [EU] legislative machine works)”.

Tip: Bipartisanship is back? Having representatives of House Financial Services Chair McHenry (R) and Senate Banking Chair Brown (D) together on the same trip is a step in the direction of bicameral possibilities.

enforcement is global – Terraform Labs

In spite of the fact the company controlling the algorithmic stablecoin TerraUSD was based outside of the United States, yesterday the Securities and Exchange Commission (SEC) charged Singapore-based Terraform Labs PTE Ltd and its founder Do Kwon with “orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.” Read the release.

The TerraUSD stablecoin once had a market cap of over $18 billion and then imploded in May 2022 sending rippling effects throughout the digital asset ecosystem. Terra Forma had been rumored to be under investigation by the SEC since at least last June.

SEC Chair Gary Gensler breaks down the charges in two parts in the release:

    • “Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD,”
    • “They committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”

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SEC Custody Rule Change May Affect Crypto; Gillibrand Criticizes SEC Chair Gensler

SEC on Crypto Custody rule

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custody rule – facts

A proposed change to a Securities Exchange Commission (SEC) custody rule has created more fog in the crypto universe.

At an SEC Open Meeting yesterday, and according to the the SEC’s fact sheet, the changes would “expand the current custody rule to protect a broader array of client assets and advisory activities to the rule’s protections” such as crypto; “enhance the custodial protections that client assets receive under the rule; [and] update related recordkeeping and reporting requirements for advisers.” Read the rule (PDF).

What is crypto custody? – see here.

custody rule – Chair

SEC Chair Gary Gensler argues in support of the rule change in a press release: “Congress gave us authority to expand the advisers’ custody rule to apply to all assets, not just funds or securities. Further, investors would benefit from the proposal’s changes to enhance the protections that qualified custodians provide. Thus, through this expanded custody rule, investors working with advisers would receive the time-tested protections that they deserve for all of their assets, including crypto assets, consistent with what Congress envisioned.” Read his statement, too.

Side tip: With the participation and comments of several SEC staff on the “Open Meeting” webcast, these rule edits would appear to have been in the works for months if not longer.

custody rule – dissent

Though she provided five concerns about the proposed custodian rule changes, Commissioner Hester Peirce ended her statement hopefully such that she could vote for the rule change (with edits) when it approaches a vote on final adoption.

Peirce, one of two Republicans on the Commission along with Mark Uyeda, was the only commissioner to vote “no” on the proposal. Two of her chief concerns were directly related to crypto: first, a stated supposition in the changes that all crypto assets were securities; and secondly, crypto custody choices would be even more limited than today as a result of changes. She said, “By insisting on an asset neutral approach to custody we could leave investors in crypto assets more vulnerable to theft or fraud, not less.”

crypto custody rule – 3 commissioners

Commissioner Mark Uyeda (statement) – like Peirce, a Republican appointee – expressed his misgivings about the rule changes and shared: “How could an adviser seeking to comply with this rule possibly invest client funds in crypto assets after reading this release?” Nevertheless, Uyeda voted for the rule change process to move forward saying, “The Commission should make changes through notice and comment rulemaking.” Perhaps Uyeda believes the comment period will shoot this rule change down.

Continue reading “SEC Custody Rule Change May Affect Crypto; Gillibrand Criticizes SEC Chair Gensler”