Tag: dccpa

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Blockchain Industry Smackdown Continues With Stabenow, Scary Statement

No Crypto Allowed

The bad news continued for the blockchain industry last week with two consequential announcements.

First, Senator Debbie Stabenow (D, MI), Chairwoman of the Senate Agriculture Committee, announced out-of-the-blue that she will not run for re-election in 2024 and therefore leave the U.S. Senate at the end of her term on January 3, 2025.

Second, the offices of the Federal Reserve, Comptroller of the Currency and the Federal Deposit Insurance Corporation banded together on January 3 for a clear warning (PDF) that if you’re a bank – therefore regulated by the Federal government – crypto is a no-go. Happy New Year!

Stabenow

For crypto proponents, the loss of Stabenow diminishes the likelihood that the Digital Commodity Consumer Protection Act (DCCPA) – and perhaps any blockchain bill from Senate Ag – will ever see a vote on the Senate floor in 2023. DCCPA which she co-sponsored with Senate Ag Committee Ranking Member and Senator John Boozman (R, AR) remains well-poisoned by FTX CEO Sam Bankman-Fried’s (SBF) involvement.

Sen. Stabenow, 72, prioritized her remaining two years in Congress in a statement saying that “leading the passage of the next five-year Farm Bill which determines our nation’s food and agriculture policies” is critical. Going forward, blockchain is the last thing she wants to mention to voters who are inundated with the latest SBF drama as they consider a Democratic or Republican candidate for Stabenow’s seat in the months ahead.

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Predictions for 2023 Blockchain Legislation in the U.S. Congress

Predictions for the blockchain industry

Washington D.C.’s population is inflating again with the commencement of the 118th Congress and there’s no better time to prognosticate on the blockchain legislation possibilities in 2023.

With the humiliation wrought by Sam Bankman-Fried (SBF) and FTX burned into the Congressional record (1, 2, 3) in 2022, action would appear imminent one way or another.

Let’s predict…

Was DCCPA

The Digital Commodity Consumer Protection Act (DCCPA) from Senate Agriculture Chairwoman and Senator Debbie Stabenow (D, MI) and Ranking Member and Senator John Boozman (R, AR) was in the pole position for new crypto law in the U.S. But with FTX founder and CEO Sam-Bankman Fried’s fingerprints all over this legislation through his congressional collaboration last year, DCCPA looks radioactive.

So, in spite of the theatrics of a December Senate Agriculture hearing where everyone including Commodity Futures Tradiing Commission Chair Rostin Behnam tried to distance themselves from FTX while still professing support for DCCPA, there’s no way forward for the bill.

Enter a re-purposing of DCCPA that will continue to address jurisdiction of the Bitcoin and Ether cash markets by the CFTC.  But, even this bill will be met with skepticism given the SBF connection and his mugshot continuing to clog the mainstream and social media airwaves.

RFIA boost

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Senate Ag Committee Attempts To Resuscitate DCCPA, Distance From FTX

Senate Ag hearing

With the collapse of cryptocurrency exchange FTX not even a month old, the first FTX hearing commenced on Capitol Hill with the Senate Agriculture Committee questioning Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam yesterday in Washington D.C.

Overall, the hearing seemed to be a theater of positioning by Senate Ag intended to address…

    • Urgency – Senate Ag and the CFTC appeared to believe the Digital Commodity Consumer Protection Act (DCCPA) has more urgency than ever in light of the FTX collapse.
    • Overcoming the conflict of interest – Senate Ag and the CFTC endeavored to distance themselves from FTX and its founder Sam Bankman-Fried (SBF). The unspoken message is that FTX did not influence the creation of the DCCPA. On that note – and grasping for transparency, for example – CFTC Chair Behnam’s calendar in the past year was under the microscope which included 10 FTX meetings largely related to its subsidiary LedgerX and its DCO application – not DCCPA.
    • Refinement– Chair Rostin Behnam and Committee members urged that learnings from FTX’s implosion be incorporated into the new bill. In some ways, the refinement appears to be finding a way to bring companies like FTX onshore, which would have required the company to adhere to regulations that would have prevented the implosion in the first place.
    • Pause – In spite of the urgency, the need for refinement requires pause. DCCPA won’t be heading for a vote on the Committee or Senate floor until next year at the earliest. Chair Behnam advocated as much.

Hearing context

On its face, D.C. appears to be in soul-searching mode as it gropes for answers on how the FTX collapse occurred even though the company was based in the Bahamas. The krux of the concern, though, stems from the humiliation endured by unsuspecting lawmakers who had been courted and cajoled by FTX founder and CEO Sam Bankman-Fried.

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Staffers See Stablecoin Legislation And DCCPA in 2023

Staffers speak

A swirl of several hundred government relations executives and general counsels from crypto companies around the globe gathered at the Conrad Hotel this week for Blockchain Association’s first annual Policy Summit.

Even amidst the recent implosion of crypto exchange FTX, an agenda sprinkled with an impressive list of elected officials offered hope to a beleaguered audience that could be justified for wanting to update their LinkedIn profile in the past week.

In a panel titled, “Post Midterms Political Outlook: What’s On Deck for the Next Congress?,” Congressional staffers who drive policy discussion on Capitol Hill, provided a behind-the-scenes look at a range of blockchain-related issues facing Congress.

Participants reflected the bipartisan strategy of crypto policy in the House and Senate today with two Democratic and two Republican staffers – who stressed they spoke for themselves and not Members of Congress:

    • Francesco Castella, Senior Policy Advisor for Congressman Ted Budd (R, NC). Rep. Budd, a member of the House Financial Services Committee and the Blockchain Caucus, will be moving to the Senate in the next Congress. Mr. Castella appeared at DeFiCon (https://blockchaintipsheet.com/policy/us-house-staffers-blockchain-cryptocurrency/) in August in New York City.
    • Rashan A. Colbert, Legislative Assistant for Senator Cory Booker (D, NJ). Sen. Booker, who sits on the Senate Agriculture committee, is co-sponsoring the Digital Commodity Consumer Protection Act (DCCPA). Mr. Colbert appeared in a CFTC financial inclusion webcast about blockchain technology in August.
    • Emily German, Subcommittee Staff Director at U.S. House of Representatives Committee on Agriculture, which has jurisdiction over the Commodity Futures Trading Commission (CFTC). Ms. German serves the interests of Democrats on the House Ag Committee and its Chairman, Rep. David Scott (D, GA).
    • Tim Hite, Financial Services Counsel for Congressman Warren Davidson (R, OH). Rep. Davidson has been an active Member when it comes to cryptocurrency legislation (such as the Digital Taxonomy Act and Token Taxonomy Act) which includes his participation in the House Financial Services Committee and the Blockchain Caucus.

Ron Hammond, Director of Government Relations at Blockchain Association and a former staffer for Rep. Davidson, moderated the discussion.

FTX fallout for this Congress

With FTX’s imploding looming over the conference, Hammond didn’t waste any time by asking staff members about the FTX elephant-in-the-room particularly as it related to DCCPA and where FTX and its founder/CEO Sam Bankman-Fried had taken an active, aggressive role in lobbying efforts.

Just prior to the panel, the House Financial Services Committee announced it would convene a hearing about FTX in December.

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Congress and Industry Attempt Reset After FTX Debacle

FTX and Congress

FTX CEO Sam Bankman-Fried would appear to not have any friends left in Washington, D.C. after his company’s implosion earlier this week.

Members of Congress and industry trade organizations are trying to build a protective wall around legislation still in its embryonic stages – such as the Digital Commodity Consumer Protection Act (DCCPA) – while distancing themselves from any perceived influence Bankman-Fried had on the process.

Meanwhile, Bankman-Fried’s global company has had its assets frozen by authorities in the Bahamas where FTX global operations are based. And, it appears that FTX’s US operations are also under pressure with perhaps only enough money for another week of payroll for employees according to Bloomberg. Customers are being asked to remove their assets from the US-based exchange with assurances around the exchange’s liquidity in the interim. (Update: Bankman-Fried has resigned and his company has declared bankruptcy. Read more.)

And last but not least, the SEC and CFTC are rumored to be starting investigations. Could it get any uglier?

Senate speaks

Back in Congress, leaders from the Senate Agricultural Committee expressed urgency and made clear that their still-in-committee DCCPA is alive and well despite FTX’s fall from grace.

Chairwoman and Senator Debbie Stabenow (D, MI) tweeted: “The recent collapse of a major cryptocurrency exchange reinforces the urgent need for greater federal oversight of this industry. Consumers continue to be harmed by the lack of transparency and accountability in this market. It is time for Congress to act.”

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FTX Implosion May Be The Catalyst for Fast-Tracking Legislation

Yesterday, Binance, the largest global cryptocurrency exchange, acquired FTX’s global exchange after its founder and CEO Sam Bankman-Fried appeared to have knowingly parked unbacked, illiquid assets on a sister company’s balance sheet – the stuff regulators warn about – which brought FTX to near-insolvency.

As a result, Bankman-Fried did the only thing he could which was to sell FTX to his competitor.

It’s not a good look for crypto and its legislative champions. On the other hand, if you’re rooting for new regulation, this may be what forces Congress’ hand. Guardrails are needed ASAP if consumers are going to be protected and the industry is going to flourish.

The damage

Is the impact from this bigger than the Terra Luna stablecoin debacle in the Spring? Probably.

First, let’s review the “soft” impact…

Sam Bankman-Fried was arguably the most popular industry figure in Washington D.C., appearing multiple times in front of Congressional committees in spite of his global company’s Bahamian address. Now, his name and reputation have taken a devastating hit affecting relationships with the CFTC and Congress especially as it relates to the feedback he was providing on crypto derivatives changes and the Stabenow-Boozman Digital Consumer Commodity Protection Act (DCCPA) coming out of the Senate Ag committee.

Undoubtedly, SBF’s (as Sam Bankman-Fried is colloquially known) actions were damaging to the crypto industry itself which was already dealing with multiple scandals,  hacks and “rugs” making DC power players wonder if crypto is a positive, world-changing innovation or just a fleeting ponzi scheme that allows SEC Chair Gary Gensler to say, “I told you so.”

Moreover, the financial damage wrought by the enormous blunder is still unknown. Are all customer funds safe? Maybe. Seems so. What about FTX’s billions in funds? Likely not. How about FTX’s investors? They’re definitely holding the bag.

One important qualifier in this mess is that FTX.us (the carve out within FTX which deals with US business) will remain independent from the Binance deal meaning Bankman-Fried is still in the game, so to speak – at least for now – until another shoe drops.

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Senator Thune Talks Controls on SEC Purse and Personnel

Senator John Thune

This morning in Washington, D.C., Senator John Thune (R, SD), the Senate Minority Whip, spoke on a variety of investment topics circulating through Capitol Hill at a Punchbowl News event sponsored by American Investment Council.

With mid-term elections less that two months away Thune remained sanguine about Republican prospects to overtake the majority in the Senate.

Nothing was mentioned about his recent co-sponsorship of the bipartisan Digital Commodities Consumer Protection Act, which gives regulatory authority over bitcoin and ether to the Commodity Futures Trading Commission (CFTC).

But, he did speak about general dissatisfaction with recent practices of securities regulators – namely the Securities and Exchange Commission led by Biden Administration appointee Gary Gensler, its Chair.

Overall, the SEC’s commission tilts Democratic with a 3-2 edge.

Thune was interviewed by Punchbowl News Founder, Anna Palmer and elaborated on the dynamics between the SEC and Republicans today.

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Bitcoin and Ether Get Commoditized At Senate Ag Hearing

DCCPA Hearing

The Digital Commodities Consumer Protection Act (DCCPA or S.4760) took centerstage at a 2-1/2 hour hearing of the Senate Committee on Agriculture, Nutrition, and Forestry featuring many of its committee members including Senators Debbie Stabenow (D, MI), Chairwoman, and John Boozman (R, AR), Ranking Member.

Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam, a former Stabenow staffer, led off testimony on DCCPA which he helped create in partnership with the Committee.

Back in February, shortly after Behnam was sworn in as CFTC Chair, a Senate Ag hearing on digital assets laid the groundwork for themes of the bipartisan bill which will classify the cryptocurrencies Bitcoin and Ethereum as commodities and therefore within the jurisdiction of the CFTC.

Senator Boozman stressed during the hearing that DCCPA is not meant to erode the jurisdiction of the SEC over securities.

    • Video of today’s hearing is available here.
    • Behnam’s testimony is here which includes a section titled, “The CFTC: The Right Regulator.”

Self-subsidized

Overall, there were few surprises in the Senate Ag hearing – after all, it’s a bipartisan bill co-sponsored by the Democratic Chair and the Republican Ranking member.

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