Tag: digital assets

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Crypto ATM Compliance Amid NDAA Amendment; Crypto Counsel For CFTC Commissioner

compliance

crypto ATM and NDAA

CoinDesk interviews Brandon Mintz, who is CEO of Atlanta-based Bitcoin ATM Operator, Bitcoin Depot, which has 20% market share. Mintz tells the crypto publication that the bitcoin ATM business is ripe for consolidation -and, that one of the reasons many companies fail, is a lack of compliance to existing regulations. Mintz tells CoinDesk, “My goal was always to create the strongest compliance program and hire really good compliance staff, including a compliance officer that I hired very early on in the business…” Read more.

In late July, Cato Institute did a comparison of the Anti-Money Laundering (AML) and Know-Your-Customer (KYC) aspects of the bills from Senators Elizabeth Warren (D, MA) and Roger Marshall (R, KS) – S.2669 -as well as Senators Cynthia Lummis (R, WY) and Kirsten Gillibrand (D, NY) – S.2281. In each of these bills are specific ATM provisions.

The latest KYC-AML “bill” from the Senate is the National Defense Authorization Act (NDAA) amendment from an alliance of the four Senators and includes ATM stipulations requiring complete disclosure of ATM usage.  How the must-pass NDAA and this amendment shake out in negotiations with the House remains to be seen.

A sampling of the amendment shows the Director of the Financial Crimes Enforcement Network (FinCEN) to requiring “crypto asset kiosk owners and administrators to submit and update the physical addresses of the kiosks owned or operated by the owner or administrator, as applicable, once every 120 days and collect the name, date of birth, physical address, and phone number of each counterparty to a transaction…” See it on Congress.gov.

more tips:

Crypto ATM Number Net Changes – Coin ATM Radar Continue reading “Crypto ATM Compliance Amid NDAA Amendment; Crypto Counsel For CFTC Commissioner”

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Waters Doubles Down Saying Stablecoin Bill Has ‘No Chance’; SEC Intent On Ripple Appeal

Maxine Waters on PayPal stablecoin

stablecoin rules – Waters

With the news of PayPal’s stablecoin breaking on Monday, and then the Federal Reserve conveniently introducing new crypto rules for banks a day later, yesterday, House Financial Services (HFS) Ranking Member Maxine Waters (D, CA) kept up the drumbeat of pushback by Democratic leadership on the new stablecoin bill.

“I am deeply concerned that PayPal has chosen to launch its own stablecoin while there is still no Federal framework for regulation, oversight, and enforcement of these assets,” began Waters in her statement released on the Democrats’ House Financial Services website. Later, she doubled down on rejection of the stablecoin bill and what could be construed as a message from the White House: “As I said during last month’s markup, the Republican bill has no chance of actually being signed into law, and I urge Chair McHenry and Committee Republicans to come back to the negotiation table…” Read more.

On Monday, HFS Chair Patrick McHenry had come out in support of PayPal’s new stablecoin efforts.

stablecoin rules – Waters history

It was only last March that Waters was fully supportive of moving a stablecoin bill forward “as quickly as possible” and then suddenly, at the first HFS stablecoin hearing in April, came her about-face with Rep. Stephen Lynch (D, MA), Ranking Member of the Committee’s Subcommittee on Digital Assets, Financial Technology and Inclusion, stridently backing her up. Continue reading “Waters Doubles Down Saying Stablecoin Bill Has ‘No Chance’; SEC Intent On Ripple Appeal”

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Fed Starts Crypto Activities Supervision Program; SEC Accounting Regime Attracts Criticism

Fed to banks

Fed oversight for crypto

Late yesterday, the Federal Reserve announced a more detailed regime for banks offering, or considering offering, crypto products – or as the Fed terms it – the “novel activities supervision program.” Read the press release.

Among the regime’s elements subject to supervision:

    • “Complex, technology-driven partnerships with non-banks to provide banking services…”
    • “Crypto-asset related activities…”
    • Projects that use [distribute ledger technology] with the potential for significant impact on the financial system…”
    • “Concentrated provision of banking services to crypto-asset-related entities and fintechs…”

Adding to the warning to banks, “The Program will be risk-based, and the level and intensity of supervision will vary based on the level of engagement in novel activities by each supervised banking organization.” The more a bank adds digital asset products, the more it receives supervision by the Federal Reserve.

The announcement is reminiscent of the January 3 warning titled, “Joint Statement on Crypto-Asset Risks to Banking Organizations” by the Fed, Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). See that one (PDF).

The Fed claims in yesterday’s announcement that it’s supporting innovation, but remains – at best – cautious stating, “The goal of the novel activities supervision program is to foster the benefits of financial innovation while recognizing and appropriately addressing risks to ensure the safety and soundness of the banking system.”

As Reuters notes, stablecoins are an important element of the directive, perhaps inspired by Monday’s PayPal stablecoin announcement. “For banks to receive a written non-objection to be able to engage with stabelcoins, banks should demonstrate appropriate risk management, including having systems in place to identify and monitor any potential risks, including cybersecurity and illicit finance threats,” reports Reuters. Read more.

more tips:

Letter SR 23-7: Creation of Novel Activities Supervision Program – FederalReserve.gov

Letter SR 23-8 / CA 23-5: Supervisory Nonobjection Process for State Member Banks Seeking to Engage in Certain Activities Involving Dollar Tokens (stablecoins) – FederalReserve.gov Continue reading “Fed Starts Crypto Activities Supervision Program; SEC Accounting Regime Attracts Criticism”

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PayPal Announces Stablecoin; Chair McHenry Sees ‘Signal’

new PayPal stablecoin

Payment platform PayPal arguably made the most pro-crypto announcement of the year yesterday when it announced the introduction of its new stablecoin, PayPal USD (PYUSD) which runs on the Ethereum blockchain. Read the release.

Like many stablecoins PYUSD is backed 1:1 with the US Dollar and this one is managed by Paxos Trust. PayPal was issued a BitLicense by New York Department of Financial Services in June 2022.

TechCrunch looks at PayPal’s crypto development history including when the company introduced crypto services back in 2020. Read it.

The significance of PayPal – with a $71 billion market cap – taking its next step in digital assets is, perhaps, the leading edge of traditional finance firms embracing digital assets and stablecoins, in particular. Equally important is the US Dollar finding another on-ramp into the Web3 ecosystem. Squeaky blockchain transactions are getting a bit more of the oil they need.

The press release explains that the rollout, which started yesterday for PayPal customers, will allow them to: Continue reading “PayPal Announces Stablecoin; Chair McHenry Sees ‘Signal’”

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Coinbase Seeks Dismissal Of SEC Lawsuit; Digital Chamber Advocates Against AML Bill

now seeking dismissal

Coinbase seeks dismissal

Cryptocurrency exchange Coinbase asked a judge to dismiss the SEC’s lawsuit against the company on Friday. The company’s Chief Legal Officer Paul Grewal said in a Tweet thread, “Our core argument is simple – we do not offer ‘investment contracts’ as that term has been construed by decades of Supreme Court and other binding precedent.” Therefore, the suit is baseless, reasons the Company. See the dismissal request (PDF).

Coinbase seeks dismissal – reaction

Jason Gottlieb, a partner and digital assets chair with law firm Morrison Cohen, complimented the company’s brief on Twitter, and argued that the Securities and Exchange Commission (SEC) has overreached. Gottlieb made note of the use of the “Major Questions Doctrine” (MQD) in Coinbase’s motion to dismiss tweeting the company could have gone even further in its argument.  Later, Gottlieb argues, “As everything is becoming digitized, this fight isn’t just about cryptocurrency. It’s a much larger battle for the right to your digital life — and whether the Securities and Exchange Commission is the proper regulator for the entire digital economy.”

Digital assets are at the forefront of regulating and integrating technology into U.S. government and its policies today. Continue reading “Coinbase Seeks Dismissal Of SEC Lawsuit; Digital Chamber Advocates Against AML Bill”

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Prometheum Investor Gets Hong Kong Crypto Exchange License; CFTC Friction Reported

Hong Kong crypto license

Prometheum investor gets license

Hashkey Group, announced it is among the first crypto exchanges to receive “Type 1 and Type 7 Licences” under Hong Kong’s new crypto regulatory framework. Read the release.

U.S. crypto regulation aficionados may recall that Hashkey Group is a subsidiary of Wanxiang Blockchain which is an investor in U.S.-based Prometheum. Prometheum was granted “a first-of-its-kind Special Purpose Broker-Dealer (SPBD) for digital asset securities” earlier this year by the Securities and Exchange Commission (SEC).  Then, in mid-June, Prometheum CEO Aaron Kaplan appeared as a witness at a House Financial Services hearing on digital assets, which raised questions about Prometheum’s SPBD.

On July 10, Republicans led by Senator Tommy Tuberville (R, AL) asked U.S. Attorney General Merrick Garland and Securities and Exchange Commission (SEC) Chair Gary Gensler for an investigation into Prometheum and Wanxiang Blockchain’s relationship expressing concerns about Wanxiang Blockchain’s ties to the Chinese Communist Party.

Yesterday, Hashkey Group emphasized in a press release its consumer protections in light of the new Hong Kong license: “User funds are kept under segregated accounts, separated from platform operations, with 98% in cold storage and 2% in hot wallets. In addition, the platform strictly adheres to regulatory requirements and undergoes regular audits and compliance inspections conducted by the Big 4 auditing firms, establishing itself as one of the most secure exchanges globally.”

Bloomberg reports that Hashkey was looking to raise $100-200 million in May in an effort to support growth of the company. The company’s Chairman and CEO, Dr. Xiao Feng, is also Vice Chairman and Executive Director of China Wanxiang Holding, and Chairman and CEO of Wanxiang Blockchain. Continue reading “Prometheum Investor Gets Hong Kong Crypto Exchange License; CFTC Friction Reported”

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House Republicans Talk Digital Assets Legislative Plan At Flyover Fintech

Flyover Fintech

Yesterday’s one-day fintech conference in Lincoln, Nebraska dubbed “Flyover Fintech” and organized by freshman Congressmen Mike Flood (R, NE) and his staff, arguably yielded as many insights as a week-long Congressional hearing.

The only thing missing was the physical presence of elected Democrats. Maybe next year?  Nevertheless, 250-strong assembled to hear, and share, the latest in digital assets efforts in DC and the U.S. as well as look to the blueprint being laid in Flood’s home state of Nebraska.

The highlight of the day came last when Rep. Flood, a capable interviewer, asked his fellow House Financial Services Committee members – Rep. French  Hill (R, AR), Chair of the Digital Assets Subcommittee, and Rep. Warren Davidson (R, OH) – to join him on stage for a 40-minute Q&A that took attendees behind-the-scenes in Congress.

After covering the impact of FTX’s implosion and the buildup to the recent markups of the stablecoin and digital assets market structure bills, the Congressmen shared their best guess on next steps…

Partial spoiler:

1) The return of Senate Agriculture to the digital assets legislative mix;

2) House member education needs to happen before any House floor vote;

3) Lummis-Gillibrand (RFIA) need a state pathway in their bill.

Noting that Rep. Hill has been on the Financial Services Committee for nine years, and Congressman Davidson, has been on the committee for six and a half years, Flood began by asking for perspective on what it took to get the stablecoin bill to last week’s markup stage.

(Transcript lightly edited for clarity.)

REP FRENCH HILL: It’s been 15 months of bipartisan work between Rep. Maxine Waters (D, CA), who was the Chair of the HFS committee in the last Congress, and Rep. Patrick McHenry (R, NC), to come up with a stablecoin bill that would fill the gap. But it goes back a lot further than that.

We’ve had efforts since Rep. Davidson came to Congress. And, Majority Whip Tom Emmer (R, MN) came to Congress in my class in 2014 to try and move this conversation forward with a Financial Technology Task Force, where we uncovered exactly what we ought to be doing and how we ought to be doing it.

But then, the pandemic got in the way – I do think we would have made more progress if we hadn’t gone through the pandemic.

Last summer, [Maxine Waters and Patrick McHenry] set a goal of trying to get a consensus stablecoin bill through as the initial gateway [product] in the digital asset space. They got very close. And we picked up with Chair McHenry’s leadership this year. We’ve gotten a bipartisan bill through the House with more changes to come. But, now we have to obviously work with the Senate. Continue reading “House Republicans Talk Digital Assets Legislative Plan At Flyover Fintech”

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Reaction To Do Kwon Crypto Securities Ruling; Blockchain For Museums

security

Do Kwon ruling

Another court ruling, more rough waters for digital assets. The Wall Street Journal reported Monday that algorithmic stablecoin creator Do Kwon of Terraform Labs did not convince Judge Jed Rakoff of dismissing the Securities and Exchange Commission’s (SEC) enforcement action against him using the recent Ripple/XRP outcome penned by Judge Analisa Torres.

Read the ruling (PDF) on CourtListener.

Judge Rakoff said he disagreed with Torres’ decision and wrote that securities laws do not make the distinctions between institutional and retail investors that Torres identified in her decision two weeks ago. Rakoff said that “secondary-market buyers have the same expectations for an investment as initial purchasers,” according to The WSJ. Read more.

Do Kwon ruling – reaction

Brown Rudnick crypto lawyer Stephen Palley commented on Twitter about Rakoff’s decision saying, “A big [difference] between Rakoff & Torres decisions is that the former was on a motion to dismiss & the latter on summary judgment. Motions to dismiss focus on if plaintiff has stated a cognizable claim in the pleadings. Summary judgment looks outside the pleading, at evidence.” Read Palley’s thread. Continue reading “Reaction To Do Kwon Crypto Securities Ruling; Blockchain For Museums”