Tag: digital assets

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historic weekend – U.S. Treasury

In an historic joint statement on Sunday afternoon led by U.S. Treasury along with The Federal Reserve and The Federal Deposit Insurance Corporation (FDIC), the bank regulators announced 100% of all deposits would be covered by the FDIC for two failed banks – Silicon Valley Bank (SVB) and Signature Bank – and any other “eligible depository institution” (i.e. a bank) that might show signs of imminent insolvency. The bank failures were the second and third largest in U.S. history.

Floating along in the financial flotsam and jetsam was Circle, issuers of the USDC stablecoin, as well as other crypto companies whose deposits were trapped at the failing institutions (more below) and could have potentially lead to catastrophic consequences for the businesses. 

The move by the bank regulators also averts a gathering storm of “bank runs” among small, regional U.S. banks this week where depositors would have fled with their funds to the safe haven of much larger banks (Citi, J.P. Morgan, etc.).

The statement:

“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank (SVB), Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

That last line means shareholders of failed banks get nothing unlike some banks in the 2008 financial crisis. Continue reading “U.S. Bank Regulators Say Deposits Will Be Covered For Failed Banks; Crypto Sighs With Relief”

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taxes – commodity vs security

The Biden Administration is planning on closing a tax loophole it perceives with cryptocurrencies and raising $24 billion according to The Wall Street Journal. “Currently… [crypto transaction sales] aren’t subject to the same so-called wash-sale rules that apply to stocks and bonds. That means people can sell their underwater crypto investments, take a tax-deductible loss and buy right back into the same investment.” Read more.

Tip: This potential taxation change all goes back to the “securities versus commodity” discussion and could be seen as a backdoor to regulating the digital assets industry by defining what is a commodity and what is a security.

taxes – bitcoin mining

A new tax embedded in the Biden Administration’s 2023 budget proposal wants to extract revenue from Bitcoin miners. “The U.S. Treasury Department has proposed a 30% excise tax on the cost of powering crypto mining facilities. (…) The tax would be phased in over the next three years, increasing 10% each year,” writes CoinDesk. Read more.

Gensler speaks

In an op-ed in The Hill, Securities Exchange Commission (SEC) Chair Gary Gensler returns to the media again with a defense of his position on cryptocurrencies and their need to be regulated (“come in and register, or else”).  Responding to critics, Chair Gensler writes, “I find the talking point that there’s a lack of clarity in the securities laws unpersuasive. Some crypto companies might message that the laws are unclear rather than admitting that their platforms don’t have sufficient investor protection.” Read more.

Tip: Gensler’s tempo of crypto-related communications remains at a high intensity. Continue reading “Crypto Tax Change Proposed By Biden Administration; The Fed Speaks on Digital Assets”

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today – digital assets subcommittee

All eyes will be on Digital Assets, Financial Technology and Inclusion Subcommittee Chair French Hill (R, AR) today as he hosts his committee’s first hearing titled “Coincidence or Coordinated? The Administration’s Attack on the Digital Asset Ecosystem.” See the hearing’s event page on House Financial Services website – starts at 2 p.m. ET.

Five current digital asset bills are listed for review such as HFS Chair Patrick McHenry (R, NC) and Rep. Ritchie Torres (D, NY) “Keep Innovation in America Act” and discussion draft’s of new, 118th Congress bills from House Minority Whip Rep. Tom Emmer’s (R, MN) and Rep. Warren Davidson (R, OH).

All of today’s prepared remarks are available from the hearing’s five witnesses including:

• • Mr. Mike Belshe, CEO and Co-Founder, BitGo (remarks (PDF))
  • Ms. Tonya Evans, Professor, Penn State Dickinson Law (remarks)
  • Mr. Jonathan Gould, Partner, Jones Day (remarks)
  • Mr. Paul Grewal, Chief Legal Officer, Coinbase (remarks)
  • Mr. Lee Reiners, Policy Director, Duke University (remarks)

Snippet from the testimony: Law professor Tonya Evans makes numerous suggestions on the way forward for digital assets regulation including: “Request the SEC to appear before Congressional oversight committees to explain how its aggressive piecemeal approach to regulation of crypto assets comports with efficient and effective regulation and in line with its legislative mandate to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation.” Continue reading “Digital Assets Subcommittee Hits The Ground Running Today; House Ag Convenes, Too”

At last week’s “Future of Digital Assets” conference produced by the Milken Institute, Rep. French Hill (R, AR), chair of the House Financial Services’ Digital Assets, Financial Technology and Inclusion Subcommittee, spoke at length regarding digital assets legislation prospects in the 118th Congress.

Nicole Valentine, FinTech Director at Milken Institute moderated the discussion.

(Transcript edited for clarity)

On key priorities for the House Digital Assets Subcommittee…

REP. FRENCH HILL: The Digital Assets Subcommittee is a priority for the House Republicans and the House Financial Services Committee because back in 2019, we had two task forces: a task force on artificial intelligence and we had a task force on FinTech, financial technology. Those were bipartisan. It was agreed to and set up by then-Chairwoman Rep.Maxine Waters (D, CA) and then-Ranking Member Rep. Patrick McHenry (R, NC).

And digital assets and financial technology have been a priority for the committee for many years to help solve many of the challenges that the existing financial structure has and lay a framework for innovation for the future. And so it was a “natural” that when Patrick [McHenry] became the chairman of the committee that he would want to have a subcommittee on digital assets. That’s the background – it has the full jurisdictional aspects of all things FinTech, inclusion and the broader picture of digital assets.

In the House and in the Senate, you don’t have clean jurisdiction in some of these key areas. The House Agriculture committee and the Senate Agriculture Committee play a role here as well because under market regulation conditions they might be involved in the futures market or certain aspects of the currency oversight of an exchange.

Our goal is to create a regulatory framework for digital assets. And there’s no doubt in my mind that this country needs that – we’ve seen that through the willy-nilly formation, so far, with no guidance – just pure innovation out there. We’ve seen it in the malfeasance in the industry that we witnessed last year culminating in the collapse of FTX. And we see it in the competition across the globe where other jurisdictions are establishing a legal framework and regulatory framework for digital assets, whether it’s in Europe or Asia. And so that is a critical element to take into account.

And finally, the United States has been at the forefront of financial innovation in the capital markets for certainly the 20th century and into the 21st century. We want to see that continue in a digital format. This is a big agenda for this subcommittee and I look forward to leading it as its initial pioneering chairman, and it’s gonna be a fun ride this year. Continue reading “Rep. French Hill Discusses Digital Assets Legislation Prospects at Milken Institute”

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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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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

Continue reading “House Financial Services Due Date Arrives for SEC’s Communications About SBF”