US Government
Law Decoded: Arab States of the Gulf open up to digital asset services, March 14–21
Last week got off to an antsy start as the clause that many interpreted as a direct route to ban proof-of-work-(PoW)-based cryptocurrencies made a sudden comeback to the draft of the European Union’s key directive on digital assets. Many in the crypto policy space got immediate flashbacks to other instances of harmful last-minute additions to must-pass legislation days and hours before the vote. It all ended well, though, as the Committee on Economic and Monetary Affairs voted against the draft that contained the hostile language. Over in the United States, monetary policy kept growing more political, as evidenced by Sarah Bloom Raskin, President Joe Biden’s pick for the Federal Reserve’s vice chair for supervision, being forced to withdraw her nomination due to a Senate gridlock. Ukrainia...
Congress members concerned SEC stifling innovation with crypto scrutiny
In a bipartisan letter put forward by Republican Minnesota Congressman Tom Emmer, a cohort of Congress members has written to Securities and Exchange Commission (SEC) Chairman Gary Gensler, challenging the regulator’s scrutiny of cryptocurrency firms and expressing concern that “overburdensome” investigation may be suffocating the crypto industry. They suggest the SEC is drowning companies in paperwork in contravention of the SEC’s stated aims and mandated jurisdiction. Emmer tweeted to his 51,000 followers: “My office has received numerous tips from crypto and blockchain firms that SEC Chair @GaryGensler’s information reporting ‘requests’ to the crypto community are overburdensome, don’t feel particularly… voluntary… and are stifling innovation.” This is why I sent a bipartisa...
US Labor Dept warns of crypto risks in retirement plans
The US Department of Labor (DOL) has told 401(k) investors to “exercise extreme care” when dealing with cryptocurrencies and other digital assets citing fraud, theft, and financial loss as “significant risks”. In a compliance report, released on Thursday, the DOL offered a stark warning to employers that seek to increase their 401(k) exposure to cryptocurrencies, stating that any significant crypto investments within company-sponsored retirement accounts may attract legal attention. A 401(k) is a retirement savings plan offered by most American employers that extend tax advantages and long-term financial security to those that opt-in. Regarding the legislation surrounding 401(k) investments, the Employee Retirement Income Security Act of 1974 (ERISA) does not specifically...
Crypto-related stocks jump in positive reaction to executive order
The stock prices of crypto-related companies have jumped as the broader market reacted positively to President Joe Biden’s long-awaited executive order requiring US federal agencies to create a regulatory framework for digital assets, as well as exploring a future digital dollar. Coinbase (COIN) surged, up 10.5% at market close, while shares in Bitcoin-evangelist Michael Saylor’s MicroStrategy (MSTR) posted a 6.4% gain, according to TradingView. Blockchain-related exchanged-traded funds (ETFs) also enjoyed the markets’ renewed confidence in crypto, with ProShares Bitcoin Strategy ETF (BITO) gaining 10% and Valkyrie Bitcoin Strategy ETF (BTF) closing up 10.3%. Cryptocurrency mining companies enjoyed the largest gains with Riot Blockchain Inc. (RIOT) shares up 11.2% and Marathon Digital Hold...
Biden to sign executive order on crypto, authorize all-government effort to consolidate regulation
Later today, U.S. President Joe Biden will sign a long-anticipated executive order on digital assets. Despite fears that the order may resound a regulatory clampdown on the industry, the language of the document is fairly favorable, the key focus being the coordination and consolidation of various agencies’ efforts within a unified national policy. The order designates six key areas of the federal government’s involvement with the digital asset ecosystem — consumer and investor protection, financial stability, financial inclusion, responsible innovation, the United States’ global financial leadership and combating illicit financial activity — and directs specific agencies to lead in designated policy and enforcement domains. The Department of the Treasury will take the lead in developing p...
Crypto industry seeks to educate, influence US lawmakers as it faces increasing regulation
Interaction between the cryptocurrency industry and Capitol Hill is becoming ever more intensive as efforts to regulate crypto grow in tandem with its popularity. The surge in crypto industry lobbying last year was given some concrete parameters in February by crypto analytics startup Crypto Head. It released a report showing that the crypto companies that spent the most money on lobbying in 2021 were Robinhood, Ripple Labs, Coinbase and the Blockchain Association. These organizations were the lobbying leaders during the past five years as well, although with different rankings. Here is what the United States crypto-lobbying landscape looks like today. Metrics of influence Robinhood spent $1.35 million on lobbying in 2021 and was the only crypto-related organization to spend more than $1 m...
Seizure of Bitfinex funds is a reminder that crypto is no good for money launderers
As public understanding of how digital assets work becomes more nuanced along with the mainstreaming of crypto, the language of Bitcoin’s (BTC) “anonymity” gradually becomes a thing of the past. High-profile law enforcement operations such as the one that recently led to the U.S. government seizing some $3.6 billion worth of crypto are particularly instrumental in driving home the idea that assets whose transaction history is recorded on an open, distributed ledger are better described as “pseudonymous,” and that such a design is not particularly favorable for those wishing to get away with stolen funds. No matter how hard criminals try to obscure the movement of ill-gotten digital money, at some point in the transaction chain they are likely to invoke addresses to which personal details h...
Fed never did it: US Senate Banking head lashes out at Super Bowl crypto ads
The Super Bowl advertisements by crypto companies, including Coinbase, FTX and several others, ruled social media and news headlines for their out-of-the-box approach. However, United States Senate Banking Committee Chief Sherrod Brown was not impressed and blasted the ad-makers for not including appropriate warnings and risks involved. Brown, during the Tuesday Senate hearing on stablecoins, brought in the topic of popular crypto advertisements that aired during the Super Bowl. He said most of these ads failed to tell people about the downsides of investing in cryptocurrencies. The companies failed to mention the wild price swings and prevalent scams that occur in the market or the fact that the crypto market is not as well regulated as the traditional ones. Super Bowl advertisement ...
Laundering via digital pictures? A new twist in the regulatory discussion around NFTs
On Feb. 6, the United States Department of the Treasury released a report under the headline “Study of the facilitation of money laundering and terror finance through the trade in works of art.” In fact, only a tiny fraction of the 40-page document is dedicated to the “Emerging Digital Art Market,” by which the department understands the market for nonfungible tokens, or NFTs. Still, even a brief mention of the emerging NFT space in this context can have major implications for the tone of the nascent regulatory debate with regard to the asset class. What the report said The overall tone of the report is hardly alarming for the NFT space: The document casually mentions the growing interest in the digital art market both from private investors and legacy institutional players such as a...
Law Decoded: Tangible wins, new menaces and the global crypto taxation drive, Feb. 1–7
Every global event or major political crisis these days can trigger a digital asset-related conversation. As China welcomes the world’s top athletes to the Beijing 2022 Winter Olympics, showing off ultra-high-tech facilities and sports infrastructure, some United States politicians have raised concerns over the Games’ potential to act as a booster to the digital yuan’s adoption. In neighboring Myanmar, the military government that had overthrown the nation’s elected leadership a year ago is now looking into launching its own digital currency, not to project economic influence but to improve the domestic payments system and the struggling economy more broadly. Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the las...
Stealth rulemaking: Is proposed SEC rule with no mention of crypto a threat to DeFi?
On Jan. 26, the United States Securities and Exchange Commission proposed amendments to Rule 3b-16 under the Exchange Act that lacks any mention of digital assets or decentralized finance, which could adversely affect platforms that facilitate crypto transactions. Some cryptocurrency advocates — including SEC Commissioner Hester Peirce — believe that the commission’s extended definition of an exchange could thrust an entire class of crypto entities under the regulator’s jurisdiction, subjecting them to additional registration and reporting burdens. How real is the threat? The proposed change The amendments proposed by the regulator dramatically expand the definition of what an exchange is while eliminating the exemption for systems that merely bring together buyers and sellers of securitie...
Law Decoded: Russia flounders, America competes, IMF keeps fuming, Jan. 24–31
One of the most fascinating implications of the collision between traditional political institutions and the crypto space is how it can reveal the glaring lack of cohesion within power systems that otherwise look monolithic. Digital assets reside in a parallel policy dimension where neither a centralized consensus nor a clear rulebook exists, leading to a surprising variety of voices and opinions emerging in the absence of a politically coordinated course. Last week, a rare lively policy debate broke out in Russia in the aftermath of its central bank’s attempt to promote a hardline stance on crypto. One does not often see such a public interagency disagreement on substantive issues. Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy develo...
