Crypto hit a $4 trillion market cap in a wild “Crypto Week” which included some drama in Congress and started rocky, but ended with some of the most bipartisan support for various crypto bills that we have ever seen and the first digital asset bill in America being signed into law. But while all that was going on, the criminal trial regarding the right to code started, and the crypto treasury company trend continued.
Here’s everything that happened last week in Web3 legal:
GENIUS Act Passes House, Signed Into Law
It took the longest vote in House history with the voting process lasting almost 10 hours to obtain enough votes to clear the procedural threshold to hold a floor vote on the GENIUS Act and CLARITY Act, with the GENIUS Act eventually passing on a 307-122 bipartisan vote. The President held a signing ceremony the following day to enact this the bill into law, making the United States one of the first countries to develop a framework for issuance, sale, and redemption of digital assets pegged to a sovereign currency. This allows major businesses and financial institutions to implement stablecoin payment processing into their businesses with regulatory certainty as to how those assets will be legally classified.
Tl;dr– It wouldn’t be a Crypto Week without some drama which was the case in both getting the GENIUS Act over the hump to eventual passage along with related CLARITY Act horse trading (discussed below). If the Anti-CBDC Surveillance State Act had been attached as certain House Republicans were demanding last minute, the GENIUS Act would have needed to go back to the Senate where it likely would have died. Thankfully, cooler heads prevailed in the end, and this landmark digital asset legislation was finally passed and signed into law. This is the first digital asset legislation to be signed into law in the United States and sets the country up for implementing smoother, cheaper, and faster payments than under most other existing payment rails.
CLARITY Act Passes House, Heads to the Senate
The House’s digital asset market structure bill, the CLARITY Act, has passed on a full house vote with wide bipartisan support on a vote of 294-134. All House Republicans voted in favor of the legislation or abstained, and 78 House Democrats voted in favor as well. That is more House Democrat support than FIT21 (the House’s previous attempt at a market structure bill when Democrats controlled the House) which had 71 Democrats join their Republican colleagues in passing in the House before eventually dying in the Senate. The CLARITY Act will now head to the Senate, where the Senate Agriculture and Banking committees are already working on their own market structure ideas as well.
Tl;dr– Just like the GENIUS Act, the CLARITY Act was held up for a bit with the Freedom Caucus group in the Republican Party wanting to attach the Anti-CBDC Surveillance State Act last minute, which would have killed all bipartisan support for the bill. After late night negotiations, the CBDC bill was added a defense authorization spending bill instead, which allowed for broad bipartisan support for CLARITY. While it is unclear whether the Senate will stick with CLARITY or use the ideas of CLARITY to form their own market structure legislation, this amount of bipartisan support is a good sign of potential market structure legislation making its way through the Senate and eventual signage into law.
OTHER STORIES
Tornado Developer Criminal Trial Starts: As I covered in the prior update, DOJ v. Roman Storm started last week with Storm being charged with various money laundering-related charges due to his development of the Tornado Cash software. The Rage has some of the best coverage on the trial so I would recommend reading that to stay up-to-date for those interested. The case has another week before the DOJ intends to close its case in chief and likely another week or two of defense so I will keep covering major updates as they occur.
DOJ Polymarket Probe Ends: In better news, the DOJ and CFTC have ended their investigation into Polymarket. The timing of the investigation, right after Polymarket correctly predicted the outcome of the Presidential election, is impossible to ignore, but I’m happy for the founders to have this all behind them.
Anti-CBDC Surveillance State Act Update: I appreciate everything that Tom Emmer has done for crypto policy as he seems to be one of the few members of Congress that truly understand the technology, but the Anti-CBDC bill seems more marketing than real policy so glad it didn’t impair gaining bipartisan support in the real crypto bills of GENIUS and CLARITY. It passed the House in an expected (mostly) partisan 219-210 vote with just 2 Democrats voting in favor.
Another Crypto Treasury Company There was yet another crypto treasury company announced last week, this time Nasdaq-listed Sonnet BioTherapeutics looking to purchase $HYPE. I am not sure why people want to buy into these instead of the assets themselves, but to each their own I guess.
ETF Updates: In other “ways to hold crypto without holding crypto” updates, the SEC is taking more time to assess the availability of in-kind redemptions for crypto held through ETFs, and Blackrock is looking to add staking rewards to its ETH ETF.
AAVE Passes $50 Billion in Deposits: DeFi lending stays hot, with AAVE becoming the first protocol to pass $50 billion in TVL. Which would make it the one of the 50 biggest banks in America if it was a commercial bank.
Libra Token Lawsuit Update: I typically do not link to stories behind a paywall, but I had to make an exception for this one about Hayden Davis’s motion to dismiss on a jurisdictional basis because it called him a “Crypto Exec” in the story. Never forget.
Banking Regulators Give Guidance on Crypto Custody: This guidance from FDIC, the Office of Comptroller of Currency, and Federal Reserve saying banks can custody crypto assets for customers but need to be aware of risks and take appropriate steps to protect against those risks is just common sense guidance that is long overdue.
Coinbase Rebrands Wallet to Base: Coinbase released a slew of updates, including rebranding it wallet to Base as a part of an overarching rebranding strategy for its non-exchange consumer products and services it seems. It also looks like they are more closely integrating with blockchain-based social media farcaster, which is p neat.
Marshal Service BTC Holdings: While most people were focused on Congress, there was a kerfuffle over the amount of BTC held by the U.S. Marshal Service?
Crypto Tax Changes: While this was announced a while ago, it made the news again that the President supports efforts of certain law makers to make a de minimis tax exemption on gains for crypto used to purchase everyday goods and services. Which makes sense. It is dumb to force me to try to calculate gains on $0.01 of ETH used to pay gas fees to used USDC to buy something.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Farcaster. As always, I am an attorney, I am not your attorney. For legal advice, you should always consult (and pay for) an attorney.
Outro/Disclaimer: Since late 2022, I’ve prepared weekly updates for attorneys at my firm to stay abreast of the latest Web3 legal developments. The biggest stories are included in Bi-Weekly posts on the firm’s BitBlog, where we provide tl;dr overviews and insights into the biggest stories from the past two weeks. I post the weekly updates on my personal blog every Tuesday, where I also provide links to more obscure legal developments and otherwise discuss industry trends and stories. Please note, the views and opinions I express, both on BitBlog and my personal blog, are solely my own. They do not reflect the official stance or endorsement of my firm.
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