Most of the focus right now is on the Senate as they work through their market structure legislation process. But at the administrative agencies, things are moving forward whether market structure happens this year or not, with the SEC moving forward with implementing blockchain technology into trading equities, and the CFTC still waiting for a new Chair as there were communications released by the current nominee indicating why his confirmation has been denied thus far.
Here’s everything that happened last week in crypto law:
Senate Democrats Release Market Structure Framework
The Senate Democrats have responded to the Senate Banking Committee majority’s revised market structure bill with their own set of policies and framework the minority will seek to have addressed in any eventual final legislation. There is a plan to have a market structure legislation markup in Senate Banking by the end of September or early November, so that leaves very little time for Senate Democrats to vet language proposals with industry participants before seeking to add those changes to the existing market structure draft. That said, the Senate Agriculture Committee still hasn’t released their companion bill, and nothing will be finalized until that is done as well.
Tl;dr– The big take away is that the Senate Democrats are not far away from Senate Republicans on most issues, making passage of market structure in the Senate a more likely possibility. However, there are seemingly some sticking points for people on both sides which they may not be able to reach a resolution on. This includes whether there should be state law preemption, the level of government oversight over decentralized finance software, and adding additional prohibitions against stablecoin treasury yields being passed to consumers.
OTHER STORIES
Nasdaq Tokenized Securities: Nasdaq is proposing a rule change to the SEC which would allow tokenized shares of securities stating “[o]ur goal is to integrate digital assets into Nasdaq’s current infrastructure and systems, which will advance financial innovation while maintaining stability, fairness, and investor protection.”
Crypto Private Equity: This company which was recently funded to do private equity-style buys of existing companies and improve them through adding crypto rails and efficiencies is something super interesting and worth highlighting. I would think more of a consulting company which services existing PE would be a better fit, since most companies need more than crypto to be fixed, but certainly something worth following.
CFTC Chair Kerfuffle: Brian Quintenz, who was initially nominated by President Trump to be the next chair of the CFTC but who has had his confirmation hearing continuously postponed, publicly released a series of messages which he believes is the reason his confirmation has been so delayed. Never great for this drama when the CFTC is being expected to move fast on revising crypto-related policies.
Gemini IPO: The CFTC Drama between the proposed CFTC Chair and Gemini’s founders comes right as Gemini is gearing up for IPO with increased valuation target which resulted in a seemingly successful IPO. So the suboptimal timing of the CFTC Chair drama apparently did not hit the price too hard (if at all).
Figure IPO: Another major player in the space, Figure, also went public last week surpassing their anticipated $7 billion valuation day 1. Hard to tell if this is a crypto thing or just demand for newly public companies in the market after a dearth of IPOs in the prior years. But either way, happy to see these crypto companies who built through the bear win.
SEC Chair Speech Further Advocates “Super-App”: SEC Chair Atkins gave a keynote address where he further stated his intention to drive the agency to remove barriers from onchain trading of securities, stating “we must allow for ‘super-app’ trading platform innovation that increases choice for market participants. Platforms should be able to offer trading, lending, and staking under a single regulatory umbrella.” Great stuff to make it a less fractured system for financial products.
Hyperliquid Stablecoin Bidding War: There was a bidding war for third-party providers to assist Hyperliquid in launching its own stablecoin. This is always going on in the background, but one of the interesting parts of crypto is to see a DeFi platform like Hyperliquid have these bids and discussions (mostly) happen in the public.
More Stablecoin News from Tether: Tether announced it is releasing USA₮, with former Crypto Czar Bo Hines at the helm, which is designed to be a U.S.-regulated stablecoin. It was always going to be a question on if Tether would be able to (or want to) unwind their Bitcoin and other positions backing their USDT stablecoin to make compliant with expected GENIUS Act implementing regulations, so this makes sense releasing a new stablecoin to be used in the U.S. markets.
DOJ Sim Swap Civil Forfeiture: The DOJ is going after over $5 million in bitcoin which is alleged to be connected to various sim-swap attacks. I think more of these types of actions will happen as the DOJ looks to avoid statute of limitation issues on frozen fund seizures and have a better grasp on quickly identifying and freezing funds in centralized accounts of bad actors.
Packet Attack Scares Crypto: There was a supply-chain attack which was flagged by the CEO of Ledger as constituting a major security risk as it replaced transactions on certain platforms with an attacker’s address instead of the intended address. It turned out to be mostly harmless as the issue was identified and remediated quickly, but served as a reminder on the importance of checking your own transactions when you self-custody crypto and otherwise follow safe security practices.
Treasury Considering Rules Banning Crypto Mixers: According to reporting from The Rage, the Department of Treasury is considering a “so-called mixer rule, which uses the PATRIOT Act to prohibit private transactions in cryptocurrency.” Despite the protections for developers provided in the Senate’s current market structure draft, I think privacy preserving technology is going to be something it will be hard to build a coalition around for both sides and will primarily need to be fought in courts (although I would love to be wrong here).
Coinbase Files Motion Re: Gensler Deleted Texts: Coinbase filed a motion in their pending FOIA lawsuit against the SEC regarding a recent finding that former SEC Chair Gensler had texts improperly deleted (around the same time the agency was levying hundreds of millions in fines against registered companies for failing to meet document preservation requirements). Respect this level of petty, even with a new administration in charge now.
Private Market Funding Stays Hot: Nine crypto startups raised over $869 million last week, and companies are on pace to reach $25 billion before end of year. Love to see the building and funding going on under the new regulatory regime.
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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