It was another week focused on market structure, as the Senate Agriculture committee is working through the brackets in its commodities-focused market structure draft and Senate Republicans are in talks with Senate Democrats on the banking/securities focused aspects of market structure in Senate Banking. With the CFTC-Chair nominee one step closer to taking over that role, it looks like he is going to have his work cut out for him. There were also some updates coming out of DevCon, and a new bill designed to allow U.S. taxpayers to pay their taxes in Bitcoin.
Here’s everything that happened last week in crypto law:
OTHER STORIES
Digital State Network Launch: Excited now that it is official the amplify the State Network from Digital Chamber, which is our way of expanding from focusing purely on federal policy and give more attention to state-level policy. If you know anybody who is doing state-level policy work in crypto, please reach out and we would love to connect and be a resource for you all.
Access to Finance Through Crypto: Really liked these materials put out by Paradigm on why historically unbanked populations have turned to crypto to gain access to finance. “Nearly all of the interviewees said that the main reason they used crypto was because they found it more trustworthy and safe than traditional finance.” Crypto doesn’t need to replace the banking system. It just needs to be an option for people to use who want more control over their personal finances.
Bitcoin Tax Bill: Representative Davidson has proposed new legislation that would let people pay their taxes in Bitcoin without recognizing a gain on that Bitcoin, with the payments received earmarked for the U.S. Bitcoin strategic reserve. No idea how far this effort goes, but I appreciate the idea and intent behind it.
SEC Financial Privacy Roundtable: The SEC has scheduled a roundtable discussion on financial privacy, set for December 15th. This is obviously a focus for Commissioner Peirce, so good to see this is moving forward.
Staked ETH ETF: Last week, I had an update about changes to tax rules which allowed ETF issuers to stake their proof-of-stake assets held in ETF products, but with burdensome rules on distributions. In that update, I said it seems like the best route would just be an ETF for already staked assets like stETH. I would like to think somebody at Blackrock was reading my update knowing that’s exactly what they already had in the works before it was announced last week.
OCC Allows Banks to Pay Gas Fees: The OCC issued some interpretive guidance last week which many in banking were looking for regarding banks acquiring digital assets to pay gas fees to test products and services and paying gas fees for customer-directed transfers. These are the types of simple and common-sense determinations that the industry has been clamoring on about for years.
Polygon Payment Processing: Polygon was tapped by EU FinTech giant Revolut to be embedded in their app and be the technical rails for zero-fee transfers. It has been interesting to watch Polygon pivot from gaming/general purpose L2 into really leaning in and focusing on institutional users.
Crypto Privacy Update: Vitalik gave a presentation at ETH DevCon about what he is calling Kohaku, a suite of privacy-preserving crypto tools to enhance privacy and security in the Ethereum ecosystem. As the technology increases in adoption, the need for privacy preserving tools is also going to increase.
AAVE App: AAVE is releasing an app which is designed for users who want to ditch their savings accounts and switch to something which pays real interest. I predict we will see a lot more of this type of thing along with the DeFi Mullet-type offerings of major financial service providers giving their users access to DeFi and associated yield optimization options.
Crypto Crime: As could be expected, with market structure efforts heating up, the anti-crypto groups are putting out their less-than-favorable coverage. Binance has pushed back against some of this coverage, but this is going to be a continuous effort in clearing up the misstatements and strategic omissions in these types of articles.
Proposed CFTC Chair Hearing: The Senate Agriculture Committee held a hearing over the nomination of Mike Selig to be the next Chair of the CFTC. He was voted through committee and now his nomination goes to the full Senate for confirmation.
Basel Proposal: The Chair of the Basel Committee on Banking Supervision confirmed that rules for banks with crypto holdings need to be reworked. This is good news, because the current capital rule requirement proposals for things like stablecoins being the same as more volatile digital assets make no sense.
DeFi Mullet Expansion: Coinbase is now letting users access DeFi lending platform Morpho through Coinbase to lend ETH, which adds to other integrations for stablecoin and wrapped bitcoin lending. Love to see it.
Industry Letter for Regulatory Guidance: The Digital Chamber joined more than 65 other industry advocates in submitting a letter to the President encouraging the President to continue building and implementing on his working group’s recommendations on issues like tax and rulemaking.
Wintermute SEC Submission: I try to at least give a once-over for all the industry submissions to the SEC through the Crypto Task Force page, and this Wintermute submission is worth highlighting. It’s crucial as we move to implement blockchain technology more broadly that we don’t limit the benefits of that tech through unnecessary forced intermediation.
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: In late 2022, while I was at Polsinelli, I started preparing weekly updates for attorneys at the firm to stay abreast of the latest Web3 legal developments. I now 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 are solely my own. They do not reflect the official stance or endorsement of the Digital Chamber or any of its members.
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