Lots of talk out of Switzerland last week, as the world’s financial leaders met in Davos and crypto was a frequent topic of discussion. Back stateside, the Senate Agriculture Committee released updated draft text for their portion of the overall market structure legislation, and Chair Selig at the CFTC has gotten settled in and started to roll out his administrative agenda partnering with the SEC to modernize both agencies to a tokenized future.
Here’s everything that happened last week in crypto law:
Senate Agriculture Releases Revised Market Structure Draft
The Senate Agriculture Committee released their revised market structure bill, now titled the “Digital Commodity Intermediaries Act” (or “DCIA”) ahead of their planned bill markup this week (which was pushed back from Tuesday to Thursday of this week because D.C. can’t handle a few inches of snow). While this was a product of bipartisan negotiations, it appears Senate Democrats and Republicans were not able to reach a deal on all the language prior to it being released so this is a Republican-only product in how it decided to remove brackets and make changes from the previously released (but very incomplete) bipartisan Discussion Draft from November.
Tl;dr– The biggest changes were probably the removal of brackets and the incomplete sections dedicated to AML and DeFi, with the current bill instead implementing those types of issues throughout rather than treating as separate and standalone. The definition of “Decentralized Finance Trading Protocol” stayed largely the same, but they added a prong requiring it to be censorship resistant which was interesting for sure. They also added a specific provision related to memecoins, and there was far more mandatory joint rulemaking between the CFTC and SEC giving the SEC less unilateral authority despite the “SEC Front Door” provisions added in the Senate Banking portions of the bill. All and all, this is a solid bill but we shouldn’t expect the vote in Senate Ag. on Thursday to be bipartisan due to Republicans being the party filling in virtually all of the blanks from the prior bipartisan discussion draft.
OTHER STORIES
All Eyes on Davos: Most of the financial world was focused on the World Economic Forum in Davos where President Trump once again pushed for market structure legislation in his speech at the event, Coinbase was apparently wheeling and dealing with banks over market structure stablecoin yield issues (while apparently bringing and entire country onchain?), and Lary Fink was pushing for tokenization chain consolidation that made my ETH bags happy. I’m not at all jealous of people who got to go. If you are going to be cold, being cold around the financial leaders of the world where all the backroom deals get done seems like the way to do it.
CFTC/SEC Chair Fireside Chat: Chairs Selig (CFTC) and Atkins (SEC) are going to host a fireside chat on Tuesday (now moved to Thursday due to weather) to discuss their plans to work together in moving both agencies into the 21st century. Will be also available to stream regardless of weather issues.
CFTC “Future-Proof” Imitative: CFTC Chair Selig announced his plans to “upgrade” the agency through lasting rulemaking aimed at modernizing the CFTC’s approach to digital assets and limiting risk of future enforcement first regimes. Love to see it!
Wallets Pivot to Social and Social Pivots to Wallets: Farcaster, the crypto native social networking protocol, had previously announced it was pivoting to focus on its wallet application and has now been sold to a core developer to continue that process. Meanwhile, the Base app is pivoting to trading vs. prior social post. What is old is new and what is new is old.
SEC to Dismiss Gemini Lawsuit: The SEC will dismiss the lawsuit it brought against Gemini exchange regarding their “earn” program. This brings the long battle in the fallout of the Genesis collapse to an end. Considering all investors were made whole, good to see this come to an end so everybody can move on.
Consensys Pushed Back at FTC: Consensys submitted a comment letter regarding the FTC’s proposed consent judgement in the Nomad hack findings. Some industry groups commented too. While comment letters are permitted in FTC consent judgements, they are rare since they are negotiated settlements which have no legally bind effects on others. Pocket watching a settlement between consenting parties seems odd. Also, these seem to take issue with allegations in the Complaint vs. the actual consent judgment? “It’s not what you said, it’s how you said it” in comment letter form, I guess?
Senate Banking Market Structure in Time-Out: It looks like Senate Banking will take a break from market structure issues to work through+h some housing legislation. Would have been nice to have had a markup so the break could be used on floor/other amendments without delaying everything, but I’m sure those developers will be fine going to jail if nothing get passed this session but stablecoin yield stays the way it is. Right?
Stocks Onchain at NYSE: The New York Stock Exchange announced it is developing a tokenized securities platform which would allow 24/7 trading and settlement. Love to see financial rails being modernized, but the real fun starts when DeFi has a seat at the table.
Developer Protection Myths: Happy to amplify this work from our friends at the DeFi Education Fund laying out the myths and misunderstandings on what developer protections in market structure legislation do.
Crypto Securities Safeguard Article: Adding this article to the never-ending list of things to read, dealing with how the SEC can provide security safeguards for tokenized securities which is in-line with the rules for their non-tokenized equivalents. It has helpful charts too!
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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