It was another busy week in crypto legal developments with a flood of crypto companies responding to the CFTC’s request for comment on compute futures, and the first of the prudential regulators releasing their final GENIUS Act implementation rules ahead of the law going live in early 2027. The comments on Regulation Crypto Assets and the Treasury Department’s GENIUS Act rulemaking proposals also closed last week, so a lot to digest in those responses as well.
Here’s everything that happened in Crypto Law last week:
Responses to CFTC Compute Futures Request Filed
The Commodity Futures Trading Commission (“CFTC”) issued a request for comment on the listing of compute futures a few months ago. Last week, the responses were due and quite a few companies in and around the digital asset space submitted their responses including The Digital Chamber (discussed below), Kalshi, Hyperliquid Policy Center, Paradigm, Douro Labs, Jump, and others. Compute falls within the Commodity Exchange Act’s broad definition of a commodity, and the CFTC’s existing regulations under Parts 38 and 40 provide established procedures for exchanges to list new derivatives products.
Tl;dr– There were quite a few responses, and I am obviously biased, but TDC’s response was one of the most comprehensive. The submission strongly supports the development of federally regulated derivatives markets for computing capacity, an increasingly critical resource for artificial intelligence development and deployment, facilitate financing, and provide businesses with tools to manage the future cost of compute. Rather than prescribing a single definition of compute or determining which contracts should succeed, the CFTC should allow exchanges and market participants to develop products that respond to commercial demand. These could include traditional futures, perpetual contracts, cash-settled products, and physically settled contracts that deliver transferable or tokenized rights to future computing capacity. We look forward to discussing the response with the CFTC further. While on the subject, this article about data center financing is super interesting for anybody interested in this topic.
OCC Issues Final Proposed GENIUS Act Implementation Rules
The Office of the Comptroller of the Currency (“OCC”) released its final rule to implement the GENIUS Act. It is the first of the prudential regulators to release final rule text, with the initial final rules from all the various banking regulators due ahead of the January 2027 go-live date for the law. It was great to see many of the suggested improvements from the four letters TDC submitted in response to the proposed rules which were released in March of this year. As a reminder, you can keep track of all of TDC’s GENIUS Act responses on this central webpage.
Tl;dr– The main thing people are focused on, for good reason, is the removal of the “rebuttable presumption” that arrangements between issuers and third parties in which third-parties pay some form of consideration in relation to a particular stablecoin are attempts to evade the GENIUS Act’s narrow yield prohibition. While banking lobbies will never say this out loud, quite a few of them were depending on federal prudential regulators taking an expansive view of the GENIUS Act’s yield prohibition which is why they felt comfortable killing the Clarity Act even if that meant killing the additional restrictions on stablecoin yield payments that the Clarity Act would have provided. They are probably regretting that now, in addition to missing out the various permitted activities the Clarity Act would have defined for banks to compete with FinTechs on crypto services. But while yield is what everybody is focused on, there were a ton of other minor but important improvements such as removing requirements of downstream customer identifications and bringing redemption time periods closer to what the FDIC proposed.
OTHER STORIES
Starknet Conversion to L1: Starkware, the development company behind the Starknet Ethereum L2, has proposed converting to an independent L1 which seems to have the support of its governance token holders. It makes sense for them, considering how much work they have already put into their proposed post-quantum solutions.
Anchorage Pushed Back Against ICBA Lawsuit: This is a great Op-Ed from Anchorage pushing back against Independent Community Bankers of America’s lawsuit vs. the OCC challenging trust chartering decisions. It is time we stop trying to fit different business models in the same regulatory bucket when they represent fundamentally different benefits and risks.
Reg Crypto Comment Period Closes: The SEC’s “Regulation Crypto Assets” rulemaking proposal which provides a pathway for financing a business through token sales had its comment period close last week as well. As always, if you only have time to read one response, it should be The Digital Chamber’s response which is excellent work product.
Treasury Section 3 Rulemaking Response: The Digital Chamber also submitted it response to Treasury’s Section 3 rulemaking proposal which deals with issuer and DASP liability once the GENIUS Act takes effect. Great work worth reading where Treasury got it right and where the proposed rules could use refinements or changes.
UK DeFi Consultations: The UK’s Financial Conduct Authority (“FCA”) released a pair of consultation requests seeking comments on how the regulator should address decentralized finance as applicable for use by UK residents (among other things). The U.S. isn’t the only regulation grappling with the increasing merging of DeFi and TradFi into just Fi.
Innovation Exemption Venues: Companies are starting to roll out their plans for becoming tokenized securities venues (i.e., TSV’s) as tokenized stock trading is expected to be available to U.S. investors in the very near future on these venues.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Farcaster. Any typos or errors are intentional to prove I am not AI. 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.
