Tag: Crypto

Operation Choke Point 2.0

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By Andrew Langer. April 4, 2023. (Real Clear Policy)

In 2014, the Wall Street Journal blew the lid off the Obama-Biden Administration’s “Operation Choke Point”, where the Department of Justice and bank regulators colluded and overreached their authority to close legal businesses that were deemed “undesirable”.  They did it through pressuring banks and credit card payment processors to close the accounts of people and companies that had not violated any laws, without any proof of wrongdoing. It’s happening again today, on a much bigger scale, against legal U.S. companies that use crypto technology for their product offerings.

It was illegal then. It’s illegal now.

As I have previously written, we are still in the infant stages of cryptocurrencies and associated crypto tech. Cryptocurrencies and the underlying technology don’t neatly fit into the related – but ultimately, different – legal categories and classifications for the agencies that regulate securities, commodities, currencies and all other aspects of commerce. 

Congress and the federal government should have moved a long time ago to set out a regulatory framework that addressed this, so that American innovators could know how to legally operate and consumers could be protected from harm. It didn’t happen, and that has provided an opening for a panicked Administration to launch another illegal war on American businesses they don’t like and distract the public from their own economic mismanagement.

Read the full article here.

Barney Frank Was Right About Signature Bank

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By The Editorial Board. March 20, 2023. (Wall Street Journal)

We never thought we’d write that headline. But on Sunday the Federal Deposit Insurance Corp. announced that New York Community Bancorp’s Flagstar Bank will assume all of Signature Bank’s cash deposits except for those of crypto companies. This confirms Mr. Frank’s suspicions—and ours—that Signature’s seizure was motivated by regulators’ hostility toward crypto.

Mr. Frank alleged last week that regulators seized Signature, whose board he served on, “to send a message to get people away from crypto.” It increasingly appears that way. Reuters reported last week that the FDIC was requiring any buyer of Signature to give up all crypto business at the bank. The FDIC denied this.

But the agency’s statement says that “Flagstar Bank’s bid did not include approximately $4 billion of deposits related to the former Signature Bank’s digital-assets banking business.” That means crypto companies will have to find another bank to safeguard their deposits. Many say that government warnings to banks about doing business with crypto customers is making that hard.

Read the full article here.

Crypto Firm Paxos Faces SEC Lawsuit Over Binance USD Token

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By Vicky Ge Huang, Patricia Kowsmann and Dave Michaels. February 12, 2023. (Wall Street Journal).

The Securities and Exchange Commission has told crypto firm Paxos Trust Co. that it plans to sue the company for violating investor protection laws, according to people familiar with the matter, the latest move in the agency’s escalating campaign in crypto enforcement.

The SEC’s enforcement staff issued a letter to Paxos known as a Wells notice, which the agency uses to inform companies and individuals of a possible enforcement action, according to the people.

The notice alleges that Binance USD, a digital asset that Paxos issues and lists, is an unregistered security, according to the people.

Read the full article here.

SEC v. Ripple: Did The Government Fail To Prove Its Case?

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By Hassan Tyler. January 19, 2023. (ValueWalk).

The saga for what Forbes has called “ the cryptocurrency trial of the century” looks as if it is about to enter its closing stages. Final briefs on summary judgment were filed in November of last year by the U.S. Securities and Exchange Commission (SEC) and the payments software company Ripple Labs in SEC v. Ripple .

Nearly two years of arguments are now in the hands of Judge Analisa Torres of the Southern District of New York, who is expected to rule sometime in the first quarter of this year.

SEC v. Ripple

The issue revolves around how Ripple uses the XRP token and its decentralized ledger as a tool for its cross-border payments software that it sells to international banks and money transmitters. The company and two of its executives sold large amounts of the token to exchanges starting in 2013, which fed a substantial secondary market for the cryptocurrency and an ecosphere for the XRP Ledger for businesses and individuals without the involvement or permission of Ripple.

Read the full article here.

Crypto Goes to Washington

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By Molly Ball. October 3, 2022. (TIME).

To the untrained ear, Hester Peirce’s comment sounded anodyne, but everyone in the audience knew what she was doing: selling out her boss. “It’s fairly clear,” the U.S. Securities and Exchange commissioner said from the Washington conference stage, “that we’ve been taking an enforcement-first approach in an area where we should be taking a regulatory-first approach. I think we’ve got the balance wrong right now.”

Peirce was speaking at the D.C. Blockchain Summit in May, to an audience of the cryptocurrency faithful. Outside the auditorium, geeks, lobbyists and investors mingled in a cavernous converted warehouse. “Trust is non-fungible,” read a banner for the accounting firm Deloitte, hung from a balcony where the company was sponsoring a lavish spread of snacks. Most attendees were done up in D.C. drag—conservative suits and dresses, more boardroom than Burning Man.

Read the full article.

US Treasury Develops ‘Framework’ for International Crypto Regulation

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By Nikhilesh De. July 7, 2022. (CoinDesk)

The U.S. Treasury Department published a fact sheet Thursday outlining how it could work with foreign regulators to address the cryptocurrency sector.

The fact sheet, which is the first report published by the department as a result of U.S. President Joe Biden’s executive order on crypto, said the framework “is intended to ensure that … America’s core democratic values are respected,” pointing to consumer, investor and business protection, the safety of the global financial system and interoperability.

According to the sheet, the framework’s policy objectives also include reducing the potential use of crypto for illicit finance, promoting access to financial services, supporting technological advancement and “reinforc[ing] U.S. leadership in the global financial system.”

Read the full article here.

The SEC’s Crypto Bait And Switch And Investors’ Loss Of $15 Billion

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By Roslyn Layton. June 15, 2022. (Forbes)

Four years ago this week, Security Exchange Commission’s (SEC) Director of Corporation Finance William Hinman detailed a vision for regulating digital assets. The speech was a bait and switch. It promised the opening of a blockchain revolution, the next chapter in the American innovation success story. In practice, the SEC wants to hammer crypto out of existence. On that fateful day, Hinman said that decentralization of a blockchain ledger, where tokens are being “used to purchase a good or service through the network on which it is created”, could transform a digital asset into a commodity outside the SEC’s purview. He opined that once they became “sufficiently decentralized”, a token and its network could operate without fear of an SEC enforcement action for failing to register like a stock. How wrong he was.

Crypto industry scores a big win under long anticipated Senate bill

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A highly anticipated Senate proposal to bring the freewheeling cryptocurrency industry under federal oversight would deliver a win for the sector by empowering its preferred regulator, the Commodity Futures Trading Commission (CFTC), over the Securities and Exchange Commission.

The bill’s sponsors, Sens. Cynthia M. Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.), are touting it as the first serious effort to apply comprehensive regulation to the crypto industry, which has minted a new class of billionaires and promised to reinvent financial services while also spawning scams and investor wipeouts that have raised regulators’ alarms.

Read the full article here.

The Crypto Security Debate Goes to Court

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By Paul Kiernan. May 26, 2022. (Wall Street Journal)

WASHINGTON—Investors are asking the courts to decide an existential question for the cryptocurrency industry: whether digital tokens are, for legal purposes, more similar to stocks or to gold.

Attorneys for cryptocurrency-trading platform Coinbase Global Inc. COIN 9.47% filed a motion this month to dismiss a class-action lawsuit arguing that 79 of the tokens listed on the firm’s platform are unregistered securities. 

The group of Coinbase users is demanding reimbursement for trading fees and market losses and seeking to prevent the assets from continuing to trade on the platform. 

Outside of enforcement actions, the Securities and Exchange Commission hasn’t indicated which cryptocurrencies it considers to be securities. But federal statutes passed in the 1930s deputize ordinary investors to help the SEC do its job, by giving buyers of unregistered securities the right to sue the seller for their money back. 

Read the full article here.

SEC Asked To Probe Ex-Official’s Crypto Statements

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By Al Barbarino. May 10, 2022. (Law360)

A nonprofit watchdog asked the U.S. Securities and Exchange Commission to investigate its former corporate finance head, Bill Hinman, now a Simpson Thacher & Bartlett LLP senior adviser, claiming statements he made about cryptocurrencies while at the agency may have presented a conflict of interest. 

Empower Oversight Whistleblowers & Research claims Hinman didn’t follow instructions that the SEC’s ethics office gave him to avoid conflicts tied to his financial interests in Simpson Thacher, including the firm’s connection to the Enterprise Ethereum Alliance, or EEA, according to a letter the group sent Monday to the SEC’s Office of the Inspector General.

“Directives without compliance monitoring and sanctions for noncompliance are not meaningful; they are window dressings,” said Jason Foster, president of Empower Oversight, in an announcement about the letter.

Read the full article here.