A nonprofit organization dedicated to crypto advocacy is filing an amicus brief in support of the banned crypto mixer Tornado Cash. In a new announcement, the Blockchain Association says that it has filed an amicus brief in the Office of Foreign Assets Control’s (OFAC) lawsuit against Tornado Cash, saying that the token mixer is “simply […]
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The association submitted Freedom of Information Act requests as part of an investigation into how regulators’ actions “improperly contributed” to the collapse of three banks.
The United States-based crypto advocacy group Blockchain Association called on financial regulators to provide information related to the potential “de-banking of crypto firms” in the wake of the failures of banks including Signature, Silicon Valley Bank, and Silvergate.
In a March 16 notice, the Blockchain Association said it had submitted Freedom of Information Act requests to the Federal Deposit Insurance Corporation, the board of governors of the Federal Reserve System, and the Office of the Comptroller of the Currency for documents and communications that could potentially show regulators’ actions “improperly contributed” to the collapse of the three banks. According to Blockchain Association CEO Kristin Smith, crypto firms “should be treated like any other law-abiding business” in the U.S. with access to bank accounts.
“BA is investigating troubling allegations — including account closures and refusal to open new accounts — which have grown more concerning in the wake of this week’s banking crisis,” said the association. “A crisis that long term crypto opponents have rushed to blame, incorrectly, on the technology.”
1/ TODAY: we sent FOIA requests to the following govt agencies, seeking info on the potential de-banking of lawful crypto business:
— Blockchain Association (@BlockchainAssn) March 16, 2023
FDIC
Board of Governors of the Federal Reserve System
and the OCChttps://t.co/GdjNT6sWdU pic.twitter.com/vB4He5oQfY
For many in the space, the recent banking crisis began with Silvergate’s parent company announcing on March 8 that it would “wind down operations” for the crypto bank. Silicon Valley Bank followed on March 10 with its own failure after a run on deposits, and the Treasury, Fed, and FDIC announced the closure of Signature Bank on March 12.
At the time, a joint statement from the regulators said the action against Signature was taken to “protect the U.S. economy by strengthening public confidence in our banking system”. However, former U.S. Representative and Signature board member Barney Frank reportedly claimed the FDIC was sending a “strong anti-crypto message” in shutting down the bank, and some lawmakers are demanding answers.
An FDIC spokesperson told Cointelegraph the bidding process for banks interested in acquiring Signature and Silicon Valley Bank had begun. They suggested recent reports that the FDIC requested potential buyers of the failed banks not support any crypto services could have been part of its “confidential marketing process”.
“An acquirer tells the FDIC what assets and liabilities from the failed bank it is willing to take, as well as what (if any) money will change hands,” according to the FDIC’s resolution handbook.
Related: US crypto regulation happening ‘behind closed doors’ — Blockchain Association CEO
Prior to its closure, many considered Signature to be a major crypto-friendly bank in the United States, providing services to Coinbase, Paxos Trust, BitGo, and Celsius. Some in the space have suggested that federal regulators’ perceived attack on banks servicing crypto firms could force companies to turn to “shadier” options.
The Chamber of Digital Commerce has accused the SEC of trying to impose securities regulations via the “back door” of an insider trading lawsuit.
The United States Securities and Exchange Commission has again been accused of overstepping its authority and unfairly labeling crypto assets as securities, this time in its insider trading case against ex-Coinbase employees.
In an amicus brief filing on Feb. 22, the U.S.-based Chamber of Digital Commerce argued the case should be dismissed as it represented an expansion of the SEC’s “regulation by enforcement” campaign and seeks to characterize secondary market transactions as securities transactions.
We have serious concerns about the SEC’s attempt to label these tokens as securities in the context of an enforcement action against third parties who had nothing to do with creating, distributing or marketing those assets. This is not a healthy policymaking process. Dismiss! https://t.co/06WAJ65Ckl
— Perianne (@PerianneDC) February 22, 2023
“This case represents a stealthy, yet dramatic and unprecedented effort to expand the SEC’s jurisdictional reach and threatens the health of the U.S. marketplace for digital assets,” wrote Perianne Boring, founder and CEO of the Chamber of Digital Commerce.
The Chamber highlighted the “SEC’s encroachment into the digital assets market” was never authorized by Congress, and noted in other Supreme Court cases it has been ruled that regulators must first be granted authority by Congress.
“By acting without Congressional authorization, [the SEC] continues to contribute to a chaotic regulatory environment, harming the very investors it is charged to protect,” it wrote on Twitter.
The Chamber also argued that in bringing claims of securities fraud, the SEC was essentially asking the court to uphold that secondary market trades in the nine digital assets mentioned in an insider trading case against a former Coinbase employee constitute securities transactions, which it suggested was “problematic.”
This novel attempt by @SECGov to impose securities regulations via the “back door” of an insider trading action raises serious due process concerns & will result in an array of consequences that will harm investors and threaten digital assets. Thus, it should be dismissed!
— Chamber of Digital Commerce (@DigitalChamber) February 22, 2023
“We have serious concerns about [the SEC’s] attempt to label these tokens as securities in the context of an enforcement action against third parties who had nothing to do with creating, distributing or marketing those assets,” Perianne added.
The Chamber cited the LBRY v SEC case in its brief, in which the judge had ruled that secondary market transactions would not be designated as securities transactions.
The judge had been persuaded by a paper from commercial contract attorney Lewis Cohen, which pointed out that no court had ever acknowledged the underlying asset was a security at any point since the landmark SEC v W. J. Howey Co. ruling — a case which set the precedent for determining whether a security transaction exists.
The latest amicus brief follows a similar filing from advocacy group the Blockchain Association on Feb. 13, which also argued that the SEC had exceeded its authority in the case and claimed it was “the latest salvo in the SEC’s apparent ongoing strategy of regulation by enforcement in the digital assets space.”
Related: Gary Gensler’s SEC is playing a game, but not the one you think
An amicus brief is filed by an amicus curiae, or “friend of the court,” which is an individual or organization not involved with a case but can assist the court by offering relevant information or insight.
The SEC in July sued former Coinbase Global product manager Ishan Wahi, brother Nikhil Wahi, and associate Sameer Ramani, alleging that the trio had used confidential information obtained by Ishan to make $1.5 million in gains from trading 25 different cryptocurrencies.
The “work has been done” for stablecoin regulation in the U.S., but many in Washington D.C. are feeling “burned” and “betrayed” over the FTX collapse last year.
The United States Congress needs to take control of crypto legislation and make it a more “open process” where the entire marketplace is looked at “comprehensively,” suggests Kristin Smith, CEO of the Blockchain Association — a prominent U.S. crypto industry nonprofit.
In a Feb. 22 Bloomberg interview, Smith said the industry needs U.S. lawmakers to lead crypto legislation despite it making the process “very slow,” with regulators “stepping in” in the interim.
Smith noted that despite regulators “moving very quickly,” progress on legislation is happening “behind closed doors,” suggesting it’s vital for more industry involvement in an “open process,” which would involve Congress.
Smith believes the issue with regulators leading legislation with enforcement actions and settlements relates to “very specific facts and circumstances.”
She explained it’s a difficult position for Congress at the moment, as many in Washington D.C. who “were close” to former FTX CEO Sam Bankman-Fried and FTX feel “burned” and “betrayed” over the collapse of the cryptocurrency exchange in November 2022.
Smith is hopeful that stablecoin regulation will soon happen in the U.S., saying Congress has been looking at it “since 2019” and the “work has been done.” She said it “came close” to happening last year before the collapse of FTX.
Related: FTX poked the bear and the bear is pissed — O’Leary on the crypto crackdown
She added that crypto risks are different from traditional financial services, so regulators must spend more time looking at market regulation and “tailor to those risks.”
Smith suggested that stablecoin and “market side” regulation should be a higher priority than focusing on legislating crypto-related criminal activity, saying that public ledgers make it “much more transparent” than we see in the traditional financial system.
This comes after the Blockchain Association’s chief policy officer, Jake Chervinsky, took to Twitter on Feb. 15, stating that no matter how many enforcement actions the Securities and Exchange Commission and Commodity Futures Trading Commission bring, they are “bound by legal reality,” adding that “neither” has the authority to “comprehensively regulate crypto.”
The group's policy head doubted a divided Congress can create crypto legislation but said it doesn’t give regulators absolute authority in the interim.
Despite attempts to police cryptocurrency through enforcement actions, United States financial regulators “are bound by legal reality” and Congress will ultimately decide crypto regulations the policy expert for the crypto advocacy group Blockchain Association has suggested.
The association's chief policy officer, Jake Chervinsky, shared his views in an extensive Feb. 14 Twitter thread on the state of crypto policy.
He noted neither the Securities and Exchange Commission (SEC) nor the Commodity Futures Trading Commission (CFTC) “has the authority to comprehensively regulate crypto.”
14/ No matter how many enforcement actions the SEC and CFTC bring, they are bound by legal reality:
— Jake Chervinsky (@jchervinsky) February 14, 2023
Neither has the authority to comprehensively regulate crypto, neither can obtain it through any amount of enforcement, and neither will ever have it without an act of Congress.
Chervinsky believed a deal on crypto legislation seems “unlikely, given the ideological gap between House Republicans and Senate Democrats.” He accused the SEC and CFTC of overstepping their authority in an attempt to “get things done” without Congress.
Chervinsky called for the industry to remain calm following the recent flurry of activity from “crypto’s chief antagonist,” the SEC, and pointed to its crackdown on staking services as an example.
13/ The SEC's main tactic is regulation by enforcement, and it struck again last week by labeling Kraken’s staking service a security.
— Jake Chervinsky (@jchervinsky) February 14, 2023
That's frustrating, but it doesn't change much for anyone else. Settlements aren't the law, and every set of facts is unique. Others will fight.
The SEC’s Feb. 9 settlement with crypto exchange Kraken, that banned the exchange from ever offering staking services to U.S. customers, was publicly rebuked by SEC Commissioner Hester Peirce.
In a Feb. 9 dissenting statement, Peirce argued that regulation by enforcement “is not an efficient or fair way of regulating” an emerging industry.
Related: US lawmakers and experts debate SEC's role in crypto regulation
Chervinsky suggested litigation is one way the crypto industry can push for good policy, noting the judiciary plays an important role in dictating policy that has been “ignored.”
20/ FIFTH, we can litigate.
— Jake Chervinsky (@jchervinsky) February 14, 2023
Policy is made in all three branches of government, and we’ve ignored the judiciary for too long.
At the core of crypto is a fight for civil liberty, a fight that calls for impact litigation.
Our best allies may be in the courts. Let's go find them.
Crypto exchange Coinbase also faces an SEC probe similar to what resulted in Kraken’s settlement.
Coinbase CEO and co-founder, Brian Armstrong, has taken a more resolute stance, claiming that getting rid of crypto staking would be terrible for the U.S.
Armstrong argued in a Feb. 12 Twitter post that Coinbase’s staking services are not securities and would “happily defend this in court if needed.”
Coinbase's staking services are not securities. We will happily defend this in court if needed.https://t.co/GtTOz77YV3
— Brian Armstrong (@brian_armstrong) February 12, 2023
Judge’s rulings in landmark cases create a legal precedent. If such a case were brought to court and a judge decided Coinbase’s staking services did not classify as securities, other crypto companies in a similar position could use the precedent as part of their defense.
SEC's recent charges against crypto exchange Kraken over its staking program have sent tremors through the crypto industry.
Members of the crypto community seem outraged over the recent charges laid against crypto exchange Kraken in relation to its staking-as-a-service program in the United States.
On Feb. 9, the United States Securities Exchange Commission (SEC) announced it had settled charges with Kraken over “failing to register the offer and sale of their crypto asset staking-as-a-service program,” which it claims is qualified as securities under its purview.
Kraken agreed to settle the charges by paying $30 million in fines and to immediately cease offering staking services to U.S. retail investors, though they will continue to be offered offshore.
The move appears to have attracted the ire of not only the general crypto community but also of investors, politicians and industry executives.
Cinneamhain Ventures partner and Ethereum bull, Adam Cochran, called out SEC chief Gary Gensler, describing him as “an agent of an anti-crypto agenda” rather than a regulator, and questioning why the same standards weren’t applied to Sam Bankman-Fried and FTX:
2/2
— Adam Cochran (adamscochran.eth) (@adamscochran) February 9, 2023
Gensler is not a regulator. He is an agent of an anti-crypto agenda, who only aims to wield his power as cudgel for those he doesn't agree with.
So the big question then, is why didn't FTX get this treatment?
Whose pocket is he in?
In a Feb. 9 statement shared on Twitter, Kristin Smith, CEO of the Blockchain Association, argued that the situation at hand is a textbook example why Congress — not the SEC — should be working with industry players to forge appropriate legislation:
The following statement is attributed to @KMSmithDC in response to today's settlement between the SEC and Kraken:https://t.co/32KysvKfz0 pic.twitter.com/8vkWZXB6a2
— Blockchain Association (@BlockchainAssn) February 9, 2023
U.S. Congressman Tom Emmer — who has long been a critic of Gary Gensler — reiterated the importance of staking in the crypto ecosystem.
In a Feb. 9 Twitter post, the lawmaker explained that staking services will play an important role in “building the next generation of the internet” and argued that the “purgatory strategy” will hurt “everyday Americans the most,” as they may soon be forced to fetch such services offshore.
Meanwhile, Ryan Sean Adams, the founder of the Ethereum show Bankless, suggested to his 220,800 Twitter followers on Feb. 9 that the SEC could have taken other measures rather than charging Kraken out of the blue:
You could have:
— RYAN SΞAN ADAMS - rsa.eth (@RyanSAdams) February 9, 2023
- Mandated proof-of-reserves
- Required staking transparency
- Supported decentralized staking
Instead, we just got another gary g. ban hammer to the head. And we have no confidence you won't come for decentralized staking next.
You're driving it all offshore.
Other members of the community questioned how Kraken could possibly have registered with the securities regulator, as there was “no clear path” to approve crypto staking.
Others suggested it could impact Ethereum’s consensus layer, given Kraken is the fourth-largest validator on Ethereum, according to on-chain metrics platform Nansen.
Related: ‘Kraken Down’ — SEC commissioner rebukes own agency over recent action
However, not all were against the SEC’s decision. Prominent Bitcoin bull Michael Saylor — who has long considered ETH and other proof-of-stake cryptocurrencies to be securities — agreed with Gensler’s analysis that retail investors “lose control” of their tokens when they’re delegated to external staking service providers:
"Not your keys ... " - @GaryGensler. The @SECGov understands the importance of self-custody. https://t.co/oxPkFeJ77k
— Michael Saylor⚡️ (@saylor) February 9, 2023
Meanwhile, attorney and chief policy officer of the Blockchain Association, Jake Chervinsky, noted that such “settlements are not law” and that Kraken’s decision to settle was likely an economic decision rather than a legal one:
Settlements are not law. They're a decision that the economics of settling are better than fighting, no more.
— Jake Chervinsky (@jchervinsky) February 9, 2023
The SEC thinks staking-as-a-service is a security. Kraken didn't admit or deny either way.
It may be a tough question, but the SEC hasn't answered it either way today.
The debate comes as the SEC’s charge towards enforcing action against staking service providers prompted Coinbase CEO Brian Armstrong to say that “regulation by enforcement” would be a “terrible path” for U.S. innovators, as they’ll be forced to push more of their services offshore.
On Wednesday, 60 organizations involved in cryptocurrencies, open-source and free software, and human rights and privacy-preserving projects launched a new campaign calling on the 118th U.S. Congress to protect privacy. The groups, including Fight for the Future, Electric Coin Co., and the Tor Project, insist that Congress needs to deliver policies dedicated to standing up […]
XRP investment products have seen a third consecutive week of inflows, suggesting investors may be increasingly confident of Ripple’s victory.
Recent developments in the Ripple vs. Securities and Exchange Commission (SEC) case appear to have bolstered investor confidence in XRP (XRP)-tied investment products, according to investment data from CoinShares’ head of research, James Butterfill.
In its latest Digital Asset Fund Flows published on Nov. 7, Butterfill noted that XRP investment products have seen a third consecutive week of institutional inflows, clocking $1.1 million.
Butterfill said the figures imply “improving investor confidence as the SEC case against Ripple looks increasingly fragile.”
The last few weeks have seen Ripple Labs gaining increasing support from heavy hitters in the crypto industry including Coinbase and the Blockchain Association.
In a Nov. 4 post, General Counsel for Ripple Stuart Alderoty announced to his 89,000 followers that, “A dozen independent voices - companies, developers, exchanges, public interest and trade assoc’s, retail holders” had offered their help to explain how “dangerously wrong the SEC is.”
A dozen independent voices - companies, developers, exchanges, public interest and trade assoc.’s, retail holders - all filing in SEC v Ripple to explain how dangerously wrong the SEC is. The SEC’s response? We need more time, not to listen or engage, but to blindly bulldoze on. https://t.co/PRgvwI9m2X
— Stuart Alderoty (@s_alderoty) November 3, 2022
Other entities in support of Ripple include nonprofit organization Investor Choice Advocates Network, crypto mobile app SpendTheBits and the Crypto Council for Innovation, as well as the XRP “decentralized community.”
In total, there are 12 independent entities pledging legal support for Ripple.
However, despite the support and both sides calling for a summary judgment, the case could still take months, according to Ripple CEO Brad Garlinghouse, who spoke at DC Fintech Week on Oct. 11.
Garlinghouse speculated that the case could be wrapped up by the first half of 2023, but admits that is only a guess.
Related: Judge rules LBRY video platform’s token is a security in case brought by the US SEC
A recent ruling by the United States District Court in favor of the SEC against blockchain-based file-sharing and payment network LBRY could complicate the Ripple case as well.
Jeremy Hogan, Partner at Hogan & Hogan, told his 238,000 followers he expects the results of his case to “make its way into the SEC’s final brief in the Ripple case.”
LBRY fought the good fight but lost at summary judgment.
— Jeremy Hogan (@attorneyjeremy1) November 7, 2022
The Judge hung his hat largely on the fact that there was essentially no use for the tokens at the time of the sales.
I would expect this case to make its way into the SEC's final brief in the Ripple case. https://t.co/IDlq8J4RMS
Crypto lawyer John Deaton appears to still be bullish about Ripple’s chances of winning the case.
In a Twitter post, Deaton said the recent ruling “doesn't shake my confidence AT ALL,” teasing a lengthier explanation for his 224,000 followers on Nov. 8.
The United States-based crypto industry advocacy group the Blockchain Association has said it will stand with Ripple Labs amid its ongoing legal battle with the Securities and Exchange Commission (SEC), claiming the case could be very important for the future of the industry.
United States-based crypto advocacy group Blockchain Association has come out in support of Ripple Labs amid its ongoing legal battle with the Securities and Exchange Commission (SEC), claiming the case could be very important for the future of the crypto industry.
In an Oct. 28 post, the advocacy group announced it will "stand" with the American crypto economy by filing an amicus brief, also known as "friend of the court" in the SEC enforcement action against Ripple.
Nearly two years ago, the SEC announced they were suing Ripple (XRP), former CEO Christian Larsen, and current CEO Brad Garlinghouse in Dec. 2020 for allegedly raising $1.3 billion through unregistered securities sales through XRP.
"This case, which is just one in a long line of SEC efforts to regulate by enforcement, highlights the SEC's efforts to cement and legitimize its overly broad interpretation of the Howey test,” wrote the association.
The Howey Test determines what qualifies as an investment contract and is therefore what is subject to U.S. securities laws.
In their brief, the Blockchain Association outlined why in their view, the SEC and Chairman Gary Gensler's views of securities laws could have "devastating effects" on the crypto industry.
They argue blockchain technologies have many uses across the crypto industry; tokens can be used to pay for goods and services, conveyance of intellectual property rights, inventory tracking, and for a specific purpose in a given blockchain project.
"Applying the securities laws to those tokens – whether or not through the prism of the Howey test – would significantly restrict those networks from functioning."
The association also claimsSEC is disregarding clear Supreme Court and Second Circuit precedents stating transactions aboard are beyond the jurisdictional reach of the SEC.
"Though the blockchain industry is global in nature, the federal securities laws are not. The Second Circuit has repeatedly re-emphasized the Supreme Court's lesson on this subject."
"Accordingly, both for liability and (if necessary) damages purposes, this Court should be mindful of the limits of the securities laws," it added.
Related: Ripple boss tips when SEC case will end as Hoskinson hits back at XRP army
Kristin Smith, executive director of the Blockchain Association, believes this case could have wide-reaching ramifications for the future of crypto, calling the SEC's interpretations of the securities laws, “the single greatest threat to the future of this rapidly growing industry."
"By erratically applying these outdated standards to a modern and innovative technology, the SEC continues its "regulation by enforcement" pattern, punishing crypto companies with little justification or warning,” she said.
The Blockchain Association said the case gives the industry the chance to push back against what they see as the "SEC's regulation by enforcement agenda" and potentially open the door to modernized standards for the industry."
The US government is reportedly delaying collecting billions of dollars worth of crypto taxes to give firms in the industry more time to gather relevant information on their customers. According to a new report by Bloomberg, The U.S. Treasury Department and the Internal Revenue Service (IRS) plan on delaying tax collection on digital assets until […]
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