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U.S. Congressman wants to scrub bill provision that crypto advocates say is a potential disaster

Representative Ted Budd stated that the provision would let the Treasury unilaterally prohibit certain financial transactions without public input.

North Carolina Representative Ted Budd submitted an amendment to the omnibus America COMPETES Act of 2022, specifically targeting the provision that would allow the Treasury Department to impose “special measures,” including surveillance and outright prohibitions, against “certain transmittals of funds.”

As Cointelegraph reported, executives of crypto advocacy group Coin Center had earlier turned the spotlight on the provision, introduced by Connecticut Representative Jim Himes, that would scrap the existing checks — such as the requirement of public consultation and time limits on special measures orders — constraining the Treasury’s power to unilaterally prohibit financial transactions. If passed in its current form, the provision would deal a major blow not only to the cryptocurrency industry but to “privacy and due process generally,” as Coin Center’s executive director Jerry Brito stated.

Republican Congressman Ted Budd echoed this argument in a statement that read:

"The Treasury Department should not have unilateral authority to make sweeping economic decisions without providing full due process of rulemaking. This draconian provision would not help America compete with China, it would employ China’s heavy-handed playbook to snuff out financial innovation in our own country."

In a tweet that followed, Budd called the provision in question a “massive mistake.”

Tucking new rules that could adversely affect the crypto industry into huge, “must-pass” pieces of legislation is a practice that first came into the spotlight last year with the appending, without public discussion, of a highly contentious definition of a “digital asset broker” to the Infrastructure Investment and Jobs Act later signed into law.

The primary focus of the 2,912-page America COMPETES Act of 2022 is on remedying supply chain issues to keep the manufacturing and technology sectors of the United States internationally competitive. However, the sprawling bill also includes a host of seemingly unrelated measures and spending authorizations, including a ban on shark fin sales, steps against harassment in science and new liabilities for online marketplaces.

Ethereum pushes back Pectra upgrade to conduct third testnet ‘Hoodi’

Lawmakers explore Bitcoin mining efficiency, broader crypto policy issues during Congress hearing

While we are unlikely to see immediate policy effects of the exchange, legislators got educated on a wide array of blockchain-related concepts and issues.

On Jan. 20, the Oversight and Investigations subcommittee of the U.S. Congress House Energy and Commerce Committee convened a hearing to investigate the environmental effects of cryptocurrency mining. Despite the narrow focus, the conversation that ensued – which many industry experts appraised as a meaningful educational experience for the lawmakers – touched upon a range of blockchain-related issues and themes beyond energy consumption. Here is how it went down, and what comes next.

Witnesses set the frame

Following the opening remarks, the hearing kicked off with the witnesses delivering their testimonies. Bitfury CEO Brian Brooks made a point that it was up to the market to decide on the most productive ways to use the already produced energy and maintained that proof-of-work (PoW) is the consensus mechanism that is best suited to produce true decentralization of a blockchain network.

In contrast, Cornell Tech professor Ari Juels, while speaking favorably of blockchain technology and Bitcoin (BTC) in particular, maintained that proof-of-work is unnecessarily wasteful while the downsides of the alternative proof-of-stake, or PoS, mechanisms are largely theoretical.

John Belizaire of Soluna Computing stated that Bitcoin’s energy consumption should be seen as a feature rather than a bug because crypto mining can create efficiencies by using the excess renewable energy. Steve Wright, a former general manager of a public utility district in Washington state, shared his experiences of interacting with crypto miners who flocked into the area due to abundance of cheap electricity, while former acting assistant secretary of the U.S. Treasury Gregory Zerzan introduced multiple uses of blockchain technology and said that regulatory uncertainty could hurt its development.

Representatives then took to the floor with statements and questions. A few used their time for partisan attacks and political grandstanding, yet most made an honest effort to ask questions that either tackled the energy-related issues at the core of the hearing or sought broader context on the uses and potential applications of blockchain technology.

Getting to the bottom of crypto mining

Committee chair Frank Pallone and Oversight Subcommittee chair Diana DeGette interrogated the witnesses on how wasteful crypto mining really is and how to make sure that communities do not bear the costs of energy consumption upticks caused by miners. Congresswoman Jan Schakowsky expressed her concerns about the use of fossil fuels to power mining rigs. Witnesses responded by reassuring the lawmakers of the overall green trend in which the mining industry is evolving, particularly in the U.S.

Some Representatives sought to get a better understanding of the efficiencies generated by cryptocurrency mining in order to determine whether they justify the associated energy use. Congresswoman McMorris Rodgers inquired about the larger blockchain industry’s capacity to generate new jobs and protect user data.

Florida Representative Neal Dunn showed off some advanced knowledge of Bitcoin economics when he asked Brian Brooks about the relationship between BTC halving and mining efficiency. Dunn also stated that the nation needs to produce more energy anyway, and powering innovative industries such as crypto mining is a good use of this growing capacity.

Congressman Morgan Griffith explored the geopolitical aspect of Bitcoin mining, concluding with a supposition that China’s mining ban resulted not so much from energy efficiency concerns but rather from the Chinese government’s dislike of the idea of decentralization. The resulting exchange with Gregory Zerzan resulted in the witness stating that “Bitcoin equals freedom, and there are a lot of places in the world that don’t like freedom.”

Industry reception

While the hearing did not come across as a massive breakthrough, most industry observers highlighted the educational component of the exchange, as well as its role in moving the policy conversation around crypto mining forward.

In an interview with Cointelegraph after the hearing, witness John Belizaire said that the committee members’ readiness to thoroughly explore the complex matter at hand has rendered the discussion productive:

"Chairwoman DeGett set the right tone from the very beginning, the tone of ‘we are here to learn.’ Representatives asked good questions and wanted to get educated on these problems."

Belizaire added that he was surprised by some questions related to the possibility of using less environmentally friendly energy sources to power Bitcoin mining in the future, saying that “You have to put it into the context of the global movement taking on climate change.”

John Nahas, vice president of business development at Ava Labs, the company behind smart contracts platform Avalanche, noted that the hearing, having started slow, eventually evolved into a “meaningful conversation.” Nahas commented:

"It’s clear to me that legislators are seeing the value of blockchains. It was refreshing to see that they understand the numerous areas, like health care records and energy management, that will make our lives more efficient and secure."

John Warren, CEO of U.S.-based Bitcoin mining company GEM Mining, said that the hearing was “an important step in educating U.S. lawmakers on the benefits of the rapidly growing cryptocurrency industry, and mining in particular.”

Consonant with Belizaire’s testimony and some of the Representatives’ comments, Warren believes that the migration of mining activity into the U.S. is a favorable scenario in terms of reducing the industry’s environmental impact:

"Greater oversight in America, coupled with ongoing innovation, will ensure U.S. companies lead the way in taking steps to operate as efficiently as possible and thereby further reduce mining's environmental impacts."

Policy implications

While nothing about this hearing was particularly groundbreaking, the effects of such interactions between Congress and the industry tend to compound. It is consequential that over time, elected officials across a varied set of specialized committees – and not only those engaged in financial oversight – get exposure to pro-blockchain industry rhetoric and arguments.

In the near-term, however, this interaction shouldn’t be expected to result in any specific legislation.

Ava Labs’ Nahas commented:

"This was mostly informational and the early stages of any policy process. However, policymakers should continue to engage with experts and objective resources to better understand emerging blockchains and their ability to secure billions of dollars in value while consuming just a small fraction of proof-of-work chains."

Still, the arguments that were raised around decentralization, the dangers of overregulating the crypto space, and various efficiencies that blockchain technology can engender will stick with at least some of those who participated in the hearing, adding to their long-term policy vision.

Ethereum pushes back Pectra upgrade to conduct third testnet ‘Hoodi’

Former pro-crypto CoC Brian Brooks to testify in a House hearing on the energy impacts of mining

Crypto allies dominate the list of witnesses slated to appear before the House Committee on Energy and Commerce.

As the U.S. Congress prepares to take a thorough look at the energy use of crypto mining, the list of witnesses for the Thursday hearing contains more proponents of blockchain technology than its outright critics.

The House Energy and Commerce Oversight Subcommittee announced a hearing on “Cleaning Up Cryptocurrency: The Energy Impacts of Blockchains” last week, with the event itself scheduled for Thursday. The focus of the hearing will be on the energy and the environmental effects of crypto mining, specifically as it relates to networks that use a proof-of-work, or PoW, consensus mechanism.

A Committee on Energy and Commerce staff memo released on Jan. 17 revealed the list of witnesses invited to testify. Among the five experts on the list, only one — Cornell Tech professor Ari Juels — can be definitively categorized as an outspoken critic of Bitcoin (BTC) mining in its current form. Ironically, Juels is one of two authors of a 1999 paper that defined and introduced the term “proof-of-work.”

Another entry on the witness list is Brian Brooks, former U.S. Comptroller of the Currency and Binance.US CEO who in Nov. 2021 joined BitFury, a major player in the crypto mining industry, as CEO. Also notable is the presence of John Belizaire, CEO of Soluna Computing, a firm that is focused on developing green data centers for batchable computing. In a Jan. 6 blog post, Belizaire lauded Bitcoin’s energy consumption as a “feature, not a bug,” arguing that it provides a viable mechanism for absorbing excess renewable energy.

Utility providers will be represented by Steve Wright, a recently retired former general manager of the Chelan County, Washington state, public utility district. During his tenure, Wright took steps to attract cryptocurrency miners to the county.

Gregory Zerzan, Jordan Ramis shareholder and former acting assistant secretary of the U.S. Treasury, once noted that concerns around Bitcoin mining could be addressed by “transitioning away from fossil fuels.”

The memo itself offers a rather balanced overview of energy-related concerns associated with PoW mining, although it also reiterates certain statements that have been questioned by recent research. For one, the authors stated that the energy consumption and environmental impact of crypto mining may grow in the coming years — a claim that was countered in Bitcoin Policy Institute’s fact-checking brochure.

Jake Chervinsky, head of policy at the Blockchain Association, tweeted that the memo was “not all bad, but commits basic errors.”

The hearing is scheduled for 10:30 am EST on Jan. 20 and will be streamed here.

Ethereum pushes back Pectra upgrade to conduct third testnet ‘Hoodi’

How the Democratic Party didn’t stop worrying and fearing crypto in 2021

In 2021, mainstream U.S. Democrats’ stance on crypto has tipped towards skepticism and preference for tighter regulation.

As 2022 is kicking off, America nears the first anniversary of Joe Biden’s presidency. Following the tenure’s ambitious start, the last few months witnessed some serious tumult around the overall health of the United States economy, the administration’s handling of the COVID-19 pandemic, and the tense debate around Biden’s opus magnum — the $1.7 trillion Build Back Better infrastructure legislation plan.

But even as the Democrats’ ability to maintain undivided power after the 2022 midterm elections can raise doubts, the party’s prevailing view of crypto has become more consolidated than ever. The incumbent president’s party will be setting the tone of the regulatory discussion for at least three more years, so a thorough look at the fundamental premises and potential directions of its emerging crypto stance is in order.

The narrative arc

The path that mainstream Democrat thinking on crypto has traveled over the last three years is perfectly captured by an anecdote featuring two crypto-related public statements made by a Clinton. One is by the 42nd U.S. president, Bill Clinton, then 72, who said at Ripple’s Swell Conference in October 2018 that the "permutations and possibilities" of blockchain were "staggeringly great”

Three years later, speaking at the Bloomberg New Economy Forum in Singapore, Bill’s wife and ex-presidential candidate Hillary Clinton, though calling the cryptocurrencies an “interesting” technology, warned about their power to undermine the U.S. dollar and destabilize nations — “perhaps starting with small ones but going much larger.”

This startling difference in opinion within the power couple reflects the recent evolution of the Democratic party, itself — from a “third way,” business, tech and finance-friendly centrism of its 1990’s generation to the newfound statism with a heavy emphasis on redistributional justice and big government projects. By current standards, the former first lady sounded rather balanced in comparison to her party comrade Senator Elizabeth Warren, who has famously lashed out at the crypto market after the volatility outburst in early September:

Advocates say crypto markets are all about financial inclusion, but the people who are most economically vulnerable are the ones who are most likely to have to withdraw their money the fastest when the market drops. [...] High, unpredictable fees can make crypto trading really dangerous for people who aren’t rich.

Warren berated crypto on numerous occasions, calling it a “fourth-rate alternative to real currency” that is “unsuitable as a medium of exchange;” a “lousy investment,” that “has no consumer protection;” and a tool that makes many illegal activities easier.

Beyond Senator Warren

The negative sentiment is largely shared by Senator Sherrod Brown, which is arguably even more unsettling given his status as chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. Brown’s opening statements at Congress hearings have never been amicable towards crypto. Their overall spirit can be summarized in the introduction that opened the July hearing entitled “Cryptocurrencies: What are they good for?”

All of these currencies have one thing in common — they’re not real dollars, they’re not backed by the full faith and credit of the United States. [...] And that means they all put Americans’ hard-earned money at risk.

Brown blamed the “cottage industry of decentralized financial schemes” for an attempt to create “a parallel financial system with no rules, no oversight, and no limits,” calling it “a shady, diffuse network of online funny money,” with nothing democratic or transparent about it. The lawmaker repeatedly rejected the notion that crypto could be an alternative to legacy money — last time at a December Congress hearing:

Stablecoins and crypto markets aren’t actually an alternative to our banking system. [...] They’re a mirror of the same broken system – with even less accountability, and no rules at all.

It’s not all dark, though. One figure that represents a more moderate, if not pragmatic approach to crypto — Congresswoman Maxime Waters — would also play a major role in any future outcome for the industry. As a chairwoman of the House Committee on Financial Services, she initiated the Digital Assets Working Group of Democratic Members with a mission to ensure responsible innovation in the cryptocurrency and digital asset space and “meet with leading regulators, advocates, and other experts on how these novel products and services are reshaping our financial system.”

Related: Lines in the sand: US Congress is bringing partisan politics to crypto

Sen. Waters has publicly recognized that “Americans are increasingly making financial decisions using digital assets every day,” and affirmed that her Committee will explore “the promise of digital assets in providing faster payments, instantaneous settlements and lower transaction fees for remittances.”

What’s it all about?

The good news is that underneath the redoubtable oratory, there is a keyword: regulation. It is clear, at this point, that a China-style total war on crypto isn’t an option in the U.S. Therefore, what drives the heated activity of congressional committees and federal agencies in recent months is a clear intention of the Democratic establishment to sort out the rules of the game before the next presidential election.

Part of this effort of the Biden administration is the launch of the President's Working Group on Financial Markets, a superhero team composed of the SEC, CFTC, OCC, FDIC and Federal Reserve System executives, with the secretary of the Treasury Department leading the group.

So far, the key product of the Working Group is a 26-page report on stablecoins, which advises Congress to designate some stablecoin-related activities — such as payment, clearing and settlement — as “systemically important” (which would inevitably lead to a tighter oversight) and limit stablecoin issuance to insured depository institutions, i.e., banks.

As in the pre-Biden era, the main problem lies with the core classification of digital assets. The PWG report failed to propose a novel interpretation and give precedence to a single regulatory body, thus perpetuating a situation where a variety of regulators oversee different types of crypto-related activity.

In October, Rostin Behnam, the chairman of the Commodity Futures Trading Commission and a member of the Democratic Party, claimed that as much as 60% of digital assets can be classified as commodities, which amounts to proposing that the agency become the lead U.S. cryptocurrency regulator. He also further stated that his agency, as well as the Securities and Exchange Commission, would likely need “a regulatory structure for both securities and commodities.” How exactly that would help the ongoing patchwork approach to regulation is still a mystery.

The Democratic cause

There are several reasons to believe that the largely proclamatory activity of 2021 will be followed up by some real action in the following year. The first is the general idealistic mindset of U.S. Democrats. For example, the drive to aggressively regulate Big Tech is part and parcel of this mindset.

While President Barack Obama and some regulators worked alongside Google and Twitter to facilitate the growth of internet businesses, Joe Biden’s administration came to power amid the wave of popular anxiety over international cyberattacks, personal data leaks, Meta’s crisis mismanagement and the overall outsize influence on the political process accumulated by tech goliaths.

While Meta and Google have been fighting federal and state regulators in courts over allegations of anticompetitive conduct for a while, Biden’s team also pledged to hold tech companies to account for toxic speech they host and strengthen policing anti-competitive practices.

However, in 2021, we haven’t witnessed any significant policy steps in this direction. Neither of the two major legislative proposals — Amy Klobuchar’s bill, which ​​would bar big tech platforms from favoring their own products and services, and a bill by House Democrats that seeks to remove some protections afforded tech companies by Section 230 of the Communication Decency Act — has become law.

The second reason behind the Democratic rush to put crypto within the regulatory perimeter is pragmatic: The Biden administration and its allies on Capitol Hill need money. Biden’s first-term agenda relies heavily on ambitious Roosveltian infrastructure projects. While the $1.2 trillion Infrastructure Investment and Jobs Act managed to get bipartisan support and was signed into law on November 5, the Build Back Better Act, which now hangs by a thread after Democratic Sen. Joe Manchin had announced his opposition to the current draft, would cost nearly $2 trillion.

By some estimates, should it make it to the president’s desk, the spending program would increase the deficit by $360 billion over 10 years, making it urgent to raise more tax revenue. This is what makes a thriving crypto industry an important battlefield for Democrats, who see the possibility of harvesting some cash from it and an urgency to prevent tax evasion via digital tools.

What’s next?

There’s no doubt that the Biden administration will continue to pursue a strict regulatory agenda in 2022. We will see more Congressional hearings next year, but even more consequential negotiations will be taking place behind closed doors, where Democrats will have to finally decide whether the SEC, CFTC or any other body should dominate crypto oversight. Despite Sharrod Brown’s recent “with or without Congress” remarks, it is also hard to believe that Republicans will let their opponents single-handedly decide the fate of the industry.

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Law Decoded: A different Congress hearing, Dec. 6–13

Direct exchanges between U.S. lawmakers and the crypto industry could be finally taking a constructive turn.

The biggest regulatory story of the week was a United States House Committee on Financial Services hearing squarely focused on crypto. Even the event’s title — “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States” — conveyed a different vibe than countless previous Congressional meetings that had been first and foremost about investor protection or security risks or threats to financial stability. 

Judging from reactions from many industry participants and experts, the exchange has been received as an overwhelming net positive, with legislators asking informed questions and otherwise acting like their goal was to understand this new thing rather than act on preconceived notions. Of course, there were tired questions about Bitcoin’s environmental footprint and Representative Brad Sherman’s anti-crypto rants, but the entire thing finally looked a lot like a constructive dialogue between the digital asset industry and lawmakers that we’ve been longing to see for a while.

Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.

Hearing the industry

The hearing, called by the Financial Services Committee Chair Maxine Waters, centered on the role of crypto exchanges, the growth of the stablecoin sector, and general issues around overarching digital asset regulation. Several top crypto CEOs were summoned to represent the crypto space.

Some of the salient themes discussed on the House floor included the crypto-powered decentralization of the digital ecosystem — a politically advantageous angle at the time when many U.S. lawmakers are uneasy about Web 2.0-era tech giants’ power grab — as well as U.S. regulators’ reluctance to give way to certain crypto investment products that could be seen as a symptom of a fragmented approach to regulation. The relationship between the U.S. dollar’s global role and the growing demand for stablecoins also received much attention.

BIS: Terrified of DeFi?

Just not to get too carried away by what feels like a win on the Congress floor, a note on the Bank of International Settlements’ latest report on decentralized finance is in order. The “bank for central banks” took a deep dive into the sprawling DeFi space and came up with a handful of alarmist slogans such as “decentralization illusion” to describe it.

BIS analysts are concerned with some structural aspects of the DeFi landscape, such as liquidity mismatches and the lack of shock absorbers such as banks. The authors of the report maintain that the protocols governing DeFi activity carry risks of centralization, potentially leading to a concentration of power within these systems at the hands of the few. These assertions are sure to raise many eyebrows, especially among those closely familiar with the DeFi space.

CBDC watch

The BIS’ taste for a more controlled financial innovation can be seen in the news about its specialized department, BIS Innovation Hub, being actively engaged in trials of the digital euro-based cross-border settlement, along with the central banks of Switzerland and France. The experiment was deemed a success, but the parties involved made a point to state that it does not warrant the ultimate issuance of a European CBDC.

In other centralized digital currency news, a two-year-long investigation by the Reserve Bank of Australia concluded with a report that highlighted the potential for a wholesale central bank digital currency to improve the efficiency of financial market transactions.

Ethereum pushes back Pectra upgrade to conduct third testnet ‘Hoodi’

DraftKings Marketplace plans to launch gamified NFT collection next NFL season

DraftKings has partnered with the NFL Players Association to expand the offerings of its marketplace via gamified NFL player NFTs.

The Nation Football League Players Association, or NFLPA, in collaboration with sports betting operator DraftKings Inc., announced the launch of a gamified nonfungible token, or NFT, collection to drop on DraftKings Marketplace during the 2022-2023 NFL season. Starting next year, fans will be able to play NFT-based games featuring their favorite NFL Players, according to the company.

OneTeam, the official media business partner of the NFLPA, helped facilitate the deal with DraftKings, giving them the necessary licensing rights to use the name, image and likeness for active NFL players.

In a statement shared on the DraftKings website, Beth Beiriger, SVP of product operations for DraftKings Marketplace said, “The future of fandom is unfolding in front of us, and few organizations beyond DraftKings are as equipped to capitalize on the increasing intersection between sports and NFTs that will be cornerstones of engagement and entertainment within Web3.”

The DraftKings Marketplace went live this past August with its inaugural Tom Brady NFT collection in partnership with the NFT platform co-founded by Brady himself called Autograph. Besides NFTs, Brady further displayed his backing of crypto by giving a fan 1 BTC for his 600th touchdown pass.

Related: Rams player Odell Beckham Jr. will accept NFL salary in Bitcoin

The announcement suggested that DraftKings’ upcoming NFTs will enable customers to buy and sell collectibles via the Polygon network, and use them within games against other players. The goal of the DraftKings’ NFT experience is to “create authentic connections for avid fans,” according to Sean C. Sansiveri, General Counsel and Head of Business Affairs at NFL Players Inc., the marketing and licensing arm of the NFLPA.

Related: Pro sports leagues are no longer resisting NFTs: Dapper Labs

Last month the NFL also entered a collaboration with Ticketmaster to tie NFT collectibles to select game tickets when purchased, emphasizing the pro sports league’s broad adoption of blockchain technology.

Ethereum pushes back Pectra upgrade to conduct third testnet ‘Hoodi’

Law Decoded: Bitcoin exchange-traded funds are put on the spot again, Nov. 29–Dec. 6

The Securities and Exchange Commission's continued resistance to spot Bitcoin ETFs draws industry players' ire.

Do you remember the time when a fleeting mention of Bitcoin, stablecoins, or even central bank digital currencies by a top-ranking government official was considered major news all over the cryptoverse? Feels like It’s been forever. As we find ourselves in the midst of digital assets’ global mainstreaming, such statements come in droves every day and are expected. Randal Quarles, an outgoing member of the U.S. Fed’s board of governors, warned against overregulating stablecoins and even rebuked some of the conclusions that the President’s Working Group on Financial Markets had articulated in its November report. Treasury Secretary Janet Yellen admitted to remaining undecided on the issue of the digital dollar, but prospective Fed Vice Chair Lael Brainard seems to be all in on the CBDC project. It goes without saying that the leading makers of economic policy are deeply immersed in these issues.

Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.

SEC on the ETF hot seat again

Meanwhile, the Securities and Exchange Commission is standing its ground on spot Bitcoin exchange-traded funds. WisdomTree’s application for a spot BTC product to be traded on the CBOE bZx Exchange became yet another one to be turned down by the regulator. The rationale for the decision was familiar as the SEC’s verdict cited the proposed ETF’s sponsors’ lack of demonstrated capacity to prevent fraud and manipulation and protect investors. 

The SEC has been under fire from multiple directions for its discriminatory stance of accepting derivatives-based products based on an asset’s derivatives while inhibiting the products based on the asset itself. The latest round of criticism came from asset manager Grayscale Investments in a letter to SEC Secretary Vanessa Countryman where the firm argues that the failure to treat the two types of BTC-based products equally constitutes a violation of the Administrative Protections Act (APA).

Crypto CEOs to go up the Hill

Later this week, the U.S. House Committee on Financial Services is calling a hearing squarely focused on digital assets and the future of finance — in fact, that is what the hearing is called officially. Top crypto CEOs, including those of Circle, FTX, Bitfury and Coinbase, will climb Capitol Hill to make their case for benign regulation of the industry and defend its role in the nation’s economic competitiveness. This could be the biggest opportunity in months for the leaders of the crypto space to catch key lawmakers’ ears and directly deliver their opinions and recommendations.

Clampdown updates

The last issue of this newsletter focused extensively on the disconcerting news out of India where a new bill hinted at a possible blanket ban on all “private cryptocurrencies.” The good news is that things might be less dreadful than they initially appeared. The bill’s sponsor, former Indian Finance Secretary Subhash Garg, followed up with a statement that the language around the prospective ban was “misleading” and that the actual shape of the nation’s crypto regulation will emerge after extensive discussions with stakeholders and industry participants.

Furthermore, a cabinet note obtained by local media suggested that the government had been eyeing a set of regulatory measures around crypto assets rather than an outright ban.

Ethereum pushes back Pectra upgrade to conduct third testnet ‘Hoodi’

Law Decoded: India ponders going full China on crypto, Nov. 22–29

The world's sixth-largest economy could adopt a hardline stance against decentralized cryptocurrencies as soon as this winter.

Are big emerging economies more likely to gravitate toward blanket crypto bans? China has set a precedent, and now it appears as if India could be weighing a similar policy direction: A bill containing a proposed ban on all “private cryptocurrencies” will go in front of the nation’s parliament sometime this winter. The measure is designed to clear the way for India’s central bank to advance its digital currency agenda. Whether a sovereign central bank digital currency can coexist with a thriving market of “private” cryptos will be one of the central questions of the looming CBDC age, and it is clear that governments will be tempted to use their coercive authority to tilt the playing field in favor of the centralized money that they control.

Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.

Lok Sabha to consider policy options

One of the 26 new bills that the Lok Sabha, the lower chamber of the Indian parliament, will take on during the winter session that kicks off this week is The Cryptocurrency and Regulation of Official Digital Currency Bill. The document outlines a set of measures meant to facilitate the creation of a CBDC, including a proposed ban on all “private” digital assets, with a few exceptions. The exact implications of the legislation remain a subject of much speculation, with analysts offering diverging interpretations of the scope of the potential ban. The market, however, responded in a more consolidated way, as crypto prices on the major Indian exchange WazirX tanked on the news

Powell to remain, Omarova up in the air

United States President Joe Biden nominated Jerome Powell, the current chair of the Federal Reserve System’s Board of Governors, for another four-year term at the helm of the Fed. During one of his recent appearances in front of Congress, Powell stated that a China-style blanket ban on crypto was not in the cards but said that stablecoins needed greater regulatory oversight. During Powell’s current tenure, which is set to expire in February 2022, the Federal Reserve has been actively exploring the possibility of issuing a CBDC, as well as teaming up with federal regulatory agencies for crypto-focused “policy sprints” aimed at identifying and remedying gaps in digital asset regulation. 

South Korean NFT politics

Crypto taxation remains a hot-button political issue in South Korea, as the government is sending mixed signals on whether new rules, including a 20% tax on crypto income, will go into effect starting Jan. 1, 2022. Which types of digital assets fall under the updated tax code remains murky as well. While the nation’s Financial Services Commission had previously stated that nonfungible tokens, or NFTs, are exempt from taxation, the agency’s chairman stated the exact opposite last week. Furthermore, the regulator has come forward with a set of strict reporting requirements for digital token issuers, with jail time prescribed for those who fail to comply.

Ethereum pushes back Pectra upgrade to conduct third testnet ‘Hoodi’

Law Decoded: Constitutions of the future will be ratified by DAOs, Nov. 15–22

An online initiative to secure a rare copy of the U.S. Constitution shows the power of Web 3.0 collective action.

A haphazardly assembled online group of passionate people who formed a decentralized autonomous organization, or DAO, and pooled a spectacular amount of Ether (ETH) for a noble cause came tantalizingly close to pulling off an incredible feat of collective action.

While they fell short of reaching their main goal — securing the last privately owned print copy of the United States Constitution’s first edition in order to make it available to the public — the speed, scale and efficiency of the decentralized effort were profoundly impressive. The fact that the group’s objective was to preserve an artifact epitomizing the most successful attempt to date to conceive a rationally structured, rules-based societal order is also freighted with symbolism.

Below is the concise version of the latest “Law Decoded” newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.

Chasing the Constitution

The last of the 13 surviving copies of the original print of the U.S. Constitution remaining in private hands went up for auction at art broker Sotheby’s last week. Mere days before the bidding was slated to start, an online initiative to crowdfund buying the document to make it freely available to the public, christened ConstitutionDAO, began to gain traction.

In less than a week, upward of 20,000 people joined the group’s Discord server, and the dollar-denominated amount of ETH collected via Juicebox, a platform for Ethereum-based DAOs, exceeded $49 million. As the bidding unfolded, the group came close to securing the document yet ultimately fell short — reportedly due to failing to raise enough money to establish a reserve fund needed to preserve it.

Infrastructure struggle carries on

The notorious infrastructure bill, which carried several provisions widely believed to be detrimental for crypto users and businesses in the U.S., became law during a pompous signing ceremony last week. Of particular concern is the requirement that digital asset transactions worth more than $10,000 be reported to the Internal Revenue Service.

As expected, the bill’s passage only catalyzed the pushback from crypto-friendly lawmakers. Days after President Joe Biden’s signing of the infrastructure bill into law, a bipartisan group of U.S. Congresspeople, spearheaded by Representatives Patrick McHenry and Tim Ryan, introduced the Keep Innovation in America Act, which would amend the overly broad definition of a broker and push back the enactment of reporting requirements from 2024 to 2026.

Mining troubles

Last week’s news cycle brought several unrelated stories of regulators’ unfriendly actions against crypto miners from vastly different jurisdictions, which, hopefully, do not reflect a rising global trend. China continued to crack down on what remains of the nation’s once-thriving cryptocurrency mining sector by pressuring state-owned organizations and businesses to cease Bitcoin (BTC) mining once and for all. Meanwhile, in the U.S., a mining firm has found itself under Securities and Exchange Commission investigation, leading to the entire sector’s stock prices taking a dip. The president of Kazakhstan — the nation that rose to the No. 2 spot in the world’s hash rate share race thanks to China’s exit — bemoaned the state coffers receiving a very small share of mining revenues, a statement that could be a prologue to intensifying regulatory scrutiny of the booming industry.

Ethereum pushes back Pectra upgrade to conduct third testnet ‘Hoodi’

Foundry USA becomes second-largest Bitcoin mining pool amid China ban

New York-based Foundry USA contributed to a 15.42% share of the network hash rate and is just 4,000 PH/s behind AntPool.

New York-based crypto-mining service provider Foundry USA takes the lead to become the world’s second-largest Bitcoin (BTC) mining pool after taking up a 15.42% share of the network.

Data from BTC.com shows that Digital Currency Group-owned Foundry USA stands behind the pool leader AntPool by a hash rate of just 4,000 PH/s, which contributed to a 17.76% network share at the time of writing.

The rise in the participation of American entities can be attributed to China’s recent blanket ban on crypto trading and mining activities. The ban forced a large-scale migration of local Bitcoin miners, who now reside in crypto-friendly jurisdictions including the United States, Russia, and Kazakhstan.

Out of the top five mining pools in terms of hash rate distribution, Foundry USA charges the highest average transaction fees of 0.09418116 BTC (nearly $5,500) per block. American businesses have also picked up China’s slack in terms of crypto ATM distribution.

Coin ATM Radar data shows that Georgia-based Bitcoin Depot has overtaken its Chinese counterparts to become the world’s biggest crypto ATM operator. Interestingly enough, a majority of the crypto ATM operators are run by American companies, a trend more prominent after China’s proactive ban on crypto activities.

Despite the clear intent to pursue an in-house central bank digital currency (CBDC), the Chinese Communist Party has also sought public opinion on the Bitcoin mining ban on Oct. 21, which has sparked conversations around the amendment of the government’s negative stance on Bitcoin and cryptocurrency mining activities.

However, Statista’s data confirms that China’s contribution to the Bitcoin mining hash rate has been on a steady decline since September 2019. Two decades ago, China represented over 75% of Bitcoin’s mining hash rate, which by April 2021 reduced to 46% prior to banning cryptocurrencies.

Related: US lawmakers introduce bill to ‘fix’ crypto reporting requirement from infrastructure law

As the United States inches towards Bitcoin’s mainstream adoption, the regulators seek clarity in relation to the new reporting requirements put forth by the Biden administration.

Members of the Republic and Democratic party have appealed, in different occasions, to amend the crypto tax reporting reforms along with a plea to redefine the word “broker” in crypto transactions.

Starting from 2024, the bipartisan infrastructure bill requires the general public to declare digital asset transactions worth more than $10,000 to the Internal Revenue Service. The bill currently considers miners and validators, hardware and software developers and protocol developers as brokers.

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