government

Texas lawmaker introduces resolution to protect Bitcoin miners and HODLers

The Lone Star State is already home to many crypto and blockchain firms as well as miners taking advantage of the regulatory-friendly environment.

Cody Harris, a member of the Texas House of Representatives, has introduced a resolution aiming to have the legislature say the “Bitcoin economy is welcome” in the state.

In a resolution released on March 21, Harris encourages Texas lawmakers to “express support for protecting individuals who code or develop on the Bitcoin network” as well as miners and Bitcoiners operating in the Lone Star State. The state representative added that Texas’ constitutional rights concerning “all unreasonable seizures or searches” should extend to attempts to go over residents’ digital asset holdings.

“Individuals who mine Bitcoin in Texas will never be inhibited by any law or resolution that restricts the practice of securing the Bitcoin network for the safety of the virtual currency,” said the resolution. “All those in the broader community who choose to own Bitcoin as a manner of storing their wealth and transacting peer-to-peer with other law-abiding Texas citizens shall always feel free and safe in their ownership and use of Bitcoin.”

House Concurrent Resolution 89, if adopted, would largely not apply to Texas’ laws and regulations, but rather express a certain sentiment among lawmakers. The resolution cited the Chinese government’s crackdown on crypto miners, a move that drove many firms to Texas. Riot Platforms, Core Scientific and White Rock Management are among some of the firms to set up operations in the Lone Star State.

Under the state’s commercial laws, cryptocurrencies are recognized as part of an amendment to Texas’ Uniform Commercial Code. However, some lawmakers at the federal level have criticized Texas’ seemingly loose regulatory regime for the potential environmental impact caused by the energy consumption of mining firms.

Related: Bitcoin mining advocate is going state-to-state to educate US lawmakers

Texas Governor Greg Abbott, reelected to another four-year term in November 2022, has previously referred to himself as a “crypto law proposal supporter” in the state. According to Florida Governor Ron DeSantis, Texas was considering a ban on central bank digital currencies, both foreign and domestic, following a similar initiative announced by his office on March 20.

CryptoUK calls on regulators to address de-banking of digital asset firms

The trade association said many banks in the U.K. had begun imposing blanket bans on dealing with crypto firms “instead of taking a risk-based and case-by-case approach.”

The self-regulatory trade association CryptoUK has proposed providing a “white list” of registered firms in the United Kingdom to address banks limiting or banning transactions to crypto companies.

In separate letters to U.K. Economic Secretary Andrew Griffith and members of the Financial Conduct Authority and Payment Systems Regulator dated March 21, CryptoUK said many banks had begun imposing blanket bans on dealing with crypto firms “instead of taking a risk-based and case-by-case approach.” The proposed white list would allow registered crypto companies to conduct transactions with banks freely without limitations or the threat of bans.

“Many of the major UK banks have now put in place bans or restrictions, and we are concerned that other banks and Payment Services Providers (PSP’s) may also soon follow suit,” said CryptoUK. “We believe that government action is now warranted.”

Under the U.K.’s Financial Conduct Authority, crypto services providers in the country must be registered and comply with Anti-Money Laundering regulations. Some U.K. banks, including HSBC Holdings and Nationwide Building Society, have reportedly banned crypto purchases for retail customers using credit cards.

Related: Congress announces March 29 hearing into failures of SVB and Signature Bank

The CryptoUK proposal echoes concerns among digital asset advocacy groups and lawmakers in the United States following the failures of the crypto-friendly Silvergate Bank, Silicon Valley Bank and Signature Bank. The U.S.-based Blockchain Association submitted requests for information from the Federal Deposit Insurance Corporation, the board of governors of the Federal Reserve System and the Office of the Comptroller of the Currency related to the potential “de-banking of crypto firms.”

SBF shilled FTX risk model to FDIC chairman Gruenberg prior to collapse

The invitation was mediated by former CFTC Commissioner Mark Wetjen, who joined FTX US as the head of policy and regulatory strategy in November 2021.

Before crypto exchange FTX and its founder Sam Bankman-Fried (SBF) got tied down with allegations of misappropriation of users’ funds, SBF was among the most influential crypto entrepreneurs. Before FTX collapsed, a leaked email exchange with a top regulator allegedly showed SBF’s intent to get the exchange federally regulated.

On May 28, 2022, nearly six months before FTX filed for bankruptcy and SBF resigned as the CEO, Federal Deposit Insurance Corporation (FDIC) chairman Martin Gruenberg received an invitation to meet SBF on June 13, 2022, the Washington Examiner reported. The email was mediated by former CFTC commissioner Mark Wetjen, who joined FTX US as the head of policy and regulatory strategy in November 2021.

Sam Bankman-Fried’s meeting invitation to FDIC Chairman Martin Gruenberg. Source: The Washington Examiner

In the latter half of the email, Wetjen told Gruenberg that FTX is in the “unusual position of begging the federal government to regulate us.” He further added:

“We have an application before the CFTC that lays out for the agency how to do so. All the CFTC has to do is approve it. Once the CFTC does, the others will follow — the other major US exchanges also have CFTC licenses.”

In response to the SBF’s request, Gruenberg agreed to meet the duo, as shown in the leaked email below.

FDIC chairman Martin Gruenberg accepts Sam Bankman-Fried’s meeting invitation. Source: The Washington Examiner

Following the collapse of FTX, SBF’s political ties were uncovered amid parallel investigations. An FDIC spokesperson confirmed that the FDIC chairman met SBF as part of “routine courtesy visits with leaders of financial firms and institutions.”

Related: Sam Bankman-Fried to propose revised bail package ‘by next week’

Alongside federal investigations, FTX’s new management started conducting internal investigations to track missing funds.

Recent court documents revealed that SBF and five other former FTX and Alameda Research executives received $3.2 billion in payments and loans from FTX-linked entities. SBF reportedly received the lion’s share of the funds, receiving $2.2 billion.

Peter Schiff blames ‘too much gov’t regulation’ for worsening financial crisis

Finding the right balance between regulations and banking institutions is important for Schiff, considering that Puerto Rico regulators closed down Schiff’s bank due to non-compliance.

The recent fall of major banks in the United States and the need for federal intervention reignited discussions to identify the most effective ways to safeguard the crumbling economies. Comparing the episode to the financial crisis of 2008, prominent economist Peter Schiff found that increasing banking regulations contribute to the worsening economic crisis.

A deeper analysis of Silicon Valley Bank (SVB) by a group of economists revealed that nearly 190 banks in the United States are at risk of a depositor-driven collapse. It was highlighted that the monetary policies penned down by central banks could hurt long-term assets such as government bonds and mortgages, creating losses for banks.

The 2008 financial crisis was primarily driven by the collapse of the housing market. However, Schiff believed the crisis was caused by “too much government regulation.”

Schiff highlighted how the U.S. government introduced new banking regulations after the 2008 financial crash while promising “what is happening right now would never happen again.” He added:

“But one reason we had the 2008 Financial crisis was too much Govt. regulation. That’s why this crisis will be worse.”

Finding the right balance between regulations and banking institutions is important for Schiff, considering that Puerto Rico regulators closed down Schiff’s bank not too long ago, on July 4, 2022.

At the time, Crypto Twitter reminded Schiff why millions of people worldwide vouch for Bitcoin (BTC) adoption in the quest for financial freedom.

Related: SVB mixup forces India’s SVC Bank to issue a notice of clarification

On the other end of the spectrum, crypto entrepreneurs have started to double down on Bitcoin’s epic comeback. Former Coinbase chief technology officer Balaji Srinivasan predicted that Bitcoin would reach $1 million in value within 90 days.

As Cointelegraph reported, pseudonymous Twitter users James Medlock and Srinivasan made the wager based on their different views of the U.S. economy’s future amid ongoing uncertainty regarding the country’s banking system.

Srinivasan’s bet circles around an impending crisis that will lead to the deflation of the U.S. dollar and take the BTC price to $1 million.

Circle taps Cross River as banking partner, expands ties with BNY Mellon

Circle announced a new banking partner after Silicon Valley Bank’s failure, and is expanding ties with BNY Mellon.

Circle has revealed that Cross River Bank — recognized for its services to fintech and crypto firms like Visa and Coinbase — is now its new commercial banking partner for producing and redeeming USD Coin (USDC).

In addition, Circle has “expanded relationships” with other banking partners to assist with USDC redemption, including Bank of New York Mellon (BNY Mellon), which already provides custody services for Circle’s reserves.

Surviving a harrowing weekend that saw Circle’s flagship USDC stablecoin break its peg to the dollar, falling below $0.90 early on Saturday before a series of moves by banks and regulators restored confidence in the token. At the time of publication, USDC has recovered and trades at $0.99.

During the weekend, Circle issued a press release confirming 100% of USDC reserves are safe and secure. The company said it would complete the transfer of the remaining Silicon Valley Bank (SVB) cash to BNY Mellon, and liquidity operations for USDC will resume at banking open on Monday.

Related: Silicon Valley Bank collapse: Everything that’s happened until now

Circle’s announcement noted that it had no exposure to Silvergate, the crypto-friendly bank that announced it would voluntarily liquidate its holdings as part of a takeover process by federal regulators.

This weekend’s USDC turmoil was part of a broader financial catastrophe that started due to the collapse of SVB, the 16th-largest bank in the United States and a financial pillar of the tech and venture capital world.

The failure of SVB triggered a panic as thousands of companies, including Circle, could not access billions in deposits. However, the Federal Reserve and other agencies calmed markets by announcing depositors at SBV would be made whole.

Silicon Valley Bank shut down by California regulator

The FDIC stated that as the receiver, it had immediately transferred all insured deposits of Silicon Valley Bank to the newly created Deposit Insurance National Bank of Santa Clara (DINB).

Silicon Valley Bank, a major financial institution for venture-backed companies, was shut down by California’s financial watchdog on March 10 — marking the first Federal Deposit Insurance Corporation-insured bank to fail in 2023. 

The California Department of Financial Protection and Innovation confirmed that Silicon Valley Bank was ordered to close but did not specify the reason for the shutdown. The California regulator appointed the FDIC as the receiver to protect insured deposits. 

Depositors “will have full access to their insured deposits no later than Monday morning, March 13, 2023,” read the official statement. The regulator explained that uninsured depositors would be given a “receivership certificate for the remaining amount of their uninsured funds” and entitled to future dividend payments once the FDIC sells all Silicon Valley Bank assets.

Silicon Valley Bank, which is also known as SVB, operated 17 branches across California and Massachusetts. All branches and the main office will be open on March 13 to facilitate depositor access.

SVB is one of the United States’ 20 largest banks by total assets. The bank provided financial services to several crypto-focused venture firms, including Andreessen Horowitz and Sequoia.

Related: Bitcoin battles $20K as trader calls bank chaos ‘2008 all over again’

The bank’s downfall was swift, coming less than 48 hours after management disclosed that they needed to raise $2.25 billion in stock to shore up operations. The announcement was part of SVB’s mid-quarter financial update, where it disclosed the sale of $21 billion in securities at a $1.8 billion loss.

SIVB stock was trading north of $280 at the start of the week. Before trading was halted, the stock was worth $106.08. Source: Yahoo Finance

Trading in SVB stock (SIVB) was halted on March 9 due to extreme volatility. The stock’s 60% drop was the biggest single-day wipeout in history, according to The Wall Street Journal.

The failure of Silicon Valley Bank prompted a flurry of commentary from businesses and policymakers. Congresswoman Maxine Waters, the top Democrat on the House Financial Services Committee, said, “I am alarmed by the failure of Silicon Valley Bank, which marks the second largest bank failure in U.S. history.” She added:

“I am closely monitoring and convening Committee members with regulators so myself and members can understand the latest around the closure of Silicon Valley Bank (SVB) by the California Department of Financial Protection and Innovation (DFPI), and the Federal Deposit Insurance Corporation (FDIC) appointed as receiver.”

US lawmakers planning to reintroduce bill aimed at fixing crypto reporting requirements: Report

Representatives Patrick McHenry and Ritchie Torres reportedly plan to reintroduce the Keep Innovation in America Act to address reporting requirements in the infrastructure law.

A group of United States lawmakers is reportedly planning to reintroduce legislation to change the reporting requirements for certain taxpayers involved in crypto transactions.

According to a March 7 report from Punchbowl News, Representatives Patrick McHenry and Ritchie Torres plan to reintroduce the Keep Innovation in America Act. McHenry was one of the leading voices behind the previously proposed bill in an effort to change the definition of a broker as defined in the U.S. infrastructure law — President Joe Biden signed the legislation in November 2021.

Under a draft of the bill, the requirement for brokers to report on digital asset transactions worth more than $10,000 to the Internal Revenue Service would be pushed from 2024 to 2026. In addition, “miners and validators, hardware and software developers, and protocol developers” would not be considered brokers.

Some lawmakers identified potential conflicts as the infrastructure bill was being considered in Congress in 2021 and attempted to amend the legislation. Many have still criticized the law for setting impossible crypto reporting requirements for firms and individuals.

McHenry and Torres have reportedly included provisions in the revised bill to limit the U.S. government’s ability to define the term “digital asset.” According to Punchbowl, a bipartisan group of seven other House members has signed on as co-sponsors for the legislation, including pro-crypto Representative Darren Soto.

The draft bill states:

“Consistent and accurate reporting on digital asset transactions is necessary. Congress must work to bring legal and regulatory certainty to the digital asset industry. Clear rules of the road fosters technology and innovation.”

Related: IRS reminds taxpayers of crypto income reporting ahead of 2022 filing

McHenry took over as chair of the House Financial Services Committee from Representative Maxine Waters at the start of the 118th Congress in January. In his leadership role, he has helped set up a subcommittee on digital assets, financial technology and inclusion, which is scheduled to hold a hearing on March 9.

Coinbase launches grassroots campaign for pro-crypto policy in the U.S.

The company provided a link for voters to sign up so that they can gain information about local politicians’ crypto policies

Coinbase has launched a grassroots political campaign to promote pro-crypto policies, according to a Feb. 28 Twitter thread from the company.

The company said that the #Crypto435 campaign is intended to “grow the crypto advocacy community and share tools and resources” so that crypto users can make their voices heard in all 435 congressional districts.

Coinbase provided a link to a signup page asking users to provide a name, address, phone number and email address to receive further information. The exchange claimed that it will provide people who sign up with “information about how to contact specific politicians in their local districts, what those politicians’ records on crypto are, tips for making your voices heard in D.C., and more.”

In the thread, Coinbase argued that the crypto community has reached a “pivotal moment” in which political action will now be necessary, stating:

“The crypto community has reached an important moment. Decisions being made by legislators and regulators in DC and around the country will impact the future of how we can build, buy, sell, and use crypto.”

The announcement had mixed reactions from Twitter users. Many applauded the move with statements like “Crypto is what we can all come together and support.” and “Good stuff Coinbase. Very important!” At the same time, some XRP fans alleged that the announcement was hypocritical. They felt that if Coinbase really wanted to fight the powers that be, it would not have delisted XRP after the Securities and Exchange Commission labeled it as a security.

Aside from a small tax provision enacted in 2021, the U.S. Congress has not passed any laws defining what a cryptocurrency is or legislating how specifically crypto businesses can comply with regulation.

This is in contrast to Singapore, where the legislature passed a law that specifically spelled out the requirements for operating a crypto-related business in the country.

SEC Chair Gary Gensler has argued that existing U.S. securities law applies to crypto in some cases. But Nexo and other crypto companies have claimed that current U.S. laws are so vague the industry doesn’t know how to comply with them.

The issue of crypto regulation continues to be hotly debated both inside and outside the crypto community. Crypto companies have donated to lobbying groups in the past. But this appears to be one of the first times a crypto company has tried to organize a grassroots political campaign.

Is the SEC’s action against BUSD more about Binance than stablecoins?

The SEC’s enforcement action against BUSD raises questions about whether the regulatory body is focused on the stablecoin market or the crypto exchange Binance.

Binance branded stablecoin, Binance USD (BUSD), is a dollar-backed stablecoin issued by blockchain infrastructure platform Paxos Trust Company, and is the third largest stablecoin after Tether’s (USDT) and Circle’s USD Coin (USDC).

Paxos has claimed in the past that BUSD is fully backed by reserves held in either fiat cash or United States Treasury bills. BUSD was reportedly authorized and regulated by the New York State Department of Financial Services (NYDFS).

Paxos partnered with crypto exchange Binance in 2019 and launched the stablecoin, which received approval from the NYDFS. Binance CEO Changpeng Zhao has stated that the exchange licensed the Binance brand to Paxos, and BUSD is “wholly owned and managed by Paxos.”

However, on Feb. 12, the U.S. Securities and Exchange Commission (SEC) issued a Wells notice to Paxos — a letter the regulator uses to inform companies of planned enforcement action. The notice alleged that BUSD is an unregistered security. After receiving a Wells notice, the accused is allowed 30 days to respond via a legal brief known as a Wells submission — a chance to argue why charges should not be brought against prospective defendants.

One day later, the NYDFS ordered Paxos to stop minting new BUSD, citing specific unresolved issues around Paxos’ oversight of its relationship with Binance regarding BUSD. Paxos then decided to cut ties with Binance due to regulatory scrutiny, saying they are working with the SEC to resolve the issue constructively.

Binance, on the other hand, hopes the SEC won’t file an enforcement action based on the BUSD saga, telling Cointelegraph:

“The U.S. SEC, hopefully, will not file an enforcement action on this topic. Doing so is not justified by the facts or law. Furthermore, it would undermine the growth and innovation of the U.S. financial technology sector.”

Paxos refused to comment on the issue, citing ongoing talks with the SEC. The company directed Cointelegraph to an internal email with Paxos co-founder Charles Cascarilla reiterating their earlier stance that BUSD is not a security.

The statement from Cascarilla noted that the precedents used to identify securities in the U.S. are known as the Howey test and the Reves test. He stated that BUSD does not meet the criteria to be a security:

“Our stablecoins are always backed by cash and equivalents–dollars and U.S. Treasury bills, but never securities. We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in private. Of course, if necessary, we will defend our position in litigation. We will share more information when we can.”

Tether — issuer of the largest stablecoin by market capitalization — didn’t directly respond to specific questions about stablecoins being classed as securities. However, a spokesperson from the firm told Cointelegraph that “Tether has good relationships with law enforcement globally and is committed to operating securely and transparently in compliance with all applicable laws and regulations.”

Are stablecoins the focus or are there bigger fish to fry?

Many crypto community members were baffled by accusations of BUSD being a security, and to see enforcement action against it. This is because BUSD is “stable,” maintaining a 1:1 peg to the U.S. dollar, limiting its usage for speculation.

Just days after the SEC action against BUSD, rumors started circulating about a similar Wells notice being sent to other stablecoin issuers, including Circle and Tether. Circle’s chief strategy officer, Dante Disparte, quashed such rumors and said that the stablecoin issuer had not received such a document.

Speaking to Cointelegraph earlier this month, some legal experts explained how stablecoins might be considered securities. Although stablecoins are supposed to be stable, Aaron Lane, a senior lecturer at RMIT’s Blockchain Innovation Hub, said buyers might benefit from various arbitrage, hedging and staking opportunities.

He further explained that, while the answer isn’t obvious, a case could be made regarding whether the stablecoin was developed to produce money or is a derivative of a security.

Some crypto community members have stated that the issue might not be just about stablecoins as much as it is about Binance, indicating that the SEC didn’t take action against Paxos’ gold-backed stablecoin called Pax Gold (PAXG.)

Carol Goforth, a university professor and the Clayton N. Little professor of Law at the University of Arkansas, told Cointelegraph that the issue might be more about Binance than the stablecoin itself:

“There are unique issues with regard to that particular crypto asset because of its ties to and relationship with Binance. It is possible that some of those unusual features are what the SEC is focusing on, but because part of that is a lack of transparency and accuracy in reported information.”

Goforth added that the price of the stablecoin is designed to be stable, which would appear to be the antithesis of an expectation of profits.

Nonetheless, “I can see a potential argument that stablecoins make fast transactions in other forms of crypto possible and this is, in fact, the biggest use of stablecoins to date, accounting for a disproportionately high trading volume as compared to market capitalization” Goforth said, stating:

“‘Profit’ could be argued to include the extra value obtained from the ability to make such trades, although that seems to be a bit of a stretch. (Expectation of profits is important because it is one of the elements of the Howey investment contract test).”

Just weeks after enforcement action against BUSD, the SEC filed a motion to bar final approval of Binance.US’ $1 billion bid for assets belonging to bankrupt crypto lending firm Voyager Digital. The SEC flagged the potential sale of Voyager Token (VGX), issued by Voyager, which “may constitute the unregistered offer or sale of securities under federal law.“

The series of enforcement actions by the SEC against various aspects of Binance’s business led many to believe that the regulator was going after the exchange rather than the stablecoin industry.

SEC’s jurisdiction under question

Amid the ongoing increase in enforcement actions in the crypto market, the SEC’s jurisdiction has also been questioned, especially regarding stablecoins. In a recent interview, Jeremy Allaire, the CEO of USDC issuer Circle, said that “payment stablecoins” are payment systems, not securities.

Allaire argued that SEC is not the suitable regulator for stablecoins and said, “there is a reason why everywhere in the world, including the U.S., the government is specifically saying payment stablecoins are a payment system and banking regulator activity.”

Coinbase — the first publicly listed crypto exchange on the Nasdaq — is fighting a securities battle of its own related to its staking products. It also questioned the SEC’s decision to get involved with stablecoins and claim they are securities.

2022 was a disastrous year for the crypto industry, seeing most crypto assets lose more than 70% of their valuation from their market highs. Outside the crypto winter, the collapse of crypto lending giants, exchanges and asset funds became a more significant concern. Many then questioned regulators for not ensuring investor security and enforcing regulations. In 2023, the tables have turned, with regulatory agencies coming out in full force against crypto firms. However, their approach and intentions are being questioned now that they have sprung into action.

FSB, IMF and BIS papers to set global crypto framework, says G20

A series of recommendations and papers setting standards for a global crypto regulatory framework will be released by the institutions in July and September.

The Financial Stability Board (FSB), the International Monetary Fund (IMF), and the Bank for International Settlements (BIS) will deliver papers and recommendations establishing standards for a global crypto regulatory framework, the group of the 20 biggest economies of the world — collectively known as G20 — announced on Feb. 25.

According to a document summarizing the outcomes of the meeting with finance ministers and central bank governors, the FSB will release by July recommendations on the regulation, supervision and oversight of global stablecoins, crypto assets activities and markets.

India’s finance minister, Nirmala Sitharaman, during FMCBG meeting in Bengaluru. Source: Ministry of Finance

The next guidance is expected for September, when the FSB and the IMF jointly should submit “a synthesis paper integrating the macroeconomic and regulatory perspectives of crypto assets.” In the same month, the IMF will also report on the “potential macro-financial implications of the widespread adoption” of central bank digital currencies (CBDCs). According to the G20 statement:

“We look forward to the IMF-FSB Synthesis Paper which will support a coordinated and comprehensive policy approach to crypto-assets, by considering macroeconomic and regulatory perspectives, including the full range of risks posed by crypto assets.”

The BIS will also submit a report on analytical and conceptual issues and possible risk mitigation strategies related to crypto assets. This report’s deadline is not mentioned in the document. A G20 financial task force will also look at the use of crypto assets to fund terrorist activities.

The announcement came after two days of official meetings in Bengaluru, India. In the first financial meeting under India’s presidency, the group addressed key financial stability and regulatory priorities for digital assets, Cointelegraph reported.

During the event, United States Treasury Secretary Janet Yellen said it was “critical to put in place a strong regulatory framework” for crypto-related activities. She also noted that the country is not suggesting an “outright banning of crypto activities.“ Speaking to reporters on the sidelines of the event, IMF managing director Kristalina Georgieva stated that banning crypto should be an option for G20 countries.