Coin Center Sues Treasury, Celsius Under Investigation in 5 States, and Profiles on Patrick McHenry and Maxine Waters
Also Blockfi Fines in Iowa and Lobby Hire, EU Push for Stablecoin Regulation, and 401k suit against Labor Dept.
Twali Wrapped tracks the most important developments of the past week for policy, regulation, compliance, and legalities, related to web3. Are you an expert in in compliance, HR, legal, tokenomics, governance, accounting, tax, policy or regulation? Apply here!
Regulation/Policy - The Docket
🇪🇺 EU Commissioner McGuinness called upon EU policymakers to compromise and pass MiCA (Markets in Crypto Assets) by the end of June.
McGuinness cited the war in Ukraine, Terra’s collapse, and Celsius freezing withdrawals as key signals for necessary crypto-asset and stablecoin regulation.
Why it Matters. We have seen and will continue to see more regulation of crypto markets around the world, and now with entry to bear market and subsequent asset freezes, regulators are calling for more immediate action.
Background. For a deep dive into international stablecoin regulation, listen to Laura Shin’s Unchained episode with Olta Andoni, deputy general counsel at Ava Labs, and Ari Redbord, head of legal and government affairs at TRM Labs.
🇺🇸 SEC Chair Gary Gensler concerned about the Lummis-Gillibrand crypto proposal, pushing for registry of securities offers on lending platforms and exchanges.
Gensler specified lending requires registration and disclosure and that compliance will not come without enforcement.
Why it Matters. With the Lummis-Gillibrand bill reigniting debate over cryptocurrencies being registered as securities vs. commodities, Gensler reiterated his belief that much of crypto falls under the securities regime.
🇧🇷 Proposed: Brazilian lawmaker proposes crypto-friendly addition to existing law.
Cryptocurrencies would be legally accepted as a “financial asset, means of exchange or payment, or instrument of access to goods and services or investment.”
Why it Matters. Though not considered legal tender, this proposal would also protect private keys from being attained by courts, thus placing consumer protections and privacy at the center Brazil’s crypto adoption.
Legal
🇺🇸 Securities regulators in 5 states are investigating Celsius Network after their move to freeze withdrawals.
Why it Matters. While Celsius publicly stated they are working hard for those affected by the exchange freeze, in the same week they hired restructuring attorneys from Akin Gump Strauss Hauer & Feld LLP—likely to help sort out the aftermath from this week.
🇺🇸 Coin Center (non-profit research and advocacy center) suing the Treasury Department over unconstitutional tax provision in the Infrastructure Investment and Jobs Act.
Coin Center is citing violations of the Fourth Amendment (unreasonable searches and seizures) and First Amendments (freedom of speech).
Why it Matters. The provision requires individuals and businesses receiving $10,000 or more in crypto to report the name, DOB, and SSN of the sender to the government — speaking to theses such as these.
🇺🇸 BlockFi hires lobbying firm following SEC settlement and was fined over $900k by Iowa Insurance Division for failing to register as a securities trading platform.
Why it Matters: In addition to not properly registering, BlockFi claimed that their institutional loans were “typically” over-collateralized when many were not — a fact potentially arming harsher regulation around audits and consumer protection in market conditions such as these.
🇺🇸 401(k) provider ForUsAll has sued the Labor Department over their handling of crypto in retirement plans.
The lawsuit contends the agency should have engaged in its regular rule-making process, including soliciting public comment, before issuing the guidance.
Why it Matters. If ForUsAll wins this suit, it could set a precedence for cryptocurrencies to be accepted as viable assets in retirement funds. If the Labor Department gets their way, critics are concerned that future asset types may be similarly excluded from retirement investments.
🌎 Holland & Knight served a defendant with a NFT—the first law firm to make use of the technology.
Why it Matters. Using a NFT as serving papers is a major and critical point in legal history, which could ignite more widespread adoption of blockchain technologies in legal proceedings. But beyond the scope of law, seeing this NFT use-case could inspire other industries to start implementing such technology in similar ways.
Patrick McHenry (R-N.C.)
Worked as a realtor until he was appointed Special Assistant to the US Secretary of Labor by George W Bush in 2001
McHenry is a Ranking Republican on the House Financial Services Committee. McHenry appears to be pro-crypto as he works to protect consumers and business owners from onerous regulations and policies that would hurt their ability to access and grow capital.
Republican, North Carolina (United States)
Formerly: North Carolina House of Representatives 2002 - 2004
Policy Goals and Reasons for Supporting Crypto:
Regulation in support of innovation
Consumer Financial Protection
McHenry demands regulators protect Americans’ access to financial systems from government overreach.
Additional Policy Goals
(1) Managing the federal budget; (2) defending Second Amendment rights; (3) strengthening small businesses as the backbone of the American economy
Legislation/Regulation: Pro-Crypto
McHenry is currently, through his ranking role on the House Financial Services Committee, in support of bipartisan laws on stablecoins.
(Sponsor) HR1839 the RAISE Act of 2015
(Sponsor) HR1219 Supporting America’s Innovators Act of 2017
(Sponsor) HR4767 Financial Services Innovation Act of 2019
Maxine Waters (D-C.A.)
The venerable chair of the House Financial Services Committee, Maxine Waters (D-CA) is in her 16th term as a U.S. Representative.
Representative Waters built a policy reputation on addressing urban poverty, from housing to financial inclusion. As Chairwoman of Financial Services, she exhibits a skeptical public stance towards crypto, but has also taken concrete actions to increase Congressional awareness and understanding of the sector.
Democrat (California, United States)
Policy Goals and Stance on Crypto
Rep. Water’s goals for crypto regulation are to “support responsible innovation that protects consumers and investors while promoting greater financial inclusion.”
In committee hearings and public comments, she frequently highlights the potential risks crypto poses to individual investors and the financial system.
At the same time, Rep. Waters is spearheading a Digital Assets Working Group charged with developing legislation and policy solutions for the cryptocurrency and decentralized finance sector.
Why It Matters
As the most senior Democrat on the House Financial Services Committee, Rep. Waters will play a key role in shaping the Congressional approach to crypto regulation. Clearly she is not taking crypto evangelist claims at face value. For the time being, only a select few Democratic policy cadres know whether - despite her public posture - she is being constructive behind the scenes.