Do Kwon's Alleged Money Laundering in the Hands of the S.E.C. & Get to Know Lummis & Gillibrand
Profiles on the two most important women in crypto this past week; also Crypto bank sues the Fed, the DOJ tackles crypto-crime, and illicit chaos at Binance.
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!
A Message From the Editors: Taking into consideration your feedback, the Guild has revamped the structure of Twali Wrapped to break down news by industry. Please let us know how this new format is working for you! Further, for the next few months, we will be profiling politicians with strong, influential stances on crypto — for or against. Please let us know if there is anyone you think we should be focused on.
TL;DR
Regulation and Policy: Sweeping bipartisan crypto bill in the United States, and new stablecoin regulation from the U.S. and Japan
Legal: Do Kwon’s alleged money laundering in the hands of the S.E.C, Crypto bank sues the Fed, the DOJ tackles crypto-crime, and illicit chaos at Binance
Crypto Profiles: Get to know United States Senator Cynthia Lummis and Senator Kirsten Gillibrand
Regulation/Policy - The Docket
📜 (United States) Proposed: Senator Lummis and Senator Gillibrand unveil the Responsible Financial Innovation Act: first major U.S. regulatory framework covering crypto (mining, staking, lending) taxation, DAO classification and taxation, legal definition (hint: NOT a security), consumer protections, and stablecoin regulations.
For those interested in a section-by-section breakdown, Lummis and Gillibrand released this helpful document.
The takeaway. Whether this bill passes or not, this bill presents a well-researched starting point for debate and clarity. But most importantly, the show of bipartisan support for crypto is a major win and will be critical for widespread adoption in a country that is divided on many fronts.
📜 (United States) Proposed: New York State Department of Financial Services (DFS) pushes regulatory guidelines for stablecoins stating they must be fully backed by FDIC insured assets, and the DFS must approve stablecoin issuers.
The takeaway. With the collapse of TerraUSD, criticism of algorithmic stablecoins has bled into international calls for more strongly regulated stablecoins.
📜 (Japan) Stablecoin legal framework has passed requiring stablecoins to be backed by the yen or another form of legal tender for lawful use in Japan. The proposal also stipulates that stablecoins can only be issued by banks, money transfer agents, and trust companies.
The takeaway. Japan is but one country this week to propose stablecoin regulation after the depegging of TerraUSD, suggesting a trend that we will likely see around the globe in coming weeks.
Legal
By Lucy Pappas & David Feld
⚖️ (United States) Crypto bank Custodia Bank (formerly Avanti) has sued the Federal Reserve for “unlawful delay in processing” an application for a master account that would allow it direct access to the Federal Reserve without needing an intermediary bank.
The takeaway. The Fed’s delay in granting the United States’s first crypto bank a master account not only slows Custodia Bank’s business, but any prospective crypto banks looking to bring more consumers into the market.
⚖️ (United States) DOJ released a report on how to assess and process criminal activity related to digital assets, and how law enforcement may need to collaborate with international bodies on such crimes.
The takeaway. This is the latest on preventing and combating crypto-crime, but the DOJ takes a fairly positive stance on crypto adoption and international collaboration, going so far as to say the U.S. supports the “use and development of digital assets.”
⚖️ (Global) Reuters alleges that, for five years, the world’s largest cryptocurrency exchange Binance served as a conduit for the laundering of at least $2.35 billion in illicit funds, some of which belonged to North Korean hacker group Lazarus, and Russian-language drug mart Hydra.
The takeaway. Already the subject of an S.E.C. probe, Binance continues to come under fire. How the U.S. treats the company may serve as an example for how the U.S. will deal with issues of KYC and the enforcement of it on a global scale.
⚖️ (United States) The S.E.C. has reportedly got hold of money laundering conducted by Terra’s Do Kwon and launched an investigation into Terra’s collapse.
The takeaway. Determining whether the consistent outflow of $80 million to external wallets in the months leading up to the collapse was money laundering or not will play a large part in determining the future of Terra.
Meet Senator Cynthia Lummis
By Lucy Pappas & David Feld
Rancher, lawyer, and Wyoming’s first female Senator. Senator Lummis first bought Bitcoin in 2013.
Beyond penning the first bipartisan crypto bill this past week with Senator Gillibrand, Lummis is a staunch advocate for treating Bitcoin as a commodity rather than a security. She does not like CBDCs.
Republican, Wyoming (United States)
Formerly: House Representative for Wyoming (2009-2017), Wyoming State Treasurer (1999-2007), member of the Wyoming State House and Senate (1979-1995)
Policy Goals and Reasons for Supporting Crypto:
Financial Innovation and Digital Assets
Maintenance of the United States’s status as a global financial leader will be greatly influenced by its adoption and integration of digital assets — which themselves will be an inevitable player in global finance.
Bitcoin as outside money — “an inflation hedge, an asset that can maintain its value independently of the dollar or the global economy.”
Senator Lummis currently serves on the U.S. Senate Committee on Banking, Housing, and Urban Affairs, and the Senate Committee on Commerce, Science, & Transportation.
Energy and Natural Resources
Senator Lummis currently serves on the U.S. Senate Committee on Environment & Public Works
Additional Policy Goals
(1) Supporting Wyoming’s agriculture business throughout the United States, (2) improving transportation and infrastructure in rural America, (3) advocating for improved care of Veterans; (4) and improving access to affordable healthcare.
Legislation/Regulation: Pro-Crypto
Introduced (Sponsor): S.4356 A bill to provide for responsible financial innovation and to bring digital assets within the regulatory perimeter.
Introduced (Co-Sponsor): S.4109 National R&D Strategy for Distributed Ledger Technology Act of 2022
Introduced (Co-Sponsor): S.3249 A bill to revise the rules of construction applicable to information reporting requirements imposed on brokers with respect to digital assets, and for other purposes.
Introduced (Co-Sponsor): S.2543 A bill to require a study on the national security implications of the People's Republic of China's efforts to create an official digital currency.
Funds raised (by industry)
Republican/Conservative: $395,142
Leadership PACs: $329,000
Retired: $182,199
Oil/Gas: $146,226
Lawyers/Law Firms: $66,938
Meet Senator Kirsten Gillibrand
Lawyer, ran for Democratic nomination for President in 2020 (withdrew August 2019).
Senator Gillibrand is making her crypto regulatory debut with the Responsible Financial Innovation Act, though she has been an active voice on financial and technology issues, including debates on tax system reformation, data privacy, economic inequality, and insider trading among Congress members.
Democrat, New York (United States)
Formerly: House Representative (2007 - 2009) and was a member of the Blue Dog Coalition, filled Hillary Clinton’s vacancy as a Senator in 2009
Policy Goals and Reasons for Supporting Crypto:
Transparency and Accountability
Believes accountability and transparency are essential to open and honest government; the first member of Congress to post her official daily meetings, earmarks, and personal financial disclosures online.
Believes our country is facing a data privacy crisis, and Americans deserve to be in control of their own data. ([S.2134] Data Protection Act)
Financial Innovation Act: Establish a regulatory framework that spurs innovation, develops clear standards, and defines appropriate jurisdictional boundaries and protects consumers, and Safety and soundness, consumer protection, and address certainty for markets
Additional Policy Goals:
(1) Agriculture: Supports farming including access to financing, new market opportunities, improve risk management products for dairy and specialty crops, and investments in renewable energy. (2) Environment & Climate Change Advocate (3) National Security + Cybersecurity: Focus on industry and sector specific information sharing and developing at 21st century workforce to fill the jobs that protect our data. (4) Workplace reforms, cost of college education, and championing economic empowerment of women and working families.
Legislation/Regulation: Pro-Crypto
Gillibrand has, prior to the Responsible Financial Innovation Act, been quiet in her support or otherwise of cryptocurrency.
Introduced (Co-sponsor): S.4356 A bill to provide for responsible financial innovation and to bring digital assets within the regulatory perimeter (referred to as: Responsible Financial Innovation Act).
Introduced (Sponsor): S.2134 Data Protection Act of 2021
Funds raised (by industry)
Lawyers/Law firms: $2,486,027
Retired: $1,466,709
Securities/Investment: $1,112,011
Real Estate: $690,091
TV/Movies/Music: $559,277