Research Summary
The report discusses the recent legislative developments in the United States concerning the regulation of digital assets and blockchain technology. It highlights the changes in the FIT 21 bill, the Senators’ challenge to the DOJ’s interpretation of the federal prohibition on operating an unlicensed money transmitting business, and the ongoing court battles between the SEC and crypto exchanges Coinbase and Kraken.
Key Takeaways
Revisions in FIT 21 Bill
- Exclusion of Blockchain Protocols and Developers: The FIT 21 bill now explicitly excludes blockchain protocols and developers from its definitions of digital asset dealers, brokers, and trading systems. It also excludes certain decentralized finance activities from its scope.
- Joint Study on DeFi: The bill requires the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to carry out a joint study on DeFi. The Comptroller General is also required to conduct a separate study.
Senators Challenge DOJ’s Interpretation
- Concerns Over Expanded Scope: Senators Cynthia Lummis and Ron Wyden have written to the US Attorney General expressing concerns over the DOJ’s interpretation of the federal prohibition on operating an unlicensed money transmitting business. They argue that the interpretation expands the scope beyond Congressional intent.
Tornado Cash Developer Convicted
- Conviction for Laundering Illicit Assets: Alexey Pertsev, a developer of Tornado Cash, was convicted in a Netherlands’ court of laundering $2.2 billion in illicit assets and sentenced to a prison term of five years and four months.
Coinbase and Kraken’s Court Battles with the SEC
- SEC’s Motions Against Coinbase: The SEC has filed two motions against Coinbase. The first addresses Coinbase’s motion for an interlocutory appeal to the Second Circuit Court of Appeals, challenging the district court’s application of the Howey test to digital asset transactions. The second argues against Coinbase’s petition for a new regulatory framework for digital assets.
- Kraken’s Motion to Dismiss SEC Lawsuit: Kraken has filed a motion in the Northern District of California to ask the court to dismiss the SEC lawsuit against it. Kraken asserts that the SEC fails to identify legitimate investment contracts on its platform and that the SEC’s application of the Howey Test would significantly expand the SEC’s jurisdiction.
Actionable Insights
- Monitor Regulatory Developments: Stakeholders in the crypto industry should closely monitor the ongoing legislative developments and court cases to understand the evolving regulatory landscape for digital assets and blockchain technology in the United States.
- Understand Implications of Legal Decisions: The outcomes of the court battles between the SEC and crypto exchanges Coinbase and Kraken could have significant implications for the regulatory oversight of digital assets. Stakeholders should understand these implications to inform their strategic decisions.
- Consider Legal Precedents: The conviction of Tornado Cash developer Alexey Pertsev sets a legal precedent for developers of privacy-enhancing technology. Developers should consider this precedent when developing similar technologies.
