A group of U.S. regulators urged lawmakers to subject stablecoin issuers to the same strict federal oversight as banks, in a highly anticipated report released Monday.Congress should also require custodial wallet providers to be regulated by a federal agency and limit stablecoin issuers’ interactions with non-financial companies such as tech or telecom providers, the President’s Working Group for Financial Markets said. The latter recommendation appeared to be aimed squarely at Diem, formerly Libra, the controversial stablecoin project created by Meta, the social media giant previously known as Facebook.The report is part of an escalating effort by policymakers to rein in this $138 billion segment of the broader crypto market to mitigate the risks they believe stablecoins pose to consumers, markets and the financial … [Read More...]

Major players in the crypto industry want favorable regulations, and they’re actively explaining their own visions.You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.Policy weekThe narrativeThere’s a growing push from the crypto industry to suggest how regulators can approach this rapidly-growing sector.Why it mattersCrypto exchanges Coinbase and FTX, venture capital firm Andreessen Horowitz (a16z) and the Digital Dollar Foundation have all recently published suggested policy proposals for addressing the digital asset market, ranging from creating a dedicated regulator for crypto to detailing how a central bank digital currency could address privacy issues.Clearly, the industry is hoping to have a hand in creating a favorable regulatory regime … [Read More...]

WASHINGTON, D.C. – A group of U.S. lawmakers say Facebook cannot be trusted to launch a digital currency.In a Tuesday missive, U.S. Senators Brian Schatz (D-Hawaii), Sherrod Brown (D-Ohio), Richard Blumenthal (D-Conn.), Elizabeth Warren (D-Mass.) and Tina Smith (D-Minn.) ordered Facebook CEO Mark Zuckerberg to “immediately discontinue the company’s pilot of Novi” and end its work on the diem stablecoin project.The lawmakers said Facebook cannot be trusted to protect user data or manage a payments network, in an open letter Tuesday just hours after Facebook announced it was launching a pilot program for its Novi wallet subsidiary in the U.S. and Guatemala.Read more: Facebook’s Novi Taps Paxos, Coinbase Ahead of Diem RolloutUnder … [Read More...]

Facebook’s Novi wallet is ready to launch – but it won’t be launching with the Diem (formerly Libra) stablecoin.Novi, Facebook’s digital wallet subsidiary, will go live in the U.S. and Guatemala in a pilot program, allowing users to start trading the Paxos Dollar (USDP), the social media giant announced Tuesday. Crypto exchange Coinbase will provide custody services for the program.Users can purchase USDP through Novi, and Novi will deposit the funds with Coinbase, according to a Coinbase blog post.“This does not mean our support for Diem has changed,” the Facebook press release said. “We intend to launch Novi with Diem once it receives regulatory approval and goes live.”The pilot has already gone live, but is being rolled out slowly on the … [Read More...]

The Commodity Futures Trading Commission (CFTC) fined Bitfinex and Tether more than $42 million on allegations the USDT stablecoin was not fully backed at all times and that Bitfinex violated a previous agency order.The federal commodities regulator settled charges with the sibling crypto companies on Friday, barring both firms from “any further violations of the Commodity Exchange Act (CEA) and CFTC regulations.”According to a CFTC press release, Tether’s stablecoin was fully backed by reserves for only one-quarter of the time over a 26-month period between 2016 and 2018. Further, Tether comingled reserve funds with the company’s corporate funds and held reserves in non-cash products.“At various times, Tether maintained some of the Tether Reserves in bank accounts other than the Tether Bank Accounts. Tether represents … [Read More...]

Payments tied to ransomware attacks in 2021 are already exceeding 2020?s total, the U.S. government’s financial crimes watchdog said Friday.Exchanges and other financial institutions reported more than $590 million in payments tied to ransomware attacks, including cryptocurrency payments, to the Financial Crimes Enforcement Network (FinCEN) in the first half of 2021, outstripping a 2020 total of just $416 million. It was not immediately clear what amount of this total was comprised specifically of cryptocurrency transactions, versus more traditional payment methods.A Treasury Department press release said attackers are “increasingly requesting payments in Anonymity-Enhanced Cryptocurrencies” such as monero.Attackers are also using mixers, decentralized exchanges, fresh wallet addresses and hopping between chains more as an effort to evade law enforcement officials, the release said.Crypto SARsFinCEN tied the … [Read More...]

The U.S. government may expand its efforts to study and regulate the roughly $2 trillion digital asset sector.The Biden administration is considering an executive order for federal agencies, which would require them to study the crypto industry and provide recommendations on their oversight, Bloomberg reported Friday, citing unnamed sources.According to the report, the order would include the Treasury Department, Commerce Department, National Science Foundation and national security agencies. In addition to asking agencies to study different aspects of the industry, the order “would clarify the responsibilities” different agencies have around crypto and blockchain.Requests for comment sent to the White House, Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) were not immediately returned. The Treasury Department declined to comment.Federal agencies … [Read More...]

We’re starting to get a sense of how the Biden administration will try to regulate stablecoins. The short version seems to be: A regulatory framework that would mandate more transparency and oversight from issuers (versus one focused on the stablecoins themselves).Side note: I’m at The Trading Show Chicago today and tomorrow. If you’re also here, let’s say hi.You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.Stablecoins as not-securitiesThe narrativeThe Biden administration is moving beyond vague hints on how it will regulate stablecoins to more concrete descriptions. There’s still a lot we don’t know yet.Why it mattersStablecoins have exploded in popularity over the past year or two, with … [Read More...]

The U.S. Securities and Exchange Commission (SEC) may be investigating Tether and Tether Operations Limited, a Freedom of Information Act (FOIA) request found.The SEC said it would not release records around Tether because they were collected for enforcement purposes, according to a FOIA response the SEC sent to The New Republic staff writer Jacob Silverman.“We are withholding records that may be responsive to your request under 5 U.S.C. § 552(b)(7)(A). This exemption protects from disclosure records compiled for law enforcement purposes, the release of which could reasonably be expected to interfere with enforcement activities,” the response said.The SEC response also said the withholding of records for the law enforcement exemption does not necessarily mean any charges or enforcement actions will … [Read More...]

The U.S. President is reportedly moving forward with the nomination of a crypto critic to run a federal bank regulator.The Biden administration intends to nominate Cornell University Professor Saule Omarova to be the next Comptroller of the Currency (OCC), Bloomberg reported on Wednesday. The administration was first rumored to be vetting Omarova last month.An OCC spokesperson declined to comment.Omarova has criticized the existing bank structure and cryptocurrencies in recent years, according to the Bloomberg report. She has advocated for having the U.S. central bank provide consumer banking services, rather than existing private banks.In a 2019 paper called New Tech v. New Deal: Fintech as a Systemic Phenomenon, Omarova wrote that fintech, including cryptocurrencies, is changing how financial transactions and services in the … [Read More...]

Crypto exchange Coinbase is preparing to pitch a proposed regulatory framework to federal officials.The exchange plans to publicly roll out this proposal in the coming days, according to sources familiar with the regulatory discussions. Details of the proposal were not available at press time, but among other matters the company intends to argue what should and should not be defined as a security within the U.S.When reached by CoinDesk, a Coinbase spokesperson declined to comment.The news comes after Coinbase announced it was ceasing plans to offer a crypto lending product, which the Securities and Exchange Commission (SEC) said would violate securities laws.Earlier this month, Coinbase Chief Legal Officer Paul Grewal and CEO Brian Armstrong revealed that the SEC had sent a Wells … [Read More...]

A spate of cryptocurrency exchange-traded fund (ETF) filings continued Tuesday after Amplify, Invesco and Galaxy Digital filed for a pair of such products.Invesco and Galaxy jointly filed a registration statement for a physically-backed bitcoin ETF, while Amplify set its sights more broadly in filing for a decentralized finance (DeFi) and crypto ETF, according to a pair of regulatory filings.The Amplify ETF application would allow the fund to invest in bitcoin futures, Canadian bitcoin funds and companies that hold more than 50% of their net assets in bitcoin, ether or another “liquid” cryptocurrency.“Initially, the Fund expects to directly invest up to 15% of its total assets in Grayscale Bitcoin Trust (‘GBTC’) and Canadian bitcoin ETFs investing in bitcoin,” the filing said. (Grayscale … [Read More...]