Crypto news and regulatory update: July 14, 2023 – July 28, 2023

Editor’s note: The a16z crypto Regulatory Update is a series that highlights the latest regulatory and policy happenings relevant to builders in web3 and crypto, as tracked and curated by the a16z crypto regulatory team. The roundups are based on recent news, the latest updates, new guidance, ongoing legislation, and frameworks released by regulatory agencies/bodies, industry consortia and professional associations, banks, governments, and other entities as they impact the crypto industry (or applications) around the world. We also occasionally include select other resources such as talks, posts, or other commentary – from us or from others – with the updates.

🧠 tl;dr

• The House Financial Services Committee (HFSC) and the House Agriculture Committee approved the “Financial Innovation and Technology for the 21st Century Act.” The HFSC also approved the “Clarity for Payment Stablecoins Act” and the “Blockchain Regulatory Certainty Act.” This is the first time that crypto-specific bills have advanced House Committees on their own merits and not as part of broader legislation.  All of the bills had bipartisan support.
• Senators Jack Reed (D-R.I.), Mike Rounds (R-S.D.), Mitt Romney (R-Utah), and Mark Warner (D-Va.) introduced the “Crypto-Asset National Security Enhancement (CANSEE) Act of 2023,” which would extend sanctions and money laundering compliance obligations to certain stakeholders in decentralized protocols, and others who facilitate access to such protocols. 

🌽 Commodity Futures Trading Commission

• The Commodity Futures Trading Commission (CFTC) charged a Tennessee husband and wife with defrauding more than 100 people across the U.S. and failing to register with the CFTC in connection with a multi-million dollar digital asset commodity pool known as “Blessings of God Thru Crypto.” 
• Commissioner Caroline D. Pham said that “institutions, central banks, and asset managers” have known since 2016 or 2017 that tokenization of real assets presents a real opportunity to “modernize” financial market infrastructure.

🦅 Congress

• As mentioned in the top “tl;dr”, the House Financial Services Committee (HFSC) and the House Agriculture Committee approved the “Financial Innovation and Technology for the 21st Century Act.” The HFSC also approved the “Clarity for Payment Stablecoins Act” and the “Blockchain Regulatory Certainty Act.” This is the first time that crypto-specific bills have advanced House Committees on their own merits and not as part of broader legislation.  All of the bills had bipartisan support.
• As also noted at the top, Senators Jack Reed (D-R.I.), Mike Rounds (R-S.D.), Mitt Romney (R-Utah), and Mark Warner (D-Va.) introduced the “Crypto-Asset National Security Enhancement (CANSEE) Act of 2023,” which would extend sanctions and money laundering compliance obligations to certain stakeholders in decentralized protocols, and others who facilitate access to such protocols.
• The U.S. Senate passed the National Defense Authorization Act, which includes an amendment that would require the Department of the Treasury to “establish examination standards for crypto assets” and to conduct a study on “combating anonymous crypto asset transactions.”
• House Representative Ritchie Torres (D-N.Y.) wrote to Securities and Exchange Commission (SEC) Chair Gary Gensler calling on the SEC to “reassess its regulatory assault on crypto assets” in light of the latest decision in the SEC’s enforcement action against Ripple Labs.
• House Representatives French Hill (R-Ark.) and Dusty Johnson (R-S.D.) wrote to SEC Chair Gary Gensler, calling on the SEC to participate in “productive engagement” with Congress on recently proposed crypto legislation instead of relying on regulation by enforcement.

⚖️ Department of Justice

• A federal court authorized seizure warrants to confiscate funds from Deltec Bank’s U.S. accounts in light of an investigation into “international criminal money laundering syndicates operating cryptocurrency investment and other wire fraud scams.”
• A Nevada resident was sentenced to five years in prison for a murder-for-hire plot, in which she sent 12 bitcoins (valued at approximately $5,000 at the time) to a dark web hitman website, known as Besa Mafia, to have her ex-husband murdered.

🛡️ Government Accountability Office

• The United States Government Accountability Office (GAO) published a report recommending that Congress consider legislation for federal oversight of non-security crypto asset spot markets and stablecoins, as well as seven additional recommendations to each of the financial regulators to establish or adapt an existing “coordination mechanism” to identify and address blockchain-related risks.

📈 Securities and Exchange Commission

• The SEC charged a North Carolina resident and three entities that he owned and controlled with engaging in a fraudulent scheme involving unregistered offers and sales of crypto asset securities called “DWE” and “BPC.”
• The SEC charged Quantstamp for conducting an unregistered initial coin offering of “QSP” crypto asset securities that raised $28 million in 2017. Quantstamp agreed to settle the charges and pay approximately $3.5 million in penalties, disgorgement, and interest.
• SEC Chair Gary Gensler told Yahoo Finance that he was both “pleased” and “disappointed” with the court’s latest decision in the SEC’s enforcement action against Ripple Labs.
• The SEC’s chief accountant released a statement warning accounting firms of their potential legal liability when working with clients in the crypto industry.
• SEC Chair Gary Gensler requested additional funding for the fiscal year 2024 budget from the Senate, which would be used, in part, for the agency’s activities in the crypto sector.

🌍 International

💰 Financial Stability Board

• The Financial Stability Board (FSB) published its global regulatory framework for crypto-asset activities to “promote the comprehensiveness and international consistency of regulatory and supervisory approaches.”

🇫🇷 France

• Societe Generale’s cryptocurrency subsidiary, SG Forge, received a license to offer digital assets custody, trading, and other related services in France from the country’s financial regulator.
• The Banque de France published a second report on the lessons it has learned from wholesale central bank digital currency (CBDC) experiments, including that a tokenized form of central bank money could improve cross-border payments, settlement finality, and security for a vast range of financial assets.

🇮🇹 Italy

• The Bank of Italy’s Milano Hub innovation center will provide support for a project to research a security token ecosystem for institutional decentralized finance.

🇯🇵 Japan

• Japan’s Prime Minister Fumio Kishida said that web3 is part of a “new form of capitalism.” 

🇰🇼 Kuwait

• Kuwait’s Capital Markets Authority has prohibited the use of crypto for payments, imposed a ban on digital asset mining, and warned the public that companies are not allowed to provide any type of crypto-related services.

🇳🇬 Nigeria

• The Central Bank of Nigeria announced that it is amending the eNaira, its current CBDC, to ensure an increase in the volume and activity of wallet holders.

🇷🇺 Russia

• Russian President Vladimir Putin signed a digital ruble law that would allow the Russian central bank to issue its own digital currency. 

🇰🇷 South Korea

• South Korea established an interagency investigation unit to combat cryptocurrency crimes.
• The Korea Financial Intelligence Unit held a consultative meeting with five domestic virtual asset service providers (VASPs) with the goal of strengthening the government’s responses to illegal activities and the compliance capacity of VASPs.

🇬🇧 United Kingdom

• The Financial Conduct Authority (FCA) announced the launch of a permanent digital sandbox “to support firms at the early stage of product development by enabling experimentation through proof of concepts.”
• HM Treasury published a response rejecting a proposed plan of lawmakers from the House of Commons Treasury Committee to regulate crypto like gambling.

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