Crypto news & regulatory update: March 1 – March 15, 2024

Editor’s note: Our Regulatory Updates series highlights the latest regulatory, legal, 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, guidance, legislation, and frameworks released by regulators, industry consortia, professional associations, banks, governments, and other entities as they impact the crypto industry (or applications) around the world. We also occasionally include select resources such as talks, posts, or other commentary — from us or from others — with the updates.

🧠 tl;dr

1. Wyoming Governor Mark Gordon signed into law Wyoming’s Decentralized Unincorporated Nonprofit Association Act (DUNA), which establishes a framework for recognizing decentralized autonomous organizations (DAOs) as legal entities.
2. The founder of crypto mixing service Bitcoin Fog was convicted on charges of facilitating the laundering of hundreds of millions of dollars in bitcoin, most of which came from darknet marketplaces tied to illegal narcotics, computer crimes, identity theft, and child sexual abuse material.
3. Crypto exchange ShapeShift AG agreed to pay a $275,000 penalty to the U.S. Securities and Exchange Commission (SEC) to settle charges that it operated as an unregistered securities dealer. Commissioners Hester Peirce and Mark T. Uyeda dissented.

In case you missed it, we also recommend a16z crypto general counsel Miles Jennings and Cowrie principal David Kerr’s blog post explaining the significance of Wyoming’s passage of the DUNA. 

🌽 Commodity Futures Trading Commission

• U.S. Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam testified that the CFTC was most active in the digital assets space in fiscal year 2023, bringing 47 actions involving conduct related to digital asset commodities, representing more than 49% of all CFTC actions filed during that period.
• The CFTC’s Global Markets Advisory Committee advanced three new non-binding recommendations, which include publishing a first-ever digital asset taxonomy to support U.S. regulatory clarity and international alignment.

🦅 Congress

• Senators Jack Reed (D-R.I.) and Laphonza Butler (D-Cal.) wrote to SEC Chair Gary Gensler, urging him to protect investors from inadequate disclosures relating to bitcoin exchange-traded products (ETPs) and to reject applications for ETPs based on crypto assets other than bitcoin. 
• House Majority Whip Tom Emmer (R-Minn.) discussed central bank digital currencies (CBDCs) and other issues on IntraFi’s “Banking with Interest” podcast.

⚖️ Department of Justice

• As mentioned in “tl;dr,” the founder of crypto mixing service Bitcoin Fog was convicted on charges of facilitating the laundering of hundreds of millions of dollars in bitcoin, most of which came from darknet marketplaces tied to illegal narcotics, computer crimes, identity theft, and child sexual abuse material.
• The CEO of a Las Vegas-based company was convicted of a multimillion-dollar fraud and money laundering scheme in which he converted illicit proceeds into bitcoins before sending them to anonymous crypto wallets.
• The Department of Justice filed a civil forfeiture action to recover approximately $2.3 million worth of crypto that is alleged to include proceeds of a “pig butchering” fraud scheme targeting a Massachusetts resident as part of a romance scam.
• The Federal Bureau of Investigation’s 2023 Internet Crime Report found that losses from crypto investment scams increased 53% from $2.57 billion in 2022 to $3.94 billion in 2023.

🔐 Federal Deposit Insurance Corporation

• Federal Deposit Insurance Corporation Vice Chair Travis Hill said that the U.S. “risks ceding influence” over the development of standards for tokenization to non-U.S. jurisdictions, and criticized SEC Staff Accounting Bulletin 121, which directed firms safeguarding consumer crypto assets to track them as liabilities on their balance sheets.

💰 Federal Reserve

• Federal Reserve Chair Jerome Powell testified that the Federal Reserve is “nowhere near” recommending or adopting a CBDC in any form, and that the “last thing” it would want is to have individual accounts for all Americans.

📈 Securities and Exchange Commission

• As mentioned in “tl;dr,” crypto exchange ShapeShift AG agreed to pay a $275,000 penalty to the SEC to settle charges that it operated as an unregistered securities dealer. Commissioners Hester Peirce and Mark T. Uyeda dissented.
• The SEC charged 17 individuals for their roles in a $300 million Ponzi scheme that involved Texas-based crypto trading platform CryptoFX LLC and targeted more than 40,000 predominantly Latino investors in the U.S. and two other countries.
• A federal district court obtained a default judgment (a ruling in favor of a plaintiff when a defendant does not respond to a summons or appear in court) against the friend of a former Coinbase product manager, who was charged with engaging in insider trading through a scheme to trade ahead of multiple announcements regarding certain crypto asset securities that would be made available for trading on the Coinbase platform.
• The SEC delayed making a decision on spot ether ETF applications from BlackRock and Fidelity.
• Commissioner Mark T. Uyeda discussed challenges associated with the rise of the administrative state, including the SEC’s regulatory approach to crypto and the definition of a security.

©️ U.S. Copyright Office and the U.S. Patent and Trademark Office

• The U.S. Copyright Office and the U.S. Patent and Trademark Office released a joint study on non-fungible tokens (NFTs), concluding that changes to intellectual property laws and to the Offices’ registration and recordation practices are not necessary or advisable at this time to address the use of NFTs.

🏛️ White House

• The U.S. government fiscal year 2025 budget proposal includes line items for (1) applying wash sale rules to digital assets; (2) providing information reporting requirements for certain financial institutions and digital asset brokers; (3) requiring foreign crypto account reporting rules; (4) amending the mark-to-market rules to include digital assets; and (5) imposing an excise tax on mining.

🌍 State

🦬 Wyoming

• As mentioned in “tl;dr,” Wyoming Governor Mark Gordon signed into law Wyoming’s Decentralized Unincorporated Nonprofit Association Act (DUNA), which establishes a framework for recognizing decentralized autonomous organizations (DAOs) as legal entities.

🌍 International

🇦🇺 Australia

• An Australian federal court dismissed the Australian Securities and Investment Commission’s case against Finder Wallet on the grounds that the ASIC did “not establish that the Finder Earn product is a debenture.”

💰 Bank for International Settlements

• The Bank for International Settlements published a working paper that examines decentralized finance (DeFi) user behavior, particularly with respect to leverage, using wallet data associated with major DeFi lending protocols.

🇪🇺 European Union

• The European Parliament approved new rules relating to sanctions that would apply to crypto assets and wallets, among other things.

🇭🇰 Hong Kong

• Hong Kong’s Securities & Futures Commission (SFC) added crypto exchanges BitForex, Bybit, and MEXC to its list of suspicious crypto exchanges.
• The Hong Kong Monetary Authority (HKMA) announced Project Ensemble, a new wholesale CBDC project to “render support to the development of the tokenisation market in Hong Kong.”
• HKMA announced the launch of a stablecoin issuer sandbox arrangement and invited applicants with a “genuine interest in developing a stablecoin issuance business in Hong Kong.”

🇮🇳 India

• The Securities and Exchange Board of India Chairperson Madhabi Puri Buch said that investors will move to crypto if current markets do not offer faster settlement times and tokenization.

🇮🇩 Indonesia

• Indonesia’s Financial Services Authority issued new directives to implement technological innovation in the financial sector, which will also apply to crypto.

🇸🇪 Sweden

• Sweden’s central bank governor Erik Thedeen told reporters that he wants “as little bitcoin as possible in the Swedish financial system.”

🇹🇭 Thailand

• Thailand’s Securities and Exchange Commission will allow asset managers to manage private funds that invest in spot Bitcoin ETFs that trade on U.S. exchanges.

🇬🇧 United Kingdom

• The UK’s Financial Conduct Authority announced that it will not object to requests from Recognised Investment Exchanges to create a UK-listed market segment for crypto asset-backed Exchange Traded Notes (cETNs).
• UK HM Treasury announced that it will expedite work on its regulatory approach to staking, in addition to its current work on developing a regime for stablecoins.

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