Dispatch #91: Landmark US Crypto Legislation Is Here

Jun 10, 2022 3 min read

Dispatch

In this patch of your weekly Dispatch:

An important new bill makes it to the US Senate
An Ethereum testnet successfully merges to proof-of-stake
DeFi is diversifying with Optimism

The Big Idea

Meet the Responsible Financial Innovation Act

As you’ve been reading on Dispatch all year, the regulatory discussions around crypto in the United States are picking up in a major way. A few months after the Biden Administration released their Executive Order on crypto, Congress has now joined the party in a major way.

Senator Cynthia Lummis – a staunch Bitcoin advocate, crypto OJ, and Republican from Wyoming – teamed up with Senator Kirsten Gillibrand, a Democrat from New York, to release the draft bill on Tuesday. The 69-page document (section-by-section overview here) covers a huge number of topics in crypto, including:

Defining most crypto tokens as a new type of “ancillary asset” that is legally a commodity, not a security
Giving the CFTC primary authority to regulate the digital asset space
Clarifying rules around stablecoins, including who can issue them and what sort of reserve disclosures they need to operate

The bill is easily the most politically-relevant and thorough attempt to define a digital asset regime in the USA to date. By and large, the crypto community has received it with optimism, although there are some specific concerns around more nebulous areas of decentralized finance.

For all the excitement though the bill is unlikely to see major progress this year before the Midterm elections in November. Still, hard not to feel like progress is being made when one of the most high-profile legislative efforts of the contentious election season is focused on crypto.

The Latest In…

Ethereum

As the dreary bear market continues, one of the events some people think could be a catalyst for a return to more favorable sentiment is the upcoming Ethereum merge and transition to proof-of-stake. This week saw some major progress in that direction, as Ethereum’s oldest testnet Ropsten successfully completed its POS transition. This is one of the last stages of tests before the merge comes to the Ethereum mainnet later this summer or early this fall. Can a successful ETH Merge beat out Powell and the Fed’s hawkish turn? Only time will tell.

The Latest In…

Crypto Institutions

It was a busy week among large crypto companies.

Bloomberg reported that the SEC was looking into Binance’s BNB token sale from 2017, while Coinbase reversed its big hiring plans and actually ended up rescinding some accepted offers. Ouch.
Citadel is teaming up with Virtu to build a liquidity platform for crypto and Paypal started enabling transfers to external wallets.
Finally, Custodia Bank sued the Federal Reserve over delays in their application for a master account and Grayscale seems to be gearing up for similar battles over its application to convert the Grayscale Bitcoin Trust into an ETF and hired Obama’s former solicitor general.

The Latest In…

TRON’s 13%

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The Week’s Most Interesting Data Story

DeFi is Diversifying

For a fairly long period, DeFi was in a never-ending growth mode, with the total value locked in protocols soaring into the hundreds of billions. Over the last few months of bear market action, however, those numbers have fallen. Interestingly, research shows that the overall DeFi ecosystem has been diversifying from where it was during the bull market, as new dapps come online and attract attention. This suggests to us that the BUIDL energy remains strong in the sector. We’re Optimistic.