Oct. 25, 2023

Examining the intersection of cryptocurrency and government

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Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De.

I poked my head out of the Sam Bankman-Fried trial just long enough for my entire panel of House lawmakers at CoinDesk's policy event in Washington, D.C. to cancel, leading to a very impromptu session instead. Unfortunately that's not enough time to really dig into any of the things that's happened over the past month so here's a brief list of things I missed instead.

Things happening

This photo doesn't really have anything to do with anything but it seems nice. (Martin Sanchez/Unsplash)

The narrative

Fun fact: November starts next week. We're 5/6 of the way through 2023 and ending on a somewhat busy note.

Why it matters

Full disclosure: I've been in a courtroom with no internet access for most of the past three weeks. I'm presenting information and links below but I'm providing no real analysis or interpretations of the below, mostly because I haven't had a chance to actually look into any of it.

Breaking it down

The Wall Street Journal, citing data from a July blog post from crypto analytics firm Elliptic, said Hamas raised over $90 million in crypto. This (obviously) caused great consternation from within the crypto community, which doesn't particularly want to be associated with a terrorist organization in the wake of a major attack.

Sen. Elizabeth Warren (D-Mass.) and around 100 other lawmakers wrote a letter to the U.S. Treasury Department and National Security Advisor asking about crypto's role in terrorism.

Sen. Sherrod Brown (D-Ohio), chair of the Senate Banking Committee, said the crypto link must be looked at (citing the same letter).

Chainalysis, another analytics firm, pushed back on the WSJ reporting on the Elliptic blog post.

The Financial Crimes Enforcement Network (FinCEN) published a Notice of Proposed Rulemaking that would designate all mixers (tools to obfuscate the origin and destination for funds) as a "primary money laundering concern," though it also alarmed other parts of the crypto industry who said the proposed rule would capture all of decentralized finance (DeFi). Worth noting that while the timing of the publication of this proposal seems somewhat coincidental to the Hamas attack in early October, it was probably percolating internally for a while – this kind of thing does not happen overnight.

In a turn of events, Elliptic published another blog post saying its data had been misinterpreted.

Journal reporter Ian Talley tweeted out a side-by-side comparison of Elliptic's most recent blog post and what the company said in July.

Looking at the original Elliptic post, while it does provide a disclosure up top that some of the addresses are frozen by Israel's national counter-terrorism entity, it also say throughout the post that the "wallets [are] linked to Palestinian Islamic Jihad by" Israel's National Bureau for Counter Terror Financing of Israel, which is vague enough that I think I understand where the Journal is coming from.

Elsewhere, bitcoin exchange-traded fund (ETF) hype was up, except wait no it wasn't, except yes it was, except no, except wait maybe X (formerly Twitter) just isn't a great source of information?

After three false starts, including a speaker-designate who was speaker-designate just long enough to see all four House members who were supposed to be on my panel cancel (if any of your staffers are reading, hi!), the House of Representatives has a leader again. No one looks happier than former Speaker Pro Tempore Patrick McHenry, who can now return to running the House Financial Services Committee.

In Sam Bankman-Fried news, we do seem to be nearing the end of this trial. The Department of Justice is about ready to rest its case, and the defense only has a few witnesses to call (though that list does include Bankman-Fried himself).

A message from Amberdata

We were surprised too. Coalition Greenwich's research, sponsored by Amberdata, shows that the U.S. regulatory environment remains crucial for digital asset investors, but other locations like Dubai and Switzerland also garner support. Check out the report to learn more.

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Stories you may have missed

How Japan Is Leading the Race to Regulate Stablecoins: Japan is..look it's a pretty straightforward headline, you don't need me to summarize it.
Coinbase Poised to Make Final Pitch in Bid to Kill SEC Accusations Quickly: Realistically, the judge overseeing the SEC suit against Coinbase is probably not going to dismiss it at this stage. This isn't a judgment call on the merits of the SEC's argument or the strength of Coinbase's response, just an observation that we'll probably see this case advance at least a bit further.
Binance Again Seeks to Nix ‘Incendiary’ CFTC Suit: I mean, ya know, see above I guess.
UK Regulator Warns Crypto Firms of 'Hard to Read' Risk Warnings: The UK is serious about how crypto companies warn their users.

A message from Chainalysis

Our Token Health Report is out now! Inside, we show you how on-chain data is a game changer for investors interested in crypto. It provides insights that simply aren’t available for traditional assets, such as real-time data on how tokens are moving through the crypto economy, who’s holding how much, what services participants are using, and more.

Read now to learn how on-chain data can help you better understand the opportunity and risk associated with any token

This Week

Wednesday:

11:30 UTC (12:30 BST) The U.K. Parliament's House of Commons had an opportunity to review a crime bill that includes crypto, but ended up not voting on it.

Thursday:

We're back in court. You know the one.

Elsewhere

(Zero Day) Kim Zetter walks through how alleged North Korean employees found their way to jobs with U.S. and other companies, allowing them to move "millions of dollars" back to the nation in violation of sanctions.

Today's Toot

Tried watching [video streaming service] without adblock. It was ridiculous.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.