US officials to meet ‘crypto’ villains to discuss European rules
US officials will travel to Europe to discuss transatlantic regulation of digital assets, but their plan to speak to some of the world’s biggest crooks casts doubt on their judgement.
On Wednesday, Politico (paywall) reported that a dozen-strong delegation of US officials will land in Europe next week on a week-long fact-finding mission focusing on the EU’s Markets in Crypto Assets (MiCA) regulations. The delegation, which includes advisers to several prominent federal politicians, will meet with their European Union counterparts, banking and securities regulators, as well as some “industry representatives.”
The federal lawmakers sending advisers include Sen. Sherrod Brown (D-OH), chairman of the powerful Senate Banking, Housing and Urban Affairs Committee, which held a “cryptocrash” hearing earlier this week. Brown’s opening statement in that hearing left little doubt about his feelings, with quotes such as “this crypto nightmare is not over yet” and “cryptocurrencies, stablecoins, investment tokens are speculative products run by unscrupulous companies that put Americans’ hard-earned money at risk.”
Crypto bros will still have a few allies in this delegation, including a staffer from the office of Sen. John Boozman (R-AR), a ranking member of the Senate Agriculture, Nutrition and Forestry Committee. Last year, Boozman co-authored the Digital Commodities Consumer Protection Act, which would have given the digital asset-friendly Commodity Futures Trading Commission (CFTC) the lead role in regulating digital assets.
Europe-bound is also a staff member from the office of Representative Patrick McHenry (R-NC), chairman of the House Financial Services Committee. Like others in his party, McHenry – a blockchain supporter – has criticized Securities and Exchange Commission (SEC) Chairman Gary Gensler for his alleged “regulation by enforcement” approach to reining in digital currency excesses.
Last week, McHenry co-authored a letter to Gensler noting that Sam Bankman-Fried (SBF), the founder of the collapsed FTX exchange and its affiliated market maker Alameda Research, was scheduled to testify before McHenry’s committee last December 13 , but was instead arrested in the Bahamas the night before on criminal charges filed by the US Department of Justice, as well as civil charges by the SEC and CFTC.
McHenry’s letter claimed that “the timing of the charges and [SBF’s] the arrest raises serious questions about the SEC’s process and cooperation with the Department of Justice.” McHenry sought “all records and communications” that SEC officials might have had regarding SBF, either internally or with the DoJ. McHenry wants a response by February 23.
The big tour
Returning to Europe, the US delegation will reportedly start in Brussels to meet members of the European Commission (EC), the European Parliament and the Council of the European Union. Officials from the European Central Bank may also appear.
The second leg of the US delegation’s European holiday sees them stop in Paris to meet officials from the European Banking Authority and the European Securities and Markets Authority.
A final vote on MiCA has been pushed back to April, typifying the often glacial pace at which legislation actually becomes law in the country(s). Even assuming no new procedural roadblocks emerge, the 18-month transition period means the new crypto regime won’t take effect until mid-to-late 2024 (although the stablecoin rules could take effect early next year).
In any case, US lawmakers now have a blueprint from which to craft their own rules for digital assets, even as pressure is on to harmonize these with their European counterparts. Mairead McGuinness, the EU’s finance commissioner, wrote an op-ed in The Hill last year calling for a “global approach to cryptocurrencies” and suggesting that “the EU and the US can lead the way on crypto regulation.”
Okay, but that would require American politicians to agree to an international approach to problem solving, a stance that many pols—we’re looking at you, GOP—tend to see as a treasonous surrender of American sovereignty. There’s also the idea that the US is effectively being asked to follow Europe’s lead here, and if the colorful culinary history of “freedom fries” and “liberty cabbage” is anything to go by, don’t expect a transatlantic handshake anytime soon.
Paris(ites)
More troubling are the US delegation’s plans to meet with a handful of digital asset firms to get their views on the potential impacts of MiCA. Politico reported that the companies sending representatives to this Wednesday (22) meeting include Ava Labs, Binance, Bitstamp, Chainalysis, Coinbase (NASDAQ: COIN), Circle,
Kraken, Ripple (NASDAQ: XRP), Stellar Development Foundation, TRM and Uniswap Labs.
With the exception of Chainalysis, whose annual Crypto Crime Reports do yeoman service in documenting the misuse of digital assets, it is hard to imagine a less qualified group to advise on how to create digital asset regulations. Frankly, it’s like the Drug Enforcement Agency calling in the heads of New York’s five mafia families to assess their views on the impact of cracking down on the drug trade.
One can easily imagine the heads of Binance, Coinbase and Kraken getting together next Tuesday to plan how to confuse the unsuspecting political aides with their patented mix of technical hand-waving nonsense along with slogans like “banking the unbanked”, “democratizing finance” and ‘the number goes up.’ Only afterwards will they say their actual motto.
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Just this month, Kraken was fined $30 million for offering unregistered securities to US clients. Kraken’s outgoing CEO Jesse Powell appears to have rolled over without a fight – much as he did when Kraken was caught allowing Iranian clients to avoid financial sanctions – but resumed his Internet Tough Guy schtick immediately afterwards.
Coinbase CEO Brian Armstrong and Chief Counsel Brian Grewal also mocked the SEC last week based on their apparent belief that they are above the law. This is from a company that paid over $103 million in fines in just the first month of 2023 for regulatory failures in the US and Europe.
And then there’s Binance, the poster boys for crypto-crime, whose boss Changpeng ‘CZ’ Zhao rarely stays in any jurisdiction longer than he absolutely has to, apparently all too aware that an arrest warrant or Interpol ‘red notice’ could be lurking. On Thursday, CZ was exposed (again) as a liar, this time with unauthorized access to the US banking system, which should go over very well with the chairmen of the House and Senate Finance Committees.
If these shysters really are the best that ‘crypto’ has to offer, the sooner the sector is killed, the better. These guys are the problem, not the solution. If US officials really want an insight into what Bitcoin was designed for – inexpensive peer-to-peer transactions and immutable data storage, all within the confines of the law – there are classes for that. And unlike their scheduled Paris meeting, you can enjoy these hours from the privacy of your hotel room, and you don’t have to have one hand on your wallet the whole time.
See: BSV On-chain Ecosystem Development in Europe
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