Is This a New Era for Crypto Legislation?
Weekly News Recap: 🚀 SEC approves spot Ethereum ETFs, 🏛️ US House passes FIT21, 🚔 SBF moves to new correctional facility, 📝 Grayscale CEO steps down, and more!
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Senator Cynthia Lummis on Why Crypto Now Has Bipartisan Support in Congress
With crypto becoming more politicized than ever, U.S. Senator from Wyoming Cynthia Lummis came on Unchained to talk about the recent regulatory action in Washington, D.C.
She delves into what led to bipartisan support to repeal SAB 121, and how the strength of the vote there in both the House and Senate may have affected the about-face decision to approve spot ether ETFs. Sen. Lummis also explains why she disagrees with how Gary Gensler’s SEC is handling the industry, how to avoid the next TerraUSD, why she feels Wyoming-chartered Custodia Bank is not being treated fairly, the ban on a Chinese-owned, Wyoming-based Bitcoin mining firm, and what advice she would give to the crypto industry during this election year.
Listen to the episode on Apple Podcasts, Spotify, Pods, Fountain, Overcast, Podcast Addict, Pocket Casts, Castbox, Amazon Music, or on your favorite podcast platform. Or watch it on YouTube.
Weekly News Recap
SEC Approves Spot Ethereum ETFs
The U.S. Securities and Exchange Commission (SEC) has approved 8 spot Ethereum ETFs, including those from BlackRock, Fidelity, and Grayscale. This approval, part of an omnibus order, marks a significant development just four months after the first spot Bitcoin ETFs were approved.
While the ETFs have received initial approval, the issuers must still complete their S-1 registration statements before trading can begin, a process that could take several weeks. This unexpected approval follows a sudden shift in the SEC’s engagement with issuers, prompting speculation about the reasons behind the change.
With ETH ETFs approved, the crypto community is speculating about which asset might be next. Joe McCann of Asymmetric favors Solana, citing strong interest. However, James Seyffart of Bloomberg Intelligence points to regulatory challenges for SOL given that it has been named as a security numerous times by the SEC. He suggested Dogecoin or Litecoin are more likely, though ultimately, what will determine the next crypto asset is whether there is an underlying regulated futures market. Most experts agree the next spot crypto approval is a ways off.
US House Approves Crypto Regulation Bill
In a week that will go down in history for marking a sea change in the U.S. government’s attitude toward crypto, on Wednesday, the U.S. House of Representatives passed the first comprehensive crypto market structure bill, the Financial Innovation and Technology for the 21st Century (FIT21) Act. The bipartisan vote of 279 to 136 included 71 Democratic representatives crossing party lines to get it approved.
Proponents, like Representative Patrick McHenry, believe the bill, which aims to establish regulatory clarity over digital assets by delineating the roles of the SEC and the CFTC, could end the regulatory "food fight" and foster innovation in the crypto space.
The FIT21 Act now faces the Senate, where its future is uncertain amidst looming elections. Despite President Biden's opposition, he has not threatened a veto.
Sam Bankman-Fried Moves to New Correctional Facility
Sam Bankman-Fried, the founder of the now-defunct cryptocurrency exchange FTX, has been moved to a new prison facility, as first reported by the Wall Street Journal. Federal officials began the transfer early Wednesday, according to a spokesperson for Bankman-Fried. While the exact destination remains unconfirmed, sources suggest he is being relocated to a correctional facility in Mendota, California.
The move follows recommendations from federal prosecutors to transfer Bankman-Fried to a low-security prison closer to his parents’ home in Palo Alto. Previously, SBF had requested to remain at the Metropolitan Detention Center in Brooklyn to be near his legal team working on his appeal, and even U.S. District Judge Lewis Kaplan had concurred with Bankman-Fried.
SBF is serving a 25-year sentence for orchestrating one of the biggest financial frauds in U.S. history. His relocation may take up to a month.
Grayscale CEO Steps Down
Michael Sonnenshein, CEO of Grayscale, has resigned after a decade with the company. Effective August 15, he will be succeeded by Peter Mintzberg, currently the head of strategy for asset and wealth management at Goldman Sachs. Until then, CFO Edward McGee will serve as interim CEO.
Sonnenshein, who started at Grayscale in 2014 and became CEO in 2021, played a pivotal role in transforming Grayscale’s Bitcoin Trust into an ETF earlier this year, a milestone in the firm's history—and crypto history. However, the ETF has experienced significant outflows, totaling over $17 billion, mainly due to a 1.5% management fee that is several times as expensive as the competition’s.
Mintzberg brings over 20 years of traditional finance experience from notable firms such as BlackRock, OppenheimerFunds, and Invesco.
Genesis Settles With NYAG, Establishes Victims' Fund
The New York Attorney General's office announced that a state court has approved a $2 billion settlement with the bankrupt crypto lender Genesis. This settlement will create a fund for Genesis’ creditors, who invested over $1.1 billion through the Gemini Earn program, and prohibits Genesis from operating in the state.
Attorney General Letitia James remarked, "This historic settlement is a major step toward ensuring justice for the victims." The lawsuit, filed in October 2023, accused Genesis, Gemini, and Digital Currency Group of defrauding over 230,000 investors, including 29,000 New Yorkers.
Genesis has agreed to the settlement without admitting or denying the allegations. This follows their recent agreement to return $3 billion in customer assets as part of a bankruptcy liquidation plan approved earlier this week.
Uniswap Labs Rebuts SEC Allegations
On Tuesday, Uniswap Labs responded to a Wells notice from the SEC, which claims the company behind the decentralized exchange operates as an unregistered securities exchange and broker-dealer. The SEC contends that UNI tokens constitute investment contracts.
In its rebuttal, Uniswap Labs criticized the SEC’s stance as overreaching, arguing that the regulator’s jurisdiction does not extend to the majority of the platform’s activities, which involve commodities like ETH and stablecoins. Marvin Ammori, Uniswap’s chief legal officer, wrote on X, "The SEC is targeting assets and people in nations well beyond its authority." Uniswap maintains that the SEC’s arguments are "weak and wrong," and stresses the importance of embracing open-source technology instead of litigating it out of existence.
Gala Games Hit by Major Hack, Partial Funds Recovered
Gala Games, a Web3 gaming platform, faced a significant hack on Monday, with an attacker minting 5 billion GALA tokens worth over $200 million. The price of GALA dropped nearly 15%.
The attacker exploited a vulnerability in the protocol’s mint function, allowing the creation and transfer of a massive number of tokens. Gala Games quickly froze 90% of the unauthorized tokens, worth approximately $180 million. However, the hacker managed to sell 600 million GALA tokens, valued at over $20 million, through Uniswap.
The attacker has since returned around $20 million of the stolen funds. CEO Eric Schiermeyer stated, "We believe we have identified the culprit and are working with authorities." Gala Games now plans a governance vote to decide whether to burn the 4.4 billion frozen tokens.
Farcaster Secures $150 Million in Series A Funding
Decentralized social network Farcaster has raised $150 million in a Series A round, reaching a $1 billion valuation. The funding round was led by Paradigm, with participation from a16z crypto, Haun Ventures, Union Square Ventures, Variant Fund, and Standard Crypto.
In an interview with Unchained, co-founders Dan Romero and Varun Srinivasan emphasized their focus on scaling to an "internet-scale protocol" and maintaining a lean team. Highlighting the network's developer and user growth, spurred by features like Frames and the recent FarCon event, they also shared their commitment to long-term development. Their ultimate goal? To create valuable, user-friendly products that can compete with mainstream social media giants.
ZkSync Prepares for Token Generation Event and Airdrop
According to The Block, zkSync, this week, an Ethereum Layer 2 network developed by Matter Labs, is set to conduct a token generation event (TGE) that will introduce a total supply of 21 billion tokens. ZkSync then plans to execute an airdrop around June 13, aiming to distribute tokens ahead of Blast’s scheduled airdrop on June 26.
The token, intended to use the ticker "ZK," faces potential conflicts as the ticker is already claimed by Polyhedra Network. Despite this, zkSync might still proceed with the ticker "ZK," as noted by a source who pointed out that Binance has yet to list Polyhedra's token.
Trump Campaign Embraces Crypto Donations
Supporters of former President Donald Trump’s campaign can now donate cryptocurrencies to his campaign. According to the campaign website, donations can be made via Coinbase Wallet and MetaMask.
"Demonstrating President Trump’s success as a champion of American freedom and innovation, we proudly offer you a chance to contribute to the campaign with cryptocurrency," the site states. This move makes Trump the first major-party presidential nominee to accept cryptocurrency donations ahead of the November 5 election.
Ethereum Researchers' Advisory Roles at EigenLayer Spark Debate
Two Ethereum Foundation researchers, Justin Drake and Dankrad Feist, recently revealed their advisory positions at EigenLayer, a restaking protocol, igniting discussions about potential conflicts of interest within the Ethereum community.
Drake, who disclosed his role after receiving a query from crypto influencer Cobie, who questioned the ethics of Ethereum researchers accepting substantial compensation from Ethereum dapps, says he intends to reinvest his advisory proceeds into Ethereum projects.
Afterward, Feist also disclosed his new role, emphasizing that his advisory position is personal and not representative of the Ethereum Foundation. Acknowledging he received a significant amount of EIGEN tokens, he noted he will “focus on risks and decentralization," and asserted that his role would not influence his professional opinions.
Debate Over Low Float, High FDV Tokens Intensifies
A recent Binance report sparked debate about low float, high fully diluted valuation (FDV) tokens, which are often criticized for offering limited upside post-TGEs, have seen significant price drops, leading to widespread scrutiny. Binance responded by announcing a shift to listing small- and medium-sized projects.
Crypto influencers like Cobie and Haseeb Qureshi weighed in, highlighting potential conflicts of interest and market manipulation. Cobie argued that early private investors capture most of the upside, leaving little for public participants. Meanwhile, Qureshi analyzed factors like VC dumping and market conditions, suggesting that market forces will eventually correct these mispricing.
FUN BITS 😂: Algorand's Ad Makes Fun of Other Blockchains
In a new ad, Algorand humorously highlighted the struggles of paying with Bitcoin, Ethereum, and Solana at a supermarket. The video shows three customers attempting to make purchases with their respective cryptocurrencies. The Bitcoin user awkwardly waits as the transaction slowly clears, while the Ethereum user is shocked by the exorbitant fees. The Solana user faces repeated transaction failures, much to their frustration.
In contrast, Algorand users are shown breezing through the checkout, paying effortlessly and happily.