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US Congress Encouraged to Regulate Crypto Sector Under Bank Secrecy Act

A Washington DC-based strategic advisory firm, the Financial Integrity Network (FIN), pushed the United States Congress to regulate firms in the cryptocurrency sector under the Bank Secrecy Act (BSA).

The FIN recommended that virtual asset service providers (VASPs) should be regulated based on the type of service that they provide, as stated in testimony. The testimony was published before a hearing set to be held by the US Senate Committee on Banking, Housing and Urban Affairs’ subcommittee on National Security and International Trade and Finance on Sep 3.

The hearing, “Human Trafficking and its Intersection with the Financial System” will be reviewing ways to prevent financial transactions related to human trafficking and to detect these transactions swiftly once they have occurred.

David Murray, the FIN’s vice president for product development and services, will be testifying among others. He noted that some VASPs are currently regulated as money transmitters under the BSA. He stated:

“Some VASPs are currently regulated as money transmitters under the BSA. Others are not regulated at all. Even for those VASPs currently regulated as money transmitters, the regulations are insufficient to protect virtual assets from exploitation.”

Murray also mentioned that imposing the recommended regulations on people and entities would make it more difficult for existing implementations of blockchain-based payments to continue to operate.

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US Congress Examines Draft Stablecoin Bill While Facebook Will Not Launch Libra Until US Regulators Approve

The United States Congress has been considering drafting a bill that argues that all managed stablecoins must be treated as investment contracts and hence are securities.

Sylvia Garcia, the US Representative for Texas’ 29th congressional district, drafted a bill, “Stablecoins are Securities Act of 2019,” stating that stablecoins should be regulated under the Securities Act of 1933. The draft bill noted that “amending statutory definitions of the term security” would be needed to include “managed stablecoins.”

The draft bill emerged in a time where Facebook’s founder, Mark Zuckerberg, has been reportedly scheduled to testify before the US Congress this week.

Zuckerberg told lawmakers that Facebook would not “be a part of launching the Libra payments system anywhere in the world until US regulators approve.”

Zuckerberg mentioned that Libra would not be competing with sovereign currencies and that Libra Association will work with the Federal Reserve and central banks to ensure it does not interfere with monetary policies.

According to Zuckerberg’s prepared remarks released on Oct.22, Libra will be pegged mostly to US dollars. He further emphasized the importance of supporting innovation, stressing that Libra will help the US maintain its global position of financial leadership as China has plans to release a similar digital currency to Libra in the coming months.

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US Congress Plans New Provisions for Cryptocurrency Derivatives Markets

The US Congress aims to pass a new bill deciding on data collection for digital commodities contracts and swaps.

The Commodity Futures Trading Commission’s (CFTC) clarified how all information can be accessed, helping efforts to fight manipulation and fraud in crypto markets. If the new bill is passed, it would be the first to place crypto set requirements onto the CFTC, which means that they must follow a higher set of guidelines.

The bill aims to have the CFTC comply with new rules detailing trade and trader data, including other information that the board of trade must be able to access. Congress sees this as the time to create smarter guidelines and regulations across all crypto-related trading and traders. In the US derivatives markets, there are more than 4 trillion USD of activity each day. If this were to become jeopardized, it would lead to an extreme problem for the economy and US citizens.

Regulation to ensure safety on all markets, including emerging crypto markets, is underpinning new approaches from congress in an attempt to close the gap in regulation between old and new financial markets.

The crypto markets are still small in comparison to traditional markets, however, without planning and new bills to support their growth, it seems unlikely the US government will allow citizens to become involved.

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US Congressman Set to Implement the Cryptocurrency Act of 2020

A congressman from the United States of America recently stepped up the bid to clarify which regulatory agency is responsible for digital assets otherwise known as cryptocurrency.

Paul Gosar of the House of Representatives introduced the “Crypto-Currency Act of 2020,” on March 9, a bill that is set to choreograph a wide range of digital assets to be liable to the appropriate regulatory bodies and agencies assigned to it.

Purpose of the proposed regulatory bill

While speaking to the cryptocurrency news outlet, Gosar’s legislative assistant, Will Stechschulte stated that- “the bill looks to provide not only clarity but legitimacy to crypto assets in the United States.”

The proposal by Gosar partitioned digital assets into three categories which are, crypto-commodity, crypto-currency, and crypto-security. These three categories respectively, are to be controlled by the Commodity Futures Trading Commission (CFTC), the Secretary of the Treasury via the Financial Crimes Enforcement Network (FinCEN), and the Securities and Exchange Commission (SEC).

Surprisingly, the language of the bill looks to cement the status of digital assets like Bitcoin as crypto-commodities instead of crypto-currencies. The classification of crypto-currency is now described as “representations of United States currency or synthetic derivatives” — more likely to mimic stablecoins like Tether (USDT).

The new bill is the updated version of the first one that was leaked to the public last December. The updated version of the bill features well-clarified definitions for terms like “Decentralized cryptographic ledger” and “smart contract” — concepts that U.S legislators have been struggling to deal with.

Related legislation

The year 2019 had seen a number of newly drafted bills, especially in response to Facebook’s Libra white paper. The fear of encountering regulations by the SEC most likely added to several changes to Libra’s initial version of a managed stablecoin based on a “basket of currencies.”

However, the closest bill to Gosar’s new bill is Warren Davidson’s Token Taxonomy Act, initially introduced in 2018 and later updated and re-introduced in April 2019.

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US Democrats Propose Distributing Covid-19 Stimulus Payments Through Digital Dollars to Unbanked Citizens

As markets across the globe continue to feel the crunch of economic disruption caused by the coronavirus pandemic, debate has raged over a massive stimulus package being proposed in the US which could see the IRS send up to $2000 a month to all US citizens until the recession takes a turn for the better.According to a draft of the Covid-19 economic stimulus legislation, House Democrats are proposing the use of digital dollars and digital wallets to expedite the distribution of the emergency funds to unbanked citizens.

Digital Stimulus Payments for Families

In section 101 of the draft entitled ‘Direct Stimulus Payments For Families’, the draft which has been circulating since March 23, specifically calls for the creation of digital wallets for all American citizens which are to be maintained by the Federal Reserve.

The paper defines the term Digital Dollar as, “(A) a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal Reserve Banks or (B) an electronic unit of value, redeemable by an eligible financial institution.”

The section outlines that every adult in the US earning less than $75,000 a year would receive the $2000 per month stimulus payment, with the payments becoming less and less as the market rebalances.

This latest draft of the bill comes from the office of House Speaker, Nancy Pelosi (D-CA) orginating on March 22, according to Bloomberg.

The Democrat version of the bill has enormous financial implications for the US, is over a thousand pages long and aims at distributing upwards of $1.8 trillion. The Republican version of the bill was immediately blocked when it made its appearance in Congress on both occasions (March 22 and 23) and was criticized for being too focused on helping big business.

Economic Countermeasures

Almost as concerning as the global economies downturn, is the projected inflation aftermath of the stimulus packages and counter measures being imposed by the Central banks and governments that have been fast to respond to the disruption caused by the Coronavirus.

Recent analysis by Bitmex highlighted, “In the US the Federal reserve has lowered interest rates to near zero (0% to 0.25%), announced the purchase of at least $500bn of treasuries and $200bn of mortgage backed securities, and also reduced the commercial bank reserve requirement to absolute zero.”Bitmex believes that there are further measure to come, but it is clear that these attempts to restabalize the broken system are, “the last major throw of the dice from central bankers. Monetary policy will not be enough.”

The Fed and the Infinite Money Pool

As reported by Blockchain.News, in an interview given to CBS’s 60 Minutes on March 22, Neel Kashkari, the President of Federal Reserve Bank of Minneapolis made a controversial remark after being asked to comment on how the state would deal with it if a situation like the 2008 financial crisis came again due the Coronavirus outbreak.

On being asked whether the Federal Reserve Bank is equipped to provide money to the US banks if they needed to satisfy all incoming panic withdrawals, Mr. Neel Kashkari was quick to respond that this is the reason why Federal Reserve Bank exists.

“Yes. This is the fundamental reason the Federal Reserve exists.”, said Mr. Neel Kashkari. He further added, “If everybody gets scared at the same time and they demand their money back, that’s why the Federal Reserve is here, is to make sure that there’s liquidity and that there’s money to meet those demands.”

Mr. Neel Kashkari further clarified his controversial statement by saying ‘that’s what Congress has told us to do’. He stated that they have been given the authority to print money and provide liquidity in the financial system by first creating it electronically and then printing it with the Treasury Department.

After the interview went live on the internet it received a wave of public criticism, one of the voice was the CEO of Cardano, Charles Hoskinson. He went on to tweet that the comments made by Neel Kashkari gave the US Dollar a real OneCoin Ponzi scam vibe. These sentiments were reiterated by CZ of Binance and Anthony Pompliano, co-founder of Morgan Creek Digital who tweeted, “History tells us that this is not sustainable long-term for a currency.”

Can US Lawmakers Really Just Mint Two $1 Trillion Coins to Back a Digital Dollar COVID Stimulus with "No Additional Debt"?

As the economy continues to deteriorate in the ongoing COVID-19 pandemic climate, US Lawmakers are once again pitching the creation of a sovereign digital dollar to quickly distribute the proposed stimulus packages.

Congresswomen Rashida Tlaib (MI-13) and Pramila Jayapal (WA-7) unveiled the Automatic BOOST to Communities Act (ABC), legislation to immediately provide a $2,000 payment using BOOST debit cards to every person in America as economic stimulus relief during the COVID-19 crisis.

After the initial payment, the ABC Act will provide a further $1,000 in recurring monthly payments for a full year from the time the coronavirus pandemic has been defeated.

According to a release on 16 April, “the ABC Act would be funded directly from the Treasury with no additional debt issued by minting two $1 trillion coins, and additional coins as necessary.”

FedAccounts and the Two Trillion Dollar Question

While there has been discussion about the Federal Reserve getting involved in the ongoing race for Central Bank Digital Currency (CBDC) dominance with a proposed FedCOIN, the motivations previously revolved around concerns with China’s determination to launch their DCEP and Facebook’s Libra project, which incidentally may be showing up once again on the Fed’s radar with the release of their new white paper earlier today.

The ABC Act would jolt the Federal Reserve into action if passed, and the Fed would be authorised by Congress to create digital wallets for all people and businesses in the US. These digital wallets are called “FedAccounts” in the proposal. The digital dollars that will be distributed are not going to be stablecoins and there is no mention of the payments being based on blockchain infrastructure.

An alarming notion is the insinuation that the FED must recognise the two newly minted Treasury coins valued at a trillion dollars each to back the payments with “no additional debt” and the explanation given seems like an exercise in creative accounting. According to Fortune, “Under the plan, the Treasury would mint the two $1 trillion coins, then deposit them at the Federal Reserve. Forced by law to recognize the coins as legal tender, the Fed would add $2 trillion to the Treasury’s account. The Treasury would then use this money, under Congress’s direction, for stimulus.”

FinTechs Enlisted in the Fight Against COVID

The bill was introduced as concerns continue to be raised regarding the timeliness of the $1,200 stimulus payments authorized under the CARES Act. While the IRS has been distributing the stimulus, it has not been an easy or quick process so far.

An appeal to Congress by Financial Innovation Now (FIN), on March 19, for FinTech companies to help distribute the loans digitally was given the green light by Lawmakers over the last week.

PayPal, Square and Intuit have received the US Government’s approval to take part in the Small Business Administration’s (SBA) Paycheck Protection Program(PPP) which was established in response to the COVID-19 pandemic triggered global financial crisis.

FIN is a FinTech alliance which includes Square, PayPal, Intuit and Stripe. In the letter addressed to lawmakers they argued that they had “the reach, relationships, and digital capabilities to reach those businesses most vulnerable” in a more timely fashion while the traditional US insititutions were left wanting in this regard.

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FinTech Giants PayPal, Intuit and Square Capital Approved to Digitally Distribute US Govt COVID-19 Small Business Stimulus

PayPal, Square and Intuit have received the US Government’s approval to take part in the Small Business Administration’s (SBA) Paycheck Protection Program(PPP) which was established in response to the COVID-19 pandemic triggered global financial crisis.

The approval was granted following an appeal to Congress by Financial Innovation Now (FIN), on March 19, for FinTech companies to help distribute the loans digitally, citing concerns that many small businesses would run out of working capital before they received any of the $350 billion stimulus package.

PayPal First Non-Bank Participant

Paypal was the first of the non-bank institutions to announce they had received official approval to help distribute the funds under the SBA program, which is part of a larger US Congress approved economic stimulus relief package totalling $2 Trillion USD.

The global payments giant has been offering small businesses loans and cash advances since 2013.

In a Linkedin post on April 11, Dan Schulman, President and CEO of PayPal said, “We are eager to deploy our capital and expertise to do our part in helping small businesses survive this challenging period.”

Shulman also revealed that the first loans have been applied for and issued. He said,“ We expect more loans to be issued in the coming days. Thanks to Congressional leaders and the Administration for ensuring the CARES Act allowed companies like PayPal to help distribute funds quickly to those businesses that are most impacted.”

Square Capital Joins In

Jack Dorsey’s newly founded Square Capital also announced it had received SBA approval as a PPP lender in partnership with Celtic Bank.

Jackie Reses, Capital Lead and People Lead at Square took to Twitter yesterday to announce, “Square Capital has received U.S. Treasury and SBA approval to be a PPP lender, and we will start rolling out our PPP loan applications this week. We continue to work with our partner Celtic Bank as they have existing expertise as a leading SBA lender.”

The announcement also stated that sellers would be notified through the Square Dashboard when their applications are available.

Intuit Demystifys Stimulus Programs and PPP

Joining PayPal and Square Capital, Intuit has also received approval as a non-bank lender for the SBA’s PPP via its QuickBooks Capital.

Intuit appears to be taking things a step further in demystifying the whole process for American citizens. Their software simplifies the application process and offers guidance on which relief funds the small business owner’s are eligible to claim. Intuit automates the application in coordination with the SBA to distribute the PPP funds quickly.

On Monday, Intuit also announced the details of several of its new programs launched in response to the COVID-19 global financial crisis and the resulting US federal government aid programs. The FinTech company set up Intuit Aid Assist as a free website designed to help small business owners and those who are self-employed assess how much federal relief they’re eligible for under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

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Ohio Democrat Lawmakers Propose Blockchain Voting in Bill For Election Overhaul

In the Ohio House of Representatives, Democrats have included a new voting system pilot based on blockchain as part of their elections law overhaul bill. The system will be used to count and track the votes of military personnel stationed outside of the US but registered to vote in Ohio.

On May 5, the Ohio Democrats introduced the elections overhaul bill which requests the set up of a pilot program for blockchain voting specifically for Ohio registered U.S military voters stationed overseas.

The bill was introduced by Democrat Reps. Beth Liston and Michele Lepore-Hagan with the signatures of 16 other Democrat party members.

While no technology vendor has been named as of yet, the proposal is explicit about the role that blockchain will play in the new system. Should the bill be passed, the votes of military personnel will be encrypted, transmitted and be protected and secured by blockchain technology.

A board of elections would be selected and then physically print the incoming military votes for counting. The selection of the election board responsible for the counting falls on the Ohio Secretary of State, Frank LaRose, as the bill reads, “The Secretary of of state shall select the boards of elections that shall participate in the pilot program.”

Potential US Congress Blockchain Government Voting Overhaul

Blockchain voting systems appear to be increasingly part of the US Government’s discussion on elections.

The Ohio Democrats’ proposed pilot for military members comes at a time when US Congress is also considering using blockchain technology to enable the Senate to conduct remote voting on national affairs during the ongoing COVID-19 pandemic.

According to a Senate staff memo, the Covid-19 pandemic has forced the shut down of many sectors of the society. As the two chambers of Congress have always met in person to conduct deliberation and vote, there is an expressed need to change the system to follow social distancing orders and to protect member voters.

Voting enabled by blockchain could allow the process to be conducted remotely while offering a high level of security. “Blockchain can provide a secure and transparent environment for transactions and a tamper-free electronic record of all the votes. It also reduces the risks of incorrect vote tallies,” read the memo.

Louisiana State Congress Unanimously Pass Crypto-Business Licensing Bill

Crypto businesses may soon be offered a regulated path to legalization in the state of Louisiana.

The state of Louisiana may soon pass a bill, that was filed earlier this year and will allow crypto-businesses to operate legally under a state license.

The proposed bill has been backed by Louisiana state representative Mark Weight. Should the bill be passed, the state would have a regulated crypto framework to operate within and would provide an official definition of traditionally ambiguous cryptocurrency-related terms.

Unanimous Approval

The crypto-license bill was unanimously approved in Louisiana’s House of Representatives last week. A positive sign for potential cryptocurrency providers, but it will now have to pass through the State Senate, and then to the Committee on Commerce, Consumer Protection, and finally International Affairs before final approval.

The new bill is a breath of fresh air for US virtual asset providers, who historically have been forced to set up in crypto-friendly jurisdictions like Malta and Switzerland. This has been due to the restrictive and heavily-enforced overarching US regulatory agenda to prevent cryptocurrencies from being used illegally for money laundering, purchasing contraband, and illicit content.

Louisiana appears to be the next US state demanding clarity on regulations for cryptocurrency business and BitLicenses. So far, New York has been the most active state in seeking regulatory clarity and the state has approved 18 Bitlicenses since 2015.

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Democrats Request Trump Administration Briefing on Enormous Seizure of Cryptocurrency Terrorism Funding

House Democrats Reps. Josh Gottheimer (D-N.J.) and Emanuel Cleaver (D-Mo.) more details from the White House on the recent seizure of cryptocurrency funding that was bound for Hamas, al-Qaeda and Islamic State terrorist groups.

According to a report from The Hill on Aug 25, Cleaver, who is the chairman of the House Financial Services Subcommittee on National Security, International Development, and Monetary Policy, and Gottheimer, a member of the subcommittee—have requested that Treasury Secretary Steven Mnuchin and Attorney General William Barr offer a briefing to the subcommittee on the seizure operation.

Cleaver and Gottheimer wrote in their request to the Trump Administration:

“It is vital that Members of the Subcommittee on National Security, International Development and Monetary Policy receive a briefing, at the appropriate classification level, on this action, the largest ever seizure of online terrorist financing, from the Department of Justice, the Department of the Treasury on this investigation.”

Gottheimer was part of the House Bipartisan group that, in 2019, pressured Twitter to remove several accounts tied to Hamas and Hezbollah, which Twitter did in the end.

On Tuesday Gottheimer said, “foreign terrorist organizations, including ISIS and al Qaeda, are constantly evolving and using tactics to threaten our way of life and we must continue to stay one step ahead.”

Terrorist Bitcoin and Crypto Seizure

According to the US Justice Department, two weeks ago millions of dollars in Bitcoin and cryptocurrency that was intended to fund the activities of terror groups like the military arm of Hamas, the Islamic State, and Al-Qaeda were seized by law enforcement. This breakthrough is the largest clampdown on online crypto terrorist fundraising in history.

Apart from the captured funds, the US officials also disclosed that they had attained court orders to get hold of 300 cryptocurrency accounts, four Facebook pages, and four websites linked to the alleged terror fundraising.

They also noted that Al-Qaeda groups mainly in Syria were to be financed using laundered Bitcoin. The funding organizations in question solicited Bitcoin donations using social media platforms like Telegram.

According to the US government’s court filing, the appeal for donations was at times disguised as charity work, including scams for COVID-19 relief work.