{"id":321033,"date":"2025-10-21T11:26:12","date_gmt":"2025-10-21T11:26:12","guid":{"rendered":"https:\/\/www.europesays.com\/us\/321033\/"},"modified":"2025-10-21T11:26:12","modified_gmt":"2025-10-21T11:26:12","slug":"us-digital-asset-market-structure-road-just-keeps-getting-bumpier","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/321033\/","title":{"rendered":"US digital asset market structure road just keeps getting bumpier"},"content":{"rendered":"
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  7. US digital asset market structure road just keeps getting bumpier<\/li>\n<\/ol>\n

    A group of United States blockchain CEOs are attempting an intervention with Senate Democrats to try and resurrect the lifeless market structure legislation push.<\/p>\n

    On October 19, Crypto in America journo Eleanor Terrett tweeted<\/a> that a heavy-hitting list of digital asset CEOs had scheduled a roundtable meeting with Senate Democrats on Wednesday (22). The guest list reportedly includes the CEOs of Coinbase<\/a> (NASDAQ: COIN<\/a>), Kraken<\/a>, Galaxy Digital<\/a> (NASDAQ: GLXY<\/a>), Chainlink<\/a>, Uniswap<\/a>, plus top reps from Ripple Labs<\/a>, Circle<\/a> (NASDAQ: CRCL<\/a>), and others.<\/p>\n

    Convened by Sen. Kirsten Gillibrand (D-NY), the meeting will reportedly focus on the Dems\u2019 controversial proposal to impose additional guardrails on decentralized finance<\/a> (DeFi) platforms. The Dems want to incorporate these modest restraints into the digital asset market structure legislation<\/a> under consideration by the Senate Banking Committee (the Responsible Financial Innovation Act<\/a>).<\/p>\n

    The proposal, which first came to light on October 9, spread panic across the blockchain space<\/a>, as DeFi proponents loudly declared that the sky was falling. The six-page proposal<\/a> states its goals as \u201cdefining accountability, clarifying oversight, and preventing the misuse of decentralized protocols for illicit finance, sanctions evasion, or to bypass market guardrails.\u201d<\/p>\n

    The proposal\u2019s highlights (or lowlights) include requiring DeFi platforms to conduct proper \u2018know your customer\u2019 (KYC) and anti-money laundering (AML) procedures. Anyone \u201cdesigning, deploying, operating, or profiting from a DeFi front-end\u201d involved in \u201ctrading, custody, settlement, lending, etc.\u201d would be considered a \u2018digital asset intermediary\u2019 required to register with the appropriate federal authority.<\/p>\n

    The Treasury Department (with the help of various federal agencies) would be empowered to determine \u201cwhich parties exercise control or influence over a DeFi platform,\u201d as well as whether a platform was \u201csufficiently decentralized\u201d and thus spared the extra oversight that comes with being an \u2018intermediary.\u2019<\/p>\n

    Terrett previously reported<\/a> that the Dems\u2019 proposal wasn\u2019t intended as an ultimatum, but more part of their quest for substantive input<\/a> into the final market structure text. Regardless, someone on the GOP side appears to have leaked it with the intent of riling up the pro-crypto base.<\/p>\n

    Whatever the intention, the result has been the demise of constructive talks between the two sides on Capitol Hill. Insiders are now expressing pessimism on reaching a timely consensus that would lead to a committee markup session of mutually acceptable language.<\/p>\n

    That dissension extends to GOP members of the Banking Committee. On October 14, Politico quoted<\/a> Sen. John Kennedy (R-LA) saying the committee is \u201cnot ready to mark this bill up\u2014not even close. Nobody on the committee understands it. I think a majority of the members of the committee have no idea what\u2019s in the bill.\u201d<\/p>\n

    Not long after this quote, Kennedy delivered a speech<\/a> on the Senate floor in which he addressed the difficulties in getting a final bill text, saying, \u201cwe need to hold hearings. This is a complicated piece of legislation \u2026 I think it\u2019s going to take at least two hearings for us to be able to understand the pros and the cons of this legislation and understand the legislation itself.\u201d<\/p>\n

    Kennedy added that \u201cI hope we\u2019ll move it quickly, but I hope we\u2019ll move deliberately. I hope we\u2019ll take the time to hold the hearings \u2026 and then additional time, once we get a bill, to mark it up, as we say, to amend it and make sure that we do the job for the American people.\u201d<\/p>\n

    The Banking Committee originally planned a markup session for September 30, then extended that timeline to this current week, which now appears all but impossible. Skeptics are suggesting the bill\u2019s final text might not come up for a Senate floor vote before Congress heads home for the holidays in December.<\/p>\n

    Further complicating matters is the ongoing government shutdown, now approaching its fourth week with no sign of ending soon. Also, the Senate Agriculture Committee\u2014which oversees the Commodity Futures Trading Commission (CFTC) that will be tasked with the majority of digital asset oversight\u2014has yet to craft its own market structure language.<\/p>\n

    But fear not, crypto fans. Wednesday\u2019s meetings will almost certainly include some subtle reminders from the CEOs in attendance that they have millions of dollars to deploy<\/a> in next year\u2019s midterm elections, and they will be basing their spending on how nice the pols treat crypto initiatives<\/a>. And since Dems always cave in the end<\/a>, why prolong this charade?<\/p>\n

    The devil in GENIUS details<\/strong><\/p>\n

    Some stakeholders, particularly U.S. banks, want the market structure bill to address alleged \u2018loopholes\u2019 in the GENIUS Act<\/a>, the stablecoin<\/a>-focused legislation that President Donald Trump signed into law<\/a> this summer.<\/p>\n

    Banks claim crypto firms like Coinbase, which offer \u2018rewards\u2019 on stablecoins held on their platforms, are doing an end-run around GENIUS\u2019s prohibition on stablecoin issuers offering \u2018yield\u2019 to customers holding their tokens. Banks fear that these high-interest \u2018rewards\u2019 will result in massive customer deposit flight, a fear that crypto firms claim is overblown.<\/p>\n

    Some senators on the Banking Committee have expressed sympathy with the bank\u2019s viewpoint<\/a>, but other prominent members of traditional finance are now flagging other problems with GENIUS, specifically, that its implementation is running ahead of regulators\u2019 capacity to establish sufficient guardrails.<\/p>\n

    At last week\u2019s D.C. Fintech Week confab, Federal Reserve Gov. Michael Barr gave a speech<\/a> highlighting \u201cthe benefits and risks of stablecoins.\u201d Barr noted that there remains \u201ca lot of work to do on the part of the government to fill in the specifics during the rule-writing process [and] it will matter how these rules are written.\u201d<\/p>\n

    Barr expressed concern over GENIUS language that allows stablecoin issuers to back their tokens with overnight reverse repurchase (REPO) agreements based on \u201cany medium of exchange authorized or adopted by a foreign government.\u201d Barr noted that \u201cuntil quite recently, El Salvador treated Bitcoin as legal tender<\/a> \u2026 as a result, an issuer could argue that Bitcoin repo could qualify as an eligible reserve asset for a stablecoin.\u201d<\/p>\n

    Taking this to its logical conclusion, Barr warned that \u201cif Bitcoin were to drop sharply in value, a stablecoin issuer could be stuck holding the Bitcoin that had declined in value, potentially compromising the one-to-one backing of the stablecoin liabilities. To the extent possible, regulations should be put in place to eliminate or minimize such risks.\u201d<\/p>\n

    Barr added that \u201cstretching the boundaries of permissible reserve assets can increase profits in good times but risks a crack in confidence during inevitable bouts of market stress.\u201d<\/p>\n

    Barr also warned of the potential for \u201cregulatory arbitrage\u201d given that GENIUS \u201cpermits four federal agencies and agencies in each state and territory to serve as the primary regulator and supervisor of stablecoin issuers.\u201d GENIUS allows issuers to conduct \u201ca broad range of \u2018digital asset service provider\u2019 and \u2018incidental\u2019 activities other than stablecoin issuance, including potentially acting as a crypto-asset exchange or broker-dealer,\u201d activities that could heighten the risk of vulnerabilities developing.<\/p>\n

    Vague rules could also confuse consumers presented with \u201ccertain dollar-denominated tokenized products\u201d that mirror stablecoins but don\u2019t fall under GENIUS\u2019s scope. This could lead to consumers \u201crelying on payment instruments that they believe are regulated, but for which there are no prudential protections of any kind.\u201d Stablecoin users are also not provided the same type of fraud protections applied to more traditional payment instruments.<\/p>\n

    Barr closed by insisting he saw major potential for stablecoins to improve cross-border finance, but much will depend on how federal and state regulators write the new rules of this road.<\/p>\n

    Back to the top \u2191<\/a><\/p>\n

    SEC hypes tokenization, Ondo Finance pumps the brakes<\/strong><\/p>\n

    Speaking at the same event was Paul Atkins, chair of the U.S. Securities and Exchange Commission (SEC), who told the audience that America is \u201cprobably 10 years behind\u201d some other nations when it comes to regulating the digital asset\/blockchain space.<\/p>\n

    Atkins, under whose leadership the SEC has struck a decidedly pro-crypto tone<\/a>, has previously spoken of the agency\u2019s plans to introduce an \u2018innovation exemption\u2019<\/a> by year\u2019s end. This exemption would allow projects like initial coin offerings<\/a> (ICOs), airdrops, and network rewards to launch without their operators first securing explicit approval from the SEC.<\/p>\n

    Atkins doubled down on this plan last week, suggesting that he prefers to describe the SEC as \u201cthe Securities and Innovation Commission.\u201d Atkins claimed crypto and tokenization are now \u201cjob one\u201d for the SEC, which plans to be \u201cvery forward-leaning in that in order to accommodate new ideas.\u201d The goal is to \u201cattract people back into the United States who might have fled\u201d from the far less permissive SEC approach<\/a> under his predecessor, Gary Gensler.<\/p>\n

    However, some blockchain firms appear spooked by the fact that mainstream financial players also want to play this innovation game. Last week, the Ondo Finance tokenization platform issued an open letter<\/a> calling on the SEC to slow roll an application by The Nasdaq Stock Market LLC to trade tokenized equities<\/a> and exchange-traded funds<\/a> (ETFs) on the same order book as their non-tokenized versions.<\/p>\n

    Blockchain-friendly firms like Robinhood Markets<\/a> (NASDAQ: HOOD<\/a>) have already begun offering tokenized equities<\/a> to customers, but only in European Union markets, not in the U.S. Other firms have filed their own tokenized securities applications<\/a> with the SEC, but Ondo\u2019s letter expresses concerns that tradfi firms like Nasdaq appear to have a leg up on their blockchain rivals.<\/p>\n

    Ondo singles out wording in Nasdaq\u2019s application that appears to claim knowledge that the Depository Trust Company<\/a> (DTC) central clearinghouse for U.S. securities is developing \u201cthe requisite infrastructure and post-trade settlement services\u201d to handle blockchain-based transactions.<\/p>\n

    Ondo notes that \u201cno direct evidence\u201d of the DTC\u2019s efforts to develop this infrastructure is \u201con the record.\u201d Ondo argues that this \u201cimplies differential access to information relevant and necessary for Ondo and other market participants to provide meaningful comment on the proposed rule change.\u201d<\/p>\n

    Ondo adds that Nasdaq\u2019s application states that the DTC\u2019s tokenization settlement process may take a year to arrive and thus Ondo believes \u201cthere is no harm, and there is much benefit to be gained\u201d by the SEC refusing to approve Nasdaq\u2019s application at this time.<\/p>\n

    It\u2019s perhaps worth remembering that it was only a couple of weeks ago that tradfi giants like CME Group and Cboe Global Markets were the ones demanding a \u201clevel playing field\u201d and asking the SEC<\/a> why only blockchain firms seemed eligible for the regulator\u2019s \u2018innovation exemption.\u2019 How can you tell when regulations are working? Nobody is happy.<\/p>\n

    Back to the top \u2191<\/a><\/p>\n

    Coinbase spends $25 million on NFT even as platform creaks and groans<\/strong><\/p>\n

    Coinbase was one of the companies knocked offline by Monday\u2019s early-morning cockup at Amazon Web Services<\/a> (AWS), and it wasn\u2019t until late-Monday that the site claimed to be back to full functionality. While this outage wasn\u2019t Coinbase\u2019s doing, the site does have a lengthy history of going offline at inopportune moments<\/a>, usually when token prices are tanking.<\/p>\n

    Coinbase couldn\u2019t blame Amazon during the major crypto liquidation event<\/a> of about 10 days ago, when customers found themselves experiencing what Coinbase called \u201clatency or degraded performance when transacting.\u201d Coinbase was hardly the only exchange to let customers down that day, with users around the world complaining that their leveraged positions had been liquidated due to their inability to access their accounts.<\/p>\n

    A year ago, Coinbase announced plans to use AI to predict spikes in user activity<\/a>, theoretically allowing it to deploy extra resources to prevent outages from occurring. Whether that plan is still a work-in-progress or simply failed to work during the crash remains a secret known only to Coinbase management.<\/p>\n

    Regardless, Monday was probably not the most optimal time for CEO Brian Armstrong to confirm<\/a> the on-chain data<\/a> that showed Coinbase paying $25 million for the sole non-fungible token<\/a> (NFT) issued by Cobie, the crypto trader otherwise known as Jordan Fish.<\/p>\n

    In May, Cobie publicly vowed<\/a> that if someone bought the NFT for that amount, he\u2019d create another eight episodes of his Up Only TV podcast, which hasn\u2019t issued any new material in nearly three years. Despite his fiscal windfall, Cobie issued a tweet<\/a> on Monday that just said \u201cAh man wtf\u201d and a reply<\/a> to Armstrong saying he \u201cshould fire whoever approved this.\u201d<\/p>\n

    The paused podcast\u2019s popularity aside, Coinbase customers might have preferred<\/a> that Armstrong spend these millions of dollars beefing up his company\u2019s wonky technical underpinnings. But perhaps they plan to do that once they shake off their personal latency and\/or degraded performance.<\/p>\n

    Back to the top \u2191<\/a><\/p>\n

    Watch: Reggie Middleton on DeFi, booms\/busts & crypto regulation<\/p>\n

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