Author: Nicole Rankin

The Chamber of Digital Commerce applauds the bipartisan initiative taken by Senator Cynthia Lummis (R-WY) along with Representatives Mike Flood (R-NE) and Wiley Nickel (D-NC) for their commitment to overturning the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121. SAB 121 has negatively impacted consumers and breached the integrity of the rulemaking process.  

Today’s bipartisan resolution represents a decisive action to ensure the SEC operates within its designated rulemaking authority. By failing to issue SAB 121 in adherence with the rulemaking process, the SEC bypassed established procedures, compromising the integrity of the regulatory framework, and violating principles of transparent and inclusive governance.  

Moreover, SAB 121’s implementation imposed stringent restrictions on banks and other trusted custodians’ ability to manage digital assets. This not only heightened the risks of consumers delving into digital asset investments, but also increased their financial burdens, making it more challenging for them to safely engage with digital assets.  

As we celebrate this milestone, let us also prepare for the road ahead. We will continue to engage with our allies in Congress, the industry, and the broader community to ensure that this resolution passes and SAB 121 is nullified as we pave the way for the responsible, innovative growth of the digital asset sector.  

Background:  

• The SEC issued SAB 121 in March 2022. It presented an unworkable regulatory environment for digital asset custodians by mandating an equivalent liability on the balance sheet for each held digital asset. This requirement, both unprecedented and financially unfeasible, threatened the operational viability of digital asset custodians.  

• In response, the Chamber of Digital Commerce’s Token Alliance established our SAB 121 workstream, driving advocacy efforts to rescind the unworkable rule. The workstream has submitted eight letters to Congress concerning digital asset custody matters, engaged with the SEC’s Office of the Chief Accountant, and urged the Government Accountability Office (GAO) to review the rule in a collaborative effort with Senator Lummis and Representative McHenry.  

• In October 2023, the GAO conducted a comprehensive review and concluded that SAB 121 qualifies as a rule under the Congressional Review Act (CRA). This classification was due to its nature as an agency statement of general applicability and future effect, aimed at interpreting and prescribing policy. 

• CRA allows Congress to review and approve/disapprove rules issued by federal agencies for a period of 60 days (if rule not submitted, its 60 days from GAO opinion). If Congress does not agree with the rule, each chamber may pass a resolution of disapproval that must be signed by the President. If a rule is nullified by a resolution of disapproval, the rule is void and the SEC is prohibited from reissuing a similar regulation without congressional authorization.  

• Resolutions of disapproval need to be passed by both Houses of Congress by a simple majority vote – so Senate only needs 51 votes not 60.  

• This resolution must also be signed by the President. Successfully passing this resolution not only stops the rule from being implemented or remaining in effect but also prevents the agency from reintroducing a similar rule unless new legislation permits it. 

WASHINGTON, D.C., Jan. 10, 2024 — The Chamber of Digital Commerce congratulates the Bitcoin community on the approval of eleven spot bitcoin ETFs applications for U.S. public markets. Marking a historic victory for the industry, The Chamber and its members take pride in their dedicated advocacy, playing a crucial role in supporting this achievement. 

ETFs have consistently ranked among the most popular investment vehicles, and today’s approval empowers issuers to provide investors with transparent, liquid, and cost-effective exposure to bitcoin. Through this approval, the SEC is greatly expanding the opportunities for retail investors to buy and hold bitcoin, the highest-performing investment asset in the world for eleven of the past fourteen years.  

As Perianne Boring, Founder and CEO of the Chamber of Digital Commerce, noted, “Retail investors seeking exposure to bitcoin now have much easier and more direct access to the asset through many of the top financial institutions. They now have a very simple and straightforward way to allocate a percentage of their investments into bitcoin, and the peace of mind that comes from holding it in their existing investment portfolios. This alone is a transformational event for hundreds of millions of investors and the bitcoin community.”    

Over the years, The Chamber has championed this approval through several key strategies:  

• Research: Their report, “The Crypto Conundrum: Why Won’t the SEC Approve a Bitcoin ETF,” laid the groundwork for their advocacy efforts. It provided a detailed analysis of the investing community’s pursuit of a spot bitcoin ETF and the SEC’s increasingly unjustifiable refusal to approve it.  
• Advocacy: The Chamber’s report reached all 535 Members of Congress, collaborating with members to educate Congress on the SEC’s discriminatory treatment of digital asset funds. They had held multiple briefings for the Senate Banking and House Financial Services Committees, urging them to exercise their oversight function over the SEC.  
• Oversight: Due to The Chamber’s advocacy efforts, Congress challenged the SEC’s handling of spot bitcoin ETF applications in six Congressional hearings. 
• Litigation: The Chamber of Digital Commerce joined other industry trade organizations to submit an amicus brief in the Grayscale v. SEC case, where the Court ruled the SEC acted in an arbitrary and capricious manner in denying Grayscale’s application. The Chamber’s research played an important role in this legal victory, which has undoubtedly helped compel the SEC to approve spot bitcoin ETFs.  

Boring concluded on an optimistic note, “This green light opens new doors for U.S. investors, paving the way for increased adoption. While we have many challenges ahead, we’re looking forward to a future marked by expanded opportunities and a thriving ecosystem.” 

The Chamber of Digital Commerce wants to congratulate its members whose applications were approved today – Bitwise Asset Management (BITB), Fidelity Asset Management (FBTC), Invesco (BTCO), and Wisdom Tree (BTCW), as well as all other approved issuers.  The Chamber also congratulates its law firm members who supported these issuers in their efforts – Chapman and Cutler, Clifford Chance, and Perkins Coie – as well as State Street, who is also providing important services around these approved products. 

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About the Chamber of Digital Commerce: 

The Chamber of Digital Commerce is the original and preeminent trade association dedicated to digital assets. Our mission is to ensure that the United States remains the leading hub for bitcoin, digital assets, and blockchain technology. We educate and assist policymakers and regulatory bodies, while advocating for industry. Our goal is to develop a legal landscape that fosters innovation, job growth, and attracts investment.  

What happened? There is a new requirement from the U.S. Internal Revenue Service (IRS) for individuals or businesses that receive more than $10,000 in digital assets to report these transactions to the IRS and the Treasury’s Financial Crimes Enforcement Network (FinCEN). This requirement was put into place by an amendment to Internal Revenue Code Section 6050I, which was part of the Infrastructure Investment and Jobs Act passed in 2021. This means that, like cash transactions over $10,000, transactions involving cryptocurrencies or other digital assets that exceed this amount must be reported to the IRS and FinCEN to ensure tax compliance and to combat money laundering and tax evasion.

Effective Date: The statute is effective for returns required to be filed after December 31, 2023. Although there are regulations and an IRS form (Form 8300) implementing Section 6050I prior to the amendment, the IRS has not provided any guidance on how the reporting requirement applies to digital asset transactions.

On December 4, the Department of Justice, representing Treasury Secretary Janet Yellen, in a brief to the United States Court of Appeals for the Sixth Circuit stated, “the mere fact that the amendment to Section 6050I has a January 1, 2024 effective date does not mean that the statute’s new reporting requirement will automatically go into effect on that date.”[1] Furthermore, the brief states “Like other provisions of the Internal Revenue Code that have similar language, Section 6050I’s reporting requirements are not self-executing and will become effective following the promulgation of implementing regulations.”[2]

These statements would indicate then that the effective date is delayed until there are implementing regulations clarifying how Section 6050I would apply to digital asset transactions. 

What’s next? Given this uncertainty and the complexities surrounding the application of Section 6050I to digital assets, and the criminal penalties for noncompliance, we strongly encourage all digital asset businesses to consult with legal and tax counsel. It is crucial to understand how this new law may impact your business operations and reporting requirements. Legal and tax counsel can provide tailored advice and help you navigate these changes effectively, ensuring that your business remains compliant with the evolving regulatory landscape.

We understand that these changes can be challenging or near impossible to adapt to, especially in a rapidly evolving industry like digital assets. Please know that The Chamber of Digital Commerce is committed to advocating for additional clarity and providing our members and the broader digital asset community with the most up-to-date information and resources to assist you during this transition.

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[1] Hubbert, D. A., Ugolini, F., Delsol, E. P., & Klimas, G. J. (2023). Brief for the appellees in Dan Carman, Coin Center, Raymond Walsh, and Quiet Industries Corp. v. Janet Yellen, U.S. Department of the Treasury, Daniel Werfel, Internal Revenue Service, Merrick B. Garland, and United States of America [Brief for the appellees]. No. 23-5662. In the United States Court of Appeals for the Sixth Circuit.

[2] Ibid.

The Chamber of Digital Commerce, representing the world’s leading innovation in digital assets and blockchain technology, has been closely monitoring the Securities and Exchange Commission’s (SEC) recent enforcement action against Kraken. This development is particularly concerning as it represents another instance of the SEC’s aggressive regulatory approach towards the digital asset industry. 

We have consistently emphasized the importance of a balanced and clear regulatory framework that not only protects consumers but also fosters an environment conducive to innovation. The ongoing situation with Kraken further underscores the urgency for Congress to provide legislative clarity that thwarts the overreach and unjust tactics of the SEC.  

“The time is now for Congress to step up and do their job of actually legislating, so entrepreneurs can innovate and continue to make America a premier destination for emerging technologies,” said Cody Carbone, Vice President of Policy. “The pattern of SEC overreach in the digital asset world is unacceptable.” 

We will be monitoring this action closely. The Chamber of Digital Commerce remains committed to advocating for a regulatory landscape that is fair, transparent, and conducive to innovation.  

We express our profound disappointment regarding Governor Kathy Hochul’s decision to veto the bipartisan bill S1891, which proposed the creation of a cryptocurrency and blockchain study task force. This veto represents a missed opportunity.

The formation of this task force was a pivotal step towards understanding and navigating the complex and rapidly evolving landscape of cryptocurrencies and blockchain technology. Its purpose was to ensure that New York remains at the forefront of innovation while protecting consumers and maintaining market integrity. The veto of this bill impedes New York’s ability to adapt to and shape the future of finance and technology.

We hope Governor Hochul will reconsider this decision, recognizing the critical need for informed and balanced regulation in the digital assets sector. The Digital Chamber’s commitment to advocating for smart, balanced regulation of digital assets remains unwavering. We will continue our efforts at every level – state, federal, and international – to champion regulations that foster innovation, ensure market stability, and protect the interests of all stakeholders in this dynamic industry.

September 8, 2023 – Today, The Chamber of Digital Commerce responded to the Senate Finance Committee’s solicitation for policy input on the taxation of digital assets. 

In the response, The Chamber provides clarity on marking-to-market for traders and dealers, trading safe harbor, the treatment of loans of digital assets, wash sales, constructive sales, timing and source of earned income from staking and mining, nonfunctional currency, FATCA and FBAR reporting, and valuation. 

These responses were all formulated with the best interest of preserving safe innovation for blockchain technology and digital assets and align with The Chamber’s belief that by fostering an environment that encourages innovation coincides with ensuring regulatory compliance.  

“We believe that our collective efforts can lead to a more comprehensive and effective regulatory framework that balances the need for innovation with the necessity of compliance and investor protection,” said Cody Carbone, Vice President of Policy. “The Chamber appreciates the Committee’s thoughtfulness in engaging industry on this issue and looks forward to continuing to engage with the Committee on this and other matters of importance to the business community as they develop their legislative efforts.” 

The Chamber of Digital Commerce applauds the Financial Accounting Standard Board’s (FASB) unanimous decision to approve its proposed crypto asset standards. The long-anticipated standards will introduce fair value accounting rules for crypto assets, like bitcoin, which will finally provide clear and common-sense accounting rules for this nascent asset class. 

The new rules will better reflect the economics of the technology by measuring crypto assets at fair value, potentially reducing the cost and complexity associated with applying the current cost-less-impairment accounting model.

“Fair value measurement for crypto assets is a big step forward for mainstream adoption of crypto,” said Perianne Boring, Founder and CEO of The Chamber of Digital Commerce. “Measuring these assets at fair value provides a more favorable, equitable accounting treatment. This move highlights the desire of the crypto industry to be treated similarly to other forms and classes of investments.” 

The new rules, expected to be published by the end of 2023, are set to go into effect as soon as 2025, but companies will be able to apply for early adoption. 

FASB’s willingness to collaborate with The Chamber and its diverse membership to achieve this goal is extremely appreciated.

The Chamber looks forward to continuing to be part of the conversation and get these rules over the finish line.

Background:

The Chamber submitted comments to the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (Subtopic 350-60) Accounting for and Disclosure of Crypto Assets in June 2023 calling for fair value measurement of crypto assets. For nearly a decade, The Chamber has advocated for setting clear accounting disclosure rules for crypto assets and this draft proposal gets us one step closer to the clarity our industry deserves.

The Chamber of Digital Commerce commends the Committees for their collaborative efforts in developing a comprehensive legal framework that establishes clear regulations for digital assets and positions the United States as a global leader in blockchain technology. 

The current approach of regulating through enforcement is no longer sustainable and is driving American innovation and intellectual property overseas. This poses a significant threat to our national security, as we risk losing our technological superiority to other nations. 

The Market Structure bill addresses the prevailing uncertainty surrounding regulatory jurisdiction and strives to create a transparent pathway for companies to introduce registered and regulated digital asset products to the market, ensuring the protection of investors. 

We express our appreciation for the diligent work undertaken by the Committees and value the opportunity to actively engage in the legislative process. The Chamber, along with our members, remains committed to supporting lawmakers in the formulation of digital asset policies in the United States. 

We are thrilled to share the exciting news that the Chamber of Digital Commerce has once again been granted membership in the Financial Crimes Enforcement Network’s (FinCEN) Bank Secrecy Act Advisory Group (BSAAG) for another three-year term. This renewal reaffirms our position as the leading digital asset organization representing the industry’s interests in crucial regulatory discussions.

We are honored to be the only digital asset-focused member organization selected to participate in the BSAAG, a prestigious group that advises FinCEN on anti-money laundering (AML) and counter-terrorist financing (CTF) matters. This opportunity provides us with a unique platform to advocate sensible and effective policies that promote the growth and innovation of the digital asset ecosystem, while ensuring compliance with necessary regulatory measures.

Our continued presence in the BSAAG underscores the Chamber’s commitment to fostering dialogue and collaboration between the public and private sectors. As the digital asset landscape continues to evolve rapidly, it is crucial that our industry has a seat at the table where decisions impacting our members and the broader public are made. By actively engaging in discussions and sharing our industry expertise, we aim to shape policies that strike a balance between protecting against illicit activities and enabling the responsible development of digital assets and blockchain technology.

Our renewed membership in the BSAAG also serves as a testament to the Chamber’s unwavering dedication to driving positive change within the digital asset industry and affirms our standing with policymakers as a reliable and trusted voice for our industry Together, we will navigate the evolving regulatory landscape, shaping policies that embrace innovation and foster the growth of a responsible and compliant ecosystem.

Bank Secrecy Act Advisory Group (BSAAG)

BSAAG was created to provide FinCEN with advice and recommendations on matters related to the Bank Secrecy Act (BSA), AML, and CTF efforts in the United States.

The BSAAG is composed of representatives from various stakeholders including financial institutions, trade associations, law enforcement agencies, regulatory bodies, and other organizations involved in combating financial crimes. The members are selected based on their expertise and knowledge in AML/CTF matters.

The mission of the BSAAG is to foster public-private cooperation, enhance information sharing, and promote effective implementation of AML/CTF measures. It aims to strike a balance between preventing illicit activities such as money laundering and terrorist financing while minimizing the burden on financial institutions and encouraging innovation in the financial sector.

On April 25th, 2023, Cody Carbone, VP of Policy at the Chamber of Digital Commerce, testified in a New York State Senate Hearing: To educate legislators and the public on cryptocurrency, discuss regulation of FinTech companies, and discuss FinTech licensing legislation (S.1450/Sanders).