Category: Uncategorized

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U.S. (Federal) 

Not publicly listed, but known: SEC Oversight Hearings in HFSC, Senate Banking w/ Chair Gensler testifying (Sept 23 & 25, respectively). HFSC markup on several to-be-determined bills on September 26 

• November 21-22: Federal Reserve Bank of Cleveland – Office of Financial Research – 12^th Annual Financial Stability Conference: Emerging Risks in a Time of Interconnectedness and Innovation. (read more)
  • TBD 
     
• Oct 22-23: Federal Reserve Bank of Philadelphia – 8^th Annual FinTech Conference (read more)
  • Topics: real-world asset tokenization, tokenized deposits, BaaS, FinTech in shaping the future of finance 
     
• October 9-10: Chicago Fed Payments Symposium (read more)
  • Panel Session: Digital Currency, Digital Assets and Settlement 
     
• October 9: NYU – Fireside chat w/ SEC Chair Gary Gensler (read more) 
   
• October 1-2: Fed Banks of Atlanta, Boston, and Richmond – Technology Enabled Disruption: Implications of AI, Big Data, and Remote Work (read more)
  • Evening Keynote: A Conversation with the Federal Reserve Presidents 
     
• September 26: 2024 U.S. Treasury Market Conference (read more)
  • Panel: Treasury Market Structure: Past, Present, and Future 
     
• September 25: NIST – Unleashing AI Innovation, Enabling Trust: A Symposium to Discuss Recent Progress and Next Steps in AI measurements and standards (read more) 
   
• September 19: SEC Investor Advisory Committee meeting (read more) 
   
• September 18: Federal Reserve Board FOMC Press Conference 
   
• September 18: HFSC Hearing – Protecting Americans’ Savings: Examining the Economics of the Multi-Billion Dollar Romance Confidence Scam Industry(read more)
  • TBD 
     
• September 18: HFSC hearing – Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets (read more)
  • TBD 
     
• September 17: Senate Judiciary Committee – Oversight of AI: Insiders’ Perspectives (read more)
  • Georgetown University, Google AI, OpenAI, UC Berkeley 

U.S. (State) 

Uniform Law Commission 

• October 30: Virtual Currency Customer Protection – Drafting Committee meeting (read more) 

New York 

• September 20: Assembly Standing Committee on Consumer Affairs and Protection & Assembly Standing Committee on Science and Technology – Ensuring Consumer Protection & Safety Relating to the Use of Artificial Intelligence (read more)
  • The Committees would like to hear testimony on existing laws and regulations in New York State, other states, or new initiatives being discussed at the state and federal levels regarding the use of AI related to consumer safety and protections. 

Texas 

• October 1:Senate Business and Commerce Committee meeting (read more)
  • Innovative Power Generation: Explore emerging technologies with the potential to add new dispatchable power to our electric grid including, but not limited, to small modular nuclear reactors, advanced batteries, and new developments in hydrogen and geothermal resources. Identify and recommend regulatory and policy actions required to deploy emerging technologies within the state’s electric grid. 
     
• September 19: House Committee on Pensions, Investments & Financial Services (read more)
  • HB 1666 – Relating to the Commingling of funds by digital asset service providers; providing an administrative penalty 

• September 17: IT Caucus Emerging Technologies Lunch & Learn (read more) 
   

Wyoming 

• September 19: WY Stable Token Commission meeting (read more) 
   
• September 16-17: Select Committee on Blockchain, Financial Technology and Digital Innovation Technology meeting (read more)
  • WY Stable Token Commission Update 
  • Federal legislative update w/ U.S. Sen Cynthia Lummis (R-WY) 
  • Cryptocurrency Mining Update 
  • Artificial Intelligence (AI) Governance – info session re: AI liability, data provenance, and automated decision-making issues 
  • Bill draft – Defense of state banking 
  • Review of Select Cmte on Blockchain Enabling Legislation 
  • Special Purpose Depository Institutions (SPDIs) 
     

UK 

House of Commons & House of Lords in recess. Return October 7, 2024.  

• September 17: UK Regulated Liability Network (RLN) experimentation phase – Final Report Launch (read more)
  • BoE Executive Director of Payments, Victoria Cleland, to speak 

Europe 

• October 16: First-ever EU-GCC Summit  
   
• September 26-27: ESRB – New Frontiers in Macroprudential Policy conference (read more)
  • Panel Discussion: Artificial Intelligence and Systemic Risk w/ Google, S&P, American University, University of Luxembourg 
     
• September 26: ECroundtable on consolidation of market infrastructure in the EU (read more) 
   
• September 26: BdF Seminar – Central Bank Digital Currency (CBDC) Wholesale component (wCBDC) (read more)
  • This webinar in English, simultaneously translated into French, details what an interbank central bank digital currency (known as “wholesale”) could look like: why? how? where do we stand? what are the next steps? 
     
• September 25: EC Working Party – Financial Services and Banking Union (Digital Euro) (read more)
  • Continued examination of the Digital Euro proposals 
     
• September 23: ESMA/ EBA – Hearing on the Guidelines under MICA establishing templates for explanations and legal opinions regarding the classification of crypto assets (read more) 
   
• September 20: EBA – Public Hearing on Guidelines on templates to assist competent authorities in performing their supervisory duties regarding issuers’ compliance under MiCAR (read more) 
   
• September 19: EC Working Party on Competition meeting (read more)
  • Presidency priorities 
     
• September 18-19: ECB – Supervision Innovators Conference 2024: Technology and Banking Supervision Connected (Invite only & Online) (read more) 
   
• September 18: EC Financial Services Committee meeting (read more)
  • Follow-up on the future of CMU 
  • ESMA update on the latest MiCA developments 
  • Update on ESMA’s supervisory approach and new mandates 
     
• September 17: EC Working Party – Financial Services and Banking Union (Payment Services) meeting (read more)
  • Continued examination of legislative proposals on the Payment Services Directive and Regulation 
     
• September 16-19: European Parliament Plenary Session (read more)
  • Address by Mario Draghi – Presentation of the report on the Future of European competitiveness 
  • Debate – The future of European competitiveness 
  • Presentation of the program of activities of the Hungarian Presidency 

Australia 

• September 20: Parliamentary Joint Committee on Corporations and Financial Services – Financial Services Regulatory Framework in Relation to Financial Abuse (read more) 
   
• September 19: Select Committee on Adopting Artificial Intelligence (AI) expected to produce a report to the Parliament on/before this date 
   

UAE 

• September 18: US-UAE Business Council: Webinar on U.A.E.’s Enhanced AML/CFT Framework(read more)
  • Lara Murad, US Treasury Attaché to the UAE and Oman 
     
• September 17: EU – UAE bilateral meetings  

Asia 

• November 6-8: Singapore FinTech Festival (read more) 
   
• October 28 – November 1: Hong Kong FinTech Week (read more) 
   
• September 20-21: Solana Breakpoint (read more) 
   
• September 18-19: Token 2049 Singapore (read more) 
   

Multilateral 
 

• October 25: 10th BdF-BoE-BdI International Macroeconomics Workshop: Structural factors in the global economy (read more)
  • Financial fragmentation and the changing structure of the international monetary system 
     
• October 21-25: IMF-World Bank Group 2024 Annual Meeting (Fall) (read more) 
   
• October 4: BoE – Banque de France – Banca d’Italia – IMF – OECD – 5^th International Capital Flows and Financial Policies Workshop (read more) (Invite-only)
  • The role of non-bank financial intermediation in the propagation of global shocks 
  • Capital flows in a digital age: international spillovers of crypto activities, stablecoins, and central bank digital currencies (CBDC) 
     
• September 24-30: 79^th session of the UN General Assembly – High-level general debate begins. 

• September 20: IMF 2024 Michel Camdessus Central Banking Lecture w/ ECB President Christine Lagarde (read more) 
   
• September 20: OMFIF – William Dudley on the Monetary Policy Outlook for the US (read more) 
   
• September 17: OMFIF – Digital Assets 2024 Report: A Long Awaited Revolution (read more) 

Third-Party / Academic 

• November 5: LSE – AI in public policy: opportunities and challenges (read more) 
   
• October 22: City & Financial Global – Data, AI and the Future of Financial Services Summit 2024 (read more)
  • FCA’s Data Strategy and pro-innovation regulatory approach w/ FCA’s Jagpal Singh Jheeta, Chief Digital Product Officer 
  • Digital ID in the context of privacy and financial services w/ Rob Kotiarz, Co-Founder & President, OneID 
  • Digital Assets and Privacy w/ Dr Ruth Wandhöfer, Global Fintech 50 Influencer, International Keynote Speaker; Non-Executive Board Member, Aquis Exchange; Dr Ian Hunt, Industry Consultant and Author on Digital assets, Advisor on Tokenisation at Schroders 
  • The UK Government’s initiatives on enabling trustworthy innovation using data and AI. Understanding artificial intelligence ethics and safety 
     
• October 21-24: DC FinTech Week (read more) 
   
• October 21: SIFMA Annual Meeting in NYC (read more) ($$$)
  • Speakers include: CFTC Chair Behnam, SEC Chair Gensler, Fed Bank (Dallas) Lorie Logan, BlackRock’s Larry Fink,  
  • Program: TBD 
     
• October 21: PIIE – Geopolitics and International Trade and Finance – Knowns and Unknowns (read more)
  • Impacts of geopolitics on international finance 
  • Policy implications and solutions 
     
• October 15-17: Meridian 2024: Transformation (read more) 
   
• September 26: ETA FinTech Policy Forum (read more)
  • FinTech – a view from Capitol Hill 
  • Identity and fraud in a digital world 
  • Regulators views on FinTech 
  • Digital Assets 
     
• September 26: Atlantic Council – 2024 Transatlantic Forum on GeoEconomics (read more)
  • Securing the Global Financial System; Enabling Technology Innovation; Driving Energy Transition 
  • Speakers include: Dept of State, Dept of Commerce, Dept of Treasury, Nasdaq, Atlantik-Brucke, Stellar Development Foundation, White House National Security Council, Amazon Web Services, Dept of Justice, Goldman Sachs, European Parliament 
     
• September 25: EBF-S&P Global Market Intelligence: The Future of Instant Payments: Challenges & Strategies in Europe (read more)
  • Dutch Payment Association, Italian Banking Association, European Banking Federation, Bizum 
     
• September 24: Securities Enforcement Forum Central 2024 (read more)
  • Keynote Q&A Discussion with Tina Diamantopoulos, the new Director for the SEC’s Chicago Regional Office, as well as eight other panels 
     
• September 24-26: Currency Research – The Central Bank AI Conference (read more) 

• September 23: FPRI – How do Technological Revolutions Affect the Rise and Fall of Great Powers? (read more) 
   
• September 20: CNAS – Confronting the Axis of Upheavel (read more)
  • House Armed Services Committee Ranking Member Adam Smith (D-WA) 
  • Vice Chairman of the House Armed Services Committee Rob Wittman (R-VA)  
     
• September 19: Program on International Financial Systems – Roundtable on the Future of Digital Assets (read more) 
   
• September 19: CEPS – The rise of the far-right in the EU: what, why and how? (read more) 
   
• September 19: Axios – The State of Play for Crypto on Capitol Hill (read more) 
• Sen. Gillibrand; Rep. Emmer; Better Markets; Consensys 
   
• September 17: ForumGlobal – 6^th Annual Data Privacy Conference – Washington, DC (read more) 
   
• September 17: GDF Tokenization Forum (Hybrid) in NYC 
   
• September 17: Brookings Institute: Global Conference on Frontier AI (read more)
  • Fireside chat: Nat Sec & AI w/ Jason Matheny, President & CEO, RAND 
  • Regulatory Foundations for AI Governance 
  • Cybersecurity and Systemic Risk (CFTC’s Pham speaking on a panel) 
  • Privacy 
     
• September 17: Georgetown University – Financial Markets Quality Conference 2024 (read more)
  • Market structure w/ Morgan Stanley, WFE, Cboe, Nasdaq 
  • Innovation in ETFs w/ SEC, Dimensional Fund Advisors LP, BlackRock 
  • Crypto & financial Markets w/ Robinhood, Bullish, Grayscale, Ripple, WEF 
  • Regulatory Roundtable w/ US SEC (Uyeda), CFTC (Pham), Treasury (Sandra Lee) 
  • Keynotes: CFTC’s Behnam, Rep. Patrick McHenry, Sen. Cynthia Lummis, CME CEO Terry Duffy; LSEG CEO David Schwimmer, Treasury’s Nellie Liang; JPM CEO Jamie Dimon 
     
• September 17: OMFIF – Digital Assets 2024: A Long-Awaited Revolution (read more) – R3 & Stellar sponsoring
  • The report will explore:
    • Which asset classes will be tokenized 
    •  Where tokenised cash will come from – central banks? Commercial banks? A stablecoin provider? 
    • How the roles of financial market infrastructure providers will change with DLT 
    • Whether regulators should re-examine the oversight of digital asset custodians 
       
• September 17: Politico: AI & Tech Summit – American Leadership, Security and Democracy (read more) 
   
• September 16: Atlantic Council – Can Europe Get Competitive? Insights from Mario Draghi’s Competitiveness Report (read more) 

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On September 10^th, 2024, the House Financial Services Committee’s Subcommittee on Digital Assets and Financial Inclusion held a hearing entitled “Decoding DeFi: Breaking Down the Future of Decentralized Finance.” The hearing lasted approximately 2 hours. This was the first Congressional hearing dedicated to decentralized finance. 

Summary 

With this being the first DeFi Hearing within the US Congress, both parties, as well as industry witnesses, hit their key talking points. Legislation was not discussed heavily, aside from sparse mentions of the Financial Innovation and Technology for the 21st Century Act (FIT 21) that passed the House earlier this year. Instead, participants debated benefits, risks, regulatory purview, and appropriate legal categorization of the decentralized protocols underlying the industry. This concept of DeFi protocols being more akin to internet telecommunications infrastructure than financial infrastructure is not new within industry but has not been met with open ears by Members of Congress—until now. 

Overall Impression 

• Democrats focused on bad actors in the space and the overall illicit finance risks of Defi—which witnesses pointed out are also a large issue in traditional finance. Discussion from Democrats included: 
  • Regular talking points for digital assets: that bad actors continue to engage in illicit activity using DeFi to conceal the origins and endpoints of crypto funds, using self-hosted wallets, chain-hopping, and anonymity-enhanced cryptocurrencies to quickly launder money, fund terrorist activities, and evade taxes.  
  • Ranking Member Lynch referenced the US Treasury Department’s risk assessment report as evidence. In a break from historic Democratic talking points regarding digital assets, however, Mr. Lynch stated there is a need for anonymity, greater efficiency, and privacy in finance—all benefits that DeFi provides. But in a return to form, Lynch then championed the centralized solutions leveraging US government systems, such as FedNow, the Federal Reserve’s real-time payment system, and MIT’s Central Bank Digital Currency Pilot Project Hamilton, as superior methods of supporting those needs. 
  • DeFi should have been addressed as part of a broader digital asset bill, such as FIT 21, instead of being pushed out to explore later. This is despite most jurisdictions worldwide, including the European Union, focusing on broader crypto legislation first, leaving DeFi legislation until after official government studies are completed. 

• Republicans focused their attention on broader blockchain use cases, such as the concept of a decentralized web that empowers users over large tech companies. Also discussed was the ongoing lack of regulatory and legal clarity provided to DeFi protocols that must nevertheless navigate overlapping regulatory jurisdictions in areas such as KYC/AML, tax reporting, and SEC and CFTC registration. Republican discussion included: 
  • Highlighting that DeFi is an improvement on the existing financial system, filling gaps and creating efficiencies by eliminating the need for intermediaries, enabling self-custody, heightening the security of assets, settling payments faster and with lower fees, and enabling users to enjoy enhanced privacy protections. 
  • Emphasizing that DeFi would benefit from a different regulatory framework than what exists for Traditional Finance due to fundamental differences such as a lack of intermediaries. A disclosure-based regime, as opposed to a registration-based one, was discussed as a potential path forward. 

• Industry witnesses were given a platform to explain the technology, the ecosystem, and debunk myths and misconceptions about both. Though it was contentious at times, the hearing overall demonstrated a willingness by lawmakers to better understand DeFi in earnest. Industry witnesses came prepared to help them in that regard, and with policy frameworks and recommendations in hand. 

• Witness 1: Brian Avello – Chief Legal Officer at Universal DeFi Holding Company (UDHC) – [Testimony Link] 
• Witness 2: Rebecca Rettig – Chief Legal and Policy Officer at Polygon Labs – [Testimony Link] 
• Witness 3: Amanda Tuminelli – Chief Legal Officer at DeFi Education Fund – [Testimony Link]  
• Witness 4: Peter Van Valkenburgh – Director of Research at Coin Center – [Testimony Link] 
• Witness 5: Mark Allen Hays – Senior Policy Analyst at Americans for Financial Reform – [Testimony Link] 

 Key Points  

How DeFi Technology Works 

• Overview: Witnesses were asked both introductory and advanced questions on the technical workings of DeFi protocols. Some Subcommittee members took this Hearing as an opportunity to educate themselves in the basics, while others saw it as a platform for industry to share their nuanced perspectives, as well as their technical and legal expertise on the technology and the ecosystem. 
• Perspective: That Republican Members—and select Democrats—not only focused on the financial application of DeFi protocols and their efficiencies over TradFi but also on other use cases that would allow a more free, decentralized internet, demonstrates how far these lawmakers have come over a relatively short period of time since DeFi’s general introduction to the world during the Summer of 2020. This signals an understanding by these lawmakers of how significant DeFi is and the importance of crafting appropriate legislation. 

Benefits and Risks of DeFi Compared to Traditional Finance (TradFi) 

• Overview: A running theme of this hearing was the cost-benefit analysis of the risks and rewards of DeFi, viewed both as something net new, and when compared to the existing financial system where centralized intermediaries serve as tentpoles. 
• Perspective: The risk/benefit comparison allowed for preconceived notions about DeFi to be addressed and refuted, with witnesses providing clear examples of risk mitigation and improvements in DeFi compared to TradFi. Tuminelli flagged the work of crypto ISACs (Information Sharing and Analysis Centers) that work to advance security initiatives across the globe and assist in returning consumer funds. Rettig also pointed out the DeFi ecosystem’s partnerships with law enforcement, combined with the transparency of on-chain activity, which has helped illicit actors be found and charged orders of magnitude faster in DeFi than in traditional finance.    

Legal and Regulatory Implications and Treatment of DeFi 

• Overview: The legal and regulatory focus was appropriately broad, covering more than the standard regulatory jurisdiction debate between SEC and CFTC oversight. Additional areas of discussion covered illicit activity, KYC/AML requirements, digital identity, custodianship, cybersecurity, and telecommunications. Importantly, the outstanding issue on the treatment of DeFi protocols as Brokers under the Bank Secrecy Act—as written in the 2021 Infrastructure Investment and Jobs Act—was raised. That definitional expansion has been at the heart of DeFi legal and policy discussions—and industry concerns—since the 2021 bill was introduced, as it would impose information gathering and reporting requirements on decentralized smart contracts acting as market makers (such as Decentralized Exchanges) and their developers, and capture wallet developers and some blockchain node validators. 
• Perspective: The breadth of regulatory areas and outstanding questions that were covered demonstrate that lawmakers on the Subcommittee have gained a more mature, holistic understanding of DeFi technologies, protocols, and the activity taking place in the ecosystem through varied methods and use cases. This is a move forward in the right direction and is a critical step needed to introduce effective, appropriate legislation that allows the industry to continue innovating within the US under a regime that recognizes its value. 

TDC experts are available for comment, please contact: press@digitalchamber.org 

Amid growing concerns over the Securities Exchange Commission’s (SEC) latest overreach into the digital asset industry with their wells notice issuance to OpenSea, The Digital Chamber (TDC) is calling for legislation to clearly define certain NFTs as consumer products and exempt them from federal securities laws. This language should:  

• Clearly define that NFTs, which are created for the purpose of consumptive use, are not financial products. 

• Highlight that NFTs should not be classified as securities under the authority of the SEC, or as any other type of financial instruments.   

 
NFTs Are Consumer Goods, Not Financial Products 

In 2023, TDC conducted an in-depth study of the NFT ecosystem. In our Pixels to Policy report, we highlight a number of the most popular NFT applications, from digital art and collectibles to video games, to unique digital event experiences, and more. Many NFT applications are clearly not designed as investment contracts or financial tools for speculation, even if consumers occasionally sell NFTs for a profit, much like traditional collectibles or artwork. This secondary market feature does not make them financial products. 

These items should be classified as consumer goods, not securities. TDC is advocating for legislative clarity that reflects this distinction. 

The Importance of Protecting NFT Creators and Communities  

However, SEC Chair Gary Gensler’s regulation-by-enforcement approach has jeopardized the livelihoods of countless individuals who rely on NFTs to pursue their passions, connect with their communities, and sustain themselves by selling and trading digital goods and access rights within this thriving ecosystem.  

NFT companies providing these minting services and data transfer infrastructure have also endured a lack of legislative clarity and have suffered as a result. Recent securities lawsuits against DraftKings and Dapper Labs, along with a threat of an enforcement action against the NFT marketplace OpenSea, have not only put the industry at risk but also sent a troubling message to consumers: their rights are unjustly restricted by an agency acting beyond its authority. 

Call for Congressional Action 

Congress must act now to ensure that this burgeoning industry remains within the US, for the benefit of the US economy, and not move overseas to more favorable regulatory environments. The Digital Chamber strongly encourages Congress to clarify that Consumptive-Use NFTs are consumer goods and not financial products.  

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Update 9/16:

TDC is please to announce that the US Congress is directly addressing the legal and regulatory treatment of non-fungible tokens (NFTs). We applaud Congressman Timmons’ leadership and the announcement of the New Frontiers in Technology Act (NFT Act). Read more about this monumental legislation in the TDC Update here.

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If you have any questions, please reach out to Policy@digitalchamber.org

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What’s Happening:

The US Treasury officially withdrew a rule proposed in 2020 by FinCEN, the Financial Crimes Enforcement Network. The rule would have:  

• Subjected individuals using unhosted, or self-custodial, wallets to requirements that would ultimately ban peer-to-peer digital asset transactions, decentralized finance (DeFi), particular NFT platforms, and other decentralized or peer-to-peer activities.  
• Required self-hosted wallet users to collect and report on counterparty information for each transaction they participate in. 

The reporting requirements are technically impossible in most cases. Since blockchain wallet addresses are pseudonymous, users can trust the transactions and their counterparties without knowing or being able to learn personally identifiable information that this rule would have required for reporting purposes. This innovative design not only sets blockchains apart from traditional financial and data transfer technologies, but also makes it prohibitively difficult for users and developers to collect counterparty information outside of centralized platforms. Similar legislative and regulatory efforts to “ban” self-hosted wallets and non-centralized activities in other jurisdictions, such as the European Union, have also been unsuccessful in previous legislative efforts. However, with EU legislators discussing updates to their Markets in Crypto Assets (MiCA) Regulation, this issue may be renewed in that region.   

Background: 

TDC has been deeply involved in supporting the U.S. Treasury’s decision to withdraw the proposed rule on self-custodial wallets. We started by sending a detailed letter to Secretary Mnuchin, expressing our serious concerns about how the rule would impact digital asset innovation and individual privacy. Recognizing the urgency, we also launched a petition to stop the last-minute rulemaking, mobilizing support from both industry leaders and the general public. Our thorough analysis of the proposed rule highlighted potential negative effects on the digital assets sector, advocating for a more balanced regulatory approach. In our response to FinCEN’s Notice of Proposed Rulemaking (NPRM), we reiterated these concerns, arguing that the rule would unfairly burden users of self-hosted wallets without providing clear benefits. Through these concerted efforts, we played a key role in the Treasury’s decision to retract the proposal, underscoring our commitment to shaping fair and effective regulatory policies for digital assets. 

Why it Matters:  

The rule was part of a broader effort to apply the same Know-Your-Customer and Anti-Money-Laundering rules from traditional finance to crypto. While The Digital Chamber strongly supports efforts to eliminate fraud and illicit finance in crypto, the would-be application of this rule does not meet these policy goals. Instead, it would force virtually all crypto activity outside centralized exchange platforms to cease. Moreover, blockchain analytics reports continue to show that illicit finance and money laundering in crypto account for less than one percent of overall transaction activity (see TRM Illicit Crypto Economy report). The application of this rule would have had outsized harm to the industry in exchange for microscopic progress toward its policy objective, when measuring total transaction volume.  
 

Key Points:  

Counterparty reporting requirements are rigorously enforced in traditional finance and by centralized crypto platforms, where they serve their intended purpose. However, these requirements do not fully address the policy objectives they were designed for, as fraud and money laundering in traditional finance are in the trillions of dollars. In contrast, blockchain systems offer full transaction transparency, making it easier to trace and catch illicit activities. Traditional financial networks, on the other hand, often lack transparency; cash transactions, fraudulent accounts, scams, terrorist financing, and money laundering activities are not always visible to regulators and law enforcement. Applying the same regulations in traditional finance that do not fully meet intended policy objectives to crypto transactions and individual users is a suboptimal method of stopping crime and protecting consumers, at best.   
 

Our Perspective  

“The Digital Chamber strongly supports technical efforts, legislation, and rules that meet the critical policy objectives of combatting fraud and illicit transactions and protecting consumers. However, this rule would have brought large parts of the industry to a halt. We applaud the Department of the Treasury for recognizing that there are ways of achieving these policy objectives in the crypto ecosystem that will allow the industry to live on and innovate. It will become safer and more secure as it does so. We look forward to working with policymakers and industry to create these better-fitting policy and technical solutions.”  – Jonathan Rufrano, Policy Director, The Digital Chamber. 

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The Digital Chamber (TDC) unequivocally condemns the SEC’s latest overreach in issuing a Wells notice to OpenSea. The notice, which alleges that NFTs listed and sold on the platform are securities, represents a significant and troubling expansion of the SEC’s enforcement actions into the digital economy.

TDC has consistently advocated that certain NFTs, particularly those representing consumer products, are not securities nor financial products and should be outside of the SEC’s jurisdiction.[1]

The SEC’s current approach of regulating by enforcement, as evidenced by this Wells Notice, threatens to stifle innovation, disrupt vibrant markets, and undermine the economic opportunities that NFTs provide to creators and entrepreneurs.

We strongly urge the SEC to reconsider this enforcement-driven strategy and instead work collaboratively with Congress to develop clear and fair regulations that support innovation while protecting consumers. It is essential that regulatory efforts foster the growth of emerging technologies and creative industries rather than hinder them.

TDC remains committed to advocating for a regulatory environment that encourages innovation and secures the future of the digital economy without compromising investor protections. For more information on our efforts and the NFT Working Group visit here.

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[1] Read our response to Commissioner Peirce and Uyeda following their dissent in the Stoner Cats case here.

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August 20, 2024 – The Digital Chamber today filed an amicus brief in NVIDIA CORP. v. E. OHMAN J:OR FONDER AB, in support of NVIDIA’s motion for reversal of the judgment of the US Court of Appeals for the Ninth Circuit.  

Why is this case important? 

NVIDIA is the subject of a class action lawsuit in which plaintiffs allege that a significant portion of Nvidia’s gaming GPU sales were driven by purchases from cryptocurrency miners. Plaintiffs allege that NVIDIA’s CEO downplayed this in public statements and failed to disclose the potential impact of volatility in the cryptocurrency market, which later affected NVIDIA’s financial results. 

The plaintiffs’ case relies on “expert” opinion based on unsupported assumptions about the cryptocurrency industry, constructing a theory disconnected from the facts of NVIDIA’s business.   

This case revolves around the Private Securities Litigation Reform Act of 1995 (PSLRA) and two key PSLRA requirements: plaintiffs must allege with “particularity” facts that strongly suggest the defendant acted with scienter, and they must clearly state the facts supporting their belief that statements were misleading. 

Our amicus brief provides the Supreme Court with crucial context about the PLSRA. The Act was enacted to deter nuisance lawsuits that burdened high-growth, high-tech companies with costly discovery and extortionate settlements. Congress specifically aimed to protect these vulnerable sectors, like the cryptocurrency industry, from abusive securities litigation, due to their inherent volatility. We explain how the proper application of the PSLRA’s strict pleading standards should protect the entire cryptocurrency industry.   

Under the PSLRA, a complaint must clearly identify each statement claimed to be misleading, explain why it’s misleading, and provide detailed facts supporting that belief.  

This case shows how allowing speculative expert opinion to substitute for particularized factual allegations of securities fraud (in other words, clear and detailed facts about the securities fraud) creates the very problems Congress tried to solve with the PSRLA.   

In this case, the plaintiffs rely on non-evidence-based “expert opinions.” These opinions, based on general market research and unreliable or hidden assumptions, are NOT enough—undermining the purpose of the PSLRA. 

If the plaintiffs win, it will set a dangerous precedent, allowing speculative and unsupported claims to succeed in court. This could lead to a surge in frivolous lawsuits against companies in the cryptocurrency industry, stifling innovation by burdening them with costly litigation and discouraging investment. Ultimately, this would slow the growth of blockchain technology and undermine the very protections that the PSLRA was designed to provide for emerging, high-tech industries. 

“Today, TDC took its advocacy effort to the U.S. Supreme Court for the first time. We felt compelled to weigh in due to the grave risks of a potential increase in frivolous securities lawsuits based on nothing more than unfounded negative perceptions about the cryptocurrency industry and its high-growth business cycle,” said Perianne Boring, Founder and CEO of The Digital Chamber. “We are hopeful that the Supreme Court will consider the arguments laid out in our brief, and we will continue to support for fair and equivalent application of laws for the cryptocurrency industry.”  

TDC’s counsel on the brief, Joshua B. Simmons of Wiley Rein LLP, said that “it is a privilege and an honor to have the opportunity to represent TDC before the U.S. Supreme Court.  TDC is at the forefront of the cryptocurrency industry, and our firm understands well the intersection of technological innovation and policy. This brief reflects TDC’s key insights into this pivotal case.” 

TDC is represented in this matter by Frank Scaduto, Joshua B. Simmons, Kevin B. Muhlendorf, Krystal B. Swendsboe, Joel S. Nolette, and Christina V. Lucas of Wiley Rein LLP. We appreciate the contributions to this initiative by the Wiley team and other members of The Digital Chamber. 

**TDC experts are available for comment. Contact press@digitalchamber.org to schedule an interview** 

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The Digital Chamber (TDC) welcomes the conclusion of the long-standing legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC). As amicus curiae in this case, TDC advocated for regulatory clarity for digital asset businesses. 

Judge Torres has issued her ruling on remedies in the Ripple case with the following outcomes: 

• $0 disgorgement, as anticipated, due to the lack of demonstrated losses by the SEC. 
• $125 million in civil penalties for securities violations related to sales to institutions. 
• An injunction restraining Ripple from further violations of Section 5 of the Securities Act. 

This decision represents a small fraction of the damages initially sought by the SEC and highlights the flaws in the SEC’s regulation by enforcement approach. While this ruling brings some clarity to the market, it underscores the urgent need for Congress to pass comprehensive market structure legislation. 

We commend our member Ripple for fighting on behalf of the industry in court, setting a precedent that many smaller players could not, and helping to create a more coherent and predictable regulatory environment. 

For more information, please contact: press@digitalchamber.org 

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Dear Vice President Harris,

As you are poised to become the Democratic Presidential nominee, we write to urge you to take a forward-looking approach on digital assets and blockchain technology, an area that holds immense potential for innovation, economic growth, and financial inclusion.

Representing the emerging stance of the Democratic Party and the United States, leaders such as Senate Majority Leader Chuck Schumer, Speaker Emerita Nancy Pelosi, and a majority of House Democratic leadership have recently supported pro-digital asset legislation. However, there is a public perception that the party holds a negative viewpoint on digital assets, largely due to the Biden/Harris Administration’s notably cautious and at times hostile approach to these transformative technologies. We believe this previous hostility does not reflect the progressive and inclusive values of your Party. Your expected candidacy for President represents an opportunity to change that perception.

Over 50 million Americans have embraced digital assets, seeing them as a means to democratize finance, spur innovation, and create new economic opportunities. Data shows that digital assets are being adopted at higher rates among Black and Latino Americans and immigrant communities, key constituencies of the Democratic party compared to traditional financial products. These technologies are revolutionizing opportunities for these communities, reflecting its transformative potential.

Digital assets and blockchain technology are not merely financial instruments but represent a revolutionary shift that can enhance transparency, reduce fraud, and create a more inclusive financial system. We believe this technology is non-partisan and the Democratic Party should also champion these innovations to help reaffirm the U.S.’ position as the leader in the global digital economy.

We respectfully call on you to:

1. Advocate for the Inclusion of Pro-Digital Asset Language in the Party’s Platform: It is imperative that the party’s platform reflects the potential benefits of digital assets and blockchain technology.
2. Select a Vice-Presidential Candidate Sophisticated in Digital Asset Policy: Choose a running mate with a proven track record of engaging with digital asset technology and proposing pro-innovation policies, such as Colorado Governor Jared Polis.
3. Engage with Industry Leaders: We urge you to sit down with leaders in the digital asset and blockchain industry to discuss policies that support and nurture this technology.
Open dialogue with industry experts will provide valuable insights and help craft policies that encourage growth while ensuring consumer protection and financial stability.

The future of digital assets and blockchain technology is a critical issue that requires informed and progressive leadership. By embracing this technology, we can harness its potential to drive economic growth, foster innovation, and promote financial inclusion for all Americans. We are hopeful that with your leadership, the Democratic Party can pivot towards a more supportive stance on digital assets, aligning with the aspirations of millions of Americans who believe in the transformative power of this technology.

Thank you for considering our views. We are eager to support any efforts of yours to integrate digital assets into our nation’s economic framework.

Sincerely,

The Digital Chamber

For more information, please contact: press@digitalchamber.org 

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As the blockchain ecosystem continues to expand, the need for seamless communication between different networks becomes increasingly crucial. Blockchains today are not interoperable – they do not talk to each other and are siloed. It is like having different phone networks where iPhone users can only call other iPhone users, and Android users can only call other Android users. Multichain bridges have emerged as a powerful solution to this challenge, offering users the ability to transfer assets and data across multiple blockchain networks. Let’s dive into what multichain bridges are, their importance, risks, and the outlook for this technology. 

What are Multichain Bridges? 

Multichain bridges, also known as cross-chain or multi-asset bridges, are software protocols that enable the transfer of digital assets and information between two or more blockchain networks. Unlike single-chain bridges that connect only two specific blockchains, multichain bridges can facilitate transfers across multiple networks, creating a web of interconnected blockchains. Think of multichain bridges like international bank transfer systems. Just as these systems enable the transfer of money between banks in different countries with different currencies, multichain bridges allow digital assets and information to move between different blockchain networks. They handle the conversion and ensure the assets are securely transferred from one blockchain to another, similar to how bank transfer systems manage currency conversion and secure transactions. 

These bridges typically work by locking assets on one chain and minting equivalent tokens on another chain. When users want to move their assets back, the process is reversed – the equivalent tokens are burned (or destroyed), and the original assets are unlocked. For example, if a user wants to transfer USDC from the Ethereum blockchain to the Solana blockchain, the bridge will lock the USDC tokens on Ethereum and mint an equivalent amount of USDC on Solana. When the user wants to move their USDC back to Ethereum, the Solana USDC would be burned, and the original Ethereum USDC would be unlocked and returned to the user.  

Importance of Multichain Bridges 

Understanding how multichain bridges function is crucial to appreciating their broader impact. Let’s now explore their significance in the blockchain ecosystem.  

Multichain Bridges enable and extend several benefits and capabilities:  

• Enhanced Interoperability: Multichain bridges break down the silos between different blockchain ecosystems, allowing users to leverage the strengths of various networks. 
• Increased Liquidity: By enabling asset transfers across chains these bridges can improve liquidity in smaller or newer blockchain ecosystems and applications. 
• Expanded DeFi Opportunities: Users can access decentralized finance (DeFi) applications on multiple chains without having to fully exit their preferred network. 
• NFT Flexibility: Non-fungible tokens (NFTs) can be moved between chains, opening up new marketplaces and use cases. 
• Scalability Solutions: Multichain bridges can help alleviate congestion on popular networks by allowing users to conduct transactions on less crowded chains. 

Risks Associated with Multichain Bridges 

While multichain bridges offer significant benefits, they also come with inherent risks: 

• Smart Contract Vulnerabilities: The complex smart contracts that power these bridges can contain bugs or exploitable flaws. 
• Centralization Concerns: Some bridges rely on centralized components which can be points of failure or manipulation. 
• Economic Attacks: Bridges holding large amounts of assets are known as “honeypots” because a concentrated locus of value can be targeted for sophisticated cyberattacks. 
• Liquidity Risks: During periods of high volatility or demand bridges may face liquidity crunches. 
• Regulatory Uncertainty: Multichain bridges operate in a complex and evolving regulatory landscape, particularly in the United States. A primary regulatory consideration is their potential classification as money transmitters under federal and state laws. However, it is crucial to note that, according to FinCEN’s 2019 guidance, entities that do not accept and transmit convertible virtual currency are not considered money transmitters. Since most multichain bridges do not directly custody user funds but instead use smart contracts to facilitate cross-chain transactions, they may fall outside this definition of money transmitters. 

Nevertheless, the regulatory landscape remains uncertain. If bridges were to be classified as money transmitters despite the 2019 FinCEN guidance they could face significant compliance obligations, like registering with FinCEN as Money Services Businesses (MSBs), obtaining state-level money transmitter licenses, and implementing robust Anti-Money Laundering (AML) and Know Your Customer (KYC) programs. 

Cross-border transactions facilitated by multichain bridges also raise questions about jurisdictional authority and applicable laws. Ensuring compliance with sanctions imposed by the Office of Foreign Assets Control (OFAC) is particularly challenging in the pseudonymous environment of blockchain transactions. The decentralized nature of these systems also complicates the assignment of regulatory responsibility, as it is unclear whether developers, node operators, or governance token holders should be held accountable for compliance. 

As the technology continues to evolve regulators may require implementation of cross-chain asset tracking systems which presents significant technical challenges. While not strictly a regulatory issue the critical role of smart contracts in these bridges may lead to increased scrutiny of their security, potentially resulting in mandatory audit requirements. As multichain bridges gain prominence it is likely that regulatory frameworks will adapt to delineate more specific guidance that takes into account their unique technological characteristics and operational models. 

These concerns are not solely theoretical. On June 24^th, 2024, The Digital Chamber hosted a roundtable with Treasury Department representatives to discuss their 2024 NFT Risk Assessment report. During this meeting bridge vulnerabilities emerged as a significant point of concern given the history of hacks against them over the past several years. Industry attendees identified bridges as an attractive attack vector for bad actors primarily due to the value of assets they contain. This real-world discussion underscores the critical need for enhanced security measures and ongoing vigilance in the development and operation of multichain bridges. 

Outlook for Multichain Bridges 

Because of their utility the future of multichain bridges looks promising. Some of the drivers of, and potential vectors, for innovation include:  

• Increased Adoption: As the blockchain ecosystem continues to diversify, the demand for efficient multichain solutions is likely to grow. 
• Enhanced Security Measures: Ongoing research and development are focused on improving the security of these bridges, including decentralized security models and advanced cryptographic techniques. 
• Standardization Efforts: Industry-wide standards for multichain bridge protocols may emerge, leading to better interoperability and reduced risks. 
• Integration with Layer 2 Solutions: Multichain bridges are likely to play a crucial role in connecting various layer 2 scaling solutions, improving overall blockchain scalability. 
• Regulatory Adaptation: As the regulatory landscape evolves, multichain bridges may need to implement new compliance measures to operate across different jurisdictions. 

Conclusion 

Multichain bridges represent a significant step forward in blockchain interoperability. By enabling seamless asset and data transfers across multiple networks these bridges are breaking down barriers and creating a more connected blockchain ecosystem. While challenges remain, particularly related to security and regulatory compliance, the potential benefits of multichain bridges are driving continuous innovation in this space. 

As the technology matures we can expect to see more robust, secure, and user-friendly multichain solutions emerge, further enhancing the utility and accessibility of blockchain technology across various use cases and industries. To fully realize the potential of multichain bridges, ongoing collaboration between developers, regulators, and users will be essential. This cooperation will help ensure that the benefits of a connected blockchain ecosystem are maximized while minimizing the associated risks. 

For more information, please contact: press@digitalchamber.org 

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