for staff: Tornado Cash

today's tips for July 23, 2024

quick tips:

For Staff: An interview on crypto mixers and Tornado Cash with DeFi Education Fund's Amanda Tuminelli. Excerpt below or go now.

Rep. Zach Nunn's (R, IA) bipartisan "Financial Technology Protection Act" successfully passed out of the House by voice vote with implications for digital assets and illicit finance.

Senator Cynthis Lummis (R, WY) is promising something "Big" at this week's Bitcoin 2024 co nference this week in Nashville.

Today's House Financial Services hearing led by Chair Patrick McHenry (R, NC) on Artificial Intelligence begins at 10 am.

Industry organization The Digital Chamber reached out to Vice President Harris yesterday.

Regulation = Certainty = Number Go Up

Ether spot market ETFs hit the markets this morning. TradFi is raring to go.

Consensys senior counsel Bill Hughes warns that the Securities and Exchange Commission (SEC) is not letting up on the digital assets industry in spite of recent dismissals.

Crypto campaign spending is going too far in Arizona according to some says The Hill.

| interview: tornado cash update

In Congress, crypto mixing and its privacy-enhancing use of blockchain technology has been a troubling innovation for some Members. Case and point: crypto mixer Tornado Cash has been front-and-center in illicit finance deliberations within the U.S. government and was sanctioned in 2022 by U.S. Treasury.

Last Friday, blockchain tipsheet sat down with Amanda Tuminelli, Chief Legal Officer of decentralized finance advocacy firm DeFi Education Fund (DEF). We discussed both the latest and the "basics" in crypto mixing as well as the Department of Justice's indictment in August 2023 of Tornado Cash software developers Roman Storm and Roman Seminov.

Roman Storm is currently in custody and his case has been delayed until later in the year in the Southern District of New York. Roman Seminov remains at large.

Also, last October, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a Notice of Proposed Rule Making (NPRM) - see it - that identified crypto mixer transactions as a source of money laundering. DeFi Education responded with a formal comment (PDF).

With lawmakers and their staffs in mind, blockchain tipsheet's interview with Ms. Tuminelli covered:

why crypto mixers are controversial
the lawful purpose of mixers
balancing AML regimes and mixers
crypto wallets and identifiers
overview on indictment of Storm and Seminov
Dutch court convicts Tornado Cash developer Alexei Pertsez
scenarios pending U.S. court decisions
unlicensed money transmitting
crypto mixing 5-10 years from now

Read the full interview on blockchaintipsheet.com.

| House Floor – illicit finance

The “Financial Technology Protection Act” [H.R.2969] sponsored by Rep. Zach Nunn (R, IA) and co-sponsored by Rep. Jim Himes (D, CT) easily passed the House yesterday afternoon by voice vote.

The Senate version of this bill [S.1340], sponsored by Senator Ted Budd (R, NC) and co-sponsored by Senator Kirsten Gillibrand (D, NY), sits idly in Senate Banking currently.

what you should know: In that the bill establishes a working group within government and a public-private partnership to study the use of digital asset in illicit finance, it seems likely that Senate Banking Chair Sherrod Brown (D, OH) would perceive S.1340 as an "industry bill" given its limited elements even though it's been around since 2018. So, considering Chair Brown's past pronouncements on industry bills, it appears unlikely to ever make it to a markup in the 118th Congress.

| big things

Senator Cynthia Lummis (R, WY), who is scheduled to appear at this week's Bitcoin 2024 conference said on X yesterday, "₿ig things are in store this week. Stay tuned!"

Editor's note: The "B" in "Big Things" in the tweet was the Bitcoin symbol.

More to be revealed at Bitcoin 2024?

what you should know: Entrepreneur Elon Musk now has "laser eyes" added to his X account profile.

| today's AI hearing

The House Financial Services (HFS) Committee led by Chair Patrick McHenry (R, NC) will hold a hearing today called “AI Innovation Explored: Insights into AI Applications in Financial Services and Housing.”

See the hearing page - starts at 10 a.m. ET in Rayburn.

| Dear VP Harris...

Industry association The Digital Chamber moved quickly to reach out to Vice President Kamala Harris yesterday as Democrats coalesce around the VP to replace President Joe Biden on the Democratic Presidential ticket this fall.

The letter states in part, "... 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.”

See the letter.

more tips:

Kamala Harris could mean an end to Democrats’ hard line on crypto—but it’s too soon to say for sure - Fortune on Yahoo

| crypto regs drive price

Analysts at Wall Street firm Bernstein believe that a Trump victory in November and the possibility of new crypto regulations under Trump are not "priced in" to crypto - specifically Bitcoin.

The Block quotes the Bernstein analysts who said, "We see significant headroom from institutional investors allocating to crypto and crypto stocks." Read more.

more tips:

JPMorgan says crypto rebounds ahead unlikely to be sustained - The Block

what you should know: Will "number go up" be in a political platform soon? Arguably, Republicans appear to have done this already.

| Ether ETF approved

Ethereum ETFs were approved to go "live" today by the SEC yesterday and traditional finance companies are raring to go.

Among several new funds, Fidelity announced the launch of the Fidelity Ethereum Fund (FETH).

Fidelity's Head of Digital Asset Management Cynthia Lo Bessette said in a statement:

“We drew on over a decade of experience in digital assets to deliver a spot ether exchange-traded product that enables investors to gain exposure to ether through thoughtful index and product design supported by a dedicated operations and trading team and industry-leading security.”

more tips:

Ethereum ETFs Approved by SEC, Bringing Popular Funds to Second-Largest Cryptocurrency - CoinDesk
SEC Clears Final Hurdle for Ether ETFs to Launch Tuesday - The Wall Street Journal

| regulator versus industry

Consensys senior counsel Bill Hughes took to the pages of Cointelegraph yesterday for an op-ed on the realities of the crypto industry's legal battles with the Securities and Exchange Commission.

Just because the SEC recently dismissed its action against "Ethereum 2.0," says Hughes, does not mean the SEC is any less aggressive about enforcement against the digital assets industry.

Hughes continues, "We will see what happens in November, but the odds of a resounding victory for Trump and even possibly a sweep of the GOP in Congress are getting better by the day. Until then, you should not doubt that the SEC under this leadership will continue to fight tooth and nail against the industry." Read more.

what you should know: The digital assets industry remains at odds with the Biden Administration not just the SEC.

| still more tips

Crypto, GOP spending in Arizona Dem primary irks Latinos - The Hill

Trump, Vance campaign eyes Peter Thiel’s support as tech billionaire stays mum - Fox Business

The Tides of Tokenization - McKinsey

| DC events

Today - House Financial Services Committee hearing titled, "AI Innovation Explored: Insights into AI Applications in Financial Services and Housing" - financialservices.house.gov

Tomorrow - PGP* for Crypto Briefings and Roundtable Discussion - Electric Coin

Congressional Calendar 2024 - Roll Call