January 06, 2023
TGIF! We're glad to be back with all of you in the start of the new year.
- Does anyone think that D.C. will come down on Coinbase over the same issues that New York did? [email protected]
Today's newsletter is 1,254 words, a 5-minute read.
⏯ 1 big thing: Legacy legislation
Sen. Debbie Stabenow's (D-MI) surprise announcement — that she would not be seeking reelection in 2024 and will retire — puts crypto legislation back in the spotlight, Crystal writes.
- Stabenow was the lead sponsor of the Digital Commodities Consumer Protection Act (DCCPA), the legislation previously seen as the lead contender to create a fresh crypto regulatory scheme.
Why it matters: The DCCPA in its current form would give the Commodity Futures Trading Commission (CFTC) authority to regulate digital assets — which, in the least, would mean bitcoin.
- That would bring law and order to spot markets for some digital assets.
State of play: The bill is one of several routes to establish the clearer and more robust regulations that everyone agrees the country needs for digital assets. The other side is for Congress to do nothing, and let the SEC and CFTC figure it out under existing laws.
- The DCCPA's co-sponsor, Sen. John Boozman (R-AK), has not made any decisions yet with respect to the bill this year, Republican Senate Agriculture spokesperson Patrick Creamer tells Axios.
- "Senator Boozman believes that the events that have transpired in recent months reinforce the clear need for greater federal oversight of the digital asset industry to bring transparency, accountability and stronger consumer protections to the market," Creamer says.
- "He is still very interested in legislation that will put necessary safeguards in place, but as this session is still in its infancy, he hasn’t yet sat down with Chairwoman Stabenow to discuss the DCCPA."
Of note: The Agriculture committee has oversight of the CFTC. Stabenow is chair and Boozman is the ranking member.
What others are saying: Pre-FTX collapse the Stabenow-Boozman bill — or the "SBF bill," if you're a hater — had a "strong likelihood" of passage, says John Rizzo, senior vice president of D.C. public affairs firm Clyde Group and former senior spokesman at the Treasury department.
- "Post-FTX, it’s fair to look at the legislation as 'in-development,' but should be taken seriously in the new Congress."
- "The retirement will certainly hang over the bill. [But] Sen. Stabenow is a hard worker. Anyone saying she's not going to put in sufficient effort — that's wrong."
The intrigue: SBF was a vocal supporter of the bill, posting long threads about how the industry could be regulated; he, along with other FTX leadership, also donated to Sen. Stabenow's and other lawmakers' campaigns.
- Stabenow has since said that she will donate those funds to a local charity.
The other side: Industry groups are on their haunches.
- "As we have noted, the DCCPA is a work in progress. If it is reintroduced in this session, it will require changes to account for the unique nature of decentralized exchanges and protocols, among other issues," Kristin Smith, CEO of Blockchain Association, tells Axios.
Between the lines: Industry leaders worry about language in the legislation that could ban DeFi platforms outright.
🏏 2. Charted: What BONK did for SOL
So the Solana coin, sol, fell below $10 recently, which was a dramatic fall for a token that had reached as high as $250 in 2021, Brady writes.
- Its fall has generally been associated with the crash of FTX and Sam Bankman-Fried, who is credited with bringing an onrush of interest to the Solana ecosystem.
Yes, but: Solana got two pieces of good news in the last week or so.
- First, Ethereum creator Vitalik Buterin had good words to say about Solana.
- Second, a new dog coin launched on Solana and it was a hit: BONK.
Context: Ever since Dogecoin, there have been many "dog tokens" that have been launched in imitation. Shiba Inu (SHIB) is the leader on Ethereum.
- BONK seems to have hit at the right time for Solana, when its fans wanted something unrelated to FTX to talk about.
- "Bonk!" is something of a derivative meme of Doge, of doggos getting hit on the head.
In the weeds: 50% of the total supply was distributed to different kinds of contributors to the Solana universe, giving it instant stakeholders (this is called an airdrop).
- Airdrops don't always win friends. Sometimes they are seen as spam, but this one seems to have worked, at least for a bit.
By the numbers: Interest in BONK brought some funds back to Solana, driving roughly a 40% uptick in the price of the coin of the realm, SOL.
- Both BONK and SOL are losing steam as the fun wears off.
⛈ 3. Dark clouds for Genesis
Genesis Trading has laid off 30% of its staff as it continues to consider a bankruptcy filing, according to a new report by the Wall Street Journal.
Why it matters: If Genesis goes under, it could mean that the contagion from FTX has not been resolved. Further, as a subsidiary of the Digital Currency Group, there's the looming threat that its fall could also take down a mainstay of the blockchain industry, Brady writes.
Catch up fast: In November, Genesis announced it was suspending withdrawals for depositors who had contributed funds to its lending unit, blaming the decision on repercussions from the FTX bankruptcy.
- Genesis has provided four updates to clients since FTX collapsed, none of which have addressed when withdrawals might be re-opened.
- The company, via an outside spokesperson at strategic advisor FGS Global, confirmed that deposits remain frozen.
What they're saying: In a Wednesday update to clients, Derar Islim, interim CEO, wrote: "We believe we can arrive at a solution. We will continue to give you updates on meaningful developments, including any updates on timing."
Of note: Also yesterday, a decision in the bankruptcy case of fellow crypto lender Celsius could be making Genesis depositors more anxious.
- The judge there found that depositor assets belonged to the estate (that is, Celsius), and could be used to fund continued operations.
By the numbers: No specific number of employees has been reported with respect to the Genesis layoff. In August 2022, the WSJ reported that it had let go of 20% from a staff of 260, which would have brought it to around 200 employees.
- If staffing has stayed level since August, a 30% cut now would mean roughly 70 additional people.
Quick take: DCG is the biggest open question mark in crypto right now. Bankruptcies seem to move quickly, so the fact that it has taken this long may indicate that a deal is coming together.
- Recent moves, such as staff cuts and nixing its wealth management offering, may be cost cutting steps required by a rescue funder.
🛷 4. Catch up quick
🚨 The SEC is probing FTX investors about what due diligence they conducted on the crypto exchange. (Reuters)
✂️ Crypto exchange Huobi Global is laying off 20% of its staff. (Reuters)
🚮 Digital Currency Group, parent of troubled crypto lender Genesis, has shut down its wealth management division HQ. (The Information)
🧑🏻🦱 Sam Bankmam-Fried filed an objection, seeking to block FTX debtors from taking over his stake in Robinhood. (The Block)
📫 5. Culture hash: Barry stans
Some letters are written in vain, Crystal writes.
What's happening: The Jan. 8 deadline that Cameron Winklevoss, founder of the crypto exchange Gemini, set in a letter to Barry Silbert, founder and chief of the once-storied Digital Currency Group, is looming.
- Winklevoss accused Silbert of "bad faith stall tactics."
- Meanwhile, DCG subsidiary Genesis, which owes Gemini Earn customers some $900 million, has been laying off staff and DCG reportedly shuttered new wealth management division HQ.
Between the lines: The still from Eminem's music video "Stan" nods to the violence of silence in the face of growing desperation, which is also evident in Winklevoss' words — the last of which were "time is running out."
This newsletter was edited by Pete Gannon and copy edited by Nick Aspinwall.
📚 This story has nothing to do with crypto. It's just weird. Some guy stealing unpbublished books. Brady's bet: he was selling translations on black markets around the world, but maybe he's just a fan? —C & B