Axios Crypto

A multicolored cube.

Hello, hello! So much government stuff today. Proposed crypto legislation!

📧 Keep the feedback coming: [email protected].

This newsletter was edited by Pete Gannon and is 1,109 words, a 4-minute read.

🎱 1 big thing: Senators propose updated laws

Illustration of a person looking up at a large stack of glowing legislative papers.
Illustration: Aïda Amer/Axios

Crypto keeps asking for updated rules, and two senators have gotten the conversation started, Brady writes.

Driving the news: Senators Cynthia Lummis (R-Wyoming) and Kirsten Gillibrand (D-New York) co-sponsored new legislation on digital assets.

Why it matters: Entrepreneurs and investors have been asking for updates to U.S. law that reflect the realities of the new ways of doing business enabled by blockchains.

What they're saying: "Big picture: This is a great view into what a few people on the Hill think the rules should be for crypto, but it is unlikely this legislation moves forward in the foreseeable future," Tony Tuths, an alternative investment tax principal at KPMG, said in a statement.

Details: Here are the parts of the bill most relevant to people who might invest a little in this new asset class:

  • Exemption for small payments: If passed, purchases of goods and services with crypto worth less than $200 would not incur a tax obligation.
  • Homework for the IRS: The tax collectors need to start writing specific guidance around the weird new ways people earn valuable stuff in crypto, such as airdrops.
  • Mining and staking: Earning crypto by doing work (even with computers) would not be taxed until they are exchanged for dollars.
  • Crypto retirement: The bill directs the General Accounting Office to look into rules around adding crypto to retirement portfolios, like in Fidelity's offering.
  • Cybersecurity standards: This legislation starts the process to create better security practices at firms that hold crypto for other people.
  • User protection in exchange bankruptcy: The legislation would protect users' digital assets if the company storing them goes belly up.
  • Lots more transparency. Token issuers would have to be more clear about what they are selling, what a token is, what it does and how it might change.

Many of these rules are likely to make the space much less dangerous, but they may also make it more expensive to use as companies increase fees to keep up with compliance costs.

What we're watching: All the fighting around this bill is going to be around the definitions that decide which agency gets to have power over which kinds of digital assets, i.e. court intrigue.

  • We'll keep you posted on those things as they develop, but the items above are some of the key efforts that directly address normal investors.

Go much deeper.

🦥 2. Charted: Bitcoin miners fail to break a billion in May

Data: Coin Metrics; Chart: Axios Visuals

For the first time in months, bitcoin miners earned less than a billion dollars — poor guys.

Why it matters: The more lucrative it is to mine, the more people will do it. But bitcoin's price has been falling, so those fresh bitcoins aren't as dear, Brady writes.

  • The protocol also turned down the difficulty of the cryptographic problem miners have to solve to earn fresh bitcoin, which indicates that miners are dropping off.

Miners mostly earn revenue from the block reward that comes with each new confirmed set of bitcoin transactions, roughly every 10 minutes. It also comes from transaction fees though. (These days, a bitcoin transaction costs about $1.50.)

Hat tip to Compass Mining for pointing this out.

🇯🇲 3. Jamaica's central bank steps toward CBDC

Illustration of a piggy bank, but the dots on its nose have been replaced with binary code 01.
Illustration: Maura Losch/Axios

The central bank of Jamaica is one step closer to issuing digital currency backed by the state to be used as local legal tender, Crystal writes.

Why it matters: Governments are pressing forward on so-called central bank digital currencies, eager to provide faster more efficient payment options while preserving monetary and financial stability.

  • There are 105 countries, representing over 95% of global GDP, exploring CBDC, according to the Atlantic Council's CBDC tracker. That's up from 35 countries in May 2020.

Flashback: After Jamaica's central bank (BOJ) completed its 2021 sandbox project with Dublin-based technology firm eCurrency Mint, it named its CBDC the Jamaican Digital Exchange, or JAM-DEX.

  • And the BOJ recently announced a phased launch of the token so that users can transact using the CBDC via their digital wallets.

Driving the news: Jamaica's Senate on June 3 passed proposed amendments to the BOJ Act. Those amendments authorize the central bank to be the sole authority to issue CBDC and for CBDC to become legal tender, Natalie Haynes, deputy governor of the central bank, tells Axios.

  • "However, before those amendments become law, there are still some steps to be taken," Haynes said.
  • "The publication of the Act in the Gazette will signal the date when the Act comes into effect. At the date of promulgation, the Bank will be so authorized to issue CBDC, and CBDC will then be regarded as legal tender."

JAM-DEX does not use blockchain technology.

  • That's not because they have any major concerns with the tech usually associated with CBDCs, according to BOJ, but because blockchain technology can't be easily integrated into the state's payment infrastructure.
  • At the same time, the use of CBDC stands to raise "systemic efficiency" and lower physical cash distribution and storage costs, the central bank said in their CBDC primer.

Yes, but: CBDCs still have a long way to go before they're useful for regular people. Recall our brief note on the Bahamian CBDC in our state-backed digital money primer.

The bottom line: The great race toward CBDCs continues.

🐇 4. Catch up quick

💢 Human rights advocates sent a letter to Congress in support of bitcoin and stablecoins. (CNBC)

🏦 Wyoming's Custodia bank has filed suit against the Fed for dragging its feet on the new bank opening a master account there. (CoinDesk)

✋ New York's governor is facing heavy lobbying from crypto interests to veto the state's mining project moratorium bill. (NYT)

🔵 Circle's USDC expands to Polygon, an Ethereum layer-2. (The Defiant)

🇰🇷 Korean exchanges delist litecoin after it adopts new privacy features. (The Block)

Top coins

Data: CoinGecko; Table: Axios Visuals

🙋‍♂️ 🤦‍♀️ 5. Culture hash: Trouble in paradise

A screenshot of a Reddit thread.
Screenshot: u/DifficultFox1 (Reddit)

We got into an interesting discussion here at Axios recently about whether or not the website Reddit has become the best source of reliable information, as some bloggers have been arguing lately, Brady writes.

  • It has long been a forum for relationship advice. In this post, it's crypto-related relationship advice.

What do you do when your partner is doubling down on an investment that looks very bad to you? In this case, following a "crypto influencer" without question?

Some advice from Redditors:

  • "Your best bet would be to short the token for the same amount he's invested."—u/Wagizmo
  • "Some people just have an unwavering pathology that not even an act of god can shake."—u/nickoaverdnac
  • "If I can't be reasoned with on the terms of my own reasoning, I can usually be reached on the topic of my impact on my SO [significant other]." —u/sangderenard

Zooming out: The project in question appears to be Safuu, which advertises a 383,025.80% annual yield. (No, seriously, it does.)

How does crypto figure into y'alls relationships? We wanna know! —B & C