Empire Newsletter: The Iran-Crypto affair (Inside Congress’ latest crypto discourse)

The Treasury Department wants stronger crypto oversight powers, writes Blockworks’ Casey Wagner


Artwork by Crystal Le


More crypto powers, please

If there is one thing Congress can get done, it’s a crypto hearing. 

The Treasury Department’s number two guy — Deputy Secretary Wally Adeyemo — faced the Senate Banking Committee yesterday to discuss keeping money out of illicit actors’ pockets. 

Crypto, of course, was a main topic of conversation. 

The hearing only lasted 90 minutes. Or, in other words, it ended as soon as it started, as far as Congressional gatherings go. 

Adeyemo began with a plea, asking for Congress to give his agency power to oversee more of the crypto ecosystem, namely through additional secondary sanctions tools and laws that make dealing with crypto actors overseas easier. 

Read more: Illicit actors are getting better at using crypto, Treasury tells Congress 

The Treasury Department can’t sufficiently stop terrorists and illicit actors from using cryptocurrencies to evade sanctions and fund their crimes because they don’t have the tools, Adeyemo said. 

Sen. Elizabeth Warren, who’s been spearheading a bipartisan effort to expand anti-money laundering requirements around the crypto industry for years, took the hearing as an opportunity to double down on one of her more controversial takes. 

Warren wants to see validators subject to the same rules as banks, and to make her point, she used a hypothetical that seemed designed to speak to Republicans, many of whom have vastly different opinions when it comes to regulating crypto. 

The exchange went like this: 

Warren: If I wanted to send $1,000 worth of crypto to you, Mr. Secretary, is it possible that, when I just send it, just to send this, that Iran could be our validator and would be collecting a fee for processing our crypto, all of that without either one of us knowing?

Adeyemo: That is certainly possible.

Warren: So Iran — which is subject to all kinds of sanctions — is moving money through crypto and actually making millions of dollars validating crypto transactions for Americans and for everyone else, all because we don’t have the right money laundering rules in place. 

Warren was getting at a key point she made in the Digital Asset Anti-Money Laundering Act (DAAMLA) of 2023, which she reintroduced last summer alongside Republican Roger Marshall. The legislation seeks to bring “crypto participants” — defined in the bill as wallet providers, miners and validators — under compliance requirements. 

Read more: Senate money laundering bills continue to duel, Dems get 9 new sponsors

The language has many crypto advocates and industry members nervous. They say the bill will have little impact on actual bad actors; it’s more likely to send crypto firms overseas where they don’t have to face these strict (and oftentimes impossible) requirements. 

Plus, anti-DAAMLA advocates say illicit actors using digital assets is not nearly as big of a problem as many Dems claim. 

Republican Senator Tim Scott expressed frustration that the conversation had morphed into one solely about crypto as opposed to illicit financing as a whole. Crypto has become the “scapegoat,” he said. 

Read more: ‘No evidence’ Hamas raised millions in crypto, Elliptic says

All the spicy comments aside, Tuesday’s hearing — the second the committee has held on the subject in the past six months — was just that: a hearing. 

Even as high-power Dems make crypto legislation a cornerstone of their platforms, DAAMLA is not currently on the agenda to be marked up, let alone voted on.

Plus, it’s an election year, so the already-tight agenda is even more narrow. 

Casey Wagner

Data Center

  • Ethereum layer-2 transaction counts are up almost 200% since Dencun’s blobs made them much cheaper last month.
  • Crypto-enabled mobile network Helium has gained 80,000 subscribers since August.
  • Base DEX volumes have cooled by more than 20% over the past seven days compared to the previous period.
  • Bitcoin (BTC) is down 2% over the past day, hovering at $69K after falling short of a fresh all-time high.
  • Ether (ETH) is trading 27% below its own price record, down 3% to $3.5K. 

No more dial-up tones, please

Honey, we’re hitting our broadband moment. The team at Pantera Capital put together some thoughts on the market and where the tech stands yesterday.

Layer-2s have achieved lower costs and better speeds, which is reminiscent of the transition from dial-up (remember that iconic sound?) to broadband.

The seven-day transaction count has jumped 20% on Ethereum, and the same metric for layer-2s went to 163 million from 8.6 million, marking an 850% increase.

Specifically, the team praises Arbitrum, noting: “Over the last 30 days, the Arbitrum network has processed four times as many transactions as Ethereum.”

Pantera believes that not only is Arbitrum set to “accelerate further,” but that it’s the “layer-2 of choice for leading Web3 projects and developers.” 

Read more: Sommelier DeFi strategy vaults now live on Arbitrum

Arbitrum has 565 projects, 349 more than Optimism, which is the next closest layer-2. It also dominates in terms of monthly active developers, with over 1,800. Putting that into perspective, Optimism has almost 1,300. 

But I don’t want to just talk about how Arbitrum’s dedication to developers sets the layer-2 up for future success over competitors, because Pantera also penned some thoughts on bitcoin. 

Bitcoin’s currently on a streak — and not just in mentions in this newsletter — but also in terms of its positive performance. It is month seven of positive performance (from September to March). In October, bitcoin jumped 29% and then, in February, it jumped 44%. The last time bitcoin saw this kind of streak was in 2017 which lasted six months. 

The performance within the larger market is beginning to prove that the landscape is not just a zero-interest rate policy (ZIRP) phenomenon, as critics claimed it was back in 2021 and 2022. 

So while traders on Wall Street fret about the Federal Reserve’s next rate decision, cryptoland is seeing record rallies and technological expansion. 

Katherine Ross

a16z vs. bitcoin

Andreessen Horowitz (a16z) is one of the most prolific and largest venture capital firms in the blockchain space — if not number one — operating four crypto-focused funds with more than $7.6 billion in assets under management.

Gauging exactly how its investments have performed is difficult, considering that details of its portfolio, both equity in the startups it backs and the token allocations it manages, aren’t publicly available.

What we do know is that of the 95 crypto companies listed in its portfolio, 38 have issued their own cryptocurrencies. And of those, six have outperformed bitcoin since it bottomed out at the end of 2022, which, depending on how you measure market cycles, marked the earliest days of our current bull run.

As it turns out, the native token for the Ronin Network (RON) — the gaming-focused blockchain developed by Axie Infinity creator Sky Mavis — is by far the best performing token tied to a16z portfolio companies over that period, having rallied nearly 1,700%. For scale, bitcoin has gained 340%.

Solana (SOL) is next with about 1,100%, followed by the governance token for decentralized credit protocol Goldfinch (GFI), which is up about 720%.

(Only the best and worst performers make it to the chart)

While most cryptocurrencies from a16z portfolio companies have underperformed bitcoin during this bull market to date, more than half have doubled in price and only six have shed value. 

The worst performers are privacy coin Iron Fish (IRON), down 78%, Web3 social token Friends With Benefits (FWB), down 52%, while payments token (ECO) and metaverse crypto Apecoin (APE) have each lost about 40%.

Zooming out to encompass each token’s total trading history, though, shows more than half of the analyzed cryptocurrencies are in the red and most of those have to date sunk by more than 50%. 

SOL is the best performer by far, multiplying in price almost 180 times. Axie Infinity (AXS) is second-best with 6,700%, then DePIN darlings helium (4,200%) and arweave (3,300%).

Of course, token returns don’t exactly paint a complete picture of the health of those particular projects. Charts like these only really gauge market sentiment, which as we know rarely follows fundamentals.

In any case, if we consider “success” to be tokens gaining value since they first hit crypto markets, a16z’s portfolio companies currently have just under 50% strike rate. 

Sounds about right for venture capital.

— David Canellis

The Works

  • Former TechCrunch reporter (and Blockworks alum) Jacquelyn Melinek and investor Anthony Pompliano have launched Token Relations, a new startup focused on crypto community comms. 
  • Hong Kong is on the cusp of approving a slate of spot bitcoin ETFs, Reuters reports. 
  • Worldcoin is now allowing people to delete their eyeball scans. 
  • Kraken’s Jesse Powell is suing a Republican recall committee focused on recalling California Gov. Gavin Newsom, according to Politico, with Powell alleging that the committee tricked him into donating.
  • Chip giant TSMC’s revenues are booming thanks to demand from AI companies, CNBC reports. 

The Morning Riff

The Securities and Exchange Commission’s case against crypto influencer Richard Heart should be dismissed, Heart’s legal team argued in a motion shared with Blockworks. 

The 69-page document makes a number of arguments though one stands out: “The SEC’s complaint is an impermissible effort to penalize and [restrain] Mr. Heart’s speech.” 

Heart’s team argued that he’s a “free-speech pioneer” and that the SEC failed to show securities fraud or establish proper jurisdiction because Heart lives in a foreign country. 

Read more: DEBT Box loss shows SEC ‘overreach and failure,’ Hill says

To refresh your memory: The SEC filed a suit against Heart in July of last year claiming that Hex, PusleChain and PulseX are securities and that Heart purchased luxury vehicles and other items after he allegedly misappropriated over $12 million in investor funds.

“Hex, PulseChain, and PulseX constitute twenty-first century ‘public squares’ in which individuals enjoy a First Amendment right to share their ideas and make their voices heard,” Heart’s lawyers argued. 

Meanwhile, Heart is asking others to consider filing amicus briefs in the case on another “public square.” 

Putting aside the securities allegations — the SEC’s number-one argument in most of these crypto cases — the First Amendment arguments make this case, and potential future filings, far more exciting than some of the other enforcement actions from the SEC within this space.

— Katherine Ross

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