Katherine Ross

Senator Cynthia Lummis and Rep. French Hill penned a letter to US Department of Justice Attorney General Merrick Garland on Thursday.



Hill and Lummis — both of whom have been advocates for crypto — penned the letter following reports that Hamas, and “bad actors,” used Tether and Binance.



Israeli authorities reportedly asked Binance to shutter around 100 accounts tied to Hamas. <a href="https://blockworks.co/news/israel-freezes-hamas-crypto-accounts">Tether froze 32 addresses</a> controlled by both Hamas and “Russian-linked entities.”&nbsp;



The letter cites a report from the Wall Street Journal which is facing controversy after Elliptic — the blockchain analysis firm named in the WSJ report, <a href="https://blockworks.co/news/wsj-elliptic-crypto-fundraising">refuted the figures cited in the article</a>.



The two asked Garland to “reach a charging decision on Binance that reflects their level of culpability.” The DOJ initially launched a probe into Binance back in 2018, with both the IRS and DOJ <a href="https://blockworks.co/news/irs-justice-department-probing-binance">seeking answers from Binance back in 2021</a>.



Reuters <a href="https://www.reuters.com/markets/us/us-justice-dept-is-split-over-charging-binance-crypto-world-falters-sources-2022-12-12/">reported</a> in December 2022 that the Justice Department was split about charging the exchange after <a href="https://blockworks.co/news/sam-bankman-fried-recap-trial-week-one">the collapse of FTX</a>.



The US Securities and Exchange Commission, however, filed a <a href="https://blockworks.co/news/sec-allegations-against-binance">lawsuit against Binance back in June</a>, alleging that Binance and Binance US sold unregistered securities. Binance also, according to the suit, evaded regulatory oversight and “put the safety of dollars of US investor capital at risk and at Binance’s and [CEO Changpeng] Zhao’s mercy.”



Hill and Lummis wrote, “Binance, notably, is an unregulated crypto asset exchange based in the Seychelles and Cayman Islands. Binance has historically been linked to illicit activity and is purportedly the subject of a current Department of Justice investigation.”



Binance did not immediately respond to a request for comment on the letter.&nbsp;



In addition to Binance, Lummis and Hill asked Garland to “expeditiously conclude [their] investigations into the ongoing illicit activities involving Tether.”



Reports of a <a href="https://blockworks.co/news/tether-remains-stable-amid-reports-of-doj-probe">criminal probe into Tether</a> surfaced in 2021. Damian Williams, who’s also involved in the case and trial of ex-FTX CEO Sam Bankman-Fried, was <a href="https://blockworks.co/news/tether-fraud-investigation-gets-new-leader-bloomberg">reportedly tapped to head the probe in October 2022</a>.



“There is simply no evidence that Tether has violated Sanctions laws or the Bank Secrecy Act through inadequate customer due diligence or screening practices,” Tether said in a <a href="https://tether.to/en/tether-reinforces-stance-against-cryptos-terrorist-utilization-urges-governments-to-fact-check-mainstream-medias-misinterpretation-of-data/">post</a> on Thursday.



“We urge the Department of Justice to carefully evaluate the extent to which Binance and Tether are providing material support and resources to support terrorism through violations of applicable sanctions laws and the Bank Secrecy Act,” Lummis and Hill wrote.



“To that end, we strongly support swift action by the Department of Justice against Binance and Tether to choke off sources of funding to the terrorists currently targeting Israel.”



Updated Oct. 26, 2023 at 2:49 pm ET: Added statement from Tether.



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Lummis, Hill push for ‘swift’ DOJ action against Binance, Tether 

Ben Strack

Congress’ latest proposed crypto bill would take away the “haphazard, schizophrenic” ways of regulators that have laid down enforcement on large industry players, according to US Rep. French Hill.



But the planned framework could have trouble passing anytime soon, some said.&nbsp;



The Republican congressman from Arkansas noted in an interview shown at the DACFP Vision conference in Austin, Texas on Tuesday that passage of crypto regulation is “a heavy lift,” as reactions from fellow policymakers are mixed.&nbsp;



Hill, vice chair of the House Financial Services Committee and chair of the subcommittee on digital assets, financial technology and inclusion, said during <a href="https://blockworks.co/news/house-grapples-with-stablecoins">an April hearing on stablecoins</a> that the “turf war” between the SEC and the CFTC over crypto is “unhelpful” and “unsustainable.”



Since then, Reps. Patrick McHenry, R-N.C., and Glenn Thompson, R-Penn., earlier this month introduced what they called a <a href="https://blockworks.co/news/house-republicans-referee-cftc-sec">Digital Asset Market Structure draft</a>.&nbsp;



The <a href="https://docs.house.gov/meetings/AG/AG00/20230606/116051/HHRG-118-AG00-20230606-SD002.pdf">framework</a> seeks to give the CFTC jurisdiction over digital asset commodities — if certain conditions around decentralization and functionality are met — while allowing the SEC to make arguments for crypto assets it feels are securities.&nbsp;



It would also allow crypto platforms to register with the SEC as an alternative trading system, and with the CFTC as a digital commodity exchange.



Hill said Tuesday that education around the proposal, and the broader crypto space, will be critical. A number of “roundtables” have occurred in recent weeks, and the House Financial Services and Agriculture committees continue soliciting feedback on the draft.&nbsp;&nbsp;&nbsp;



“You’ll see that continue to advance over the next two, three or four weeks as we do more work on it,” Hill said. “This is not a partisan issue. This is a bipartisan issue.”



The bill’s focus on clearing up token classification comes after SEC Chair <a href="https://blockworks.co/news/regulatory-clarity-ethereum-gensler">Gary Gensler failed to give a clear answer</a> to McHenry’s question at a hearing in April on whether ether was a security or a commodity.&nbsp;



Gensler has been “a bit of an impediment” in terms of having “a reasonable conversation” around crypto as the proposed bill was drawn up over the last three or four months, Hill said.



The SEC <a href="https://blockworks.co/news/sec-sues-coinbase">claimed Coinbase was operating as an unregistered exchange</a> and alleges Binance <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">engaged in the unlawful sale of securities</a>, among other charges. The regulator <a href="https://blockworks.co/news/the-sec-says-these-crypto-assets-are-securities-their-reasoning-is-wrong">labeled more tokens as securities</a> as part of the two lawsuits.



“Our market structure bill would clear up, I don’t want to say 100% of these issues or challenges in and around all this…but it’s going to clear up the vast majority of the assertions of what Mr. Gensler and others are saying is not being done to whatever standard,” Hill said.



<h2 class="wp-block-heading">Chances of passing?</h2>



Lee Bratcher, president of the Texas Blockchain Council, said during a panel at the DACFP Vision conference that though he supports the McHenry-Thompson proposal, he doesn’t think there is enough “political capital” in the Senate to get it passed.



“I think [the Republicans] are optimistic publicly because they want to be seen as the innovators,” he said. “I think privately, if you asked them, they know that this is going to run into some problems in the Senate.”



Julian Sevillano, a digital assets-focused partner at consulting firm McKinsey &amp; Company who touted the bill’s “fundamental building blocks” during a separate panel, also doesn’t expect passage anytime soon.&nbsp;



“What we’ve heard in the industry is we don’t think any significant crypto regulation will pass because it’s not a priority within the year we have right now,” he said. “It’s an election cycle.”



The bill doesn’t have Democratic sponsorship yet, Sevillano added.&nbsp;



Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., have their own crypto-focused proposal <a href="https://blockworks.co/news/gillibrand-lummis-revamped-crypto-bill">they had planned to reintroduce</a>: the Responsible Financial Innovation Act.&nbsp;



“We met with them obviously and they are glad to see the intensive work we’re doing in the House on drafting [a bill] and the concepts we’re spelling out that may assist them with what they’re doing,” Hill said. “We look forward to hearing their best ideas in the Senate on the approach they might take.”



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Proposed crypto bill would help clear up latest SEC allegations: Rep. Hill

Casey Wagner

A draft of the long-awaited bipartisan stablecoin legislation Congress members have been promising hit the wire last week, but top Democrats say the bill is nothing like what was discussed.&nbsp;



House Representatives <a href="https://blockworks.co/news/house-grapples-with-stablecoins">met last week to discuss stablecoins</a> and hear from expert witnesses about their role, safety and stability. The current <a href="https://docs.house.gov/meetings/BA/BA21/20230419/115753/BILLS-118pih-Toproviderequirementsforpaymentstablecoinissuersresearchonadigitaldollarandforotherpurposes.pdf" target="_blank" rel="noreferrer noopener">draft bill</a> was released by Republicans on the Subcommittee on Digital Assets ahead of the hearing. 



Subcommittee Chair Rep. French Hill (R-Ark.) hailed the legislation as a bipartisan effort that began last fall.&nbsp;



But Democrats beg to differ. The draft “in no way recommends the final work on stablecoins by negotiations between the two of us,” Rep. Maxine Waters (D-Cali.) said, referring to unresolved conversations with Hill. Democrats will have to “start from scratch,” she added.&nbsp;



Hill responded by saying he welcomes collaboration on the bill and stablecoin framework.



As the hearing progressed, the party lines became more clear. Here is a rundown on where leaders stand when it comes to collaboration on stablecoin policy.&nbsp;



<h2 class="wp-block-heading">Where cross aisle agreement can be found&nbsp;</h2>



Several Subcommittee members brought up the collapse of <a href="https://blockworks.co/tag/terra" target="_blank" rel="noreferrer noopener">TerraUSD</a> and <a href="https://blockworks.co/tag/luna" target="_blank" rel="noreferrer noopener">Luna</a> and highlighted the need to protect investors and enforce strict reserve reporting requirements. 



Customer funds should also not be commingled, Republicans and Democrats agreed unequivocally.&nbsp;



There also seems to be some bipartisan agreement that US Dollar dominance should not be undermined, by a stablecoin or otherwise, although there is some disagreement about how stablecoins may impact USD.&nbsp;



House Republicans and Democrats may not agree on how to get there, but both sides of the aisle are calling for some sort of policy to make it through soon.&nbsp;



<h2 class="wp-block-heading">Where party lines remain strong&nbsp;</h2>



Some Democrats maintain the need for more guidelines around who can issue stablecoins.&nbsp;



&#8220;These programs are typically limited to banks who are heavily regulated and that is for good reason,&#8221; Rep. Stephen Lynch (D-Mass.) said. &#8220;It is the danger of allowing shadow banking products, particularly stablecoins, to issue deposits like products without FDIC insurance. So I strongly believe we need to separate crypto assets from our banking system, and this [draft] bill does just the opposite.&#8221;



Others in the party, like Rep. Ritchie Torres (D-NY), counter that stablecoin issuers are nothing like banks; if there are no lending services provided, there is no need to require issuers to be licensed banks.&nbsp;



Lawmakers also disagreed about privacy and KYC policies around stablecoins. Rep. Bill Foster (D-Illi.) suggested regulators would need access to each wallet owner’s identity in order to effectively oversee the industry.&nbsp;



Rep. Warren Davidson (R-Ohio) on the other hand, said private and permissionless blockchains are essential.&nbsp;



Congress members also had a difficult time getting on the same page about state versus federal policy. Rep. Torres said he would not be inclined to support any legislation that undermined New York’s current stablecoin regulatory policy.



<h2 class="wp-block-heading">What’s next</h2>



Bipartisan talks between current Chairman of the House Financial Services Committee Patrick McHenry (R-NC), and Rep. Waters began last year, but the two were unable to move their efforts out of committee.&nbsp;



Any bill will ultimately have to get through the Senate as well, and if Senate Banking Committee Chair Sherrod Brown (D-Ohio), doesn’t take interest, the legislation will likely die.&nbsp;



Crypto investment vehicles are “speculative products run by reckless companies — we know that’s true,” Sen. Brown said <a href="https://blockworks.co/news/senate-banking-hearing-on-crypto-crash">during a February hearing after the fallout of FTX</a>.&nbsp;&nbsp;



“It would require, certainly, a change in approach for the Banking Committee to move forward with markup,” Sen. Cynthia Lummis (R-Wyo.) said, <a href="https://blockworks.co/news/gillibrand-lummis-revamped-crypto-bill">during an appearance in DC to discuss her bipartisan crypto bill</a>.&nbsp;



Rep. Waters has not yet released her own draft or proposal for a new stablecoin bill to counter what Republicans unveiled last week. The draft bill has also not yet been introduced on the House floor.



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