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A comprehensive a stablecoin bill can still pass this Congress, despite little time remaining on the calendar, but the Biden administration is holding up an agreement, top House Financial Services Committee Republican Patrick McHenry, R-N.C., told The Block.

“I’m optimistic that we can still get something done this Congress. It’s up to the administration to come to the reality of votes on the Hill,” McHenry said.  “I’m grateful for the willingness of Chairwoman Waters to compromise. Democrats are in the majority, she doesn’t have to compromise with Republicans. But on this matter I think it’s important to have bipartisan legislation.”

McHenry added, “The administration and Hill policymakers are in different places. I think there’s goodwill on the Hill to come up with a reasonable product, for those of us who are serious policymakers.” 

Legislation to create clearer rules around stablecoins has been on the front burner since the collapse of TerraUSD this past spring, but progress between McHenry, House Financial Services Committee Chair Maxine Waters, D-Calif., and the Biden administration stalled over the summer. The Financial Stability Oversight Council, a collection of financial regulatory agency leadership led by Treasury Secretary Janet Yellen, recently repeated a call for legislation around stablecoins. 

With Republicans favored to take control of the House of Representatives after the midterm elections, McHenry noted that he’s likely to have more leverage in drafting legislation next year. Earlier Wednesday, during a panel discussion with Stripe CEO and co-founder Patrick Collison, the North Carolina Republican referred to the bill he and Waters had worked on as an “ugly baby.”

“Financial Services will be the primary mover on digital asset legislation next Congress regardless of what happens in the next two months, three months,” McHenry said.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Rep. Patrick McHenry, R-N.C., is hopeful that a stablecoin bill he is negotiating with House Financial Services Chair Maxine Waters will advance in the coming months, he said during an event on Wednesday. 

“We’ve come up with a pretty ugly baby,” McHenry said, referring to draft stablecoin legislation. “It is a baby nonetheless, and we are grateful and hopeful that this ugly baby can grow and prosper into something that is a little more attractive.” 

McHenry made the comments during D.C. Fintech Week, a financial conference hosted by the Georgetown University Law Center. McHenry is the top Republican on the committee and poised to become the chair if Republicans retake the House in November. 

For months, Water and McHenry have worked behind the scenes to hash out a deal to regulate stablecoins. A draft of the legislation would create a federal framework around stablecoins and temporarily ban the types of payment coins that are not backed by outside assets. The Treasury Department has also been involved in drafting the bill, McHenry said. 

McHenry noted several areas of disagreement, including determining the appropriate federal regulator, the means by which stablecoins are held and new rules around wallets. The Republican lawmaker said he is encouraged that committee members are nearing a deal, despite operating in a “divided Washington” and a time of “chaos.”

“I’m hopeful for what this means in the coming months,” McHenry said. “I’m optimistic that we will come to terms.” 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The world’s largest crypto exchange has been accused of filing a “grossly inaccurate” annual report in 2020 by the co-owner of a Binance UK subsidiary called Dimplx. The Financial Times first reported the story.

Financial statements for one of Binance’s UK companies “do not accurately report” the nature of its business, the directors of Dimplx said, nor do they reflect its assets and liabilities, “including potential tax liabilities” and turnover.

Dimplx, which was formed as part of a joint venture with Binance in 2019, made the allegation in its own filings this month, raising questions about the role that UK companies played in Binance’s global operations in the period before its warning from the Financial Conduct Authority (FCA), a UK financial regulatory body.

In June 2021, the FCA issued a consumer warning against Binance Markets Ltd, a UK subsidiary of the Binance group, which banned it from engaging in any regulated activities in the UK. Binance had failed to provide basic information about its operations, such as “trading names and functions for all group entities globally,” the agency said. 

Dimplx’s claims center on another UK entity, Binance Digital, which was incorporated in the UK in November 2019 as a “payment processing facilitator” according to its annual reports, and was “responsible for transactions” between crypto and all national currencies except the Turkish lira, according to archived copies of Binance’s terms and conditions. 

In Dimplx’s annual report for the year to February 2021, company directors Simon Dingle and Joshin Raghubar allege that there were a spate of inaccuracies in Binance Digital’s accounts for 2020. 

Binance’s filing suggests that at the end Binance Digital had roughly £100 million ($100 million) in “cash and/or bank balances” in 2020, and that the same sum was owed to “creditors.” The Dimplx directors said they believe the £100 million represented balances held “on behalf of Binance Digital customers who had visited binance.com,” who would be “liable to pay transaction fees.”

The financial statements, however, recorded “zero turnover or fees,” on any transactions recorded by customers during the financial year, Dimplx said. Binance Digital’s 2020 accounts say that no turnover or revenue was recognised during the year, and the company paid no UK tax. 

Dimplx said that it plans to pursue litigation against Binance over disputes arising from their business relationship, but it did not provide details about its claims. Binance stated that in light of the threat of litigation, it would not be able to “respond fully to the allegations,” and added that “we understand that the minority shareholders are disappointed that the joint venture did not bear fruit.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A group of Democratic lawmakers from the House of Representatives and Senate has sent a letter to Texas’ power authority requesting more insight into crypto mining operations.

Senators Elizabeth Warren (D-MA), Sheldon Whitehouse (D-RI) and Edward Markey (D-MA) joined forces with Congress members Al Green (D-TX), Katie Porter (D-CA), Jared Huffman (D-CA) and Rashida Tlaib (D-MI) to address their “concerns about the states unreliable electricity market and the potential for mining to add to the stress on the state’s power grid” with ERCOT.

After significant discussion of data they say illustrates the risks of crypto mining, lawmakers included a series of questions for ERCOT, including what the annual electricity consumption and carbon expenditures are for Texan crypto mining, future plans of firms to scale in Texas, how the state plans to scale the grid in kind and what kind of estimates or modeling ERCOT uses to estimate the impact of crypto mining.

Texas has become a hub for miners in recent years, and lawmakers say they’re worried that the Electric Reliability Council of Texas (ERCOT) is participating in the growth. Indeed, the lawmakers’ letter to ERCOT cites comments from ERCOT interim CEO Brad Jones saying Texas is aiming to become the world’s largest mining center.  

The lawmakers cited a series of studies and investigations that they say show mining is increasing production and creating what they consider to be “substantial amounts of carbon emissions and other adverse air quality impacts.” In addition, they’re taking issue with subsidies that ERCOT pays to miners for powering down during peak usage periods.

Those in favor of crypto mining contend that Texas’ de-regulated energy system incentivizes miners to shut off during peak usage because the price reaches a level where it’s not profitable to mine. Energy usage costs too much at those times to be offset by mined bitcoin. But lawmakers say the state has made a win-win for miners and undercut this argument by offering subsidies to miners who shut off during peak usage periods. 

“In simple terms, the Bitcoin miners make money from mining that produces major strains on the electric grid: and during peak demand when the profitability of continuing to mine decreases, they then collect subsidies in the form of demand response payments when they shut off their mining operations and do nothing,” said the letter.

Lawmakers ask that ERCOT respond to their questions by the end of October.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Hester Peirce wants to see new law to regulate crypto, following disappointment with the Securities and Exchange Commission under Chair Gary Gensler.

Peirce herself is an SEC commissioner who has been an outspoken advocate for crypto for years. On October 12, she spoke at a conference for the Securities Traders Association in Washington.

Peirce described her change in stance over the prospect of legislation relative to optimism when Gensler came to the SEC “with a tremendous amount of knowledge about crypto” as an opportunity to set up a new approach to crypto regulation – namely an oversight regime that indicates when certain disclosure rules apply to certain crypto assets and when.  

“We haven’t really done anything except some enforcement actions,” she said. “So I think it is a good time for legislation.”

The commissioner did, however, gesture at the market chaos of the past seven months, which has spurred interest in new legislative efforts as well as more aggressive regulation of crypto.

“Obviously there are lessons that apply equally to crypto markets as to regular markets and some people in the crypto markets have been learning those lessons recently and people in the traditional markets probably could have warned them of some of those things,” Peirce said.

Peirce’s comments come as one of the most conspicuous pushes on crypto legislation would carve out greater authority for the Commodity Futures Trading Commission. The other Republican commissioner at the SEC, Mark Uyeda, has similarly criticized the commission’s approach, namely foregoing the rulemaking process in favor of what critics decry as “regulation-by-enforcement.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Traditional banks are increasing their use of distributed ledger technology, as well as exposure to digital assets, and regulators are paying close attention, said Federal Reserve Vice Chair of Supervision Michael Barr.

The Fed “is working with our colleagues at the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to ensure that crypto-asset-related activities banks may become involved in are well regulated and supervised, to protect both customers and the financial system,” Barr said. “This effort is not intended to discourage banks from providing access to banking products and services to businesses associated with crypto assets.”

That could include further regulatory guidance in coming months and years from the Fed and other banking agencies, according to Barr.

Barr delivered his remarks Wednesday at the Georgetown University Law Center’s D.C. Fintech Week in Washington.

The lead financial regulator on the Fed’s Board of Governors, Barr told an audience of lawyers, lobbyists, and policymakers that he sees potential parallels between the expansion of financial innovation, including cryptocurrencies, and lead up to the 2008 global financial crisis. Barr also warned banks seeking to launch their own stablecoins and engage in other crypto-related projects that it’s an “open question” whether some of those projects comply with current law due to “novel risks inherent” in digital assets.

On Tuesday, BNY Mellon, one the largest banks in the U.S., said that it could custody cryptocurrencies for its customers, the latest step a traditional financial institution has taken into crypto.

Barr echoed a call from the Financial Stability Oversight Council, a super committee of regulators chaired by Treasury Secretary Janet Yellen, for Congress to pass comprehensive stablecoin legislation to create rules and regulations around that market, though a finalized bill looks unlikely this year. 

The Fed governor also reiterated the comments of Federal Reserve Chair Jerome Powell and Fed Vice Chair Lael Brainard that the central bank has not yet made a decision on creating a digital dollar, and hopes to launch its own real-time payments network, FedNow, between May and July of next year.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

London-based crypto custody provider Copper has raised $196 million during an ongoing Series C funding round.

The funds included a convertible $15 million loan note, as well as $181 million in fresh capital. Bloomberg first reported the news. 

Copper earlier sought to raise as much as $500 million to put its valuation over $1 billion, having previously courted investors such as Barclays, and billionaire fund manager Alan Howard. 

The company took a 2021 loss of £14.4 million ($15.95 million), according to filed documents. 

Copper had sought anti-money laundering (AML) approvals to operate as a crypto service provider in the UK, going so far as to obtain an extension for a UK Financial Conduct Authority (FCA) deadline. The drawn FCA out process ultimately saw Copper seek out AML approvals from Swiss regulators, granted in May this year.

Copper did not immediately respond to The Block’s request for comment.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A judge has denied Aptos Labs CEO Mo Shaikh’s motion to dismiss a lawsuit filed by Shari Glazer, member of the Glazer family, who alleges that as an early potential investor she was cheated out of a fair share of equity.

Aptos Labs was founded by former Meta employees with the goal of building a scalable Layer 1 blockchain, able to reach an audience of billions of people. The technology is based on the Diem payments network, which Aptos’ founders worked on while at Meta, formerly known as Facebook.

Glazer and her firm Swoon Capital have been fighting for up to $1 billion from Matonee, also known as Aptos Labs, according to a complaint filed with the Supreme Court of the State of New York in March. 

Glazer and Swoon claimed that a “fraudulent scheme” implemented by Shaikh deprived her of her rightful share of a partnership in a “blockchain technology venture.”

The latest development in the case has seen a motion to dismiss the lawsuit denied, according to a court transcript published on Monday, as the judge cast uncertainty on how the dispute would culminate.

“I can’t emphasize enough that both parties here should have significant uncertainty in terms of how this case unwinds,” said Justice Jennifer Schecter. “It would behoove the parties to enter into some type of negotiation where they can work something out, limit the uncertainty and acknowledge the roles that everybody have played in connection with this transaction,” she added.

The court dismissed four legal claims, including fraud, but allowed three others to proceed and be hashed out between the pair—for breach of agreement, unjust enrichment, and Glazer’s entitlement to a 50% stake in Matonee.

“We are pleased with the court’s ruling in which the majority of Ms. Glazer’s claims were dismissed outright — despite a high legal standard at this phase of litigation that requires giving Ms. Glazer nearly every benefit of the doubt and requires accepting Ms. Glazer’s allegations at face value,” an Aptos spokesperson told The Block in an emailed statement.

“As the facts will show, the claims in Ms. Glazer’s lawsuit are meritless, and we will continue to fight them. We will not allow this lawsuit to distract us from achieving our mission and we will continue to build for the benefit of all.”

The dispute comes as Aptos gears up to launch its blockchain mainnet.

The tech provider has garnered a host of heavyweight backers since its inception. Aptos had announced in March that was funded to the tune of $200 million in a round led by venture firm Andreessen Horowitz with other investors ranging from Multicoin Capital to Coinbase Ventures. Katie Haun, Three Arrows Capital, ParaFi Capital, Irongrey, Hashed, Variant, Tiger Global, BlockTower, FTX Ventures and Paxos also joined the round.

At the time, while not disclosing numbers, Aptos founders told TechCrunch they were “well off into the unicorn territory,” indicating that the company was valued at a minimum of $1 billion.

In September, Binance’s VC arm said it would top up an investment in the Layer 1 developer, adding to an $150 million round announced in July, led by FTX Ventures and Jump Crypto.

At the time, Bloomberg reported that Binance’s co-founder Yi He said the market value of Aptos is now estimated to be more than $4 billion. A spokesperson for Binance contacted The Block to say the $4 billion valuation is inaccurate, while declining to specify the true figure.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• Decentralize trading protocol Mango Markets was hit with a 9-figure exploit on Tuesday night
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Washington, D.C.-based policy nonprofit Coin Center is suing the Treasury Department over its sanctioning of Tornado Cash, the open source software that can be used to anonymize transactions on the Ethereum blockchain. 

Treasury’s August sanctioning of the transaction mixer, “exceeded their statutory authority because Tornado Cash is used to complete functions that do not include ‘any property in which any foreign country or a national thereof has any interest,’” the co-plaintiffs argue in their brief. Joining Coin Center on the suit are an anonymous human rights advocate based in the Southeastern United States, a software developer who used the Ethereum blockchain, and David Hoffman, a digital asset manager.

The lawsuit is the second against the Treasury Department over the sanctioning. U.S. crypto giant Coinbase is backing a lawsuit filed last month by six individuals who used the software, including two Coinbase employees. 

Challenges to Treasury’s sanctioning of the software could be landmark cases for blockchains. The nonprofit and Coinbase-backed lawsuits seek to convince the court that the government overstepped its authority in targeting software, rather than an individual or entity, as well as overstepping the statutory language and intent giving Treasury the power to issue economic sanctions. 

“Americans use Tornado Cash unilaterally to protect their own property,” the suit continues. Treasury’s “defiance of this statutory element assumes an authority that would give them virtually unlimited control to regulate the American economy.”

The plaintiffs also state that the mixer is necessary to protect their right to privacy. 

“If a user doesn’t take proactive steps to protect his privacy, the ledger’s transparency allows strangers to track his private associations and stalk his intimate relations,” Coin Center and the other plaintiffs assert. “It invites publicization of and retaliation for his private contributions to unpopular causes. And it allows anyone to see whether he has a lot of assets, which would put a target on his back.”

The suit has been filed with the U.S. District Court for the Northern District of Florida.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.