A highlight from Ron Hammond Interview - Crypto Regulation News! SEC Gary Gensler Hearing, FTX Trial, Crypto Bills, Coinbase, Stablecoin Regulation
Last time he spoke in front of the House Finance Service Committee, he kept saying multiple times, we have not lost a court case on crypto at all. We have brought several actions. And again, remind you, they call settlements wins. And so in their case, they were. They had won every single court case. But now that talking point is really faded because, as you mentioned, the Ripple's case, the Grayscale case, there's also ones like the Coinbase suit going on right now. This content is brought to you by Link2, which makes private equity investment easy. Link2 is a great platform that allows you to get equity in companies before they go public, before they do an IPO. Within their portfolio includes crypto companies, AI companies, and fintech companies. Some of the crypto companies you may recognize include Circle, Ripple, Chainalysis, Ledger, Dapper Labs, and many more. If you'd like to learn more about Link2, please visit the link in the description. Welcome back to the Thinking Crypto podcast, your home for cryptocurrency news and interviews. With me today is Ron Hammond, who's director of government relations at the Blockchain Association. Ron, great to have you back on. Thanks for having me. Always a pleasure. Ron, it's going to be a busy week. It's already a busy week here in DC. Tomorrow is, of course, the hearing with chairman of the SEC, Gary Gensler. Tell us about that and what can we expect. Definitely. For those who may not know, Gary Gensler, the chair of the SEC, is going to be testifying in front of the House Financial Services Committee for the second time this year. That's a really big deal because, to remind you, last year, they barely saw him at all in that committee when the Democrats had control. But if the Republicans can control, they want to exercise oversight of the SEC as much as possible. And again, it's pretty typical, though, for the opposite party to try to put the screws on to the party that has the White House. But in this case, a lot has happened, both in crypto, but also just generally, that it's going to get a lot of flack for Gary Gensler, whether it be on private funds, ESG. And again, crypto will definitely come up a lot after talking to several folks on the House side. He recently testified, though, in front of Senate Banking two weeks ago, and we didn't get too much out of that candidly. We saw a couple of questions from Senator Hagerty from Tennessee on the issues of promethium, for example, and Bitcoin ETF. We also saw some questions from Senator Lummis on SAB 121, which is more crypto accounting standards, and how do you custody actual crypto for banks. So I think we're going to see a lot more hard -hitting points from the House, especially on the Republican side. But I'd also like to caveat, as well, that the shutdown approaching, a lot of Democrats are going to use their time to hit the Republicans. It's just standard politics here. The Republicans are the ones in the House that are really slowing things down, unfortunately, when it comes to funding the government. So Democrat, any for the most part, is going to utilize their five minutes to not really talk about Gary Gensler, but talk about the Republicans shutting down the government. Because again, that's a major, major thing here. As much as crypto is big for us, the macro of all of the shutdown has a lot of implications. So we won't see crypto come up too much, but after talking to a couple offices, it does seem like we're going to have some definitely hard -hitting questions, very similar to what we saw earlier this year in the House. Yeah, and to your point of, you know, things have certainly changed since the last time he appeared, because you had the Ripple lawsuit decision, you had the Grayscale decision, where Grayscale won that, Ripple won a big chunk of theirs as well. And the Prometheum details are more about what Prometheum is and what they're up to. So do you think there's going to be some hard -hitting questions around that, those cases and those things that happened? Definitely. So if you recall, last time he spoke in front of the House Financial Services Committee, he kept saying multiple times, we have not lost a court case on crypto at all. We have brought several actions. And again, remind you, they call settlements wins. And so in their case, they were. They had won every single court case. But now that talking point is really faded because, as you mentioned, the Ripple case, the Grayscale case, there's also ones like the Coinbase suit going on right now. That's got a lot more attention. Actually, it looks a lot better for Coinbase post those decisions. And so he can't rely back on the courts here or say that, hey, look, I'm winning in all these court cases. And actually, especially in the Grayscale case, he lost 3 -0. And two of those judges were Democrat appointees and they're based here in D .C. And so I think that having that set the tone of like, look, you are really overextending here and you're losing in the courts, not by a small margin, by unanimous margin sometimes. And it's just not crypto. You are pushing the balance elsewhere where other industries like ESG or like private equity are seeing these wins and saying, you know what? I think we're going to actually have a chance to win against the SC as well. So like the ETF situation where crypto really just goes out ahead and fights a lot of these fires for more traditional finance. And then those folks kind of benefit from crypto's push. I think we're seeing some of that happening now with the Grayscale case and Ripple case and Coinbase case empowering other industries who feel like they are also having overreach from the SEC saying, you know what? I think we have actually a case here when we can actually win the courts. So I think it's going to be a major theme of this hearing going forward. But also there's going to be several other questions to your point about Prometheum. That was a major issue for that committee, which had Erin Caplan in front of that committee just a couple of months ago. And they reiterate all the talking points, securities laws are clear. The SEC gave us a way to work forward and move things forward. But that argument really fell apart pretty quickly. And we're seeing that in this case, that the Prometheum line that there is a pathway forward registration, there is a way to comply, just doesn't hold water. And so I'm pretty sure we'll see some members of Congress tighten the screws a little bit there because it's been really more of a black box, the SEC, of how this process went. Caplan just kept saying that we actually kept working the SEC and they were clear, but that has yet to even show itself. So I think there'll be a major other theme for this hearing as well. Now you mentioned Coinbase and everyone's looking at that lawsuit. There was also news reported, I think you mentioned it, where Coinbase CEO Brian Armstrong will be on the Hill. They've also launched an education campaign around crypto. Tell us about that. Yeah, Coinbase has been a godsend, candidly. Again, we used to have only about five or six lobbyists during the infrastructure fight. And again, we're going up against the banks who have over 150 plus lobbyists. We have going against other agencies or other groups that have way more funding. But Coinbase really has stepped up and said, look, the fights here in DC, we are committed to the United States and we're committed to resources here in the United States and DC to educate Congress, to educate regulators, and to showcase in DC why crypto is important for the future of the United States. And so they're having a huge Hill day tomorrow, actually. Again, it lines up not on purpose at all with Kerry Gensler testifying and of course also the shutdown too. But they're going to be having a whole set of presentations for Hill staff and members of Congress to learn from founders. It's not just Coinbase itself. They're also bringing in other founders from other companies and having a whole demo day, a Hill day, you can say, to educate various offices. And so I think it's really important to have. We're all seeing a lot of other folks from the industry come down. So it's going to be quite the crypto week here in DC. Of course, bad timing with the shutdown, but no one can really plan it like that. So we're really excited to see how that plays out, especially with all the heat recently more moving to AI in terms of interest, but also scrutiny. I think it's good to have more adults in the room and say, hey, look, crypto was the AI about one or two years ago. We're still here. We're fighting a lot of big battles. We need Congress's help to move the needle. But at the same time, let's show you why this is important and why this technology needs to be in America and not be based elsewhere. Because unfortunately, we're seeing a lot of folks migrate over to London, migrate over to the EU. And Coinbase is really taking a strategic stand saying, we're here to stay. We're here to comply with the rules, but we also need some action from Congress. So we'll see how that goes. Sure. Yeah, that's really great that they're doing that. And education advocacy are certainly key. And speaking of legislation and regulations, obviously, we had the market structure bill get marked up in the house. You also have the stable coin bill. What's the latest with those and the next steps? I know the shutdown is probably delaying a lot of things. What are the latest on those items? Yeah, so we were kind of expecting by October timeframe to have a vote on the stable coin bill and the market structure bill. There are other crypto bills as well that passed out of the house financial service committee, but those are the two main big ones. And so the plan was, hopefully, was after this whole shutdown drama that we would have a vote probably in October, but it's looking more like November now. And again, our message to folks is the closer we get to that 2024 election, we're almost a year out, all of a sudden, all bipartisan politics goes away and folks start retreating back to their bases. And it's my team versus your team. And that's when everything grinds to a halt in DC. We're already seeing that right now a little bit with the shutdown where folks are saying it's my team versus your team, but the Republicans are a lot more splintered on their teams. And so we want to make sure that we get these bills pushed out of the house on a good bipartisan basis and then showcase to the Senate why it's important to take up this legislation. Now, there are been some rumors going around recently. Again, Politico report on it, Punchbowl report on it recently, too, that Patrick Henry gave an interview saying, look, the Senate Bank Committee, my Senate counterpart, they're doing completely different things than we're doing in the house. We're focusing on crypto and capital formation and data privacy. They're more focused on marijuana banking, exec compensation, and banking regs. So we are in two different camps on two major different issues. But if we were able to make a trade of some sort, the priorities that Sherrod Brown, who's running for reelection in deep red Ohio, who's going to need all the help he can get, would at least his case to voters saying, look, I'm actually working on this committee that traditionally has not passed that many bills. Mind you, again, they haven't passed a bill, except for this year, for four years before that. And that's during his time as well as Republicans in the chair time. It's crazy. And so in order for this to move the needle, they have to have a trade. And I think that's what's really important to say. If this trade were to happen, a lot does have to happen. But this does provide a pathway potentially for crypto legislation to move forward to the president's desk. Again, a lot has to happen. A lot can mess this up. But this isn't one of the first few times we're seeing kind of a light at the end of the tunnel. And we're really excited by it now again. But we have to have a lot of education because the Senate has not really given too much thought to this issue besides a couple handful of really powerful champions. Yeah, boy, fingers crossed, toes crossed, everything, hoping they can get something through the House and then we can go through the Senate. Boy, I'm hoping something happens by early next year before the madness of the election cycle. Now, there's also the trial for Sam Beckman Fried and the whole FTX debacle. In addition, there's been new updates around Sam Beckman Fried's parents and how money was moved to his aunt and Stanford University and much more. What do you expect to happen in October with this trial? So the main issue that we're going to have here in D .C. is just the noise. A lot of people are going to be talking about the SPF trial. It does have a huge media attention, for better or for worse. And again, we've really at least made sure we tell folks in D .C., again, this is not a crypto problem. This is a complete scammer just using newer technology. But guess what? Same old playbook as we've seen with Madoff and others. But there is concern that there are, at least in the case of the House, for example, we're voting on these big bills. FTX came up as a reason to support the bill, as a reason also to oppose the bill. Some folks say, look, there's no coming of a customer funds. That's what FTX did. And this bill bans that. On the other end, they're saying, you know, well, this legitimizes the crypto market. So this could potentially make more FTXs come up down the road. And so we've seen FTX kind of being pulled in two different directions when it comes to supporting or opposing legislation. And so our concern is the 300 plus members of Congress who have not sat in a crypto hearing who may not even know what Bitcoin or Ethereum is, are they going to listen to the headlines and say, look, actually, SPF is all crypto, which we all know it's not the case. Or they're going to say, SPF did this fraud. That's why we need to pass legislation to make sure this doesn't happen again. And so we're trying to really thread that needle. Of course, you know, we still know everything is going to come out through the trial. There could be some regulatory implications. Again, the campaign donations is a major factor and a major reason why a lot of folks in Congress are a lot more put back by crypto and kind of staying away on the sidelines because they don't get burned again. But as we're seeing kind of recently with the indictment with Senator Menendez recently from New Jersey, some members of the Senate took money from his PAC. And so there's a lot of, you know, just it doesn't matter if you're in crypto, doesn't matter if you're a Singh Senator, there's a lot of issues when it comes to campaign financing as a whole. And a lot of folks are on their toes here. But I think, you know, we want to make sure that we showcase it. Folks, SPF kind of went abroad and tried to really railroad the industry here in D .C. by trying to screw DeFi with his legislation and trying to protect his fraud and scam. Let's make sure it doesn't happen again. Let's put some rules on the road because, yes, SEC is not providing that right now. They haven't for years. And so it's time for Congress to act. So we'll see how that makes the dynamics. I'm sure, again, there'll be a lot of D .C. ties and connections with that court case. So if there's anything damning, we'll soon find out. But our hope is that this actually encourages Congress to act rather than sit on the sidelines saying, no, we're good. Crypto is kind of all SPF, FTX. And what do you think about the dynamic of and I don't know if this is going to be discussed in the trial at all, but Sam Beckman Fried and FTX officials met with the SEC many times. These are confirmed things on the calendar. I believe Sam met with Gary Gensler, according to some calendar updates. Does that play a factor at all? Because obviously we don't know what was discussed and what was the agenda items. But would that bring any pressure on Gary Gensler? Like you met with this guy. Yeah. He said in the New York Times article back in December that he met with SPF, I think it was twice actually, SPF and Gensler personally. But again, also remind you, it's a big organization. SPF was in D .C., more than any CEO in any industry I've seen in my time in D .C. But at the same front, staff meet all the time too. I mean, it wasn't just SPF. He had a whole team of staff that helped out on this front, both at the CFTC, at the SEC and of course with Congress as well. And so Gensler said again explicitly that he met with SPF twice. But I think it'd be good to know, look, how many times does your staff interact? How long do those conversations go? What do they lead to? Because there were some rumors swirling around that FTX is going to get a pass of sorts. And again, those are rumors. We have not had confirmation of that. But the one thing about the court case is that it's going to bring all this to light. So if there's anyone that's saying anything half -truths here or they're trying to protect their character or protect their image, it could really bite them if they have been lying to the press or they've been getting half -truths here. And so if I were to chair Gensler, this likely will come up in tomorrow's hearing. The question is like, look, it's going to come out. The truth will come out. We just want to make sure you're shored up here because it's going to be really bad for you on top of all the other things that have been happening in the courts if you've been caught potentially lying here. And again, I don't see any reason why he would in this situation, but I think the focus should be also not just on SPF and Garrett Gensler, but where do the staffs and the senior level execs and regulators also meet from FTX and the SEC? Hmm. I'm very curious to get those details. Now, speaking of FTX, obviously with the relation with Binance, and I forgot to ask you this earlier, the judge recently said it blocked the SEC from conducting further discovery, if I'm not mistaken, with Binance US. Have you heard anything about that? Not as much, at least in the DC front, but at least when it comes to the Binance situation as a whole, there's still that looming DOJ investigation that a lot of folks in DC are waiting for that shoe to drop. Again, there's various rumors of why that DOJ lawsuit hasn't dropped. There have been confirmation reports of central sanction evasion violations, as well as money laundering violations by Binance and the parent company, not Binance US to my knowledge, but Binance. What is the relationship though between Binance US and Binance? Is that there much cohesion there or is there actually a pretty separate line between those two entities? So one thing's for sure though, a lot of folks in DC or in the early of 2023 are hearing a lot more from Binance. They were definitely hitting DC a lot more, trying to get their narrative out. And I think the mounting allegations are pretty damning. And we've seen a lot of folks who were in DC for Binance trying to deliver that message. They're not here anymore. It was a very short stint for them. So whether that be for the company having financial problems, whether it be more of the regulatory issues, that's unclear at the moment. I would lean more to the regulatory issues, but I think it's all going to come more to light as time goes on, but it's pretty bad. So we'll see exactly how Binance recovers from this, if at all. But at least here in DC, the folks that they had speaking, they largely aren't here anymore. Wow. And final item here, obviously you got the Gensler hearing tomorrow with the House Financial Services Committee. Is there any other major hearings for the remainder of the year that we should be aware of? Not at the moment, at least in terms of big ones. We are seeing some small hearings, rumors coming up right now for more of Senate banking. Again, if they do consider crypto legislation, they've only had one major crypto hearing so far this year, whereas the House has had over 13. But again, like I mentioned earlier, that's just two separate priorities for two separate chairs. But if this trade were to happen, I think I'd just keep an eye on Senate banking. They just had their first AI hearing last week. And as they kind of get more into the AI issues and tech issues in finance, that's going to eventually loop in crypto more and more. So I think we'll keep an eye on Senate banking. And then finally, if we are looking for those votes happening on the House floor for the stablecoin bill, as well as the market structure bill, I probably keep a little eye on the House as well. I guess I think lastly, I'll say now, too, is tax issues. We've been talking a lot about securities law, commodities law for quite some time. But tax issues are really percolating to the surface here. Senate Finance, which is Ron Wyden, who's a big champion for crypto, Democrat side, as well as Mike Crapo from Idaho, they actually put a request out to the industry and another stakeholder saying, look, what does taxation for crypto look like? Please help us. Who should be reporting 1099s? Who should be doing various filings and such? So that's just a request ended in early September. And so we potentially could see some action or at least some legislative hearings on what does crypto taxation look like. And I think it's a very important issue with the broker definition coming out from Treasury. There's a lot of comments going through that system right now. So we'll see where that lines up by keeping an eye on tax issues. That's going to be a major fight for quite some time. And I think it's going to be really important. It's a little nitty gritty, but it's very important for any business to operate in the United States. Yeah, absolutely. That's a big one. And I know there's been some other things happening. I think the FASB rule and with corporations being able to hold Bitcoin and things like that on their balance sheet, I believe there were some updates there. Don't have the full details, but there's certainly a need for further clarity and for individuals and institutions. Ron, always great information, man. Thank you so much. Happy to help. Thanks for having me.