PROGRAMMING NOTE: We’ll be taking a break for Thanksgiving on Thursday and Friday, but will be back on our regular schedule on Monday, November 27.
The $4.4 billion Binance settlement is an historic deal that reveals the struggle crypto firms face as they seek legitimacy in the face of Washington’s increased scrutiny. To that end, the industry is deploying a small army of former defense, national security and law enforcement officials.
Coinbase, the largest U.S. crypto exchange, recently announced the addition of former Defense Secretary Mark Esper and Bush counterterrorism adviser Frances Townsend to their “global advisory council.” Meanwhile, the Blockchain Association sent a letter signed by 40 ex-military officers, ex-intelligence personnel, and former Treasury, White House and DHS staff to Capitol Hill. The purpose of the letter was to downplay illicit activity in crypto relative to traditional finance, and to argue against policies that could drive digital asset players overseas. The group are planning to visit the Hill next Tuesday.
Senator Elizabeth Warren, who has been outspoken about her criticism of crypto, rallied over 100 lawmakers to ask the White House and Treasury to crack down on the issue. Henry Burke of the Revolving Door Project has raised concerns over the recruitment of former officials by crypto firms, due to their knowledge of law enforcement’s weaknesses, the legitimacy they lend the industry, and how it incentivizes post-government work. Warren weighed in on the issue, saying “Lawmakers should reject this influence-peddling and focus on keeping the American people safe by passing bipartisan, anti-money laundering legislation.”
Industry representatives defended the recruitment of former officials, with True Ventures partner and former DHS acting general counsel Gus Coldebella calling the suggestion “scurrilous and wrong.” Michele Korver, a former FinCEN chief digital currency advisor, added that the role of former law enforcement and government officials in helping companies comply with their legal obligations is “a critical element to ensure responsible innovation in the web3 space.”
Coin Center, a think tank, recently released a report raising doubts about the constitutionality of the Bank Secrecy Act, the legislation used to combat money laundering. Neeraj Agrawal, a spokesperson for the organization, said “We support strong national security but it has to be constitutional, otherwise what are we defending?”
The world’s largest crypto exchange, Binance, was found to have enabled “terrorists, cybercriminals and child abusers” and will be paying $4.4 billion in a settlement. Binance CEO Changpeng Zhao is pleading guilty to money laundering charges, stepping down from the company, and paying $200 million in penalties. Richard Teng, formerly of Singapore’s central bank, is the firm’s new CEO. Binance will be overseen by a monitor, and undertake new compliance efforts to ensure that it exits the U.S.
The FDIC is also taking steps to investigate improper conduct at the agency. Board member Jonathan McKernan and Acting Comptroller of the Currency Michael Hsu will lead a special committee to oversee the review. Vice Chair Travis Hill and CFPB Director Rohit Chopra will not be part of the committee. The committee may appoint up to three people from outside the agency.
The Electronic Payments Coalition, which represents banks and credit unions, is targeting Sen. Roger Marshall with ads during football games in order to rally opposition against bipartisan legislation that would crack down on credit card fees. Marshall’s chief of staff Brent Robertson responded, calling the ad “garbage”.
The minutes of the FOMC’s most recent meeting suggest that officials “might be comfortable holding rates steady for at least the rest of the year”, according to the Wall Street Journal. ECB President Christine Lagarde said it’s too early to start declaring victory in the fight against inflation, according to the Financial Times. The Bank for International Settlements has warned that governments are increasingly at risk of having to foot the bill as insurers pull out of markets ravaged by climate change.
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