Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law.
Editor’s note
In the United States, as President Donald Trump stonewalls any efforts at transitioning to a new administration, all eyes are on Joe Biden’s potential team and any hints as to candidates for major appointed positions.
Further complicating the set up of a presidential roster is that most presidential appointments require Senate approval. The Senate, meanwhile, is waiting until January for a run-off election in Georgia to establish a majority. So, as with everything else, we in the states are in limbo.
It is a fair bet that any Biden appointee to Treasury Secretary will be less overtly antagonistic to crypto than Steven Mnuchin. But at the same time, at regulators like the Securities and Exchange Commission and the Commodity Futures Trading Commission, Republican Trump appointees have taken the lead in pushing for clarity on rules governing digital assets. We’ll look at the case of Brian Brooks, whose status as Acting Comptroller of the Currency may not survive a new administration.
At the same time, crypto exchanges have been stepping up their compliance with new Anti-Money Laundering regimes — one of the most resilient criticisms that governments level at the entire industry. As regimes are adapting, industry players are clearly adapting to regimes.
Brooks’ journey through the congressional wringer
Witnesses from federal financial regulators appeared before House and Senate committees to testify as to the state of their work in the still-ravaged economy.
Among those witnesses was Brooks, who has headed the Office of the Comptroller of the Currency since May. The OCC is the Treasury office that regulates federal banks. Brooks joined the office from Coinbase’s legal team and has, consequently, been eager to push forward a pro-crypto agenda.
While these crypto developments have made for some huge announcements for Cointelegraph’s readership, it has rubbed a number of the Democrats on the House Financial Services Committee the wrong way. Several signed onto a letter effectively telling Brooks to slow his roll on crypto guidance for major institutions in favor of work to bank the unbanked.
To be fair, this stance is not entirely new. The FSC’s chairwoman, Maxine Waters (D-CA), chastised Brooks and his predecessor, Joseph Otting — both Republicans — extensively for crippling the Community Reinvestment Act back in the spring.
What’s critical to watch in this case is that Brooks was never confirmed to his position, stepping in as he did to replace Otting during an election year in which his office was low on the priority list to confirm. Brooks’ position is, therefore, somewhat tenuous. A Biden presidency, especially without a Senate majority, is not going to look to sweep Republicans from all appointed positions. But what the Democrats of the FSC are doing is establishing a more aggressive line that either Brooks or a successive comptroller will need to toe.
Biden onboards blockchain professor to transition team
Gary Gensler, who served as chairman of the CFTC under the Obama administration, will be joining Biden’s transitional team as an expert on financial policy.
The big news for crypto here is that Gensler teaches on blockchain and digital currency at MIT, making him likely the first person advising an incoming president with his degree of expertise in the area.
During his time at the CFTC, Gensler was at the helm during the implementation of Dodd-Frank (2010), the act that sought to bring finance in line following the calamity of 2008. He was, therefore, a feared figure among Wall Street for efforts like shining a light on swap markets, which had been fairly lawless prior to Dodd-Frank.
While Gensler’s familiarity with crypto is obviously a plus, his priorities have historically suggested that he will be more assertive with regulating the industry, likely continuing an existing charge to stamp out openings for money laundering on crypto platforms. But while the Trump administration has a reputation for rolling back a lot of financial regulation writ large, his appointees have been fairly dogged in rounding up crypto exchanges. So, it’s likely only a good thing that maybe the person doing the rounding up at least knows something about the business and technology.
Exchanges begin re-registering in the Netherlands
At the beginning of the year, the Netherlands announced new measures to comply with Europe’s new 5th Anti-Money Laundering Directive, leading to a minor exodus of crypto firms.
The new requirements include registration for all crypto service providers, due at the end of the year. The first of these have started to roll in.
Among the first tranche of registered firms, most are institution-facing, with only one currently catering to retail clientele. Nonetheless, it’s meaningful that these firms can survive. 5AMLD is new in treating fiat-to-crypto exchanges as “obliged entities,” meaning they have to do the same Know Your Customer due diligence as traditional financial services. It’s a controversial requirement, especially given the crypto community’s long-standing attachment to privacy.
Further reads
Blockchain Association leader Kristin Smith talks crypto and a Biden administration with Circle’s Jeremy Allaire.
The crew at Coin Center digs into AML, privacy and the role of FinCEN in tracking digital asset exchanges.
Ross Todd interviews the attorney who represented the enigmatic “Individual X,” who turned over $1 billion in crypto to the Department of Justice last week.
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