Welcome to this week’s edition of the Myth of Money, a weekly newsletter on all things money, economics and technology read by 10,000+ investors, curated by Tatiana Koffman.
Disclaimer: The following is not intended as investment advice. Do your own research.
I spent this weekend trying to understand the controversy around the infrastructure bill, so that I can dissect it for you. Unfortunately, the more reports I read, the more confusing things became. And I think it might be by design.
This is my best recap of the whole situation:
An infrastructure bill was introduced in U.S. congress by the Biden administration. The document is over 2,500 pages in length, which means that it is impossible that any politician has personally read the entire thing.
The bill has been called ‘crazy’ by some as it includes things like “the removal of invasive plant species, $1 billion for an organization that is overseen by a politician’s wife, and what appears to be authorization for the US government to purchase marijuana to be used in studies of the impact of driving high” according to Pompliano.
But most importantly, the bill addressed U.S. taxation of crypto earnings, extending to more esoteric things like DeFi.
The key issues is - who is considered a “broker” of securities? Is it just the facilitator of capital? Does this include developers? Miners? Fund managers? Would new rules sweep to unintended targets?
This article Washington Post, aims to outline the controversy of the bill:
And after years of debate over how to improve America’s infrastructure, and months of sensitive negotiations between the White House and lawmakers, the $1 trillion bipartisan infrastructure proposal suddenly stalled in part because of concerns about how government would regulate an industry best known for wild financial speculation, memes — and its role in ransomware attacks.
Sen. Rob Portman (R-Ohio) and the Biden administration had agreed on a proposal that would give federal regulators authority to impose new tax reporting obligations on cryptocurrency brokers, which enable traders to buy and sell cryptocurrency. The crypto provisions emerged as lawmakers struggled to find ways to pay for the bill, with nonpartisan estimates suggesting the tax changes — which would codify work the Internal Revenue Service was beginning to undertake — would increase federal revenue by about $28 billion over 10 years.
The disagreement has led to a days-long stalemate — continuing Saturday — in which negotiators fiercely contested details over which parts of the complicated cryptocurrency sector would be subject to the new requirements.
Regardless of the measure’s ultimate fate, the fact that crypto regulation has become one of the biggest stumbling blocks to passage of the bill underscored how the industry has become a political force in Washington — and previewed a series of looming battles over a financial technology attracting billions of dollars of interest from Wall Street, Silicon Valley and financial players around the world, but that few still understand.
The new SEC Chair, Gary Gensler, further stated that, “It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These products are subject to the securities laws and must work within our securities regime.”
This is new. Previously, token issuers could claim utility in much of the crypto-sphere, by-passing securities laws. Labelling many tokens as securities has the result of making crypto exchanges likely to fall under SEC regulations for securities exchanges.
There is more. “If a lending platform is offering securities, it also falls into SEC jurisdiction,” said Gensler. This means that crypto-lending platforms could be next under attack.
Previously, Bitcoin and Ethereum was confirmed to be a commodity, regulated by the CFTC. So the CFTC, fired back during this debate:
Meanwhile this new Infrastructure Bill threatens both miners and DeFi protocols with new tax reporting requirements:
As of Sunday and at the time of me writing this, the story is still in progress. Here’s an update from Politico:
In a 68-29 vote, the Senate closed down debate on a bill negotiated by a bipartisan group of 10 senators that spends $550 billion in new money on the nation’s physical infrastructure. Sunday’s vote came after senators spent the weekend haggling over amendments and time agreements to consider them.
Final passage of the legislation is expected late Monday night, or the wee hours of Tuesday at the latest, unless a deal is reached among all 100 senators to speed it up.
While Senate passage of the bipartisan infrastructure bill is imminent, the legislation still faces an uncertain future in the House. Democratic moderates are already pressuring Speaker Nancy Pelosi to take the legislation up immediately, though Pelosi and many progressives want to wait until a Democratic-only social spending bill also passes the Senate. That bill cannot be filibustered by Senate Republicans in the evenly split chamber.
Pelosi and Schumer have devised a two-track process to enact as much of Biden's domestic agenda as possible, pledging that the bipartisan infrastructure bill will only advance if it is married to the party-line legislation that will spend as much as $3.5 trillion on climate change action, paid leave policies and health care expansion.
BUT, it’s not over till it’s over.
Stay tuned. And if you hold an American passport… call your Senator.
This Week By the Numbers 📈
Gold tumbled, as Friday’s strong employment data indicated that the Fed may pull back stimulus, alleviating inflation woes.
Last week’s crypto rally continued with Ethereum beating Bitcoin after the announced me of the Ethereum upgrade.
TL:DR: Ethereum network was upgraded to the new London hard fork, implementing EIP-1559. With EIP-1559, the base fee will increase and decrease by 12.5% after blocks are more than 50% full. A priority fee, or tip, can be designated to have a transaction prioritized. The tip goes to miners, but the base fee will now be '“burned” during a transactions (i.e. those coins will cease to exist and will decrease the overall supply of ETH). In the first few days of the update, over 4,800 ETH (~ $13.4 million) was burned.
I continue to be bullish on Ethereum for this cycle.
Top Stories 🗞
SEC Brings Its First DeFi Case Over Unregistered Token Sales
The U.S. Securities and Exchange Commission brought its first case tied to the booming decentralized finance market, alleging a company sold digital tokens that should have been registered with the Wall Street regulator. The SEC sued Cayman Islands-based Blockchain Credit Partners and two of its top executives for illicitly offering securities through its DeFi Money Market platform from February 2020 to February 2021, according to a Friday statement. The company sold more than $30 million worth of two types of tokens that the SEC considered to be securities, which must be registered with the agency. Blockchain Credit Partners’s Gregory Keough and Derek Acree will both pay fines of $125,000, the SEC said. The executives and the company also agreed to pay $12.8 million in disgorgement. They settled the case without admitting or denying wrongdoing. [Read Full Story.]
BSV Appears Faces a ‘51% Attack’
The “51% attack” -- an invasion on a blockchain by miners who gain control of more than half a network’s computing power -- could enable the intruders to prevent new transactions from gaining confirmations, thus giving them the power to stop payments between some or all users or double-spend coins. Bitcoin SV, a spinoff based on the original “Satoshi Vision” of the world’s best-known cryptocurrency, endured previous attacks in June and July. BSV is the 44th-biggest cryptocurrency with a market value of about $2.6 billion. It was created as a so-called hard fork off Bitcoin Cash in November 2018, which itself involved a radical protocol change from Bitcoin in 2017. Amid the apparent attack, BSV was down about 4% in the 24 hours to 1 p.m. Hong Kong time to $135.47, according to CoinGecko pricing. It’s off more than 70% from its mid-April highs. [Read Full Story.]
British Fashion Brand Burberry Releases First NFTs
Luxury fashion brand Burberry has launched its first non-fungible token (NFT) collection in partnership with Mythical Games. The latest luxury brand to embrace NFTs, Burberry will feature its items via Blankos Block Party, a game with digital vinyl toys known as Blankos that live on the blockchain. The 165-year-old British fashion brand said the digital collection, dubbed Burberry’s “B Series,” will feature limited-edition product drops. The brand said it is hoping to unlock value for the gaming community by encouraging players to interact with its brand in an environment that celebrates art and design. Most recently, Dolce & Gabbana announced via twitter it had partnered with the luxury marketplace UNXD to launch NFT wearables. In July, 4K, a novel marketplace that issues NFTs paired with luxury items held in storage, raised $3 million in a seed round of funding that was led by Electric Capital, ConsenSys and IDEO CoLab Ventures. [Read Full Story.]
Binance.US CEO Brian Brooks Quits, Cites ‘Strategic Differences’
Brian Brooks announced on Twitter Friday afternoon that he’s resigned as Binance.US CEO after just four months on the job. In the tweet, Brooks cited “differences over strategic direction” between him and his colleagues. Before joining the U.S. arm of the Binance global crypto exchange, Brooks helmed the Office of the Comptroller of the Currency (OCC), the regulator for national banks, under U.S. President Donald Trump. Brooks’ hiring appeared to have been part of a strategy by Binance.US and its parent to improve their standings by hiring well-regarded former regulators from around the world. Now, Brooks’ abrupt departure, along with last month’s similarly unexpected departure of the director of Binance Brazil after only six months, is bound to raise questions as regulatory scrutiny of the world’s largest crypto exchange by trading volume and its various subsidiaries has only intensified. In recent months, multiple countries including the U.K. and Japan have taken action against Binance. [Read Full Story.]
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
By Tatiana Koffman
Hi there and thanks for reading. If you stumble upon my newsletter, you will notice that I write about money, economics and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital and Cryptocurrencies. I believe in empowerment through closing the financial education gap and creating equality of opportunity for the next generation. Check out my articles in Forbes here.
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