Another long, frenetic day in American politics, but one thing you might have missed amid everything else is Paradigm filed an amicus brief in Lejilex v. SEC.

The topic, once again, is the SEC’s regulation by enforcement approach to crypto. The story here is becoming an old familiar song: a company wants to create a peer to peer system of token sales. There is no clear and obvious way to do that under current SEC guidance. So Lejilex is suing the SEC for clarity.

policy.paradigm.xyz/actions/amicus…

There’s been lots of news in the last 24 hours, but it’s possible that the most consequential event amidst all this will be the Supreme Court’s decision in a case known as Loper Bright.

Basically, it will trigger a sea change in all regulations.

Thread. So, the modern administrative state (which exists in basically every major economy) is built on a pretty basic system: the legislature passes laws and then agencies issue regulations to implement those laws.

Earlier this month, Paradigm went back into the field for a new national poll on Americans’ ownership of crypto, their views on how the government is approaching crypto, and other key political topics.

Today, we’re sharing those findings with the community. The full write up can be found at our Policy Lab, but I wanted to flag the findings we were especially struck by.

And if you don’t care about crypto but care about politics and elections, there’s even more reason to look at this data.

policy.paradigm.xyz/writing/March-…

Ok, having gone through the Ripple decision, here’s my takeaway:

Big loss for the SEC’s approach to crypto via focusing solely on enforcement, and this measurably increases the odds of crypto legislation passing this year.

Thread

storage.courtlistener.com/recap/gov.usco… Some context: A long time ago, in a far off place, I was a full-time lawyer, having clerked, been a big firm attorney, and then been an attorney in Congress and at the CFTC.

I’m a policy/politics wonk at heart, but I’m putting on my old lawyer hat for the bulk of this thread. 2

Another big crypto bill has dropped, the Lummis Gillibrand Responsible Financial Innovation Act.

It’s the biggest Senate crypto bill this year, but it’s going to be especially important for how it influences the House’s McHenry Thompson bill.

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lummis.senate.gov/wp-content/upl… Background: This is a reintroduced bill from last year with some new sections, especially Title III on combatting illicit finance, Section 206 “cleaning up crypto asset lending,” and Section 203 mandating annually audited proof of reserves. 2

So, I respectfully disagree with Noelle on this one. I think BlackRock is doing this on the merits (seeking to get a bitcoin ETF approved) rather than trying to send a political message.

Bear with me, because this is complicated in terms of Democratic politics.

https://twitter.com/noelleinmadrid/status/1669624250804600832

So, first off, it’s 100% true that Larry Fink is a very big player, donor, and macher in Democratic politics. Famously, in 2019, when Joe Biden’s campaign seemed to be struggling, Fink said to him “I’m here to help.” amp.theguardian.com/us-news/2019/m…

The deep dive into the bill is finished (see the QT for the thread). Here are a few overall thoughts on the bill and its prospects for passage.

Short thread.

https://twitter.com/jbsdc/status/1664791786038935552

Overall, the McHenry-Thompson bill (which actually has no name yet) is a strong effort at crafting a comprehensive regulatory regime for crypto.

It's Friday night, the kids are in bed, the biggest piece of crypto legislation for this year has dropped—the McHenry-Thompson bill on market structure— so let's get this party started.

Here’s a deep dive into the bill’s contents. Thread

docs.house.gov/meetings/AG/AG… First, word of warning: this bill is MASSIVE. It clocks in at 162 pages, meaning it’s almost 20% of the size of the entire Dodd-Frank Act.

And understandably! This bill is an effort to provide clarity across a host of issues (jurisdiction, registration, even on stablecoins). 2

Overall, this bill strikes me as a positive sign for crypto, though the bill clearly needs to be improved on major points. NY AG James and her staff really seem to have put in a decent amount of work on this legislation and research into crypto.

https://twitter.com/jbsdc/status/1654627798680580097

For the last six months, at least since FTX collapsed, a lot of progressives have seemed to adopt a posture of strong hostility to even the idea that crypto will or can exist. To quote one notable thinker “why do we need rules for an industry that won’t exist in six months?”

So, another day, another piece of draft legislation on crypto. This one is from NY Attorney General Letitia James and represents an effort to create a regulatory framework for crypto in NY state.

Let’s dive into what the bill actually does. Thread.
ag.ny.gov/press-release/… First, New York already has a registration regime of sorts for digital assets, the BitLicense introduced in 2015. It’s been a mixed bag: it’s been very hard/time-consuming to get approved, so many companies have simply opted to not do business in NY. 2 dfs.ny.gov/virtual_curren…

To wrap up, the SEC staff is making clear that it doesn’t think Bitcoin is uniquely resistant to fraud/manipulation, dismissive of arguments & data that Greyscale ETF is adequately linked to a large market, and unmoved that an ETF would be better than status quo for investors.

https://twitter.com/jbsdc/status/1542489139312033792

It’s hard to see the staff coming down differently on any of these prongs for any realistic product that could come before them in the next few years. If you need a connection to a national securities exchange and Bitcoin isn’t a security, we’re all stuck.

Reading through the SEC’s disapproval of the Greyscale ETF in the clear light of day, the major takeaway is that the SEC will probably reject any other Bitcoin/crypto ETF absent new legislation. Short thread.

sec.gov/rules/sro/nyse… Clarifying point to start: these decisions are handled by the staff not the Commissioners (though there can be a role for the Chair in broad strokes). This isn’t like rules where the five Commissioners vote on a proposal.

Most people don’t realize that the American governmental bureaucracy - slow, byzantine, obsessed with process, & inscrutable to vast majority of citizens - is a post World War II development.

https://twitter.com/mattyglesias/status/1522688235264425984

Reasons for why it came about were pretty simple - growth in government but also, per @mattyglesias, population was getting more educated.

Even more important was that there were few checks on executive branch government action.

It’s a joy and a privilege to announce that I’m joining the fantastic team at @paradigm to assist them with policy. I’m incredibly grateful to @alanapalmedo, @matthuang, and @FEhrsam for the opportunity. Thread.

paradigm.xyz/2022/02/joinin… I’m joining @paradigm because I believe that crypto is a force for dynamic growth and increased competition in the economy. Paradigm represents the absolute best of this movement. 2