Self-Hosted Wallets, the STABLE Act, & Crypto in the Biden Administration

HODLpac Newsletter - December 2020, Pt. 1

Dec 7, 2020

Hello HODLpac-ers,

(We’ll see if that name sticks…)

Welcome to the first edition of the re-vamped HODLpac newsletter!

Now that we’ve made it through our first election cycle - and donated $7,500 to ten champions of good crypto policy on Capitol Hill - we thought it was a good time to give our newsletter a bit of a makeover. Instead of solely posting HODLpac’s interview content on here, we’re adding a bi-weekly series (every other Monday, for now) that will provide you - the HODLpac community - with everything you need to know about crypto-related policy and politics. Also, be on the lookout for more interviews, guest posts, and longer form stuff. Have ideas about what you want to see published? Reply here - we welcome your input!

We’re excited to continue building HODLpac with you all. It is now more important than ever that the crypto community organizes itself to fight for a regulatory regime that enables public blockchains and the decentralized economy to thrive in the United States.

If you don’t already, please follow us on Twitter: https://twitter.com/HODLpac

And join our Discord, where we will be posting more frequently in the coming weeks and months: https://discord.com/invite/fDxHZxJ

Now, here is what you need to know…

The Coming Self-Hosted Wallets Battle

Rumors of coming actions by the Treasury Department to clamp down on self-hosted wallets - aka non-custodial wallets like MetaMask that allow individuals to take control of their own assets - spurred the crypto community into speaking out.

Brian Armstrong @brian_armstrong

Last week we heard rumors that the U.S. Treasury and Secretary Mnuchin were planning to rush out some new regulation regarding self-hosted crypto wallets before the end of his term. I'm concerned that this would have unintended side effects, and wanted to share those concerns.

As it stands, we’re currently in wait-and-see mode. The hasty 30 day comment period on the Financial Crime Enforcement Network and Federal Reserve’s proposed rulemaking on the Travel Rule is now up and Secretary Mnuchin has until January 20th to act on whatever he wants to prioritize in the closing weeks of the current administration. But, unfortunately, even if nothing happens between now and then, that doesn’t mean we are in the clear.

Here are some great resources to learn more about what this is all about and why it matters:

“Everything You Need to Know About the Looming Battle Over Privacy in Crypto” - HODLpac board members Kristin Smith and Jake Chervinsky joined Laura Shin’s Unchained Podcast to give her audience a rundown of this important topic.
“Crypto Privacy and Policy with Peter Van Valkenburgh” - Coin Center Director of Research Peter Van Valkenburgh joined the new Bully Esquire podcast to “talk about the importance of privacy and the state and direction of crypto-specific policy/regulation in the United States and abroad.”
“Self-Hosted Wallets and the Future of Free Societies: A Guide for Policymakers” - this report by the Blockchain Association is a well-written and highly-detailed lay of the land on the topic of self-hosted wallets. Their main conclusion? “This is a policy decision that has vast societal implications and therefore should be adjudicated by Congress.” (We agree!)
“How I Learned to Stop Worrying and Love Unhosted Wallets” - part of Coin Center’s Expert Views series, former Department of Justice anti-money laundering chief Jai Ramaswamy “considers the unintended consequences of unhosted wallet restrictions and the regulatory benefits of cryptocurrency adoption.”

The STABLE Act

If you were on crypto Twitter last week, you probably saw some of the lengthy back-and-forths about the recently proposed STABLE Act. Representatives Rashida Tlaib from Michigan, Jesús “Chuy” García from Illinois, and Stephen Lynch from Massachusetts introduced this legislation in a bid to “protect consumers from the risks posed by emerging digital payment instruments.”

However, all one needs to do is read the text of the bill to see that our metaphorical crypto baby would be thrown out with the bath water if it were to be passed.

From CoinDesk’s article on the bill, “The 18-page bill would specifically require stablecoin issuers to obtain a banking charter; require approval from the Federal Reserve, Federal Deposit Insurance Corporation and the issuer’s specific state or federal bank regulator; require those same entities to conduct an ongoing analysis of any systemic risk; and require issuers to have FDIC insurance or maintain reserves for easy conversion back into U.S. dollars.”

Let’s just say this doesn’t bode well for the sponsors’ HODLscores. Rep. Tom Emmer’s HODLscore, on the other hand, will continue to be an example for the rest of Congress, here is a link to an article in The Block in which he voices his opposition.

Reaction to the bill from the crypto community was swift:

Tyler Winklevoss @tyler

The proposed STABLE Act is a thinly veiled attempt to block @Facebook from executing on its Diem (formerly Libra) ambitions. This is obviously being pushed behind the scenes by the bankers. It is patently anti-innovation and would make stablecoins the exclusive purview of banks.

Marco Santori @msantoriESQ

Did... did a bank write this?

Congresswoman Rashida Tlaib @RepRashida

Preventing cryptocurrency providers from repeating the crimes against low- and moderate-income residents of color traditional big banks have is critically important. That's why I'm proud to introduce the #STABLEAct with @RepChuyGarcia and @RepStephenLynch. https://t.co/yorQPo6wz4

Jeremy Allaire @jerallaire

1/8 The STABLE Act would represent a huge step backwards for digital currency innovation in the United States, limiting the accelerating progress of both the blockchain and fintech industry.

If you haven’t yet already - and you’re looking for some entertaining Twitter fights - just follow some of the threads emanating from this tweet by Rohan Grey, an advisor to the bill:

Rohan Grey @rohangrey

I'm thrilled to share the announcement of @RashidaTlaib's new "Stablecoin Tethering & Bank Licensing Enforcement (STABLE) Act", (#STABLEAct) cosponsored by @ChuyForCongress & Chair of the House Financial Services Committee's Fintech Task Force, @RepLynch.

Tlaib, García and Lynch Introduce Legislation Protecting Consumers from Cryptocurrency-Related Financial ThreatsWASHINGTON—This week, Congresswoman Rashida Tlaib (MI-13), along with Congressmen Jesús “Chuy” García (IL-04) and Chairman of Task Force on Financial Technology Rep. Stephen Lynch (MA-08), introduced the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act, which would protect consumers …tlaib.house.gov

One such thread might lead you to this exchange, which strikes at the heart of why the HODLpac community should care about this:

Rohan Grey @rohangrey

@Alex_LLOYLaw @NeerajKA @TheStalwart @nic__carter @anguschampion @angela_walch Or you have to accept that running an open blockchain network means you are, at some level, liable for the actions that take place on that network. Crazy thought, I know.

Hayden Adams 🦄 @haydenzadams

@rohangrey @Arceris_eve @pierre_rochard @awrigh01 @kate_sills @RealBankReform @ConsumerReports @LPE_Project Okay thanks for admitting what you’re actually arguing for is banning decentralize blockchains like Ethereum. Not sure how you can reconcile that with your statements about not wanting to hurt innovation though.

This debate is crucial and showcases why the crypto community needs to organize politically. It is up to us to educate and influence our representatives in Congress. People close to power (on both sides) have shown that they don’t have our interests at heart.

The good thing: this bill is likely not going anywhere before Congress’s legislative session ends next week. But, as former Warren Davidson staffer Ron Hammond warns in his tweet thread, it will likely come back in some form next year.

We agree with Bill Warren of Peeps Democracy (thanks for the shout out if you’re reading this, Bill):

Bill Warren 🤘 billw.eth @0xBillW

Proposed legislation like the #STABLEAct shows why the US crypto ecosystem needs orgs like @HODLpac and @coincenter to protect their interests.

And we’re thankful for the allies we do have, like Rep. Emmer, and incoming Wyoming Senator, Cynthia Lummis:

Cynthia Lummis @CynthiaMLummis

@CaitlinLong_ @real_vijay @MartyBent @adam3us @pierre_rochard @GAMdotAI @CynthiaLummis Following this thread. Keep the ideas comin’.

To learn more about this issue, read:

The STABLE Act itself or this one-page summary
“The Unintended(?) Consequences of the STABLE Act” - this blog post by Peter Van Valkenburgh is typically well-written, clear-headed, and informative.
“Crypto’s New Villain: Meet the Legal Scholar Behind the STABLE Act” - despite the title, this article by Jeff Benson at Decrypt does a solid job of representing both sides of this debate. For the record, Rohan Grey isn’t a villain.

Crypto in the Biden Administration

Hopefully it isn’t too presumptious to say that a Biden administration will be taking the reins of government on January 21, 2020.

So, what does that mean for crypto?

The best answer is: we shall see.

To repeat what will be an oft-mentioned thought in this newsletter: it is up to us - as Americans that want to see the cryptoeconomy thrive - to help shape our own future by organizing politically to that end.

If you’re curious as to how the political and policy landscape will shape up in the Biden administration, here are some good places to start:

“Biden presidential win seen as a ‘good thing’ for cryptocurrency,” Jen Weiczner, Fortune Magazine
“Episode 26: Biden & Crypto featuring Kristin Smith and John Collins,” Money Movement Podcast with Jeremy Allaire
“In Her Own Words: Here’s What Janet Yellen Has Said About Bitcoin,” Nikhilesh De, CoinDesk

Extra Credit

Here are some other interesting reads, listens, and streams to check out…

“Digital Currency: Risk or Promise?,” 38th Annual Cato Monetary Conference, Cato Institute
“The Battle For P2SH: The Untold Story Of The First Bitcoin War,” Pete Rizzo and Aaron van Wirdum, Bitcoin Magazine
“‘Congress Overwhelmed’: A book event with Kevin R. Kosar, Lee Drutman, and Timothy M. LaPira,” American Enterprise Institute
“Crypto Civilization featuring Balaji Srinivasan,” Ryan Sean Adams and David Hoffman, Bankless
“How Unbundling and Decentralization are Reshaping Banking and Financial Services,” Brian Brooks, International Banker
“Fall 2020 Crypto Survey,” Blockchain Capital
“Acting Comptroller of the Currency Brian Brooks on Crypto Banks,” Laura Shin, Unchained Podcast
“The Episode That Turned Tracy Into A Bitcoin Bull,” Joe Weisenthal and Tracy Alloway, Odd Lots Podcast

Did we miss anything?

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Finally, if you’ve donated to HODLpac or are a subscriber to this newsletter and you haven’t received HODLvote tokens, shoot us an email at tyler@hodlpac.org with your Metamask address and we’ll send them to you right away!

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