Unchained - Senator Cynthia Lummis on Why Crypto Now Has Bipartisan Support in Congress - Ep. 651

Starting point is 00:00:00 since the having and the strength of participation in Bitcoin ETFs. And now with a decision imminent regarding an Ethereum ETF, it just seems that we're having a moment here in Washington where these assets are getting the consideration that I think they've been due for a very long time. Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians.

Starting point is 00:00:34 I started coming crypto nine years ago and as a senior editor at Forbes was the first Mainstream reader reporter to cover cryptocurrency full time. This is the May 24th, 2024 episode of Unchained. Pocod is the original and leading layer zero blockchain with over 2,000 plus developers. And the Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Join the community at Pogo dot network slash ecosystem slash community. With I trust capital, you can buy and sell crypto in a tax advantage retirement account. Enjoy significant tax advantages, 24-7 access, and the industry's lowest fees.

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Starting point is 00:01:42 Welcome, Senator Lemmiss. Laura, it's nice to be on your program, and I sure want to thank you for being one of the presenters at our Financial Innovation Caucus event. Your book about FTX is going to be, I think, something. something we all want to read and are just dying to get our hands on it. Thank you so much. I really appreciate that. So this last week or so, you've really been at the center of crypto history in the making. And I know this is all old hat for you, but just for listeners who, I mean, this has just been a head spinning turn of events. So I'm going to go a little bit slowly at first. Last week, we saw that the Senate had this last minute

Starting point is 00:02:22 bipartisan vote to overturn an SEC accounting bulletin, SAB-121, which was unfriendly. to the crypto industry. So in a sense, the vote to return was good for the crypto industry. But then going into this week, it was expected that President Biden would veto that, which of course then would be bad. However, now we are at a position where this veto is not going to happen. And the other thing that it looked like was going to happen on going into Monday morning was that the SEC was not going to approve spot ether ETFs.

Starting point is 00:02:52 And there's, again, been a 180 reversal on that. So I just would love to hear from your perspective this story. of how all these changes happened. Let's start with SAB-121. What got a bipartisan group of senators to vote for your bill to overturn that? Well, there were two reasons why it was bipartisan. One is that some people were voting for our disapproval of the staff accounting bulletin simply because it hadn't gone through the proper procedure. It should have gone through a typical rulemaking process, including a public comment period. And it didn't do that. It was instituted as staff guidelines. However, they're binding on the people who are subject to it. So some people,

Starting point is 00:03:46 both Democrats and Republicans, voted with our efforts on the Congressional Review Act for that reason. And then there were others who voted with us specifically because staff accounting Bulletin 121 does not protect consumers. It would provide that, for example, if you were a custodian and I had an asset placed with you and your custodial business failed, my assets would show up as an asset of yours and not of mind. So that's not protective of the consumer. And I think most people could see that that's bad policy. That asset does not belong to the custodian, belongs to the custodian's client, and that it should not be accounted for as an asset of the custodian. So for those two reasons, it was bipartisan in both the House and the Senate.

Starting point is 00:04:54 and passed both. So I'm just curious now to see what the White House will do, considering the very strong vote on both sides of the Capitol building. Oh, so you wouldn't consider a foregone conclusion that the veto will not happen. I had seen some chatter on Twitter that from the statement of the White House released on Wednesday morning that it looked like the veto would not happen, but you feel it's still an open question? I'm very hopeful that that is an accurate statement, but I'm holding my breath. Okay. Okay. And so typically in that kind of situation, what would a signal be that would make you confident that the veto would not happen? This is the first time I've been in this situation where I've been monitoring a piece of

Starting point is 00:05:44 legislation that has gone to the president's desk and that it's not a foregone conclusion. at least initially when we started into this process, Laura, the Congressional Review Act process, I had talked to people at the SEC and just asked them to withdraw staff accounting bullets in 121 so we would not have to go through this whole process. And I was told that if I did go through this process, that the president would veto the CRA and that they had no intention of withdrawing it. So that was a pretty strong signal earlier on that they were highly resistant to just withdrawing it on their own. I don't think they anticipated how strong the bipartisan vote would be on this. and now the White House will have to reconsider, and I hope that they will not veto it. I hope that the staff accounting Bulletin 121 will be withdrawn, or that if they feel strongly that they're on the right track from a policy perspective, go through the proper channels.

Starting point is 00:07:05 Use the APA, the Administrative Procedure Act, do it as a rulemaking, get public comment, and proceed accordingly. So we'll see what path is taken. So just from your remarks, this really indicates how quickly things have been shifting when you say they were surprised by House-strawing the bipartisan support was how last minute did all of that come together?

Starting point is 00:07:29 I think that when the House passed it first with strong bipartisan support, it helped indicate to senators that this is an issue that transcends partisan boundaries and that both parties are concerned when process is short-circuited. But furthermore, it's not hard to see the consumer protection

Starting point is 00:07:58 that would accompany having your asset custodied by someone who is not allowed to put my asset on their balance sheet. So I think in terms of common sense and adhering to what is good public policy and that is getting public participation in the rulemaking process, the strength of that vote might have surprised the administration a little bit. And now we're seeing the strength of Bitcoin, for example, since the halving and the strength of participation in Bitcoin ETFs. And now with a decision imminent regarding an Ethereum ETF, it just seems that we're having a moment here in Washington, where these assets are getting the consideration that I think they've been due for a very long time. Yeah. And, you know, I did, of course, want to ask you about those ether ETFs because that was just a huge shock to pretty much everybody. I'm sure you know that going into Monday, the markets had pretty much discounted the possibility

Starting point is 00:09:11 that they would be approved. You know, they were two Bloomberg analysts who follow this very closely. They had set the odds at 25%. I happened to record a podcast with one of them Monday, literally seconds after he had a second confirmation that this was probably changing. So what do you think caused that last minute 180 reversal from the SEC, which is, is arguably the agency most hostile to crypto? Yeah, I think it's a great question.

Starting point is 00:09:40 If they go ahead and approve it, I actually might reach out to some of the SEC commissioners just to try to understand what changed their mind or if the markets had been misreading their reticence. So it's a mystery to me, but it's one that I'm curious about because, you know, at the same time that Senator Gillibrand and I are trying to make policy for a legislative framework for digital assets, there's resistance from the administration to have it legislated. They feel they have the tools at the executive branch level to handle this. but then we've gotten the sense that even though they have the tools, that they intended to use the tools from an enforcement action setting,

Starting point is 00:10:43 rather than from a policy setting. And that's been a huge frustration for the industry. When you want to comply with the rules, but you don't know what the rules are, you just kind of have to take a stab at it. And so we have companies, pretty sophisticated companies, who've been at this for years, trying to guess what the rules of the road are, trying to comply with the SEC, and then in return for that, getting slapped with a very expensive punitive enforcement action because they guessed wrong. You know, that's not good public policy. we shouldn't have to be guessing what the policies will be towards investment products and then

Starting point is 00:11:34 get slapped when we guess wrong. That's just not the American way. We have a legislative process that sets the rules of the road. Senator Gillibrand and I have vetted our bill with many groups, many individuals, we still invite comment with regard to our Financial Innovation Act. So we think we've been the more transparent process, the lawmaking process, and that the SEC's process has been the more opaque process. I hope they're getting pressure to be more transparent and to work with Congress to help us fulfill our role, not to put up roadblocks to our fulfilling, our role as policymakers. And you know, Laura, Europe is way ahead of us now.

Starting point is 00:12:33 The European Union has a framework. They are working with companies. And there are companies, well-established companies, that quite frankly had their genesis in the United States that are looking now to Europe as the more clear regulatory framework in which to operate. But Laura, if the beachhead for digital asset law and regulation is in Europe, they'll be in a position to deny dollar-denominated transactions with digital assets they regulate. So we're cutting off our notes, despite our face, if we defer through our inaction to the European Union.

Starting point is 00:13:22 Yeah, yeah. And earlier when you said the SEC was getting pressure to change its ways, I mean, certainly the industry has been putting pressure on them, even just on social media. You can see that. I did also want to ask you tweeted this morning, the morning we're recording, which is Wednesday. You said, quote, there is a bipartisan majority. in both chambers of Congress in favor of crypto. And I was curious, would you not have said before the events of the last week that there was a bipartisan majority in both chambers of Congress?

Starting point is 00:13:53 And if so, if you felt that it was different before than what has changed? It was difficult to tell because we could not jar loose major legislation in any of the committees that have jurisdiction over parts of the bill. In the Senate, it's really complicated jurisdiction-wise because, for example, Lemus Chillebrand, which is very comprehensive, it covers digital assets that are commodities, digital assets that are securities, stable coins, a study of CBDCs, illicit finance. So it covers a broad array of digital asset policy. What that means in the Senate is the commodities, meaning Bitcoin, are in the Ag Committee, because that's where the Commodity Futures Trading Commission has jurisdiction. The digital assets that are securities are in the Banking Committee because the SEC is responsive to the Banking Committee. The Intelligence Committee has jurisdiction over illicit finance, and certain components of this bill are also in the Finance Committee. So it's divided up among jurisdiction of four committees.

Starting point is 00:15:08 jurisdiction is much easier in the U.S. House. Much to my surprise and delight, Patrick McKinery is moving legislation in the House that I did not expect to see. So now we're actually between the SAP 121 in the House and the Senate and now watching Congressman McKinneyry begin to move legislation that I didn't see a path to. forward for, but that he has the gravitas to move along, I think we're starting to see that there is bipartisan support, and it is probably a majority. And it just delights me no end, that we're finally able to move forward. So it has been a very positive week with regard to digital assets on Capitol Hill, which is a place where policy is a struggle. It's just hard to make policy here.

Starting point is 00:16:15 And with the House and Senate almost equally divided right down the middle between Democrats and Republicans, it's even hard to get legislation passed that doesn't have a partisan taint. And the good news about digital assets is they don't. you know, it's not a partisan subject, which is one of the reasons it's been fun to work on it. But we are finding that among sort of the more progressive wing of the Democrat Party, there are people who are uncomfortable with assets that the government does not control. And so I think that that is sort of an element of the Democrat Party that may never

Starting point is 00:17:02 adapt to an asset that can be used in some cases as a currency that was not created by government. And on the conservative side as well, less libertarian-leaning conservatives, I think struggle with that same notion. Is this going to be a competitor that undermines the U.S. dollar? and just a lot of suspicion about something new. But fortunately, over the last couple of years, I think the center of both parties are seeing people adopt the use of Bitcoin and alternative coins. You know, Bitcoin is now the seventh largest currency in the world.

Starting point is 00:17:53 So adoption is growing. And to pretend that it's going to go away, which I think some people thought it was so new and novel that it might go away. Now that it's obvious, it's not going away. And one of the things that made it extremely obvious that it was not going to go away was when 11 ETFs were adopted and embraced by investors, who truly embraced. So these companies like BlackRock and J.P. Morgan that used to badmouth Bitcoin and alternative coins are now offering Bitcoin ETFs and applying to be the house of Ethereum ETFs. So it's been interesting to see sort of mainstream financial institutions have embraced these. assets that the Congress somehow feels that's a good housekeeping stamp of approval or something. But whatever it is, I'll take it. I'm delighted to see us have an opportunity to move forward.

Starting point is 00:19:09 Yes, yes. So in a moment, we're going to talk more about stable coins and comprehensive legislation for crypto. But first, a quick word for those sponsors who make this show possible. Deploy custom crypto strategies and boost your yield with perpetual options on VaultCraft, the universal defy adapter for supercharging your crypto. With version V1.5, users can now earn options on optimism and arbitram while also rebalancing multi-strategy yield products all-in-one vault. MintValtron, Waltcraft's NFT reward optimizer to earn even more in XP points. From institutional service providers to defy DGens, anyone can deposit any asset into VaultCraft's products

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Starting point is 00:20:17 Perfect for GameFi and Defy to build, grow, and scale. Get your Web3 ideas to market fast. Think big, build bigger with Pocod. Join the community at poca dot network slash ecosystem slash community. Back to my conversation with Senator Lemis. So you said a number of things in that answer right before we cut to the commercial break and I just needed to kind of put the highlight on a few of them. So one of them is you mentioned that there are certain,

Starting point is 00:20:47 groups within government that are concerned about stablecoins and their potential to perhaps either destabilize the U.S. dollar or the banking system. And I wondered, you know, what you thought of those concerns. You know, we did see some issues last year with U.S.D.C. and Silicon Valley Bank. One could argue that's because there wasn't, you know, comprehensive stablecoin legislation at that point. But anyway, just I wondered, you know, what you thought of those concerns. Well, I think that as there is adoption of certainly Bitcoin and Ethereum, that people are finally beginning to see the value in having off ramps and on ramps between the U.S. dollars and these assets, and that stable coins can accomplish those goals. Now, in the

Starting point is 00:21:43 Lumas Gillibrand draft, which I have to credit Senator Gillibrand with being very significant encouraging our work on stable coins to be separated from some of our other work, brought out as standalone legislation and introduced as standalone legislation in anticipation of seeing something move in the House. But also to give people a chance just to see what we've been working on, that is stablecoin specific, and that is, we think, protective of consumers. In that we don't allow algorithmic stable coins in our bill, they have to be 100% hard asset backed, and that these kinds of backstops make for a stable coin product in the United States that would be protective of consumers.

Starting point is 00:22:43 So we did. We put out our bill. It's, again, I've been introduced for everyone to see, to amend, to discuss. And we were hopeful that Patrick McKinney and Maxine Waters would be successfully negotiating a bill on the House side that had considerable input from the White House. We haven't seen it yet. And just to be clear when you said you were looking for stable coins that were protective of consumers, what types of situations are you looking to prevent or mitigate with your bill? Well, for example, there was a very significant failure. I think it was Tara Luna that was an algorithmic stable coin that had a spectacular failure. And I'm sorry if I've gotten the wrong name. No, that's it, Tara Luna. Okay.

Starting point is 00:23:38 we wanted to assure that America's first step into stable coins would not validate a type of Terraluna structure. We wanted consumers to know that a 100% hard asset-backed stable coin would be the so-called stable coin of the land, the sort of the gold standard of stable coins under U.S. law. And, you know, referencing some of the other comments you made earlier, I did want to ask about, you know, this potential for comprehensive, you know, crypto asset legislation for something like a market structure bill. Obviously, as you alluded to earlier, the House is voting on the Financial Innovation and Technology for the 21st Century Act, which is being called Fit 21. So this is the one that's in the House.

Starting point is 00:24:37 As far as I understand, the sort of similar bill, not a counterpart, would be your legislation with Senator Gillibrand. So where do these two bills differ? What issues need to be resolved before we could see something past both houses of Congress? And, you know, based on the White House's statement this morning that they were interested in building what they called a comprehensive and balanced regulatory. framework for digital assets. Between those, I guess, three different parties, what do you feel are still the issues that need to be hammered up before we will see such a bill? Well, first of all, I want to tell you that I'm very pleased to see the House bill moving, that there's no pride of authorship. We were very hopeful that we'd have the opportunity to see one or the other of these

Starting point is 00:25:25 main regulatory frameworks move. And it appears the House bill will move first. I congratulate them for being able to get that bill moving. There are differences, as you point out, between that bill and the Lomas-Jillibrand bill. Our bill creates a category called ancillary assets that allows for what we in the cattle business would call the ability to gate cut between what is a commodity and what is a security. And so I prefer the ancillary asset approach to some of those alternative. coins or digital assets that are difficult to characterize, even if you use the Howie test. So that would be something that if the House bill comes to the Senate, I'd want to sit down with Senator Gillibrand, with Patrick McKinry, and others who've worked hard on the House

Starting point is 00:26:23 bill to see if there's a way to meld our drafts to address that issue. but honestly, Laura, there's so much more similarities than there are differences in what the House is moving forward with and what Senator Gillibrand and I have drafted that we're just very pleased. And we think that whatever discussions have to occur in order to get agreement between the House and the Senate is very achieved. And do you think that might be achievable either before the election or before January 1st? Oh, from your mouth to God's year. That would be wonderful. And that would help the United States because we are at risk of seeing significant companies move their beachhead overseas. We want them in the United States.

Starting point is 00:27:29 We want the innovation to occur here. We want our regulatory framework to be the world standard. We understand that digital assets, although perhaps native to blockchains that were developed in the U.S. can have a residence anywhere. The entire Bitcoin blockchain is on every node in the world. And those nodes are all over the world. So Bitcoin's a worldwide asset. We believe that the stronger and more just transparent and clear that our regulatory structure is,

Starting point is 00:28:13 the better off the United States is to continue to be the center of innovation. And, Laura, the other thing that I see is AI, artificial intelligence is in some ways an adjunct. to digital asset technology advances. They sort of dovetail. They sort of feed off each other. And I think if we establish a successful regulatory framework for digital assets, it gives us a leg up when we're developing a regulatory framework for artificial intelligence that also threads the needle.

Starting point is 00:28:59 between consumer and human protection versus innovation in the United States. That's the sweet spot we're looking for. That's the needle we're trying to thread. I think it's a good symbiosis. And speaking of companies that are, you know, facing headwinds here in the U.S., there is a Wyoming-based chartered special purpose depository institution called Custodio Bank. It was denied a banking master account. and you wrote an amicus brief for custodia in its lawsuit against the Fed and Kansas City Fed.

Starting point is 00:29:35 And I wondered, would you say that that's an example of what's been dubbed, so Operation Showpoint 2.0, or do you think that that is largely over? Well, I felt very strongly that the Fed, if an application for a master account is presented to the Fed that meets all of their criteria, that they don't have the discretion to deny it, that once the criteria are met, it is their ministerial duty to issue a master account. So this notion that the Fed has discretion to deny a master account,

Starting point is 00:30:19 even though all of the criteria to obtain one has been met, is, I believe, a novel theory for the Fed. And so we're going to continue to fight that. And I did want to ask one other crypto-related Wyoming question, which is, I saw that President Biden banned a Wyoming-based Chinese-owned Bitcoin mine that was located near a U.S. nuclear facility. What did you think of that decision? Well, Sipius was involved. I am assuming that information was available to Siphyas. that led them to believe that the mining operation may have been a cover for illicit activity by the Chinese Communist Party.

Starting point is 00:31:09 We're seeing the purchase by CCP-related companies of land adjacent to other of our nuclear warhead bases. There are three of them. One of them is in Montana at Malmstrom, and the other is in North Dakota, and Shalia, Wyoming is the third. The fact that CCP-related companies are buying land that is adjacent to all three of those nuclear military bases, our land-based portion of our nuclear triad, is of concern. And so I have to believe that this was not an anti-Bitcoin mining move, that this was an anti-CCP-related corporation next to a U.S. military base move. There are other Bitcoin miners, Laura, in Wyoming. There's this terrific company that has an agreement with a, Wyoming rural electric provider. So under the umbrella of rural electric associations, which are cooperatives, there's a Bitcoin mining operation near Pine Bluffs, Wyoming that sits right at the base

Starting point is 00:32:39 of the power source. So you don't have any line loss. They're mining Bitcoin right there. And those are the kinds of Bitcoin mining operations that can utilize base load of electricity. at a time when it's available. So in other words, the Bitcoin miners can ramp up mining when there's excess base load in the system and ramp it down when people have their air conditioners or their heaters on due to weather conditions. So the success of Bitcoin mining as a baseload balancer

Starting point is 00:33:18 is playing out in Wyoming and in New York. Texas and probably in other states, we think it's a great way to demonstrate that Bitcoin mining can be a stabilizer in the electric grid as opposed to something that sucks a tremendous amount electricity out of a system that's not adequately base loaded. So I just think it's a success story. And I discount this one particular instance of concern about a Chinese Communist Party-related business next to Effie Warren Air Force space. We've just seen crypto play a part on the election stage over the last couple of weeks with Trump holding a dinner for his NFT holders, inviting the industry to support him

Starting point is 00:34:08 and accepting crypto assets for campaign donations. And I wondered from how you were seeing the crypto industry influences election and politics and policymaking generally. I wondered if you had any specific recommendations that you wanted to give the industry for how it can accomplish its goals in D.C. Contact senators and educate them and House members. Contribute to their campaigns if they are friendly to your business or willing to learn. And don't ignore the political opportunity that we have in 2024 to avail ourselves of a potential

Starting point is 00:34:46 lasting framework and relationship between digital asset industries. and the policymakers that are going to affect this industry, whether it's positive or negative. Let's make sure that those relationships are built during this campaign season and then can play out in 2025. Perfect. Thank you so much for coming on unchanged. Thanks, Laura. Good to see you. Don't forget. Next to Bitsa Weekly News Recap, today presented by Wondercraft AI. Stick around for this week in crypto after this short break.

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Starting point is 00:36:39 Gala Games, and Farcasters' impressive funding round. Additionally, we'll touch on ZK Synx's upcoming AirDrop, Trump's campaign accepting crypto donations, and the debate over Ethereum researchers' advisory roles. Finally, don't miss our FunBits section featuring Algaran's humorous new ad. Thanks for tuning into the weekly news recap. Let's begin. SEC approved spot Ethereum ETFs. The U.S. Securities and Exchange Commission has approved eight spot Ethereum ETFs, including those from Black Rock, Fidelity, and Grayscale. This approval, part of an omnibus order, marks a significant development just four months after the first spot Bitcoin ETFs were approved. While the ETFs have received initial approval, the issuers must still complete their S1 registration statements before trading can begin, a process that could take several weeks.

Starting point is 00:37:31 This unexpected approval follows a sudden shift in the SEC's engagement with issuers, prompting speculation about the reasons behind the change. With ETH ETFs approved, the crypto community is speculating about which asset might be next. A Joe McCann of asymmetric favors Solana, citing strong interest. However, James Seifart of Bloomberg Intelligence points to regulatory challenges for Saul, given that it has been named as a security numerous times by the SEC. He suggested Dogecoin or Lightcoin are more likely, though ultimately what will determine the next crypto asset, is whether there is an underlying regulated futures market.

Starting point is 00:38:10 Most experts agree the next spot crypto approval is a ways off. U.S. House approves crypto regulation bill. In a week that will go down in history for marking a sea change in the U.S. government's attitude toward crypto, on Wednesday, the U.S. House of Representatives passed the first comprehensive crypto market structure bill, the financial innovation and technology for the 21st Century Act. The bipartisan vote of 279 to 136 included 71,000. Democratic representatives crossing party lines to get it approved. Proponents, like Representative

Starting point is 00:38:46 Patrick McHenry, believe the bill, which aims to establish regulatory clarity over digital assets by delineating the roles of the SEC and the CFTC, could end the regulatory food fight and foster innovation in the crypto space. The Fit 21 Act now faces the Senate, where its future is uncertain amidst looming elections. Despite President Biden's opposition, he has not threatened a veto. Sam Bankman-Freed moves to new correctional facility. Sam Bankman-Fried, the founder of the now-defunct cryptocurrency exchange F-TX, has been moved to a new prison facility, as first reported by the Wall Street Journal. Federal officials began the transfer early Wednesday, according to a spokesperson for Bankman-Fried. While the exact destination remains unconfirmed, sources suggest he is being relocated to a correctional facility in Mendota, California.

Starting point is 00:39:38 The move follows recommendations from federal prosecutors to transfer Bankman-Fried to a low-security prison closer to his parents' home in Palo Alto. Previously, SBF had requested to remain at the Metropolitan Detention Center in Brooklyn to be near his legal team working on his appeal, and even U.S. District Judge Lewis Kaplan had concurred with Bankman-Fried. SBF is serving a 25-year sentence for orchestrating one of the biggest financial frauds in U.S. history. His relocation may take up to a month. Grayscale CEO steps down. Michael Sonnonshine, CEO of Grayscale, has resigned after a decade with the company. Effective August 15th, he will be succeeded by Peter Mintzberg, currently the head of strategy for asset and wealth management at Goldman Sachs.

Starting point is 00:40:24 Until then, CFO Edward McGee will serve as interim CEO. Son and Shine, who started at Grayscale in 2014 and became CEO in 2021, played a pivotal role in transforming Grayscale's Bitcoin Trust into an ETF earlier this year, a milestone in the firm's history and crypto history. However, the ETF has experienced significant outflows, totaling over $17 billion, mainly due to a 1.5% management fee that is several times as expensive as the competitions. Mintzburg brings over 20 years of traditional finance experience from notable firms such as BlackRock, Oppenheimer Funds, and Invesco. Genesis settles with New York Attorney General's office. the New York Attorney General's office announced that a state court has approved a $2 billion

Starting point is 00:41:09 settlement with the bankrupt crypto lender, Genesis. This settlement will create a fund for Genesis' creditors who invested over $1.1 billion through the Gemini Earned program and prohibits Genesis from operating in the state. Attorney General Letitia James remarked, This historic settlement is a major step toward ensuring justice for the victims. The lawsuit, filed in October 2023, accused Genesis, Gemini, and Digital Currency Group of defrauding over 230,000 investors, including 29,000 New Yorkers. Genesis has agreed to the settlement without admitting or denying the allegations. This follows their recent agreement to return $3 billion in customer assets as part of a bankruptcy liquidation plan approved earlier this week.

Starting point is 00:41:59 Uniswap Labs Rebutz SEC allegations. On Tuesday, Uniswap Labs responded to a well's notice from the SEC, which claims the company behind the decentralized exchange operates as an unregistered securities exchange and broker-dealer. The SEC contends that UNI tokens constitute investment contracts. In its rebuttal, Uniswap Labs criticized the SEC's stance as overreaching, arguing that the regulator's jurisdiction does not extend to the majority of the platform's activities, which involve commodities like ETH and stablecoins. Marvin Amory, Uniswap's chief legal officer, wrote on X, The SEC is targeting assets and people in nations well beyond its authority. Uniswap maintains that the SEC's arguments are weak and wrong, and stresses the importance of embracing open-source technology

Starting point is 00:42:49 instead of litigating it out of existence. Gala Games hit by Major Hack. Gala Games, a Web 3 gaming platform, faced a significant hack on Monday, with an attacker minting 5 billion Gala tokens worth over $200 million. The price of Gala dropped nearly 15%. The attacker exploited a vulnerability in the protocol's mint function, allowing the creation and transfer of a massive number of tokens. Gala games quickly froze 90% of the unauthorized tokens,

Starting point is 00:43:19 worth approximately $180 million. However, the hacker managed to sell 600 million Gala tokens, valued at over $20 million through Uniswold. The attacker has since returned around $20 million of the stolen funds. CEO Eric Scheermeyer stated, We believe we have identified the culprit and are working with authorities. Gala Games now plans a governance vote to decide whether to burn the 4.4 billion frozen tokens. Farcaster secures $150 million in Series A funding.

Starting point is 00:43:52 Decentralized social network Farcaster has raised $150 million in a Series A round, reaching a $1 billion valuation. The funding round was led by Paradigm, with participation from A16Z crypto, Han Ventures, Union Square Ventures, Variant Fund, and Standard Crypto. In an interview with Unchained, co-founders Dan Romero and Varen Srinivasin

Starting point is 00:44:15 emphasized their focus on scaling to an internet-scale protocol and maintaining a lean team. Highlighting the network's developer and user growth spurred by features like frames and the recent FARCON event, they also shared their commitment to long-term development. Their ultimate goal? To create valuable, user-friendly products that can compete with mainstream social media giants. ZKSink prepares for token generation event and AirDrop.

Starting point is 00:44:42 According to the block, ZikSink, this week, an Ethereum Layer 2 network developed by Matter Labs, is set to conduct a token generation event that will introduce a total supply of 21 billion tokens. ZK Sync then plans to execute an airdrop around June 13th, aiming to distribute tokens ahead of blast-scheduled airdrop on June 26th. The token, intended to use the ticker ZK, faces potential conflicts as the ticker is already claimed by Polyhedra Network. Despite this, ZikSink might still proceed with the ticker ZK, as noted by a source who pointed out that Binance has yet to list polyhedra's token. Trump campaign embraces crypto donations. Supporters of former President Donald Trump's campaign can now donate cryptocurrencies to his campaign. According to the

Starting point is 00:45:29 campaign website, donations can be made via Coinbase wallet and Metamask. Demonstrating President Trump's success as a champion of American freedom and innovation, we proudly offer you a chance to contribute to the campaign with cryptocurrency, the site states. This move makes Trump the first major party presidential nominee to accept cryptocurrency donations ahead of the November 5th election. Ethereum Researcher's Advisory roles at Eigenlayer Spark Debate. Two Ethereum Foundation researchers, Justin Drake and Dankrad Feist, recently revealed their advisory positions at Eigenlayer, a restaking protocol, igniting discussions about potential conflicts of interest

Starting point is 00:46:08 within the Ethereum community. Drake, who disclosed his role after receiving a query from crypto-influencer Kobe, who questioned the ethics of Ethereum researchers accepting substantial compensation from Ethereum DAPs, says he, intends to reinvest his advisory proceeds into Ethereum projects. Afterward, Feist also disclosed his new role, emphasizing that his advisory position is personal and not representative of the Ethereum Foundation. Acknowledging he received a significant amount of Agen tokens, he noted he will focus on risks and decentralization and asserted that his role would not influence his professional opinions.

Starting point is 00:46:47 Debate over low-float high FDV tokens intensifies. A recent Binance report sparked debate about low-float, high fully diluted valuation, FDV tokens, which are often criticized for offering limited upside post-TGEs, have seen significant price drops, leading to widespread scrutiny. Binance responded by announcing a shift to listing small and medium-sized projects. Crypto influencers like Kobe and Haseeb Qureshi weighed in, highlighting potential conflicts of interest in market manipulation. Kobe argued that early private investors capture most of the upsides.

Starting point is 00:47:20 leaving little for public participants. Meanwhile, Qureshi analyzed factors like VC dumping in market conditions, suggesting that market forces will eventually correct these mispricings. Time for fun Bits. Algarand's ad makes fun of other blockchains. In a new ad, Algarand humorously highlighted the struggles of paying with Bitcoin, Ethereum, and Solana at a supermarket. The video shows three customers attempting to make purchases with their respective cryptocurrencies. the Bitcoin user awkwardly waits as the transaction slowly clears, while the Ethereum user is shocked by the exorbitant fees. The Solana user faces repeated transaction failures, much to their frustration.

Starting point is 00:48:03 In contrast, Algorand users are shown breezing through the checkout, paying effortlessly and happily. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to Unchainedcrypto.substack.com. That is UnchainedCripto.substack.com and sign up for our free newsletter. so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin, with help from Matt Pilchard,

Starting point is 00:48:27 Juan Aronovich, Megan Gavis, Pamajumdar, and Margaret Curia. The weekly recap was written by Wanneranovich and edited by Laura Shin. Thanks for listening. Unchained is now a part of the Coin Desk Podcast Network. For the latest in digital assets, check out markets daily, five days a week, with host Noel Atchison. Follow the CoinDesk Podcast Network for some of the best shows in crypto.

Unchained - Senator Cynthia Lummis on Why Crypto Now Has Bipartisan Support in Congress - Ep. 651

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