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Here’s what the DeFi Education Fund (DEF) has been up to in January 2024. If you have any questions or would like to learn more about a specific activity, please do not hesitate to reach out at contact@defieducationfund.org.
DEF Submits Comments on FinCEN’s Proposed “Mixing” Rulemaking
On January 22, DEF submitted a comment letter to the Financial Crimes Enforcement Network (FinCEN) in response to their proposed rulemaking, titled “Proposal of Special Measure Regarding Convertible Virtual Currency Mixing, as a Class Of Transactions of Primary Money Laundering Concern.” At a high-level, we believe the proposed rule will, at best, only minimally achieve its stated goals and come at a high cost.
Specifically, in our letter, we argue that there are existing regulatory requirements under the Bank Secrecy Act (BSA) that provide for the collection, retention, and reporting of nearly the same information as described in this proposal. FinCEN and its government partners need only clarify, examine for compliance with, and enforce these existing requirements to accomplish the Proposal’s goals.
Furthermore, the proposed rulemaking in its current written form is so vague and unworkable that it is arbitrary and capricious under the Administrative Procedures Act. For instance, the definition of convertible virtual currency (CVC) mixers (“any person, group, service, code, tool, or function that facilitates CVC mixing”) is so broad that it captures nearly all cryptocurrency transactions, and the proposal concludes, without elaboration, that the breadth of this definition is “necessary” because of the “nature of CVC mixing.”
Lastly, we point out the significant deleterious effects the proposed rule would have on U.S. user’s privacy, violating their Fourth Amendment rights, and that it will suppress development of and investment in privacy-enhancing technologies in the United States.
Check out our full letter here.
DEF Submits Comments on CFPB Proposed Rulemaking
On January 5th, DEF submitted a comment letter on the Consumer Financial Protection Bureau’s (CFPB) proposed rulemaking, “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications.”
While DEF shares the CFPB’s objective of empowering and protecting consumers, we argue that the proposed rulemaking should not be finalized in its current form and the CFPB should defer any further action until Congress provides a comprehensive legislative direction.
Our letter included the following arguments:
The proposal’s definitions for the “‘general-use digital consumer payment applications” market and “larger participants” in that market are vague and make it nearly impossible to decipher which entities will be included;
The proposal does not include an adequate cost-benefits analysis and fails to consider publicly-available resources that could aid in conducting a more thorough analysis;
The proposal conflicts with other agencies’ interpretation of their own authorities over the same market participants; and
Novel technology requires careful consideration and the CFPB — among other agencies — should await Congressional action before attempting to regulate the digital asset industry.
Check out our full letter here.
Update in DEF’s Action Against True Return Systems
On January 5th, 2024, the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office granted DEF’s petition to institute inter partes review (IPR) of a patent filed by True Return Systems, LLC’s (TRS) that falsely claims to invent oracle-like technology. An IPR is a procedure for challenging the validity of a U.S. patent before the PTAB.
To institute an IPR, a petitioner must show that at least one ground for challenging the patent is reasonably likely to succeed on the merits. Here, the PTAB found that “[DEF]… demonstrated sufficiently, for purposes of institution, that claim 1 would be unpatentable under §103.” Meaning DEF successfully convinced the Board that at least one argument challenging the validity of TRS’s patent is likely to succeed on the merits.
Currently, an oral hearing by the PTAB is scheduled for October of this year, and the parties will have a chance to make motions ahead of the hearing.
For a recap of what this is all about, check out our previous blog on the matter.
Media
Blog Post
Op-Eds
Fortune: You’ve got a friend in me: How amicus briefs are helping the crypto industry win over the courts, by Amanda Tuminelli
Print/Online
CoinDesk: How the Crypto Industry Responded to FinCEN's Proposed Mixer Rule
For example, "everyday economic activity" like liquidity pools or swaps might be captured in the part of the proposal that addresses users exchanging different types of digital assets, a letter from the DeFi Education Fund said.
CoinDesk: Coinbase vs. the SEC Debates the Difference Between Beanie Babies and Securities
Further, in a memo she wrote when dismissing a lawsuit against Uniswap founder Hayden Adams, Failla distinguished between decentralized apps, protocols and tokens, in an “indication of how careful she will be here,” Chief Legal Officer at the DeFi Education Fund Amanda Tuminelli said.
The Defiant: Crypto Advocates See Coinbase’s SEC Hearing as a “Step Forward”
A spokesperson from the DeFi Education Fund (DEF), a DeFi-focused research and advocacy group, told The Defiant the hearing was “a step forward.” “On wallets and staking, the court rightly noted the paucity of factual allegations in the SEC’s complaint, and we were happy to hear that our amicus brief on these issues was useful in the court’s understanding of them,” the spokesperson said.
DL News: How two Supreme Court fishing cases arm Coinbase and Binance with ammo in SEC battle
“This is the most important case in decades for commerce in this country, the relationship between business and the government, and the relative balance of the legislative and executive branches,” Miller Whitehouse Levine, CEO of DeFi Education Fund, told DL News.
“Regulatory agencies — the CFPB included — are trying to grab jurisdiction in a way that creates statutory contradictions,” Miller Whitehouse-Levine, CEO of the DeFi Education Fund, told DL News.
Cointelegraph: A taxing obligation: Is crypto reporting ‘impossible’ under US law?
“At the moment, it is literally not possible to comply with the reporting requirement,” Miller Whitehouse-Levine, CEO at the DeFi Education Fund, told Cointelegraph. What’s needed instead for the 60 million Americans who own digital assets today are “fit-for-purpose tax provisions” that basically regard crypto as a different sort of case.
Law360: USPTO To Review Blockchain IP Used To 'Troll' Crypto Firms
The challenge has been led by the DeFi Education Fund, a crypto advocacy group that says that the technology the patent covers predates the patent itself and has called True Return Systems a "patent troll" that threatens to force anyone using oracle systems to pay. On the same day in 2022, True Return Systems brought two suits against what amount to technology programs, arguing that they were infringing on the True Return Systems patent.
Decrypt: Report Crypto Trades Over $10K to IRS or Face Jail? It’s Complicated
“I think it's quite clear that it applies to pretty much any transaction in which someone is, in exchange for a good or service, receiving over $10,000 worth of crypto assets,” Miller Whitehouse-Levine, CEO of the crypto lobbying group DeFi Education Fund, told Decrypt.
For years, sporadic enforcement actions and dragged-out lawsuits have defined the American government’s relationship to the crypto sector. According to Miller Whitehouse-Levine, CEO of crypto lobbying group DeFi Education Fund, 2024 looks poised to finally bring some much-craved certainty to U.S. crypto regulation—for better or worse.
For up-to-date information about what’s happening in D.C. and what we are up to, please follow us on Twitter @fund_defi and subscribe to our Substack.
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