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DEF Authors New Paper Exploring Samourai Wallet & Money Transmitters
Last week, DEF published a paper entitled “Prosecuting Privacy: Examining Samourai Wallet, Money Transmitters, and the Criminalization of Innovation” authored by DEF’s Spencer Peek. The paper examines whether non-custodial tech tools can legally be classified as “money transmission,” and argues that the DOJ’s interpretation stretches existing laws in ways that threaten innovation and due process.
Nominations in Washington
What happened?
Last week, President Donald Trump announced a slate of nominations to federal posts that will be critical to crypto policy under the new administration.
President Trump nominated Brian Quintenz, Former Commissioner of the Commodity Futures Trading Commission (CFTC) and Global Head of Policy at A16z Crypto, to be Chairman of the Commission. Mr. Quintenz has a long track record of supporting DeFi and advocating for sound policies that will enable DeFi developers and users to thrive in the United States.
Trump also nominated Jonathan McKernan,a member of the Federal Deposit Insurance Corporation (FDIC) Board of Directors, to serve as Director of the Consumer Financial Protection Bureau (CFPB). Additionally, President Trump nominated John Hurley, the founder of Cavalry Asset Management, to serve as the Department of Treasury Under Secretary for Terrorism and Financial Intelligence (TFI). The Treasury’s Office of TFI combats illicit finance, oversees the implementation of U.S. sanctions programs, and supervises the Financial Crimes Enforcement Network (FinCEN), which enforces the Bank Secrecy Act. If confirmed, Mr. Hurley would help lead TFI to combat illicit finance and emerging threats.
Finally, President Trump selected Jonathan Gould to lead the Department of Treasury’s Office of the Comptroller of the Currency (OCC). Comptroller-designate Gould previously served as the Chief Counsel for the Senate Banking Committee and the Chief Legal Officer at Bitfury. OCC plays a critical role in banking regulation, ensuring compliance with financial regulations and risk management.
What does this mean?
DEF congratulates the nominees and looks forward to working with them on issues central to the future of DeFi. As Congress and the federal government embark on this new chapter, DEF hopes to work together to address the novel policy issues with the emergence of decentralized technology.
The SEC Halts the CAT System
What happened?
On February 10th, the Securities and Exchange Commission (SEC) released an Order granting exemptive relief from certain provisions of the National Market System Plan governing the Consolidated Audit Trail (CAT). As a refresher, the CAT is an SEC-mandated system that collects and consolidates trade and order data from all U.S. equity and options markets in an effort to enhance regulatory oversight and detect market manipulation. It tracks the full lifecycle of trades across securities exchanges and broker-dealers, allowing regulators to monitor market activity. As part of the CAT, broker-dealers were required to furnish the personally identifiable information (PII) of their customers to the SEC’s central repository. This resulted in an extensive database of users’ PII, as well as their transaction histories.
This Order states that securities exchanges and broker-dealers will now be exempt from reporting certain PII (names, addresses, and years of birth) to the CAT. Instead, regulators seeking PII will need to request the information from exchanges and broker-dealers on an individual basis. The Order notes that the exemption will decrease the risk that bad actors will be able to associate individuals with their transaction history.
What does this mean?
Last year, DEF submitted an amicus brief supporting a challenge to the CAT’s invasive data collection practices. As DEF’s Amanda Tuminelli wrote in a co-authored op-ed on the CAT, “Remember, privacy is normal.” We should not regress into a societal norm where privacy equates to wrongdoing, especially in personal financial matters, lest we get closer to the Washington D.C., featured in Minority Report. One shouldn’t feel like their government is looking over their shoulder as they complete every personal financial transaction, especially when those transactions may include revealing sensitive information such as through donations to political causes or paying for medical procedures.” The SEC’s Order represents a positive step forward in safeguarding privacy and constitutional rights.
Digital Assets Subcommittee Hearing on “The Golden Age of Digital Assets”
What happened?
Last week, the House Financial Services Committee’s (HFSC) Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence convened a hearing to explore the evolving role of digital assets in modernizing financial services and bolstering U.S. leadership in the global economy.
Subcommittee Chairman Bryan Steil (R-WI) opened the hearing stating that “[d]igital assets present a clear opportunity for the advancement of financial services in the United States. This technology has the potential to modernize our financial infrastructure, enhance the dollar’s dominance in global markets, increase the efficiency of payments both domestically and abroad, and provide American businesses and consumers with a faster, cheaper, and more transparent way to transact in an increasingly digital economy.”
The witnesses included Mr. Jonathan Jachym, Deputy General Counsel and Global Head of Policy & Government Relations at Kraken Digital Asset Exchange. Notably, Mr. Jachym stated during his opening statement that “[w]e must avoid blunt application of centralized rulebooks to decentralized protocols that do not have centralized governance systems, infrastructure, and management. Policymakers must continue to evaluate and craft best practices and distinct policy approaches to address DeFi.”
In his opening statement, Mr. Ji Kim, President and Acting CEO of the Crypto Council for Innovation, stated that “Congress and the administration should prioritize supporting the development of decentralization and DeFi technologies. Policymakers should recognize the importance of self-custody solutions and software which enable individuals to securely manage their own digital assets.” Mr. Coy Garrison, a partner at Steptoe LLP and former SEC counsel, addressed the evolving regulatory landscape and the importance of providing clarity for market participants. Mr. Jose Fernandez da Ponte, Senior Vice President and General Manager of Blockchain, Crypto, and Digital Currencies at PayPal, discussed the role of stablecoins and digital payment innovations in enhancing financial services.
Finally, Mr. Timothy Massad, Research Fellow and Director of the Digital Assets Policy Project at Harvard’s Kennedy School of Government and former CFTC Chairman, provided insights into regulatory challenges, particularly in the DeFi space, and stressed the importance of safeguarding financial stability while promoting responsible innovation.
The witnesses and many of the members of the subcommittee focused extensively on stablecoins, reflecting the growing legislative momentum around their regulation.
During the hearing, Representative Bill Foster (D-IL) pressed Mr. Jachym on the alleged role of self-hosted wallets in illicit finance, pointing to concerns about national security threats and illicit activity, including transactions linked to North Korea and fentanyl distribution. Foster alleged that illicit finance in crypto occurs on-chain, asserting that the two primary obstacles to crypto legislation are blockchain’s “anonymity” and “finality.” He framed onchain trading and self-custody as a weak link in financial oversight, suggesting that its permissionless nature enables bad actors to operate without sufficient regulatory guardrails. In response, Jachym defended the potential of DeFi while acknowledging that illicit finance is a challenge for all financial systems, including traditional banking. He cautioned against overgeneralizing DeFi as a primary enabler of illicit activity, pointing out that blockchain-based transactions are inherently more traceable than cash-based transactions.
Representative Warren Davidson (R-OH) then countered, reminding the room of the importance of securing Americans’ right to permissionless self custody of digital assets. Rep. Davidson stated that, “the idea that you have to go through an intermediary to be trusted basically says unless the government grants you permission, we just assume you’re a criminal.” He continued, “There is no decentralized finance without the decentralized part. If you don’t protect self custody all you really do is change what intermediaries are involved.” He concluded, “So I don’t think any serious legislation to chart a path for a ‘golden age’ of digital assets could possibly exclude serious protections for self-custody.”
Representative Ritchie Torres (D-NY) argued in his remarks that “we in Congress should neither romanticize or demonize emerging technologies like blockchain,” highlighting the importance of providing regulatory clarity to maximize the positive use-cases of blockchain. He continued by recognizing the potential of blockchain technology for remittances, emphasizing its ability to provide faster, cheaper, and more transparent cross-border transactions compared to traditional financial systems. He noted that for many underserved communities, blockchain-based remittances significantly reduce fees and processing times, ensuring that more money reaches families in need rather than being lost to intermediaries.
What does this mean?
This hearing demonstrated growing legislative and regulatory momentum, particularly around stablecoins, an area central to the industry's future. DEF will continue to push to educate Members about the positive use cases of decentralized finance and self-custody, despite the flawed assumptions made in the hearing.
Stablecoin Legislation Continues to Progress
What happened?
Congress has seen a flurry of proposed stablecoin legislation in the past two weeks. All three pieces of legislation aim to ensure stablecoins are backed 1-to-1 with highly liquid reserves (cash, insured bank deposits, or short-term U.S. Treasuries), enhance transparency around reserves and redemptions, and provide issuance pathways for bank subsidiaries and nonbank entities. All three pieces of legislation would also formally subject stablecoin issuers to the Bank Secrecy Act anti-money laundering and counter terrorism financing (AML-CTF) regime.
GENIUS and STABLE Acts
As DEF noted in its last weekly update, Senator Bill Hagerty (R-TN) proposed the Guiding and Establishing National Innovation for U.S. Stablecoins, (GENIUS) Act, which received bipartisan support in cosponsoring Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY). In addition to the GENIUS Act, House Financial Services Committee (HFSC) Chairman French Hill (R-AR) and Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee Chairman Bryan Steil (R-WI) released their own discussion draft on February 6 of the Stablecoin Transparency and Accountability for a Better Ledger Economy Act (STABLE) Act.
Both the GENIUS and STABLE Acts define a “payment stablecoin” as a digital asset that “is designed to be used as a means of payment or settlement” and whose issuer “is obligated to convert, redeem, or repurchase for a fixed amount of monetary value” and “represents [it] will maintain or creates the reasonable expectation that it will maintain a stable value relative to the value of a fixed amount of monetary value.” Monetary value is defined in both as a “national currency or deposit” that is “denominated in a national currency” (as defined under Section 3 of the Federal Deposit Insurance Act), therefore exempting decentralized stablecoins from the legislation.
Although the GENIUS and Stable Acts are largely similar in content, they have two key differences. Unlike the GENIUS Act, which requires that any stablecoin issuer with a market capitalization of greater than $10 billion be subjected to federal regulation, the STABLE Act would allow any issuer to opt into state regulation, regardless of market capitalization, so long as the state regulatory regime meet certain requirements. Additionally, the STABLE Act would prohibit the creation of “endogenously collateralized stablecoins,” or algorithmic stablecoins, whereas the GENIUS Act would simply require the Treasury to carry out a study to be given to the House Committee on Financial Services and the Senate Banking Committee.
Ranking Member Maxine Water’s Legislation
On February 10th, HFSC Ranking Member, Representative Maxine Waters (D-CA), unveiled her own version of bipartisan stablecoin legislation. Ranking Member Waters’ legislation creates a regulatory framework for both depository institution stablecoin issuers as well as nonbank stablecoin issuers with a central role for the Federal Reserve throughout, including strong reserve requirements. However, the bill does not define an explicit federal application and approval process timeline for nonbank issuers. The legislation would also allow for application denial on the basis of “public benefit” and “financial stability.”
The bill definitions of “payment stablecoin” and “monetary value” are substantially similar to that of the GENIUS and STABLE Acts. The legislation also includes robust protections for custodial wallet providers, including risk management and financial resource requirements, as well as back-up examination and enforcement authority for the Fed. Notably, the legislation would place a “prohibition on a non-financial commercial company controlling the registered payment stablecoin issuer or licensed nonbank entity,” which would serve to stop large, centralized tech firms (e.g., Google, Meta, X) from entering the stablecoin space.
Additionally, Waters’ bill would bar anyone convicted of crimes involving “insider trading, embezzlement, cybercrime, money laundering, or financing of terrorism, or felony financial fraud” from serving as an executive officer or controlling more than 5 percent of a stablecoin issuer’s share.
What does this mean?
DEF welcomes the increasing conversation around regulatory clarity for stablecoins and will continue to advocate for decentralization and self-custody protections.
CFTC Digital Assets Markets Pilot Forum
What happened?
The Commodity Futures Trading Commission (CFTC) announced the Digital Assets Markets Pilot Forum, bringing together major industry players, including Ripple, Coinbase, Circle, Crypto.com, and MoonPay, to discuss the launch of a pilot program for tokenized non-cash collateral such as stablecoins. This initiative is part of a broader effort to integrate digital assets into traditional financial markets, increasing efficiency, liquidity, and risk management in derivatives trading. Additionally, CFTC Acting-Chair Caroline D. Pham announced that the Commission will host a CEO Forum, bringing together executives from leading digital asset firms to discuss the pilot program’s structure and potential impact.
What does this mean?
The CFTC’s pilot program will test the use of tokenized stablecoins and other digital assets as collateral for margin requirements in derivatives trading. This initiative follows Chair Pham’s long-standing call for a regulatory sandbox approach. Regulatory sandboxes provide a controlled testing environment for financial innovation, enabling regulators to evaluate new market structures, risk frameworks, and compliance measures before making permanent rule changes. DEF applauds the efforts of Acting-Chair Pham to provide regulatory clarity to the digital assets space.
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