Crypto industry advocacy bodies have slammed a newly proposed United States Senate bill for what they say is a confused approach to regulating the decentralized finance (DeFi) sector.
On July 20, crypto think tank Coin Center and crypto advocacy group the Blockchain Association released separate statements describing the legislation as a “messy,” “unworkable,” and “unconstitutional” way of regulating DeFi.
Introduced on July 18, the bipartisan Crypto-Asset National Security Enhancement Act (CANSEE) bill aims to reign in money laundering violations in DeFi.
If passed, the legislation would extend new penalties to anyone who “controls” or “makes available an application designed to facilitate transactions using a digital asset protocol.” They would also be required to adhere to anti-money laundering and financial reporting standards.
The definition of who or what “controls” a DeFi protocol was left to be made by the U.S. Secretary of the Treasury — a move some pundits say will lead to excessive controls being applied to DeFi.
In its July 20 blog post, Coin Center wrote the bill gives “virtually unbounded discretion to the Secretary to decide what it would take to designate one as having ‘control’ of a protocol.”
Additionally, the think tank declared the bill to be unconstitutional as it would crack down on software developers who — as an extension of free speech — have a First Amendment right to publish code.
Coin Center was also concerned with the scope of the legislation and said by design DeFi is decentralized — meaning it could prove legally troublesome to enforce control over a given protocol.
Kristin Smith, the CEO of the Blockchain Association echoed Coin Center’s concerns and described the new legislation as unworkable.
Blockchain Association CEO @KMSmithDC released the following statement following today’s introduction of the Crypto-Asset National Security Enhancement Act of 2023:
“The Crypto-Asset National Security Enhancement Act of 2023, introduced today by Sen. Jack Reed (D-RI), is an… pic.twitter.com/S65XSUheTW
— Blockchain Association (@BlockchainAssn) July 19, 2023
Smith took aim at the bill for overstating the presence of money laundering in DeFi and crypto more broadly.
“At present, illicit transactions represent a small fraction of total volume: only 0.24% of all digital asset transactions in 2022, far less than in traditional finance.”
Smith said federal law enforcement agencies are already equipped with the tools and expertise to combat this “relatively small but important issue.” Ultimately, Smith denounced the new punitive measures in the bill as redundant.
While crypto organizations have taken aim at the broad scope of the bill, an April 7 U.S. Treasury report found many DeFi protocols are more centralized than claimed, often featuring a high concentration of funds and voting power in the hands of a few token holders.
The UK is to rejoin the European Union’s Erasmus student exchange scheme, according to reports.
The popular programme, which allowed Britons to spend a year studying at European universities as part of their degree without paying extra fees and vice versa for their European counterparts, ended for British students after Brexit on 1 January 2021.
But ministers could announce the UK will rejoin Erasmus from January 2027 as soon as Wednesday, The Times and The Guardian have reported.
Negotiations have included work on “mutually agreed financial terms” for the UK and the EU.
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The UK had pushed for a discount on membership fees, which are calculated on the basis of a country’s gross domestic product (GDP), The Times reported.
It said the EU is understood to have offered the government a 30% reduction of fees in the first year of membership.
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Labour MP Darren Frith told Sky News’ Politics Hub he would “welcome” such a move.
The Guardian reported that as well as university-based study exchanges, British students will be able to participate in vocational training placements under the scheme.
Cabinet Office minister Nick Thomas-Symonds held talks with Maros Sefcovic, the European Commission’s trade lead, in Brussels last week.
A Cabinet Office spokesman said: “We are not commenting on ongoing talks.”
But the UK’s universities welcomed the apparent breakthrough.
Tim Bradshaw, chief executive of the Russell Group of leading universities, said: “We’re delighted at the UK’s association to Erasmus+.
“With an even greater scope than previous programmes, Erasmus+ opens up fantastic opportunities for students, adult learners and young people to all benefit from new experiences and learning.
“It will also renew the huge contributions that EU students and staff make to life on our university campuses.”
The Lib Dems, who have been campaigning to rejoin Erasmus, welcomed the news.
Leader Sir Ed Davey said: “This is a moment of real opportunity and a clear step towards repairing the disastrous Conservative Brexit deal.”
Sir Keir Starmer has authorised an “urgent” review into the extent of foreign interference in British politics, as he prepares to change the law to tighten donation rules.
Ministers have initiated a rapid inquiry into current financial rules on donations and election safeguards, which will report at the end of March.
It will be led by Philip Rycroft, the former permanent secretary of the Brexit department.
The inquiry is a direct response to the jailing of Nathan Gill, the former leader of Reform UK in Wales, who admitted accepting tens of thousands of pounds in cash to make pro-Russian statements to the media and European Parliament.
In this case, officers said that they believed some individuals had a direct link to Vladimir Putin.
Communities Secretary Steve Reed, who announced the inquiry to the Commons on Tuesday, wants Mr Rycroft to assess how well the rules work at the moment and promised the report will be published in full.
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Mr Reed told MPs that the “conduct [of Gill] is a stain on our democracy”.
“The independent review will work to remove that stain,” he said.
The review could then lead to changes in the Elections Bill, due this spring, which could significantly change the way elections are financed.
Tuesday’s announcement is likely to ignite a firestorm of criticism.
Among the changes that could result from the Rycroft report could be a clampdown on cryptocurrency donations, which Reform UK leader Nigel Farage has said in the past would be a direct attack on his party.
It could introduce new rules for donations to thinktanks, which fall outside any regulatory regime at the moment, and could see new rules around foreign donations.
Image: Philip Rycroft will carry out the review
Foreign donors can effectively give money if they have a trading UK subsidiary at the moment.
The government has already promised to clamp down on “shell” companies, but this could give more clarity over how this will work.
It could also look at funding of “troll farms” – vast banks of social media accounts based overseas designed to try and sway public opinion as part of state disinformation campaigns.
However, the financial affairs of and donations to Labour MPs could be in the scope of the review, and those named in the report could face fresh disciplinary consequences.
The government also singled out Christine Lee, the UK-based lawyer accused of working covertly on behalf of the Chinese Communist Party, as another case of concern.
Image: Christine Lee is accused of working on behalf of the CCP
Nevertheless, other parties are likely to suggest this is an attempt to change the donation rules in Labour’s favour, after promising to lower the voting age to 16 and cancelling some mayoral elections because of a local government re-organisation.
The review will invite all party leaders to take part in “in-depth assessment of the current financial rules and safeguards and offer recommendations to further mitigate risks from foreign political interference”.
Mr Rycroft cannot compel politicians to give evidence, but he will have access to the security services, though the extent of their cooperation is unclear.
The conduct around the Brexit referendum has been specifically excluded in the terms of reference, and Mr Rycroft will be instructed to focus on more “recent” cases, although there is no specific start date.
The 12-week timeline for the inquiry, alongside the lack of statutory powers, is likely to make it hard for Mr Rycroft to uncover substantial new incidents of bribery or corruption and prove them to a standard necessary to put details in the public domain.
The publication date, at the end of March, comes just five weeks before local elections in which Reform UK is expected to do well, and opposition politicians are likely to question the timing.
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Mr Rycroft has previously locked horns with Boris Johnson.
He argued that, at times, Mr Johnson was a PM who “only speaks for England”, his government was “not sensitive to the niceties of constitutional convention” and had “imperious disregard” for devolved policies, fuelling the breakup of the UK.
In June last year, just before the election, when Rishi Sunak was PM, he signed a letter to The Times which said: “Trust in politics, and in the people and institutions of public life, is at an all-time low.
“This is a serious problem for the health of our democracy and is indicative of the need for substantial improvement in the governance of the UK.”
Mr Rycroft has previously expressed his caution about the relationship between big tech and politics, telling Sky News two years ago: “Politicians do have to be a little bit careful in this space.
“Nobody’s elected Elon Musk, his opinions are those of a businessman, he is not a statesman.
“Clearly, they can court business people for their investment, but they shouldn’t look as though they’re kowtowing to them in terms of their regulatory concepts.
“They should listen to their views, but it should be democratically elected politicians that take those really, really important decisions, and let’s hope that’s the case in the UK.”
It comes as Reform and the Conservatives both received significantly higher donations than Labour in the first three quarters of this year.
They included the largest ever political donation from a living person: £9m to Reform UK from British-Thai businessman Christopher Harborne.
Scotland’s justice secretary has survived a vote of no confidence amid claims she misrepresented a leading expert on grooming gangs and therefore misled parliament.
MSP Angela Constance has ignored calls to stand down and has First Minister John Swinney’s full backing in the wake of comments she made about Professor Alexis Jay.
Mr Swinney led her defence, describing her as a “sincere minister” who was “getting on with the job of making Scotland safer”.
Both Scottish Labour and the Scottish Conservatives lodged motions of no confidence, with a debate held at Holyrood on Tuesday afternoon.
Scottish Labour, the Scottish Tories and the Scottish Liberal Democrats joined forces to vote against Ms Constance, but the motion failed due to the backing of the SNP and Scottish Greens.
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Image: Justice Secretary Angela Constance at Holyrood on Tuesday. Pic: PA
MSP Russell Findlay, leader of the Scottish Conservatives, said: “Shameless SNP and Green MSPs put partisan politics before truth and integrity, to the understandable fury of grooming gang victims.
“To any reasonable person, Angela Constance’s position is untenable. She misled parliament by misrepresenting Professor Jay, tried to cover it up and then publicly lied after being caught.
“She twisted Professor Jay’s words to reject our calls for a Scottish grooming gangs inquiry and then failed to correct the record.
“It’s an open-and-shut case of a ministerial code breach for which she should lose her job.”
Amid a failed Scottish Conservative amendment for a public inquiry to be established into grooming gangs in Scotland, Ms Constance insisted Professor Jay agreed with her that such a probe was not needed.
However, emails made public by the Scottish government last week revealed the professor – who led the Independent Inquiry into Child Sexual Exploitation in Rotherham in 2014 – later contacted Ms Constance to say she would “appreciate” her position “being clarified”.
Professor Jay added that her comments quoted by Ms Constance had “nothing to do” with the situation in Scotland.
Scottish Labour leader Anas Sarwar said he supported the motion as “victims and survivors of grooming gangs and child sexual exploitation have lost confidence in this justice secretary”.
He added: “The justice secretary misrepresented Professor Jay’s views in order to find an excuse not to have an inquiry into grooming gangs.
“Victims and survivors should be able to rely on their justice system, and their government, to tell the truth, to act with integrity and to put them first.
“On this, the justice secretary has failed.”
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During First Minister’s Questions last week, Mr Swinney claimed Ms Constance “was making a general comment” on the situation as he gave his justice secretary his full backing.
He reiterated his support for Ms Constance during the debate, saying: “The cabinet secretary in the debate in September did not state that Professor Jay was speaking directly about the amendment.
“She made a general point drawing on the publicly stated views of Professor Jay.
“But I acknowledge that members of parliament and members of the public will draw different conclusions from the words we all use.”
Mr Swinney described Ms Constance as a “sincere minister who would never address parliament in a way that would in any way mislead parliament or the public”.
The first minister added: “She’s never shied away from asking tough questions about our approach to justice.
“Nor has she ever avoided tackling some of the biggest issues that we face.
“For these reasons, Angela Constance has my full confidence as justice secretary.
“She’s getting on with the job of making Scotland safer, and I urge members to enable her to continue doing that by rejecting this motion today.”
The motion was defeated by 57 votes to 67, with one abstention