In regulators
Crypto firms Circle, Ripple, and BitGo have applied for National Trust Bank charters, which, if approved, would insert them directly into the heart of the traditional financial system.15 “Stoking the system with banks heavily linked to venture capital and crypto could be a terrible idea, however,” wrote Bloomberg columnist Paul J. Davies in what could be the understatement of the year. At least these charters do not automatically grant banks access to master accounts (although it enables them to request access), nor do they allow them to take demand deposits or engage in lending.16
These charters, granted by the Office of the Comptroller of the Currency, have historically been hard for crypto firms to obtain, so they have instead resorted to trying to worm their way into the banking world in weird ways like by buying tiny rural banks. But shortly after these firms applied for charters, the Senate confirmed former blockchain executive Jonathan Gould as Comptroller of the Currency.17 In addition to approving banking charters, the OCC will oversee stablecoin issuers under the proposed GENIUS Act: likely motivating these applications by stablecoin issuers Circle and Ripple and “stablecoin-as-a-service” company BitGo, which custodies the reserves for Trump’s USD1 stablecoin.
Another bank called Erebor, which as you might guess by the Lord of the Rings name is backed by Peter Thiel, Joe Lonsdale, and Palmer Luckey,h has also applied for a bank charter.
![As I wrote in November, shortly after Trump’s World Liberty Financial opened its WLFI token sale:
[The token has] strict limitations around token resale and remuneration to token holders, and availability only to accredited investors — limitations which were rather obviously crafted to try to dodge securities enforcement. If Trump succeeds with his plans to defang the SEC, I expect these limitations to swiftly change — likely significantly financially benefiting Trump and his family, who receive 75% of net protocol revenues in addition to their initial allocation of 22.5 billion $WLFI tokens.
Well, wouldn’t you know it, the team behind World Liberty has just proposed lifting the restrictions to allow WLFI to be resold.12 As with many other crypto businesses lately, they haven’t even bothered to wait for crypto legislation to pass in Congress, and are instead relying on the paralyzed SEC not to enforce existing law.](https://media.hachyderm.io/media_attachments/files/114/836/194/231/572/892/original/80bf5150eae4a0bf.png)
![Anti-CBDC bill
The rather alarmist-named Anti-CBDC Surveillance State Act exemplifies the peculiar Republican stance on digital currency surveillance. They’ve somehow convinced themselves that Federal Reserve banks are poised to launch a CBDC (central bank digital currency) that would enable mass surveillancee — though no such plan has been seriously proposed. Somehow, preventing this imaginary threat takes priority over addressing things like the president’s own stablecoin, which has already given him the types of surveillance and control powers they fear in CBDCs. Indeed, those concerns have mostly come from the Democratic wing of Congress, and have been brushed off by Republicans who are largely terrified to criticize anything Trump does.
And while Republicans decry purely hypothetical CBDC surveillance, they celebrated crypto’s actual surveillance capabilities at the recent Senate hearing, where Senators and crypto executives alike delighted in how blockchains’ public ledgers ease tracing by law enforcement and, frankly, anyone else. Conveniently, recording all transactions publicly means law enforcement no longer needs to obtain a pesky subpoena to peek in on your financial activities!
Senator Tim Scott (R-SC): [C]rypto companies are helping law enforcement track illicit activity with greater precision than traditional finance allows. ... Blockchain technology creates a permanent traceable ledger that can help law enforcement catch those bad actors.](https://media.hachyderm.io/media_attachments/files/114/836/188/225/052/890/original/68988935a12b2484.png)
![If Kennedy thinks accepting crypto money makes one a crook, well, perhaps he should do something about that. (Kennedy himself accepted almost $40,000 in 2024, all from Cumberland DRW’s Donald Wilson. This relatively low amount compared to other crypto-backed Congresspeople is likely because Kennedy was not up for re-election in 2024.)
Evidently angered by Painter’s refusal to take the bait and his requests that they actually discuss the proposed bill instead of wasting time mischaracterizing tweets, Kennedy lashed out: “You’re a whackjob. You are a major league, next-level whackjob.” At the end of the hearing, Chairman Tim Scott proclaimed, “I hope we all remember very clearly that our words are containers of power”, going on not to rebuke the Senator for attacking a witness as a “major league, next-level whackjob” but instead those who “weaponize[d words] against Senator Gillibrand or President Trump”. (Notably, Painter did not bring up Gillibrand; it was Kennedy who printed out Painter’s tweet to read at the hearing.)](https://media.hachyderm.io/media_attachments/files/114/836/185/871/317/697/original/d1818878c023053b.png)
![Money Stuff’s Matt Levine put it well in his must-read newsletter on the topic when he wrote:
The “legal friction” [Robinhood mentions] is that some companies are private because they do not want to comply with securities disclosure rules, and tokenization’s solution is that they can sell stock to the public without complying with those rules. ... Saying “we should get rid of the disclosure rules” sounds bad, retrograde, greedy. Saying “tokenization” sounds good, modern, cool.
Crypto companies already barreling forward with blockchainified stocks have hit some resistance from someone they may not have expected: SEC Commissioner Hester Peirce, who has otherwise been such a staunch ally of the crypto industry that she earned (and embraced) the moniker “Crypto Mom”. On July 9, she cautioned, “As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset. Tokenized securities are still securities.”4 While this is temporarily reassuring, bills like the CLARITY Act, currently making their way through Congress, threaten to undermine the SEC in this area. In a July 9 Senate Banking Committee hearing, former CFTC Chairman Timothy Massad agreed with Ranking Member Elizabeth Warren that the bill “could undermine [the SEC’s] authority substantially”, effectively turning blockchains into the regulatory escape hatch the industry desires.5](https://media.hachyderm.io/media_attachments/files/114/836/173/753/050/392/original/4526b89ce6bfc464.png)
![These companies don’t usually admit that, by encasing stocks in a blockchainy wrapper, they hope to tap into lucrative equities markets while sidestepping the expensive compliance and oversight requirements of traditional American brokerages and exchanges. This fits the long history of companies trying to use blockchains as a magic get-out-of-regulation-free wand, reminiscent of the 2017 bubble when companies used “initial coin offerings” (ICOs) to try to sidestep IPO regulations.d Indeed, Robinhood has been heavily lobbying for “a new regulatory approach [that’s] needed to allow tokenization to flourish” and not “stifle growth and innovation”.1 Regular readers of this newsletter will recognize this language as the standard rhetoric of a crypto company asking for carveouts and exemptions from regulations we collectively learned are necessary, oh, about a century ago — when a speculative bubble emerged around stocks sold to the public based on false or incomplete information and we wound up in the Great Depression.
Some companies have gone even further, tokenizing shares in private companies. When Robinhood announced its tokenized equities offering (only available to European investors at the moment while the company works on lobbying US lawmakers and regulators), they also announced that they had tokenized shares in the private companies SpaceX and OpenAI. This prompted concerns from European regulators and OpenAI themselves, who tweeted: “These ‘OpenAI tokens’ are](https://media.hachyderm.io/media_attachments/files/114/836/170/423/430/475/original/a35ce6e08ab7cd51.png)
