US defibrillates market structure talks; banks v Coinbase gets nasty

The U.S. Senate claims to be making tangible progress toward digital asset market structure legislation, while new fronts are opening in the fight between U.S. banks and America’s biggest crypto exchange.

On November 4, Politico reported that President Trump’s ‘AI & Crypto Czar’ David Sacks was planning to speak on Wednesday with Senate Agriculture Committee chair John Boozman (R-AR) and committee member Cory Booker (D-NJ) regarding the committee’s version of digital asset market structure legislation.

The Ag committee has moved slower than the Senate Banking Committee, which released its first draft of market structure legislation in July and a more substantial second draft in September. Banking oversees the Securities and Exchange Commission (SEC), while Ag oversees the Commodity Futures Trading Commission (CFTC). The two agencies will share responsibility for digital asset oversight, with the CFTC taking the lead in most aspects.

Sacks will reportedly get an earful from Booker regarding Trump’s apparent unwillingness to appoint Democrats to agencies like the CFTC (which currently has only one of its five seats filled). Booker will also mention the Trump family’s highly profitable crypto ventures, as Dems in both legislative chambers have tried (and so far failed) to add language to crypto legislation that would prohibit elected officials (and their families) from profiting off activities over which they have influence.

Boozman said Tuesday that an Ag discussion draft would emerge “soon, in the next few weeks,” while Ag staffers have suggested a draft could come as early as Friday, November 7. Sections of the draft that remain unresolved between the two parties will reportedly be indicated as works-in-progress.

Some GOP Banking members have suggested their committee’s legislation is far from the point where a markup vote is possible. Sen. John Kennedy (R-LA) has warned that the crypto sector needs to reach some accord with the banking industry over the stablecoin yield/rewards issue (more on this below).

Meanwhile, Sen. John Marshall (R-KS) expressed concern over the fact that “crypto is used by a lot of criminals” and said his pro-crypto colleagues on the committee need to educate him on how they can prevent crypto from being “such a tool for organized crime.”

On November 4, Banking committee member Sen. Cynthia Lummis (R-WY) told Bloomberg that “staff-level” work was going on “every single day” to ensure the bill would have enough votes to make it out of committee and to the Senate floor. These “bipartisan” discussions were happening “at the granular level” to ensure the bill “incorporates both parties’ changes and has been vetted by industry so they’ll understand what they’re being asked to do from a regulatory point of view.”

Lummis claimed GOP staffers were working “intensely” with their Dem counterparts to “make sure they’re comfortable with the draft.” Lummis claimed these conversations have been “very successful,” although “slower than we’d hoped.”

Lummis said she wasn’t aware that market structure progress had suffered from President Trump’s controversial pardon of Binance founder Changpeng ‘CZ’ Zhao and Trump’s subsequent comments on last Sunday’s episode of 60 Minutes that he pardoned CZ despite not knowing anything about him or his charges.

In a briefing on Tuesday, White House press secretary Karoline Leavitt claimed that Trump meant “he does not know [CZ] personally” and “does not have a personal relationship with this individual.” Leavitt added that “when it comes to pardons, the White House takes them with the utmost seriousness.” Leavitt claimed CZ was “abused and used by the [President Joe] Biden Department of Justice” and so “the president is correcting that wrong.”

Banks v stablecoin rewards

America’s banks have been pressing Congress to use the market structure bill to amend the GENIUS Act. The banks want it spelled out plainly that the GENIUS prohibition on stablecoin issuers such as Circle (NASDAQ: CRCL) offering ‘yield’ (aka interest) to customers who hold their tokens also applies to non-issuers.

Meanwhile, digital asset exchanges like Coinbase (NASDAQ: COIN) claim that, as non-issuers, they have the right to offer ‘rewards’ (aka interest) to customers who hold stablecoins on their platforms. Banks and credit unions argue that the high rates available via these rewards will cause mass withdrawals of bank deposits, which could negatively impact the capacity of these banks—notably smaller community banks—to issue new loans.

Asked about the banks’ push, Sen. Lummis said, “It was so difficult to get GENIUS passed that I kinda hate to reopen GENIUS. I can understand the frustration of the community banks but I want them to know that they’re going to have access to custody and include and incorporate digital assets into their offerings as banks.”

The Treasury Department is currently soliciting feedback on how best to implement GENIUS, and banks have some strong opinions. On November 4, the American Bankers Association (ABA) and 52 state bankers associations submitted a joint letter urging Treasury to “broadly interpret the GENIUS Act’s prohibition on interest, a critical provision intended to support stablecoins’ use as a means of payment rather than a store of value.”

The banks claim Congress intended “payment stablecoins to be used for transactions and not as investment vehicles. Treasury must reinforce this intent.” The banks warn that “deposit losses could reach 25.9%, eliminating approximately $1.5 trillion in lending capacity. Small business and farm credit would shrink by $110 billion and $62 billion, respectively.”

The banks want Treasury to “define ‘interest or yield’ broadly;” “prevent evasion through affiliates, partners, or other arrangements;” and make it clear that “If holding the coin is required to get the [reward], that should be enough to trigger the prohibition.”

Also pushing this narrative is Better Markets, a nonprofit group focused on protecting consumers from Wall Street excesses. The group filed its own letter to Treasury that called the stablecoin rewards offered by Coinbase and others “clearly violative of the intent of the GENIUS Act.”

Coinbase has its own statistics and studies that it claims blow holes in the banks’ deposit flight arguments. Coinbase’s chief legal officer Paul Grewal’s response to the ABA letter was to call it “true comedy, if it’s [sic] implementation would not be a policy tragedy.”

Coinbase’s chief policy officer, Faryar Shirzad, recently tweeted that GENIUS “is clear that rewards are allowed. Third party rewards programs and interest paid by the issuer are not the same thing.”

Jonathan Gould, chief of the Treasury Department’s Office of the Comptroller of the Currency (OCC), seems to have taken the crypto sector’s side in the ‘yield v rewards’ brouhaha, saying recently that if mass deposit flight to stablecoins were to occur, the OCC “would have something to say about that.” But Gould suggested it was unlikely to be a “material impact” from this asset transfer.

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Banks v Coinbase the Bank

Coinbase’s Shirzad also tweeted his mock praise of a November 3 blog post by the Bank Policy Institute (BPI), an advocacy group representing banks doing business in the U.S. The BPI claimed stablecoins “are likely to pose risks to retail investors, borrowers and lenders, and, consequently, the financial system.”

The BPI says stablecoins are prone to slipping their 1:1 value with the fiat currencies they represent, while stablecoins borrowers’ fondness for highly leveraged bets on decentralized finance (DeFi) platforms increases the risk that stablecoin lenders will lose their assets.

In response, Shirzad said many BPI member banks “are doing great work in adopting stablecoins. BPI’s efforts to protect the last century’s payment technology won’t work, especially as its own member banks are looking forward.”

(The BPI published a separate blog post detailing the regulatory/legislative changes it would like to see to prevent the use of stablecoins by criminals/terrorists to exploit the U.S. financial system. The BPI wants Congress to use market structure legislation or regulations to extend ‘know your customer’ (KYC) and anti-money laundering (AML) requirements to “digital asset intermediaries engaged in substantially similar activities as banks.”)

Specifically, the ICBA says CNTC will rely on “Coinbase’s demonstrably flawed risk and control functions while operating under a governance structure that prevents independent oversight.” CNTC would also “struggle to achieve and maintain profitability during crypto bear markets, the very time at which the similarly concentrated Coinbase would be least able to provide support.”

Finally, the ICBA says the OCC’s “untested receivership framework would struggle to resolve an uninsured institution of CNTC’s proposed scale and operational complexity, particularly given the technical challenges of crypto custody and CNTC’s likely importance as a dominant crypto [exchange-traded fund] custodian.”

Coinbase’s Grewal was quick to respond, tweeting: “Imagine opposing a regulated trust charter because you prefer crypto to stay … unregulated. That’s ICBA’s position. It’s another case of bank lobbyists trying to dig regulatory moats to protect their own. From undoing a law to go after rewards to blocking charters, protectionism isn’t consumer protection.”

Coinbase is far from the only crypto firm seeking a national trust charter, with these ranks including Ripple Labs and Circle. And the ICBA is far from the only banking group opposed, with several of them sending a joint letter to the OCC this summer expressing their concerns.

Speaking at a Clearing House conference in New York on November 4, the OCC’s Gould appeared to welcome crypto bank charters. Bloomberg quoted Gould saying he has “no ability to supervise or regulate nonbanks. And so the only way I can possibly ensure a level playing field is for those who voluntarily come into this system or want to come into the system.”

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North Korea crypto laundromat still bringing the suds

There’s probably little disagreement (except in Pyongyang) over the Treasury’s Office of Foreign Assets Control (OFAC) imposing sanctions this week on eight individuals and two entities linked to North Korea’s hacking and money laundering activities.

Among the individuals newly sanctioned are two North Korean bankers who helped manage funds (including millions in tokens) linked to a North Korean ransomware actor. Other individuals were sanctioned for handling funds generated by North Koreans using fraudulent identities to obtain information technology (IT) work with unsuspecting firms, including some based in the U.S.

OFAC also blacklisted dozens of digital wallets, each containing USDT, the stablecoin issued by Tether. A lengthy report released last month by the Multilateral Sanctions Monitoring Team (MSMT) says cryptocurrency-related activity is providing the North Korean regime with billions of dollars annually, and USDT plays a prominent role.

The report says USDT is used in North Korea’s “procurement-related transactions, including the sale and transfer of military equipment and raw materials such as copper, which is used in munitions production … Making and accepting payment in USDT is less cumbersome and safer than cash transactions.”

However, the report adds that stolen tokens can only be held in USDT for “short periods of time.” The MSMT notes that Tether “retains the technical capability to freeze USDT balances and continues to cooperate with law enforcement entities to freeze transactions that violate UN sanctions.”

North Korea’s laundering process relies heavily on swapping stolen tokens for ETH, BTC, and the DAI stablecoin, with the conversions taking place on “decentralized exchanges with weak identity verification requirements.” (These types of platforms were singled out for concern last month by Senate Democrats looking to impose greater KYC/AML rules in market structure legislation.)

Cross-chain bridges, instant exchanges, and P2P traders also play a role, as do coin mixing platforms, with the report observing North Korea’s use of Wasabi Wallet, CryptoMixer, Tornado Cash, JoinMarket, and Railgun during the period spanning January 2024 to September 2025.

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Prosecutors seek five years in prison for Samourai Wallet devs

Not mentioned in the MSMT report was Samourai Wallet, the BTC-based mixer that shut down after its co-founders, Keonne Rodriguez and William Lonergan Hill, were arrested in April 2024. This July, the pair pleaded guilty to operating an unlicensed money transmitting business in exchange for the Department of Justice (DoJ) dropping money laundering charges.

But if the pair thought that plea meant the DoJ would let them off easy, think again. On October 31, prosecutors requested that the U.S. District Court for the Southern District of New York impose 60-month prison terms on each defendant, the maximum sentence permitted under the law. Rodriguez’s sentencing is scheduled for November 6, with Hill learning his fate the following day.

Prosecutors noted that the two developers “repeatedly solicited, encouraged, and invited criminals to use Samourai to conceal their transfers of criminal proceeds—ultimately resulting in large-scale money laundering and sanctions evasion.”

As a result of these solicitations, “at least $237 million in proceeds from drug trafficking, darknet marketplaces, cyber-intrusions, frauds, murder-for-hire schemes, and a child pornography website were laundered using Samourai. That laundering activity was not a byproduct; it was a feature.”

Coin-mixing devs like Tornado Cash’s Roman Storm have become causes célèbres among crypto bros, who tend to ignore the substance of the activities these devs facilitate. In August, Storm was found guilty of conspiracy to operate an unlicensed money transmitting business, a verdict Storm’s attorneys are attempting to overturn. Storm could also face up to five years if his verdict is upheld.

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SBF’s appeal attorneys lay an egg

Speaking of verdicts, the appeal of the 25-year sentence imposed last year on Sam Bankman-Fried (SBF) following the infamous collapse of his FTX exchange didn’t exactly get off to the most promising start on Tuesday.

SBF is seeking a new trial after being found guilty in November 2023 on seven criminal charges, including fraud and money laundering. But a three-judge panel of the U.S. Court of Appeals for the Second Circuit expressed serious skepticism of the merits of SBF’s arguments.

You can read a play-by-play courtesy of the ever-nimble thumbs of Inner City Press, but the gist is that the court isn’t taking kindly to SBF’s ongoing refusal to acknowledge (a) that FTX was insolvent at the time of its November 2022 collapse, (b) that he had no right to use customer deposits for personal investments, political donations and to make up billions of dollars lost through poor trades by his affiliated market-maker Alameda Research, and (c) that he, not his attorneys, was the architect of his own demise.

With his appeal looking like a serious long shot, SBF’s only real hope is securing a pardon from President Trump. Ahead of his appeal, SBF began giving interviews from prison and (apparently) hiring influencers to issue lengthy social media posts attesting to the alleged injustice of SBF’s prosecution, conviction, and incarceration, while continuing to double down on SBF’s fantasies that FTX was never insolvent.

SBF has also tried to claim that he was targeted for destruction by Trump’s Democratic predecessor Biden, after the Dems learned he’d “donated tens of millions to Republicans” in addition to his higher-profile Democratic donations.

(SBF’s mom, Barbara Fried, has gotten into this act, posting a 65-page defense of her son, from whom she and her husband Joseph Bankman received tens of millions of dollars in cash and properties.)

Given the heat that Trump is currently taking from his CZ pardon, and the crypto community’s serious lack of goodwill towards SBF, it seems extremely unlikely that SBF’s appeal to the president will be any more successful than his bid for a new trial. But hey, stranger things have happened, so watch this space.

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