Following our comment letter to the OCC, this letter responds to the @FDICgov notice of proposed rulemaking relating to GENIUS Act implementation. Our comments track what we told OCC but differ in some material respects. First, the rebuttable presumption extending the yield prohibition beyond stablecoin issues to “related third parties” should be narrowed because the statute does not authorize it. Companies like @metamask that have branded distribution deals are beyond what the law says is prohibited, are akin to plenty of other commercial arrangements in the financial system, and shouldn't be barred if we want to adopt the best pro-consumer policies. Second, non-custodial software interfaces that facilitate user access to independent DeFi protocols are outside the scope of the proposed rule, consistent with the GENIUS Act’s self-custodial software carve-out. This seems obvious but we need to say it nonetheless Third, the FDIC’s permissive approach to multi-brand issuance, its discretionary approach to consequences for reserve and capital shortfalls, and several other points where the FDIC has departed from the OCC’s more prescriptive proposal reflect sound policy judgment and should be maintained. You got it write FDIC so stick to your guns during interagency deconfliction! Fourth, the proposed rule should be careful to properly conceptualize and categorize cross-chain stablecoin representations and ledger and smart contract architecture. Accuracy here will meaningfully impact the industry. As always, our sincere gratitude at the work the @USTreasury and its sub agencies are putting into this and the speed with which they are going.

We have a small securities problem that impacts DeFi but that no one has really been talking about. While we all (rightfully) applaud the @SECGov interpretive guidance on token taxonomy and the Division of Trading & Markets staff guidance on registration of neutral crypto self custody wallets and DeFi interfaces, there is an issue when you read the two side by side. Did you catch it? If you don't want a spoiler, then stop reading here. For those who read on . . . you know that digital commodities are outside the SEC's purview. The Interpretive Guidance says it. You know that to avoid registration you need to make your interface very neutral if it is going to allow users to trade tokenized securities. That's what the Staff Statement says. But what about transactions in non-security crypto assets that remain "attached" to an investment contract? Those transactions are securities transactions, says the Interpretive Guidance, but the Staff Statement doesn't say anything about the registration requirements of an interface that users employ to transact in them. This is a HUGE category of tokens. Like basically all of them. 99% of them. If we got nothing else from the SEC, what do we, your humble yet tenacious US-based wallet and interface providers, do? Maybe each of us simply figures out which non-security crypto assets are attached to investment contracts and which have "separated", as the Interpretive Guidance lays it out. I'd love to do that. Really I would. But I'm afraid that just isn't going to work. Not only is the "attached/separated" concept brand new with very little (none?) guidance on how it is to be applied, but also its built on the Howey doctrine which is generally messy and has had very little to say so far on secondary transactions. Most important, how on earth are we to expect wallets like @MetaMask to look at the universe of tokens - thousands and thousands of tokens which we have nothing whatsoever to do with especially as it relates to issuance - and be able to parse which ones have outstanding representations and promises that make them subject to an active investment contract (and not only a single assessment, mind you, but one that you have to make continuously!)? Maybe we could do that when artificial super intelligence takes over and I and my colleagues lose our jobs to all-knowing robots, but until then, it's just not possible for us to do. We wave the white flag on it. So what DO we do? We all come together and work on exemptive relief with the @HesterPeirce-led Crypto Task Force and with the hard working staff of Trading & Markets. (Ed note: These little regulatory wrinkles/snafus/gaps are simply unavoidable, and that is why you get the public's comments and iterate - which is exactly what the SEC is doing.). We get a safe harbor for good faith, transparent interfaces that avoids harsher securities-focused restrictions that put a drag on potential innovation. And wallets and interfaces in the good ol' U.S. of A. will be able to lead the pack instead of struggling to compete with foreign wallets and interfaces which aren't mindful of SEC guidance. Our letter is available below. The more the merrier in advocating for this important issue.