The Breakdown First Five - Monday, July 1, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

5. Chevron Destroyed

Chevron deference is no more. The 40 year old doctrine that enabled massive expansion of the administrative state has been struck down by the Supreme Court. Chevron required courts to defer to Federal agencies where legislation was ambiguous, allowing regulators to reach for ever increasing power. This has no impact on enforcement, but could seriously hamstring rulemaking creep at the SEC and the CFTC. Expect court challenges. Lots of them. 

4. Governments Keep Dumping

The German and US governments have continued to dump their crypto. The Germans moved $95M worth of Bitcoin this morning, while the US Government moved almost $12M worth of ETH. Germany still has another $2.8B worth of Bitcoin to sell. This was the entire ETH holdings for the US government and was moved to an unknown wallet, perhaps suggesting custody management rather than outright selling. 

3. IRS Crypto Rules Constrained

The IRS have published final rulemaking around crypto and took a far more conservative approach than expected. Custodial exchanges will need to report on their users but DeFi protocols and self-hosted wallets are exempt for now. The rulemaking referenced the need to sift through 44,000 comment letters before dealing with non-custodial infrastructure. 

2. Binance Partially Dismissed

The bulk of the SEC’s lawsuit against Binance can continue save for some very important issues around tokens. The court ruled that BUSD is not a security, querying how anyone can expect a profit from stablecoins. Secondary sales of BNB were also thrown out under the same logic used in the Ripple case. Mounting precedent that tokens are not securities by themselves. The judge also tore apart major SEC legal theories and strategies.

1. SEC Sues Consensys

The SEC have filed their long anticipated lawsuit against Consensys.The complaint alleges that Consensys is an unregistered broker via swap functionality in their Metamask wallet. The SEC is also taking aim at staking, claiming that access to both Lido and Rocketpool was sold as an investment contract through Metamask. The SEC is arguing that liquid staking tokens as a category are unregistered securities, but have not sued Lido or Rocketpool directly.