Fed raises Interest Rates
EU Rejects Proof of Work Limitations
The EU has rejected a rule that would have banned Proof of Work mining. The proposed Markets in Crypto Assets (MiCA) framework included a last-minute addition targeting this energy-intense mining, but the addition was struck down by the European Parliament’s economic and monetary affairs committee this week.
The proposal had received huge backlash from the crypto industry worldwide, and Jake Chervinsky, Head of Policy at the Blockchain Association, had suspected that MiCA’s PoW ban was “a pretext for a bitcoin ban.” He said:
“Make no mistake: if they manage to ban PoW, they’ll come for PoS next, & every other Sybil resistance mechanism after that.”
This decision now marks a strong win for crypto miners across 27 countries in the European Union, and it will continue to allow competitive mining and potential for widespread growth in that region of the world.
Patrick Hansen, head of strategy at Unstoppable Finance, explained that this doesn’t necessarily mean the battle is over.
“The groups that lost the vote have one last option. They could veto a fast-track procedure of MiCA through the trilogues & bring the discussion to the plenary of the Parliament. They need 1/10 of the votes of the EP to do so, which they have.”
Additionally, a slim majority of the committee did vote in favor of a compromise that addressed climate change issues and called for accountability:
“By 1 January 2025, the Commission shall present to the European Parliament and to the Council, as appropriate, a legislative proposal to amend Regulation (EU) 2020/852, in accordance with Article 10 of that Regulation, with a view to including in the EU sustainable finance taxonomy any crypto asset mining activities that contribute substantially to climate change mitigation and adaptation.”
Overall, the show of strength from the crypto community succeeded in protecting bitcoin for the time being, as regulatory crackdowns continue worldwide.
Julian Assange Appeal Denied
Julian Assange's request to appeal his extradition back to the United States has been denied by the UK Supreme Court. A spokesperson stated that the reason it was denied was because Assange's application did not raise "an arguable point of law".
The US government has been chasing Assange since he published leaked documents in 2010 that exposed corruption and war crimes by various world governments, including the United States. For seven years he had refuge in the Ecuadorian Embassy in London. In 2019 Assange’s asylum was revoked by Ecuador, he was arrested and dragged from the Ecuadorian embassy, and the US unveiled an indictment and extradition request against him. The US indictment against him cites a breach of the 1917 Espionage Act for his journalistic ventures, and Julian Assange has been fighting against their extradition request ever since. He has now been in Belmarsh maximum security prison, the UK’s Guantanamo Bay, for over 3 years.
Assange originally won his first appeal against the US extradition request — but not because the judge wanted to uphold freedom of the press. Instead Assange won on the grounds that he was not in a stable enough mental condition to go to the US. The judge ruled that the awful conditions he would be subject to in the US might lead him to self-harm, and she cited the treatment of Chelsea Manning as precedent.
That decision was then overturned in 2021 when the US convinced the UK judge that they’d protect Assange whilst he was in their custody.
To be clear — the same government that organized assassination plots against Assange swore they’d look after him. And the UK judge believed them.
Assange appealed again, and the Supreme Court just announced they wouldn’t hear the appeal.
The rejection was expected, though, because he was appealing to the same person that had just agreed to the US extradition in the first place — he was literally appealing to this same judge to overturn their own initial ruling.
Wikileaks reported that the decision now goes to UK Home Secretary Priti Patel to authorize the extradition.
After approval, Assange will have one last opportunity to challenge the ruling in a final appeal to the High Court.
The corruption and vindictiveness involved in this case against Assange is staggering. Assange’s brother revealed to me the whole story in an interview, recently shared by wikileaks. A must watch for anyone who wants to understand the actual state of Freedom of the Press in the world.
The Fed, The Can, and The End of the Road
The US Federal Reserve has raised benchmark interest rates by .25% in its first rate hike since 2018. Fed Chair, Jerome Powell, said:
"We feel the economy is very strong and will be able to withstand tighter monetary policy."
Whether the economy is actually strong enough, and what that actually means anyway, seems a secondary concern to the fact that the Fed has backed itself into a very tight corner. Inflation is soaring, hitting a new 40-year high of 7.9% this February, and the hope is that raising interest rates will help slow this down.
Essentially how this complex mechanism of centrally controlling the money supply works is that the Treasury issues bonds (basically IOUs from the government) and then places like Goldman Sachs and JP Morgan buy these bonds from the Treasury. Then the Fed prints money to buy these bonds from the banks. If they buy fewer bonds (and hence print less money to do so) then the price of the bonds will go down (simple supply and demand).
Because the bond is itself an IOU with the government saying “we agree to pay you x amount in 5, 10, 20 years etc” then if the initial price you pay for that bond goes down, you are essentially getting more money when the government eventually pays you for it. Or in other words, you’re getting more “interest”. So the mechanism of setting the interest rate higher essentially means “we’ll print less money, to make the current price of bonds lower, so that the interest you get on your initial purchase is greater. The main macro impact of Fed policy is not through changing rates, but through changing money supply.
Interest rates have been kept close to zero for years, and now “.25%” interest is being called “hawkish” as the Fed finally starts to reign in their incredibly loose monetary policy. The coming credit crunch will likely make the road ahead (where the government has been kicking the can for a very long time) a very bumpy ride. Hang on tight.
Ukraine Legalizes Crypto
Ukraine has officially legalized the crypto sector after receiving more than $100 million in cryptocurrency donations to help fight against the Russian invasion. President Zelensky signed a bill into law this week that “determines the legal status, classification, ownership and regulators of virtual assets, as well as setting registration requirements for crypto services providers,” according to a statement from the Ministry of Digital Transformation.
The statement detailed that Ukraine's National Commission on Securities will be handling the regulatory aspects, and their Ministry of Finance will be “working on amendments to the country's tax and civil codes to fully launch the market for virtual assets”. Cryptocurrency has proven to be a lifeline for many in Ukraine. It’s great to see a country where politics is keeping up with the people’s needs when it comes to money, rather than standing in the way.
Elizabeth Warren’s Unconstitutional Crypto Bill
Senator Elizabeth Warren introduced a new bill to Congress this week designed to target those who would use and develop crypto/blockchain technology to get around Russian sanctions. The Digital Asset Sanctions Compliance Enhancement Act states that its purpose is “to impose sanctions with respect to the use of cryptocurrency to facilitate transactions by Russian persons subject to sanctions, and for other purposes”.
The language in this bill is reminiscent of the much debated “broker” definition that made its way into the $550 Billion infrastructure bill late last year. Essentially, this new crypto bill would overbroadly define “transaction facilitator” to include software engineers, developers, crypto exchanges, even participants in conversations on “communications platforms.” Coin Center said:
“The bill would place sweeping restrictions on persons who build, operate, and use cryptocurrency networks even if they have no knowledge or intent to help anyone evade sanctions. It calls for sanctioning technologists and users merely for the act of publishing open source software or facilitating communication among network participants. This is unnecessary, overbroad, and unconstitutional.”
Not only is the bill unconstitutional, it’s also predicated on a fabricated narrative. Experts in government and across the crypto industry alike have published findings that crypto is not being used by Russia to avoid sanctions in any meaningful way. In fact both the White House and the Treasury Dept have said that Russia’s potential usage of cryptocurrency to fund its war efforts would not be a viable tactical route.
Carol House, the director of cybersecurity for the National Security Council, during a webinar on Wednesday, said:
“The scale that the Russian state would need to successfully circumvent all U.S. and partners’ financial sanctions would almost certainly render cryptocurrency as an ineffective primary tool for the state.”
The Treasury said:
“The scale of what they have to move, and where they have to move things from, [crypto’s] not necessarily going to be that concerning,” said Todd Conklin, counselor to the deputy Treasury secretary. Any attempt to move that much money through exchanges would contribute to “a bit more of a spike in the crypto market, in my view, than has been observed lately.”
Nevertheless, Warren tried to paint coin mixing and non-custodial wallets as sanction-evading tools in a senate hearing this week (never let a good crisis go to waste, as they say). Jony Levin, co-founder of Chainalysis, shut down her accusations, saying that these tools don’t make it any easier for people to hide their funds (and this should also be a wake up call for those who still consider coinjoin a robust privacy solution).
Despite these attempts to take monetary power away from individuals, it seems this bill is currently toothless. Jerry Brito tweeted:
"It is not time to call Congress. This is not a moment to pull the red alert lever. This bill, as it stands, so obviously lacks support that it likely won't move. Let's not cry wolf."
Let’s hope this is the case.
By Will Sandoval, NBTV Associate Producer, and Naomi Brockwell.