Crypto Journalist

Amin Ayan

Crypto Journalist

Amin Ayan

About Author

Amin Ayan is a crypto journalist with over four years of experience in the industry. He has contributed to leading publications such as Cryptonews, Investing.com, 99Bitcoins, and 24/7 Wall St. He has…

Share

Last updated: 

August 2, 2025

The DeFi Education Fund (DEF), a policy advocacy group backed by an early Uniswap grant, has called on the US Senate Banking Committee to take a more measured approach to DeFi regulation.

In a formal response to the draft Responsible Financial Innovation Act of 2025 (RFIA), DEF and a coalition of top crypto firms outlined a framework they believe can safeguard innovation without undermining national security or consumer protections.

The response was co-signed by a16z Crypto, Jito Labs, Jump Crypto, Paradigm, Multicoin Capital, Solana Policy Institute, Uniswap Foundation, Uniswap Labs, and Variant Fund.

DEF Calls for Clear DeFi Rules, Developer Protections in Senate Response

The DEF’s response pushes for four key pillars, including distinguishing between DeFi developers and intermediaries, defining which entities are required to register with federal authorities, setting decentralization criteria, and ensuring technology-neutral rulemaking.

These suggestions come amid the Senate’s call for public feedback on the RFIA, which builds on the earlier CLARITY Act.

Lawmakers say they aim to strike a balance between market growth and financial oversight, but DEF argues that a nuanced understanding of decentralized systems is essential.

One of the more urgent issues raised in the letter involves the ongoing federal case against Tornado Cash developer Roman Storm.

DEF criticizes current FinCEN guidance used in the prosecution, warning that treating non-custodial software code as a financial service sets a dangerous precedent.

“Software that does not take custody or control should not be regulated as an intermediary,” DEF states, urging legislative clarification.

The coalition also emphasized the need for federal preemption to override conflicting state laws.

According to DEF, without preemption, well-funded traditional financial players could exploit state-level loopholes to target DeFi developers and suppress emerging competition.

Andreessen Horowitz Flags Gaps in Draft Crypto Bill

On Thursday, Andreessen Horowitz (a16z) also urged US lawmakers to revisit and revise the draft crypto regulation bill, warning that the current proposal could open legal loopholes and weaken investor protections.

While the draft seeks to clarify the regulatory landscape for digital assets, a16z argues that the framework as written poses legal and structural risks, especially around the treatment of “ancillary assets.”

Ancillary assets refer to digital tokens sold alongside investment contracts, typically without providing buyers with equity, dividends, or governance rights.

a16z said using this category as the foundation for new legislation “without significant modifications” is problematic.

The firm believes this structure contradicts the Howey test, which is the longstanding legal standard for determining whether an asset qualifies as a security under U.S. law.

“Rewriting Howey,” the letter stated, “would depart from settled law and endanger investor protections.”

Instead, a16z supports the CLARITY Act’s narrower definition of “digital commodities” and recommends codifying a control-based decentralization model.

This would assess whether any party retains unilateral control, operational, financial, or governance, over a blockchain system.

According to the firm, decentralization should mark the point at which an asset transitions from a security to a commodity.

The Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (Fed), and the Federal Deposit Insurance Corporation (FDIC) released a joint statement explaining how existing banking rules apply when institutions custody crypto for customers. 

The guidance describes “safekeeping” as the act of holding a digital asset on a client’s behalf and stresses that it does not create new supervisory demands.

Risk control centers on cryptographic keys

Regulators instructed boards and executives to view crypto custody as a service that relies on exclusive control of private keys and other sensitive data. They note that a bank must prove no other party, even the customer, can unilaterally move an asset once it enters custody. 

Management must assess how key-generation tools, wallet types, and contingency plans align with the institution’s broader control environment and ensure that staff possess the necessary technical skills to maintain these safeguards.

The statement also told banks to weigh the volatility of the asset class and the rapid pace of technological change when allocating capital and staffing for custody operations. 

The agencies said sound programs include continuous reviews of each supported token’s software dependencies and ledger design to spot vulnerabilities that could threaten safety and soundness.

Compliance, governance, and third-party oversight

The three agencies reminded institutions that crypto custody must satisfy Bank Secrecy Act, anti-money laundering, counter-terrorism financing, and Office of Foreign Assets Control rules, including the “travel rule” that attaches identifying information to transfers. 

Boards must involve the BSA officer and senior managers early in any custody rollout to gauge illicit-finance exposure and document controls. 

Additionally, banks that delegate storage to sub-custodians remain responsible for the performance of those vendors. The guidance instructed firms to examine a sub-custodian’s key management methods, segregation of assets, and insolvency protections before signing contracts.

Firms will also be required to build notice requirements for any breach or operational event. Institutions that keep assets in-house but buy third-party software must apply the same vendor-risk disciplines. 

Finally, the agencies requested that auditors expand their testing to include crypto-specific elements, such as key generation, wallet security, and on-chain settlement controls. 

When internal teams lack expertise, management should hire independent specialists to validate safeguards and report directly to the audit committee.

The joint statement concluded that existing fiduciary, custody, and information security regulations already provide a framework for banks that wish to safeguard their crypto.

However, those banks must demonstrate that they can control keys, manage vendors, and comply with federal financial crime statutes in real time.

US spot Bitcoin exchange-traded funds have seen their first joint outflow day in over two weeks, with only BlackRock’s fund seeing a net inflow for the day.

The 11 Bitcoin (BTC) ETFs together recorded a net outflow of $347 million on May 29, ending a 10-trading-day inflow streak, which last happened on May 13, according to CoinGlass.

It is also the largest single day of net outflows since March 11, when $396 million in total left the ETFs.

The latest outflows came as Bitcoin sank by more than 3.5% on the day, falling from an intraday high of $108,850 to briefly dip below $105,000. 

The Fidelity Wise Origin Bitcoin Fund (FBTC) had the largest net outflow for the day, shedding $166 million, followed by the Grayscale Bitcoin Trust (GBTC), which saw an outflow of $107.5 million.

Bitwise, Ark 21Shares, Invesco, Franklin Templeton and VanEck’s ETFs also saw outflows, while funds from CoinShares, WisdomTree, and Grayscale’s mini Bitcoin trust recorded no flows.

BlackRock’s iShares Bitcoin Trust (IBIT) bucked the trend with a net inflow of $125 million. This brought its consecutive trading day inflow streak to 34 days, with the product last seeing an outflow on April 9.

Related: BlackRock in-house portfolio boosts IBIT Bitcoin ETF exposure by 25%

BlackRock’s ETF has now seen just shy of $4 billion in inflows over the past two weeks, with the total inflow figure reaching $49 billion and assets under management for the fund exceeding $70 billion.

Over the past 5 weeks, more than $9 billion has entered spot BTC ETFs, while nearly $3 billion has outflowed from gold ETFs, observed ETF Store President Nate Geraci on May 29. 

Ether ETFs buck the trend

Meanwhile, spot Ether ETFs also bucked the outflow trend with a net inflow of $92 million on May 29, according to Farside Investors.

This brings the inflow streak to 10 consecutive trading days without an outflow, the last of which was on May 15. 

BlackRock’s iShares Ethereum Trust (ETHA) saw the lion’s share of those inflows, with just over $50 million bringing its total to $4.5 billion in inflows since the product launched in July 2024. 

Commenting on the recent SEC clarification on staking not being a securities-related activity, Geraci said it was “Another hurdle cleared for staking in spot ETH ETFs.”

Magazine: Bitcoin bears eye $69K, CZ denies WLF ‘fixer’ rumors: Hodler’s Digest

]]> https://earlybirdsinvest.com/bitcoin-etfs-have-first-joint-outflow-in-2-weeks-but-blackrock-bucks-trend/feed/ 0 39102 https://earlybirdsinvest.com/us-big-banks-hold-early-talks-on-joint-crypto-stablecoin-wsj/ https://earlybirdsinvest.com/us-big-banks-hold-early-talks-on-joint-crypto-stablecoin-wsj/#respond Fri, 23 May 2025 07:10:58 +0000 https://earlybirdsinvest.com/us-big-banks-hold-early-talks-on-joint-crypto-stablecoin-wsj/

In the first major speech to Congress of his second term, President Donald Trump made clear that he intends to barrel ahead with the MAGA agenda.