“After Show” Thoughts from My Coindesk TV Segment re: CFTC Chair’s Testimony About FTX at Senate Hearing

Today, I did a segment on Coindesk TV’s morning show, First Mover, with hosts Christine Lee and Lawrence Lewitinn. We discussed the CFTC Chairman’s testimony at the Senate Agriculture Committee hearing on the FTX demise and need for amendments to CFTC’s regulatory authority to increase its ability to regular crypto asset spot trading of digital asset commodities like bitcoin and ethereum.

FTX, one of the world’s largest cryptocurrency trading platforms, filed for bankruptcy earlier this month after a series of reports about its shoddy finances triggered a run on its books. FTX also lost billions of dollars in customer deposits on risky bets made by Alameda Research, an investment firm run by FTX founder Sam Bankman-Fried.


Summary of CFTC Chairman Benham’s Remarks:

  • noted that in the absence of stringent and uniform standards, the digital asset market rapidly expanded

  • we need to move quickly on a thoughtful regulatory approach to establish guardrails in these fast-growing markets of evolving risk, or they will remain an unsafe venture for customers and could present a growing risk to the broader financial system.

  • CFTC lacks the necessary and direct authority to write rules and to oversee this marketplace.

  • CTFC is more reactive than proactive due to constraints in the enabling legislation that created its regulatory authority. Instead, it can only reach the crypto market (or commodities market, more broadly) through more limited authority activated when fraud or manipulation has already occurred. By then, it’s already too late.

  • In the absence of direct regulatory and surveillance authority in an underlying cash market, CFTC enforcement activity begins with a referral or whistleblower tip from an external source.

  • Despite this limitation, the CFTC has brought more than 60 enforcement cases in the digital asset space since 2014, with total penalties of just over $820 million. In fiscal year 2022, more than 20% of our 82 enforcement actions involved digital assets.FN3CFTC asks Congress for Comprehensive regulation to protect customers on the front end by stopping fraud before it occurs.

  • He supports the Stabenow/Boozeman bill August 2022: Digital Commodities Consumer Protection Act (DCCPA) to amend the Commodity Exchange Act to provide the Commodity Futures Trading Commission jurisdiction to oversee the spot digital commodity market

  • Under the DCCPA, FTX would not have occurred. Main failures would have fallen within the core protections under this proposed law.Consumer protection is paramount, as well as consumer education of operating safely, legally and confidently in the new digital asset economy.Comes for VPNs, as well. What’s the impact on financial and information privacy?

Finally, Chair Behnam recommended that any legislative amendment strike the right balance to provide sufficient authority and guidance but not hamstring the agency from being able to shift and adjust and evolve with the market. The House Financial Services Committee Chaired by Maxine Waters will hold its own hearing on Dec. 13th, titled “Investigating the Collapse of FTX”.

Watch the hearing and download Chair Behnam’s prepared remarks here.


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A Message to Community-Based Banks: Evolve and THRIVE

November 30, 2022 Copyright 2022. Tonya M. Evans. All rights reserved.

Evolve or die. That has been a consistent and persistent thread running through messaging from staunch crypto advocates regarding the disruptive purpose and impact of bitcoin and the over 22,000 different types of native crypto coins and tokens in the decentralized finance (defi) ecosystem. The point is well made and correct. But I think the fear-based framing is counter-productive and misses the incredible opportunities community banks (publicly or privately owned by local community members) and credit unions (privately owned by its members) can provide in the form of better, faster, less expensive and more creative savings and loans products and features that provide greater access to banking.

Although it is true that with every passing day fintech companies, digital banks, and crypto assets, become more ubiquitous as more investors and consumers access these alternatives to traditional banking and capital asset accumulation. These technological advances in finance continue to create a customer service issue for traditional financial entities (tradfi) because some consumers—especially those who have been historically marginalized—see fintech and blockchain-enabled banking solutions more viable as an alternative to the legacy banking system.

For example, an annual Black Investor report published by Ariel Investments and Schwab, one-quarter of Black Americans (25%) currently own cryptocurrency, and among Black investors under 40, that figure jumps to 38%. Black investors are more than twice as likely to say cryptocurrency was their first investment (11% of Black investors compared to 4% of white investors).

What is a Community Bank?

Community banks are smaller banking institutions (fewer than one hundred branches) devoted to nurturing relationships and prioritizing community care, impact and involvement to provide stability and opportunity to individuals and businesses within a specific local or regional area. Contrast Community banks like credit unions with super-regional banks like PNC and Truist Financial and mega-banks like Bank of America and JPMorgan, that began to proliferate in the late 1990s.

Palm-Powered Banking

With the increased demand for 24/7/365 access to a variety of banking services (and assets) and the ability to review, move, and manage value digitally on feature-rich platforms quickly and securely.

Banks (and the agencies charged with disclosure, compliance, and consumer protection oversight) that are ready, willing, and able to commit time, talent, and resources to reskill and increase digital and new technologies competency, will also be poised to increase positive relationship-based impacts for customers in the communities in which they serve.

Evolve and thrive.


My Thoughts on Copyright Office & USPTO Joint Study to Examine IP Issues Related to NFTs

Copyright 2022 Tonya M. Evans (Twitter/IG: @IPProfEvans)

On Tuesday, November, 22, 2022, the U.S. Copyright Office and the U.S. Patent and Trademark Office (USPTO) announced a joint study to examine various IP issues arising from the use of non-fungible tokens (NFTs). The Wednesday, November 23, 2022 Notice of Inquiry for the Federal Register can be found here.

This joint study follows a June 9, 2022 letter from Senate Judiciary Subcommittee on Intellectual Property leadership, Senators Patrick Leahy (D-Chair) and Thom Tillis (R-Tillis), requesting that the Copyright Office and the USPTO conduct a joint study and address issues related to NFTs and intellectual property rights in consultation with the private sector, drawing from the technological, creative, and academic sectors.

The notice seeks written public comments to several questions listed and also announces that the Copyright Office and USPTO intend to hold virtual public roundtables in January 2023.

A Closer Look at Copyright + NFTs

In late 2017 and early 2018, the era of token proliferation to leverage token issuance to raise funds to build blockchain-enabled projects (with a healthy dose of scams and unregistered securities), I began studying the intersection of copyright and blockchains, smart contracts, open source software and token standards in the Ethereum ecosystem (ERC-20 for fungible tokens and ERC-721 and later standards for non-fungible tokens).

My first law review article, CryptoKitties, Cryptography, and Copyright, presented at the 2019 BYU Copyright and Trademark Symposium and published in the American Intellectual Property Law Association Quarterly Journal, 47 AIPLA 219, 2019), examined the copyright implications of unique, scarce digital creative assets transferred and stored on blockchains, which I refer to herein generally as unique crypto assets (UCAs).

Specifically, I explored the emergence of NFTs created based on the ERC-721, a novel token standard at the time that enabled, for the first time, verifiable digital scarcity—an elusive characteristic in the world of Web 2.0. I analyzed whether ERC-721 tokens (and other non-fungible coding standards) could empower UCA holders to maintain control over their cryptographic creations in gaming, collectibles, and the full range of copyright-intensive industries, to name a few.

More recently, I examined the creative justice opportunities that might be enjoyed by systemically marginalized creatives when NFT and blockchain technology is leveraged.

I assessed whether such web3 technologies could provide and protect the economic power and creative control the Copyright Act promised but historically failed (and fails) to secure when at odds with discriminatory practices, contractual loopholes, and statutory impediments like the copyright transfer termination right.

I hope that stakeholders from all aspect of creativity, technology, education and policy submit comments and are invited to provide testimony during any hearings in these matters. This technology has disrupted copyright-intensive industries as much as it has the financial industry. And we’ve only just begun to explore the power and promise (as well as the pitfalls), to be sure.

In working with creatives and collectors at BlackNFTArt, Umba Daima and Black@, I know firsthand how disintermediated access to platforms that connect them on a peer-to-peer basis globally and to transfer artistry for cryptocurrencies (capital assets in the US) has begun to move the needle on the income and wealth gaps (at least before the current crypto winter).

I also know that numerous issues exist for artists, collectors and exchanges: the copyright complexities in the referenced art file connected to an individual token (because the token, itself, it not the art); direct and secondary liability issues for platforms; copyminting issues; file storage; how to respond to takedown notices and decentralized file storage issues; copyright transfer termination issues; estate planning and post-mortem copyright and license management issues. The list goes on. And that is just copyright!

So there is much to discuss. What intellectual property issues do you see at the intersection of IP and NFTs?

I’ve talked about this topic to several lawyers on my podcast, Tech Intersect, so listen, subscribe, share and let’s continue to conversation: