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Sen. Gillibrand Warns Against a ‘Watered-Down’ Stablecoin Bill

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U.S. Senator Kirsten Gillibrand (D-N.Y.), one of the leading Democrats supporting crypto legislation, warned the industry against pushing for a “watered-down” version of the long-awaited stablecoin legislation currently moving through the Senate, arguing that stringent regulations are necessary to foster innovation and protect investors from bank runs like the one on Silicon Valley Bank in 2023 and the collapse of crypto exchange FTX in 2022.

Speaking at the D.C. Blockchain Summit in Washington, D.C. on Wednesday, Gillibrand said that the bipartisan stablecoin bill — Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) — creates a number of protections for consumers in the event of an issuer bankruptcy scenario.

“You have to think through all the ways this can go wrong. Something as simple as how you define a dollar — is a Treasury the same as a dollar? What happens if your 1-to-1 backing is all in Treasuries and you have an interest rate misalignment like SVB just did, and you have a run on your stablecoin and all your dollar-to-dollar backing is in a three-month Treasury that you can’t get out of – that’s a run on your stablecoin, that’s a collapse,” Gillibrand said.

If dollar-backing requirements are not met or enforced, Gillibrand said: “You’ll just have another FTX. You’ll just have another algorithmic stablecoin that plunges because it never really made sense. That is a huge problem for the U.S. market.”

“The worst thing we could do is water it down,” Gillibrand said. “Do not think that a watered-down bill will help your industry. It will destroy your industry. Because one more SVB, one more algorithmic stablecoin [collapse], just continues to create such uncertainty that nobody wants to do business in the United States.”

After years of false starts, stablecoin legislation appears to finally be gaining momentum. Earlier this month, the U.S. Senate Banking Committee voted to advance the GENIUS Act to a Senate-wide vote. A similar bill from the U.S. House of Representatives is expected to go public on Wednesday.

Read more: U.S. House Stablecoin Bill Poised to Go Public Lawmaker Atop Crypto Panel Says

Gillibrand said that if Congress is able to get the GENIUS Act signed into law, it is then more likely to be able to make progress on a market structure bill.

“A market structure bill is much more complex. It regulates the entire industry, not just one version of a digital asset,” Gillibrand said. “So it’s really important that we do this right so we can move to something much bigger, and something we need to build even broader consensus around.”

A market structure bill would create a regulatory framework for the crypto industry as a whole, giving crypto companies and digital asset issuers clearer rules of the road and a framework to determine whether their tokens are securities or not — and therefore, who their primary regulator is.

Speaking on the same panel, Sen. Bernie Moreno (R-Ohio) suggested that any digital asset with a centralized issuer is likely to be a security, not a commodity.

“If your digital currency has a CEO it’s not a commodity, by definition,” Moreno said.

During another panel discussion at the same event on Wednesday, Sen. Tim Scott (R-S.C.), said the future market structure bill would need to “find a way to create a structure that works beyond the two major categories” of security vs. commodity.

Moreno said he wanted to see the GENIUS Act passed before the August recess.

“I’m gonna lay out the gauntlet — let’s get this done by August recess, what do you think? Markets structure, GENIUS Act, [Strategic Bitcoin Reserve], all done by August,” Moreno said.

Gillibrand tempered expectations, telling Moreno that there was no way to get a market structure bill done by August, but that Congress is “definitely going to get stablecoins done” before the summer break — perhaps, she amended, even before the Easter recess in April, “if we’re really productive.”

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Canary Capital Files for Tron ETF With Staking Capabilities

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Canary Capital is looking to launch an exchange-traded fund (ETF) tracking the price of Tron’s native token, TRX, according to a filing.

The hedge fund submitted a Form S-1 for the Canary Staked TRX ETF with the Securities and Exchange Commission (SEC) on Friday. As the name suggests, the fund — if approved — would stake portions of its holdings.

This would be done through third-party providers, with BitGo acting as custodian for the assets. The fund would track TRX’s spot price using CoinDesk Indices calculations.

A proposed ticker as well as the management fee for the product have not been shared yet.

Issuers had initially filed applications for spot ethereum (ETH) ETFs with the staking feature included but removed them in an amended filing later in order to receive approval from the SEC on their proposals.

While the SEC under former Chair Gary Gensler was strictly against staking, issuers have grown more hopeful that they will be able to add the feature to their spot ether funds, among others, with the appointment of crypto-friendly Chair Paul Atkins.

A decision on a February request from Grayscale to allow staking in the Grayscale Ethereum Trust ETF (ETHE) and the Grayscale Ethereum Mini Trust ETF (ETH) was postponed by the regulator just a few days ago.

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Feds Mistakenly Order Estonian HashFlare Fraudsters to Self-Deport Ahead of Sentencing

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Just four months ahead of their criminal sentencing for operating a $577 million cryptocurrency mining Ponzi scheme, the two Estonian founders of HashFlare were seemingly mistakenly ordered to self-deport by the U.S. Department of Homeland Security (DHS) — an instruction that directly contradicted a court order for the men to remain in Washington state until they are sentenced in August.

In a joint letter to the court last week, lawyers for Sergei Potapenko and Ivan Turogin told District Judge Robert Lasnik of the Western District of Washington that both men had received “disturbing communications” from DHS ordering them to leave the country immediately.

“It is time for you to leave the United States,” an email to Potapenko and Turogin dated April 11 read. “DHS is terminating your parole. Do not attempt to remain in the United States — the federal government will find you. Please depart the United States immediately.”

The email, included with the letter filed last week, threatened both men with “criminal prosecution, civil fines, and penalties and any other lawful options available to the federal government” if they stayed in the country. It resembles emails that undocumented immigrants and U.S. citizens alike have received over the past few days.

Ironically, Potapenko and Turogin are not in the U.S. of their own volition — they were extradited from their native Estonia at the request of the U.S. Department of Justice in 2022 on an 18-count indictment tied to their HashFlare scheme. Though they initially pleaded not guilty to all charges, in February they both pleaded guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and agreed to forfeit over $400 million in assets. They have both been in the Seattle area on bond since last July.

“Although there is nothing Ivan and Sergei would want more than to immediately go home, they understood that they are also under Court order to remain in King County,” wrote Mark Bini, a partner at Reed Smith LLP and lead counsel for Potenko, wrote in the pair’s joint letter to the court. Bini did not respond to CoinDesk’s request for comment.

In his letter, Bini said DHS’s emails had caused both Potapenko and Turogin «significant anxiety.”

“We and our clients have all seen recent news. Immigration authorities make mistakes, and individuals who should not be in custody end up in custody, sometimes even deported to places where they should not be deported,” Bini wrote.

Six days after Bini’s letter to the judge, the DOJ filed its own letter with the court saying that prosecutors had coordinated with DHS’s Homeland Security Investigations (HSI) division and secured a year-long deferral to the self-deportation order.

“This should provide ample time for the sentencing to take place,” the prosecution’s letter said.

DHS did not respond to CoinDesk’s request for comment.

Potapenko and Turogin are slated to be sentenced on August 14 in Seattle. Their lawyers have said that they will request to be sentenced to time served, meaning no additional time in prison, and to be sent home to Estonia “immediately.”

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CoinDesk Weekly Recap: EigenLayer, Kraken, Coinbase, AWS

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Following last week’s tariff-caused drama, this was a relatively quiet week in crypto. Bitcoin remained stable around $84k. The CoinDesk 20, which tracks about 80% of the market, was up about 4% in the last seven days — i.e. nothing historic.

Still, plenty happened. On Tuesday, much of crypto went offline because of a tech issue at AWS, showing how the decentralized economy isn’t always that decentralized. Shaurya Malwa reported the news early. Bitcoin and other major cryptos slipped on bad news for Nvidia, Omkar Godbole reported.

Mantra, a project focused on real world assets, lost 90% of its value. Explanations varied (the company said it was due to “force liquidations” exchanges).

Meanwhile, EigenLayer, a restaking leader, rolled out a “slashing” feature meant to address security concerns (Sam Kessler reported). OKX, a major exchange, announced plans to set up in California following a $500 million settlement with the SEC over claims it operated previously in the U.S. without a money transmitter license. Cheyenne Ligon had that story.

In less good news, Kraken laid off “hundreds” of staff ahead of an expected IPO. And Coinbase became embroiled in a “front running controversy” linked to a curiously named token on its Base L2. Privacy advocates reacted with alarm to rumors that Binance was about to delist Zcash following a long decline in the value of privacy coins.

In D.C. news, Jesse Hamilton reported on a new wave of crypto lobbyists flooding the capital. Some asked if there are now too many trade groups and whether they really all could be effective.

Friends With Benefits, a buzzy social club for creative technologists, launched a new program to build Web3 products for music, film, publishing and other fun activities. (I wrote that one.)

Of course, there was plenty happening in the economy and markets (Trump’s disgust for Fed chair Powell fed into the unease). But, in crypto, it was pretty much business as usual. Fortunes won, fortunes lost, fortunes deferred.

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