California State Capitol
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Crypto regulations won’t just be up to Washington

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Wednesday: watching states’ crypto regulations, PayPal’s wallet opening and the secrets of a fintech CEO.

Off the chain

The crypto market’s plunge doesn’t seem to be discouraging Citadel Securities from diving deeper into crypto. CoinDesk reports it’s building crypto trading systems with Virtu Financial with “deep pools of liquidity.” The irony here is that this would, presumably, be off-blockchain trading, because blockchain transactions are expensive. Web3 promises a frictionless financial future, but at least in the short term, the smart money seems to be on grafting centralization back onto it.

— Owen Thomas (email | twitter)

States of change

The big federal crypto bill the industry has been waiting for is finally here — but that won't slow the action at the statehouse. If anything, it might spur more state-level regulation of digital assets. The same day that Sens. Cynthia Lummis and Kirsten Gillibrand introduced the most comprehensive federal crypto legislation yet, a California lawmaker proposed a new state licensing process for companies “engaging in digital financial asset business activity,” joining a long list of active state efforts focused on the industry.

In the absence of clear federal policy, states have taken point for more than a decade on U.S. cryptocurrency regulation. Along the way, they’ve created a patchwork of rules that range from the aggressive approach of New York to the red carpet rolled out in Wyoming.

  • The Responsible Financial Innovation Act, introduced Tuesday by Wyoming Republican Lummis and New York Democrat Gillibrand, hopes to clarify federal policies and includes a provision aimed at making state regulations more uniform. The bill faces a long road to becoming law that almost certainly extends into 2023.
  • In the meantime, the California proposal will join more than 160 crypto-related bills under review in statehouses across the U.S., according to a list kept by the National Conference of State Legislatures.

State crypto legislation is all over the map. That reflects the varying priorities of state legislators, which range from consumer protection to economic development to environmental concerns.

  • New York lawmakers recently approved a moratorium on permits for new cryptocurrency mining facilities powered by fossil fuels.
  • Wyoming and Arizona, meanwhile, are weighing whether to allow residents to make tax payments in crypto.
  • In New Jersey, lawmakers advanced a pair of bills last week creating a state licensing system for businesses that facilitate digital asset transactions. California’s new bill would do much the same.
  • Through a separate effort kicked off last week, California's Department of Financial Protection and Innovation is taking comments on how it should regulate blockchain businesses, based on an executive order from Gov. Gavin Newsom to create "a comprehensive and harmonized framework for responsible web3 technology."

The Lummis-Gillibrand bill has a gentle push toward standardizing things. It includes a provision that would require states to adopt "substantially uniform standards" for how digital assets are treated under money transmission laws.

  • Most states, along with the federal government, require a money transmitter license for cryptocurrency exchanges and other businesses that facilitate transactions. A common industry complaint is a lack of clarity and consistency in that process.
  • For states that have not adopted a uniform money transmitter standard, the Consumer Financial Protection Bureau would be authorized to step in and enforce licensing rules based on the standards adopted in other states, according to language in the bill.

Many in the industry are still weighing its potential impact. "Certainly anything that makes it easier and creates more uniform regulation is generally positive," said Kristin Smith, executive director of the Blockchain Association, which offered support for the bill as a whole. In the meantime, the industry will stay busy. It’s not enough to watch Washington: They’ll have to track statehouses from Albany to Sacramento, too.

— Ryan Deffenbaugh (email | twitter)


A resounding 96% of respondents claimed that there is work to do in digitizing their AR departments, yet 60% agreed that their AR departments haven’t been prioritized as much as other departments for digitization. At a time when the importance of securing cash flow is higher than ever, many businesses are not putting enough focus on it.

Learn more

On the money

On Protocol: PayPal users can now transfer their crypto to and from PayPal and other wallets and exchanges, a new feature that could make its existing crypto wallet a little more useful. While there are no transfer fees, network or gas fees may apply. started accepting stablecoins as a payment method. Through a partnership with digital asset security firm Fireblocks, the payments company will allow merchants to accept payments in USDC.

BlockFi is reportedly raising a down round. The Block says the company is close to finalizing an investment at a fraction of its previous $1 billion valuation. A BlockFi spokesperson called the report “market rumors.”

Shopify CEO Tobi Lütke won special voting rights. The company’s shareholders voted to allow Lutke to have at least 40% of the voting rights of the company, dubbed the “founder share,” under certain conditions.

Circle announced support for Polygon USDC on its payments and treasury products. Circle CEO Jeremy Allaire said that the move is “another step toward making USDC interoperable across more leading blockchains,” and will allow businesses to more easily accept payments in USDC with Polygon’s often-lower fees.


A16z partner Sriram Krishnan thinks crypto critics should keep their day jobs, saying that an “interesting vibe shift is the rise of the 'anti-crypto media personality.'” OK, but if a16z doesn’t like what the media is saying, couldn’t it fund an audio-broadcasting network, or a newsletter startup or its own explicitly pro-tech news site?

David McDonough, founder of Commonstock, just exposed a harsh reality of a day in the life as a CEO. “Figma is down so I can't do my job. Devastating. (99% of my job as CEO is asking designers for the Figma file to ‘make some small tweaks’),” he tweeted.

Binance CEO Changpeng Zhao wasn’t happy about a Reuters report that said that the crypto exchange served as a conduit for money laundering schemes, and went on the defense. “This is 50+ pages of email records between our cyber security team (ex-law enforcement background) and the cherry picking, misleading, and time wasting journalists,” he tweeted.

Just one question for Sergey Nazarov, co-founder of Chainlink

Sergey Nazarov is a veteran tech investor and entrepreneur who has been rumored to be Satoshi Nakamoto, a claim he’s denied.

What fintech trend is most troubling to you?

Large consumer-focused brands aggregating massive amounts of trading or asset management volume from retail consumers, while giving them no guarantees about those assets or trading relationships actually being available to them when it counts the most.


A resounding 96% of respondents claimed that there is work to do in digitizing their AR departments, yet 60% agreed that their AR departments haven’t been prioritized as much as other departments for digitization. At a time when the importance of securing cash flow is higher than ever, many businesses are not putting enough focus on it.

Learn more

Thanks for reading — see you tomorrow!

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