Max LeValley

Financial regulations are just protocols carried out by inherently self-interested human beings who routinely mess up the rule at each stage of the process--and often do so intentionally to their benefit. Smart contract protocols carry out the rule exactly as stated. While harm may result from, for example, a bug in the code, it still operated as it stated it would. This is a much different risk and belies the absurdity of regulators--who have a duty to understand the tech they seek to regulate--continuing to argue that financial regulations designed to mitigate human deceit should apply, exactly as they are, to open-source computer code.

@norbertjmichel Congress seems pretty intent on going even further in the opposite direction: x.com/mt_levalley/st…

The FDIC's push to apply strict BSA standards to stablecoin issuers is a predictable script: take a broken legacy surveillance dragnet and force new technology into it. It won’t stop criminals, but it will turn your financial data into an open book. We will never realize the full potential of crypto until Congress rolls back the constitutional infringements of the BSA. @HesterPeirce @EconWithNick @CatoCMFA

Laws prohibiting yield on stablecoins (e.g., EMD2, GENIUS) mistake a boundary drawn around banks for a boundary required by money. Deposits needed a special regime because banks transformed short-term runnable claims into long-term risky assets and then received public support when that structure proved fragile. Fully collateralized stablecoins did not need to inherit that architecture. A blockchain-based payment system can separate payments from credit rather than separating payments from yield. Yet, somehow, here we are.

Government backing isn’t inherent to deposits. It’s a legal benefit given to them because of their otherwise unacceptable risk. If I'm interpreting your point correctly, it assumes the conclusion: deposits are safer because the law protects them, stablecoins riskier because it doesn’t.

@faryarshirzad @greg_ip @WSJ Deposit monies are backed by government guarantees; stablecoins are not.

A piece from @greg_ip in @WSJ today asks whether stablecoins are a risk to the economy because they are "private money." It's a fair question, but the framing skips over how the US monetary system has actually worked for 160 years. "Private money" isn't the exception in our system — it's the rule. Roughly 90% of M2 is privately issued: commercial bank deposits and money market fund shares. Each carries different risks and is regulated commensurately — banks by Basel, capital, FDIC, and stress testing; MMFs by SEC liquidity rules; and now GENIUS stablecoins by a purpose-built federal regime. The right question isn't "public or private." It's whether the regulation matches the risk. GENIUS does.

@Aarondklein @austincampbell @faryarshirzad @greg_ip Have you ever stopped to consider why banks would be regulated that way and require FDIC backstopping? Perhaps because there's a significant difference between fractional and full reserve models?

@austincampbell @faryarshirzad Stop with the bank comp. Banks are prudentially regulated and FDIC insured neither of which stablecoins have. Banks make loans to people/businesses. Stablecoins facilitate crypto trading and illegal randoms in crypto. They don’t do payments as @greg_ip clearly puts it

1) Stablecoins are backed by Treasuries that lose value when interest rates move (what bankrupt SVB) 2) Companies like Coinbase and Kraken offer rewards greater than what Treasuries pay. @faryarshirzad how do you that without incurring risk?

This is disappointing. You guys especially should be able to see the value of an unintermediated, transparent alternative to the global financial institution-dominated, intermediated, traditional system. You’re unintentionally doing the bidding of the latter, while justifying it with the rhetoric of the Patriot Act.

The Senate is nearing a vote on the Clarity Act. The bill would make it easier for criminals to use crypto to launder money, and doesn't restrict Trump and his family from making billions. The Act would also deregulate the industry, and let banks put your savings into crypto.

Ethereum has been winning, is winning, and has never lost. The most-used subprotocol or subchain by actual users is EVM-based. Every major wallet either supports ETH natively or is built entirely on EVM architecture. Every chain that tried to compete failed to attract meaningful developer adoption. Algorand, Tezos, Polkadot - none crossed the threshold. Most “ETH killers” eventually found a single niche and settled: NEAR became a solid intent-based bridge layer, TRON became a USDT wallet. That’s not winning, that’s narrowing. Cheap L2s never retained long-term users either. The pattern is always the same: airdrop announcement, usage spike, MEV bots flood in because gas is cheap, then silence. Base is a clean example of that cycle. Ethereum sets the vision. Every fork and new proposal chases the EIP backlog because the entire infrastructure stack - Etherscan, Infura, Alchemy, Blockscout - standardized on EVM. Deviate from that standard and you’re on your own. That’s why deploying a forked contract to TRON is a nightmare, why Optimism shipped multiple broken hard forks chasing weird gas estimation edge cases, and why dapp developers refuse to write chains of if/else blocks just to handle behavioral differences across 10+ forked EVMs. No one wants that complexity in their JavaScript. No wallet team wants to maintain it either. Conform to EVM or get left behind. Ethereum didn’t enforce that rule - the ecosystem did.

@SenLummis What about the limbo that Section 302 newly creates for noncustodial DeFi interface operators? It basically says “Treasury can decide whether the BSA applies” despite treasury already deciding the BSA doesn’t apply based all existing law/rulemaking/guidance.

I’ve sat through years of hearings, negotiations, and rewrites to get the Clarity Act to this point, and the reason is simple: American consumers and industry deserve a real framework, not regulatory limbo.

@JacobRobinsonJD @SenLummis x.com/mt_levalley/st…

@SenLummis Thank you for your tireless, years-long work on this. (For those interested in what's inside CLARITY, I spoke to the leading legal experts who explained) x.com/JacobRobinsonJ…

Every single day, digital asset companies are moving offshore because Congress hasn’t done its job. My bill, the Clarity Act, fixes that. I will continue to fight to ensure America leads the way in digital asset regulation.

TLDR = Crypto makes illicit activity *more visible*, which makes the actual amount of crime feel larger than it is. But higher visibility into crime is not the same as higher underlying criminality. A glass house looks dirtier than a concrete bunker because you can actually see inside it.

@mt_levalley @jessevantol I’m not sure I follow that public info v no info unless voluntarily provided?

Definitely going to tune into this. So many believe the BSA is broken and absurdly inefficient. Very few (including myself) have concrete solutions. The answer may simply be that the amount of cost and lack of privacy just isn’t worth what BSA produces

@ddisparte @WhiteHouse I know Circle won't be affected but food for thought if you care about DeFi's competitiveness going forward: x.com/mt_levalley/st…

Because hurry up and wait is not a national strategy when it comes to harnessing and winning a global fintech race. The @WhiteHouse executive order on integrating financial technology into regulatory frameworks accelerates progress made by the GENIUS Act and the potential of the Clarity Act, all of which advance U.S. economic competitiveness and security. whitehouse.gov/presidential-a…

That's why it's important to break it down to first principals: based on its irreducible components, which system would I expect to be better at identifying illicit activity? The one with an inherently public ledger of transaction data or the one where the ledger is inherently private? The answer should be obvious.

It is good-faith reliant when the profits of looking the other way are likely to exceed the penalties. And why is "hardly perfect" sufficient for TradFi but for DeFi, your standard is it has to "actually stop the illicit activity"? And that's leaving aside that we are comparing a system that has had hundreds of years to iron out the kinks to a system that has existed for about ten years tops.

@jessevantol @RogueCfpb Dude the argument is literally "public txn info > no info unless voluntarily provided." If you aren't able to give an inch on that, then agree to disagree I guess.

@mt_levalley @RogueCfpb I’m sorry didn’t you just say lower incidence? Now you’re saying same incidence. So many of these arguments are “it’s better because I believe it’s better because it’s obviously better.”

@jessevantol @RogueCfpb The only reliable data we have comes from the DeFi side--again because there's a record to review. It's not a tight comparison but it's about the same percent of all transactions, even going off of self-reported numbers on the TradFi side.

@mt_levalley @RogueCfpb Could you point to the data or evidence that there is lower incidence?

@RogueCfpb @jessevantol The relevance is there is a lower incidence than the existing system due to that public record. Nothing will ever "prevent" illicit money movement. It's about being better at identifying it.

@mt_levalley @jessevantol I think you’re forgetting how this discussion started. It started with the comment about how crypto has a public record. And I asked what the relevance was, since it doesn’t seem to prevent money laundering or illicit money movement. That’s it.

@jessevantol @RogueCfpb Is your takeaway from this, "boats facilitate money laundering so apply AML"? home.treasury.gov/news/press-rel…

@mt_levalley @RogueCfpb You’re having a conversation about “understanding.” I am not. I’m having a conversation about actual enforcement and liability. On “understanding” I agree with you. It’s great to understand that North Korea and Iran heavily use crypto for illicit activities.

@jessevantol @RogueCfpb Which messaging systems that banks/TradFi use to facilitate movement of funds are also themselves regulated as Financial Institutions under the BSA, again? Oh right, none. Application of the BSA, is and always has been, tied to the intermediary taking custody/control of funds.

@mt_levalley @RogueCfpb Reporting also exists for banks as part of extending AML/BSA liability to them. CLARITY will help with this for crypto companies, but many of them have not been in favor of that being a robust framework.

@haydenzadams if Congress gets their way, the "on DeFi" part is a big if: x.com/mt_levalley/st…

the worlds value will be tokenized and trade on defi

@jessevantol @RogueCfpb Requiring persuasion that de facto access to transaction data is more useful for understanding transactions than a system where data exists only if voluntarily provided says a lot about your priors.

@RogueCfpb @mt_levalley I also notice that the biggest proponents of “a public ledger is better for identifying illicit finance” are fighting the hardest to ensure crypto firms have little or no liability for BSA/AML. Seems odd - if it’s so easy to identify who is moving $ b/c it’s on a public ledger