The Senate's 309-Page Crypto Bill, Broken Down 📜

NEWS
The Senate’s Crypto Bill Has Arrived. The Real Story Is in Title IV 😶

Here’s what’s in the Tim Scott amendment that came out last night. You can read it all here, too. If you like that kind of stuff. I’m going to summarize this as much as possible – I mean as much as 309 pages can be summarize.

Seriously, who writes these things?

Section 404: Stablecoin Economics Rewired

Let’s go ahead and start with the thing that 99.9% of crypto centric people are just going to love (and by love I mean hate, as much hate as when Packer’s fans learned Brett Favre was going to the Minnesota Vikings levels of hate).

Exchanges and other digital asset service providers cannot pay interest or yield to U.S. customers on payment stablecoin balances, including any consideration “economically or functionally equivalent” to bank deposit interest.

Here’s the dicking over crypto carveout compromise:

• Activity-based and transaction-based rewards stay legal when not equivalent to deposit interest

• Permitted categories: validation, staking, governance, market-making, liquidity provision, transaction acceptance, product use

• Rebates calculated by reference to balance, duration, or tenure are explicitly allowed

• Deposit-equivalent loyalty and promotional structures are prohibited

Title I: SEC Posture Flipped

A new Sec. 4B of the Securities Act of 1933 creates two categories.

• An ancillary asset is a network token whose value depends on the entrepreneurial or managerial efforts of an originator or related person, subject to ongoing disclosure.

• A network token is a digital commodity intrinsically linked to a distributed ledger, treated as a non-security under federal securities law.

The mechanism is a rebuttable presumption that every network token is an ancillary asset unless the originator files written certification with the SEC. Isn’t that nice.

Gratuitous distributions get explicit protection across self-staking, self-custodial staking, liquid staking (LSTs treated as administrative receipts), custodial and ancillary staking services, programmatic protocol distributions, and a technology-neutral catchall.

Title III: The DeFi Line

A protocol is decentralized or it is not, based on three structural tests:

• No person or coordinated group holds control authority

• Operations execute solely on transparent on-chain rules

• And no unilateral censorship power exists.

Non-decentralized protocols get pulled into tailored SEC rulemaking and parallel BSA registration via Treasury. Decentralized protocols stay outside the perimeter.

Title IV: The Bank Door Opens

Section 401 authorizes banks, credit unions, and financial holding companies to use digital assets and DLT for any otherwise-permissible activity. Some of the enumerated list:

• Staking and digital asset lending facilitation

• Loans collateralized by digital assets

• Payment activities involving digital assets

• Principal trading for investment or trading purposes

• Node operation and self-custodial wallet software

No additional prior approval required beyond existing banking law. NFTs are excluded.

Title VI: Builders And Users

• Section 601: software developers, validators, node operators, oracle providers, and wallet publishers removed from securities law reach. Retroactive to conduct before, on, or after enactment

• Section 602: NFTs not securities unless the transaction in substance involves all elements of an investment contract.

• Section 604 (Blockchain Regulatory Certainty Act): non-controlling developers not money transmitters.

• Section 605 (Keep Your Coins Act): federal agencies cannot prohibit, restrict, or impair self-custody for any lawful purpose. Treasury, banking, and sanctions enforcement powers preserved.

WTF Is This Doing Here?

Section 904 is the Build Now Act. It adjusts Community Development Block Grant allocations based on housing growth rates, penalizing below-median jurisdictions by 10% and rewarding high-growth areas with bonus allocations.

Yes. A housing thing is in this.

So Now What?

We wait. A quick read and any search will show you crypto centric people are not thrilled.

But keep this in mind: this Senate substitute is not law. It is the Senate’s opening position in the conference negotiation that follows. Issuers, exchanges, and DeFi builders who care have until the markup to make their case.

POLL
Take This Poll 👇️

So far, 48% believe it will pass both chambers. What do you think?

GAMING
Ronin Moves Back In With Parents 🏘️

After four years of running its own chain because Ethereum was too slow and too expensive, $RON ( ▼ 5.69% ) is becoming an Ethereum L2. Sky Mavis is calling it a “homecoming.”

And it’s really all about money numbers. RON inflation drops from over 20% to under 1%. The Ronin Treasury picks up new revenue from sequencer profits and a marketplace fee bump from 0.5% to 1.25%. The network inherits Ethereum’s security via $OP ( ▼ 3.33% ) Stack.

Ten hours of mainnet downtime today, then it is done.

Oh, and they have this cool (well, I think it’s cool) thing called “Proof of Distribution.”. Builders earn automated RON rewards based on a Builder Score weighted across six metrics: gas spend, new users, active users, NFT volume, DEX volume, and contract volume.

Sky Mavis reviews the weights monthly and may change them. The Ronin Marketplace, despite presumably topping most of those metrics, is excluded because it would win too easily. Other “volume processors” may also be excluded (at Sky Mavis’s discretion).

So it is a merit-based reward system where Sky Mavis decides what counts as merit, who qualifies as a builder, and how much each metric is worth, recalibrated monthly.

Let’s see what happens, but the only thing going through my brain is remember a time when $AXS ( ▼ 5.93% ) was over $80 an Axie. Those were some truly insane times.

SPONSORED

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DEFI
AAVE Attack Update: Decentralized Autonomous Organization Receives Centralized Restraining Order 🤔

Quick intro for those of you not in the know: three weeks ago the $ARB ( ▼ 2.94% ) Security Council froze 30,765 $ETH ( ▼ 2.25% ) tied to the rsETH exploit. The plan was straightforward. Release the ETH back into a coordinated recovery to rebuild rsETH’s backing.

Then things got weird.

Plaintiffs holding judgments against North Korea, in a case unrelated to this exploit, served a restraining notice on “Arbitrum DAO.”

Aave LLC filed an emergency motion to vacate. A federal judge held a hearing. On May 8 she issued an order specifying that token holders voting on an on-chain transaction would not be in violation of the restraining notice. So the amended AIP now routes 30,765 ETH to an Aave LLC controlled wallet, where it will sit untouched while the court continues to deliberate.

Meanwhile a forum commenter named Ceazor pointed out that the DAO could just send the ETH back through the bridge and re-back rsETH directly. Which was, more or less, the entire point.

The on-chain vote is live. The ETH is still frozen. The lawyers are still billing. The exploit is still unresolved. The trustless protocol now requires three court filings, an LLC, and a federal judge’s permission slip to do what the temp check already approved.

This Arbitrum forum thread has all the deets.

RWA
Ondo Hits 70% Market Share 👏

$ONDO ( ▼ 9.2% ) crossed $1 billion in TVL on tokenized US stocks and ETFs. Eight months from launch. TVL doubled since January. Growing faster than stablecoins. Over 70% market share. $18 billion in cumulative volume. Well done.

I could probably just leave it there, but when you get into the nitty gritty, it’s impressive.

260+ tokenized US stocks and ETFs across Solana, Ethereum, and BNB Chain. Each token fully backed by the underlying security, held at a US-registered broker-dealer. Tracks total return including dividends. 24/5 trading.

More big deals: Last week (May 6) there was a cross-border tokenized Treasury redemption with $JPM ( ▲ 1.63% ) , $MA ( ▲ 0.4% ) , and $XRP ( ▼ 2.28% ) that settled in under five seconds. Plus the Franklin Templeton ETF tokenization deal earlier this year.

They’re a good example of the crypto space: the only thing bearish is the price action. Adoption, interest, use, etc keeps going up.

CRYPTOTWITS
Stream Signals 📢

A handful of Stocktwits posts worth pulling out of the scroll. 👇️

<blockquote align="center" class="stocktwits-embedded-post" data-origin="https://stocktwits.com" data-id="653067555"

$STRC  $MSTR  $BTC.X
It’s so beautiful to see the control of STRC to par with ATM sales. 2.35 million shares of yesterday’s volume (out of 4.47M total) was ATM — that’s 53% of the total trading.

<blockquote align="center" class="stocktwits-embedded-post" data-origin="https://stocktwits.com" data-id="653096490"

$BTC.X The bulls are fulla crap. Confluence of resistance says most likely next move is down, 38K or lower.

<blockquote align="center" class="stocktwits-embedded-post" data-origin="https://stocktwits.com" data-id="653094567"

$401JK.X
$USDUC.X $NOBODY.X $USELESS.X

What he said 👇🏻

<blockquote align="center" class="stocktwits-embedded-post" data-origin="https://stocktwits.com" data-id="653097473"

$ONDO.X $XLM.X  why are people panic selling?  The bill gets a vote on May 14 in Senate committee from a bipartisan bill.

OLD NEWS
Crypto Stuff That Happened Today, But A Long Time Ago 📜

Here’s what was happening in the newsletter a year ago today:

• Stocktwits launched Cryptotwits one year ago today.

• The on-chain angle was altcoin MVRV – the piece framed names like ETH, LINK, PEPE, ADA, and ONDO as either bargains or value traps depending on how much pain you enjoy.

• Craig Wright got told to knock it off – a UK court effectively said no more legal spam without permission. Long overdue.

• Goldman Sachs kept leaning into BlackRock’s Bitcoin ETF – upping its position to about $1.4B, because TradFi finally admitted the casino has good margins.

OLD NEWS
Other Stuff That Happened Today, But A Long Ass Time Ago ⌛️

May 12

• 907 – Emperor Ai abdicates, the end of the Tang dynasty.

• 1510 – Well, that’s just rude. Zhu Whifan kills all the officials invited to a banquet, beginning the Prince of Anhua rebellion.

• 1780 – American Major General Benjamin Lincoln surrenders to British Lt. General Sir Henry Clinton at Charleston. It is the worst defeat of the American revolution. 3,000 Americans captured along with countless munitions and equipment.

• 1862 – American Civil War – A 22 hour long battle, mostly hand-to-hand and over mounds of the dead (17,000 died), the Union defeats the Confederates. The amount of musket fire was so much that it felled a 22-inch thick oak tree. The stump is in the Smithsonian with bullet and minie balls still embeded in it.

• 1925 – Yogi Berra is born.

• 1935 – Alcoholics Anonymous is founded.

• 1940 – The Nazi’s blitzkrieg of France begins.

• 1978 – The US Commerce Department decided that hurricane names would no longer be female.

• 1994 – Pulp Fiction premiers.

Get In Touch 📬

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Author Disclosure: The author of this newsletter holds positions in AVAX, ADA, PUDGY, WLD, NEAR, INJ, LTC, LINK, ZEC, XLM, and FET. 📋