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Welcome to the On the Margin Newsletter, brought to you by Ben Strack, Casey Wagner, and Felix Jauvin. Here’s what you’ll find in today’s edition:

• It’s debate day! Ben breaks down where the candidates stand on crypto. 

• An ETF giant looks to be different as it enters the crypto fund game. 

• Congress has been back for 24 hours and they’re already fighting about digital asset policy.

Crypto’s an election issue. But is it a debate issue?

Perhaps a crypto question is coming at tonight’s presidential debate. Perhaps not.

Industry folks certainly view this as a good time to get more details on each of the candidates’ crypto stances. A Chamber of Progress executive sent a letter to tonight’s moderators asking that they pose such an inquiry to Donald Trump and Kamala Harris.

(Check out our full debate preview here.)  

But there are plenty of other big issues expected to be touched on — from inflation to immigration — so expecting to get crypto clarity from the candidates tonight may be optimistic thinking.  

Even if the presidential hopefuls aren’t asked about crypto specifically, remarks about fostering innovation or regulatory agency leadership could be telling, industry watchers told Blockworks.

On that latter point, big Democratic donors are reportedly pressuring Harris’s team to replace SEC Chair Gary Gensler and Federal Trade Commission Chair Lina Khan if the VP becomes president. Trump already vowed to fire Gensler, if elected, during a speech at the Bitcoin 2024 conference in July.

Just hours ahead of this historic debate, let’s take a look at some of the events that have led up to the political clash — highlighting how crypto has become an election issue. 

May 21: The Trump campaign revealed it would begin accepting crypto donations.  

May 31: President Joe Biden vetoed a resolution (deemed as pro-crypto) that would have invalidated the SEC’s SAB 121. Exodus legal chief Veronica McGregor previously told Blockworks she doesn’t think it’s fair to “saddle [Harris] with ownership of everything the Biden administration has done or not done with crypto.” Still, the less Harris says about crypto, the more she is likely to be associated with Biden on this issue.

June 11: Trump met with bitcoin mining executives at Mar-a-Lago. He praised an ASIC machine as “beautiful American technology,” according to Marathon Digital executives, who said they shared specific policy proposals with the former president. This came around the time Trump said via Truth Social that he wanted “all the remaining bitcoin to be made in the USA.”

July 8: The GOP party platform states: “Republicans will end Democrats' unlawful and unAmerican Crypto crackdown and oppose the creation of a Central Bank Digital Currency.” Various industry watchers have said crypto should not be a partisan issue.  

July 27: The former president told a crowd at Bitcoin 2024 in Nashville (along with the previously mentioned pledge to oust Gensler) that he would stop government sales of seized bitcoin and create an advisory council focused on crypto issues.  

Aug. 14: Several Democratic heavyweights appeared during a virtual “Crypto4Harris” event alongside SkyBridge Capital founder Anthony Scaramucci and billionaire Mark Cuban. Perhaps most notably, Senate Majority Leader Chuck Schumer said he believes the Senate can pass “sensible” crypto legislation by the end of the year. Still, some criticized the fact that no one from Harris’ team was present. 

Aug. 21: A policy adviser for the Harris campaign told Bloomberg News (when asked about crypto) that the VP would “support policies that ensure that emerging technologies and that sort of industry can continue to grow.” The Harris campaign has not returned Blockworks’ requests for comment.  

Sept. 5: Trump doubled down on a promise to make the US “the world capital for crypto and bitcoin” during a speech at the Economic Club of New York. This came about a week after he posted a video on X that tagged Liberty Financial and made a similar promise.

With that, the stage is set, so to speak. We’ll be here tomorrow to digest what went down.

— Ben Strack

The number of US companies that currently hold a special purpose broker-dealer license from the SEC. 

Financial technology company tZero said on Tuesday it received clearance from the SEC and FINRA to custody digital securities, which the company says will go into effect early next year. tZero joins Prometheum, who became the first firm to obtain such a license in May 2023.

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Congress’s second day back after the Labor Day recess kicked off with a bang: a hearing on DeFi (a first for Capitol Hill) in the House Financial Services Committee. 

Democrats and Republicans, as expected, clashed at the hearing, hosted by the HFS’s digital asset subcommittee. 

The goal was to “explore emerging topics like tokenization and DeFi” and “consider how blockchains can be used in finance,” according to subcommittee chair French Hill, R-Ark. Some of his colleagues across the aisle, however, questioned whether DeFi has any use beyond facilitating criminal activity. 

“What we have here is an effort to liberate billionaires from income taxation,” Rep. Brad Sherman, D-Cali., told witnesses, adding that DeFi technology allows the wealthy to avoid tax obligations. 

“Every time a billionaire successfully cheats on his taxes, a member of the Freedom Caucus earns his wings,” Sherman said.  

Witness Peter Van Valkenburgh, director of research at Coin Center, later countered Sherman, arguing that regulators have not given actors in the crypto industry enough guidance on how to comply with regulations. 

“Tax evasion is a crime; it should be aggressively policed,” Van Valkenburgh said. “I do not, however, think that tax evasion and its existence warrants a 100% surveilled and controlled financial system.

“A difficult area in the cryptocurrency space has been getting clear tax guidance from the IRS on how Americans can pay their taxes when they earn capital gains, or perhaps their wages, on these networks,” Van Valkenburgh added. 

The hearing comes as the Sept. 30 deadline for Congress to pass a spending bill looms. Lawmakers are scheduled to recess again on Sept. 27 (until Nov. 12 for the election), but an out-of-session vote could be called should they need more time. They probably will.

— Casey Wagner

The “big three” ETF issuers are BlackRock, Vanguard and State Street Global Advisors — at least from an assets under management perspective. 

Now two of them are in the crypto fund game.

BlackRock’s ETF AUM amounts to roughly $3 trillion. In Vanguard and SSGA ETFs: nearly 2.8 trillion and $1.3 trillion, respectively. Invesco is in a distant fourth place with about half of SSGA’s total.

We know about BlackRock’s crypto ETF success — with its iShares Bitcoin Trust (IBIT) so far growing to $20 billion in assets and its ether ETF notching $1 billion of net inflows since its July 23 launch. 

Vanguard has said it has no interest in launching crypto ETFs (or letting clients buy them on its platform), arguing that crypto products don’t fit in “a well-balanced, long-term investment portfolio.” 

That leaves State Street’s asset management arm, which is getting involved in its own way.  

Though not yet looking to offer a spot bitcoin or ether product, SSGA revealed on Tuesday the launch of its Digital Asset Ecosystem ETF (DECO), Hedged Digital Asset Ecosystem ETF (HECO) and Transformative Tech Accelerators ETF (TEKX). Galaxy Digital is managing these portfolios as the sub-adviser.

DECO and HECO each target crypto- and blockchain-related stocks, ETFs and futures contracts — with HECO also designed to manage volatility via covered call options and protective put options.

TEKX targets “companies within the value chain supporting new disruptive technologies,” including both blockchain and AI.

So why not spot ETFs? Well, SSGA chief business officer Anna Paglia said in a statement: “Some investors are not comfortable with the short-term, volatile price swings of single-currency crypto.” 

The actively managed approach with diversification in mind is the “next evolution of this market,” she added. 

We’ll see what other crypto ETFs SSGA comes up with going forward. When it comes to a spot offering from the firm, never say never.

— Ben Strack

How are crypto venture capital and growth equity markets faring? 

Hear some of the leading investors in the digital assets space in Salt Lake City at Permissionless.

• Crude oil futures have hit a 52-week low, signaling that traders are worried about an economic slowdown and recessionary conditions. More lackluster economic data is likely to send prices lower. 

• The Monetary Authority of Singapore has launched a probe after some Worldcoin users allegedly transferred ownership of their accounts to illicit actors. Worldcoin’s World ID, launched last year, is advertised as a permissionless protocol for users to verify their identities. 

• In a sign things may not be as bearish as they appear, Chainalysis co-founder Jonathan Levin shared a suite with Taylor Swift, Travis Kelce and Patrick Mahomes at the US Open men’s final on Sunday. Our invite must have gotten lost in the mail.