U.S. Treasury overstepped authority in Tornado Cash sanctions, court rules: CNBC Crypto World

Today, Bitcoin climbs to the $95,000 level after its recent pullback. An appeals court rules that the Treasury's Office of Foreign Assets Control overstepped its authority by sanctioning crypto mixer Tornado Cash. And Securitize co-founder and CEO Carlos Domingo discusses the upcoming regulatory shift in Washington and the latest in its tokenization partnership with BlackRock. Welcome to CNBC's Crypto World. I'm Tanaya McKeel. The crypto market rose today with Bitcoin recovering slightly from a pullback this week that knocked it from record levels. As of noon Eastern, Bitcoin had bounced back above $95,000 after trading as low as $90,000 earlier in the day. Ether jumped 6.75% to $3,560 and Ripple's XRP rose 6.5%. Let's talk about the top stories. First, sticking with Ripple. Its CEO, Brad Garlinghouse, announced yesterday it's donating another $25 million to crypto super PAC Fairshake. The announcement comes as the bipartisan crypto PAC raises money for the 2026 midterms. Ripple was a major political donor in this year's election cycle, giving Fairshake around $50 million. The PAC showed promising results this past cycle. For example, it supported Republican Senator-elect Bernie Moreno in Ohio, who flipped Democrat Sherrod Brown's seat with low name recognition going into the race. Garlinghouse called Fairshake, quote, the most successful multi-candidate bipartisan super PAC in American history. Ripple has faced a years-long battle with the SEC and, along with much of the industry, anticipates less regulatory headwinds coming into the new Congress. Next, a federal court ruled that the U.S. Treasury's Office of Foreign Assets Control overstepped authority by sanctioning crypto mixer Tornado Cash. For background, the Treasury sanctioned the mixing service back in 2022, alleging it was used to launder more than $7 billion, including funds stolen by North Korean hackers. The Treasury was consequently sued by some of the mixer's users with the support of Coinbase. A panel of judges ruled yesterday that Tornado Cash's immutable smart contracts are not property and therefore cannot be blocked. The ruling does, however, validate the Treasury's concerns regarding money laundering by illicit foreign actors and says perhaps Congress will target crypto mixing software. We reached out to the Department of the Treasury but didn't immediately hear back. The crypto industry largely cheered the ruling. Coinbase chief legal officer Paul Graywall took to X to call this a historic win for crypto and all who care about defending liberty. Consensus senior counsel Bill Hughes called it a good win but clarified that it doesn't mean Tornado Cash is completely in the clear, emphasizing that the issue just pertained to smart contracts without admin keys. All right, on to our main story. I spoke recently with the co-founder and CEO of Securitize, a tokenization platform that partners with BlackRock on its tokenized funds for real-world assets. Through this partnership, BlackRock rolled out the fund earlier this year on the Ethereum network but this month extended the offering to several other blockchains. We spoke about the expansion and he shared his outlook for tokenization projects going into a more pro-crypto Congress. I want to talk to begin talking about Biddle, which recently expanded to several other blockchains after launching earlier this year on Ethereum. Talk to me about the timing of that and why these specific networks you decided to expand to. Good, well, thanks for having me, Tanya. So as you saw, we started on Ethereum, which I guess was where everybody starts and we started as a company in 2017-18 and the oldest blockchain, if you want, besides from Bitcoin. But the crypto world is actually multi-chain. Over the years, there's been kind of growth into different directions, one new layer one blockchains that kind of parallel to Ethereum that try to improve in some of the features that Ethereum lags behind, whether it's transaction speed or fees, et cetera. And then there's also been this kind of so-called layer two blockchains that roll into Ethereum, but they actually allow you to run transactions separately at a faster speed and lower cost. So we've always had in mind that as Securitize, we want to be in as many chains as possible to access different pockets of liquidity, different functionality, transaction speed, fees, et cetera. So this is just an evolution of where we're going. And obviously we started first in one place, waited for a little bit until we had grow the assets over half a million dollars there and then expanded into those five chains that we announced recently. And can you talk about the timing? I think at least one of those chains was something that the SEC had previously kind of double clicked on. And obviously, after the election, the market is very optimistic heading into a year that is bound to be just a lot more supportive on the regulatory front. Did that have anything to do with the timing of the expansion? No, no. So first, what the SEC had been saying in the past is that maybe some of the tokens of these blockchains are securities, but that has nothing to do with the blockchain itself or the infrastructure. It's just simply that the token that people use for some payment mechanism to access the compute of the blockchains and accessing these ledgers might actually be a security. But the timing of launching this has nothing to do with the elections. We're very pleased with the outcome and the fact that, you know, it seems that we're going to get regulatory clarity on those topics. But the two things are just coincidental in time, but unrelated. Can I have you back up for just a sec and describe the fund and why you launched it at all earlier this year? It's sort of, from what I understand, the inverse of the Bitcoin ETF, which was kind of the headliner at the start of this year. So with the ETF, you've got, you know, the new digital asset in a traditional wrapper. And then I think with Biddle, you've got the opposite, the traditional assets on a blockchain network. Tell me about the, you know, why and the demand and who is trading this. So actually, that's the best way to describe it. Right. So Bitcoin ETF is a TradFi wrapper for a digital asset. And what we're doing with tokenization is take a TradFi asset and wrap it into a digital asset that people can use within the crypto ecosystem. So that's our company has been particularly focused on that part of the business of tokenization, which is, as you describe, is bringing TradFi assets into crypto. I think that, you know, the most successful case of tokenization or wrapping a TradFi asset into crypto so far has been the dollar. If you think about stable coins, these are tokenized dollars that people use in the crypto economy to transact. But if you think about traditional markets, treasuries are actually being used very widely for, you know, trading, for treasury management, for many activities and not actual dollars, right? Because treasuries are dollar equivalent, but, you know, they provide a deal, they're backed by the US government, like the dollar, et cetera. So I think that there's a lack of like proper tokenized treasuries products in the crypto space. And I think that we were very fortunate to partner with BlackRock, which is the largest asset manager in the world and the best company we can think of doing this together to basically bring tokenized treasuries, which is what the fund does, basically short-term dated treasuries and repo agreements into the crypto market for the crypto economy to be able to use treasuries instead of dollars when the use case, you know, makes sense to do it, whether it's treasury management or collateral for trading, et cetera. And obviously you cannot mess around on the regulatory front being a partner to someone like BlackRock. And I do want to ask you for kind of your hindsight on this. Gary Gensler, the chair of the SEC, has now announced his resignation formally coming up in January. And you've worked with this SEC a lot over the years to get everything in order to be able to be a BlackRock partner. And obviously, the SEC has posed a big challenge to the crypto industry at large, but you've been successful. So tell me about your experience and, you know, going into a more pro-crypto 2025, what you, the changes that you are expecting and how that aligns with your sort of wish list for the SEC next year. We work with both administrations. When I started the company, Jake Layton was the chairman of the SEC. And then Gensler came. The fact that Gensler resigned, I don't think this is a surprise to anybody. Every time there is a change in administration, the chairman, which is appointed by the president, if it's from a different party, it resigns to leave room for the new appointee, which is, I guess, going to be announced soon. I think that what we do, as you mentioned, is always a regulated activity, right? So we're registered with the SEC as a transfer agent, as a broker dealer, et cetera. So it shouldn't be controversial at all, but because of all the association with all the things happening in that the SEC, this kind of, this last SEC didn't like, then we were kind of like indirectly affected by that. And certain things that we wanted to do with our licenses, that if you, if we were not using, you know, blockchain as the underlying ledger, but we were using, I don't know, a database or cloud services wouldn't be controversial, have become controversial for no reason, I will say. So, so we welcome change. We welcome clarity, like what you mentioned about like these blockchains, maybe they're talking to security or not, it would be nice to know whether they are or not, so we can be prepared for those things. So I think that we are entering four years where we can probably accelerate in terms of what we can do with our licenses and get clarity in other parts of the market that indirectly impact us as well. Is there anything in particular that you think Securitize can do? Or maybe it's not as specific as that. Is there anything, you know, in your outlook for tokenization next year or in this sector more broadly that you think you will be able to do in this more pro-crypto regime that you perhaps would not have seen in recent years? Yeah, so there's a few things. As you might know, I was a witness testimony for the Republican Party in a congressional hearing about tokenization. And there's a couple of things that I mentioned there that are important for us. We want clarity about what can a broker dealer can do in the digital asset space and what type of assets we can deal with, we can do custody, etc. And then second, one of the advantages of tokenization is that you represent securities and dollars in the same ledger, and then you can settle trades, you can move things in and out at a different speed that you do in capital markets where the ledgers are not connected to each other, right? Like when you move dollars and you move securities, that's why settlement periods sometimes take days, etc. So I think that the other area where we're expecting to get clarity is about stablecoins and how they get finally regulated and how brokers like us can actually use stablecoins to conduct our business. Okay, that's all for Crypto World today, but we'll be back again Friday. We'll see you then.