Edition No. 10

3AC & Voyager toss in the towel; The U.S. Treasury calls for global cooperation; The Office of Government Ethics says crypto has no place in crypto regulation; and more: 7/5/2022 - 7/11/2022

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Jul 11, 2022

Welcome to another edition of Around the Blockchain, the weekly letter dedicated to keeping readers like you up to date on the fast-paced world of Crypto & Law by airdropping current stories and projects directly to your browser.

1. On the Docket (Top 5 Stories of the Week)

2. Podcasts, Videos, & Blogs (The faces, voices, and pens of Web3’s brightest contributors)

3. Bird Watching (Tweet, tweet!)

4. Motion to Compel (Meant to provoke thought and action)

5. The Public Ledger (Highlights from our weekly library of sources, built by our Feedly AI)

6. Closing Statements

On the Docket

Five things you might have missed last week:

1. Cryptocurrency platforms Three Arrows Capital and Voyager Digital Resort to Bankruptcy for Relief

The Bank Officially Breaks:

It appears the clock has finally struck midnight for formerly affluential crypto lenders 3AC and Voyager Capital, who are the latest in a flurry of lending protocols to declare bankruptcy following the crypto market collapse. But the interconnectedness of these protocols persists, with Crowell authors Frederick (Rick) Hyman & Richard J. Lee noting the following of Voyager:

“One of its largest loans was to 3AC – a loan of 15,250 BTC and $350 million USDC (the “3AC Loan”). On July 1st, facing a “run on the bank,” Voyager restricted further withdrawals by its customers as Celsius Network had done weeks earlier.”

As losses continue to mount, one can only hope we are nearing the bottom of this crypto winter, and that spring will come shortly. For now, we wait among the proverbial ceramic shards of the empty piggy banks.

See Also: Crowdfundinsider.com; CNBC.com

2. US Treasury Calls for International Cooperation on Crypto Regulation

Regulators without Borders:

The U.S. Secretary of the Treasury has presented it’s research and subsequent opinion on the globalist nature of crypto-regulation in response to the President’s Executive Order on Ensuring Responsible Development of Digital Assets (March 9, 2022). The “Framework for Interagency Engagement with Foreign Counterparts and in International Fora” is summarized in a fact sheet released by the agency, which calls for greater cooperative efforts across national jurisdictions moving forward.

“Technology-driven financial innovation is frequently cross-border and can impact households, businesses, and governments across the world. International cooperation among public authorities, the private sector, and other stakeholders is therefore critical to maintaining high regulatory standards and a level playing field, expanding access to safe and affordable financial services, and reducing the cost of domestic and cross-border payments, including through the continued modernization of public payment systems.”

The G7, G20, and Financial Action Task Force (FATF) are all mentioned directly as footholds from which to begin implementation of this proposed international network of regulations.

3. Ethics Watchdog Bars US Government Employees From Writing Crypto Policy if Invested

Additionally; electricians banned from using electric light at home:

The U.S. Office of Government Ethics (OGE) has issued a legal advisory notice declaring:

“The de minimis exemption – which, when applied to a security, would allow the owner of an amount below a certain threshold to work on policy related to that security – doesn’t apply to any cryptocurrency or stablecoin, even if the cryptocurrencies in question ‘constitute securities for purposes of the federal or state securities laws.’”

Though meant to avoid conflicts of interest, the advisory notice has met with criticism from some in the crypto community:

Coin Bureau (guy.eth) @coinbureau

So, they are effectively trying to say that only no-coiners will be allowed to shape the conversation around #crypto regulation. Hypocrisy much?

See also: Law360.com; Coingeek.com

4. The Compelling Implications of Using a Blockchain to Record and Verify Patent Assignments

Utility > JPEGs

Despite the recent collapse of the NFT “PFP” market, NFTs themselves remain a largely unexplored tool with mountains of potential value yet undiscovered. JDSupra author Michael Borella shares his thoughts:

“Not unlike the world-wide web circa 1993, blockchain is a new frontier, the applications of which are vast. It is hard to see where the technology is going or how it will be used in the future. The most likely outcome is that there will be a large number of spectacular failures, but also a few successes that could potentially be integrated into 80-90% of software moving forward.”

Borella goes on to argue that Patent Assignments could potentially be a natural use case for blockchain tech due to the alignment of the concepts of immutability and permanence:

“The USPTO's assignment database is a natural candidate for recording in a blockchain. It is largely a write-only database of transactions in which records are rarely expunged (see M.P.E.P. § 323). As new assignments are recorded, they can be added in new blocks. These blocks can be mined (verified) by USPTO computer systems to ensure that they are proper.”

While it sounds like a match made in heaven and a way to legitimize blockchain tech by removing the “monkey jpeg” stigma, time will tell if implementation will actually occur.

5. Responsible Financial Innovation Act Offers Clarity, Safeguards for Digital Assets

Another Day, Another Acronym:

The Responsible Financial Innovation Act (RFIA), introduced in the Senate on June the 10th, proposes the addition of new Section 11A to the Federal Reserve Act that would require:

“The Board of Governors of the Federal Reserve System (FRB) to make available currency and coin services, wire transfer services, automated clearinghouse services, and settlement services to any depository institution chartered under state or federal law, and to make available a segregated balance account to a depository institution upon request.”

In addition, the bill offers potential clarity on the definitions of Stablecoins, particularly the definition of “Custody”, noting:

“The RFIA defines a payment stablecoin as a digital asset that is: redeemable, on demand, on a one-to-one basis for instruments denominated in US dollars and defined as legal tender, or for instruments defined as legal tender under the laws of a foreign country (excluding digital assets defined as legal tender under the laws of a foreign country); issued by a business entity; accompanied by a statement from the issuer that the asset is redeemable as specified from the issuer or another identified person; backed by one or more financial assets (excluding other digital assets); and intended to be used as a medium of exchange.”

The world may indeed be saturated by acronyms, but this one may be worth keeping an eye on.

Podcasts, Videos, and Blogs

The brightest voices & sharpest pens:

The Crypto Market Meltdown by WBUR On Point:
- Molly White and Hester Pierce speak on the collapse of the crypto market.
Episode #54 of Law of Code: Jacob speaks with John Deaton about Ripple, Decentralization, XRP and the SEC:

Fox business takes shot at understanding the ongoing dispute between Grayscale and the SEC:

This week’s Bankless Rollup covers Voyager, the Solana Phone, ENS Domains, Facebook NFTs, and more:

Amir Haleem, CEO of Nova Labs and founder of Helium, talks about the use cases for Internet of Things (IoT), how blockchain and crypto help to construct a decentralized internet infrastructure, and what is the future of Helium with Laura Shin:

Bird Watching

Tweet, Tweet, Tweet!

“I’m going to give you a billion dollars to manage but you have to pinky swear not to lose it.”

foobar @0xfoobar

After reading the Celsius-0xb1 lawsuit my initial conclusion is that the industry is a total joke - Tether gave them a 1b loan??? - Celsius used customer BTC to pump their own token - USD performance metric when liabilities were in ETH - handshake deal to manage 9 figures

Your honor, this is obviously a different species of banana. I beg that this court use reason…

Aaron Moss @copyrightlately

This copyright infringement claim survived a motion to dismiss in the Southern District of Florida. Happy Friday.

Comparison of two bananas taped to a wall in a copyright infringement case filed in the Southern District of Florida.

Not Jerome Powell gets the scoop on FTX’s latest impulse purchase:

Not Jerome Powell @alifarhat79

BREAKING: SAM BANKMAN-FRIED INTERESTED IN BUYING THE UNITED KINGDOM AFTER GOVERNMENT DISSOLVES

Animals in hats remain undefeated (open for a surprise):

memes i wish i could tag my cat in @memesiwish

Motion To Compel

Thought-provoking questions and arguments for your consideration each week:

3AC Founders Reportedly Flee Singapore in Wake of Bankruptcy

Counsel retained by 3AC founders Su Zhu, Kelly Kaili Chen, and Kyle Davies report the founders have fled Singapore in the wake of liquidation and extensive lawsuits. Is this simply a case of fear due to mistakes? Or could it be that the company was doomed to perish from the start?

AssetDash @assetdash

Breaking: The lawyers for 3AC claim founders Su Zhu and Kyle Davies fled Singapore. Their whereabouts are unknown.

“Now that the founders of 3AC have fled Singapore, investor suspicions have been strengthened that 3AC was an illegitimate operation. To add to this point, 3AC once boasted that it had around $10 billion worth of assets under management, leaving some in the space to believe that the recent bankruptcy filing was a cover up for the founders’ escape plan.”

What do you think, anon:

The Public Ledger

Highlights from the hundreds of sources gathered each week by our research AI. Always DYOR - but in case you don’t have time, here’s some of ours:

General News and Opinion

U.S. - Federal

U.S. - State Law

International

NOTE: For your convenience, we have started identifying articles that require a subscription or site registration (paid or free) with ** preceding the article link, and the linked site in () after.

Closing Statements

We want to hear from you:

If you enjoyed what you read today, subscribe to receive the weekly publication and give the authors a follow on Twitter for updates on what’s next for the newsletter!

If you didn’t enjoy it, let us know why! We value the opinion of our readers above all else. After all, this letter is for you. - Kyler & Chris

Keep an eye out for a new collaboration next week!

I think we can all agree that we need more women in the crypto space. This collaboration is designed to advocate for just that. We can’t wait to show you. :)

Quote of the Week:

“We're working on making sure that our incentives are in place and that our legislation promotes crypto and blockchain and is forward-thinking. We want to make sure that we're creating as much of an equity framework from an educational perspective as we possibly can.” - Francis X. Suarez

Ok, all done! You can go ahead and check your P/L now (Coin Market Cap)

This newsletter is curated, annotated, and edited by Christopher Foreman (Twitter - @CryptlessInSEA) and Kyler Wandler (Twitter - @KylerW56); with consultation and input from Jacob Robinson of the Law of Code Podcast; editing courtesy of TΞxas ₿l◎ckchain LawyΞr ; in collaboration with Ann Sofie Cloots; and support from the Blockchain Barristers Law Student Collective and the Stetson Blockchain & Law Society.

The articles and opinions in this newsletter are not legal or financial advice. For legal and financial guidance, please consult a qualified attorney or financial advisor.

Special thanks / image credits:

Law / Scale Image; Twitter Image; Blockchain Image; Podcast Image; P / L Image; Shield GIF; Lamp GIF; Bankrupt JPEG; Utility JPEG;

Around the Blockchain