Edition No. 18
Edition No. 18
California's new DFAL regulations; a crooked crypto lawyer; a16z's "Can't be Evil" NFTs; Iran's crypto progress; a "save the date" with MiCA, and much more. Here's what happened from 8/29/22 - 9/6/22.
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.
Table of Contents:
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. Voices of Women in Crypto (We need more women in Crypto - this is our small contribution: A bi-weekly segment dedicated to the women changing the space).
4. Bird Watching (Tweet, tweet!)
5. Blockchain 101 (Our new weekly educational segment! Written by law students)
6. Motion to Compel (Meant to provoke thought and action)
7. The Public Ledger (Highlights from our weekly library of sources, built by our Feedly AI)
8. Closing Statements
On the Docket
Five things you might have missed last week:
1. California Set To Implement A New Law For Licensing And Regulating Crypto Firms
BitLicense Californiacation
The California state legislature just passed a bill that will have major impacts on crypto businesses in the state–and perhaps beyond. Assembly Bill (AB) 2269 also known as the Digital Financial Assets Law (DFAL) was first introduced in June by California State Assembly Banking and Finance Committee Chair Timothy Grayson (D-Concord). The bill was sponsored by the Consumer Federation of California.
Among the regulations in the bill, DFAL requires companies investing, lending, or trading cryptocurrencies to register with the state’s Department of Financial Protection and Innovation. Effectively, the law requires most crypto businesses in California to obtain a license. The bill has been dubbed California’s "BitLicense" as it closely resembles New York’s BitLicense regulation, which took effect in 2015. This law will impact some of crypto’s major players based in California such as Coinbase and Ripple.
Among the DFAL requirements is a prohibition, to be phased out in 2028, on licensed entities dealing with stablecoins, unless that stablecoin is issued by a bank or is itself licensed by the California Department of Financial Protection and Innovation. This is similar to a proposed (but never passed) bill in the U.S. Congress that would have required stablecoin issuers to have a bank charter.
Another clause in the stablecoin section of the bill requires issuers holding securities as a reserve to have an amount "not less than the aggregate amount of all of its outstanding stablecoins issued or sold in the United States." In addition, the bill provides that the aggregate market value must be computed using the generally accepted accounting principles (GAAP) of the United States.
It is also noteworthy that if DFAL is passed it would not apply to "the exchange, transfer, or storage of a digital financial asset or to digital financial asset administration to the extent the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or the Corporate Securities Law of 1968 (Division 1 (commencing with Section 25000) of Title 4 of the Corporations Code) governs the activity". This is significant because currently, there is no consensus among the industry and regulators on the status of digital financial assets under federal and state securities laws. The great unanswered question, therefore, will be whether a particular digital financial asset is or is not a security.
Although the bill passed unanimously, some crypto experts have criticized California’s DFAL as increasing regulatory uncertainty rather than resolving it as many had hoped after Gov. Gavin Newsom issued an executive order in May to encourage crypto asset regulation and integration into California’s financial landscape. The Blockchain Association, an industry trade group, tweeted the bill would “create shortsighted and unhelpful restrictions that would impede crypto innovators’ ability to operate and push many out of the state.”
Gov. Newsom has until Sept. 30 to sign or veto California's law. If signed, the law would take effect January 2025. While legislative measures such as California’s DFAL signal the changing statewide and national views on integrating cryptocurrency and blockchain technology into the nation’s regulated financial scheme, how those regulations impact crypto businesses and innovation remains to be seen.
By: Evan Santos
2. Lawyer Kyle Roche Withdraws From Multiple Crypto Class Actions After Video Leaked Of An Alleged Pact With Ava Labs — Which Both Categorically Deny
“Gangster Style” Legal Drama
In the wake of allegations, crypto lawyer Kyle Roche filed to withdraw as counsel on several crypto class-action lawsuits against several major crypto companies, such as Tether, Bitfinex, the Tron Foundation, and BitMex. The relevant lawsuits involve Nexo Capital, BAM Trading (which operates as Binance.US), Dfinity, and Solana Labs. According to a series of court records, Roche is “no longer involved” in Roche Freedman’s class action practice.
Videos of Roche allegedly discussing an investment opportunity in a litigation-financing product surfaced Monday on a new website called Crypto Leaks. CryptoLeaks claims Ava, the core developer of the Avalanche blockchain, struck a secret pact in September 2019 with Roche. Under the alleged deal, Ava granted 1% of the supply of AVAX tokens and a similar amount of equity to Roche in exchange for bringing lawsuits against competitors according to Blockworks.
CryptoLeaks alleges Roche and Ava sought to use the American legal system “gangster style” in an effort to harm Ava’s competitors by steering regulatory scrutiny their way, in addition to secretly pursuing the personal vendettas of Ava’s founder and CEO, Emin Gün Sirer, through litigation.
Roche and Sirer have strongly denied these allegations of wrongdoing. On Monday, Ava Labs, responded in a post on Medium and Roche posted a statement to address the allegations stemming from what he termed, “illegally obtained, highly edited video clips that are not presented with accurate context.”
Roche claims the recordings published on Cryptoleaks’ website were made at the behest of ICP Token creator Dominic Williams. Roche’s firm, Roche Freedman, brought a class-action suit against Williams and his Dfinity Foundation last October. Roche said the recordings were heavily edited.
By: Evan Santos
3. a16z’s New ‘Can’t be Evil’ NFT Licenses
Common, Creative, Crypto
On August 31st A16z published free ‘Can’t be Evil’ licenses for NFT projects to use which will help creators protect (or release) their intellectual property (IP) rights and grant NFT holders a baseline of rights.
Inspired by the Creative Commons licenses, a16z employed the help of crypto influencer Punk6529 along with law firms Latham & Watkins LLC and DLA Piper to draft the licenses. a16z’s general counsel and head of decentralization, Miles Jennings (formerly of Latham & Watkins) announced the publication on twitter, stating:
“There’s currently significant ambiguity and legal risk across the NFT ecosystem, a lack of standardization makes it difficult for NFT purchasers to know what rights they’re getting, and creating customized licenses is expensive. All of this acts as a drag on the industry.”
A16z maintains that the ‘trustless’ version of the internet heralded by blockchains leads to the principle of ‘Can’t be evil’ (a play on the ‘don't be evil’ slogan popularized by Google) in web3. The ‘Can’t Be Evil’ licenses extend this principle to NFTs by transparently codifying the rights of NFT creators, buyers, and sellers so that every party has a common understanding of the rights associated with NFT ownership.
The a16z blog announcement is available here. All six license options are available on the a16z crypto GitHub, and a full legal primer (PDF) provides greater detail on each license.
See also A16z, beincrypto.com, decrypt.com, cryptotimes.com
By: Kleb
4. Iran Greenlights Bitcoin, Crypto Payments For Imports: Report
Red Light // Green Light
According to a report from the Iranian news site Tasnim, Iran has passed a law permitting the use of Bitcoin and other cryptocurrencies as payment for imports. Iranian Minister of Industry, Mine and Trade (IMT) Reza Fatemi Amin disclosed that the recently enacted law establishes regulations for cryptocurrencies, addresses issues over the availability of fuel and electricity for mining, and authorizes the administration itself to use cryptocurrencies.
Minister Fatemi Amin reportedly stated that the authorization was the result of an agreement between the Ministry of Industry and the Central Bank, indicating a multi-departmental consensus on crypto's validity as an international payment method.
Fatemi Amin also mentioned that local businesses will be allowed to import vehicles using Bitcoin rather than U.S. currency or the euro. Tasnim emphasized that the move follows an announcement made by the president of Iran's Trade Promotion Organization (TPO) on August 9th that the country registered its first import order processed with Bitcoin. According to reports, the order's worth exceeded $10 million.
While some are thrilled to see progress in the country’s historically restricted digital asset sector, others have voiced their concern that this could lead to the circumvention of sanctions.
Previously, Iran relied almost entirely on the U.S. dollar and the euro for cross-border transactions. Since 1979, the United States has regularly imposed sanctions on Iran, and in 2006, Iran's unwillingness to suspend its uranium enrichment program caused the sanctions to become among the most severe in the world. Iran International, a local newspaper, anticipates that cryptocurrency could be used to bypass sanctions and facilitate trade with other blacklisted nations, such as Russia, whose central bank has previously shown its openness to the use of cryptocurrency for foreign transactions.
By: Kyler Wandler
See also: Coindesk.com; Cryptobriefing.com
5. EU's MiCA Crypto Law Text Ready Within 6 Weeks, Lead Lawmaker Says
Save the Date
According to European lawmaker Stefan Berger, the language for the groundbreaking Markets in Crypto Assets (MiCA) Regulation of the European Union could be ready within six weeks. When asked about the draft’s timeline, he responded:
“I’d say in four to six weeks. We’re all working on it, eight hours a day, it’s in the process…but I think in six weeks we should have something ready to present.”
Though the text is nearly ready, there will still be a grace period before the rules are set into effect.
Berger, a German lawmaker who spearheaded discussions for the European Parliament on MiCA, told a Bundesblock-hosted online panel that technical work is still being conducted on the law, which will not take effect until 18 months after being published in the EU's official journal.
The regulatory framework will establish parameters for how each European Union member nation should govern cryptocurrency. It's anticipated to establish a common licensing regime, making it simpler for enterprises existing in one member nation to operate in the others, as well as clarify standards for stablecoin issuance.
On June 30, lawmakers and governments reached consensus on the primary outline of the legislation requiring crypto asset providers to register with authorities in order to offer their services throughout the bloc, but I n the absence of a definitive legislative text there remains reasonable uncertainty regarding the law's finer elements, such as whether the restrictions would apply to non-fungible tokens (NFT), which provide proof of ownership of assets such as artworks leveraging distributed ledger technology.
So although the next 6 weeks will not yield the implementation of these regulations, they will certainly shed light on what is to come.
By: Kyler Wandler
Podcasts, Videos, and Blogs
The brightest voices & sharpest pens:
The Voices of Women in Crypto
By Nicole Fernandez Prada
A Chat with Jessica Neer McDonald
Kicking off our fall segment of the Voices of Women in Crypto, we chatted with Jessica about her experience with crypto and law!
Jessica Neer McDonald, a trademark and copyright attorney in Miami, is one of the most joyous individuals you’ll ever meet in the legal/crypto field. Her entire energy throughout this conversation was so exciting and sweet.
Jessica was initially guided into the crypto community by her cousin Ashley! We’re so happy that more women are teaching others about blockchain technology. Jessica laughed lightly as she remembered how her family members wanted her to enter securities, where she then chose to delve into IP.
Jessica’s insight into crypto is refreshing. Despite being in the space for a while, she still feels she’s so new. She works daily to learn more about intellectual property and decentralized financial systems, and she loves educating clients about IP, Cryptoassets, and Web3 in general.
Jessica is currently collaborating with other individuals in the industry to create her own content, including a podcast, which will be releasing two episodes soon! As we’ve all realized being in the crypto space, it is difficult to find reliable information. She desires to provide individuals with a one-stop shop for the best information about Web3. Throughout this journey, she has met wonderful people who have supported her and encouraged her learning.
We always ask our guests to explain if they’ve ever experienced imposter syndrome and how they’ve overcome it. Jessica responded at times she feels imposter syndrome but with her constant desire to learn and know about everything within the crypto space, she’s been able to overcome it. She recommends everyone keep asking questions in order to get more comfortable. It even helps in situations with clients.
Jessica added that meaningful improvements to the space would be having conversations such as these. She is confident women’s opinions and actions are crucial to the development of the crypto space itself, and believes a diversity of voices is both incredible and necessary. The way that communities have formed in crypto it seems diversity is more accepted and involved as compared to Web2.
Her lasting advice to all women looking to enter the space? In her own words:
“Don’t be afraid to jump in, even if you’re not comfortable. There are communities here that are looking and hoping to teach people like you!”
Her personal favorites are Boys Club and Tuttle Tribe.
Jessica’s enthusiasm about web3 communities and her legal pathway was incredibly uplifting. Everyone has a place here in web3.
We hope this segment inspires women from all backgrounds to learn and grow within the crypto space! If you have educational links to share we’d love to show them to the public! Reach out to us via Discord or @Octopape on Twitter.
Bird Watching
Tweet, Tweet, Tweet!
Tweets following the 2022 Stanford DAO Workshop:
Blockchain 101
Blockchain 101 is the product of our team’s desire to reduce what has typically been a significant educational barrier of entry into the crypto space. Our goal is to create a digestible and understandable curriculum accessible to anyone - while simultaneously helping our own nascent members to expand their understanding of the fundamentals of Web3.
Lesson No. 2: Blockchain and Cryptocurrencies
By: Suryavir Dawar, Tamara Szulc, and Janet Yihm
In our last edition we covered the basics of blockchain technology, the driving force behind cryptocurrencies. Today, we’re diving deeper into:
The challenges of blockchain;
The difference between layer-1 and layer-2 networks;
Smart Contracts;
Introduction to Cryptocurrency: Bitcoin and Ethereum
Bitcoin and Ethereum are two of the most well-known cryptocurrencies and utilize open ledger blockchain technology (review our last segment for a refresher on blockchain). But what exactly are they - and what's the difference between them?
To find out, read more HERE.
Motion To Compel
Thought-provoking questions and arguments for your consideration each week:
Michael Saylor’s Legal Trouble Gives Ammunition to Web3 Critics
By Nick Corso
Michael Saylor, the Asco-founder and executive chairman of MicroStrategy (MSTR), is a prominent figure in the Bitcoin community, known for his unwavering conviction in his company’s nearly $4 billion Bitcoin investment and his social media bravado. Though familiar with the spotlight, the position in which he now finds himself may be less than comfortable.
Recently, Saylor has fallen into legal trouble for alleged tax fraud. Tributum, LLC, has filed a lawsuit on behalf of itself and the District of Columbia against Michael Saylor pursuant to the False Claims Act and common law. In 2020 D.C. amended the False Claims Act to allow qui tam plaintiffs – citizens filing claims on behalf of the government – to bring False Claims Act action relating to violations of District tax laws.
Read more HERE, then vote in our poll below to let us know what you think!
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
Gensler Says Crypto Treated Just Like The Market; 200 SEC Lawsuits Say Otherwise.
The Best-Laid Plans: Crypto Trading Plans To Limit Insider Trading Liability
Tether (USDT) Seek Termination of Legal Firm Linked to Avalanche (AVAX)
Sam Bankman-Fried Says His Crypto Bailouts Had 'Mixed Results'
Crypto Exchange Giant Binance Restricts $1,000,000 Corporate Account, Cites Law Enforcement Request
U.S. - Federal
U.S. sought records on Binance CEO for crypto money laundering probe
FBI Warns Investors to Take Precautions with Decentralized Financial Platforms
MicroStrategy Chair Michael Saylor accused of evading $25 million in taxes by DC attorney general
Ethereum ($ETH) – FBI Alerts DeFi Users Of Cyber Criminals Stealing Their Crypto Holdings
Cryptocurrency Investors Sue Coinbase Over Security Concerns
Sen. Boozman Discusses Future of Cryptocurrency, Consumer Safeguards
StrongBlock Lured, Bilked Crypto Investors Via Reward, Suit Says
Cease and Desist to Companies Making Crypto-Related Representations Following Warnings by Government
U.S. - State Law
California passes licensing law: People most interested in Bitcoin and Ethereum
State Legislature's Cryptocurrency Bill Designed to Regulate the New Financial Sector
International
Brazilian SEC seeks to change its role in cryptocurrency regulation
UK’s Competition Law Based Collective Action in the Crypto Space
Australian CBDC Research Project Could Provide Crypto Clarity, Legal Expert Says
South Korean Officials Working on 'Metaverse Industry Promotion Law'
Here Is the List of Countries Where Crypto Is Legal and Banned
EU's MiCA Crypto Law Text Ready Within 6 Weeks, Lead Lawmaker Says
Canadian Prime Minister Uses Emergency Law To Ban Bitcoin Donations To Protesters
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
Blockchain 101
We hope you enjoyed our newest segment Blockchain 101! Blockchain 101 is the product of our team’s desire to reduce what has typically been a significant educational barrier of entry into the crypto space. Our goal is to create a digestible and understandable curriculum accessible to anyone - while simultaneously helping our own nascent members to expand their understanding of the fundamentals of Web3.
NEW TWITTER AND WEBSITE
We are thrilled to announce the launch of our new website and twitter profile. Check them out and let us know what you think!
Quote of the Week:
“If the cryptocurrency market overall or a digital asset is solving a problem, it’s going to drive some value.” -Brad Garlinghouse
Ok, all done! You can go ahead and check your P/L now (Coin Market Cap)
This newsletter is written, curated, annotated, and edited by Christopher Foreman (@CryptlessInSEA), Kyler Wandler (@KylerW56), Nicole Prada (@octopape); Nick Corso (@nick_corso2); Evan Santos (@evansantos4); and Kleb (@kleb_33); 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.
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; Tea GIF; Stable JPEG; Law JPEG; Hacker GIF; Folder GIF; Angry GIF; Celsius GIF; Rose PNG; Rocket GIF; No GIF; Speech GIF; Mask Png; Pyramid GIF; Wrestling JPEG; Book GIF; Sword JPEG; Bridge JPEG; Fedora JPEG; Devil Emoji JPEG;
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