Around the Blockchain

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Edition No. 2

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Edition No. 2

They say a news week in crypto is equal to six months in any other industry. Here's what happened from 5/08/22 - 5/16/22.

Christopher Foreman
and
Around the Blockchain News
May 16, 2022
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Edition No. 2

aroundtheblockchain.substack.com

Welcome to another edition of Around the Blockchain, a 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.


On the Docket

Five things you might have missed last week:

1. Terra (UST) & Luna Fall Over 90% in Crypto “Black Wednesday”

Three “Wise Men” & A De-Pegged Stable

By now, gentle reader, you’ve no doubt heard about the collapse of the Terra Blockchain, with both UST (the stablecoin) and Luna (the burn token) collapsing with unprecedented speed & force following the depegging of UST from the Dollar. In a matter of hours, upwards of $40 billion evaporated from the market. Terraforms Labs founder Do Kwon expressed his “heartbreak” for the protocol’s users and maintains that the protocol is salvageable despite the record-breaking losses.

The Collapse prompted US Treasury Secretary Janet Yellen to call for expedited implementation of a proposed regulatory framework designed by the PWG, FDIC, and OCC.

Additionally, Binance CEO Changpeng Zhao spoke on his disappointment over Terra’s handling of the collapse.

See Also: Blockworks.co/yellen-ust; coindesk.com/do-kwon; twitter.com/ben-di-francesco; YouTube.com/Terra Collapse Explained;

2. Empower Oversight Requests Investigation Into SEC Ethics Office In Ripple Case

Who Oversees the Overseers?

The nonprofit whistleblower and research organization Empower Oversight sent a letter to the Office of the Inspector General of the Securities and Exchange Commission (SEC-OIG) requesting an investigation into the SEC’s Ethics Office for failing to prevent conflicts of interest by former high-level SEC officials in the ongoing litigation against Ripple.

See Also: Text of Empower Oversight’s request; COINTELEGRAPH

3. South Korea’s Crypto Integrations

Bit By Bit.

Per leaked documents; South Korea appears poised to introduce a “Digital Asset Basics Act” seemingly aimed at building crypto-positive infrastructure, taxation guidelines, and financial regulations in the country over the next several years. Additionally, South Korea’s leading crypto exchanges have agreed to cooperate with the judiciary by including crypto assets in bankruptcy hearings.

See Also: Cryptonews.com; Cryptonary.com

4. Coinbase Registers With the SEC To Prevent Regulatory Setbacks

Prepare & Prevent or Repair & Repent.

In a preemptive move that surprised many in the Web3 community, Coinbase announced that they had shelf filed with the SEC during their earnings report earlier this week. The crypto-exchange giant claims to have done so in order to “have better access to capital markets quickly and efficiently when needed.”, but many see the move as preparation for compliance if the SEC wins it’s battle for regulatory authority over digitalized assets.

See also: blog.coinbase.com

5. Five States Order a Metaverse Casino with Alleged Ties to Russia to Halt Sale of NFTs

The House Always Wins?

Regulators from five U.S. States filed an emergency cease-and-desist order against Flamingo Casino Club’s selling of NFTs. The state securities boards claim that the metaverse-based virtual casino failed to disclose ties with Russian business interests, assets, and other required information.


The Public Ledger

Web-3 regulatory and legal news from around the world. Always DYOR - but in case you don’t have time - here’s some of ours.

General News and Opinion

  • Crypto Suits Could Provide Road Map for Litigation

  • DAO members may be jointly and severally liable for $55 million crypto theft

  • Mainstream In-House Attorneys Dive Into Crypto

  • How Law Firms Should Prepare to Service the Growing Demand for NFT Work

  • She’s not your ‘Crypto Mom’: Hester Peirce’s fight with the SEC

  • Parsons: Cryptocurrency, Legibility, And Taxation

  • Left to their own devices: No duty arises between cryptoasset software developers / controllers and cryptoasset owners

  • From 'Practically Nothing' to Full Practices: Law Firms See Growing Business in NFT Market

U.S. - Federal

  • U.S. charges New York man with fraudulently promising fast crypto riches

  • Nike requests counterfeiting claims be added to StockX lawsuit while Hermès NFT case moves forward

  • Crypto Industry to Get Official Rules on Bitcoin Accounting

  • Regulators Considering Plan B If Congress Fails to Act on Crypto

  • Insider-trading scourge wooed to be crypto ally in U.S. Senate

  • SEC Charges Issuer with Failure to Disclose Source of Revenue Growth

  • Analysis: SEC’s Proposed Cyber Rules for RIAs, RICs, and BDCs

  • Chairmen from the SEC and CFTC talk crypto regulation at ISDA meeting

  • SEC's proposed amendments to definition of 'exchange': a potential game-changing impact on crypto companies

U.S. - State Law

  • New York State Department of Financial Services Takes Aim at Blockchain Entities Circumventing Sanctions on Russia 

  • Tennessee's DAO Statute: A Trendsetter For Blockchain-Based Corporate Governance

  • Louisville real estate: City sees first Bitcoin purchase of home

  • Utah to Create Blockchain and Digital Innovation Task Force; Governor Signs Bill

International

  • Argentina’s Central Bank Bans Crypto Trading

  • Germany outlines favorable tax guidelines

  • UK Promises New Laws to Promote, Seize Crypto

  • Salvadorans struggle to adapt to Bitcoin

  • Shanghai High Court Declares Bitcoin Virtual Asset Protected by Chinese Law

  • EU Commission Favors Ban on Large-Scale Stablecoins, Document Shows

  • France's drive to become European crypto hub blasted over regulation holes

  • Coinbase Warns Some Russian Users Their Accounts May Be Blocked

  • Belgium’s Crypto Service Providers To Go For Compulsory Registration

  • What You Need to Know About Virtual Asset Law in the UAE?


Podcasts & Videos

The brightest voices & sharpest takes.
  • In Episode #43 of the Law of Code podcast, Jacob Robinson & Jesse Pollak of Coinbase discuss all things Web3:

  • Laura Shin discusses the possibility of a deliberate attack on the Terra Blockchain in Episode #351 of Unchained:


Motion To Compel

Thought-provoking questions and arguments for your consideration this week.

Heads v. Tails - The Terra Collapse

Which side of the coin do you land on?

The Flip

May 7 - @terra_money tweets about an “eventful day”, concludes protocol is still “humming” and $UST peg is “fine”.

Twitter avatar for @terra_money
Terra (UST) 🌍 Powered by LUNA 🌕 @terra_money
Eventful day Volatility Knives out FUD abound Anchor liquidations orderly Terra protocol humming On-chain spreads healthy 3-pool rebalancing Anchor withdrawals stabilized $UST peg fine Ezpz stress test Mr. Kwon watering the plants again Nice try beras gn
5:46 AM ∙ May 8, 2022
2,014Likes344Retweets

May 8 through May 12 - Several more eventful days ensue, eventually Terra Validators halt the blockchain.

Twitter avatar for @terra_money
Terra (UST) 🌍 Powered by LUNA 🌕 @terra_money
The Terra blockchain has officially halted at block 7607789. Terra Validators have halted the network to come up with a plan to reconstitute it. More updates to come.
2:13 AM ∙ May 13, 2022
36,294Likes8,492Retweets

May 13th - Terra Founder Do Kwon (@stablekwon) addresses the community, expressing remorse for the fallout stemming from the collapse of $UST, optimism towards the future of decentralized economies in general, and stating nether he or any institutions he is involved with have profited from the incident.

Twitter avatar for @stablekwon
Do Kwon 🌕 @stablekwon
1/ I’ve spent the last few days on the phone calling Terra community members – builders, community members, employees, friends and family, that have been devastated by UST depegging. I am heartbroken about the pain my invention has brought on all of you.
10:15 PM ∙ May 13, 2022
33,486Likes6,631Retweets
Heads

May 16 - Luna Foundation Guard (@LFG_org) posts a thread breaking down a timeline and the organization’s response to the events of the week.

Twitter avatar for @LFG_org
LFG | Luna Foundation Guard @LFG_org
1/ As of Saturday, May 7, 2022, the Luna Foundation Guard held a reserve consisting of the following assets: · 80,394 $BTC · 39,914 $BNB · 26,281,671 $USDT · 23,555,590 $USDC · 1,973,554 $AVAX · 697,344 $UST · 1,691,261 $LUNA
9:05 AM ∙ May 16, 2022
9,119Likes3,193Retweets
Tails

May 16 - One opinion (among very, very many) asserts that there may be some additional hard questions to be asked in the near future about Terra’s response and who was let off the hook while others were left holding the bags.

Twitter avatar for @newmoneyreview
Paul Amery @newmoneyreview
"#Gemini and #Binance are now likely to come under pressure to disclose which #cryptocurrency traders were able to exit their #Terra #stablecoin positions last Monday/Tuesday at close to par value, while retail holders have lost nearly all their money."
newmoneyreview.comDid Terra operators bail out crypto whales? - New Money ReviewThe operators of the collapsed Terra stablecoin last week allowed selected insiders to cash out their positions at close to face value
10:54 AM ∙ May 16, 2022
13Likes2Retweets

As always, DYOR and come to your own conclusions on these hard questions. The purpose of this segment is not to convince you one way or another, but rather, to surface opposing arguments and let you decide which is the most convincing. Here are some additional links to just a few of the litany of responses, analyses, and speculation surrounding this event that we came across over the last few days: @LFG_org; @coinbureau; @BenDiFrancesco; @BriannaWu; @jchervinsky; @web3canada; @DeFiDefenseLaw; @VitalikButerin; @OnChainWizard


Bird Watching

Tweet, tweet, tweet!
  • After a week like this, some perspective from a guy who’s seen a thing or two can set the head & the heart at ease. A thread:

Twitter avatar for @robustus
Dan McArdle @robustus
In 2011 when Gox was hacked & BTC market-dumped to a penny, that was the entire ecosys. In 2012 when pirateat40 blew up, that swung the market 50% in a few days. 1/
12:25 AM ∙ May 14, 2022
9,379Likes2,635Retweets
  • He’s got a point. Now if I could just fix my slice…

Twitter avatar for @ItsMattsLaw
Matt Margolis @ItsMattsLaw
“Lawyers are going to be replaced by computers” um a computer can’t go golfing with the judge
6:37 PM ∙ May 7, 2022
144,149Likes9,931Retweets
  • Ouch. Just ouch.

Twitter avatar for @CryptoWhale
CryptoWhale @CryptoWhale
If you invested $250 million in Luna one month ago, the fourth most popular cryptocurrency at the time, you now have $0.06.
10:21 PM ∙ May 12, 2022
8,361Likes1,259Retweets

Closing Statements

If you enjoyed what you read today, subscribe to receive the weekly publication! 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

Quote of the Week:

“Justice is itself the great standing policy of civil society; and any eminent departure from it, under any circumstances, lies under the suspicion of being no policy at all.” -Edmund Burke

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 as well as 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.ojhh

Special Thanks / Image Credits:

Law / Scale Image; Twitter Image; Blockchain Image; Podcast Image; P / L Image; Eye GIF; Rain GIF; Hexagon Integration GIF; Safe Internet GIF; Cash GIF

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Edition No. 2

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