Edition No. 26 (spooky edition)
Costa Rica meets crypto; DAO risk assessment; UK's new pro-crypto PM; Sushi's new legal framework; and a new IRS digital asset definition. Here's what happened from 10/24/2022 - 10/31/2022.
Happy Halloween!!
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 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 bi-weekly educational segment written by law students)
6. The Public Ledger (Highlights from our weekly library of sources, built by our Feedly AI)
7. Closing Statements
On the Docket
Five things you might have missed last week:
1. Costa Rica Proposes to Remove Bitcoin, Crypto Tax
“Crypto Rica”
Costa Rican lawmakers are seeking to make the Central American country more crypto-friendly by significantly lowering taxes on crypto. This week, Congresswoman Johana Obando introduced a bill to allow bitcoin and other cryptocurrencies to serve as a form of payment and prevent the government from taxing cryptocurrencies when used to buy goods.
The bill, dubbed Cryptoassets Market Law (MECA), also prevents taxing crypto in cold storage and exempts crypto produced by the mining industry from profit tax. Profits from crypto trading, however, would be subject to income taxes. Moreover, the bill proposes allowing traditional banking institutions to serve as crypto exchanges, including offering retail asset custody and wallet services.
One of the objectives behind MECA is to offer clarity and protection to people and companies investing in crypto assets, and in the same way, attract more investments in this area according to Obando.
Obando clarified the bill does not force anyone to accept bitcoin as payment for debts or products, it merely recognizes the legitimacy of doing so if all parties to a transaction agree. This is different from what countries like El Salvador have done in adopting bitcoin as legal tender, which mandates bitcoin’s acceptance as payment so long as parties have access to the necessary technology.
Elsewhere in Latin America, Paraguay is working on clear regulations for the Bitcoin mining industry, and Chile’s senate this month approved a fintech bill seeking to regulate the crypto industry.
By: Evan Santos
2. Attorney Kevin Chen Releases Article On Pre-DAO and Post-DAO Legal Risk Assessment In Collaboration With The DAO Research Collective
DAOs & Legal Risk
Kevin Chen, an attorney at Homiak Law LLC wrote an article in collaboration with the DAO Research Collective laying the groundwork for crypto builders who are managing legal risk in DAOs.
In the introduction, Chen explains how some of the challenges DAOs face come from the fact the U.S. federal regulatory regime lacks safe paths for core phases of DAO development, such as public token distribution, smart contract creation and deployment, and establishing a decentralized network.
Chen defines “legal risk” as the potential for losses stemming from enforcement actions initiated by government entities for alleged legal and regulatory noncompliance. He also sets out to define “DAOs” before diving into the core risks and legal assessment questions in the development stages of these novel organizations.
According to Chen, there are generally two phases in DAO development. That is, the Pre-DAO phase and the Post-DAO phase. Within the Pre-DAO phases, Chen explores the challenges in DAO design, development, and raising capital as these intersect with securities law, commodities law, money transmission law, and tax law.
Additionally, Chen’s article analyzes challenges in Post-DAO launches including core risks relating to legal entity law– such as DAO members potentially facing personal liability for DAO-related activities. This collaborative article by Kevin Chen and the DAO Research Collective provides an excellent overview of the legal risk for DAOs.
For an audio version, you can listen to this article on the Law of Code Podcast.
By: Evan Santos
3. Crypto Friendly Rishi Sunak Is Appointed As The UK’s New Prime Minister
New era for UK crypto:
Rishi Sunak has been appointed as the UK’s new Prime Minister after his predecessor Liz Truss resigned. His appointment comes at an unfortunate time with the country facing an energy crisis, inflation, and political instability.
Sunak is seen as a friend to the crypto community: in April, as Chancellor of the Exchequer, he announced his intention to “make the UK a global hub for crypto-asset technology”.
He has taken steps he believes will help drive growth and investment in emerging technologies. In addition to urging the Bank of England to explore the possibility of creating a CBDC, he recently requested the Royal Mint — the issuer of UK coins — to develop an NFT collection. The collection is yet to be released, however, and scant detail is currently available.
From a regulatory standpoint, he helped introduce The Financial Services and Markets Bill, which gives His Majesty’s Treasury wide-ranging powers to introduce a new regulatory regime in the coming years. Additionally, it creates a new concept called ‘digital settlement assets’, which are defined in a broad manner to help regulate stablecoins used as method of payment.
A few days ago, the UK Parliament considered the Bill alongside a proposed amendment seeking to clarify crypto-assets as subject to government powers concerning financial regulation and promotion.
While there is still some way to go before the Bill becomes law, Sunak’s appointment appears to have occurred at a critical time for the UK given the EU’s recent passage of its own set of comprehensive crypto regulations–the Markets in Crypto Assets Legislation (MiCA).
By: Surya Dawar
See also: Cointelegraph; Linklaters
4. Sushi DAO Consents to Adopt a New Corporate Legal Framework
Yes, Chef!
Sushi DAO, the community behind the decentralized exchange project SushiSwap, has accepted a new legal framework to create three new companies to oversee the DAO and the protocol. The DAO Foundation and the Panamanian Foundation and Corporation will select service providers with whom they will engage in service agreements with. Before creating this new framework, the effort sought advice from Silicon Valley law firm Fenwick & West, according to Jared Grey, the new head chef of SushiSwap.
Sushi DAO voted in favor of the restructuring with nearly all hands raised. 11 million voting tokens were cast in favor of the new legislative framework. Previous posts on the SushiSwap forum suggested that the new structure would allow the three organizations to split the risk as they each oversee a different part of the SushiSwap product stack.
A project team that manages the protocol and a DAO made up of community members with voting rights currently share control of SushiSwap. A Cayman Islands-based DAO foundation, a Panamanian foundation, and a Panamanian business will all be created as a result of this agreement.
By: Kyler Wandler
5. A New Definition of Crypto Comes from the IRS
Alexa, play “Taxman” by the Beatles.
The IRS produced a draft bill last week that includes a well-defined digital assets section that defines when and how taxpayers will account for the usage of cryptocurrencies, stablecoins, and nonfungible tokens (NFTs).
Digital assets are any representations of value stored digitally on a "cryptographically protected distributed ledger or any equivalent technology," according to the draft's definition on page 16. Taxpayers had to report whether they had bought, sold, or traded in "virtual currency" on the 2021 tax form; this term will be altered on the yet-to-be-released 1040 tax form for 2022.
Taxpayers must report whether or not they engaged in digital asset transactions during the tax year in the digital assets section of their income tax return. For 2022, taxpayers who received, sold, swapped, gifted, or disposed of a digital asset must answer yes to Form 1040 or 1040-SR's digital assets question
By: Kyler Wandler
Podcasts, Videos, and Blogs
The brightest voices & sharpest pens:
ATTENTION AROUND THE BLOCKCHAIN READERS:
There's nothing better than doing what you love and getting paid for it. CryptoJobs.Law has your next opportunity to work on the legal side of web 3.
With hundreds of open roles and new positions added daily, CryptoJobs.Law is the only website dedicated solely to finding top legal minds jobs in web 3. Join the revolution today.
The Voices of Women in Crypto
Q&A with Tara Merk
1. How did you get started in crypto?
Tara: I fell down the rabbit hole during a house party in late 2016. Most interesting for me back then was the idea of running experiments of heterodox economic systems, which often only exist conceptually, through open source technologies and voluntary communities.
2. What accomplishment in Web3 are you most proud of and why?
Tara: I’m quite proud of working on designing a DAO based Exit to Community with Dada.nyc, an OG crypto art project. They’re probably some of the loveliest humans I’ve ever had the honour to learn from and I’m very excited with how things are going.
3. Has it been difficult for you as a woman to engage and retain an audience in this space?
Tara: If so, then not because I’m a woman.
4. Have you ever experienced imposter syndrome? If you have, how did you overcome it?
Tara: Of course. It’s uncomfortable but preferable to being an overly confident cryptobro. The imposter is on edge, they need to stay critical and continue learning in order to avoid detection.
5. What are you working on now that you’re excited about?
Tara: Alongside my PhD I’m involved in Metagov. Together with the DAO Research Collective, SCRF as well as researchers and practitioners around the world, we’re currently working on identifying the most pressing open problems for DAOs and establishing a kind of science of DAOs. It’s been a fascinating and exciting journey so far!
6. What would meaningful improvements to this space (in regards to gender equality) look like to you?
Tara: Less panels, conferences, podcasts organized by women for women to talk about the lack of women in blockchain. Women are already all over this space. Amplify the valuable ongoing work through funding, leadership positions and media coverage.
7. What advice would you give to other women looking to enter into the space?
Tara: This space is extremely easy to enter. If the army of apes and thousands of moonbois can do it, so can you! I’d recommend joining a DAO on a topic that you enjoy rather than one with a complex grandiose purpose and strategy. Dare to join community calls, speak up and maybe even turn on your camera. Also, sometimes it helps to find someone you trust, with more knowledge and experience who you can ask all your stupid questions on DM. Be nice to that person, they’re the best.
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!
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. 7: Types of Tokens
Welcome back, readers! In our last lesson, we discussed the Accredited Investor Rule and its application to crypto. Today, we’re giving you an overview of different types of tokens:
Utility tokens
Security tokens
Social tokens
To view this week’s lesson, READ HERE.
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
Digital Marketing & Advertising: The Legal Side Of AI, NFTs, Virtual Influencers And Dark Patterns
BNY Mellon (BK), State Street (STT) Court Crypto Custody With Fingers Crossed
Trade finance industry remains hopeful on blockchain despite failed projects
U.S. - Federal
Compliance First, Penalty Second as Feds Implement Crypto Regulations
FDIC Acting Chair Martin Gruenberg Speaks About Prudential Crypto Rules
Crypto and Commodity Policy Is on the Line in Three Tight Races
Coinbase supports Bitcoin in its legal battle against the SEC
Google settles with Uncle Sam over data that vanished during cryptocurrency biz probe
U.S. - State Law
Intrigued by cryptocurrency investments? Watch out for ‘finfluencers’
Aspen Creek Digital and Compass Mining to Host Thousands of Bitcoin Mining Rigs at Texas Solar Farm
New York Knicks Drop ‘New York Forever’ NFT Collection on Coinbase
Inside EmpireDAO, New York’s New Web3 Coworking Space Headquartered Above Supreme
New York-based forex broker Oanda launches crypto trading services in US
International
UK Parliament Approves Financial Services Legislation, Includes Crypto Assets
Costa Rican congresswoman proposes bill to regulate, recognize cryptocurrency
El Salvador, Lugano Sign Agreement to Help Spread Bitcoin Adoption and Education
Singapore Police Received 631 Cryptocurrency Scam Reports in 2021, Government Says
SushiSwap to Create Legal Entities in Panama And Cayman Islands
U.K. Seeks To Regulate Bitcoin, Crypto Similar To Current Financial Instruments
Singapore proposes crypto rules to bolster consumer protection
Conversations on Blockchain Applications and Decentralisation in the Financial Sector
Robust regulation key to limiting fallout from repeat of crypto winter
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, and the Around the Blockchain News team.
ATTENTION AROUND THE BLOCKCHAIN READERS:
There's nothing better than doing what you love. And getting paid for it. CryptoJobs.Law has your next opportunity to work on the legal side of web 3.
With hundreds of open roles and new positions added daily, CryptoJobs.Law is the only website dedicated solely to finding top legal minds jobs in web 3. Join the revolution today.
Quote of the Week:
“I think the most important idea is to remember that there have been times throughout American history where what is right is not the same as what is legal.” - Edward Snowden
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; Olive Branch JPEG; Chef JPEG; Tax JPEG;
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