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Edition No. 30

aroundtheblockchain.substack.com

Edition No. 30

ConsenSys Privacy Concerns; Genesis Investigation; SK Digital Asset Bill Amendments; El Salvador Moves Towards Regulations; Ripple Responds to NYT misinformation, and more. 11/22/2022 - 11/28/2022

Around the Blockchain News
,
Christopher Foreman
,
Evan Santos
,
Nick Corso
, and
Surya
Nov 28, 2022
1
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Edition No. 30

aroundtheblockchain.substack.com

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 Stories of the Week)
2. Podcasts, Videos, & Blogs (The faces, voices, and pens of Web3’s brightest contributors)
3. Bird Watching (Tweet, tweet!)
4. The Public Ledger (Featuring an additional 20 links on FTX this week)
5. Closing Statements
Photo by Conny Schneider on Unsplash

On the Docket

Five things you might have missed last week:

1. ConsenSys Privacy Policy Update Says It Collects MetaMask User IP and Wallet Addresses Info

One of MetaMask's 30 million plus users? Might be time to use a VPN.

New York-based blockchain company and MetaMask wallet developer, ConsenSys, recently updated its privacy policy revealing it collects potentially sensitive user data–a move sparking criticism from privacy advocates, defi proponents, and many others in the Web3 community.

On Nov. 23, Consensys informed its users their IP and Ethereum wallet addresses will be collected when they transact while using Infura as their default Remote Procedure Call (RPC) provider. 

Voices in the space have called for users to operate their own nodes, or cease using Infura, which currently accounts for a large number of nodes on the Ethereum network. Adam Cochran, partner at Cinneamhain Ventures, tweeted: “There is nothing more important than consumer privacy, especially when it comes to your financial data — you have a right to be anonymous. MetaMask has provided a great free service for a long time, but their decision to log IPs and tie it to transactions is unacceptable.”

MetaMask founder Dan Finlay responded to some of the criticism on Twitter, saying, “I think we can get this fixed soon. We are not using IP addresses even if they are being temporarily stored, which they don’t need to be, as we’re not using them for anything.”

But ConsenSys isn’t alone in increasing the amount of user data  collected according to Decrypt. Leading decentralized exchange Uniswap recently began collecting some off-chain data such as users' device type or browser, saying the move was aimed at improving user experience.

By: Evan Santos

2. US State Regulators Investigating Crypto Trading Firm Genesis Global Capital

State Regulators Crack Down on Alleged Securities Violations

Several U.S. state regulators are reportedly investigating crypto trading firm Genesis Global Capital for possibly violating securities law, according to Barron’s.

The investigations are part of a broad inquiry into the interconnectedness–and possible securities violations–of other crypto firms.

Alabama Securities Commission Director Joseph Borg said his and other states’ agencies are  specifically interested in Genesis and other companies marketing of crypto-related securities absent necessary registration. 

Genesis confirmed it’s considering bankruptcy due in large part to  exposure from collapsed crypto exchange FTX in addition to failed crypto hedge fund Three Arrows Capital according to Coindesk.

For much of November Genesis sought fresh capital or a favorable deal with creditors. The company's institutional lending unit was forced to suspend redemptions and new loan originations–Genesis previously disclosed its derivatives unit had approximately $175 million locked in its FTX trading account. As a result, parent company Digital Currency Group (DCG) opted to strengthen Genesis’ balance sheet with an equity infusion of $140 million.

By: Evan Santos

3. SOUTH KOREAN LEGISLATOR PROPOSES AMENDMENTS TO  DIGITAL ASSETS BILL

Iteration is the name of the game:

It has been a little over two weeks since FTX filed for bankruptcy, and the exchange’s collapse continues to reverberate. One of the most palpable impacts has been on the urgency shown by lawmakers to pass legislation regulating cryptocurrency exchanges. 

Last week Brazilian legislators were urged to pass a bill that imposed new requirements on exchanges, including setting up physical entities within the country and expanding mandatory disclosures. 

This week South Korean Congressman Yoon Chang-Hyun proposed amendments to the Digital Assets Bill. The proposed changes were, “introduced to reflect on the FTX incident and prevent a recurrence,” according to a member of the National Assembly.

The proposed amendments focus primarily on increasing investor protection. To begin, exchanges will now be required to separate user assets from their proprietary property. Additionally, digital asset operators will no longer be able to “arbitrarily seize” customer deposits when they’ve been transferred to a custodial institution. 

Another focus is reducing the “self-regulation” of digital asset operators and expanding the regulatory powers of the Financial Services Commission (FSC) and Financial Supervisory Service (FSS). 

In the original legislation, operators are afforded wide latitude to take unilateral measures in the case of “abnormal fluctuations in price or trading volume of digital assets.” The proposed amendments will expand the investigative and supervisory powers of the FSS and FSC. For example, digital asset operators will now be required to report any unfair trading practices and comply with any subsequent orders of regulatory authorities. 

South Korea’s push to implement regulation truly began with Terra/LUNA’s collapse, and with co-founder Do-Kwon still at large, lawmakers within the country are focused on ensuring a steady path forward for digital assets.

By: Surya Dawar

4. El Salvador Proposes a Bill to Provide Digital Asset Issuance Regulation

Forward unto dawn

Even during the recent crypto woes, El Salvador – the first country to adopt bitcoin as legal tender–continues to embrace cryptocurrency. El Salvador Minister of Economy, Maria Luisa Hayem Brevé, submitted the Digital Asset Issuance bill. The bill sets out a framework for companies offering digital assets. 

A national commission will be in charge of the certification process for these companies and their operations. The bill addresses a wide range of digital assets in addition to bitcoin–the digital asset garnering the most interest from El Salvador in the past. 

Companies must complete a certification process and disclose the assets they will offer while also highlighting the "benefits, restrictions, and limits." The bill proposes cybersecurity safeguards to which digital asset companies would have to  adhere. 

Other safeguards include disclosure requirements and specifying the countries in which  companies plan to operate. The bill’s overall stated goal is "promoting the efficient development of the digital asset market and protecting the interests of the acquirers.” 

Still under consideration, the bill may – assuming it passes at all – look vastly different in its final form.

By: Nick Corso

5. Ripple’s General Counsel Responds to Misleading NYT Article

Due Diligence

Ripple's general counsel, Stuart Alderoty, recently replied to a New York Times article that misconstrued the US Securities and Exchange Commission's (SEC) authority to determine XRP's security status. According to the piece headlined “Inside a Crypto Nemesis’ Campaign to Rein In the Industry,” the SEC has labeled XRP as a security, which caused the digital asset to lose its status as the third-largest cryptocurrency by market capitalization.

Alderoty explained that the SEC hasn’t classed XRP as a security and doesn’t have the power to do so in a tweet. According to one judge, "the SEC can only pose the question; the court determines the answer in the end."

Alderoty’s assertion was backed up by attorney John Deaton, who is defending over 75,000 XRP investors in the ongoing Ripple-SEC battle. Deaton contends that the item completely misrepresents the authority of the SEC. He said that even the SEC had conceded that only a court could judge whether an asset like XRP qualified as a security.

By: Kyler Wandler

Podcasts, Videos, and Blogs

The brightest voices & sharpest pens:

Bird Watching

Tweet, Tweet, Tweet!
  1. ConsenSys is watching:

Twitter avatar for @CoinDesk
CoinDesk @CoinDesk
.@ConsenSys said that it collects the IP and Ethereum wallet address of users by default when they use its digital wallet service @MetaMask. By @parikshitm899
trib.alEthereum Software Firm ConsenSys Reveals It Collects User DataThe firm said when using Infura as an RPC on MetaMask a user’s IP address and wallet address information would also be collected.
6:04 AM ∙ Nov 24, 2022
385Likes190Retweets
  1. Attorney Fred Rispoli of Hodl Law is playing David to the SEC’s Goliath — but is it good for the industry?

Twitter avatar for @freddyriz
Fred Rispoli @freddyriz
The Complaint is officially live! Hodl Law v. SEC, Case No. 3:22-cv-01832 (S.D. Cal. Nov. 21, 2022): Declaratory Action That #ethereum Is Not A Security. @CGasparino @EleanorTerrett @jeffjohnroberts @RoslynLayton @BobPisani @AltcoinDailyio @protocol
dropbox.com001_2022.11.21_complaint.pdfShared with Dropbox
5:14 PM ∙ Nov 22, 2022
1,187Likes383Retweets

ATBC partner and founder of the Cod3x @Lawtoshi doesn’t think so:

Twitter avatar for @lawtoshi
Lawtoshi @lawtoshi
1/9 A few things that stick out tactically, (no substance): - Most importantly, I’m concerned about this service Fred’s firm offers, which suggests he would like to have his cake and eat it too. Maybe he likes Ethereum but isn't concerned about collateral damage in litigation.
Image
Twitter avatar for @Belisarius2020
bill morgan @Belisarius2020
What precisely is your concern about the wisdom of Fred’s tactics apart from funding the litigation. https://t.co/7ZB5Ztu0sd
2:03 PM ∙ Nov 23, 2022
13Likes3Retweets
  1. DeFi Education Fund, represented by Jake Chervinsky, has filed a reply brief on behalf of Ooki DAO to assist in their fight against the CFTC:

Twitter avatar for @jchervinsky
Jake Chervinsky @jchervinsky
1/ Yesterday, @fund_defi filed a reply brief in the Ooki DAO case, challenging the CFTC's improper attempt to serve a DAO via forum post and chat box. In short, the CFTC is pushing a nonsensical theory of DAO liability in court. We say why it's wrong. 🧵 drive.google.com/file/d/1Czh3wn…
drive.google.comDEF_Amicus_CFTC_v._Ooki_DAO_Reply_Brief_FINAL.pdf
1:48 PM ∙ Nov 22, 2022
186Likes50Retweets
  1. Love that hustle:

Twitter avatar for @ItsMattsLaw
Matt Margolis @ItsMattsLaw
Basting my turkey with red bull so I can keep billing hours after thanksgiving dinner
7:16 PM ∙ Nov 24, 2022
527Likes19Retweets

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

  • Bitcoin Mining M&A in Crypto Downturn Requires Due Diligence

  • Why the collapse of FTX is worse than Enron

  • Interview with Mev Dzihic: Digital identity in the legal industry – is the future Blockchain?

  • $740M in crypto assets recovered in FTX bankruptcy so far

  • Legal crypto expert on FTX: 'This really is a fraud first'

  • Disgraced FTX founder to speak at New York Times DealBook Summit

  • FTX hires former regulators to investigate what led to the crypto giant's bankruptcy

  • DCG's Barry Silbert reveals crypto firm has $2 billion in debt as he tries to calm investors after FTX

  • ApeCoin DAO to launch bespoke NFT marketplace for Apes and Otherdeeds

  • Is Tom Brady broke after FTX collapse? Buccaneers QB could face legal trouble over crypto endorsement

U.S. - Federal

  • A look at Gary Gensler's plan to regulate most crypto as securities and questions over the SEC's handling of FTX, which met the regulator before its implosion

  • How to Keep Up With DOJ and SEC Regulation of NFTs

  • Court Authorizes the Seizure of Domains Used in Furtherance of a Cryptocurrency “Pig Butchering” Scheme

  • A crypto collective tried to get regulatory OK for tokens. It didn't go well

  • EPA Acknowledges Plans to Look at Crypto Energy Usage, Emissions

  • SEC Enforcement Chief Speaks on Penalties, Investigations, and Compliance

  • Two Estonian Citizens Arrested in $575 Million Cryptocurrency Fraud and Money Laundering Scheme

  • U.S. prosecutors opened probe of FTX months before its collapse

  • Treasury Warns Crypto Industry of Money-Laundering Risks in ‘Mixers’

U.S. - State Law

  • New York AG considers banning crypto purchases from retirement funds

  • Ohio Investment Manager Arrested for Allegedly Running a $10M Cryptocurrency Ponzi Scheme

  • Bitcoin miners look to software to help balance the Texas grid

  • New York Signs Two-Year Crypto Mining Moratorium Into Law

  • NY Governor Signs Law Pausing Some Crypto Mining for 2 Years

  • NY Governor Hochul Signs Precedent-Setting Moratorium on Fossil Fueled Cryptocurrency Mining

  • Legal Ethics Update: The Virginia Supreme Court Approves Acceptance of Cryptocurrency as an Advance Payment for Legal Services

  • New York Governor signs law cracking down on certain types of Bitcoin mining

  • Stablecoins could offer central banks a shortcut, says New York Fed advisor

  • FTX Liquidators in Bahamas Move Case From New York to Delaware

  • New York Fed advances tests of CBDCs for cross-border payments

International

  • Pseudonymous claimant debarred from proceedings

  • How does the FTX collapse affect Dubai’s crypto ecosystem?

  • Belgian regulator clarifies stand on crypto assets

  • South Korean Man Who Bought Drugs with Bitcoin Given Jail Sentence

  • Hong Kong’s SFC Proposes Risk Management Rules for Futures Brokers

  • 5 Countries That Could Be Next In Line To Adopt Bitcoin As A Legal Tender

  • WeMade pledges legal action against 'death verdict' by crypto exchanges to delist native token

  • Russia intends to launch a ‘national crypto exchange’

  • Crypto lender Hodlnaut reportedly faces police investigation in Singapore

  • Bitcoin, Ether Needn't Follow Financial Rules, Belgian Regulator Says

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, and the Around the Blockchain News team.

Quote of the Week:

“Crypto today is a libertarian paradise. If you send your money to the wrong place, it's gone. If you send it to a merchant and don't receive the goods, you have no recourse. This is cash. Treat it as such.” Gil Penchina

Thanks for reading Around the Blockchain! Subscribe for free below:


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.
Share this post

Edition No. 30

aroundtheblockchain.substack.com
A guest post by
Evan Santos
Newly minted lawyer focusing on technology & the law. Researching and writing about blockchain, digital assets, and regulation. Twitter: @EvanSantosJD
A guest post by
Nick Corso
A second year law student at the University of Miami. Twitter: @nickcorso2
A guest post by
Surya
Law student @ Durham University. Writer for Around the Blockchain. Interested in everything web3. I think about food much more than I’d like to admit. Twitter: @dawar_suryavir
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