Discover more from Around the Blockchain
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
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
On the Docket
Five things you might have missed last week:
One of MetaMask's 30 million plus users? Might be time to use a VPN.
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
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.
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
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
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
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:
Tweet, Tweet, Tweet!
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
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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
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