Edition No. 39

IMF Publishes crypto recommendations; NYAG sues CoinEx; IL proposes new crypto laws; New SBF charges filed; Emojis are financial advice; and more. Here's what happened from 2/19/2023 - 2/25/2023.

Welcome back to 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. Bird Watching (Tweet, tweet!)

3. The Public Ledger

4. Podcasts, Videos, & Blogs (The faces, voices, and pens of Web3’s brightest contributors)

5. Closing Statements

On the Docket

Five things you might have missed last week:

1. IMF Publishes Crypto Policy Recommendations for Member Countries

A Nine Point Plan, To Rule Them All

The International Monetary Fund (IMF) Executive Board recently released a paper on the “Elements of Effective Policies for Crypto Assets”, which provides guidance to IMF member countries on key elements of an appropriate policy response to crypto assets. The paper sets forth a framework of nine elements to help members develop a comprehensive, consistent, and coordinated policy response on: 

1. Safeguarding monetary sovereignty

2. Guarding against excessive capital flow volatility

3. Analyzing and disclosing fiscal risks

4. Establishing legal certainty

5. Developing and enforcing prudential conduct and oversight requirements

6. Establishing a joint monitoring framework

7. Establishing international collaborative arrangements

8. Monitoring the impact of crypto assets on the stability of the international monetary system

9. Strengthening global cooperation in digital infrastructure development. 

IMF Executive Directors broadly welcomed the proposed framework and its elements, noting the importance of a comprehensive response. Directors emphasized the importance of prioritizing elements of the framework where countries face implementation challenges, including weak regulatory institutions. Directors further urged strong coordination between authorities, both on domestic and international levels, asserting such coordination to be critical for consistent implementation and avoiding regulatory arbitrage.

See Also: IMF Policy Paper; Yahoo Finance; CoinTelegraph; CoinDesk

Photo by Shubham Dhage on Unsplash

2. NY Attorney General Sues Crypto Exchange CoinEx

Big Apple’s AG Wants Slice of Crypto Exchange

The New York State Attorney General's office has filed a lawsuit against CoinEx, a cryptocurrency exchange. The exchange was operating as an unregistered securities and commodity broker-dealer in the state and failed to register with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, or New York regulators before offering services in the state. The lawsuit claims that CoinEx listed tokens and services that qualified as securities and commodities under state law, including AMP, LBC, LUNA, and RLY tokens. The filing stated that these tokens fall within the definition of commodities and securities under the Martin Act, as they represent investments of money in common enterprises with profits to be derived primarily from the efforts of others. CoinEx is accused of engaging in the business of selling commodities through accounts, agreements, or contracts to accounts in New York primarily for investment purposes. The New York Attorney General’s office is seeking geofencing of New York by blocking local IP addresses, cessation of any business in the state, full monetary restitution, disgorgement of profits made from business in New York, and payment of NYAG fees.

See Also: NY AG Complaint; BeInCrypto; Reuters

Photo by Hưng Nguyễn on Unsplash

3. Illinois Introduces Several Legislative Proposals Related to Crypto and Digital Assets

Illinois Makes Moves in Digital Asset Policy

The Illinois Department of Financial and Professional Regulation (IDFPR) has introduced a Consumer Financial Protection and Innovation Package, consisting of two legislative initiatives, which aim to protect Illinois residents from financial fraud and abuse, while also establishing regulatory oversight of cryptocurrencies and other digital assets. The two proposals are the Fintech-Digital Asset Bill (HB 3479/SB 2233) and the Consumer Financial Protection Bill (HB 3483/SB 2232), both sponsored by Representative Mark Walker and Senator Laura Ellman. The Fintech-Digital Asset Bill modernizes regulations for money transmission in Illinois, establishes regulations for digital asset businesses, requires digital asset exchanges and other digital asset businesses to obtain a license from IDFPR to operate in Illinois, replaces the Transmitters of Money Act with the Money Transmission Modernization Act, and establishes customer protections. Meanwhile, the proposed Consumer Financial Protection Bill empowers the IDFPR to enforce the Fintech-Digital Asset Bill and existing consumer financial protection laws, while bringing the Illinois Financial Institutions Code and other statutes in line with more recently-enacted consumer protection measures.

Also,,, the crypto community has been pushing back against another recent legislative proposal in the state to ban blockchain immutability. Titled the “Digital Property Protection and Law Enforcement Act,” the bill would authorize the courts to order a blockchain transaction executed via a smart contract to be altered or rescinded. Hinkes described the bill as “the most unworkable state law” related to blockchain and cryptocurrency that he has ever seen. The bill states that any blockchain miners and validators may be fined between $5,000-10,000 for each day that they fail to comply with court orders. Hinkes said it would be “impossible” for miners and validators to comply with the bill proposed by Senator Peters. The bill also appears to mandate “any person using a smart contract to deliver goods and services” to include code in the smart contract that can be used to comply with court orders.

See Also: CoinTelegraph

Photo by Cytonn Photography on Unsplash

4. SBF Faces New Charges in Recent Indictment

SBF-Around and Find Out

Sam Bankman-Fried, co-founder of cryptocurrency exchange FTX, has been charged with four new criminal counts, including those related to commodities fraud and unlawful political contributions. Bankman-Fried could face an additional 40 years in prison if convicted of the charges, where he is accused of “multiple schemes to defraud”. The 12-count indictment against him provides new details of hundreds of political donations that Bankman-Fried allegedly directed in violation of federal campaign finance laws.

Bankman-Fried is accused of stealing FTX customer deposits and using billions of dollars of those stolen funds to support FTX’s and Alameda Research’s operations and investments, to fund speculative investments, to make charitable contributions, and to enrich himself. He also allegedly tried “to purchase influence over cryptocurrency regulation in Washington, D.C., by steering tens of millions of dollars in illegal campaign contributions to both Democrats and Republicans,” according to the new indictment. Bankman-Fried and fellow FTX executives combined to contribute more than $70m toward the 2022 midterm elections, according to campaign finance watchdog OpenSecrets.

The new indictment adds more legal pressure on SBF, whose close associates, FTX co-founder Gary Wang and ex-Alameda CEO Caroline Ellison, pleaded guilty in December 2022 to multiple fraud and other charges. Both Wang and Ellison are cooperating with the U.S. Attorney’s office in Manhattan against Bankman-Fried. Manhattan U.S. Attorney Damian Williams, in a statement on the new indictment, said:

“We are hard at work and will remain so until justice is done.”

See Also: Bloomberg Law; TheStreet

Photo by Conny Schneider on Unsplash

5. Emojis Count as Financial Advice and Have Legal Consequences, Judge Rules

[Insert Facepalm Emoji Here]

A U.S. District Court judge has ruled that certain emojis can be considered financial advice and have legal consequences, according to a recent court filing. The ruling came in response to a lawsuit filed against NFT platform Dapper Labs, alleging that its NBA Top Shot Moments violated security laws. The judge cited tweets from the NBA Top Shot account that contained emojis indicating financial returns, which were deemed to mean "a financial return on investment". However, legal experts have warned that such a ruling could be problematic and could lead to a situation where every major video game developer, ticketing platform, and travel rewards program becomes an SEC-regulated company.

Photo by Domingo Alvarez E on Unsplash

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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

• US Federal Reserve denies Custodia Bank's request for Fed supervision

• Proof of Stake Alliance publishes white papers on legal aspects of liquidity staking

• How Blockchain Impacts the Legal Profession

U.S. - Federal

• The 118th Congress on FinTech Legislation

• Federal Judge Denies Dapper Labs’ Plea To Dismiss Top Shot Class Action

• Paxos is engaged in ‘constructive discussions’ with SEC: Report

U.S. - State Law

• DFPI Announces Launch Of "Crypto Scam Tracker"

• Oregon elections officials want to fine Democrats $35,000 for misfiling donation tied to crypto exec

• Montana’s ‘right to mine’ crypto bill moves closer to passing as law

International

• New UKJT legal statement on digital securities under English law

• Hong Kong’s new crypto regulation may lure Web3 firms back, experts say

• FTX Japan Customers Can Begin Withdrawing Fiat, Crypto on Feb. 21

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.

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Podcasts, Videos, and Blogs

The brightest voices & sharpest pens:

Law of Code - Jacob Robinson sits down with Gabriel Shapiro, Sarah Brennan and Marc Goldich to discuss disclosure regimes, sufficient decentralization and much more!

Bankless - The Bankless team discusses all the crypto news that took place in the last week of February including Coinbase Q4 earnings, Base and NBA Top Shot Moments NFTs.

Bloomberg Crypto - Bloomberg Senior Editors Beth Williams and Anna Irrera discuss Coinbase earnings, FTX Japan and increasing regulatory scrutiny.

Unchained - Host Laura Shin is joined by Emily Parker, CoinDesk’s executive director of global content. The pair dive into Asian crypto markets and the bullish signs in recent developments.

DaoTalk - DAO Talk looks at sudoDAO’s latest on-chain proposals and Coinbase announcing its L2 “base”.

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Bird Watching

Tweet, Tweet, Tweet!

RYAN SΞAN ADAMS - rsa.eth 🏴🦇🔊 @RyanSAdams

A federal court says "🚀📈💰" emoji's are financial advice and their use could mean consequences. Please lord god save us from our institutional overlords who don't know how to use the internet.

Coinbase @coinbase

1/ 🔵 We’re excited to announce @BuildOnBase. Base is an Ethereum L2 that offers a secure, low-cost, developer-friendly way for anyone, anywhere, to build decentralized apps. Our goal with Base is to make onchain the next online and onboard 1B+ users into the cryptoeconomy.

Lawtoshi @lawtoshi

1/ on negotiating contracts As an in-house lawyer I have negotiated and edited hundreds and hundreds of contracts. Also was a trial lawyer for years so have some perspective on risk management. Here are the best practices I can share with you from the field.

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Closing Statements

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Quote of the Week:

Oh, a counter-offer. That's what we lawyers - I'm a lawyer - we lawyers call that a counter-offer. This is a tough decision here. Get my ass kicked or collect $200.

-Vinny Gambini

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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.