Edition No. 4
They say a news week in crypto is equal to 6 months in any other industry. Here's what happened from 5/22/2022 - 5/29/2022
Welcome to another edition of Around the Blockchain, a weekly letter dedicated to keeping readers 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:
A Brave New World
We witnessed yet another eventful week in crypto regulatory discussions, highlighted by Wednesday’s D.C. Blockchain Summit hosted by the Chamber of Digital Commerce. SEC Commissioner Hester Peirce gave an interview to CNBC stating the U.S. has “dropped the ball on crypto regulation”. On Thursday, Peirce also published an op-ed with CFTC Commissioner Caroline Pham discussing how the two agencies (SEC & CFTC) can work together to create a regulatory framework that protects consumers and is beneficial to both the crypto and capital markets. Federal Reserve Vice Chair Lael Brainard also weighed in this week on the need for regulatory protections, referencing the recent collapse of Terra ($UST). Additionally, some aspects of the SEC’s power to self-adjudicate were ruled unconstitutional by the Court of Appeals for the Fifth Circuit.
The Only Guarantees in Life: Death & Taxes(TBD)
A recent proposal to tax Bitcoin and other crypto was rejected by Portugal’s Parliament this week, contradicting and impeding the goals of Portuguese Minister of Finance Fernando Medina. While this most recent proposal was rejected, the likelihood of future regulatory requirements such as capital gains, value-added, or property tax obligations may still be on the horizon for crypto and digital asset holders.
Rainy Day Fund.
Despite the overwhelming sense of FUD in the digital asset markets as of late, a guiding star has arisen offering hope to the Web3 community at large. A16z announced Wednesday that they had raised roughly $4.5 billion in capital for its fourth fund, $1.5 billion of which will be dedicated to Web3 startups. Arianna Simpson, one of the four partners of the firm, laid out a broad and sweeping vision for the allocation of startup and seed funds on behalf of the company, saying:
“What the overall category encompasses is continuing to grow, and as a result, our fund is larger because we really want to be able to support that entire ecosystem.”
Note: This article, published by Forbes, allows for 4 free articles per month.
Vacationing with crypto! (Just kidding, it’s a regulation.)
FATF (Financial Action Task Force) Recommendation #16, better known as the ‘Travel Rule’, is a transactional regulation emanating from the regulatory arm of the G-7 (and more than 30 additional countries around the world). The FATF specializes in anti-money laundering (AML) policies, including Recommendation #16 which sets forth transactional threshold levels which, if exceeded, require virtual asset service providers (VASPs) to report information on both originators and beneficiaries of transactions to maintain compliance. (It’s a lot of acronyms, I know). Andrey Sergeenkov of CoinDesk dives into the details and applications of this rule in the article linked above, noting:
“In essence, whenever crypto worth over $1,000 ($3000 in the U.S.) is transacted between two parties, the crypto service provider of the sender is expected to communicate the personally identifiable information (PII) of the sender to the crypto service provider of the recipient and vice versa.”
The Fox & the Hound(s)
The crypto wallet giant MetaMask, home to everyone’s favorite digital fox, announced a new effort to curtail scams and enforce punitive measures against the growing number of" “bad players” that have run rampant throughout the web3 community in recent years. MetaMask — which has roughly 30 million active users — plans to provide this protection globally with the assistance of Asset Reality, a UK based firm which specializes in the investigation of stolen digital assets. In order to mitigate litigation costs that have traditionally been quite steep, the two partners plan to offer:
“…multiple victims of a scam operation to join forces and build a larger forensic investigation against a scam operation.”
For “larger scale scam operations”, however, the task would fall to blockchain analytics firm ConsenSys, a leading security protocol.
The Public Ledger
Web3 regulatory and legal news from around the world. Always DYOR, but in case you don’t have time, here’s some of ours.
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.
General News and Opinion
U.S. - Federal
U.S. - State Law
Podcasts & Videos
The brightest voices & sharpest takes.
In episode No. 46 of the Law of Code podcast, Jacob Robinson interviews the renowned J.W. Verret, who, among many other roles, has served on the Investor Advisory Committee of the Securities and Exchange Commission, where he advised the SEC on matters of investor protection:
Laura Shin speaks with Coy Garrison, former counsel to SEC Commissioner Hester Peirce in Ep.356 of Unchained. Together, they discuss the role of regulation in the crypto industry and what the SEC could be doing to make crypto a better space:
Motion To Compel
Thought-provoking questions and arguments for your consideration each week.
This week, we will examine The Accredited Investor Rules emanating from the Securities Act of 1933, and how these rules affect digital assets classified as securities. These rules were initially created to protect uneducated & unqualified investors from over-leveraging themselves in high-risk investment ventures. The rules were drafted following the stock crash of 1928, when the fear of another such event stood tall in the hearts of many. Since that time, the definition and standards of compliance for the rules have changed many times - most recently in 2020 - which begets the question: Does the Accredited Investor Rule still offer the protection it was once intended to provide, or has it instead become a barrier of entry to those that fail to meet the financial requirements set forth therein?
The Rules recently saw their first application in the Web3, with lenders Celsius & BlockFi being made exemplary sacrificial lambs. The question is no longer “If” these rules will affect digital assets — but “How”.
You can read the full length piece by Kyler Wandler here, or by following the hyperlink in the title above.
Tweet, Tweet, Tweet!
What’s that old saying about doing the same thing over and over but expecting different results?
With Mirror’s announcement of a new NFT writing platform, the power of the pen meets the power of the people:
It appears people are starting to pay attention. Now is our time as legal professionals in the space to ensure we build a strong foundation to benefit those who will follow us. I’m reminded of one of my favorite quotes:
“A wise man plants trees whose shade he knows he shall never sit beneath.” - Anonymous
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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 in the life and conduct of the State is possible only if first it resides in the hearts and souls of the citizens.” - Plato
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.
Special thanks / image credits: