Edition No. 43
Edition No. 43
SEC Makes Moves; Do Kwan Arrested; White House Criticizes Crypto; Senator Emmer's Proposal; Taiwan's Regulatory Updates; and more. Here's what happened from 3/19-3/25
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:
SEC In The News: Coinbase, Justin Sun, Sushiswap, and Others Targets of Recent Enforcement Actions
SEC Casts A Wide Net
The US Securities and Exchange Commission (SEC) has recently taken action against multiple cryptocurrency companies and celebrities, signaling a continued crackdown on the crypto industry.
Coinbase received aWells Notice (which typically precedes an enforcement action), SushiSwap received an SEC subpoena, and Tron founder Justin Sun–along with several celebrity influencers–, have been charged with fraud and illegal promotion of crypto assets.
The SEC’sWells Notice to Coinbase concerns suspected securities law violations. Despite the warning, Coinbase claims none of its listed assets are securities and attributes the notice to a misunderstanding by SEC officials.
Still, Coinbase's shares slipped by around 12% following news of the Wells Notice.
The company's chief legal officer, Paul Grewal, stated Coinbase is open to a legal process to both add regulatory clarity and demonstrate the SEC's seeming hostility toward digital assets.
In addition to Coinbase, SushiSwap, an Ethereum-based decentralized exchange, disclosed it has been subpoenaed by the SEC and proposed a legal defense fund to cover potentially steep legal costs. The DAO proposal seeks to raise the equivalent of $3 million US in Tether’s USDT stablecoin for the legal fund, with an additional $1 million US worth of USDT if the initial funds are depleted.
Finally, the SEC has charged Tron founder Justin Sun and several celebrities–including Lindsay Lohan and Soulja Boy–with fraud and illegal promotion of the crypto assets Tronix (TRX) and BitTorrent (BTT).
Sun's companies, Tron Foundation, BitTorrent Foundation, and Rainberry, are accused of distributing the assets without proper disclosure beginning in August 2017. Sun allegedly concealed payments to celebrities for promoting TRX and BTT on social media. All but Soulja Boy and Austin Mahone have agreed to settle without admitting wrongdoing, collectively paying over $400,000.
See Also: Coinbase Response; AMBCrypto; The Block
Do Kwan Reportedly Arrested in Montenegro
Do Kwan Reaping What Was Sowed In Terra Ecosystem Collapse
Terraform Labs co-founder Do Kwon has reportedly been arrested in Montenegro for his role in the $40-billion collapse of the Terra ecosystem in May 2022. The South Korean national was detained at Podgorica airport with falsified documents.
Montenegro does not have an extradition agreement with Singapore or South Korea but has an old extradition treaty with the US, and Kwon is wanted by South Korean, Singaporian, and US authorities.
On February 16, 2023, the US Securities and Exchange Commission charged Kwon with orchestrating a multi-billion dollar crypto asset securities fraud. The US Department of Justice has also been investigating Kwon's role in the Terra ecosystem's collapse since March, although no criminal complaints have yet been filed against Kwon in the United States.
See Also: Financial Times**; WSJ**; NYT**
White House Releases Economic Report Criticizing Digital Asset Industry
White House Pivots On Crypto Support
[The White House released a 513-page annual economic report, which criticized the digital asset industry, particularly cryptocurrencies, for their ignorance of basic economic principles. The report states that crypto assets have not brought any promised benefits, such as improving payment systems or increasing financial inclusion. Instead, it claims that the innovation in digital assets is mostly focused on creating artificial scarcity to support prices, with many crypto assets having no fundamental value. The report attempts to refute various claims made by crypto advocates and highlight the potential harm to consumers and the financial system due to a lack of regulation and enforcement. The report comes shortly after the collapses of Silvergate, Silicon Valley, and Signature banks, which had served aspects of the crypto industry.
In response, the crypto industry has expressed outrage over the report. Crypto executives, such as Fred Ehrsam, co-founder of digital asset investment firm Paradigm, criticized the report for dedicating 15% of its content to "crypto FUD." Blockchain Association CEO Kristin Smith called the report "disappointing" and urged the Biden administration to reconsider its stance on crypto innovation. Some in the industry, like Dan Reecer, Chief Growth Officer at Acala Network, perceive the report as an early warning of an upcoming United States central bank digital currency (CBDC).
See Also: CoinTelegraph; Decrypt
Senator Emmer Introduces Blockchain Regulatory Bill
Senator Whips Up Blockchain Protection Proposal
Majority Whip, Tom Emmer has introduced the Blockchain Regulatory Certainty Act (BCRA) to provide clarity for the blockchain industry. The bipartisan bill, co-led by Representative Darren Soto, affirms that blockchain developers and service providers, that do not custody consumer funds, are not money transmitters. Emmer argues that this clarification is essential to prevent the blockchain ecosystem from seeking more straightforward regulatory environments overseas. The BCRA aims to simplify the existing state-by-state money transmission regulatory process by asserting that noncustodial blockchain entities are not money transmitters. This move is intended to encourage growth in the blockchain and digital asset industry in the US.
See Also: Proposed Bill Language
Taiwan’s Crypto Industry Welcomes Regulatory Announcement
Rolling Out The Red Carpet > Getting Rugged
Taiwan's Financial Supervisory Commission (FSC) will soon be responsible for regulating the country's cryptocurrency industry, as confirmed by FSC Chairman Huang Tien-mu during a parliamentary hearing. Wayne Huang, CEO of XREX, welcomed the announcement, stating that regulation is necessary for the industry to grow. He suggested that one of the first steps should be to form an industry self-regulatory body to help develop a set of rules. The FSC will not regulate non-fungible tokens (NFTs) at this stage, as they are still an emerging asset class. In September, Taiwan approved 24 crypto platforms under its anti-money laundering compliance system.
Bird Watching
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
Coinbase Fronts Supreme Court Over User Lawsuits in Crypto First
CFTC’s tech committee gathered in DC to talk DeFi — Here’s what was discussed
U.S. - State Law
Wyoming Could Be First US State to Issue Official Stablecoin
Texas Lawmaker Launches Resolution to Protect Bitcoin Investors, Support BTC Economy
International
Podcasts, Videos, and Blogs
The brightest voices & sharpest pens:
Law of code - Jacob Robinson sits down with Rodrigo Seira, Crypto Counsel at Paradigm, to discuss crypto use cases, DAO member liability, NFTs and much more!
Bankless - The Bankless team discusses all the crypto news that took place in the last week of March including the Coinbase Wells notice, a Microsoft browser wallet and the contagion from recent bank failures.
Bloomberg Crypto - Senior editor Anna Irrera is joined by Bloomberg reporter Abhinav Ramnarayan and Ovie Faruq, co-founder at Canary Labs, to discuss the recent optimism surrounding NFTs.
Unchained - Host Laura Shin sits down with Paul Grewal, Coinbase’s Chief Legal Officer, to discuss the recent Wells notice against the company.
DaoTalk - Daniel Goldman and Matt Pearring from Offchain Labs join DAO Talk on this episode about the launch of Arbitrum DAO.
Closing Statements
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Quote of the Week:
“Well done is better than well said.”
- Benjamin Franklin, Poor Richard’s Almanack, 1737
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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.
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