Edition No. 5
They say a news week in crypto is equal to 6 months in any other industry. Here's what happened from 5/29/2022-6/05/2022
Welcome to 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:
1. NY Passes Bill Banning POW Mining Operations
A Miner Setback
The NY State Senate passed a bill on Friday that would impose a two-year moratorium on a wide range of Proof of Work (POW) crypto mining operations in the state, receiving predictably mixed reactions from lawmakers as well as crypto proponents/opponents in the state. The stated purpose of the bill is to:
“Establish a moratorium on air permit issuance and renewal for electric generating facilities that utilize a carbon-based fuel and that provides, in whole or in part, behind-the-meter electric energy consumed or utilized by cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions.”
The bill is purportedly targeted specifically at crypto mining companies that have been using retired fossil fuel plants in the state to generate electricity for their mining operations and applies to renewal applications/permits for operations that “seek to increase or will allow or will result in an increase” in the power used for crypto mining. The bill does grandfather existing carbon-based operations—so long as there is no increase in energy consumption—in addition to excepting operations that utilize zero-emission energy sources and operate as customers to the local energy grids:
“When properly developed, facilities that utilize zero-emission energy sources add millions of dollars in tax revenue and bring economic development to communities otherwise burdened by shuttered properties.”
The bill also requires an environmental impact study of the mining operations under goals set forth in the Climate Leadership and Community Protection Act (CLCPA). NY Governor Kathy Hochul has yet to sign the bill into law.
See Also: CoinDesk; CNBC; CoinSpeaker
2. DOJ Indicts Former OS Employee on Charges of Wire Fraud and Money Laundering
Gone [OpenSea] Fishin’
Nate Chastain, a former product manager at OpenSea, was indicted last Wednesday on charges of wire fraud and money laundering for allegedly profiting off insider knowledge of upcoming NFT promotions before the information was publicly available. The indictment alleges the employee tried to cover his tracks through anonymous accounts and wallet transactions used to flip the NFTs for a profit. While not charged under securities or commodities fraud statutes, this indictment has stemmed a larger conversation about the downstream effects on future NFT litigation.
See Also: Bitcoinist; The Street; JD Supra; CoinTelegraph
3. ForUsAll Launches First Crypto Guidance Lawsuit Against DOL
Retirement Rights v. Risky Business
The self-purported “Best 401k Provider for Small Business” company ForUsAll sued the U.S. Department of Labor on Tuesday under the Administrative Procedure Act (APA) for official statements the Department released warning potential investors against including cryptocurrency in their retirement plans, a service ForUsAll provides to their customers.
See Also: Reuters; **Bloomberg;
4. Explorations of DAOs and Legal Entities by Some of the Space’s Greatest Innovators
Ask not for Whom the DAO Tolls; It Tolls for Thee.
Attorneys Miles Jennings (Head of Decentralization and General Counsel for a16z) and David Kerr (Principal at Cowrie, LLC and Head of Research at the DAO Research Collective), published their greatly anticipated Part II of their DAO research series “A Legal Framework for Decentralized Autonomous Organizations”. Part II, titled “Entity Selection Framework”, follows up Part I, which was a framework proposal for non-profit DAOs utilizing UNA (Unincorporated Non-Profit Association) building blocks.
In addition, Dr. Chris Brummer (Professor of Law at Georgetown University and researcher for the Institute of International Economic Law), and Rodrigo Seira (General Counsel for Paradigm Investments) published a similar whitepaper titled “Legal Wrappers and DAOs”. Dr. Brummer described the whitepaper in a tweet, saying:
“Our research evaluates the entities available to DAOs, as well as their implications for limited liability, governance and more.”
Due to the efforts of these 4 researchers and the growing number of other bright minds dedicating their time and energy to the reconciling of novel digital entities with existing legal structures, the once opaque path ahead is becoming more illuminated and well defined every day.
5. XRP Ripple’s Believe it or Not: Litigation Heating up in XRP v. SEC Showdown
To make an omelet you’ve got to crack a few eggs:
Last Tuesday (May 31st) the SEC filed memoranda in opposition to XRP’s Motion challenging its responses to a Fourth Set of Requests for Admissions, prompting the Court to call for an in-person hearing on June 7th. James K. Filan tweeted out the details:
At the hearing, we will expect a decision from presiding Judge Netbum (I mean come on…we can all see the irony in that name, can’t we?) regarding the “Hinham Documents” in question. The Ripple defense case continues to be a microcosm of the battle between the Web3 community and SEC at large, with the implications of the ultimate judgment weighing heavily on the SECs push for regulatory authority over digital assets they view as securities. Eggs, stones, and skulls will continue to crack as the case progresses.
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
ABA, SIFMA ask SEC to delay effective date on crypto-asset bulletin
How can property buyers get a handle on cryptocurrency deals?
Bank of America CEO: We Have Hundreds of Blockchain Patents — But Regulation Won't Allow Us to Engage in Crypto
How The Federal Government Showed Me The Importance Of Bitcoin
U.S. - Federal
SEC Commissioner Signals Need to Fulfill Mandate of Sarbanes-Oxley Act
FinCEN Warns Service Providers, Highlights Responsible Crypto
New York couple accused of laundering $4.5 bln in crypto still in plea talks
“WRONG”: U.S. Court Affirms Sanctions Risks in Virtual Currency Transactions
CFTC commissioner advices people to view new crypto tokens as lottery tickets
Cawthorn’s Crypto Wallet Reveals Undisclosed Trades Amid House Ethics Investigation
**Lawsuit Slams US Labor Dept.'s Crypto Guidance as 'Paternalism,' Overreach (Law.com)
**SEC Reporting Guidance Poses Challenges For Crypto-Assets (Law360)
U.S. - State Law
Attorney General James Warns New Yorkers About Cryptocurrency Investment Risks
Nevada casino regulators call cryptocurrency a 'complex' topic
Do DAOs Require New Business Structures? Some States Think So
Bigger and better Texas Blockchain Summit returning to Austin
Crypto Could Strain Texas Faulty Power Grid, ERCOT Issues Warnings Summer Heat
California Senate candidate plans to make Dogecoin legal tender
**Ohio's First Step Towards Blockchain Adoption (Mondaq.com)
**Crypto Regulation Bills Get Green Light From NJ Lawmakers (Law360)
European Council and Parliament reach agreement on Digital Operational Resilience Act ‘DORA’
Basel Committee presses on with restrictive requirements for banks’ crypto holdings
UK High Court Rules on Liability of Bitcoin Software Developers
China state media signals tighter crypto regulations in Terra aftermath
China's supreme court proposes to integrate blockchain into the judicial system
Brazil Launches a Blockchain Network to Better Trace Public Expenditures
Terraform Labs' Employees Probed For Intentional LUNA, UST Price Manipulation
ACCC commences proceedings against Meta for scam crypto ads on Facebook
**EU Crypto Rules Shouldn't Compromise Privacy, DeFi Advocates Say (Bloomberg)
Podcasts & Videos
The brightest voices & sharpest takes:
In episode No. 48 of the Law of Code podcast, Jacob sits down with Michael Mosier (@M_Mosier), the General Counsel at ESPRESSO Systems, a scaling & privacy solution for Web3 applications. Michael was formerly the first in-house Counsel at cryptocurrency analytics and investigations firm Chainalysis:
Laura Shin explores the DOJ case against Nate Chastain in Ep. 359 of Unchained:
Lawfare fellow in cybersecurity law Alvaro Marañon sat down with Yaya Fanusie, an adjunct senior fellow at the Center for a New American Security, to speak about the China government’s vision for the next iteration of the internet:
@cdixon, @alive_eth, @tim_roughgarden, and @smc90 Discuss the connection between blockchains, crypto, and web3:
Motion To Compel
Thought-provoking questions and arguments for your consideration each week.
All views expressed in this section are the sole opinion of the author and are not necessarily reflective of those held by Around the Blockchain managers, editors, contributors, or associates.
Owning Up to the Ownership Economy
By Christopher Foreman
As someone who has moved from the casual observer, to cautiously optimistic, to slowly carving out a future for himself in the web3 space over the last few years, I am invested in the long-term success of this industry. As such, recent events, market trends, and certain “open letters” have not surprisingly elicited some reflection on the ecosystem, its trajectory, and my place in it. I’m guessing I’m not the only one in this position, so the question is, where to start? As a self-proclaimed “reasonably prudent student”, it behooves me to address the recent open letter to Congress written and signed by 26 people of varying degrees of technological expertise (and questionable argumentative prowess). As for a line-by-line “call and response” breakdown of the letter, I’ll leave that to those who are much more qualified than I. Preston Byrne gives a particularly pointed refutation of the letter on his personal website if you’re interested in going down that rabbit hole. While I am still of the opinion that the aforementioned letter is mostly self-aggrandizing bloviation, lacking as much intellectual honesty in its conclusory claims as it is in cited references, that doesn’t mean it isn’t reflective of an entrenched social perception of web3, or that it isn’t indicative of the need to honestly investigate why this perception exists. As with any important investigation, we must start off by asking the right questions, so let’s start with why.
Tweet, Tweet, Tweet!
Senator Lummis has announced an upcoming proposal to integrate digital assets into the financial system:
A major accomplishment for one of Blockchain Barrister’s own: Congrats Birdnals!!
And finally, some educational humor:
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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:
“Men's indignation, it seems, is more excited by legal wrong than by violent wrong; the first looks like being cheated by an equal, the second like being compelled by a superior.” -Thucydides
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.
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