Edition No. 6

They say a news week in crypto is equal to 6 months in any other industry. Here's what happened from 6/5/2022-6/12/2022

and

Jun 13, 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. Terra/Do Kwon Continue Legal Troubles

Terra Founder on Shaky Legal Ground

Terraform Labs CEO and founder Do Kwon is facing several legal issues from both U.S. and South Korean authorities. This week, the U.S. Court of Appeals for the Second District upheld a subpoena served to Kwon in 2021 while he was in New York. The subpoena was originally served in relation to an SEC investigation into Terra potentially using the DeFi protocol Mirror to sell unregistered securities. Recently, the Mirror Protocol was subject to an exploit related to the collapse of the Terra ecosystem. The recent collapse of UST, while not directly related to the Second Circuit’s order, may result in additional legal charges from U.S. Regulators looking into investor protection violations, in addition to South Korean authorities investigating tax evasion and market manipulation by Kwon and other Terra employees.

See Also: bitcoin.com; BloombergLaw** ; cryptobriefing

2. Jamaica Becomes First Country to Make CBDC Legal Tender

Legalize It. Some Criticize It.

While other countries have introduced Central Bank Digital Currencies (CBDC) into their economies, the Central Bank of Jamaica (BoJ) has become the first country to officially recognize a CBDC as legal tender. The CBCD, labeled Jamaica Digital Exchange (Jam-Dex), is scheduled to launch later this month with a number of organizations looking to build financial products and services around the currency. While authorities in Jamaica tout the currency as “a more secure, convenient alternative to physical notes and coins, [that] can be used without a bank account”, certain skeptics in the U.S. like Congressman Tom Emmer (MN-06) caution CBDCs – if wrongly implemented – can threaten Americans’ privacy and security by centralizing individual financial information.

See Also: Blockworks

3. New York Court Order Clears the Way to Serve Lawsuit Defendants via NFT

You’ve Been Served (Non-Fungibly)

In a landmark move, US law firm Holland & Knight has served a defendant a pre-trial temporary injunction as an airdropped NFT after receiving permission to do so from The New York State Supreme Court (analogous to district level courts in other states). The token was airdropped to a wallet address believed to be associated with or belonging to the anonymous defendant and was accompanied by a “Show Cause Order”. According to the Court’s order, the process of service was conducted as follows:

“…The Service Token will contain a hyperlink (the Service Hyperlink) to a website created by [Plaintiff’s attorneys], wherein Plaintiff’s attorneys shall publish this Order to Show Cause and all papers upon which it is based. The Service Hyperlink will include a mechanism to track when a person clicks on the Service Hyperlink. Such service shall constitute good and sufficient service for the purposes of jurisdiction under NY law on the person or persons controlling the Address (the “Service Order”)."

Now that’s a surprising airdrop.

See also: JDSupra; FeedBlitz

4. Japanese Lawmakers Pass Stablecoin Bill // Working on Bill to Allow Seizure of Stolen Crypto Assets

Consumer Protection In the Land of the Rising Sun

Continuing to lead in various aspects of international crypto regulations, Japanese lawmakers passed a bill this past Friday designed to protect stablecoin investors. The bill dictates that stablecoins will now be recognized as virtual currencies tied to the Yen or other legal tender, ensuring investors can convert them at their respective current prices. Coin Journal reporter Charles Thuo notes:

“[S]tablecoins will only be issued by trusted firms, registered money transfer platforms, and licensed banks. However, existing assets that are backed by stablecoins like Tether and its counterparts stablecoins are not covered by the legislative act.”

In addition, Japan’s Justice Ministry is opting to expedite the process of designing digital asset consumer protection laws by revising the existing Act on Punishment against Organized Crimes and Control of Proceeds of Crime (1991) to allow for the requisition of assets related to criminal endeavors rather than building a new such law from scratch. According to Andrew Smith of The Coin Republic:

“These amendments would enable both law enforcement officials and authorities such as courts to take control over those crypto assets that were used in illicit activity like money laundering.”

See also: The Register; Coin Spectator; NewsBTC

5. EU Aims To Clinch Deal on Landmark Crypto Law This Month

Setting the Standard

Per our EU Expert Analyst Ann Sofie Cloots:

“The European Union is edging closer to an agreement on its new crypto rule book, the Markets in Crypto Assets (MiCA) Regulation. MiCA covers crypto assets that are not financial instruments (the latter are already covered by existing EU law). MiCA was the EU’s response to the now-defunct Libra/Diem coin announced by Meta (then Facebook) and others.
Stablecoins are still very much the focus of the current draft. One of the open questions negotiators have yet to finalize is whether the document should cover newer crypto developments such as NFTs or DeFi.
MiCA is part of a broader EU package, which also includes the recently adopted Distributed Ledger Technology (“DLT”) Pilot Regulation. The Pilot allows DLT to be used to trade and settle traditional financial instruments, under certain conditions."

Ann Sofie Cloots is a Professor at the University of Cambridge in London, England, and the author of Crypto Law News, a weekly newsletter dedicated to all things Crypto & Law.

See also: Crowdfund Insider

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

International

Podcasts, Videos, & Blogs

The brightest voices & sharpest takes:

Despite the mix-up with the thumbnail below (Jacob also runs a fantasy football podcast), in Episode #49 of the Law of Code podcast, Robinson interviews Kristin Smith, Connor Spelliscy, and Marina Merkezic about their roles in the latest Gitcoin funding round, with emphasis on their respective prominent public goods orgs: The Blockchain Association, The DAO Research Collective, and the EU Crypto Initiative:

Laura Shin breaks down “Ancillary Tokens” and the new Lummis & Gillibrand Crypto Bill in Ep. 361 of the Unchained Podcast:

Ann Sofie Cloots discusses the US Crypto Bill, UK Stablecoin Insolvency, DAO laws, and more in Crypto Law Newsletter #53:

CryptoLaw’s Newsletter

CryptoLaw Newsletter #53

Hello everyone, TLDR: US bipartisan bill proposing comprehensive crypto rules gets overall warm reception from crypto enthousiasts, but criticism from consumer advocate groups. UK Treasury suggests bespoke insolvency rules for important stablecoin firms…

2 years ago · 1 like · CryptoLaw

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.

LUMMIS, GILLIBRAND INTRODUCE LANDMARK LEGISLATION TO CREATE REGULATORY FRAMEWORK FOR DIGITAL ASSETS

“The Crypto Bill”

The highly anticipated “Crypto Bill” drafted by Senator Cynthia Lummis was made public this week. The 70 page draft is packed to the brim with proposed regulations and guidelines for the blossoming industry, and represents the most thorough attempt at reconciling the inherent tenets of decentralized economics with centralized authorities to date. Below are some of the most notable aspects of the bill.

With the intergovernmental war between the SEC & CFTC for regulatory authority over digital assets continuing to rage, Lummis’ bill appears to tip the scale in the favor of the latter, with The Block Crypto reporter Kollen Post noting the bill places “significant aspects of the US crypto industry under the auspices of the CFTC”. The bill itself reads as follows:

“Except as otherwise provided by this section, the [CFTC] shall have exclusive jurisdiction over any agreement, contract, or transaction involving a contract of sale of a digital asset that is offered, solicited, traded, executed, or otherwise dealt in interstate commerce.”

“Ancillary Tokens” are added to the Securities Exchange Act in an attempt to define the nature of digital assets:

“An intangible asset that is offered, sold, or otherwise provided to a person in connection with the purchase and sale of a security through an arrangement or scheme that constitutes an investment contract…may include a digital asset, as defined in section 9801 of title 31, United States Code, that is used to facilitate the governance of a distributed ledger technology network or decentralized autonomous organization.”

Gabriel Shapiro offers his thoughts on the bill in his twitter thread:

_gabrielShapir0 @lex_node

okay, so here are my quick thoughts on the Lummis bill:

Under the proposed bill, DAOs may be forced to play closer to the rules:

Watcher.Guru @WatcherGuru

JUST IN: 🇺🇸 Leaked #crypto draft bill would require all DAOs to be registered entities in the United States.

So what happens next? Further analysis and interpretation of the bill - especially the novel terminology it introduces - will be necessary before we can ultimately decide whether the bill is “good” or “bad” for the community…but that doesn’t mean we can’t start that debate now. Tell us your thoughts - good, bad and ugly - in the comments or on twitter!

Bird Watching

Tweet, Tweet, Tweet!

In last week’s Edition No. 5, we discussed New York’s proposed ban on crypto-mining. Thus far, the bill remains unsigned. Could there perhaps be a change of heart?

Satoshi Action @SatoshiActFund

BREAKING: NEW YORK STATE GOVERNOR WILL ‘NOT COMMIT’ TO SIGNING THE BITCOIN MINING BAN!

David Zell’s thread on the open-letter to congress arguing in favor of Bitcoin and Stablecoins as a tool for human rights and global freedom:

David Zell @DavidZell_

Today, human rights leaders from 20 countries told Congress how bitcoin & stablecoins aid in the struggle for global freedom. The letter was signed by some of the most respected activists in the world, whose stories deserve attention. 🧵 (1/6) financialinclusion.tech

financialinclusion.tech21 human rights advocates write to Congress about Bitcoin’s humanitarian benefitsIf you think that our political leaders should learn about Bitcoin’s practical global value in order to craft good policy, please join the growing movement for financial freedom for all and sign this letter. Deadline is June 14, 2022.

Brandon Moore offers some dietary advice for these trying times:

Brandon Moore @bk_moore

Wife: You seemed stressed over your internet money. Let me get you a snack. The snack:

Bitcoin tumbles with the rest of the market at large:

Watcher.Guru @WatcherGuru

BREAKING: #Bitcoin falls below $25,000 for the first time since December 2020.

Closing Statements

Ann Sofie Cloots joins the team:

Around the Blockchain is thrilled to announce our new collaboration with Ann Sofie Cloots, University of Cambridge professor and author of CryptoLaw News! Ann Sofie brings her wealth of experience and passion for European Crypto Law to the table, and will function as our EU Law Expert Analyst moving forward.

LexDAO Clinic Gitcoin Fund is live:

LexDAO clinic is a staple of the crypto X legal community, and is dedicated to providing accessible legal service to Web3 while training the first generation of “Legal Engineers”. These engineers will specialize in translating the raw code of smart contracts into effective, utilitarian legal language. Consider donating today; for every $1 contributed, $149 will be matched!

We want to hear from you:

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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:

“Ethics is knowing the difference between what you have a right to do and what is right to do..” - Potter Stewart

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, editing from TΞxas ₿l◎ckchain LawyΞr , in collaboration with Ann Sofie Cloots, and 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:

Law / Scale Image; Twitter Image; Blockchain Image; Podcast Image; P / L Image; Service GIF; Money GIF; Euro GIF; Package GIF; Balance GIF; Pointing GIF

Around the Blockchain