Intro/Disclaimer: Since late 2022, I’ve prepared weekly updates for attorneys at my firm to stay abreast of the latest Web3 legal developments. The biggest stories are included in Bi-Weekly posts on the renowned BitBlog, where we provide concise tl;dr overviews and insights into how these developments might ripple through the industry. In pursuit of a more thorough and personal discourse, I also share expanded versions of these updates on my personal blog every Tuesday. Here, you’ll find my unvarnished perspectives, offering a deeper dive into the nuances of these legal narratives. Please note, the views and opinions I express, both on BitBlog and my personal blog, are solely my own. They do not reflect the official stance or endorsement of my firm.
The past week was all about digital assets infiltrating TradFi, with the various spot Bitcoin ETFs being approved (finally) and the second largest stablecoin issuer Circle looking to go public through an ICO. This has created a sharp divide in the TradFi old guard, with firms like Blackrock and Franklin Templeton saying this is the future of finance, while Vanguard Group and others stand firm against allowing users to access digital asset exposure on their platforms.
Here’s everything that happened last week in Web3 law:
The SEC Finally Approves Spot Bitcoin ETFs
In 2013, the Winklevoss twins filed the first spot Bitcoin exchange-traded fund (ETF) application with the SEC. On January 10, 2024, almost 11 years later, the SEC finally approved the 11 U.S. ETF applications that track the price of Bitcoin. Six of the ETFs will be listed on Chicago Board Options Exchange (CBOE), three will be on the New York Stock Exchange (NYSE) and two will trade on Nasdaq. This was such a landmark, that Commissioners Peirce, Crenshaw, Uyeda, and Chair Gensler all released statements regarding the approval. This comes after the D.C. Circuit struck down the SEC’s prior disapproval of a spot Bitcoin ETF as arbitrary and capricious.
Tl;dr: As stated in all of the Commissioner statements, people in the U.S. could largely buy spot Bitcoin before these approvals. However, now people can hold these investments in IRAs and other investment vehicles without worrying about self-custody or exchange hacks. This is a “watershed moment” in digital assets. Commissioner Pierce did not hold back in her release, stating “We squandered a decade of opportunities to do our job. If we had applied the standard we use for other commodity-based ETPs, we could have approved these products years ago, but we refused to do so until a court called our bluff.” The fact that these were approved exactly 15 years after Bitcoin pioneer Hal Finney’s iconic “Running Bitcoin” tweet is a fun coincidence. Now all eyes turn to spot Ether ETFs, as they are in a similar position as Bitcoin previously was with approved futures ETFs but no approved spot ETFs.
USDC Issuer Circle Is Looking to Go Public
Circle Internet Financial (Circle) has confidentially submitted a draft registration statement on Form S-1 with the SEC. The company previously sought to go public through a special purpose acquisitions company (SPAC) but that proposed transaction timed out and SPACs have fallen out of favor after many failed since their creations in 2021. This time, Circle plans to go public through a more traditional IPO process. USDC is the second-largest stablecoin by supply, with $25.2 billion to Tether’s $94.6 billion.
Tl;dr: It will be interesting to see how the SEC approaches this application. As noted above, it took over 11 years for a spot Bitcoin ETF to be granted and the regulatory environment is far different today than when Coinbase was allowed to go public in 2021. Service providers like Circle are going to be increasingly the modern bank as digital asset transactions become more common place. This will be something worth following along with.
Other Stories
The SEC’s official Twitter (X?) account was compromised and sent out a fake alert about the spot Bitcoin ETF products’ approval. Which is hilarious after they tweeted this in October, Gary Gensler tweeted about the importance of online security in October, and the SEC issued rules on cybersecurity for the companies it oversees to abide by. 2FA and double encryption for thee, not for me, eh Gary?
Bad day to be a troll, with the Special Master coming back in the Yuga Labs v. Ryder Ripps matter, recommending the Court award Yuga $6,983,432.62 in attorneys’ fees, $317,295.04 in costs, the Special Master’s fees and costs, and still on top of the damages Yuga was already awarded. Better get that bond ready if defendants want to appeal.
Blackrock’s CEO Larry Fink has been on a media tour after his firm’s spot Bitcoin ETF was approved, discussing the future of an spot Ether ETF as well as tokenization of all stocks to allow greater ability for shareholder participation. I don’t hate it. Combined with Franklin Templeton’s CEO coming out with her own thread of tweets supporting Web3 adoption, and it looks like much of TradFi is going all in on pivoting to crypto.
Speaking of TradFi, not everybody is hopping on the crypto train, with Vanguard Group banning trading any of the spot Bitcoin ETFs on their platform (despite owning 8.2% of MicroStrategy, which is really only a Bitcoin holding company at this point). Nothing I love more than a service provider that tells me how I can and cannot invest my own money.
Somebody sending over $1 million to the long inactive Satoshi Nakamoto address is peak crypto. $1.2 million effectively set on fire for a bit. Classic.
Another great update from Cap Hill Crypto breaking down the House Financial Services Subcommittee on Digital Assets’ hearing on the FSCO’s Framework on Innovation. Watching the hearings last year was a terrible time for me, so I very much appreciate having a resource I can turn to for tl;dr’s of the events.
Thank you, Jim Cramer.
I don’t know who “Bitcoin Rodney” is, but he was apparently arrested on tax evasion charges this week. Note, if you are committing crimes you still need to declare taxes. That’s how they got Capone.
In a combo AI/Crypto update, Fox is rolling out a polygon blockchain-powered tool to verify the provenance of news reports and prevent deep fakes and other associated issues. Cryptographic tech is going to be increasingly important in a world of advance AI fakes.
90% of Bitcoin in circulation is worth more now than when it was purchased. Seems good?
If Twitter removes my Hexagon I will be very upset. Especially considering I had temporarily changed my profile picture to a piece I commissioned from @sarah_script (which I have now framed because it was simply too good to stay digital only).
Celsius is trying to claw back funds from anybody who withdrew over $100,000 from their accounts in the three months before the collapse. While this is standard in bankruptcies, it is brutal for people who just took out money that they thought was theirs in the normal course of dealings.
Richard Heart has retained Quinn Emanuel and others to push back against the SEC charges against him regarding the Hex/PulseChain lawsuits. Richard is undeniably a goober and terrible representation of crypto at large on social media, but that doesn’t mean he violated securities laws.
I enjoyed this break down of the Lazy Lions project being shopped around and issues surrounding NFT company acquisitions. I just hope it’s not a Pudgy Penguins success story if purchased, because I can’t stand Lazy Lion bag holders destroying my social media timelines again.
This Nebraska bill regarding allowing residential crypto mining is interesting. With the federal legislative backlog, I expect more states to no longer wait on federal level legislation and pass their own state specific digital asset bills. Which I am excited for as an owner of digital assets but tentatively on edge as a privacy/crypto lawyer not looking to learn another patchwork of state-specific laws.
Gotta love when an OG in crypto law dunks on newcomers. Without paying to read the newcomers’ article, I can say with near certainty that as a matter of first principles, look at who has been around a while, start with their writings, and then move on to the entrants.
Vitalik and Jesse Pollak support increasing the Ethereum gas limit to 40-45M. Gas limit in Ethereum represents the maximum computational effort that can be expended on processing transactions or executing smart contracts in a single block. Essentially, this will require more compute power to process transactions but will allow for more transactions per block which would lower gas fees on a per-transaction basis.
I missed this last week, but the Digital Chamber of Commerce sent a letter to various Congressional committee chairs/ranking members to ask for closer consideration of the Keep Innovation in America Act and, specifically, it’s tax solutions for digital asset transactions.
Congressman Mike Collins from Georgia has reported he purchased ETH recently. I don’t recall him being a vocal participant in various digital asset bills, so it’s interesting to see his purchase pop up before an expected fight over a spot ETH ETF…
Genesis has settled with New York and will cease operations in the state. I recently saw a digital asset company’s Terms of Service which listed New York alongside Liberia, North Kore, and Sudan as a place where the services weren’t available, so that’s fun.
After starting slow, the PayPal stablecoin is steadily growing. Love to see it.
Conclusion
If you have any questions or would like me to write about anything else, let me know on either of my twitter pages! As always, I am an attorney, I am not your attorney. For legal advice, you should always consult (and pay for) an attorney.
The NFTtorney 