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 firm’s 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.
It was awesome connecting with so many attorneys and builders in the industry at Consensus this past week. The crypto bar is a tight knit community, so it is so nice getting time to talk things other than business with the legal leaders in the space. While I spent far more time at side events and meetings than at the conference itself, there were some updates from speakers covered below along with updates outside of Austin.
Here’s everything that happened last week in Web3 law:
President Biden Vetoes Bill to Overturn SAB 121
President Biden went through on his threat and vetoed the bipartisan bill which passed the House and Senate to overturn Senate Accounting Bulletin 121. The bill would have removed the SEC’s accounting rule which requires banks and other financial institutions treat digital assets held on behalf of customers as liabilities, effectively making it impossible for those financial institutions to custody those assets for client. This veto came after lawmakers urged President Biden not to go through with his threat to veto the bipartisan effort.
Tl;dr: President Biden’s statement was that “[m]y Administration is eager to work with the Congress to ensure a comprehensive and balanced regulatory framework for digital assets” which rings hollow in a statement about him vetoing a bill which had bipartisan sponsorship and passed with 60 votes in a Democrat controlled Senate. This is a rule which the Government Accountability Office already determined failed to abide by the Administrative Procedures Act, and which does nothing to protect consumers. It shows the administration’s supposed outreach to industry participants was more window dressing than anything, if it can’t event support a bill which had the backing of traditional banks and digital asset industry participants alike.
Coinbase Finalizes Briefing in Appeal of SEC Denial of Rulemaking
Coinbase has now completed briefing in its appeal of the SEC’s denial of rulemaking, filing the Reply in Support of its Petition. Head of legal at Coinbase summarized their filing on Twitter, claiming “The SEC is bent on choking the digital asset industry, and is refusing to provide the necessary rules the industry has requested in order to tighten the squeeze.”
Tl;dr: If we are being honest, Coinbase faces an uphill battle on this as the SEC has the discretion to make (or not make) the rules it wants to. Best case scenario would be the Court forcing the agency’s hand, but I think it would still be a massive win if this results in dicta regarding the inability for digital asset participants to abide by existing rules. For those who missed it, it is worth reading the Paradigm three-part series on why “come in and register” is not possible with cites to specific rules and reasoning.
Other Stories
I cannot comment on the DEBT Box litigation do to my involvement in the case, but you can read the Court’s Order on sanctions and the SEC’s request to dismiss here and here.
Lots of crazy things were covered in last week’s update, but the craziest which wasn’t covered may have been Michael Saylor, after famously stating repeatedly and often that there is no second-best crypto asset, seems to have changed his tune.
Matter Labs did the right thing and dropped seeking to trademark “ZK” for use in zero knowledge proofs after facing massive backlash from industry participants. Better case would have been not applying for those trademarks at all to try to landlord over a very common industry term, but this is still better than forging ahead in the face of that adversity.
Commissioner Hester Peirce is once again advocating for her regulatory sandbox solution, this time pushing for it to be a cross jurisdictional effort. It makes total sense, as it allows industry participants to directly engage with the SEC while common sense regulations are studied and put into practice.
Treasury released their study on use of NFTs in illicit finance, and tl;dr- criminals launder money with anything of value, including NFTs, but it’s not a primary means of illicit financing. My read is that this is just setting up for imposing AML obligations on NFT marketplaces.
Former President Trump has promised to pardon Silk Road developer Ross Ulbricht, seemingly as a part of his effort to be seen as the crypto-supporting candidate. On one hand, Ross was a libertarian with largely good intentions. On the other hand, it didn’t seem like the DOJ investigators had to work too hard to entrap Ross into a murder-for-hire scheme, which people in crypto appear to look past.
I don’t want to cover this, because it is the worst side of crypto, but I would be remiss if I didn’t include a link to at least one story about the Caitlyn Jenner meme coin stuff from last weekend. It is crazy how the grifters keep grifting despite everybody knowing or being a simple google search away from knowing they are a grifter.
In the latest Harris pool, 33% of respondents said they take into consideration a candidate’s stance on crypto, and 77% believe a U.S. presidential candidate should know crypto. First they ignore you…
Pro-crypto super PAC Fairshake has gotten quite a bit of funding, with $25 million from each Ripple and a16z alone. Love to see it where evidence is mounting that shows crypto policy could shape the outcome of the upcoming election.
The Biden campaign is apparently reaching out to crypto industry participants about policy suggestions. I hope the President both listens to but does not talk to Gabe for his suggestions. For obvious reasons.
FTX executive/narc got sentenced to 7 years in prison and then immediately went online to argue with @tittyrespecter so gotta respect that commitment to being online.
CZ is apparently starting his sentence in a law security facility in California. I thought he might end up serving it under a house arrest due to the massive security concerns that come with housing a multi-billionaire like CZ, but he will be serving his full time behind bars.
Conclusion
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Warpcast. 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 