The Whitehouse hosted its first “crypto summit” and the SEC stayed busy in announcing various initiatives and roundtables and cleaning house of non-fraud pending investigations and cases. Congress was also busy, with the Senate taking a crucial first step in repealing burdensome tax reporting rules for digital asset businesses, and various members of Congress creating a bipartisan Congressional Crypto Caucus.
Here’s everything that happened last week in Web3 legal:
More SEC Investigations and Cases Dropped
The creators of Bored Ape Yacht Club NFTs and related products, Yuga Labs, have announced the SEC has closed its investigation into the company writing on Twitter “NFTs are not securities.” At the same time, it appears the SEC has reached an agreement with Kraken to drop its pending case against the second largest digital asset exchange in America. That leaves just the Ripple, Cumberland DRW, and Pulsechain lawsuits ongoing with the last on that list all but dead if the jurisdiction dismissal holds up (and Cumberland dismissed literally while I was typing that, but I am leaving it in to show how fast things are moving)
Tl;dr– I honestly do not know how Ripple and the SEC can coordinate a dismissal at this point in the appeal process, but the other cases I would expect to go away as well. There will still be fraud cases ongoing and new cases brought, but the non-fraud failure to register cases will be gone and not expected to return until there are clear rules would be my guess. The costs associated with those cases have been substantial, so even as a lawyer I am rooting for the industry to spend more on building and less on legal defense costs.
National Bitcoin Reserve Plan Announced
After a few weeks of teasing it, President Trump has released his Executive Order establishing a Strategic Bitcoin Reserve and Digital Asset Stockpile capitalized with digital assets which were forfeited as part of criminal or civil asset forfeiture. On the day the Executive Order was signed, Crypto/AI Czar David Sacks released a statement on social media that under prior administrations (which includes Trump’s first term) “the federal government sold approximately 195,000 bitcoin for proceeds of $366 million. If the government had held the bitcoin, it would be worth over $17 billion today.”
Tl;dr– Basically all this does is directs federal agencies to account for and not sell digital assets seized by those agencies, which is not especially groundbreaking. There was some interesting text in the Order about it being a “strategic advantage” to be among the first nations to create a bitcoin reserve due to its limited supply, but otherwise it doesn’t really move the needle. It will be a nice 4 years without federal government sell pressure though, I guess.
OTHER STORIES
Whitehouse Crypto Summit: As teased in the intro, the Whitehouse hosted a summit of leaders in the crypto industry. Not much came of the meeting, but the fact it happened alone is a sign of good things on the horizon for the industry.
Banking Open to Crypto Again: Office of the Comptroller of the Currency posted new interpretive guidance that “crypto-asset custody, certain stablecoin activities, and participation in independent node verification networks such as distributed ledger are permissible for national banks and federal savings associations.” Combined with the repeal of SAB 121, and TradFi is open for business again in digital assets.
Aave Fee Switch Proposal: The “Aave Chan Initiative” founder posted a request for comments on a proposal which would create an Aave Finance Committee tasked with managing the platform’s treasury holdings and testing a token buyback program using excess revenue. Seems like a big deal?
Senate Passes CRA to Overturn IRS Crypto Broker Rule: The Senate passed with a 70-28 bipartisan vote a resolution to overturn controversial tax reporting rules put into effect in the final days of the last administration which would essentially define every internet service provider as a broker responsible for collecting tax information (including social security numbers) for anybody that uses their services. President Trump already said he would sign this into law, so once it passes the House (almost certainly) it will prevent the IRS from creating any similar rules going forward without Congressional approval.
SEC Sets First Crypto Roundtable: The SEC is going to host their first roundtable for the crypto task force. It’s happening conveniently the Friday before the D.C. Blockchain Summit. There are a few familiar faces on the panel (Collins, Sarah, Chris, Lewis, Miles, and Rodrigo). Hilarious the Lee/JRS and somebody from Beter Markets will be there to play heel. The SEC also announced the staff of its Crypto Task Force with industry veterans. Love to see people who use and understand the tech making the rules for that tech.
Bi-Partisan “Congressional Crypto Caucus” Formed: Republican House Majority Whip Tom Emmer and Democrat Ritchie Torres are creating a “Congressional Crypto Caucus” which is intended to create a unified and bipartisan coalition to spearhead bills which support the growth of digital assets in America. Big big fan of this.
More Articles to Read: With policy moving at a breakneck speed, so are people publishing on policy proposals. Really enjoyed these articles from a16z about token classifications.
Blockchain Based Deeds: A town in India tokenized 700k land records on the Avalanche blockchain. Addendum only ledger technology is tailor made for improving property titling.
SBF Interviewed from Prison: I don’t really need to listen to more from SBF, who seems to still think it was OK to steal customer assets as long as his venture investments he used them on ended up working out in hindsight? But his interview from prison happened and was widely reported so I am including it in the update if anybody cares.
Senate Bill to Stop Chokepoint 3.0: The chair of the Senate Finance Committee is proposing a bill which eliminates “reputational risk” as a component of the supervision of depository institutions, after it was used to debank unfavored industries in Operation Chokepoint and Chokepoint 2.0. Good bill.
Crypto Venture Activity: While down from January, venture funding in crypto still surpassed $1.1 billion, so still plenty of activity going on.
Reddit Co-Founder Bid for U.S. TikTok: Everybody is trying to buy the U.S. arm of TikTok, but this one is worth reporting since it is a founder of reddit who is a noted crypto advocate and is wanting to bring the platform “onChain” (not sure what he means. Maybe incorporate features like Drakula?).
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.
Outro/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 tl;dr overviews and insights into the biggest stories from the past two weeks. I post the weekly updates on my personal blog every Tuesday, where I also provide links to more obscure legal developments and otherwise discuss industry trends and stories. 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.
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