While the Senate continues to consider stablecoin legislation (the GENIUS Act has over seventy proposed amendments at this point) the House is now working through their own digital asset legislation with market structure being debated in various hearings. In other news, the stablecoin issuer Circle’s public offering was a huge success, and privacy preserving technology developers look to end the criminal prosecution against them. Also, starting to feed these into AI and telling it to create a picture for the weekly blog to change things up. We’ll see how long that last….
Here’s everything that happened last week in Web3 legal:
House Financial Services Committee Holds Crypto Hearing
The House Financial Services Committee held a hearing entitled American Innovation and the Future of Digital Assets: From Blueprint to a Functional Framework to discuss issues related to digital asset regulation. Witnesses included the Chief Legal Officer for Uniswap Labs, Katherine Minarik, and former CFTC Chair Rostin Behnam. Proponents of passing digital asset legislation aimed at encouraging its development in the United States emphasized in the hearing the need for legislative certainty to protect consumers and ensure companies are not leaving the United States to pursue building products and services with blockchain technologies. Opponents cited concerns with the President’s business involvements in the space and argued digital assets should change to meet existing laws rather than making new laws for digital assets.
Tl;dr– This was just a warmup to the CLARITY Act markup which is scheduled for this upcoming week on June 10th. This hearing started with Ranking Member Waters stating in reference to the CLARITY Act “the only thing clear about this bill is we need to start over” so it is looking like there can be fireworks expected at the markup. This was confirmed when Republicans pulled a surprise attendance at minority day where typically only the minority party members would attend. The House Agriculture Committee also held a digital asset hearing, but that was less dramatic as the CFTC-related provisions of the CLARITY Act serve to give them more power over the crypto spot market, which I think everybody agrees somebody should have oversight over. Will need to wait and see what comes of the markup, including if there will be changes to what has been dubbed the “DeFi Purity Test” provisions by some.
OTHER STORIES
Circle IPO Soars: Circle’s shares opened at $69.50 on the New York Stock Exchange after its IPO priced at $31. It joins Coinbase as one of the limited publicly traded crypto companies. Insert the joke here about how its equity went up but its primary token, $USDC, is just $1. Also crazy to see certain venture investors crash out over not getting enough allocation at ICO price (and crazy that Circle stuck with its ICO price when it was so crazy oversubscribed instead of raising its ICO price which could have gone to the company for operations).
Gemini Exploring IPO: Gemini has also apparently has confidentially filed for an IPO with the SEC. One has to imagine that Kraken, Consensys, and others who are considered potential targets to go public are also pushing up their timelines in light of the Circle IPO demand.
Samurai Motion to Dismiss: The developers behind bitcoin privacy tool Samourai Wallet moved to dismiss the DOJ’s unlicensed money transmitter related charges last week. “[The DOJ’s legal theory is] akin to charging an encrypted messaging app developer with conspiracy because it may know that some customers use the app to communicate about financial crimes. Or charging a burner phone manufacturer because it may know some customers use the phones to facilitate drug crimes.” DeFi Education Fund and Blockchain Association also wrote an amicus advocating for dismissal (even though the judge took a rare route and denied requests for amicus submissions). Nice ruling on this issue recently from SCOTUS as well ( “an ordinary merchant does not become liable for criminal misuse of her goods simply by knowing that, in some fraction of cases, misuse will occur.”).
End of Foundations Think Piece: Miles Jennings from a16z put out this well-reasoned piece advocating digital asset companies move away from current corporate structure which includes an offshore foundation. The problem is the entire article is premised on “new U.S. regulatory frameworks emerging in Congress” but until those actually become law, seems problematic to advise clients based on hypothetical legal frameworks vs. playing the game currently on the board. Great counterpoints in this thread as well.
Other Corporate Structuring News: Also worth noting while we are talking about corporate structuring issues: one of the leading lending protocol providers is switching its structure around and this LIDO-BORG proposal is worth reading.
DeFi SEC Roundtable: This was announced a while back, but worth including in this update since the SEC’s DeFi roundtable was this week (I finish these updates on Mondays and post on Tuesdays). One of the better groups of speakers from all the various roundtables, so I will likely try to tune in. Hope the speakers enjoy the obligatory ice cream break.
Dark Pool for Crypto Perps: With everybody talking about leverage trader “James Wynn” going on tilt and turning an $80 million win into a net loss, it was a good time for Binance founder CZ to bring up the need for dark pool decentralized exchanges for trading perps. Makes sense, as traditional derivatives trading is often opaque for good reasons.
Trump Wallet Drama: It looked like there was going to be a Trump branded wallet and app launching for a little bit last week. But then the Trump Family said they had no involvement with it and eventually reached a deal to nix it. Would be nice if we could get some bills passed into law before giving an excuse for opponents unrelated to the texts of the bills themselves…
Joint Statement on Validator and Developer Protections: The largest advocacy organizations in the digital asset industry put out a joint statement encouraging the Blockchain Regulatory Certainty Act (a bipartisan bill introduced by Representatives Emmer and Torres) be added to the CLARITY Act. It looks like it worked as was added to the new bill language, so good work all around on this.
CFTC Chair Hearing: A hearing regarding potential CFTC Chair Brian Quintenz’s confirmation is set for June 10th. With every other CFTC Commissioner set to leave in the near future, it is possible he will be a committee of one if confirmed.
Memecoin Company Token Sale: Pump.fun is apparently planning to sell $1 billion in tokens at a $4 billion total token market cap. I’ll wait for the unofficial pumpwifhat token, thank you very much.
California Bitcoin Escheatment Bill: California is looking to pass a bill which revises its escheatment law for unclaimed crypto. Despite what the internet may tell you, the government isn’t coming for your Bitcoin in a dormant self-custody wallet.
Apecoin DAO on the Rocks: It looks like Yuga is trying to disband Apecoin DAO and replace it with a more efficient entity. Having dealt with Apecoin DAO directly, it is hard to disagree that their process for grants was…less than perfect.
More Patent Fights: A patent troll is going after a bunch of Bitcoin mining companies. You know you have made it as an industry when people start doing patent troll shakedowns.
Polymarket Teams Up with Twitter: Polymarket announced a partnership with Twitter (X?) to be the social media giant’s official prediction market partner? Would rather they just fix DMs and the search function, but this is cool too I guess.
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.
The NFTtorney 