In legal news, the big stories all came out of Jackson, Wyoming with the Wyoming Blockchain Symposium happening where members of Congress and industry leaders gave talks about expectations for the back half of the year. This included a speech from a leader in the DOJ about the agency’s prosecution priorities, and the Wyoming Stable Token Commission announcing its own stablecoin launch. In non-legal news, I finally got to have fun as ETH hit an all-time high (which only last a few days before coming back to reality. But it was a fun few days!) so my BTC-only friends could stop laughing at me.
Here’s everything that happened last week in Web3 legal:
DOJ Criminal Division Head Gives Speech Regarding Prosecution of Developers
At the American Innovation Project Summit in Wyoming, Acting Assistant Attorney General of the Department of Justice Criminal Division Matthew R. Galeotti delivered a speech regarding the Justice Department’s stance on the criminal prosecution of digital asset developers. Written statement here and you can watch the speech here. In it, Galeotti stated “Our view is that merely writing code, without ill-intent, is not a crime. Innovating new ways for the economy to store and transmit value and create wealth, without ill-intent, is not a crime.” Various digital asset advocacy groups have been pushing for a statement like this due to fears of U.S. developers following the Tornado Cash and Samurai wallet developer cases.
Tl;dr– Back in April, Deputy Attorney General Todd Blanche issued a memorandum instructing federal prosecutors to cease pursuing “litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets” and this seems to be a continuation of that theme. However, even after that memo, the DOJ continued to pursue prosecution of developers such as the Tornado Cash developer Roman Storm. So while this speech says the right things, there are enough caveats that it is hard to advise clients that developing neutral technologies that are eventually used by criminals and non-criminals alike will not subject those developers to criminal prosecution. Further work needs to be done, including either judicial or legislative recognition that federal money transmitter licenses are not needed so long as the software being used does not have control over the actual funds (similar to how using internet browser software doesn’t need licensure even if you can connect to your bank account through it).
OTHER STORIES
Wyoming Blockchain Symposium: The Wyoming Blockchain Symposium was last week (ahead of the Fed’s annual Jackson Hole retreat so an easy trip for Fed officials who attended both). Some updates included Senators Scott and Lummis giving updates as to the Senate market structure progress, a new policy group that is just a bunch of other policy groups in an Avengers combination (?), a state stablecoin launch (discussed below), and SEC Chair Adkins giving more color to Project Crypto.
Treasury Asks for Comment on Stablecoins: Consistent with the requirements under the GENIUS Act, the Treasury Department is looking for comments regarding digital asset illicit activity monitoring. Suggestion 1: read the crypto privacy myths writeup from a16z below. So we don’t end up like China.
Blockchain Privacy Writeup: I wouldn’t be the crypto/privacy attorney I am if I didn’t include this writeup from a16z about blockchain privacy myths/realities. “To assume that blockchains uniquely imperil privacy — or that they are singularly capable of being weaponized to nefarious ends — misunderstands both history and technology.”
Crypto Crime Update: One proposal which has been floated for a bit to fight crypto crime without compromising financial privacy is making white hat hackers digital “privateers” like in pirate days who have authority to hack the hackers. Congressman David Schweikert (R-AZ) is proposing a law to do exactly that, and I couldn’t support it more. In another update, there was a sweep of ransomeware and crypto investment scheme (aka, “pig butchering”) bad actors recently. Love to see it.
SEC Rundown: Shoutout to Gage (another St. Louis crypto attorney) for his recent article breaking down various SEC crypto developments. It gives a solid rundown of some stories which I haven’t given much attention to with the flurry of other activity I was focused on the last few weeks.
Wyoming State Issued Stablecoin: The Wyoming Stable Token Commission is launching a stablecoin ($FRNT) to initially launch on various Ethereum L1/L2’s plus Solana. Wyoming continues to lead the way in attempted to show they are the most crypto-friendly state for businesses. Metamask also is launching a stablecoin, but as somebody who out of laziness has spent WAY too much on fees for token swaps through the wallet directly, I would prefer they drop a native token.
Anti-CBDC Bill: If you remember, the GENIUS Act and CLARITY Act had a lot of drama during the House votes because of certain representatives wanting an Anti-Central Bank Digital Currency Bill getting added (which Democrats in the House largely opposed). It looks like that legislative text has now been added to the massive military defense spending bill, so we will see where that goes from here.
Logan Paul Gets NFT Lawsuit Dismissal Nod: In a 75-page order, the magistrate judge overseeing the class action against social media influencer Logan Paul and others regarding the failed CryptoZoo NFT project, recommended the claims be dismissed in their entirety as to Logan. The Plaintiffs were granted leave to amend pretty much all the claims (except the claims that the NFTs were futures contracts, where the Court said the “mental gymnastics required to come to this conclusion are truly dizzying”), so this isn’t over. Kanye lawsuit surely already being drafted as well.
Libra Freeze Lifted: Speaking of lawsuits, the judge overseeing the New York putative class action regarding the launch and rug of Argentinian memecoin $LIBRA lifted the previously issued asset freeze. The order is short on details, but I read the hearing transcript to get context and the judge also said in passing he didn’t like Plaintiffs’ chances at success on the merits either. Not what you want to hear as a Plaintiff.
ICOs Are Back: Service providers for companies looking to do legally compliant coin offerings seem to be expanding, starting with Echo making waves earlier this year and now Legion getting backing from VanEck and others seemingly for a similar suite of products and services.
CFTC Update in “Crypto Sprint” Initiative: CFTC Acting Chair Pham is calling for comments on how the CFTC can start implementing the recommendations for the CFTC in the President’s Crypto Working Group report. Recommendation 1: talk to the Senate to get an official Chair confirmed so the person who will be responsible for implementing the comments/recommendations can be involved in that process.
Liquid Staking Token ETF: Following the liquid staking token (“LST”) guidance from the SEC which we covered in the last BitBlog Bi-Weekly, VanEck is looking to do a SOL LST ETF (that’s a lot of acronyms) which would be interesting problem solve as the SEC considers if and how to allow staking in ETF products for SOL/ETH/other assets on Proof-of-stake blockchains.
IRS Crypto Head Out: The IRS’s head of crypto is leaving for the private sector after just a few months on that job (she was at the IRS for 20 years, though, so this isn’t a revolving door situation). I am sure the opportunity is lucrative so no shame on leaving, but there is a desperate need for government service of people who actually understand crypto during this critical time in crypto-policy.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Farcaster. 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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