Hope everybody in the U.S. had a great Labor Day weekend. With Congress coming back in what is expected to include a legislative sprint towards market structure legislation in the Senate, last week was one of the last we can expect to be relatively quiet in crypto law updates for the foreseeable future. Still, advocacy groups were busy petitioning the Senate to include developer protections in their market structure legislation, and the Department of Commerce is starting to preserve financial reporting data on various blockchains.
Here’s everything that happened last week in Web3 legal:
OTHER STORIES
100+ Industry Participants Push for Developer Protections: DeFi Education Fund organized a huge coalition of industry advocacy groups and participants to sign a letter advocating for protecting the software developers and non-custodial service providers. The Digital Chamber’s Consumer Innovation working group came up with draft legislative text for self-custodial wallet developers and consumers which is a good start and was highlighted on pg. 30 of the Digital Chamber’s letter to the Senate Banking Committee regarding market structure legislation.
Why Stablecoins: Similar to the effort spearheaded by Polygon a few years ago of compiling real world uses cases for blockchain technologies, this recent effort to compile what makes stablecoins so useful is a nice addition to the zeitgeist.
No Action Letter Article: In our letter to the SEC on behalf of the Digital Chamber, we advocated that the No Action relief system was broken and needed revamping to be a viable option for companies without hundreds of thousands of dollars to spend on lawyers to go through that process. So this article from the DeFi Education Fund on the issue was something I enjoyed reading.
CFTC Down to One: With the departure of Commissioner Johnson, the only CFTC Commissioner left standing is acting-Chair Pham who is also scheduled to leave as soon as a new Chair is sworn in. Seems suboptimal as the CFTC is trying to do a “Crypto Sprint” on all the new rules and changes to existing rules which need to be considered this year. In the meantime, they are trying to get foreign exchanges to register to provide services to U.S. persons.
Google Layer-1 Blockchain: I guess it was hinted at before, but Google dropped some details this week on its own layer-1 blockchain under development. Like the Stripe/Circle announcements, I think all these payment L1s eventually go away and just have things done on ETH mainnet or a general purpose L2 similar to how intranet faded into the internet because of network effects. But until then, the more major players building out crypto rails, the better and easier it will be when they switch to the established rails.
Tokenized Stocks: Commissioner Peirce went on a podcast recently to discuss where the SEC is with efforts to tokenize securities, and the Crypto Task Force met with representatives from Kraken on that same subject. The days of costly forced intermediation are coming to an end, even in the face of pushback.
ETH Treasury Company Updates: With ETH having a wild week on the charts, BitMine increased its holdings to 1,713,899 ETH (they have said they want to own 5% of all ETH in existence before it’s all said and done), Peter Thiel-backed ETHZilla did a stock buyback and increased its holdings to a cool 102,237 ETH, and Joe Lubin’s SharpLink Gaming is closing in on a million tokens after purchasing another $250 million worth last week.
DeFi Updates: Aave is making an institutional DeFi push through Horizon, which is designed to enable lending backed by tokenized securities. Meanwhile, HyperLiquid is becoming one of the largest spot token markets surpassing Robinhood in volume for three months straight, but still has growing pains as demonstrated with the XPL pre-market short squeeze.
Economic Data on the Blockchain: Commerce Secretary Lutnick went semi-viral recently when he said his department will start issuing economic data on the blockchain. Official release here. Love the enthusiasm for blockchain tech, but unless there is some sort of live oracle feeding information for immutability purposes or something (as opposed to just publishing on blockchain for oracles to use, since oracles don’t need blockchain data to work), not sure if I see the value add here.
White Hat Safe Harbors: In addition to the crypto privateer law proposals, more and more DeFi protocols are providing safe harbors to white hat hackers in event of a breach or exploit. By the time authorities get involved, it is often too late, so giving private actors who have the ability to stop these exploits while they are occurring the power to do so is a good idea.
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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