It’s officially Conference Szn, so while two weeks ago virtually all the major crypto legal developments came from the D.C. Blockchain Summit, last week it was all about the Digital Asset Summit (“DAS”) in New York and associated side events (I spoke on a panel at the EY Global Blockchain Summit which you can sign up to watch here). Tokenization was the theme of the week following last week’s SEC guidance, including some drama on whether that tokenization will happen on centralized/private chains vs. decentralized/public chains.
Here’s everything that happened last week in crypto law:
OTHER STORIES
More Prediction Market Bills: It seems like there is a new prediction market bill every other week being proposed (most recently the “DEATH BETS Act”) which largely seem to be directed to conduct or issues which are already forbidden on federally-regulated DCMs? Certainly have our educational work to do in this area (but it’s not great for Congress to learn more about these markets when their servers block two major prediction market operators’ websites).
CFTC Innovation Task Force: The CFTC must have seen all the fun the SEC was having with its Crypto Task Force and decided to get in on the action with its own Innovation Task Force. Hopefully this gives task force head Michael Passalacqua with the resources he needs to drive the ambitious CFTC agenda forward.
Blackrock Still Tokenization Maxis: Blackrock and Franklin Templeton are probably the traditional asset managers I most associate with the support for bringing traditional markets onchain the past few years. So love to see Larry Fink is still out there preaching the gospel.
Ethereum Quantum Upgrade: The Ethereum Foundation already created a dedicated team to address network risks from quantum computing, and it is now predicting the quantum-proofing upgrades will be completed in about 4 years. Great to see this level of forward thinking from the primary stewards of the network but not sure how this interplays with recently rejected proposals regarding quantum resistance upgrades.
Dev. Lawsuit Dismissed: In things you hate to see, the Coincenter-funded lawsuit seeking clarity on issues related to privacy protocols was dismissed last week. This further cements the urgent need to get developer protections enacted into law ASAP, or risk losing some of the most important developers to crypto’s long-term success overseas for fear of arbitrary criminal prosecutions.
DeFi Vault Letter: The recent Resolv hack and its ripple effects across various DeFi vaults really showed the need to have truly safe and automated vaults. To that end, highly recommend this letter to the SEC from Veda on exactly that topic and how it should be addressed by securities regulators.
Morgan Stanley Bitcoin ETF: Morgan Stanley and its 16,000 financial advisors are about to have a new product to earn commission on selling its upcoming Bitcoin ETF product. I generally have stopped reporting every new crypto ETF since they are becoming old hat and less controversial, but this was one worth covering.
Corporate Chain Debate: There was a kerfuffle during DAS after the founder of DWR said PoS chains are not suitable for securities trading because of MEV order processing, which is basically advocating for regulatory capture for his centralized solution vs. chains like Solana or Ethereum. It is comical that current securities intermediaries who want to maintain their intermediary fees act like order flow processing is completely fair in the current system and that high frequency trading isn’t a thing.
Securitize NYSE Deal: One of the other things that was front in center of the “permissioned chain” discussion was the Securitize deal with the NYSE which was inked last week. I enjoyed the perspective from CEO Carlos Domingo weighing in on the issue in a public forum. Crypto wins when these types of debates happen in public forums.
Crypto 401(K)s: Back in August of last year, the President signed an Executive Order titled “Democratizing Access to Alternative Assets for 401(K) Investors” which was designed to allow 401(K) managers include alternative investments in plans like venture funds or crypto. The Department of Labor proposal to that effect has now cleared executive review bringing it closer to integration similar to the crypto-backed mortgages proposal which is now becoming a reality it looks like.
Crypto Tax Proposal: A new discussion draft of proposed bipartisan crypto tax reforms dropped. People are (justifiably) upset that it does not include a deminimus exemption for use of crypto in payments like foreign currencies get. But this is a good step in the process for legislating the second most important thing for crypto adoption (the first being clear rules regarding token status and application of securities laws to sales of digital assets).
House Tokenization Hearing: The House of Represenatives Financial Services Committee held a hearing entitled Tokenization and the Future of Securities: Modernizing Our Capital Markets. Honestly, not much came of this, because largely this issue will be determined by the SEC through rulemaking and the Senate in its version of market structure legislation.
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: In late 2022, while I was at Polsinelli, I started preparing weekly updates for attorneys at the firm to stay abreast of the latest Web3 legal developments. I now 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 are solely my own. They do not reflect the official stance or endorsement of the Digital Chamber or any of its members.
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