Regulations in the News - Ongoing Archive

NOTICE: The following forum thread does not constitute legal advice. My contributions here are for informational purposes only. Anyone interested in investing in cryptocurrency does so wholly at their own risk.

One of the strengths forum software like this has is it’s ability to efficiently organize and archive discussions for easy reference.

One discussion that may be fruitful for crypto stakeholders of all kinds to have on a proactive and ongoing basis is that of crypto regulations as they are considered by legacy authorities and published to various media outlets. If we can track general sentiment in these institutions towards cryptocurrency and web 3.0, we will be better prepared to coordinate and advocate for ourselves.

I propose a basic article sharing format:

  1. Article link.
  2. Abstract: no more than 3 or 4 sentences, highlighting key points of the article.
  3. Optional - Your own thoughts on the relevance or significance of the article, and whether any further discussion should be held in a separate thread. In italics.

All are invited to contribute articles.

I will personally contribute to this thread as time permits in my personal schedule. I am not paid to contribute. If you are interested in supporting my efforts, you can send DOT tokens to:

12NTUr4gb8fZWGun9Wjwa4Xu4avZP6hsxALEuWEDVfykwNxh

Thanks!

November 25, 2020: Coinbase CEO disclosing Trump administration may try to rush out crypto wallet regulations before the end of his term. Armstrong alleges these would require institutions like Coinbase to verify the identity of self-hosted wallet owners before allowing them to withdraw funds to a self-hosted wallet.

Edit January 1, 2021: As predicted, here is the announcement. Public comment is open for 15 days, and will conclude on January 4, 2021. 60 days is the amount of time normally allowed for public comment.

November 30, 2020: President of the European Central Bank, Christine Lagarde expressing what appears to be worry about cryptocurrencies, especially stablecoins issued by large tech companies, notably Facebook which is planning to launch a stablecoin (formerly Libra now Diem) January 2021. She says there is no “claim” (central authority to go to if there’s an issue?) and a “lack of trust” with cryptocurrencies. She worries instead of depositing into banks, people might start depositing into stablecoins, which might impact banks’ operations.

December 2, 2020: Democratic representatives in the U.S. being concerned unregulated stablecoin issuers could prey on low and middle class folks, especially people of color. They want stablecoin startups to get FDIC insurance and keep enough money at the federal reserve to back their token offerings.

The thinking must be that if a stablecoin goes bust it will take a lot of people with it who were sold on the promise the token would hold it’s value.

March 4, 2020: the Ukrainian National Agency on Corruption Prevention released a set of guidelines for officials, folks with foreign income, and freelancers without a business registration to report their crypto holdings. Cryptocurrencies must be reported, together with their value at the time of reporting, as an intangible asset, which is in the same class as intellectual rights or brand names.

July 5, 2018: Regulators in Michigan, USA discussing legal protections for blockchains. Specifically, up to 14 years prison time for 51% attacks. House bills 6257 and 6258. Follow up: this passed in December 2018, 108 to 0. It was sponsored by republican Senator Curtis Vanderwall.

December 22, 2020: The SEC is suing Ripple Labs for selling XRP over the course of 8 years as an “unregistered security.” The SEC stated it’s motivation is on behalf of investors who it believes did not receive protections afforded at the time of sale of a security. The consequences of this lawsuit are being felt across the blockchain ecosystem, as major exchanges such as binance.us are delisting the fourth largest cryptocurrency by market cap from their exchanges. This action is coming at the midnight hour of SEC chairman Jay Clayton’s term. In response to the allegations, Ripple CEO Brad Garlinghouse stated: “XRP is a currency, and does not have to be registered as an investment contract,” Garlinghouse said. “In fact, the Justice Department and the Treasury’s FinCEN already determined that XRP is a virtual currency in 2015 and other G20 regulators have done the same. No other country has classified XRP as a security.” Over the lawsuit, Ripple has threatened to move it’s headquarters outside the U.S. to London, where the UK Financial Conduct Authority does not see XRP as a security.

I look at this as significant for Polkadot also, seeing as it establishes a precedent for a fiat government (in this case the SEC) to retroactively bring action upon a cryptocurrency for not registering as a security, even though this same regulatory body ruled that niether Bitcoin nor Ethereum should be classified as a security. The main theme I see emerging is that penalties happen not to financially successful coins, but seem to be complaint driven. When a coin loses value or tanks as a result of problems in the core-developer community is when lawsuits happen. And these lawsuits are almost always successful.

September 30, 2019: Another lawsuit filed by the SEC for an “unregistered ICO.” This time it’s Block.one who raised 4B in their ICO. The fine was 24 million, or .06% of funds raised. According to this article, there’s speculation the low fine may be due to the fact that while Block.one has operations in Virginia, it’s registered abroad in Hong Kong.

September 1, 2020: Reuters ran an article in 2017, detailing internal strife between founders of Tezos that threatened to derail the project, which prompted a class action law suit filed in a Northern California court. This past August the Tezos founders agreed to a settlement of 25 million to be paid the plaintiffs, 8.5m of which goes to the plaintiffs attorneys. The verdict was based on the judge concluding Tezos conducted it’s ICO as an unregistered security.