LexNews+ Weekly No. 15
FIT21 - the good, the bad, and the ugly?; Tom Emmer's anti-CBDC victory; Ethereum ETF Approvals; Caitlyn Jenner & Rich Tha Kid memecoin controversy; LexDAO updates, and more!
Sections:
1. Headlines (The top stories in legal engineering and cryptolaw this week)
2. Podcasts
3. LexDAO weekly updates (Governance, Events, Membership, Study Group)
4. Closing Statements
Headlines
1. Fit21: A Landmark Victory for Crypto, or a Political Gambit?
would that it were so simple…
The recently passed Financial Innovation and Technology for the 21st Century Act, commonly known as FIT21, has been hailed as a significant victory for the crypto industry. The U.S. House of Representatives approved the bill with a strong bipartisan vote of 279 to 136, including support from 71 Democrats, reflecting a substantial shift towards regulatory clarity for digital assets (Coinspeaker) (Cointelegraph).
Paul Grewal, Coinbase general counsel and prominent activist took to X in celebration of what is, for them, not only a philosophical and political victory, but also a massive financial victory (being that Coinbase will be “[T]he trusted partner and custodian for many of the issuers who had 19b-4’s approved tonight.”:
However, despite the apparent and immediate victory FIT21 appears to represent, several criticisms have emerged from prominent crypto legal minds including that of Gabe Shapiro:
and Stephen Palley:
What FIT21 Aims to Achieve
At its core, FIT21 seeks to delineate the regulatory boundaries between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The bill aims to classify digital assets either as commodities, falling under the CFTC's purview, or as securities, regulated by the SEC. This clear division is intended to reduce the regulatory uncertainty that, along with predatory “Regulation by Enforcement” tactics has plagued the crypto industry and stifled innovation (Techopedia) (DNyuz).
The bill also includes provisions for a "decentralization test," which would allow certain crypto projects to transition from being classified as securities to commodities as they achieve sufficient decentralization (Techopedia). This aspect is particularly relevant for projects building on Ethereum or Ethereum-based L2s (such as us here at LexDAO), which could potentially benefit from this new regulatory clarity.
Political Undertones
While FIT21 appears to be a step forward for the crypto industry, some experts argue that the bill's passage is not solely about improving regulatory frameworks. Critics suggest that the Democratic Party's pivot to support for the bill may be politically motivated. As many crypto-holders and advocates have begun to take on a single-issue mentality, the party seems to be taking efforts to win back crypto enthusiasts who felt alienated by previous regulatory crackdowns and uncertainty (Coinspeaker). While a pivot to supporting crypto is certainly not a bad thing, critics urge caution and argue that building long-lasting crypto-friendly legislation will require a much longer back-and-forth effort and time-commitment.
Moreover, the White House's stance on FIT21 has been ambivalent. While it did not outright oppose the bill, it expressed concerns about the lack of adequate consumer protections and the potential for regulatory gaps that could be exploited by bad actors in the crypto space (Coinspeaker) (Cointelegraph).
Moving Forward
The FIT21 bill now faces its next hurdle in the U.S. Senate, where its fate will further unfold. Should it pass, the bill will be sent to President Biden, who will have ten days to sign it into law or veto it. The administration has signaled a willingness to work towards a balanced regulatory framework, though significant revisions might be needed to address its concerns (DNyuz).
While FIT21 marks a significant step towards regulatory clarity for the crypto industry, it is also a reflection of the complex interplay between regulatory necessity and political maneuvering. The coming weeks will be crucial in determining whether this bill becomes a cornerstone of U.S. crypto regulation or another piece of legislative history. Regardless of the outcome of this particular bill though, things do seem to be looking up. Last year, Senator Liz Warren stated she was building “an anti-crypto army”. This year, Senator Cynthia Lummis responds:
“We are building a pro-crypto army in Congress.”
2. House of Representatives passes CBDC Anti-Surveillance State Act put forth by Rep. Tom Emmer
1984? not in 2024:
The U.S. House of Representatives has passed the CBDC Anti-Surveillance State Act, introduced by Majority Whip Tom Emmer (R-MN). The bill, H.R. 5403, passed with a vote of 216 to 192, seeks to prevent the Federal Reserve from issuing a central bank digital currency (CBDC) without explicit congressional approval (Congressman Tom Emmer) (Coinspeaker).
Objectives and Provisions
The primary goal of the act is to protect financial privacy and prevent potential government overreach. It prohibits the Federal Reserve from offering CBDCs directly to individuals and using them for monetary policy, to avoid enabling government surveillance of citizens' financial activities (Financial Services House) (Cointelegraph). Emmer argues that any government-issued digital currency must emulate cash by being open, permissionless, and private (Congressman Tom Emmer).
Political and Public Reactions
The bill's passage was largely partisan. Republicans support it to protect financial privacy and prevent misuse of CBDCs, citing concerns over surveillance (Cointelegraph). Democrats, however, worry it could stifle innovation and undermine the U.S. dollar’s global competitiveness (Cointelegraph).
The bill now moves to the Senate for consideration. Its passage highlights the growing importance of digital asset legislation in Congress (Congressman Tom Emmer) (Financial Services House).
3. Ethereum ETF Approvals: A New Era with Lingering Questions
moon forever ?
The approval of multiple spot Ethereum ETFs by the U.S. Securities and Exchange Commission (SEC) has triggered a bullish rally, pushing Ethereum’s price toward $4,000 and ending a prolonged bear market (The Daily Hodl). This milestone marks a significant step for mainstream adoption of Ethereum, signaling increased investor confidence and liquidity (ETHNews).
However, despite the positive market reaction, the approval raises several unresolved issues. Legal experts continue to debate whether Ethereum should be classified as a security, which has significant regulatory implications. The SEC's abrupt decision to approve the ETFs has left some questioning the agency's rationale and future regulatory stance on Ethereum (Decrypt) (ETHNews).
Market Impact and Regulatory Concerns
The SEC’s approval is seen as a major validation for Ethereum, paving the way for broader institutional investment. Analysts predict that this move will enhance Ethereum's market stability and attract more mainstream investors (Decrypt). However, the classification of Ethereum remains contentious. Lawyers argue that the ETF approval does not settle the question of whether Ethereum is a security, leaving potential regulatory challenges ahead (ETHNews).
Future Outlook
As Ethereum’s price rallies and the market adjusts to this new development, stakeholders will closely monitor the SEC's actions and legal interpretations regarding Ethereum's classification. The approval of spot ETFs is a positive step, but the crypto community remains vigilant about the regulatory landscape and its implications for future digital asset policies (Decrypt) (ETHNews) (The Daily Hodl).
4. Caitlyn Jenner Meme Coin Sparks Controversy Amid Hacking Wave
keeping up with the degens series premier:
The launch of the Caitlyn Jenner meme coin has created confusion and sparked debates over its legitimacy and origin. Promoted through Jenner’s social media accounts, which some suspect were hacked, the coin quickly amassed a significant market cap. The incident coincides with a wave of high-profile account hacks, including crypto influencers and celebrities, who have been used to shill various tokens. This has raised concerns about the security of social media platforms and the authenticity of such crypto promotions (Decrypt) (Cointelegraph).
Key Points:
Launch and Promotion: The Caitlyn Jenner meme coin was launched on Solana and promoted via Jenner's social media accounts, raising suspicions about the coin's provenance and whether her accounts were compromised (Decrypt) (Cointelegraph).
Wave of Hacks: This incident is part of a broader pattern of hacks targeting celebrity and influencer accounts to promote various tokens, highlighting security vulnerabilities on social media platforms (Cointelegraph).
Industry Response: Observers and industry experts are divided on whether the promotions are genuine or part of a larger scam, emphasizing the need for caution among investors (Decrypt).
The controversy underscores the still very real challenges of distinguishing legitimate crypto projects from scams, particularly when celebrity endorsements and social media hacks are involved.
Podcasts
Too tired to read, anon? We feel that. Try these instead:
LexDAO weekly:
Events
MCON
What?: Metacartel is hosting MCON III, “…a [three day] gathering of dynamic DAO Operators, Governerds, and Builder-Philosophers to reconnect to the vision and values of decentralization, and dive deep into innovative onchain experiments and the spiciest topics of Web3.”
When?: September 26 - 28th, 2024
Where? Detroit, MI
Who?: We are joining the event as co-organizers and sponsors, so any and all LexDAO members interested in attending should reach out today to get involved!
Consensus 2024
What?: Consensus is the world’s largest, longest-running and most influential gathering that brings together all sides of the cryptocurrency, blockchain and Web3 community. LexDAO’s Operator, Tertius, will be live on scene, so if you’ll be there too, hit him up!
When?: May 29th - May 31st
Where?: Austin, TX
LexDAO at EthBerlin:
Law at the Limits Video Series (LexDAO at Eth Denver)
Catch up on all the action from our work on the ground in Eth Denver at the Law at the Limits event this past spring!
LexDAO USPTO Application Update:
Membership
June 1 2024 - Prior Token Deprecation
Tertius
LexDAO's 2022-2023 Polygon "Cred" Token is being sunsetted June 1 2024! Re-up your membership and get a membership token today!
If you do not already have one, go to https://lexdao.org/membership. The LexDAO membership token is a 365-day expiring erc-721 token on Polygon Mainnet (PoS).
You can self-mint your membership token today by following the link on our website, providing a little information about yourself, and paying 300 DAI on Polygon Mainnet (PoS) through Unlock Protocol. You may also purchase one with a credit card or with Google Pay or Apple Pay through Unlock. If you have any trouble or questions, please tag @deleted-role in the LexDAO membership channel. Additional payment methods forthcoming, but you may pay for membership by sending $300 of Eth, 300 DAI, 300 USDC, or 300 USDT to LexDAO's Eth Mainnet Treasury at:
0x5a741ab878Bb65f6AE5506455FB555eaf3094B3F
which resolves to joinlexdao.eth and email operator@lexdao.org for manual minting and confirmation of information and directory entry. Token sunsetting will involve the removal of discord roles and snapshot voting eligibility tied to the prior token.
Study Group
Paolo Gangi
Our upcoming, highly anticipated study group will be about Kleros - the decentralized arbitration center. There will be amazing speakers. The event will be June 3rd at 10.30 am PST/ 1.30 pm EST / 7.30 pm CEST and this is the link to join the event: Kleros Study Group Monday, June 3 Google Meet joining info Video call link: https://meet.google.com/qfy-prpt-gak
Speakers:
Moderator: Paulo Gangi
Panelist: Ines Braganza
Panelist: Stephen Palley
Panelist: Alexandre Perez
Panelist: Alexandru Stanescu
Panelist: Facundo Trotz
Closing Statements
Cimply
LexDAO is organized to form a club of legal engineering professionals, united to innovate and bring the traditional legal settlement layer to code, and coded agreements to the masses. We believe that everyone deserves access to justice provided in a quick and efficient manner. If legal services were easier to use, verify, and enforce, we could live in a fairer world. Distributed ledger technology offers solutions to many problems in the legal space.
Our mission is to research, develop and evangelize first-class legal methods and blockchain protocols that secure rules and promises with code rather than trust. We do this by training LexDAO-certified legal engineers and building LexDAO-certified blockchain applications. We strive to balance new deterministic tools with the equitable considerations of law to better serve citizens on a cooperative and nonprofit basis for the primary and mutual benefit of its members and common good.
Law is a public good.
██╗░░░░░███████╗██╗░░██╗██████╗░░█████╗░░█████╗░ ██║░░░░░██╔════╝╚██╗██╔╝██╔══██╗██╔══██╗██╔══██╗ ██║░░░░░█████╗░░░╚███╔╝░██║░░██║███████║██║░░██║ ██║░░░░░██╔══╝░░░██╔██╗░██║░░██║██╔══██║██║░░██║ ███████╗███████╗██╔╝╚██╗██████╔╝██║░░██║╚█████╔╝ ╚══════╝╚══════╝╚═╝░░╚═╝╚═════╝░╚═╝░░╚═╝░╚════╝░