Welcome back. This week, we’ve got regulatory news in the US, legislative news in the EU, and legal news from APAC.
The usual disclaimer: This newsletter collates the main themes and headlines of the week in DeFi/crypto/metaverse/Web3/NFT land and tries to provide unbiased context. It's aimed at anyone who wants to keep an eye on the space. It's put together by a team at YAP and doesn't contain any promotion of our clients (if one is mentioned, we'll flag that).
[tl;dr]
Coinbase sues the SEC
MiCA crypto framework passes in EU
Terra executives arrested in South Korea
[Coinbase Suits Up 👔]
Why won’t you just talk to us? That’s what Coinbase is asking the Securities and Exchange Commission (SEC). The US-based exchange this week sued the SEC to force a response to a July 2022 petition asking the agency to give the crypto industry regulatory guidance.
What Coinbase Said 💬: The exchange wants a yes/no answer so it can plan next steps: “If the SEC says no to our rulemaking petition, which it has the right to do, then Coinbase would be allowed to challenge that decision in court and explain in that formal setting why rulemaking is required,” wrote Coinbase chief legal officer Paul Grewal.
What Reporters Said: ”The move is Coinbase’s first formal salvo against the regulator, a little over a month after it was warned by the SEC of pending legal action through a Wells notice,” reported CNBC’s Rohan Goswami. That Wells notice centers on an SEC claim that “the company’s staking products are unregistered securities,” said Decrypt’s André Beganski. Coinbase isn’t the only interested party; the suit drew support from competitor Binance, reported Eleanor Terrett of Fox Business.
Why It Matters: Coinbase has been banging this drum for a while; now it’s getting louder. 🥁 In the background, CEO Brian Armstrong and others have been hinting that they could move elsewhere if the US doesn’t develop a regulatory framework.
[MiCA Check]
Perhaps Coinbase will look across the pond. 🌊 The European Parliament has approved the Markets in Crypto Assets (MiCA) legislation by a 517-38 margin. 🗳️ MiCA standardizes rules and guidelines for the EU’s 27 member states. Countries will have 12-18 months starting this summer to implement them.
What Reporters Said 🔎: The legislation outlines licensing requirements and mandates disclosures for crypto firms, while also requiring stablecoin issuers to maintain adequate reserves. The clearer guidelines should make regulatory adoption easier across the continent, suggested Decrypt’s Alys Key. Companies that receive approval in one European country can “’passport’ their business into others with minimal additional paperwork.”
Crypto firms are enthusiastic about having a clear path to licensure reported CoinDesk’s Jack Schickler, as are traditional finance firms that have seen crypto as too unregulated to touch. “Now,” he said, “attention turns to the details that need to be colored in.” That includes some pretty big areas, such as fleshing out language on NFTs and DeFi.
What’s Next ⁉️: All eyes are on the UK, which now lags behind the EU. Policymakers have “looked to MiCA for inspiration,” reported CoinDesk’s Camomile Shumba, as the government tries to roll out its own legislation within the next year. It better get to it. Decrypt’s Key reported that French regulators are looking to “fast-track” registered crypto firms for quick approval under MiCA’s more stringent rules.
What We Say: Reception of the law has been positive across the industry, with Binance CEO Changpeng Zhao, Coinbase CEO Brian Armstrong, and Gemini co-founder Tyler Winklevoss all showing support. With regulatory uncertainty a feature of the US crypto industry, crypto firms may pivot to regions where it’s easier to work.
[Terra-ble]
Daniel Shin, Terraform Lab’s less infamous co-founder, has been charged with embezzlement and fraud by South Korean authorities. Police arrested nine others involved in Terra, freezing nearly $185 million in assets.
What Reporters Said 🔎: “The formal charges come after months of investigation into the Terra ecosystem's dramatic implosion last year, which wiped out tens of billions in investor wealth,” wrote The Block’s Yogita Khatri.
What Shin Said: According to his lawyer, Shin “left two years before the fallout” and “has been faithfully cooperating with the probe for over 10 months.”
Why It Matters: Shin’s co-founder, Do Kwon, remains detained in Montenegro, where he has been charged with trying to travel on forged documents. Kwon is also wanted in South Korea and the US. Charges against other Terra employees could ramp up the legal pressure on Kwon.
[Tidbits]
Although liquid staking has come under scrutiny from US securities regulators, Binance is launching its own liquid staking token, wrapped beacon ETH. Story by The Block’s Adam Morgan McCarthy.
Binance.US isn’t buying bankrupt Voyager Digital’s assets after all, citing a “hostile and uncertain regulatory climate in the U.S.” Story by The Block’s Stephanie Murray.
Ukraine DAO, which purportedly fundraises crypto for the war effort, has been claiming for months that it is endorsed by the government. Not so, said the Ministry of Digital Transformation. Story by Kyiv Post.
Coinbase says its layer-2 blockchain, designed to relieve congestion on Ethereum, should be ready this year. Story by TechCrunch’s Jacquelyn Melinek.
Following up on its March airdrop to individual users, layer-2 network Arbitrum distributed $120 million in ARB tokens to projects built on its network. Story by CoinDesk’s Shaurya Malwa.
[Tweet of the week]
https://twitter.com/_bolivian/status/1650683880007954432?s=20
[Events]
Consensus | April 26th - 28th 2023 | Austin, TX, USA - Look out for our YAP Team members on the ground!
Privacy Hackathon | April 27th - 30th, 2023 | Istanbul, Turkey
Polkadot Mini Conference | April 29th 2023 | Bled, Slovenia
Avalanche Summit II | May 3rd - 5th 2023 | Barcelona, Spain
[DeFi Definitions]
A new occasional segment exploring one particular aspect of DeFi.
This week: “Modular Blockchain” by Ruth De Freitas.
A modular blockchain is a blockchain that is built using a modular architecture. It is made up of different parts or modules, each with a specific job like checking transactions, making sure everyone agrees on what happened or storing data. These parts are customisable and can be changed out for different ones that do the same job but in different ways.
Modularity makes blockchains more flexible and scalable by allowing developers to create and integrate different modules based on specific use cases, which can be easily upgraded and maintained. This makes modular blockchains ideal for enterprise applications that require customized solutions to meet specific needs.
In a modular blockchain architecture, modules can include components such as consensus mechanisms, smart contract languages, storage systems, and network protocols. These modules can be developed independently and then integrated through standard interfaces, allowing for seamless interoperability and easier adoption.
This can be used in a variety of industries, such as finance, supply chain management, and healthcare, where different use cases require different blockchain architectures.
The team: founder Samantha Yap and consulting editor Jeff Benson, Sam O'Donohoe, Ewan Brewster, Tiffany Mac Sherry, Becky Corbel and Delon Chan. Your feedback is, as always, welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
This newsletter is prepared by YAP Global, an international P.R. Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and Web3 brands through impactful storytelling. Find out more about us here.