Category: Cryptocurrency Law

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Crypto News Cryptocurrency Law Institutions Regulation

Decentralised Autonomous Organisation (DAO) Framework Officially Approved in the US

Decentralised Autonomous Organisations (DAOs) are now legally recognised as businesses entities in the state of Wyoming, US.

The passing of the bill that took effect on July 1 has been praised by Wyoming’s Secretary of State, Edward Buchanan, as another step for the state to remain on the cutting edge of business technology.

The Merchant Advisory Group (MAG), which represents 165 of the largest merchants in the US, also expressed its support of the DAO filing.

Shortly afterwards, the American CryptoFed DAO was officially the first to be legally recognised as a distinct form of limited liability company (LLC). American CryptoFed is aiming to create “a monetary system with zero inflation, zero deflation, and zero transaction costs”, looking to stabilise currency and be immune to government votes on changing resource values as a separate entity.

Ideally we’ll see more money put into the coffers of local governments in a way that then allows them to hopefully fill more potholes and do more kinds of projects, without having that cut into their profitability of that transaction.

Mark Gordon, Governor of Wyoming

What Is a DAO?

The developers of the DAO believed they could eliminate human error or manipulation of investor funds by placing decision-making power in the hands of an automated system and a crowd-sourced process, which drastically lowers management costs.

By using a open-source blockchain protocol governed by a set of rules, which were created by its elected members, it can automatically execute certain actions with smart contracts without the need for intermediaries checking if requirements have been met.

Participants are not obligated by a legal contract, but rather incentivised by rewards in the form of native asset tokens that help them work towards a unified goal. Decentralised exchange (DEX) platforms such as Compound (COMP), yearn.finance (YFI) and Uniswap (UNI) are dependent on DAOs for governance. 

Wyoming, the Most Crypto-Friendly State in the Union

This move is another demonstration of Wyoming trying to lead the way as the most crypto-friendly state in the US. Its Senate representatives have made it very clear that they are crypto-positive and have already passed 23 laws to clear up regulation around digital assets and related fields, including crypto mining.

Major crypto companies Ripple and Kraken have both set up operations there, along with 50 smaller LLCs with “bitcoin” in their names. 

Wyoming is the leading digital assets jurisdiction in the USA, and now with this DAO law, Wyoming is arguably the top blockchain jurisdiction in the world.

Marian Orr, CEO, American CryptoFed DAO

The state has been busy trying to attract companies that play a role in the crypto or blockchain industry, especially bitcoin miners.

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Australia Bitcoin Crypto News Cryptocurrency Law

Australian “Bitcoin Inventor” Wins Lawsuit Over Bitcoin Whitepaper Copyright Claim

Australian businessman Dr Craig Wright is a much derided figure within the Bitcoin community who infamously claims he is the creator of Bitcoin. Following his lawsuit filed earlier this year, the London High Court has granted default judgment for copyright infringement against “Cøbra”, the pseudonymous operator and publisher of the bitcoin.org website.

Did “Cøbra” lose the case on the merits? Not quite; he didn’t even bother defending it.

Wright Sues for Copyright Infringement

Earlier this year, Wright obtained permission to sue “Cøbra” for copyright infringement for unlawfully publishing the Bitcoin Whitepaper “Bitcoin: A Peer-to-Peer Electronic Cash System”.

Dr Craig Wright. Source: Coindesk

In his claim, the self-described student, researcher, lawyer, banker, economist, pastor, coder, investor and mathematician argued that he owned the copyright to the seminal document under the moniker “Satoshi Nakamoto”. Although he currently claims that Bitcoin is a ponzi, his legal team was quick to point out that:

Dr Wright does not wish to restrict access to his White Paper [which is freely accessible on his blog, https://craigwright.net/bitcoin-white-paper.pdf] but does not agree that it should be used by supporters and developers of alternative assets, such as Bitcoin Core, to promote or otherwise misrepresent those assets as being Bitcoin, given that they do not support or align with the vision for Bitcoin as he set out in his White Paper.

Ontier LLP, Source: https://www.ontier.net/ia/wright-v-cobra-ontier-press-release.pdf

Wright Claims a “Win” in His Lawsuit

In legal proceedings, there are two types of quick wins – summary judgment and default judgment. Summary judgment is awarded when the defendant has filed a defence but the court finds there is no prospect of success. Default judgment, however, is when the defendant doesn’t file a defence in the first place.

In the case against “Cøbra”, default judgment was awarded together with legal costs in the amount of £35,000 (US$48,400). In other words, the defendant didn’t even try to mount a defence, as it was considered “a waste of time”.

Aside from legal costs, the order also required that “Cøbra” remove the Whitepaper and put a notice on the website informing visitors of the default judgment for a period of six months.

In an underhand jibe directed at Wright, “Cøbra” issued the following statement on Twitter:

In a post, “Cøbra” noted that the Bitcoin Whitepaper located at https://bitcoin.org/bitcoin.pdf wouldn’t be accessible to UK-based visitors, but that ultimately, he hoped that the truth would prevail.

What Are the Odds That Wright Created Bitcoin?

Most Bitcoiners will tell you “no chance”, but if you were feeling charitable, you could argue the odds are marginally higher than zero.

Despite his credentials, Wright is largely discredited in crypto circles. Entire websites have been created to disprove his claim that he created Bitcoin, and even the otherwise reserved Ethereum founder, Vitalik Buterin, has called Wright a “fraud“. Most recently, he commented:

I view Craig Wright as being kind of like a Donald Trump figure and that, like, he’s not very intellectual. I think he gets a big audience because he says things that like to play to the resentments that people have.

Vitalik Buterin on the Lex Friedman Podcast

It’s not often that proponents of Bitcoin and Ethereum agree. The fact that they agree on the topic of Dr Wright is in itself revealing.

Wright’s litigious nature suggests the saga is not likely over. At the time of writing, he was still embroiled in court proceedings demanding access to 111,000 bitcoins held in two addresses which he claims were “stolen”.

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Blockchain China Crypto News Cryptocurrencies Cryptocurrency Law

Censorship Freedom: Hong Kong Newspaper Launches on the Blockchain Using DeFi Protocols

Hong Kong activists are scurrying to preserve the back catalogue of pro-democracy newspaper the Apple Daily by uploading thousands of articles onto the censorship-proof blockchain platform ARWeave.

ARWeave is a decentralised file storage platform that breaks down a file into bits of information distributed over an open network of anonymous computers around the world. It describes itself as a “collectively owned hard drive that never forgets“.

After a 26-year run, the Apple Daily was forced to cease publication on June 23 after being targeted by a national security crackdown for breaching “vaguely formulated offences“ as China’s grip over free speech tightens.

Five Executives Arrested, Assets Frozen

Last week, 500 officers raided the newspaper’s headquarters, going through reporters’ notes and other journalistic material. Police froze assets of companies linked to the Apple Daily and arrested five executives.

Following the raid, the Apple Daily closed its website and erased all its social media platforms. In anticipation of popular demand for its final print run, the paper printed 1 million copies, more than 10 times its usual run.

Staff members of Apple Daily and its publisher Next Digital with the final edition at the paper’s headquarters in Hong Kong, June 24. REUTERS/Tyrone Siu

Democratic Leaders Condemn Closure of Apple Daily

The shutdown is the most serious blow yet to Hong Kong’s media freedoms. US President Joe Biden described it as “a sad day for media freedom in Hong Kong and around the world“, adding that the Apple Daily had been “a much-needed bastion of independent journalism in Hong Kong“.

British Foreign Secretary Dominic Raab asked China to respect the agreement signed in 1997 committing to continue allowing free media in Hong Kong after the colony’s reversion to China from British rule.

We certainly view what’s been happening with the closure of the Apple Daily and the arrest of journalists very, very seriously. We call on China to respect the terms that it freely signed up to and we think that’s a matter of trust as well as important for the people of Hong Kong.

Dominic Raab, British Foreign Secretary

Apple Daily owner Jimmy Lai has been behind bars since last December over unauthorised rallies during Hong Kong’s mass pro-democracy protests in 2019. Lai is facing three national security charges, including colluding with a foreign country, and is already serving several jail sentences.

As the fight for free speech in Hong Kong continues, blockchain technology is playing a vital role in advocating for human rights in China – providing a platform where repressed citizens can resist centralised power by accessing decentralised networks that are immune from state censorship and impossible to silence.

New Blockchain Platform LikeCoin Embraced

Programmer Kin Ko has been building a decentralised registry called LikeCoin, which helps internet users identify metadata (creator, date, time, location, version) of content through a unique code called an International Standard Content Number (ISCN), similar to a book’s distinctive International Standard Book Number (ISBN). Any changes made to content would be recorded and tracked through a digital fingerprint. LikeCoin has been embraced by pro-democracy activists such as Citizen News, already using the platform to catalogue its online images.

The open-source transparency and immortality of blockchain technology poses a grave threat to those in power in China, who are desperate to keep authoritarian control over the narrative of the country’s media.

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Bitcoin Mining Cryptocurrency Law Digital Asset Mining

Iran Authorises 30 Mining Facilities Following Mass Seizure of Mining Rigs

Last week, Iranian authorities seized 7000 mining rigs located in the vicinity of capital city Tehran, citing unauthorised energy consumption and illegal operations.

Now, Iran seems to be clarifying that it does not want to follow China’s lead and ban crypto mining altogether – rather, the Iranian government wants to ensure crypto miners abide by the rules and do not cause undue stress to the power grid.

Limiting Consumption During Peak Hours

The abundance of crypto mining farms in Iran – and their associated intensive use of the power grid – is the result of financial sanctions imposed on the country by the US. Since Iran is forbidden from using US dollars and partially restricted from using SWIFT, the government has looked to cryptocurrencies for alternative payment methods.

In order to help local entrepreneurs find their footing, miners were offered a discount of nearly 50% on their electricity bills if they could prove the power was being used for crypto mining.

However, it appears this measure was a little too successful.

Energy Utility Threatens Shutdowns

Government research has revealed authorised crypto mining farms in Iran consume around 300 megawatts each day. However, according to Tavanir – the company that operates Iran’s power grid – illegal mining operations consume an additional 2000 megawatts a day. As a result, Tavanir has announced it will cut off power to mining facilities when the power grid is under stress.

Following crackdowns on illegal operations, 30 mining facilities have been authorised by the government as of June 27. Six of these are in Semnan province. Alborz, Zanjan, Mazandaran and East Azerbaijan provinces are also home to mining operations.

Tehran is home to one newly licensed crypto mining operation – in stark contrast to more than 180 unauthorised operations in the capital region that have been shut down during the past year.

Iran is not the only country to crack down on unauthorised mining. China – a close economic partner of Iran – has also recently called a halt.

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Crypto News Cryptocurrency Law Europe Investing

Norwegian Government Issues Warning on Cryptocurrencies, Calls For Regulation

Opera building in Oslo
Opera building in Oslo https://unsplash.com/photos/3VCrw7nHH4A

An official statement by Finanstilsynet – the Norwegian entity in charge of financial regulation – has warned consumers to be wary of cryptocurrency investments.

Despite acknowledging the fact that many institutional investors have shown a marked interest in cryptocurrency, Finanstilsynet stated that unlike securities, bonds and other investments, cryptocurrencies are not well regulated within Europe.

Although Norway is not a part of the EU, cooperation between the EU and Norway is very close – and the statement pointed to the EU’s proposed legislation for cryptocurrency that should start providing a general framework for crypto regulation within the EU.

Until such regulations are in place, anyone considering trading in cryptocurrency should think carefully and understand the significant risk that such investments entail. Consumers who want to try this with open eyes should not invest more than they can afford to lose.

Finanstilsynet statement

It’s worth noting that the proposed legislation will not be adopted wholesale, as each EU country controls its own legislative system.

“Certifications” Can Be Misleading

The post also states that many crypto-related businesses in Norway feature a “seal of approval” from Finanstilsynet. However, Finanstilsynet clarified that these businesses are not exactly approved by it.

All businesses functioning in Norway, crypto or not, are required to submit information to Finanstilsynet in order to comply with anti-money laundering (AML) regulations. However, this does not mean that the businesses in question are actually endorsed by Finanstilsynet – only that they comply with rules and regulations already set in place.

The statement also notes there are a number of disreputable sites that are nothing but scams – and that although the Norwegian government is doing its best to get these websites shut down, caution is highly advised.

Overall, the view of Norwegian regulatory bodies on cryptocurrencies is not negative – instead, it stresses the need for regulation and consumer protection similar to those drawn up for other forms of investment.

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Crypto News Cryptocurrency Law NFTs

Sale of NFT Version of Jay-Z’s Debut Album Stopped by Courts

Jay-Z performing

A temporary disposition by New York legal authorities has stopped the attempted sale of an NFT version of US rapper Jay-Z’s first album, Reasonable Doubt.

The NFT auction has been reportedly interrupted after Roc-A-Fella Records filed a complaint against its co-founder Damon Dash.

Record Label Ownership Rights Unclear

The album is owned by Roc-A-Fella Records, established in 1996 by Damon Dash, Jay-Z and Kareem Burke, and released the same year.

Now, according to the record label, Damon Dash was allegedly attempting to auction off an NFT version of the album – alongside its copyright – on an NFT marketplace named SuperFarm, co-founded by crypto YouTube personality EllioTrades.

It’s unclear whether the owners of the NFT marketplace knew about any of the controversy – or even if the alleged auction attempt actually took place. However, according to Roc-A-Fella Records, another listing on a different marketplace has also been attempted.

The claims against Dash include breach of fiduciary duty, unjust enrichment, and conversion. Roc-A-Fella also stated that the album had already been minted as an NFT.

The bottom line is simple: Dash can’t sell what he doesn’t own. By attempting such a sale, Dash has converted a corporate asset and has breached his fiduciary duties.

Statement from Roc-A-Fella Records

The Attempted Sale ‘Never Happened’: Dash

Dash, however, stated that the sale attempt never happened, and that he was only attempting to sell off his personal stake in the company.

There wasn’t an announcement at all. Don’t you think that if I made an announcement that I’m selling Reasonable Doubt you would’ve heard about it? What they’re accusing me of is minting a whole album. So if it’s already minted, it’s already on the blockchain, that means it’s already there. [The sale] never happened, and they know it never happened.

Damon Dash

A court hearing is set for July 1 in which Roc-A-Fella will be claiming “nominal damages, punitive damages, the cost of the lawsuit and attorney fees, and the enjoinment of Dash from selling any interest in the album”.

Jay-Z is not the first rapper to show interest in NFTs – Eminem’s “ShadyCon” was announced earlier this year.

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Bitcoin Crypto News Cryptocurrencies Cryptocurrency Law

South America is going Bitcoin crazy: Argentina, Brazil, Panama, Paraguay, Nicaragua and El Salvador

Bitcoin’s influence is having a domino effect across almost the entire South American continent as crypto-fever rises in neighbouring countries south of the border from the US.

El Salvador is Leading the Way

El Salvador passed a bill this month to become the first country in the world to approve Bitcoin as legal currency. Late on June 8, the two-paged proposal put forward by 39-year-old El Salvadorean President Nayib Bukele was voted in by Congress with a supermajority in favour of the new Bitcoin law.

El Salvador President Nayib Bukele

President Bukele is undoubtedly one of the coolest political leaders pushing crypto forward, even adopting laser eyes for his Twitter profile. He is a Bitcoin supporter who has put El Salvador on the map, making history as the first nation to adopt Bitcoin as legal tender.

The Rest of South America to Follow

Bitcoin and cryptocurrency entrepreneur Tyler Winkelvoss tweeted about the South American countries following El Salvador’s lead:

Panamanian congressman Gabriel Silva posted on Twitter (also sporting laser eyes as part of a meme contest) that he was preparing a proposal to present at the national assembly.

This is important, and Panama cannot be left behind. If we want to be a true technology and entrepreneurship hub, we have to support cryptocurrencies.

Gabriel Silva, Panamanian congressman

Argentina is also looking at Bitcoin as its inflation soars above 42.6%. Argentinian congressman Francisco Sanchez joined in the laser eyes meme, as did two Brazilian congressmen.

Adios Capital Gains, Hola Bitcoin!

It isn’t hard to understand why Latin American countries would be so supportive of cryptocurrency adoption. For Salvadoreans living abroad, using Bitcoin instead of cash (with its high international transaction costs) will make it easier, faster and far cheaper to send money home. The new law will also open up financial services to the 70 percent of Salvadoreans who do not have bank accounts.

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Cryptocurrencies Cryptocurrency Law Scams

China Police Arrest 1,100 People For Crypto-Related Money Laundering Charges

In the 5th round of an operation named “Operation Card Breaking” by local authorities, the Chinese police force has arrested over 1100 people for offences combining SIM card fraud and money laundering via crypto.

China has been cracking down on crypto-related activity for a while now – but this time the crackdown is not targeting traders or miners.

Black Market SIM Cards Used to Launder Money Through Crypto

In China, access to extra SIM cards is restricted. Seeing as in China your phone number is more or less tied to your identity due to the prevalent use of apps like WeChat Pay, many bad actors attempt to dodge these identity checks via the SIM card black market.

The Chinese government has been heavily targeting this market throughout 2020 and 2021 – and this time, the people arrested were allegedly using these black market SIM cards to launder money through cryptocurrency.

In this case, most of the arrests targeted “independent contractors” who would use the aforementioned SIM cards to sign up on crypto exchange platforms, after which money launderers would give them cryptocurrencies to trade.

Once the fences had moved the crypto around and split it up into multiple currencies – both crypto and fiat – the funds would be sent to wallets and bank accounts designated by the money laundering rings, sans a commission fee ranging between 1.5 and 5%.

Organised Crime Rings Brought Down

Much like the warrants served for an illegal crypto gambling ring back in April, these arrests targeted organised crime syndicates.

The arrests in the cities of Hangzhou, Shaoxing, Anhui, Hefei, Hunan, and Changsha were announced by the Ministry of Public Security on their official WeChat account.

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Crypto News Cryptocurrencies Cryptocurrency Law Ripple

Ripple Vs SEC: Judge Denies SEC Access To Ripple’s Legal Advice

The SEC has been in a legal battle with Ripple for a while, with certain developments seeming to lean in Ripple’s favour.

Last development sees Magistrate Judge Sarah Netburn denying SEC’s request for Ripple “to produce all communications constituting, transmitting, or discussing any legal advice Ripple sought or received as to whether its offers and sales of XRP were or would be subject to federal securities laws”.

The judge’s decision seems to have made Ripple’s fair notice defense stronger. About a month ago, the SEC filed a request to the court demanding to strike the “fair notice” defence from the Ripple case altogether, calling it “legally improper”. Ripple invoked that claiming that SEC failed to warn them (and other market participants) about XRP being an unregistered security.

SEC Attorney Looking At Retiring

According to a report from only a few days ago, one of the SEC’s attorneys, Dugan Bliss, asked to withdraw from the case, leaving SEC.

If Dugan Bliss’s request is granted, the case will go on with the SEC continuing to be represented by Jorge G. Tenreiro, Daphna A. Waxman, Jon A. Daniels and others. The whole operation is being led by SEC attorney Preethi Krishnamurthy.

In April, Dugan Bliss stated that – as far as he knows – the SEC had not yet taken an official position on ETH either.

So I want to make clear that this is my understanding of the current situation and I don’t want to be overly technical, but the SEC, itself, my understanding, it has not taken an official position. There is no action that it took to say Bitcoin is not a security, Ether is not a security.

Dugan Bliss
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Bitcoin Cryptocurrency Law Investing

Crypto App Told To Remove Billboard Advert Saying “It’s Time To Buy”

A crypto trading app called Luno was told to remove their ads featured on the London tube, in a ruling by the UK Advertising Standards Agency (ASA) earlier this week.

Billboard Considered Misleading

The investigation by the ASA came in the wake of 3 separate complaints formulated by anonymous individuals. Although all 3 complaints were based on the fact that not enough warning is given to consumers regarding the perils of a notoriously volatile market, one of the complaints hinted that perhaps the ad was taking advantage of inexperienced consumers  outright.

It’s important to note that the ASA did not consider Luno’s advertisement malicious. Rather, they were asked to change their ad which could give people the impression that cryptocurrencies are easy to invest in and a surefire way of making money.

DOYR

As always, DYOR (Do Your Own Research) applies more than anywhere else when it comes to cryptocurrencies. However, the ad simply stated: “If you’re seeing Bitcoin on the underground, it’s time to buy.”.

According to the ASA, this could be taken as investment advice, leading to unfortunate events if misunderstood.

“The ads gave the impression that bitcoin investment was straightforward and accessible, when it is in fact complex, volatile, and could expose investors to losses. We therefore concluded that the ad was misleading.”

Luno did not contest the decision and informed the ASA that future advertisements would be designed differently, and clearly feature an appropriate risk warning.

Although success stories and saucy jokes about boating accidents and Lambos abound, there is an equally large number of tales of unfortunate wipeouts by those who did not follow the DYOR rule – and hopefully, the decision regarding this ad will help cut down on the latter.