CryptoLaw Newsletter #53

US crypto bill, UK stablecoin insolvency proposal, DAO laws, SEC’s Binance coin investigation, Japan stablecoin law

Hello everyone,

TLDR:

• US bipartisan bill proposing comprehensive crypto rules gets overall warm reception from crypto enthousiasts, but criticism from consumer advocate groups.

• UK Treasury suggests bespoke insolvency rules for important stablecoin firms.

• French MP wants EU to stop obsessing over now-defunct Libra and focus on a new crypto era.

• DAO laws in US states are not helpful, according to lawyer

• SEC investigating Binance BNB coin

• Japan adopts stablecoin law

Top-5 this week:

1. Will the US finally get a comprehensive crypto law? Perhaps. US  Senators Lummis and Gillibrand submitted a bipartisan bill, long in the making that wants to clarify when a digital asset is a security or a commodity. This would delineate SEC and CFTC responsibilities – a welcome step. The draft Responsible Financial Innovation Act puts many other proposals on the table, from disclosure requirements on digital asset firms to ensure that consumers can make informed decisions to a study on digital asset energy consumption. (AP)  Crypto twitter showed many positive initial reactions to the news, although a few question marks were raised too, for example whether the bill is bad for DeFi and whether it has any chance of passing.

   Patrick Hansen @paddi_hansen

   First reactions seem mostly positive. Obv this is only the very first step/draft of a potentially longer legislative process, but bipartisan support seems like a promising starting point.

   

   Jake Chervinsky @jchervinsky

   1/ It's a big day for US crypto policy as @SenLummis & @SenGillibrand announce the Responsible Financial Innovation Act, a 69-page bill creating a thorough regulatory framework for digital assets. There's a lot to like here. Some highlights & next steps: https://t.co/o0zHWUU52J

   Dane Lund @lund_dane

   Today you will see a lot of commentary on what is in the latest draft of the Lummis-Gillibrand bill. This thread focuses on the securities implications and discusses how the bill has changed since March. tldr; the March bill would have been better for Web3 creators. 🧵

2. Important stablecoin firms may need bespoke insolvency rules, new UK consultation suggests. In the aftermath of the LUNA/Terra meltdown, regulatory initiatives on stablecoin restrictions have mushroomed. The latest in line is the UK Treasury, which published a consultation on systemic stablecoins and related service providers. The Treasury has long been working on a regulatory response to stablecoins. Its current proposal focuses not only on systematically important stablecoin coin issuers, but also on related wallets and other third service providers. The Treasury wants to ensure that existing rules apply to stablecoins where possible. It is asking for feedback on proposals to bring stablecoins under an amended financial infrastructure regime with bespoke insolvency rules, making the Bank of England the lead regulator for failing stablecoin firms. The need for bespoke rules will be studied later, it added.

3. DEFI is the Future of France (or NOT)? French parliamentarian Pierre Person released a 188-page report on a “new crypto era”. The US uses private stablecoins to bolster its monetary influence, while China has its CBDC. The EU, he argues, viewed a digital euro as a reaction to Libra, but that’s no longer relevant. As to traditional finance: instead of viewing decentralized finance as an opportunity, the sector is looking to undermine it, Person concludes.

4. Are DAOs laws any good? Jordan Teague compares LLC statues for DAOs in the US states of Vermont, Wyoming and Tennessee for The Defiant. Existing DAO LLC structures require more from DAOs than from LLCs, she argues, and fundamentally misunderstand how DAOs work.

5. Is a bitcoin bank like any other bank? A bitcoin-focused bank in the US sued the Federal Reserve for delaying a decision on whether the bank should obtain a master account with the Fed. Formerly known as Avanti, the bank is now called Custodia Bank and was founded by Caitlin Long. If the master account is approved, it would be the first one in the US for a crypto bank.

And also…

• More stablecoin news: Japan passed a stablecoin law and New York’s Financial Services Department published formal stablecoin guidance.

• The US SEC is investigating Binance’s BNB initial coin offering. The agency is also reportedly looking into potential employee insider trading.

• Meanwhile Binance CEO CZ says he has met with Philippine officials in order to get licenses for Binance in the country.

• Lithuania is considering its own crypto laws, thinking the EU’s MiCA Regulation may come too late to safeguard the sector.

• Litecoin was delisted from key Korean exchanges after its added privacy features.

• Grayscale hired former US Solicitor General Donald B. Verrilli, Jr. as additional legal counsel to help finalize its bitcoin ETF application in the US. The firm retains Davis Polk as external counsel.

• Crypto can now be used to deem an individual as an accredited investor in Singapore.

• Hong Kong‘s Securities and Futures Commission issues a Statement on NFTs.

• In Russia, a newly introduced bill proposes making it unlawful to use digital assets as a payment tool.

• Runs on Algorithmic Stablecoins: Evidence from Iron, Titan, and Steel was published as a US Federal Reserve Note.

• ISDA published a Crypto-Assets Risks and Hedging Analysis.

• Law firm Wachtell Lipton discusses emerging issues in Decentralized Governance and the lessons of corporate governance.

• Law firm Skadden Arps discusses the growing complexity of commercial rights issues in NFTs.

Thanks for reading!