The 5 Crypto Stories You Need to Know This Week (11 February 2023)

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1. Hermes Wins U.S. Trademark Trial Over MetaBirkin NFTs (Reuters)

A Manhattan federal jury concluded that artist Mason Rothschild’s NFT versions of Hermes' famous Birkin bags violated the fashion house's trademark rights.

The case has been closely watched for its potential to clarify how trademark law will apply to NFTs.

This is a positive development, as further legal clarity on topics like intellectual property (IP) is essential for the future development of NFTs.?

Any law school student or young lawyer interested in both IP law and web3 should spend time on this topic. Entire careers will be built specialising on IP matters relating to the metaverse and web3.

2. Kraken Agrees to Stop Offering Crypto Staking to Settle SEC Charges (SEC)

The SEC charged Kraken with failing to register their staking-as-a-service program.

To settle the SEC’s charges, Kraken agreed to immediately cease offering such services and pay $30 million in penalties.

SEC Chair Gary Gensler even announced this news with a rather unique video. Worth a watch here:?

There was a lot of surprise to this decision, as it really has the potential to set the US back when it comes to digital assets.

The reality is that users want staking services. And if they cannot access this via regulated US platforms, they will do so with offshore platforms.?

There was also much criticism from within the SEC itself. Commissioner Hester Peirce publicly dissented from this news by stating:

“Most concerning, though, is that our solution to a failure to register violation is to shut down entirely a program that has served people well. The program will no longer be available in the United States, and Kraken is enjoined from ever offering a staking service, registered or not. A paternalistic and lazy regulator settles on a solution like the one in this settlement: do not initiate a public process to develop a workable registration process that provides valuable information to investors, just shut it down.

More transparency around crypto-staking programs like Kraken’s might well be a good thing. However, whether we need a uniform regulatory solution and if that regulatory solution is best provided by a regulator that is hostile to crypto, in the form of an enforcement action, is less clear.”

This development is worth following, and this matter will likely be litigated in the future.

For example, Coinbase's General Counsel said that their staking offering does not violate regulations due to how it is structured and advertised.

3. Dubai Issues Comprehensive New Regulatory Framework (VARA)

The world's first crypto specialized regulator has issued its much anticipated regulatory framework that covers the entire spectrum of virtual assets.

It has many important and unique requirements that will make the crypto ecosystem stronger, from forcing exchanges to show proof of reserves and financials and getting audited twice a year to requiring disclosures of prop trading activities and mandatory client accounts at custodians.

4. Bank of England Considers Digital Pound (BoE)

The Bank of England issued a very interesting consultation on a digital pound stating that it sees it “likely that the digital pound will be needed in the future.”

Whilst any technological barriers can now be overcome (as China has shown), the challenge for the UK will be to give comfort to the public regarding data privacy and confidentiality around the use of the digital pound.?

That will not be an easy task.?

5. Sullivan & Cromwell Bills $7.5 million for 19 Days of Work on FTX Bankruptcy (CoinDesk)

Law firm Sullivan & Cromwell has billed $7.5 million for work on the FTX bankruptcy case for the first 19 days of November alone.

A total of over 6,500 hours were worked by 32 partners, 85 associates, and 34 non-legal staff.?

Many, from SBF himself to the former Chief Regulatory Officer of FTX, have accused S&C of a conflict of interest and of having accelerated the Chapter 11 proceedings in the US just to secure potential large fees.

The court statement by FTX’s former Chief Regulatory Officer where he details the conflict of interest is an interesting read on this topic.?

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