The 5 Crypto Stories You Need to Know This Week (25 February 2023)

Powered by ACX - The Crypto-specialized Customer Support and Compliance Support Provider

1. Court Rules That NBA Top Shot NFTs Are Securities

A U.S. District Judge found that NBA Top Shot NFTs (also known as Top Shot Moments) are securities. 

This is a textbook judgement that anyone interested in the legal analysis of whether an NFT constitutes a security must read. 

This judgement is interesting as the Court does a detailed analysis of the different prongs of the Howey test and finds that Dapper Labs offered an investment contract under the Howey test. 

You can read my analysis of the legal argumentation in my WhatsApp group.

There are some important takeaways here that I think are very important.

First, the Court found that the Defendants’ public statements and marketing materials objectively led purchasers to expect profits.

Although the literal word “profit” was not included in any of the tweets, the Court clarified that the “rocket ship” emoji, “stock chart” emoji, and “money bags” emoji objectively meant one thing: a financial return on investment.

Second, the Court found that the fact that Dapper Labs created and maintained a private blockchain is fundamental.

By privatizing the blockchain on which the Moments value depends and restricting the trade of Moments to only the Flow blockchain, purchasers were relying on Dapper Labs’ expertise and managerial efforts and its continued success and existence.

The Court hinted that the situation could be different if it was on a public blockchain.

This case will for sure be appealed. 

But this is a development worth watching, as it may have an impact on how NFTs and NFT marketplaces are designed, developed, and sold globally. 

The full judgement is available to read here.

2. Hong Kong Issues New Consultation on Crypto Exchanges

Hong Hong’s financial regulator - the SFC - issued new consultation on crypto exchanges. 

The consultation paper considers allowing retail investors to trade on regulated exchanges, which will need to comply with a suite of requirements, from risk management and security to AML and suitability. 

This is another positive step for Hong Kong, which is trying to reclaim its position as a global crypto hub. 

3. SEC Charges Terraform Labs with Securities Fraud

The SEC charged Singapore-based Terraform Labs PTE Ltd and its founder and CEO Do Kwon with orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.

The SEC’s complaint alleges that Terraform Labs and Kwon marketed crypto asset securities to investors seeking to earn a profit, repeatedly claiming that the tokens would increase in value.

For example, they touted and marketed their algorithmic stablecoin UST as a “yield-bearing” stablecoin, which they advertised as paying as much as 20% interest through the Anchor Protocol.

The actual legal filing of the SEC is available here.

4. Coinbase Launches Ethereum Layer 2 Network

Coinbase announced the testnet launch of Base, an Ethereum Layer 2 network allowing users to build decentralized apps on chain while acting as a bridge for other L1s and L2s. 

Base has three interesting features:

• Built on Ethereum: Leveraging the blockchain’s security and and providing EVM equivalence
• Open source: Presented as a public good available to everyone
• Empowered by Coinbase: The vision is to provide seamless Coinbase product integrations, easy fiat onramps, and powerful acquisition tools to serve the exchange’s 110m+ verified users

This is an interesting move for Coinbase. And this playbook is not new. Binance has BNB Chain, Crypto.com has Cronos, etc.

A potentially attractive angle for developers and founders is the ability to easily tap Coinbase’s user base, accessing new tools built on Base whilst using the Coinbase interface. 

Whilst Base got off to a rocky start, this is a development worth following. 

5. IMF States that Crypto Assets Should Not Be Granted Official Currency or Legal Tender Status

In a press release, the IMF Executive Board stated that “crypto assets should not be granted official currency or legal tender status in order to safeguard monetary sovereignty and stability.”

The IMF Directors said that instead “robust macroeconomic policies, including credible institutions and monetary policy frameworks are first-order requirements and that Fund advice in these areas will remain crucial.”

This should not be a surprise, as digital assets have the potential to disrupt the status quo set out at Breton Woods (where both the World Bank and the IMF were created).

On the positive side, the IMF has been consistent in its cautious views on crypto in the post-Lagarde era. 

Let’s not forget that the IMF has been actively campaigning against El Salvador's decision to adopt Bitcoin as legal tender.

Found this content useful? Make sure to subscribe!

------

Powered by ACX

ACX is the world’s first crypto-specialized customer support, compliance support, and community management provider.

ACX enables crypto platforms to offer 24/7 customer support and compliance support to their clients in multiple languages, from Spanish and French to Turkish and Arabic, by actual human agents that are advanced trained not only in crypto but also in customer experience and crypto compliance.

Want to enhance your crypto compliance function whilst reducing costs? Want to offer 5-star and differentiating crypto customer support to your clients?

ACX can help. www.acxinternational.com

—

Join My WhatsApp Community

Interested in getting my daily curated crypto news updates? And hearing my point of view on these developments?

You can join the WhatsApp Announcement Group community here:

My Latest Podcast Episode

What happens when a #crypto company goes #bankrupt?

Are claims paid back in crypto or #cash? 

And how narrow is the definition of “fraud” in such cases?

An in-depth discussion with Brown Rudnick LLP’s Louisa Watt and Ken Aulet.

You can listen to the podcast here:

Apple https://apple.co/3xGPvrN

Spotify https://spoti.fi/3SjHfHI

Google https://bit.ly/3lWsbDE

Enjoyed this content? Make sure to subscribe or share it with a friend! A new Future of Money newsletter will be in your inbox each week!

See you all next week!! 

Henri Arslanian

*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with. This newsletter is for educational purposes only and none of its content should be construed as investment or financial advice of any kind. 

Who is Henri?

Henri Arslanian is the co-founder and managing partner of Nine Blocks Capital Management, an institutional-grade hedge fund focused exclusively on digital assets, with a market-neutral crypto fund focused on generating alpha from inefficiencies in crypto markets using relative value, arbitrage, and quantitative strategies. 

Henri was previously a partner and global crypto leader at PwC. In that role, he advised many of the world’s leading crypto exchanges, investors, financial institutions, and tech firms on their crypto initiatives and numerous governments, regulators, and central banks on crypto regulatory and policy matters.

With over 500,000 LinkedIn followers, Henri is a TEDx and global keynote speaker, a best-selling published author, and is regularly featured in global media, including Bloomberg, CNBC, CNN, BBC, The Wall Street Journal, The Economist, and the Financial Times. 

Henri was named by LinkedIn as one of the 2022 global Top Voices in Finance and is the host of the CryptoCapsules? social media video series as well as The Future of Money podcast and newsletter.