SEC Ends ETH Investigation, Stablecoins Now 18th Largest Holder of Treasuries, Should Open Source Developers Be Held Liable? (#182 - 23 June 2024):

Powered by ACX Compliance - Your One Stop Shop for all your Crypto Compliance needs in the UAE: from VARA/ADGM licensing to ongoing crypto-specialized compliance support

1. SEC Closes Ethereum Investigation

The SEC halted its investigation into whether Ethereum constituted a security, representing a significant win for the U.S. crypto ecosystem. 

The lawsuit from the SEC against Etehreum was already very weak from the start from a legal perspective, and the fact that a company like Consensys had to spend time and money to litigate was wrong. And after the Ethereum ETF was approved, this investigation made even less sense. This is another positive win for the crypto ecosystem in the U.S. and globally. 

The interesting part is that it seems Consensys will continue its April 2024 federal lawsuit against the SEC as it tries to clarify whether "the user interface software Metamask Swaps and staking does not violate the securities laws."

This question is equally important as it can have a significant impact on the future of DeFi and staking in the US. However, the fact that a lawsuit has to be launched to obtain clarity on this topic is a fundamental flaw and policy failure from the US regulators (as the Consensys statement clearly reaffirms). Definitely a development to follow.

2. Can An Open Source Code Developer Be Held Liable For Future Actions Of Users?

This topic came back in the news this week after the crypto community raised over $2m to fund the legal defense of crypto mixer's Tornado Cash's developers who were recently arrested.

This is such a fundamental question that it needs to go to the Supreme Court. 

In this case, the developers behind the crypto mixer Tornado Cash have been arrested and accused of “knowingly enabling illegal activities.” Whether that was really the case will be decided by the courts.

The developers (and many in the crypto community including Vitalik Buterin who has been contributing to this defense fund) argue that everyone has the right to privacy in payments and that such mixers have a legitimate role in the future of finance. 

However, in this case, authorities disagree, arguing that its primary purpose was to enable illicit activities.

But it brings up an important question. For example, if I publish the design of a car or even build it, can I be held responsible if someone drives it into a crowd of people? Or if I sell a 3D printer and someone uses it to print a gun and commit murder?

Expect this debate to become more frequent, especially as topics like DeFi continue to grow. But having clarity on this topic is essential.

Definitely a development to follow. 

—

Join My WhatsApp Community

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

You can join my WhatsApp Announcement Group community here:

—

3. Stablecoin Issuers Now 18th Largest Holder of U.S. Treasuries

Stablecoin issuers are now the 18th biggest holders of U.S. debt globally, with USDT stablecoin issuer Tether alone holding over $90 billion of treasuries. 

Stablecoins are getting traction very quickly and have become part of daily life in many countries, from Turkey to Argentina, as well as in international trade. 

I am always pleasantly surprised to see how mainstream stablecoins have become when it comes to the settlement of cross-border emerging market transactions from commodities to import/export.

In the short term, this is positive for the U.S. Dollar and US Treasuries. The irony is that U.S. stablecoins are boosting the U.S. Dollar by making the U.S. Dollar horse run faster rather than having market participants try to imagine and build a car. And the growing demand for stablecoins is generating demand for U.S. treasuries.

In the long term, the question is not whether stablecoins will grow. Average monthly volumes have surged from $100 billion four years ago to over $1.5 trillion recently. And there are no signs of things slowing down.

But the question could perhaps be whether stablecoin issuers will still be comfortable holding U.S. treasuries as the "risk free" underlying asset or whether this will switch to another asset. Time will tell.

Found this content useful? Make sure to subscribe!

—

Powered by ACX Compliance - Your One-Stop Shop for all your Crypto Compliance needs

Your One Stop Shop for all your Crypto Compliance needs in the U.A.E

- VARA & ADGM Licensing Support

Pre-Application Review and Advisory

End-to-end Licensing Application Support

Drafting and review of relevant Policies and Manuals (e.g., AML, Data privacy)

Preparations for meetings and interviews with regulators

- Post Licensing Support

Outsourced Money Laundering Reporting Officer (MLRO) and Compliance Officer (CO)

Ad-hoc compliance support and policy updates

On-chain transaction monitoring and SAR reporting

Ongoing regulatory reporting support (weekly, monthly, quarterly, and annually)

- Customized Support

Periodic Internal and Regulatory Audit

Investigation Support (e.g., Chainalysis, Elliptic)

- Training

Cryptocurrency (Basic and advanced) and Compliance Training 

Mandatory Annual Compliance and AML/CFT Training

—

My Latest Podcast Episode

The latest on the global stablecoin ecosystem with Circle’s Jeremy Allaire

Circle CEO Jeremy Allaire joined me live at TOKEN2049 to share his thoughts on the current state and future trajectory of a range of digital assets, including stablecoins and CBDCs, and their impact on the global financial services sector. He also discusses Circle’s vision and the rollout of new regulatory and compliance frameworks in key jurisdictions.

Catch the full episode on your preferred platform:

YouTube: https://bit.ly/3GuZiW7

Spotify: https://spoti.fi/47ZCF8F

Apple Podcast: https://apple.co/3PM4eKh

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.