SEC Sues Consensys 👨⚖️
SEC Sues Consensys 👨⚖️
SEC has a weak case against Consensys? US Solana ETF filing - 21Shares follows VanEck. CBDCs will solidify government control over money? Nigeria crypto industry worth $400M. Trump campaign get $1M.
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Gary Gensler and Co. are back with the heat on for crypto.
What now? Another lawsuit.
The US Securities and Exchange Commission (SEC) has filed a lawsuit against Consensys, alleging that its MetaMask swaps and staking services violated US securities laws.
Allegation against Consensys, the SEC wrote in its filing.
Operated as an unregistered broker through its MetaMask Swaps service.
Engaged in the unregistered sale of securities through its MetaMask Staking service.
Collected over $250 million in fees from these activities.
Developed and deployed MetaMask Staking to offer and sell unregistered securities from Lido and Rocket Pool.
The service constituted an investment contract, and therefore should have been registered as a securities offering.
Last month, Consensys sued the SEC over its regulatory approach to Ethereum and received a Wells notice indicating a planned enforcement action.
Consensys recently announced the SEC had ended its investigation, but left open the possibility of future enforcement actions.
Read: Ethereum Survives SEC 🏆
Consensys denial: The company argues that the service was simply a way for users to participate in the Ethereum network's consensus mechanism, and that the rewards earned were not investment returns.
The lawsuit didn’t come as a surprise to Consensys, and they fully expected it.
Consensys Senior Counsel and Director of Global Regulatory Matters Bill Hughes.
“We are confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask. We will continue to vigorously pursue our case in Texas for ruling on these issues because it matters not only to our company but the future success of Web3.”
Does the SEC have a weak case against Consensys?
Factory Labs CEO Nick Almond says that SEC is wrong in trying to force an open-source crypto wallet to register as a broker-dealer.
Although several engineers are working to improve MetaMask at Consensys, the swapping service is essentially a robot controlled by users who want to execute their own transactions.
This was the interpretation of US District Judge Katherine Failla, who on March 27 threw out similar SEC charges against Coinbase Wallet in that ongoing case. Because it was a self-custody wallet where users maintain control of their funds, neither Coinbase nor Coinbase Wallet could be said to be brokers.
Tuyo founder Jorge Izquierdo says that there’s no difference between offering non-custodial smart contract support and “offering a UI for any random swap.”
The lawsuit comes at a hectic moment for the SEC and crypto regulation.
On June 28, the US Supreme Court overturned the Chevron doctrine — a 40-year-old court decision - the law that gave federal agencies like the SEC substantial room to interpret their powers and purviews themselves.
The Supreme Court justices voted 6-3 on Friday to overturn that doctrine. The opinion was led by Chief Justice John Roberts.
Potential implications for crypto: The outcome of this case could have significant implications for how the SEC approaches the regulation of staking services and other decentralised finance (DeFi) applications.
Read: SEC Can't Stop Suing 👨⚖️
Ethereum ETFs approval might be around the corner, but the SEC’s war against ETH staking is far from over.
Block That Quote 🎙️
Policy analyst at the Cato Institute’s Center, Nicholas Anthony.
“There should be no misunderstanding: Efforts in the United States and abroad are little more than a bid to solidify government control over money and payments,”
A new book by policy analyst for Monetary and Financial Alternatives argues that central bank digital currencies (CBDCs) will bring few benefits and pose significant risks to privacy and personal freedom
That efforts to develop CBDCs are "little more than a bid to solidify government control over money and payments"
Interest in CBDCs has quadrupled among central banks in the last four years, with 134 countries and currency unions now exploring them.
CBDC projects have struggled to gain traction, with issues like outages and lack of merchant/consumer understanding.
Anthony's reckons that there are few tangible benefits to implementing a CBDC.
The problems with the current cross-border payment system are due to policy choices, not technology.
The "programmable features" of CBDCs could allow governments to control or restrict consumers' financial decisions, such as limiting alcohol purchases.
Programmable features have fallen out of favour with Western governments in recent years, creating an "awkward space" for CBDC development.
Another Solana ETF Filing Lands in US
Investment firm 21Shares files S-1 form for Solana ETF.
21Shares, a leading crypto ETP issuer, has filed for a Solana ETF with the US SEC
This is the second Solana ETF filing after VanEck's similar move
A Solana ETF would provide investors with a convenient and regulated way to gain exposure to Solana's native token SOL
Institutional investors prefer ETFs due to their transparency, liquidity, and ease of trading on traditional exchanges
The SEC has raised concerns about market manipulation, liquidity, and investor protection in the crypto space
The filings indicate that if Solana is determined to be a security, the sponsors will terminate the ETF if they cannot comply with regulatory requirements
Key Differences in Solana ETF Filings: US vs Canada
3iQ's Solana Fund in Canada is a closed-end fund, while VanEck's Solana Trust in the US is a more traditional ETF structure.
The closed-end structure may give 3iQ's fund an easier path to approval in Canada, as a regulated futures market for Solana doesn't exist yet.
VanEck's product faces hurdles in the US due to the SEC's precedent of requiring regulated futures markets before approving spot crypto ETFs.
The SEC's labelling of Solana as an unregistered security complicates VanEck's filing, a change in US leadership could potentially alter the regulatory landscape.
The SEC's recent Bitcoin commodity designation may set a precedent for other cryptocurrencies like Solana.
In The Numbers 🔢
$400 million
Estimated value Nigeria's local cryptocurrency industry as per the Nigerian Securities and Exchange Commission (SEC).
The Central Bank of Nigeria prohibit banks in the country from facilitating crypto trading. Despite the clampdown the country jumped to second place in Chainalysis 2023 Global Crypto Adoption Index.
Rapid expansion of crypto in Nigeria: One of the leading cryptocurrency markets in Africa, with a thriving ecosystem of exchanges, startups, and individual investors.
The growth and adoption of digital assets in Africa's largest economy is driven by young, tech-savvy population and the need for alternative financial services.
Regulatory efforts to oversee crypto: The Nigerian government has taken steps to regulate the cryptocurrency market.
In 2021, the central bank issued a directive prohibiting banks from facilitating crypto transactions, though this has been met with some resistance from the crypto community.
Read: Nigeria's Crypto Crime Thriller 🇳🇬
Regulatory uncertainty, lack of financial inclusion, and concerns about fraud and money laundering have all been obstacles to the industry's growth.
Kraken Co-Founder Donates $1M to Trump
Jesse Powell has announced a $1 million donation to Donald Trump's 2024 presidential campaign.
Kraken faced legal troubles under Powell's leadership, including fines for sanctions violations and disputes with the IRS.
Criticism of Biden administration's crypto policies: Attacks by Senator Elizabeth Warren and SEC Chair Gary Gensler as reasons for his support of Trump.
He argued that the Biden administration has failed to curb "a campaign of unchecked regulation by enforcement," which has shrunk the competitiveness of the US compared to other major economies.
Crypto donations soar as lobbying intensifies: Significant contributions from crypto lobbyists suggests that cryptocurrency could play a prominent role in the upcoming presidential debates.
The Winklevoss twins have also donated $2 million worth of Bitcoin to Trump's campaign.
Quantitative trading firm Jump Crypto donated $10 million to the crypto-focused Super PAC Fairshake.
The Surfer 🏄
Custodial crypto brokers must report digital asset transactions to the IRS starting in 2026. The new rules aim to improve tax compliance and prevent crypto from being used to hide taxable income. Decentralized brokers will be covered by separate regulations.
A Bitcoin whale holding $61 million worth of BTC has become active after a long period of dormancy. Tracked by Arkham Intelligence, the whale received their coins in August 2018, when the stash was valued at just $6.68 million in total.
Toncoin (TON) has been approved for trading on licensed platforms in Kazakhstan by the country's Financial Services Regulatory Authority. The integration of TON into Kazakhstan's regulated financial hub is expected to attract new investors and stimulate market development.
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