September 26, 2022
Image: Yuichiro Chino/Moment/Getty Images
Good morning, and welcome to Protocol Fintech. This Monday: the big question of DAO liability, Gov. Gavin Newsom’s veto of California’s big crypto bill, and the search for Do Kwon.
Russia still can’t make up its mind about crypto. The country is now considering using digital currencies in international trade, for obvious reasons. But if sanctions tighten further as Russia’s war in Ukraine flounders, Putin may find that the blockchain is not a great place to hide.— Owen Thomas (email | twitter)
The winds from Washington blow ever colder in crypto winter. The industry is once again up in arms about what many call another “regulation by enforcement” action. But this time, Gary Gensler’s SEC isn’t the subject of their complaints. Instead, it’s the ostensibly more crypto-friendly CFTC that’s angered them, after the agency swept in members of a DAO into a civil enforcement action.
The CFTC is raising fundamental questions about a DAO’s liability. The organizations may be decentralized and autonomous, but they’re not beyond reach of the law.
Even CFTC Commissioner Summer Mersinger disagreed. In a dissenting opinion, Mersinger argued that a decentralized protocol shouldn’t be treated like a company, nor voting token holders as that company’s operators.
The actions may sound harsh, but they shouldn’t be a surprise. Though he agrees with Mersinger’s dissent, digital commerce lawyer Stephen Palley told Protocol it’s fairly predictable that the CFTC would treat a DAO as something that “looks like a business.”
The next move is in San Francisco, where the district court must decide whether to take up the CFTC’s case. Palley said he was skeptical it would, considering the resources required to track down individual voting members of the DAO from their wallet addresses. It also, as Consensys lawyer Bill Hughes pointed out, would have to agree the CFTC’s argument has merit. In the legal gray areas created by blockchain technology, DAO members will find out if they will hang together or hang separately.— Veronica Irwin (email | twitter) and Tomio Geron (email | twitter)
Fintech has made it easier to manage and move your money, but for merchants, financial institutions and other businesses, traditional banking infrastructure can still hold them back.
See how a Stablecoin infrastructure like USDC offers a fast, cost-effective alternative available today.
California Gov. Gavin Newsom vetoed AB2269, the state legislature’s recently passed crypto regulation bill. Newsom cited his administration’s ongoing study of crypto regulation as well as federal efforts, saying in his veto statement that it was “premature to lock a licensing structure in statute.”
Interpol issued a red notice for Terraform Labs co-founder Do Kwon. South Korean prosecutors had requested the measure, which amounts to a worldwide notice to law enforcement to locate and arrest an individual. Kwon has denied being on the run, but he hasn’t tweeted since Sept. 17, when he suggested he was unwilling to reveal his location to authorities.
The Pentagon is assessing the national security risk of crypto. The military’s innovation office — DARPA — is studying potential threats to national security and law enforcement posed by the rise of digital assets.
Apple Pay Later may not arrive until next year. Apple's plan to add an installment option for payments made through its wallet has faced “fairly significant technical and engineering challenges,” Bloomberg reports.
A data center owner focused on crypto filed for bankruptcy. Compute North Holdings, which serves bitcoin-mining rigs and blockchain companies, blamed its crisis on the collapse in cryptocurrency prices, rising costs for electricity, and supply chain issues.
An accelerator is shifting focus to victims of this year’s fintech layoffs that want to start companies. The latest iteration of Barclays’ Rise Startup Academy will focus on budding founders who lost jobs during this year’s downturn.Bank leaders say regulators need to look harder at nonbank lenders. On top of concerns about fintech-run P2P payment networks, bank executives warned lawmakers last week that their institutions are losing ground to nonbank lenders facing less stringent regulation.
JPMorgan Chase’s plan to roll out a pay-by-bank alternative to Visa and Mastercard has created some internal friction, according to the Financial Times. “If I hear that any of you aren’t sharing information with each other, or you’re hiding information, you’re fired,” CEO Jamie Dimon reportedly told a group of executives at a planning meeting last fall. Understandable, since such a product would cut into the consumer business’s billions in card revenues.
Circle’s inaugural conference, Converge22, runs Tuesday through Friday in San Francisco. The conference’s speakers include Serena Williams and Vitalik Buterin.
Boston Fintech Week is also this week, Tuesday through Thursday. This event is focused more on traditional fintech and VCs investing in the sector.
And so is the Fin & Pay LatAm Forum, taking place Tuesday through Thursday entirely online. The conference, which will be conducted in Spanish, brings together fintechs and banking institutions to discuss the future of finance in Latin America.
But don’t miss Protocol Policy’s event, “The State of Innovation,” this Tuesday at 10 a.m. PT / 1 p.m. ET. The event will cover how well the U.S. administration is supporting American innovation through funding, recruitment, and regulation.Mark your calendars for Protocol Enterprise’s event “Securing the Enterprise,” Oct. 4 at 10 a.m. PT / 1 p.m. ET. The event will review best practices in fighting cybersecurity threats, a crucial topic for any business.
USDC offers cost-effective payments that can settle in seconds, near-instant transactions that can help take the process of paying suppliers from days to minutes, and digital dollars with global reach that enable merchants to expand their business to new markets.
Learn how businesses are taking advantage of these opportunities at Circle’s USDC Hub for Businesses.
Thanks for reading — see you tomorrow!