_gabrielShapir0 Profile picture
GC at Delphi Labs #LeXpunK #DADAfinance disclosure: https://t.co/KeIOj63dUo
Finn the Human Profile picture JennyfromBlockchain #GetVaccinated Profile picture 2 added to My Authors
28 Nov
DeFi websites will never be prohibited or require a broker/dealer license to operate

they are just information about what is on a blockchain and what commands you can separately send to unrelated third parties to perform transactions on that blockchain
if creating/owning/operating such a website makes you a broker/dealer, then so does writing/publishing this article

it would break the internet and the 1st amendment

at most there should be / could be some regulations designed to punish people who provide the information in a misleading way; these are called consumer protection laws and antifraud laws, and they already exist
Read 4 tweets
26 Oct
If you talk to lawyers in the space who are working on SEC defenses for DeFi projects, one of the biggest issues is that internal chats/communications (discoverable by SEC) lapse into talking about the project as if it were any tech start-up instead of a FOSS project
if you talk like you're running a business, there is a high risk that you will be regulated like you're running a business
people like to poke holes in how XRP has been treated vs. how ETH has been treated, but one of the biggest distinctions between them is that Vitalik and others are very disciplined--communicating that they basically research & develop network clients & designs for network clients
Read 8 tweets
24 Oct
I simultaneously agree that algo stablecoins like UST are very risky and experimental and disagree that USDC and DAI (which is also USDC) are categorically safer. Just different kinds of risks they expose you to.

A better comparison would be between UST and RAI.
USDC (and now by proxy DAI) expose you to counterparty risk, censorship risk, classic info asymmetries, classic agency problems and certain regulatory risk (I think both are securities or securities swaps).
UST and RAI present different kinds of risks around game theory, the adequacy of the incentives people are expected to respond to, etc.
Read 7 tweets
24 Oct
Had a chance to review this "Tractatus" by @judge_jowday this morning. . . very interesting.

It appears to be a sort of gnomic, Wittegenstein-style philosophy of cryptolaw, intended to reconcile the two paradigms of "law is law" and "code is law".
There is no 'color commentary' provided on what the 'Tractatus' is supposed to mean or do, who would use it, whether it's meant to be descriptive or prescriptive, etc.

@judge_jowday 's intentions are open to interpretation.
The first few sections (1-3) are pretty boring, and appear to just be setting the stage for how to talk about law. They define law as an enforceable and enforced governance system consisting of rules, rights, duties and canons. (Debatable definitions).
Read 22 tweets
12 Oct
Well, today we got two very different statements on crypto/DeFi/tokens from two SEC commissioners, Hester Pierce and Caroline Crenshaw.
I will probably write something longer about this soon, but for moment what really strikes me--and that I hope everyone in crypto will understand--is that regardless of where they land on the issues, their respective takes are *extremely* well informed.
These two commissioners have, directly as well as through very informed advisors, taken a keen interest in studying DeFi & grappling with the issues it presents.
Read 11 tweets
11 Oct
Neurosis Token ($NEUR) is an insecurity.

Simply collateralize or wrap your existing tokens with $NEUR and they will be converted from non-compliant overconfident securities into fully compliant self-hating insecurities.
$NEUR will be airdropped only to U.S. persons.
Some people are asking about other $NEUR features:
--> stagflationary
--> aleatory (1M $NEUR randomly re-distributed every block)
-->negative 100,000% APY (drains all other tokens in your wallet--even your other wallets (thanks to our amazing partnership with @chain_analysis))
Read 4 tweets
11 Oct
good points from @stephendpalley

a smart gov't wouldn't "regulate devs" but would offer devs who do agree to be regulated certain safe harbors--e.g., 'get this license and we'll keep SEC away from you; otherwise, go take your chances with them'
@stephendpalley his key point is this & one I fully agree with--DeFi lacks both the traditional separation between ownership and control and 'counterparty' risk that most regulatory regimes are premised on

it has other sources of risk, but they are not addressed by those regulations:
@stephendpalley -->game theory risk (the risk that incentives designed into the system are inadequate to produce the desired outcomes)
-->tech implementation risk (the game theory is sound but implemented incorrectly)
Read 5 tweets
7 Oct
super simple fix to token securities laws:

*adapt section 13 and section 16, and call it a day--they would give all and only the needed disclosure

*don't regulate the tokens themselves as securities (unless that comes with a special version of secondary rules that works)
*a business developing software a deployed instance of which has native tokens valued at $1B+ must have its "insiders" (execs and token whales) file section 16 insider trading reports regarding that token (like insiders of public companies)
*a 10% plus holder of the token must also file section 16 reports

*any 5%+ holder (even if not in the biz of developing the software) must file section 13 reports

no financials, no CD&A, no executive comp disclosures, etc.--none of these things matter
Read 10 tweets
26 Sep
@MoneyGodRAI deserves to be at the top here--a non-pegged but volatility-resistant store of value fully collateralized with only cryptonative assets (currently ETH). But here are my broader legal-ish thoughts on the stablecoin space:
Pegged stablecoins are either collateralized or un-collateralized.

Collateralized pegged stablecoins (like DAI, not RAI) are probably all securities & regulation-vulnerable. Even if some are not securities, they require too much trust & pose too much systemic risk.
Un-collateralized 'algo' stables have failed repeatedly, but in theory can be non-securities & reg-resistant because not 'governed' or 'backed'--they just rely on a native incentive for arbing to peg, & 'hope' that people sufficiently respond to that incentive to hold the peg.
Read 15 tweets
22 Sep
no, letting a multi-billion-$ financial system develop for years with little guidance & then crashing it with a sudden politically motivated 'crackdown' is a "threat to the financial system"
Enron was an SEC-reporting company
Read 11 tweets
21 Sep
this would indeed be a wonderful thing

but it's not the full story...put simply, if most tokens are securities and AMMs are securities exchanges, then essentially all current token transactions are illegal, whether informed or uninformed
there is no current way to register any smart contract system with the SEC as a securities exchange

even if you could, it would automatically be violating the exchange requirements, as it cannot KYC its users, reverse transactions, etc.
in other words: a government-regulated disclosure regime relating to crypto technology risks would, in my opinion, be a wonderful thing...but it has to work without simply killing the technology...the non-disclosure parts of the securities laws would kill current tech
Read 4 tweets
20 Sep
so far just talking about regular capital markets 🙄
why does he call Satoshi "she"? I could understand "he or she" or "they".
Read 10 tweets
1 Sep
someone asked me 'isn't coding protected by 1st amendment? how can it be regulated?'
the answer is that publishing code is protected by 1st amendment

there is an open issue/question (I think)--is *deploying* a smart contract to Ethereum a form of 'publication', or is it 'operation'?

to what extent are 'results of operation of software' protected speech?
to get an idea of how complex and debatable the line-drawing exercise is, see here: stanfordlawreview.org/online/softwar… Image
Read 4 tweets
1 Sep
Gensler speaking at @EP_Economics on crypto:
-repeats they are very focused on "platform" (exchanging, lending), "whether centralized or decentralized"
-repeats crypto can be a "catalyst for change";
-repeats he is "technology neutral"
-repeats that tech innovations in finance do not thrive unless brought under "public policy goals" incl. "investor protection"
-notes that DeFi platforms remove broker-dealers, therefore it is incumbent "on the platform" [?] to provide broker-dealer-style protections
-notes they are also very focused on "stablecoins"; says primary purpose of stablecoins is to 'sidestep public policy goals. . .such as AML and tax reporting'
Read 9 tweets
7 Aug
been talking to a lot of DeFi teams lately

some are even more decentralized than I thought & rapidly decentralizing more

don't know what regulators will argue; that it's illegal to create an incentive system that gives rise to a transactional network as an emergent phenomenon?
or maybe that a website can itself be a securities exchange, futures exchange, etc.?

but you realize what that means right?

you can perform the same transactions and get the same info from etherscan

is a block explorer website also a securities exchange?

makes no sense
I think all regulators can do is:

(a) argue governance tokens were securities at some point & get Section 5 liability from founding team

(b) use 'cui bono' logic to say someone who benefits a lot should be liable as an exchange operator, even if they don't operate the exchange
Read 5 tweets
6 Aug
pretty sure this is the first SEC action holding 'governance tokens' per se to be securities (unless you count the DAO report)

needless to say, the platform at issue here is *not* 'decentralized finance' and I am disappointed to see it described thus

one takeaway from Gensler's recent remarks as well as this action is that the SEC is going to argue APYs / APRs are "promises"

every single DeFi front-end would do well to adjust how it is talking about them & add in-your-face disclaimers and nuance
a lot of us (@collins_belton, @propelforward, et al) discussed for a long time that there are securities other than investment contracts and tests other than Howey; SEC is now broadening its approach to encompass tokens-as-debt-securities for DeFi
Read 4 tweets
30 Jul
okay, so I went through @DonBeyerVA 's proposed 'Digital Asset Market Structure and Investor Protection Act' more carefully, and here is the obligatory thread

the good:
*this should be a low bar, but the definitions/drafting are non-circular and reasonably technologically accurate--more than I can say for other blockchain legislation
the good (cont'd):
*reasonable approach to securities laws:

-->token is security if it carries equity-ish rights in the issuer or was sold for risk capital (sorry @NYcryptolawyer)

-->can 'de-securitize' Howey tokens

-->3-year grace period prior to desecuritization
Read 29 tweets
29 Jul
Damn, pretty comprehensive.

there's going to be a lot of controversy here but I just want to say that while this bill could be evil af it at least is drafted coherently--for example, it doesn't call tokens "representations of value"
it also enshrines logic similar to @HesterPeirce 's proposal by introducing the notion of a 'desecuritization certificate' for tokens that begin as securities (in this case likely meant for tokens which are tied up in Howey transactions rather than being 'inherent' securities)
Read 6 tweets
29 Jul
good thread from @adamscochran rebutting points from @angela_walch

that miners & other ecosystem players have *some* discretion does not make them TradFi-like intermediaries/fiduciaries

miners compete; one miner will gladly get paid to mine a tx censored by another miner
@adamscochran @angela_walch much of political FUD around blockchain also ignores the natural checks/balances that have arisen in the blockchain ecosystem

sure, core devs have power, but that power is checked by miners, investors, non-mining node runners, app (wallet) providers, DApp teams, etc.
likewise, miner power is checked by the power of core devs + those other constituencies

the resulting system is more robust & trust-minimized than any set of TradFi laws / contracts / regulatory watchdogs could have made it
Read 6 tweets
3 Jun
Cryptolaw should be done in the crypto spirit. The 6 lawyers involved here are great but already lobby through other closed opaque orgs, and no 6 people can 'represent DeFi'. DAOs paying millions to non-incentive-aligned biglaw lobbyists is not the cypherpunk way.
to be clear, I am not calling the 6 lawyers who would be in the nonprofit 'non-incentive-aligned biglaw lobbyists', but it certainly sounds like they would be using a chunk of the funds to pay other lawyers, and likely those lawyers would be non-incentive-aligned biglaw lobbyists
Whatever permission you gain by playing legacy games with legacy people is fragile, corruptible & easily lost through regime change. Funding an opaque, closed lobbying org staffed by members and alums of other lobbying orgs--this is not crypto! We need a better way.
Read 18 tweets
28 May
no time to write something long, but don't be fooled by the fact that Bitconnect was a fraud--this case could become a blueprint for action against non-fraudulent DAOs

N.B.--Bitconnect was an "unincorporated association"
in this thread @collins_belton echoes conversations we have been having with DAOs for a while--they need to start thinking about indemnification structures to protect the core devs & others involved with the project

the SEC is smart. . .their theory on this case seems novel & susceptible of being challenged in several ways, but these particular defendants are un-sympathetic & will probably not have top-notch defense counsel; SEC will get a precedent it can then use against DeFi teams...
Read 6 tweets