In this recap of the crypto world, we will explore the events and news that had the most significant impact in the past week of Aug 28. Our focus will be on the following developments:
- SEC Charges Impact Theory
- Grayscale Wins SEC Lawsuit
- Musk’s X (Twitter) Paves the Way for Digital Transactions
- Uniswap Class Action Suit Dismissed
- Binance to End its Support for BUSD
SEC Charges Impact Theory
In a groundbreaking move, the U.S. Securities and Exchange Commission (SEC) has taken legal action against Impact Theory for selling unregistered NFTs. This marks the first instance where the SEC has classified NFTs as securities, shedding light on the evolving regulatory landscape surrounding digital assets. The charges against Impact Theory revolve around their sale of NFTs during the period from October to December 2021.
The SEC’s investigation into Impact Theory uncovered a series of transactions involving three distinct tiers of NFTs known as Founder’s Keys. According to the SEC’s allegations, Impact Theory actively promoted these NFTs as a unique investment opportunity. They suggested that purchasing a Founder’s Key could potentially yield substantial returns if the company achieved success. In this case, Impact Theory’s marketing and promises to investors led the SEC to conclude that Founder’s Keys are NFTs subject to securities regulations.
In response to the SEC’s allegations, Impact Theory has opted for a settlement, although they have not admitted guilt. The terms of the settlement include a cease-and-desist order, effectively halting any further sale or promotion of the Founder’s Keys NFTs. Moreover, Impact Theory has agreed to pay penalties exceeding $6.1 million, and committed to disposing of all the Founder’s Keys NFTs currently held by the company. Read more on this here.
Grayscale Wins SEC Lawsuit
In a significant turn of events, Grayscale Investments, a prominent crypto asset manager, has emerged victorious in its legal battle against the U.S. Securities and Exchange Commission (SEC). This represents a crucial step towards Grayscale’s ambition to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF). The journey to this milestone was marked by a regulatory rejection, a lawsuit, and, finally, a reversal in Grayscale’s favor.
The story begins with the SEC’s rejection of Grayscale’s application for a Bitcoin ETF. The SEC’s basis for this rejection rested on concerns that the proposed product lacked the necessary safeguards to prevent “fraudulent and manipulative acts and practices.” Unfazed by the regulatory setback, Grayscale chose to challenge the SEC’s decision through legal means.
The turning point arrived on August 29 when the U.S. Court of Appeals for the District of Columbia Circuit delivered its verdict. Judge Neomi Rao, in a decisive move, supported Grayscale’s argument that its proposed Bitcoin ETF shared significant similarities with Bitcoin futures exchange-traded products that had previously gained the SEC’s approval. The court went a step further by stating that the SEC’s reasoning for denying Grayscale’s ETF on anti-fraud grounds was insufficient.
To conclude, the SEC may have the chance to challenge the ruling, but numerous experts have suggested that Grayscale’s initial victory could potentially pave the path toward eventual approval. Read more on this here.
Musk’s X (Twitter) Paves the Way for Digital Transactions
In a strategic move that aligns with Elon Musk’s vision of turning Twitter into an everything app, X (Twitter) has acquired a regulatory license that grants it the authority to process cryptocurrency payments within the United States.
The critical piece of this puzzle is the Rhode Island Currency Transmitter License that X (Twitter) has secured. According to publicly available data from the Nationwide Multi-State Licensing System (NMLS), this license empowers X (Twitter) to engage in activities such as “maintaining control of virtual currency or transactions in virtual currency”. Notably, this license extends to both X (Twitter)’s own operations and its ability to act on behalf of others.
The specific details regarding the financial services that will be offered if and when X (Twitter) rolls out its payment features remain uncertain. However, there are hints that X (Twitter) will initially offer fiat currency transaction services similar to PayPal, with room for future crypto integration.
While the acquisition of the Rhode Island license is a headline-grabbing achievement, it is worth noting that X (Twitter) has been on an impressive licensing spree in recent weeks. The company has successfully secured money transmitter licenses from several states, including Arizona, Georgia, Michigan, Missouri, New Hampshire, and Maryland. However, it is the Rhode Island license that stands out as the one explicitly addressing cryptocurrency payments. Read more on this here.
Uniswap Class Action Suit Dismissed
In a significant legal development, the United States District Court for the Southern District of New York has dismissed a class-action lawsuit filed against Uniswap Labs, its CEO, and its foundation and venture capital backers.
The class-action lawsuit was initiated by six plaintiffs who had purchased tokens on Uniswap between December 2020 and March 2022. Their argument was on behalf of a “nationwide class of users” who had experienced losses due to scam tokens. The plaintiffs contended that Uniswap Labs had control over liquidity pools on the protocol, including those created by the scammers responsible for their financial losses.
The essence of the judge’s decision hinged on the fact that neither party had knowledge of the scammers’ identities responsible for the fraudulent tokens. And instead of opting for legal action against the scammers for their illicit activities, the plaintiffs had chosen to sue Uniswap Labs and its affiliates.
As per Cointelegraph, the judge made a broader observation, stating, “[I]t defies logic that a drafter of computer code underlying a particular software platform could be liable under Section 29(b) of the Exchange Act for a third-party’s misuse of that platform.” This commentary emphasizes the intricate challenges of applying conventional legal principles to decentralized platforms like Uniswap.
Binance to End its Support for BUSD
In a significant move that has garnered attention in the cryptocurrency world, Binance, the world’s largest cryptocurrency exchange, has announced its gradual withdrawal of support for its native stablecoin, BUSD. This decision comes in the wake of Paxos’s earlier announcement that it would cease support for Binance’s stablecoin by February 2024.
According to an official press release from Binance, the exchange will begin by delisting BUSD spot and margin trading pairs, although specific dates for this delisting have not yet been disclosed. However, it is important to note that not all products and services tied to Binance’s native stablecoin will be affected by this transition. For now, the affected services include Futures, Earn, Loans, Gift cards, and Pay products.
As per Decrypt, the withdrawal of BUSD support will be executed in stages, and certain functionalities will continue to be available. Deposits and withdrawals of BUSD tokens through the Ethereum network will remain operational, as will deposits on other blockchain networks, including Polygon, BNB Chain, Avalanche, and Tron.
