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Law Decoded: The guard changes, and with it, the tweets, Jan. 8–15

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Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law.

Editor’s note

Armed National Guardsmen are building up concentric perimeters of black barricades around the U.S. Capitol and its whole neighborhood of federal buildings in preparation for the Biden inauguration and protests against it on Wednesday. Which inspires some déjà vu, whether to last week or last summer.

As much as history is said to repeat itself, the present day seems to be stuck on its own loop. Remember how last week’s Law Decoded was mostly about the handover of presidential power in the U.S.? This is also going to be about that. Apologies; I too hope that this stops dominating news.

In the same vein, today’s leading stories are going to feature a cast of characters eerily similar to last week’s. If it’s any help, their primary role in today’s plot is that they are all about to change.

Watch the platform

One consequence of last week’s violence at the U.S. Capitol was the lockdown on President Trump’s Facebook and Twitter accounts. CEO of Twitter and Square Jack Dorsey wrote an extended thread on the decision last night, pointing to what many see as the grand crux of the current tech dilemma. Platforms make their own decisions in a free market, but consumers have little free choice between providers when a small group of major companies act collectively.

Facebook and Twitter went on to purge a number of far-right accounts — a decision they are certainly allowed to make, by law. Many of those accounts migrated to encrypted channels like Telegram and Signal, which saw a surge in bad press attacking them for fostering extremism. A combined blockade from Apple, Google and Amazon Web Services seems to have completely strangled Parler, which was a known online hangout for white nationalists. And it’s not just social media. Stripe, PayPal and Square announced that they would cut off payments to organizations connected to last week’s rallies. In advance of Wednesday’s inauguration, AirBNB has shut down rentals in the D.C. area after conversations with the mayor’s office, with a number of local hotels joining them.

Allow me to be clear: I have no patience for “stop the steal,” QAnon, nor the Proud Boys and the whole constellation of white supremacist groups surrounding them. As a D.C. resident, I don’t particularly want these protestors here either. But these are some problematic methods. Even Reporters Without Borders, certainly no fans of Trump, called for more democratic controls in the face of this mass deplatforming.

While these companies have free rein to police content on their platforms, politicians don’t always have to pass laws to pressure and even deputize private companies into doing their bidding, which is more of a First Amendment concern. Republicans and Democrats in federal office have spent recent years threatening social media giants to get them to fall in line. With Democrats narrowly winning the Senate as of last week, the recent excision of Trumpism may owe more to self-preservation than moral awakening. All of which makes me deeply uncomfortable.

Last week’s attempted insurrection was undoubtedly outside boundaries of freedom of speech. Authorities should arrest those who stormed the Capitol, especially those who did so looking to commit violence upon elected officials. Twitter and Facebook were right to cut off Trump’s megaphone. But the U.S. is facing some dangerous trade-offs between freedom and security. Dorsey’s ultimate conclusion is especially intriguing: If these platforms are going to function as town squares, they should be decentralized so there is no individual making these calls. But don’t expect legislators to wait around for that to happen before they act.

A parting gift from Brian Brooks

Brian Brooks has left the building, but not before an encore.

On Brooks’ last day as the head of the Office of the Comptroller of the Currency, the OCC announced that it had granted a national charter to Anchorage.

Compliance-minded crypto-based financial services in the U.S. have historically depended on state money services business licensing. The OCC, the regulator for national banks, has long flirted with a means of expanding that access to more niche fintech firms that may not hold traditional deposits — freeing them from the FDIC requirements that typical banks have, but otherwise authorizing them to operate nationwide.

The concept is a major rethinking of what exactly banking is, and Anchorage is the first recipient. While the idea goes back well before Brooks’ time, he is the most fintech and crypto-forward figure to lead the OCC. In only seven months as acting comptroller, Brooks has been instrumental to a flurry of actions to integrate crypto into the financial system.

Brooks’ position is, however, an appointed one, with a formal nomination from Trump coming only after the November election. The Senate, occupied with presidential shenanigans and seeing a sea change clear on the horizon, never scheduled Brooks’ confirmation hearing.

FinCEN flinches

The Treasury’s Financial Crimes Enforcement Network has extended the timeframe on its controversial proposal to require crypto exchanges to hold more data on self-hosted wallets they transact with.

This is not to say that the rule has been cancelled. Far from it. But one of the central concerns over the proposal was the fact that it gave only 15 days for response, days which fell on Christmas and New Year’s Day and came immediately before a new administration comes to power.

The slowdown was thanks to an overwhelming response from the crypto industry, which on average submitted some 500 comments a day. The extended window will put any final decision on the proposal in the hands of the next administration. The rulemaking was part of an overall suspicion of crypto from Secretary Treasury Steven Mnuchin, who, alongside many of Trump’s cabinet picks, was obsessed with uncontrolled capital flows out of the U.S. and consequently saw crypto primarily as a threat. While the next administration is likely to put out a rule based on some of these provisions, Yellen doesn’t have quite the same tradition of international hawkishness.

Further reads

The Electronic Frontier Foundation argues against firms that, like Amazon, offer technological infrastructure acting as chokepoints for content.

Brookings’ TechStream assesses two new draft laws that aim to reconfigure competition and data management among digital platforms in the EU.

The Economist gives a (comically begrudging) explainer of Bitcoin’s recent bull run.

Source: https://cointelegraph.com/news/law-decoded-the-guard-changes-and-with-it-the-tweets-jan-8-15

Blockchain

Supercar maker Mazzanti Automobili launches security token offering

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Italian luxury car manufacturer Mazzanti Automobili has launched its security token offering on regulated digital marketplace STOKR.

As part of the offering, Mazzanti aims to raise 999,999 euros ($1.2 million) on STOKR to develop a special edition of its hypercar model Evantra Millecavalli R.

According to a Feb. 25 announcement, Mazzanti’s STO will allow investors to purchase MZZ tokens, priced at 1 euro each. The token is issued by Mazzanti via Blockstream AMP, a platform for the tokenization of securities built on the Liquid sidechain of Bitcoin (BTC), which has been directly integrated with STOKR.

As part of the STO, MZZ investors will be able to receive a 50% revenue share in the sale of the Evantra special edition. The offering is available for select European countries, with a minimum investment of 50 euros, the announcement notes.

Mazzanti’s founder Luca Mazzanti said that the company has been considering running an STO for a while. The company initially announced its upcoming STO plans earlier in February.

In conjunction with the STO, Mazzanti also announced that the company will allow its customers to purchase all editions of the Evantra model with Bitcoin starting from Feb. 25. The move echoes Tesla’s recent move toward accepting Bitcoin payment for its electric vehicles. 

Based in Luxembourg, STOKR has been listing various STOs in compliance with capital market laws of the European Union. Last year, Germany’s Federal Financial Supervisory Authority approved ParkinGO’s offering as the first cross-border STO on STOKR.

Source: https://cointelegraph.com/news/supercar-maker-mazzanti-automobili-launches-security-token-offering

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Finance Redefined: Ethereum exodus continues as Binance ‘helps,’ Feb 17–24.

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The parabolic rise of the Binance Smart Chain has been all over the news this week, aided by a few seemingly unfriendly moves by the exchange itself.

It started on Friday, when Binance suddenly froze withdrawals of Ethereum-based assets for about one hour. Many interpreted it as a move against the blockchain and its ecosystem, given that the cited reason was “congestion issues” — something one hardly imagines is a problem for an exchange, unless they shoulder withdrawal costs for the user.

The day after, FTX started shaming Binance for excessive promotion of BSC on the exchange. Specifically, FTX was apparently “spending millions” in failed deposits that came over the Smart Chain but were meant for Ethereum. FTX’s accusation toward Binance, one of its investors, is that the exchange put BSC as the default option for withdrawing many ERC-20 assets, which caused a lot of failed deposits to FTX.

I can’t say I’ve ever noticed Binance Smart Chain being “the default option” for withdrawals. BSC is the first listed when you attempt to withdraw something like USDC, though it does not actually select the blockchain for you. Still, I can see how some newbies could get swindled by this. People overestimate the degree to which terms like “ERC-20” are known in the casual crypto community. Testing the withdrawal now, Binance forces you to go through a quiz where you confirm you know what you’re doing by selecting BSC. I have no idea when this was introduced, but it’s not impossible that it’s a response to FTX’s statements.

Overall though, there’s nothing inherently wrong with one company using its products to promote another of its products. From the official responses it seems that the Ethereum congestion incident won’t happen again because they “upgraded the systems.”

Cheap tricks would never be able to undermine Ethereum without there being an underlying fundamental weakness. And I think we’ve all had enough with Ethereum gas fees. I tried a non-Ethereum DeFi product recently, and it felt so good to pay just a few cents for a complete interaction.

Binance Smart Chain is already processing more transactions than Ethereum and has over 5 million unique wallets. Ethereum, with its much longer history, is currently sitting at 140 million wallets in total.

Ironically, Ethereum fans should secretly want the bull market to end right now. The longer it goes on, the more gas fees will remain high, and the more people will want to migrate away and seed other environments.

Second largest liquidation day in DeFi history

Speaking of the end of the bull market, a massive slide in crypto markets triggered some $24 million in liquidations on Tuesday, the second highest loss in DeFi history. It would’ve been the highest if not for that infamous day in November when Compound thought Dai was worth $1.3.

The firesale was triggered by nothing in particular, though I suspect that rising bond yields are having their effect on the riskiest of assets on Wall Street, of which Bitcoin is the quintessential representative. And then Bitcoin dragged the rest of crypto with it.

I don’t normally talk about price because I’m not a financial advisor or even a successful trader. But I am feeling a lot of fundamental and sentimental indicators of a coming correction, ranging from a wavering stock market to, well, the strength of Tuesday’s dump.

To top it all off, my non-crypto feeds are being invaded by crypto stuff, which is never a good sign. I certainly hope that I’m misinterpreting what is actually unprecedented adoption and acceptance, but let’s face it — it’s all about price for now, while fundamentals are still lagging.

With layer two platforms and new blockchains coming online, we may get something useful out of crypto and DeFi soon. But everything could happen before we get there. Be especially careful right now and, most importantly, don’t get liquidated.

In other news

Source: https://cointelegraph.com/news/finance-redefined-ethereum-exodus-continues-as-binance-helps-feb-17-24

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Blockchain soccer gaming startup Sorare raises $50M

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Sorare, a major blockchain-based soccer gaming platform, has raised $50 million from high-profile investors backing major companies like Twitter, Instagram and Discord

The fresh Series A round brings Sorare’s total funding to $60 million, the company told Cointelegraph Thursday.

The funding round was led by Benchmark, an investment giant famous for funding companies like Twitter, Uber and Snap. Accel Partners was another lead investor, known for backing companies like Facebook and Spotify. The round also included some additional investment from investors like Reddit co-founder Alexis Ohanian, VaynerMedia CEO Gary Vaynerchuk, and Barcelona striker Antoine Griezmann.

With the new funding, Sorare is planning to continue growing its ecosystem, including launching a mobile application and onboarding the top global 20 football leagues. “We’re designing an experience where fans can celebrate, share, and live football moments at a deeper connection. We’re making fantasy football a reality,” Sorare said.

Founded in 2018, Sorare provides a digital collectibles platform based on the Ethereum blockchain. With non-fungible tokens, the platform offers a collective fantasy football experience allowing players to manage their players and earn prizes.

Gerard Piqué, strategic advisor at Sorare, explained that the platform aims to meet the significant shift to online and digital fan experiences:

“As world football has shifted from local supporters to global fanbases, football fans are looking for new ways to be connected to the game, the players and other fans.”

Blockchain and cryptocurrency startups have been actively tapping the soccer industry in order to bring new ways of fan engagement using emerging technologies. Socios and Chiliz represent some of the best-known industry efforts, jointly providing blockchain fan tokens for popular global soccer clubs like FC Barcelona, Juventus and Paris Saint-Germain. Earlier this week, Polish Legia Warsaw became the latest soccer club to join Chiliz and Socios.

Source: https://cointelegraph.com/news/blockchain-soccer-gaming-startup-sorare-raises-50m

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