Welcome to the Block & Mortar newsletter! Every week, I bring you the top stories and my analysis on where business meets web3: blockchain, cryptocurrencies, NFTs, and metaverse. Brought to you by Q McCallum.
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(Photo by Soundtrap on Unsplash)
Can we really manage new technologies with old laws? In the wake of the SEC’s recent lawsuits against Binance and Coinbase, this question has become top of mind for many crypto practitioners.
There’s no doubt some strategic selfishness in there – laws create friction for a growing business, after all – but the claim is not entirely without merit. The fact that crypto doesn’t neatly fit into existing laws is a sign that it is different. Just how different is the question. But the question needs to be asked.
Perhaps “is a crypto token a security? or a commodity?” is the wrong approach. If multiple regulators claim to have jurisdiction over crypto, that would imply that the technology doesn’t really fall under any of them.
Maybe crypto merits its own agency with its own rules?
I doubt I’m the first person to have posed this question. And I expect we’ll hear it a lot more as the SEC, CFTC, and other regulators wage turf wars map out this new territory.
All of that was a very long-winded way of saying: welcome to the June 2023 media roundup. Three of the four podcasts are about crypto and regulators. The fourth is a tape of how crypto had a different kind of run-in with the law.
Not the same thing
Empire: The SEC’s Attack On Crypto: Binance Stumbles, Coinbase Fights Back | Roundup
(Listening time: 1hr)
If you’ve been skimming the headlines, you may think that the SEC’s cases against Binance and Coinbase are essentially the same deal. Empire hosts Jason Yanowitz and Santiago Roel Santos explain that it’s a little more complicated than that.
The Coinbase suit is another round of the “is crypto a security?” debate. Binance is that plus accusations of fraud. Binance CEO Changpeng Zhao (CZ) apparently has unofficial, indirect control over certain corporate entities that are supposed to be out of his hands; the barriers between those entities are porous, at best; and there’s supposedly been some commingling of funds. No wonder Yanowitz says that this sounds reminiscent of FTX.
Unlike FTX, Binance left some bonus material for regulators in their chat logs. Gems like “we are operating as a fking unlicensed securities exchange in the USA bro.” I realize that everything looks different in the harsh light of a regulator’s court complaint, but that one is particularly damning. Makes you wonder what they were too shy to discuss in written form.
Stick around to hear Yanowitz and Santos discuss “Switzerlands in the sky,” the Apple Vision Pro headset, and the Louis Vuitton “Treasure Trunks” NFT collection as a high-end loyalty program (which I mentioned a few weeks ago). Apparently, the point of putting luxury goods on a blockchain is … extra flexing.
Straight from the source
The Scoop: Coinbase legal chief sees a big hole in the SEC’s crypto securities claims
(Listening time: 30mn)
Want to hear about the SEC’s case, straight from Coinbase? Chief Legal Officer Paul Grewal joins host Frank Chaparro to share his take on the company’s ongoing, hmm, interactions with the regulator. Their core point is that the crypto tokens listed by Coinbase “are not investment contracts. These are assets that are traded on secondary venues.” Fair enough.
This interview adds color to the articles I’ve read about Coinbase’s attempts to play by the book and be very transparent about their work. They held almost thirty meetings with the SEC. Thirty. That’s a lot of contact for regulators to effectively say “no comment.”
Grewal explains Coinbase’s process for evaluating tokens and why they reject “almost ninety percent” of them. He also points out how a recent ruling from a different case may move the needle in Coinbase’s favor.
Then there’s that other regulator
Odd Lots: CFTC Chair Rostin Behnam on the Fight to Regulate Crypto
(Listening time: 1hr)
Let’s shift gears and hear from the other regulator that’s trying to lay claim to crypto. CFTC Chief Rostin Behnam joins Odd Lots hosts Tracy Alloway and Joe Weisenthal to share his group’s views.
On the question of whether crypto is a security (which would fall under the SEC) or a commodity (CFTC turf), Behnam acknowledges that it’s a little bit of both. Some tokens can start off as the former and turn into the latter.
The interview also explores what questions to ask if you plan to launch an exchange; the CFTC’s take on “regulation by enforcement”; and the value of investor education in this space. Stick around for Behnam’s notes on cyber risk and the Ion hack.
The wizard’s tale
Spellcaster: The Fall of Sam Bankman-Fried
(Listening time: six episodes, 30mn each)
If you’re not familiar with the Wondery podcast network, their American Scandal show delivers in-depth, multiple-episode reporting on topics such as the BALCO steroid story, the music industry’s “payola” affair, and the Enron collapse. (I may or may not have binge-listened to all of those. So good. So, so good.)
I wasn’t too surprised to see that Wondery is covering the FTX story. Instead of running it on American Scandal, though, they paired up with journalists at Bloomberg to release this under the standalone Spellcaster banner.
Yes, we all know how the story ends. But it’s still interesting to hear the details.
The first five episodes should be available by the time this newsletter reaches your inbox. Or you can wait till next Monday and binge the entire series in one sitting.
The wrap-up
This was an issue of Block & Mortar.
Who’s behind Block & Mortar? I'm Q McCallum. I've spent the past two decades in the emerging-tech space. And I'm very interested in web3 use cases.
Credit where it's due. Big thanks to Shane Glynn for reviewing early drafts. Any mistakes that remain are mine.
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