Legal troubles mount for TerraForm Labs and for Do Kwon.
Welcome to The Daily Forkast June 10th, 2022.
I'm Forkast's Joel Flynn with the latest on what's happening on the blockchain.
And the problems at TerraForm Labs continue to make headlines, but those are also raising
jurisdictional questions about the reach of US law.
So let's get you up to speed on that and everything else from Asia to the world.
Join thousands of NFT traders who already start their day on CryptoSlam.
All right.
Let's start with the latest on TerraForm Labs legal battles, this time in the US.
The company and its CEO, Do Kwon, have been ordered to comply with subpoenas from the
Securities and Exchange Commission over the company's Mirror protocol.
They've just lost appeals against the SEC subpoenas.
Kwon was first served in September last year in New York as part of an investigation into
Terra's decentralized finance service that offers investors access to cryptocurrencies
mirroring the price of US stocks like Amazon.
Terraform Labs Appeal claimed that the SEC does not have jurisdiction over the company
which is headquartered in Singapore, nor over Kwon himself, who is a South Korean citizen.
They also argued the SEC violated its own rules by serving the motions to Kwon in person.
However, the order from an appeals court in New York's Second Circuit said the SEC hadn't
done anything wrong.
Meanwhile, a South Korean media outlet has claimed the SEC has begun investigating Terra's
core developers as well as Kwon over potential money laundering.
Do you make sure you check out Forkast.News for the latest developments on Terra and Do
Kwon.
India continues to wrestle with the opportunities and the challenges of crypto.
The country's chief economic adviser has added his voice to a chorus, warning about the risks
emanating from investment in the sector.
But that comes as the Reserve Bank of India has been firming up plans to issue a central
bank digital currency.
Forkast's Monika Ghosh has more from Goa, India.
It might look like paradise, but this is where India's chief economic adviser is worried
crypto markets are getting inspiration from.
V Anantha Nageswaran on Thursday compared cryptocurrencies to the world of Caribbean
pirates and he wasn't talking about the beards.
Speaking at an event hosted by the Associated Chambers of Commerce and Industry of India,
he warned about the lack of regulation in a sector where "winners take it all."
According to local media, he said, "I wouldn't be very excited by cryptocurrencies because
sometimes we are not fully aware or comprehend the kind of forces we are unleashing ourselves."
It echoes warnings from the Reserve Bank of India last month.
Those came in the wake of the collapse of Terra's USD and Luna.
But it also comes just as the Reserve Bank of India or RBI, forms up plans for central
bank, digital currency or CBDC.
Deputy Governor T Rabi Sankar said in a press conference on Wednesday the bank was pressing
ahead with the move.
First announced in its union budget for this financial year, Sankar confirmed that the
RBI plans to introduce the CBDC in stages this fiscal year.
Various technologies will be used.
The only thing I would like to emphasize that the process of introduction would be gradual
so that there is no disruption in the banking system or the financial system.
The RBI Act of 1934 was amended in this year's Finance Bill to provide the necessary legal
framework for issuing the CBDC.
And in its most recent annual report, the RBI said the digital rupee must conform with
India's monetary policy and financial stability objectives.
It also noted that proofs of concept and pilots would be carried out before the currency's
launch.
From Goa, India I'm Forkast's Monika Ghosh.
And finally, the Consensus 2022 Blockchain Crypto and Metaverse Conference is underway
in Austin, Texas.
Forkast's Editor in Chief Angie Lau earlier moderated a rather feisty panel there on the
digital dollar.
She also took a dive into the implications of the recent US digital assets bill with
legal expert Lilya Tessler.
Forkast's Carolyn Wright has more.
During the panel, Dante, despite the head of policy for Stablecoin Issuers Circle called
Central Bank Digital Currencies a preposterous idea.
He went on to suggest that the Fed issuing its own digital dollar is equivalent to the
idea of the United States Federal Aviation Administration building jet engines and flying
planes.
Despite a claim that circle's USDC stablecoin is a real digital solution.
However, Rohan Grey, a law professor at Willamette University, an ardent crypto critic, argued
that as a private company, circle is shielded from liability and the public would be put
at risk if it went under.
Grey also exclaimed "F the Fed" in his opening remarks.
Meanwhile, Caitlin Long, founder of Crypto Bank Custodia, said that despite growth in
the DEFI space, there is still no solution for moving funds between it and the traditional
financial system.
Separate to the panel, our editor in chief, Angie Lau caught up with Lilya Tessler of
law firm Sidley Austin, asking what stood out most to her in the recently introduced
US Digital Asset Bill.
The one area where I've been focusing a lot of my attention is the application of the
securities commodities laws to digital assets and market participants that are regulated
by the SEC and CFTC.
So for starters, on the security side, there's still that open question of if something is
issued pursuant to an investment contract in asset, what is the subject of that investment
contract?
Is that asset security?
Is it a commodity?
How does that asset trade on the secondary market or even the primary transaction?
And it's pretty well settled in some of the case law regarding primary issuance being
potentially under investment contract to security.
But the subject of that in the bill is referred to as an ancillary asset and it proposes a
disclosure regime where you would disclose as part of a filing certain key information
with respect to ancillary asset for a certain amount of time.
And then at some point in time that asset would during the disclosure time and then
at some point for decentralization, the future of the asset would be treated as a commodity
and then it would be fall within the CFTC regulation.
So it's beyond KYC, it's KYS - Know your security because it might be a commodity.
This is what we're talking about.
Yes, I like that KYC characterization because it's important, because the US has a securities
regime and a commodities regime under two different regulators, SEC and CFTC.
And right now they're trying to work out the regulators and to what what jurisdiction is
the asset fall under or is it overlapping jurisdiction at some point in time?
And certain provisions of this act go to to that issue.
So it it aims to streamline the thinking, at least on the agency side, but it seems
to me it's still very bifurcated.
The CFTC have clearer jurisdictional powers and rules and maybe expanded a little bit
in this legislation, but the SEC still play a significant role here.
Yeah, no, no, definitely.
It's not that one regulator is stepping away.
It's figuring out what portions of the transactions, at what stage of the lifecycle of the asset
is it regulated by each regulator and not just the asset.
It's about the market.
Participants to the regulations regulate intermediaries and so intermediaries that transact in certain
digital assets.
No.
Do they need to be registered with the SEC?
So they need to be registered with the CFTC for purposes of secondary transaction?
You can check out more on the implications of the US Financial Innovation Act from that
discussion with Lilya Tessler at Forkast.News.
For Forkast, I'm Carolyn Wright.
And that's The Daily Forkast from Asia to the world.
There is, of course, much more about the latest on the blockchain at Forkast.News.
Do also follow our Twitter as well @Forkast_News.
Until next time, I'm Forkast's Joel Flynn.
Have a great weekend.