Degen Lawyer's Newsletter - CFTC v. DeFi, India’s Robotics Strategy, Vitalik Hack & More!

GM. Welcome to Degen Lawyer's Newsletter, where we bring you your weekly dose of legal insights, and regulatory updates in the emerging tech and law space. Our expert lawyers serve up curated analysis, hot takes, and expert commentary, sprinkled with a healthy dose of the wacky and meme worthy. Enjoy!

In this week’s edition:

1. Updates From Around The World

2. Regulatory Watch - CFTC going after Crypto!

3. Weekly Explainer - Centralised Exchanges

4. Crazy Crypto News - Vitalik gets hacked!!

Updates From Around The World

• India Proposes Regualtions on Dark Patterns:

  No this isnt right out of Harry Potter. Although it sounds a lot like Dark Spells and works in the same sinister manner. Dark Patterns are unethical UI/UX (user interface/user experience) interactions, designed to mislead or trick users to make them do something they don't want to do like make unwanted purchases and making the cancellation of a paid online subscription impossible and creating a sense of “false urgency”. The Indian Department of Consumer Affairs has come out with a regulation and is seeking inputs from interested parties. If this regulation is passed it will apply to all platforms offering goods and services in India and could be a game changing piece of legislation for conumers.

  

• G20 Summit Crypto:

  The recently concluded G20 summit has provided a positive outlook on regulations surrounding crypto assets. The International Monetary Fund (IMF) and the Financial Stability Board (FSB) has set out a paper to coordinate efforts to advance policy and recommendations to identify macroeconomic and financial stability risks associated with crypto-assets. The G20 declaration stated that states wish to use their central banks and finance departments to coordinate and take forward the recommendations set out in the paper. Hopefully, this leads to clear regulations worldwide soon.

• Coinbase out of India?

  Coinbase has disabled new user sign-ups in India and is looking to move out of India. As of now, it has stated that it remains committed to India, but it will stop withdrawals from 25th September and is asking customers to move funds.Coinbase officially stated that the reason is due to lack of appropriate standards, but we got a feeling it’s due to the regulatory and legal uncertainty to operate in India. The crypto behemoth leaving the larget free crypto nation is quite the stir up and is just another reason why we at DLA have been eyeing clearer regulations ASAP.

• India releases National Draft Strategy for Robotics:

  The Ministry of Electronics and Information Technology (MeitY) has released a draft "National Strategy for Robotics". It proposes a policy framework for the implementation of robotics in various sectors, with the aim of making India a global robotics leader by 2030. It also lays out plans for advisory support to start-ups, development of robotics industrial zones. This comes in the wake of several other countries like China and US dedicating large programmes and resources to development of robotics. Indian talent worldwide, will be keeping a keen 👀 on this.

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Regulatory Watch - CFTC v. DeFi

• The U.S. Commodity Futures Trading Commission (CFTC) has taken enforcement actions against three decentralized finance (DeFi) companies: ZeroEx (the developer of 0x Procotol), Opyn, and Deridex. All 3 companies entered into consent judgments with the CFTC after being charged with failing to register as a swap execution facilities and other similar charges. The charges were brought against the U.S. DevCos for these DeFi protocols, and all agreed to fines and to implement changes to block access to U.S. users. This seems to indicated a target on DeFi. This is in the wake of CFTC action against OokiDAO last year which made many believe that DeFi could be held ‘illegal’ as a whole. Opyn, ZeroEx and Deridex agreed to pay $250,000, $200,000 and $100,000, respectively. 

• The CFTC's current position on DeFi was laid out in a speech by Brian Quintenz (who now works for a16z) in October 2018:

• The CFTC is taking a tough stance on DeFi projects that are not in compliance with its regulations. This could have a chilling effect on the development of DeFi, as projects may be reluctant to launch or operate if they fear being targeted by the CFTC. The Dissenting Statement of Commissioner Mersinger sums up what many in the industry thinks:

  “[T]hese cases give no indication that customer funds have been misappropriated or that any market participants have been victimized by the DeFi protocols on which the Commission has unleashed its enforcement powers.” Additionally, just like any SEC action these do nothing to help others obey what the CFTC believe the law is, as at least one of the protocols did GeoFence against U.S. users.

• DeFi projects must now tread very carefully in the US as well as in any other jursidiction which offers services to US based customers. Projects that fail to do so could face enforcement action, sadly, like in the case of SEC the issue here is lack of regulations and directions on how to operate.

Weekly Explainer

Centralised Exchanges

A centralized exchange is a platform owned and operated by a single entity acting as an intermediary between buyers and sellers. This middleman or third party helps conduct transactions by providing liquidity for supported tokens.

It allows uses an order book system to establish crypto prices, much like a traditional bank does. Users trust the platform to handle their funds fairly and securely. The crypto exchange matches buyers with sellers, or vice versa, and executes trades on their behalf. They host their own custodial wallet, this means you are depositing your funds into accounts under the exchange’s control. You receive the login details to access the wallet, but you don’t actually own it. Instead, the exchange holds the account’s private key, and you are simply “borrowing” the wallet to transact and store your crypto.

To learn more about such concepts, visit our resource page linked below:

Crazy Crypto News - Vitalik gets hacked!!!

Yup thats right, the ethereum founder himself was subject to a hack!!!

On September 9, 2023, the X (formerly Twitter) account of Vitalik Buterin, co-founder of Ethereum, was hacked. The hacker posted a malicious link that falsely promoted a free NFT. When victims clicked on the link, they were phished and their cryptocurrency wallets were drained.

A user with the alias Satoshi 767 suggested that Buterin might not have implemented sufficient security measures for his X account, noting that SIM-swap attacks are a "common mistake" for many crypto project founders. However, others have stated that the reason for the hack was unclear. The hackers stole over $691,000 worth of cryptocurrency, including some CryptoPunk NFTs. The hacker has since transferred the stolen funds to different wallets.

No one is safe out there, so remember to use 2FA and Cold Wallets. Stay vigilant, stay secure and most importantly please don’t keep your private keys somewhere it may be revealed.

Thank you for reading!

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