Degen Lawyer's Newsletter - EU/US to gatekeep AI tech, Cyprus tightens laws and 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 content. Enjoy!

In this week’s edition:

1. News in short

2. Article of the week - US/EU to gate keep AI tech?

3. Crazy Crypto News - Money Laundering or Fat Finger?

News in short:

1. Cyprus tightens Anti Money Laundering laws:

   Setting up and operating out of Cyprus was long considered a desirable option as the island nation is considered one of the friendliest crypto jurisdictions in the EU. The Cyprus Ministry of Finance however, intends to amend the existing Prevention and Suppression of Money Laundering Law to bring it in line with the Financial Action Task Force (FATF), an international money laundering and counter terrorism watchdog standards. Less and less ‘offshore unregulated’ crypto havens remain.

2. SEC's motion for an interlocutory appeal in Ripple case has been denied:

   In the continuing Ripple- SEC saga, the court has denied SEC’s motion for an appeal, you might remember when the court smacked SEC in the face, and held that Ripple token by itself does not constitute a security. You can find our complete breakdown here. We were sure more litigation would follow and sure enough SEC wants to appeal the decision, but Judge Torress wasn’t hearing none of that.

3. EU released a second consultative paper on MiCA:

   The EU released a second consultative paper addressing key aspects of Markets in Crypto-Assets (MiCA) regulations. Within this extensive document, the European Securities & Markets Authority (ESMA) solicits input and feedback from stakeholders on five crucial aspects of MiCA, including sustainability indicators for distributed ledger technologies (DLTs), disclosures of inside information, technical requirements for white papers, trade transparency measures, and record-keeping standards for crypto-asset service providers (CASPs).

4. US is considering applying e-banking laws to Crypto:

   US is considering using the Electronic Fund Transfer Act (EFTA) to protect consumers from fraudulent cryptocurrency transfers. The Consumer Financial Protection Bureau (CFPB) is considering applying EFTA to "private digital dollars and other virtual currencies" to reduce the risks of errors and unauthorised transfers. The EFTA is a federal law that safeguards consumers during electronic fund transfers and limits losses from unauthorised transactions. This move comes as crypto-platform hacks have increased by over 150% year-on-year, and it coincides with the trial of FTX co-founder Sam Bankman-Fried, who is accused of fraudulently using customer funds. FTX also suffered a significant hack. So, get ready for a potential crypto rulebook, because nothing says 'digital revolution' like a dash of government oversight!

Article of the week - EU and US to gate keep AI tech??

As AI becomes a more integral part of our lives and is rapidly permeating into every industry, governments have started taking notice of the geo-political power that is garnered by access to such tech.

Much like the semiconductors has been the battle ground on which geo-political and economic battles have been fought over the last few years, AI promises to be the new frontier.

European Union officials have identified AI technology risk and risk of technology leakage as one of the top priorities. The EU intends to determine a risk assessment for AI and will determine export of the tech accordingly.

Lawmakers in the U.S. have also supported legislation that would mandate companies to report investments in Chinese technologies surrounding AI. This comes in the wake of Nvidia shares took a beating after US federal government weighed restrictions on exports of sophisticated chips used in artificial intelligence computing to China.

The fear is this, while EU and US may state that the export on AI tech would be only to countries they wish to sanction, this may turn into gate keeping this tech. Software of-course, is inherently borderless and the question of whether it could even be effectively sanctioned is up for debate. However, the increasing importance and geopolitical ramifications of the same cannot be understated.

Crazy Crypto News - Money Laundering or Fat Finger?

A Cryptoadz NFT recently changed hands for a staggering $1,660,000, translating to a substantial 1,055 ETH. But here's where it gets interesting – there were noteworthy fees of $41,500 paid to OpenSea. This sizable fee raises the question: Was this a result of a ‘fat-finger’ error?

Some context, the floor price for these Toadz NFTs currently rests at a rather paltry (in comparison to what it was) - 0.5 ETH. So at the face of it seem like a rather stupid error on part of the bidder. However, it may not be quite this simple.

When crypto sleuths looked into the source of funders, intriguingly, the origins behind this colossal NFT transaction seem to lead back to Tornado Cash, a privacy-focused Ethereum mixer that was infamously the first ever software to be added to the sanctioned list by the US Treasury Department.

It's hard not to question whether there's more beneath the surface. The eye-catching combination of an exorbitant purchase, the substantial OpenSea fees, and a relatively modest floor price of 0.5 ETH raised several eyebrows. Is this simply a result of an accidental fat finger, or could there be a more to it?

With some speculating that it could be a method of money laundering. The plot thickens, and time will reveal whether this is merely a curious blip on the blockchain or the start of a larger, more mysterious saga.

Thank you for reading!

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