Degen Lawyer's Newsletter

15th August, 2023

Happy Independence Day to India!

GM. Welcome to Degen Lawyer's Newsletter, where we bring you your weekly dose of legal insights and regulatory updates in crypto and emerging tech space. Our expert lawyers serve up curated analysis, breaking news, and expert commentary, sprinkled with a healthy dose of memes.

In this week’s edition:

1. Updates from around the world

2. Courtroom Watch - SEC v. Ripple saga continues…

3. Weekly Explorer- What does KYC/AML Laws have to do with crypto?

4. Crypto Chronicles

Updates From Around The World

• Indians can soon sign docs digitally through crypto tokens

  The Ministry of Electronics and Information Technology announced an exciting feature of their project to develop a national web browser, early last week. Indian citizens will have the ability to sign digital documents using crypto tokens that would be embedded into the web browser ensuring originality and authenticity. Looks like the Indian Govt is keen on staying ahead in the crypto adoption race!

• SBF JAILED!

  Not much to say here. What else can one expect, than to get your bail revoked by the Federal Judge, when you attempt to intimidate key witnesses in the midst of a hotly prosecuted case of international importance. During the hearing, SBF’s legal team admitted that SBF shared information from Caroline’s (former Alameda Research CEO) private diary to the NY Times and this led the Judge to conclude that “his intention was likely to hurt and frighten” the witness and as such amounted to witness tampering. Leaking notes from a private diary is just plain cringe in this day and age SBF! Grow up.

• Senator Lummis steps in to strengthen Coinbase’s stance on SEC lawsuit

  The senator filed an amicus brief supporting Coinbase’s motion to dismiss the SEC lawsuit against them. The Senator states that the SEC is trying to become the “primary influence” over the crypto industry when the legal and regulatory landscape is just beginning to take shape. It was emphasized that only the Congress can legislate and make rules in this sector and not the SEC. She called SEC’s move as an attempt to “Legislate by Enforcement”. Senator Lummis going for the kill!

Courtroom Watch

SEC v. Ripple saga continues…

The Securities and Exchange Commission (SEC) has decided to appeal the Court ruling regarding XRP sales… we all saw that coming didn’t we?

In a letter to the court, the SEC said it believes the ruling "seriously misreads the law" and that the case is "of paramount importance" to its ability to protect investors in the cryptocurrency market.

The SEC sued Ripple Labs and its executives in December 2020, alleging that they raised more than $1.3 billion through the sale of XRP, a cryptocurrency, without registering with the agency. The SEC argued that XRP is a security because it was sold to investors with the expectation of profits based on the efforts of Ripple Labs and its executives.

In February 2023, a federal judge ruled in favor of Ripple Labs, finding that the SEC had failed to prove that XRP is a security. The judge said that the SEC's definition of a security was "overbroad" and that it did not apply to XRP.

A detailed analysis of the ruling from our team can be found here:

The SEC has now said that it will appeal the ruling to the 9th Circuit Court of Appeals. The agency said that it believes the ruling "undermines the SEC's ability to protect investors in the cryptocurrency market" and that it "sets a dangerous precedent for the future of the digital asset industry."

In the time that it takes this appeal to resolve, the XRP market continues to remain volatile and the investors along with the entire crypto community are keeping a watchful eye over the outcome of the case.

Weekly Explorer

What does KYC/AML laws have to do with Crypto?

Well, blockchain technology allows anyone to use the network and the native cryptocurrencies without really giving away their true identity. Using a pseudonymous ID, anyone can use, accumulate and transact on any given blockchain. All is well and good until someone commits a crime or indulges in illegal and unlawful activities on the blockchain.

In order to tackle such issues on the blockchain and to ensure no one benefits from the proceeds of any illegal activities on the blockchain, governments all over the world have started to mandate the application of KYC/AML laws on the crypto sector.

Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations help the government to monitor and control financial activities on any platform.

Generally, the laws apply to ensure the following-

• Combat Illegal Activities- First and foremost is the concern that crypto can be misused for money laundering, terrorist financing, and other illegal activities due to it’s pseudonymous nature. Implementing KYC and AML checks ensures that any flow of funds is transparent and can be traced to specific individuals. incase legal action is to be intiated.

• Taxation- With more and more people earning exponential profits from their crypto investments, governments want to ensure they receive their fair share of taxes. KYC processes help tax authorities monitor and collect revenue.

• Consumer/Investor Protection- Crypto is extremely volatile, and it is ridden with frauds and scams. By making KYC procedures mandatory, governments can try to protect consumers/investors from deceptive practices and other financial crimes.

Let’s take a look at a few countries and their KYC/AML laws-

• India- On March 7, 2023, the government published in the official gazette that, all intermediaries dealing with virtual digital assets (VDA) and other crypto exchanges are mandated to apply Know Your Customer (KYC) checks on their customers and platform users. It was also mandated that in case any suspicious activity was found in their platforms, the entities must notify the Financial Intelligence Unit India (FIU-IND). It was stressed that AML standards must be maintained and that efforts for Combating of Financing of Terrorism (CFT) must be carried out.

• U.S.A.- The Financial Crimes Enforcement Network (FinCEN) requires all crypto exchanges to mandatorily carry out KYC/AML checks on their users in order to avoid being shut down. It also proposed rules requiring banks and money service businesses to submit reports, maintain records, and verify the identity of customers in relation to transactions involving convertible virtual currency or digital assets.

• European Union- The EU's 5th Anti-Money Laundering Directive (5AMLD) requires crypto exchanges and wallet providers to conduct due diligence on their customers and report suspicious transactions

In conclusion, it is a wonderful thing to remain invisible and go about your business in the digital realm of blockchain, given the anonymous decentralized ethos of blockchain and crypto. However it is a massive challenge to the traditional regulatory structures, that ensure the financial safety from frauds and crimes and the wellbeing of people in any market.

Owing to this need for protection and general oversight over any financial market, the integration of KYC and AML laws is seen by many governments as a necessary step to ensure security and integrity in such markets globally.

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

Crypto Chronicles

Elon Musk vs. Mark Zuckerberg: The Cage Match That Never Was

In a move that surprised absolutely no one, the cage fight between Elon Musk and Mark Zuckerberg has been canceled.

Earlier, the two tech billionaires had agreed to fight in June, after Musk tweeted that he was "up for a cage match" if Zuckerberg was. Zuckerberg responded by saying "send me location," and it seemed like the fight was on.

But then, nothing.

Musk and Zuckerberg both went silent on the matter, and eventually Zuckerberg announced on Threads (in case you forgot that’s the Twitter competitor launched by Zuck) that he was "moving on" from the fight, saying that Musk "isn't serious."

So what happened?

It's hard to say for sure. Maybe Musk changed his mind. Maybe Zuckerberg got cold feet. Or maybe they both realized that a cage fight between two billionaires would be a PR disaster.

Whatever the reason, we'll never know. But one thing is for sure: the world is a little less exciting without the prospect of watching Elon Musk and Mark Zuckerberg beat each other up in a cage.

In the meantime, we can all console ourselves with the thought that we still have the internet to fight about.

Thank you for reading!

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