Unchained - Why the SEC Is Probing Yuga Labs and Coin Center �Is Suing Treasury - Ep. 407

Episode Date: October 14, 2022

Peter Van Valkenburgh, director of research at Coin Center, comes to talk about the SEC probe into Yuga Labs, how to determine whether something is a security, and Coin Center’s lawsuit against the US Treasury over the sanctions on Tornado Cash.  Peter Van Valkenburgh, director of research at Coin Center, comes to talk about the SEC probe into Yuga Labs, how to determine whether something is a security, and Coin Center’s lawsuit against the US Treasury over the sanctions on Tornado Cash.  Show highlights: whether there’s an over-reliance on the Howey Test and how a token being non-fungible doesn’t mean it’s not a security what constitutes an investment contract and how it works in the Metaverse the consequences for NFT holders and issuers if the NFTs are considered securities why Coin Center is suing the US Treasury over the Tornado Cash sanctions Who the plaintiffs are whether this lawsuit differs from the one Coinbase is supporting how to solve the issue of bad actors like North Korea using tools such as Tornado Cash to launder money the remedy Coin Center is looking for in the lawsuit against the Treasury  how long the lawsuit could take to be resolved Thank you to our sponsors! Crypto.com Peter Twitter  SEC probe into Yuga Labs Unchained article CrypTones thread on land sales Coin Center lawsuit over Tornado Cash sanctions Coin Center lawsuit and statement Unchained article  Coinbase Backs Tornado Cash Lawsuit Against U.S. Treasury North Korean hacks Treasury Press release on the sanctions Previous coverage of the Tornado Cash sanctions on Unchained: Is TRM Labs Blocking Addresses From DeFi Protocols? Ari Redbord Says No  Tornado Cash Sanctioned. Did the Government Overstep Its Bounds? The Chopping Block: Did OFAC Overstep by Sanctioning Tornado Cash? Given the Sanctions on Tornado Cash, Is Ethereum Censorship Resistant? Preston Van Loon on Ethereum's Merge and His Lawsuit Against Treasury Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained. You're no hype resource for all things Crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto seven years ago, and as the senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. This is the October 14th, 2022 episode of Unchained. The Cryptopians, the TV series? I'm excited to announce that I'm working with executive producers at Playground Entertainment, who've optioned the rights to adopt. my book for the small screen. From our first conversation, they grasped my vision for the book, and I felt like I was talking with fellow crypto people. This is going to be juicy. Stay tuned. With the crypto.com app, you can buy, earn, and spend crypto in one place. Download and get $25 with the code, Laura. Link in the description. Today's guest is Peter Van Valkenberg, the director of research at Coin Center. Welcome, Peter. Hey, Laura. It's always great to be here.

There are multiple topics we could discuss this week, but we're going to start with the SEC probe into Yuga Labs. The agency is investigating whether any of its sales constituted securities offerings, though to be clear at this moment, Ugal Labs has not yet been accused of any wrongdoing. Peter, when you heard this news, which of its NFTs or sales do you think this probe could be about? So I don't want to comment about any specific products because I wouldn't want to sort of prejudice an investigation or offer unsolicited legal advice to anyone. But I think in general, there's an issue in the crypto community wherein people are very wary and rightly so of the enforcement of securities laws for tokens that are fungible and are not so wary

with regard to NFTs. And I think a lot of that comes down to maybe over-reliance on a certain argument as to why an NFT wouldn't be a security. And unfortunately, it means we have to talk about the Howie test, which is the flexible standard for what is the security, which I know your listeners probably are sick of. But there's these multiple prongs to the Howey test, right? And one of them is common enterprise. And historically, the test for whether you're investing in a common enterprise

rather than just sort of like a one-off thing has been whether the profits of all the investors are common. And this is something called horizontal common. or whether the profits of you as an holder of one asset are linked and common with the promoter. That's called vertical commonality. Either way, this common enterprise prong relies on this assumption that everybody's boats kind of rising or falling together. And I think some folks in the NFT space or maybe even in the legal community have over-relied on this notion that, well, they're non-fungible.

Each one's unique. So how could there be common enterprise? because my indifferent antelope is going to be based on its own value of its own unique characteristics and have little to do with your indifferent antelope. And so I think that argument has a lot of vulnerabilities in the sense that a lot of these NFTs that are issued in series, they may have slightly different attributes, but they kind of all rise and fall together with the general enthusiasm that the community has about the project, and they often are issued in advance of some future work that the artist or

promoter is saying they're also going to undertake that will go to the benefit of all the people who have the NFTs in the series. And when you get down to that, you're really talking about potentially an investment of money in a common enterprise, common enough, like we're all mostly going up or down. There might be different to make a direct analogy to securities laws. there might be different classes of shareholder, but they're all kind of together, and you're relying on a third party that might have made promises about the future value of that asset. So I think to some extent, people might be sort of blindsided or surprised by this, but maybe they shouldn't have been because a good securities lawyer would tell you that that sort of non-fungibility

quality is certainly not an absolute safeguard against your asset being rightly or wrongly found to be a security by the SEC and investigated as such. Well, so I totally take your points there about how I think the community is much less wary of the potential for NFTs to be securities. But there is actually one collection of these that I do want to ask you about, which is that you might have seen there was a really popular tweet thread that was published after the other side land sale. And it was by a Twitter user named Cryptones, who claimed to be a securities lawyer at a

company, you may actually know who this person is, I don't, but they kind of walk through how it is that the other side land sale was likely a securities offering and said that it basically really closely resembled the original case that resulted in the Howie Test. So can you talk a little bit about how those similarities break down? Yeah. So from what I understand, I don't know a lot about the details of other side, but it's a Metaverse project, right? So we can talk generally about Metaverse. projects and quote unquote land sales. So in these Metaverse projects, there's something like, I actually played Second Life back, you know, long before crypto was a thing, like the original

virtual world or one of the first ones. And you had this property and you were like, well, cool, I've got an island property in a virtual world and I can move my avatar around there and hang out and I could build a house on it. It would be better, right? And maybe I'll sell it one day. I think one of the first millionaires who made their money solely off of the sale of virtual goods was in Second Life. I remember that was like a big news story, kind of small potatoes now compared to what's going on in Web 3 and today's meta-world where Facebook renames itself and everything. So the analogy to the original Howie case is fairly straightforward. So the Howie case is about land. It's about land in Florida, not in the metaverse.

in Florida, but I actually don't think that's much of a distinction. They're both places I don't really want to visit too often. And so you've got your land, and a sale of land is not a sale of a security, right? It's just a sale of a deed or title to land. But in the Howie case, it's this orange grove. And it's a beautiful Orange Grove, and W.J. Howie, the owner of the grove, had a hotel on the property. And people, guests from New England would come down to winter or whatever to get out of the blizzards and he'd give them a tour of the land and he'd say and and the guests would say, oh, the land is so beautiful. I love your orange grove. And he'd say, well, it's funny you should say that. I'm selling parts of the orange grove if you'd like to buy some. And they say,

well, I don't know anything about growing oranges. And, you know, that's not my expertise. And say, don't worry about that. We'll continue to grow the oranges and sell them at market for a profit. And we'll give you a share of the oranges. And you can always come and stay at the hotel and look at your land. Now, that's, stops being just a sale of land in the eyes of the Supreme Court interpreting the security and starts being the sale of a security. Because at this point, you have not just the sale of a notional asset that is like a commodity or real property, you have that matched with a contract for additional services. And those two together, according to the SEC when they made their case

in the Supreme Court and according to the Supreme Court when they came up for the final ruling, those two together constitute an investment contract, because you really are not buying the land to use it, per se. You're buying the land reliant on the efforts of W.J. Howie, to grow oranges on it and to make it better. And so in the metaverse context, you could imagine sales of metaverse land that are strictly just sales of metaverse land,

but it's actually kind of hard to imagine that because there isn't really a finished and completed metaverse anywhere that everybody uses day to day. they're all sort of notional or pilot or early projects. And they're only really going to become successful if the promoters of those projects make the Metaverse more fun to use, right? Whether it's Mark Zuckerberg or whether it's somebody in the crypto space with NFTs. And so if there are any promises made during that land sale about how, well,

there's not much of a platform now, but in 10 years, you know, there'll be the ability to have better construction methods in your Metaverse plot or the ability to have, you know, like massive online parties on your land and the bandwidth and the technical capabilities to manage all those people and all those avatars and all those graphics and things like that. Then you start to look kind of like the Howie case where, yeah, I bought something that's notionally like property, real property. But obviously, I was promised a lot about the future value of that property. And I can't undertake personal efforts to create those profits. I am definitely relying on the people who control that metaverse to create those profits. That would be the claim anyway.

Now, if it was more of a communal project where really the value of the metaverse comes ground up from the individuals who own pieces of it, you might have a weaker claim that that's a security because you don't have this third party upon whom investors rely. But sales, of land in Metaverse or in Florida, definitely right at the heart, potentially, of the investment contract definition from the original case law in the 1940s. And so definitely possibly a security. And if the other side land sales or any type of Metaverse real estate sales end up being deemed securities offerings, then what would happen to those issuers and then the people also who bought those NFTs? So if they were deemed securities and,

there was a settlement, or if it went to court and a judge found that that was a proper distinction by the SEC, that they are securities, the issuers would be on the hook for unregistered securities issuance because they were supposed to do disclosures or else fit into some other exemption, like only selling to accredited investors or things like that, which to my knowledge, most NFT projects don't do, whereas a lot of token projects do now out of abundance of caution. The assets, to the extent they trade on secondary markets, wouldn't be able to trade on secondary markets like Coinbase or Cracken or things like that, they'd have to trade on national securities exchanges and alternative trading systems that are supervised by the SEC. And the purchasers,

well, you're not doing anything illegal when you purchase a security, even a security that's unregistered, because you're sort of considered the victim in the SEC's eyes, that there should have been more disclosures made to you to address information asymmetries between the promoter or the purchaser, so you could make a better choice. You're not talking about liability there. And you know, you might even have a claim against the issuer. So a lot of people don't think about this because in the crypto space, people think of the SEC bringing all the enforcement actions. But there's a private right of action in the securities laws. So if you're a purchaser who feels like you hadn't been properly informed about the risks of your investment and especially if it was an unregistered security that that you were being sort of convinced to buy, you could make a claim against the issuer for rescission.

So reverse the contract, be made whole, or even for damages to the extent that there was reliance on your part. And now you've disappointed expectations and things like that. All right. Well, thanks for explaining all that. And in a moment, we are going to unpack Coin Center's lawsuit against Treasury. But first, a quick word from the sponsors who make this show possible. Join over 10 million people using crypto.com. The easiest place to buy, earn, and spend over 150 cryptocurrencies.

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With Amex Platinum, you have access to over 1,400 airport lounges worldwide. So your experience before takeoff is a taste of what's to come. That's the powerful backing of Amex. Conditions apply. Back to my conversation with Peter. So now let's turn to Coin Center's big news this week. Your organization, along with other co-plaintiffs, is suing the Treasury Department and the Office of Foreign Assets Control over the tornado cash sanctions. Why are you suing them? So to us, the recent tornado cash sanctions, which came out last August, represented a sort of line in the sand where we would have to move beyond educational efforts or just outreach efforts to the agencies and bring actually impact litigation. And the reason for

that is sort of two things. One, it's that this is an unprecedented sanction. So OFAC is the office within Treasury that enforces U.S. sanctions policy. And these are the policies that say that Americans aren't allowed to pay people in enemy states like Iran, for example, or North Korea. Coin Center and most crypto advocates that I know of don't have a real issue with that usage of sanctions law. In 2018, OFAC added two Bitcoin addresses that belonged to two Iranian nationals to the OFAC list, which meant that if you were sending money to those Bitcoin addresses and you were a U.S. person, you were violating sanctions laws and you could be prosecuted. I think that's a very fair usage of sanctions laws, setting aside.

whether sanction laws are the right way to do foreign policy, I think at least it's a very clear fit within the statutory framework that's reasonable for the Treasury to exercise its power in that way. But the problem is that Tornado Cash is not a person. It's not an Iranian person. It's not a North Korean person. The 20 contract addresses, the pool addresses where people send their ether in the hopes that they'll obtain some disconnect between their past transactions and their future transactions, the privacy tool itself, that is a smart contract. It's software that lives on the Ethereum blockchain. And unlike some smart contracts where the original authors retain the ability to control how it operates or updated in the future, those 20 smart contracts

have no ability to be updated or changed in the future. And so when you're putting those 20 contract addresses on the SDN list, when you're sanctioning them, you're basically saying that you're sanctioning a tool. And this doesn't make sense in the context of the statute because the statute, again, empowers Treasury to sanction persons, foreign entities or majority owned foreign entities, or their property. And these 20 addresses are none of those things. Additionally, it doesn't fit within the policy purpose of OFAC. OFAC repeatedly says that their intent with sanctions is not punishment, it's behavioral changes. So the goal of sanctions is to put pressure on regimes like Iran or North Korea to change their ways, to change their behavior, or to put pressure on the

financial institutions that might be intermediating or assisting those enemy states in making financial transactions to change their behavior. The thing is, if it's autonomous software on an immutable blockchain like Ethereum, there is no ability for that thing to change behavior. It doesn't have agency. It's really just a series of ones and zeros. And so this in many ways sort of highlights that this is not a rational use of the sanctions policy. Just one further detail on that, an absurd consequence of the behavior not being able to change of the fact that it's a immutable smart contract is after the sanctions, people could still use the smart contract. In fact, non-Americans are fully within their rights to use the smart contract because U.S. sanctions

don't necessarily apply to them. And people use that smart contract, sent money to it, to send to Americans, several of whom are now obligated because they receive money from a sanctioned address to make reports to OFAC indefinitely into the future, possibly for the rest of their lives. They could maybe get a license or some specific permission to stop, but it's actually a pretty consequential legal damage that they've suffered through no fault of their own. They simply had a publicly known Ethereum address and somebody dusted them with tokens or crypto from the tornado cash addresses. So one of our co-plaintiffs is actually somebody who got dusted. We also have other co-plaintiffs in our lawsuit because a big part of lawsuits is to make sure you don't

get thrown out on standing. So you want a representative sample of all the Americans who are actually impacted and hurt by this such that if one proves to not have a real damage, you know, the lawsuit could go forward based on the claims of the other, the parties. And what does standing mean? Oh, standing just means that you have suffered an injury by virtue of the government's actions and that injury is addressable in law. So Coinbase's standing is, it should be fairly self-evident, but we are a nonprofit. We accept donations in cryptocurrency.

We've received donations in the past via tornado cash. And I think that's actually a good thing because there's certain people who don't want it to be widely known, which causes they support, because it might damage their reputation, or they just feel like it's nobody's business. And so a nonprofit relies on private donations for its livelihood. And so that's why we have damages, because we can no longer expect to use this tool to do our First Amendment protected advocacy actions. Another person in our lawsuit is somebody who regularly develop software on the Ethereum blockchain and gets paid on the Ethereum blockchain, like his actual paycheck.

comes through. And I think it's very normal and reasonable for a person to want privacy with regard to their salary from their co-workers or from, you know, people who are complete strangers. And then another person in our lawsuit is somebody who actually organized and managed to facilitate large or substantial support to the Ukrainian war effort in the form of medical supplies and flack jackets and things like this and was concerned that their identity would be revealed if they were not using tornado cash to facilitate these donations. And so with the identities of the people that they were helping to make donations to the war effort, and that has some very real consequences if you don't have privacy,

because we do know for a fact that the Russian intelligence offices look at the Ethereum blockchain and use it as one of many tools to commit cybercrimes and to target individuals who are trying to undermine their invasion of Ukraine. You know, all of these folks have standing, and they're joining us in a in our lawsuit. And just briefly, how does this lawsuit differ from the one being funded by Coinbase, which you alluded to, and they also have six other plaintiffs? We're actually making mostly the same claims.

The legal work done by the lawyers in that lawsuit is very good. We saw the complaint. We agree with the claims. They matched a lot of early writing that we had done on the subject. We were working on our own suit at that point. We hadn't coordinated. The reason why both of these are going forward is that, you know, they had plaintiffs, co-plaintiffs who had standing in the Western District of Texas in the Fifth Circuit.

We have folks mostly in the 11th Circuit in Florida and Georgia and Alabama. And so, you know, it's an interesting aspect of the U.S. judicial system, but I think actually a very good one, that if there's an issue that affects all Americans, Americans can bring claims in different federal circuits simultaneously. And it sort of gives you two chances to vindicate the rights of people who've been wrongly affected by these this government overreach. So I wouldn't say there's a substantial difference between the legal theory in both cases. The plaintiffs are different and the judges will be different and we'll get two chances to get this right, which is what I would hope for something that's really important like a matter of civil rights.

I did an interview with Airy Redboard of TRM, and he said the fact that Treasury took this unprecedented action of sanctioning smart contracts was due to how critical it was to keep North Korea from being able to launder such huge sums of money after doing these big defy hacks. And Chenelis actually estimates that between last year and this year, so just two years, North Korea has hacked about $1 billion worth of crypto. If not through sanctions, then how would you propose the... the government prevents North Koreans from being able to launder such huge amounts of crypto. So there's a difference between running your money through a smart contract like Tornado Cash

and disentangling, say, ransomware payments from future transactions on Ethereum and actually cashing out and getting something that's valuable in international markets for any kind of trade or for capital movements across borders and things like that. The first thing that comes to mind is actually when Johnny Levin of chain analysis testified in front of Elizabeth Warren and the Senate Banking Committee, Senator Warren a few months ago. And Senator Warren asked, like, are Russian oligarchs using crypto to get money out of Russia? And Jonathan Levin, who of all the people in the world who would know because of, you know, blockchain analysis, whether that kind of activity is happening and happening at scale repeatedly said, no, we do not see evidence of that.

And indeed, moving money of that quantity would be extraordinarily difficult because you'd have to find the liquidity for dollars into ether or whatever local currencies that you were seeking. And so I think, you know, we've been fairly successful by monitoring the on-ramps and off-ramps at tamping down the how lucrative cybercrimes are when they're done using blockchains. And some of that is because of the transparency of the blockchain, which to some extent is limited. by tornado cash, but most of that is just making sure that the regulated, centralized gatekeepers who allow you to buy or sell crypto for fiat pairs have risk-calibrated any money laundering programs, obey sanctions, these sorts of things. So I think that's the right policy. And the danger of saying, well, we need more than that. And so we're going to flag software is that where's the limiting principle? Even if it's just tornado cash, there's all of these innocent

Americans and other people abroad who are doing nothing wrong, who suddenly have no ability to protect their privacy when using Ethereum. Just their normal privacy when they get paid their paycheck, or when they make a donation to a political cause, or when they're a celebrity and they can't disentangle their personal publicized activities on chain from their private transactions. So you get a lot of over-over coverage of the laws that stifles a lot of legitimate, maybe even constitutionally protected, like free speech and association activity. And also there's no limiting principle as to what would happen beyond Tornado Cash. Tornado Cash, those 20 addresses, is just an extension of the Ethereum protocol. It's as immutable as that protocol itself because it's just

hard-coded into the blockchain and no one has keys that can change the software. So what's next? Do they add the entire Ethereum protocol to the SDN list? Do they add the Bitcoin protocol to the SD analyst. I don't see a limiting principle in policy. Like, well, this is really bad, but this is even worse. So where's the limiting principle? I do see a limiting principle in the statute, in the definition of what powers OFAC has to control and enforce sanctions laws. And that limiting principle has been exceeded because they've gone and they've sanctioned something that isn't a person or the property of a person. They've started sanctioning tools themselves, which really isn't controlling a foreign entity or limiting a foreign entity, it's controlling and limiting the freedom

of every U.S. person, criminal or not, innocent or not. And last quick question, if CoinCenter wins its lawsuit, what would you expect the result to be or what would you hope for it to be? So the remedy that we're seeking in the lawsuit is for the judge to find that this was outside the statutory authority, which would set a precedent that, the International Emergency Economic Powers Act really only does give you the authority to reach real persons. It doesn't give you the authority to block tools and software. And we would also ask for an injunction on its enforcement. So you'd have to remove those 20 addresses from the

SDN list, which means Americans could freely use them to protect their privacy for legitimate purposes again. And Treasury would be enjoined from going after those folks for just using software tools for their own personal privacy needs. All right. Well, actually, one more quick question. How long do you expect all this to play out? So that's a very good question. I'm not an expert in litigation.

We have good lawyers that we've excellent lawyers that we've hired for that purpose. And it is true that these things can get bogged down. So, you know, we'll file a motion. They'll file a counter. And so it's hard to say, really. But I think we're talking on the order of one or two years rather than anything quicker or anything longer. But it's not really my expertise. So hopefully my lawyers aren't, you know, our lawyers aren't just like screaming at the podcast right now.

We're like, no, we can do it faster. I hope they can. We'll see. Okay. Well, we will stay tuned to find out. Thank you so much for coming on Unchained. It's been a pleasure, Laura. Thank you.

Don't forget. Next up is the weekly news recap. Stick around for the speaking crypto after this short break. Local news is in decline across Canada, and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you live, telling the stories that matter to all of us, because local news is big news. Choose news, not noise.

CBC News. Thanks for tuning in to this week's news recap. Hack of B&B chain sparks decentralization concerns. The B&B smart chain executed a hard fork to solve cross-chain issues following last week's $100 million exploit. The developer team successfully deployed a new version of its network Wednesday morning. The hard fork called Moran was released to reenable cross-chain functionality between the beacon chain, which handles the staking in governance, and the smart chain, which enables

smart contracts. After the hack news broke last week, the team decided to halt the blockchain, which raised many questions about how decentralized it was. In response to critics, B&B chain posted a blog saying, decentralization is a journey, and that it will become more and more decentralized with time. Additionally, in the following weeks, developers are planning to introduce more features to improve the security of the network. Following the vulnerability, core team members of Cosmos and Osmosis started auditing the code and discovered a critical security vulnerability that impacts all IBC-enabled Cosmos chains. To fix the issue, the team will release a security patch that's scheduled for Friday at 2pm

UTC. Celsius reveals customer information as former CEO withdraws funds. Bankrupt crypto lender Celsius revealed a 14,500-page document with customer information, in a court filing that may leave its customers vulnerable to cyber threats. The document contains information on customer names, transaction amounts, crypto wallet IDs, and the crypto tokens held by each person, among other things. Nick Hansen, CEO of Bitcoin Minor Luxor, wrote, This Celsius leak may go down as one of the greatest breaches of customer information ever.

According to a tool that presents the data from the document, one person lost over $40 million with the letters collapse. Also this week, it was reported that former Celsius CEO Alex Mishinsky withdrew almost $1 million in crypto tokens since the beginning of this month. These movements are quite controversial as regular customers still have their funds frozen on the platform. On a related note, Voyager Digital's sale of assets to FTX had been going smoothly, up until now. According to court filings, the executives of Voyager want the agreement to grant them legal immunity from future lawsuits. This condition was received with contempt from Voyager's unsecured creditors committee, or UCC. However, it looks like creditors have two choices, to accept the deal as it is, or to fight the terms of the agreement and risk having the funds frozen for a longer period.

It has never been this difficult to mine BTC. The Bitcoin hash rate hit an all-time high as it surged over 10% this month. Hash rate is a measure of the computational power per second used when mining. The higher it is, the more difficult it is to mine BTC. It can also be an indicator of the security of the network. With the hash rate at unprecedented levels, the mining difficulty also reached an all-time high. This puts further stress on Bitcoin mining companies,

which have been suffering greatly since the beginning of the bear market, with many going bankrupt, raising debt, selling equipment, and merging with other companies to get through the winter. On-chain analyst, Will Clemente said, Only the most efficient miners will survive these low BTC price, high energy price, high difficulty conditions. Additionally, according to data from Into the block, the amount of BTC held by mining companies is at a 12-year low, as they have been likely selling to cover operational expenses. However, this could be good for BTC as there is not much sell pressure left.

Circle's stablecoin USDC has lost billions in market cap over recent months. Circle StableC has lost approximately $10 billion in market cap over the past four months. going from $55 billion in June to $45 billion now, bringing it back to January levels. This massive decrease might have to do with Binance's decision to remove USDC from its platform last month. Since then, Binance's stablecoin has gained $3 billion in market cap, as USDC has lost $6 billion. The stablecoin market is dominated by Tether's USDT, followed by USDC and BUSD. These three tokens, all centralized and backed by Fiat reserves, account for 90% of the total stablecoin market. Tether announced in a blog post that it has replaced its commercial paper holdings

with U.S. Treasury bills in an effort to uphold a company's commitment to backing its tokens with the most secure reserves in the market. Meanwhile, Circle CEO Jeremy Allaire said the House Stablecoin bill is the country's best shot to compete in digital dollar currency, and U.S. Representative Patrick McHenry said he is optimistic about the advancement of stablecoin legislation in the upcoming months, although he's not sure it will come this year. Meanwhile, speaking about regulatory issues, earlier this week, CFTC chairman Rosson Benham said the Uki-Dow case was so obvious that the agency had to intervene. NFT royalties, to charge or not to charge. The debate on NFT royalties got spicier this week as Project D-Gods announced it would be true.

charge no royalties on the sales of its collectibles. D-Gods said it still believed that royalties are an incredible use case for NFTs, but that this is the best decision for its business. In a Twitter space, the founder of D-Godd said that all marketplaces will end up following this model of 0% royalties. For those of you who watched the chopping blog last week, you will know that has seen Koreshi and I threw down about this issue during the episode, and I highly recommend that you check it out. Founder of Wobie sells stake amidst rumors. The founder of Crypto Exchange, Wobie, Leon Lee Lynn, sold his majority stake to investment

firm about capital. Following the company's announcement, a crypto news outlet reported that Justin's son, crypto billionaire and founder of the Toronto blockchain, was behind this acquisition. However, Sun told the block that these reports were wrong and he is only an advisor to Wobie. Speaking of Wobie, its stable coin HUSD slightly lost its one-to-one peg to the after the platform delisted 21 trading pairs. The token reached a low of 95 cents, but later recovered the losses. B&Y Mellon moves into crypto and receives a bitter response.

BNY Mellon, the oldest bank in the United States, will start offering Bitcoin and Ethereum custody services to investment firms. A recent survey conducted by the bank revealed that institutional investors have been showing increasing interest in cryptocurrency as an investment, with 91% of them interested in tokenized products. However, the news wasn't received positively by everybody. Caitlin Long, founder and CEO of Cryptobank Custodia, accused the Federal Reserve of hypocrisy. On a panel at DC FinTech Week, Long said she has been waiting for years to win approval from the Federal Reserve to have a master's account,

which would have enabled her company to issue the same service that B&Y Mellon is now launching. Coinbase partners with Google to allow crypto payments. Google, the tech giant, valued at $1.28 trillion, announced a partnership, with Coinbase to enable crypto payments for cloud services. Max Brandsburg, VP of Product at Coinbase, said we will look back on this moment as an inflection for developer adoption and the emergence of the next major computing platform. The partnership will begin next year and will give selected users the ability to pay for Google Cloud with several crypto tokens, including BTC, ETH, and even Elon Musk's fancied meme coin,

Dogecoin. Also this week, Coinbase received approval from the monitoring authority of Singapore to expand its services in the region. Hassan Ahmed, Coinbase's regional director for Southeast Asia, told Bloomberg, we see Singapore as a strategic market and a global hub for Web3 innovation. Ethereum goes deflationary for the first time post-merge. Ether became a deflationary asset for the first time since the merge. According to data from the ultrasound money website, the supply has decreased by 0.17% over the last seven days. The deflationary aspect of ETH has been one of the biggest narratives around the merge. Even though the transition of proof of stake was successful

at reducing the issuance levels, it hadn't achieved an extended period of five days of deflation until now. For ETHs to be deflationary, the gas price has to be above 15 quay. This past week, a new crypto token called XEN, which some have suspected of being a Ponzi spiked gas prices on the Ethereum network, thus triggering a sustained net reduction in ETH's supply. Salana's mango markets falls victim to a $100 million exploit. Mango Markets, a DeFi protocol based on this law on blockchain, suffered a $100 million exploit on Tuesday, representing the 13th largest hack to date. According to REC, a website that tracks DeFi exploits, the hacker managed to spike the price of Mango Market's native token MNGO and drain its lending pools, leaving the protocol with

$115 million of bad debt. The next day, the hacker post a governance proposal on the Mango Dow Forum to return the stolen funds for a jukewarm. bug bounty of $70 million, the same amount mango markets raised during its MNGO token sale. The attacker used their stolen MNGO tokens to vote yes on their own proposal, but they haven't achieved the necessary votes to be passed yet. We're only 14 days into the month, and October is already the worst month for crypto hacks ever, with exploits worth over $700 million. Time for Funbits. The Cryptopians, the TV series? Playground Entertainment, a television production company that has been behind series such as

Stars Dangerous Liaisons and Peacock Channel 4's Undeclared War, is often my book The Cryptopians, with plans to turn it into a TV series. I'm super excited to work with Playground, as in my first conversation with managing directors Scott Huff and David Stern, they showed a strong understanding of crypto, as well as of my own vision as a creator. David and Scott said, Laura's brilliant book uses high-stakes human drama to demystify and make accessible and immersion technology still misunderstood by so many. We're thrilled to be partnered with her to help bring to the screen the story of these trailblazers who are shaping the future of the internet and the world. Who do you guys think should play Vitalik? Let us know in a poll, which you will find on the

Unchained Pod Twitter account. Thanks so much for joining us today. To learn more about the SEC's investigation into Yuga Labs and Coin Center's lawsuit against Treasury, check at the show notes for this episode. Unchained is produced by me, Laura Shin, with help from Anthony Yun, Matt Pilchard, Bonavanovich, Pamajimdar, Shashonk, NCLK transcription. Thanks for listening.