Opinion

The Paradox of the Bitcoin Maximalist

Published

3 hours ago

September 29, 2024

However, dystopia is not an inevitable outcome. The onus to act, with purpose, still lies with crypto natives, and more specifically those who claim to be Bitcoin maximalists. While institutional dominion is a problem, the more immediate problem is the lack of acceptance that Bitcoin is a people’s currency. The sooner it is accepted that Bitcoin may be treated like any other asset, the sooner that full focus can be given to maximizing its value for everyone. If global crypto adoption is to truly manifest, minds must change and grassroots action must be taken.

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Donald Trump

The real winner of the 2024 US elections will be crypto

Published

13 hours ago

September 29, 2024

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Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial.

Crypto is the darling of the 2024 elections, and I’m totally here for it. For the first time in history, two presidential candidates are actively courting the crypto vote. Donald Trump made his pitch at the Bitcoin 2024 Conference addressing crypto voters, which was met with an astonishing vote of support from the crypto community. Democrats, unwilling to concede the crypto vote to Trump, held a crypto reset meeting with prominent industry leaders and also launched Crypto for Harris.

However, in the not-so-distant past, many proclaimed crypto “dead.” The industry experienced a brutal crypto winter, losing over two trillion in market cap in 2022 and global scrutiny from regulators. Now, two years later, crypto has emerged as the dominant player in the 2024 elections. Game on.

The SEC’s villain origin story

Crypto’s ascension into a key player on the political stage is rooted in its antagonistic sparring with the US Securities and Exchange Commission. According to Binance attorneys, Gary Gensler approached Binance to become an advisor in 2019, but the company rejected his offer.

Since 2021, there has been a considerable uptick in SEC crypto-related cases since President Joe Biden appointed Gary Gensler SEC Chair/Biden. Coincidence? I think not. Three court cases that truly establish the SEC as the chief crypto supervillain:

Number one, in the Telegram court case, the company had to return over a billion US dollars from a token raise. Ushering the reign in of SAFTs, Simple Agreement For Future Tokens contracts, and the ICO boom in the US.

Number two is the Ripple Labs case, which ultimately found Ripple (XRP) to be a security on the institutional side but not a security on the retail side.

Third, the BitMEX case, where the arrests of the founders of such top-tier exchange for AML/KYC violations, usually a slap on the wrist, shook the industry.

The legal actions taken against these companies were like warning shots fired by the SEC, foreshadowing the heavy hand they would take towards major crypto companies.

The switch up: From a friend to a foe

Once crypto winter hit, after Terra Luna collapsed, public sentiment was that bad actors in space need to be removed and held accountable. Seizing on the opportunity, the SEC began its crypto crackdown, handing out Wells notices like Halloween candy, forcing some companies to divest from US operations or close up shop to stop the bleeding.

Even companies once seen as allies became targets. The irony is that the SEC accused Coinbase of operating an illicit exchange. Coinbase has acted as a custodian of the US government, working directly with the US Marshals Service to sell Bitcoin (BTC) confiscated from the “illicit” website, the Silk Road.

This is a rather strange “UNO reverse” move by the SEC since Coinbase is US-based, a BitLicense holder, along with being a publicly traded company.

Crypto fights back

A major noticeable change is the crypto industry has gone on the offensive, accusing federal regulators of refusing to create reasonable crypto regulations and guidelines for the industry. Gemini COO Marshall Beard voiced his frustration in an interview with Bloomberg TV: “We’ve been asking for broader regulation, we’ve been doing this for a decade now, and the US does not have a broad crypto regulation framework.”

The real winner of the 2024 US elections will be crypto | Opinion - 1 — Source: OpenSecrets

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CEX

Crypto-native platforms need on-ramps to grow and leap forward

Published

2 days ago

September 28, 2024

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Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial.

Crypto was once a self-contained industry. The average user only heard about it at the Bitcoin (BTC) price peaks and was reluctant to invest in this new asset class. Those passionate about crypto found their way through with limited options to convert their digital coins into fiat and back.

But those days are gone. As crypto products grow in popularity, many platforms, previously entirely confined to web3, are integrating fiat bridges to open their doors to new users.

Disruption that doesn’t benefit users

Imagine a common type of web3 product that wants to disrupt its niche and make its service go mainstream. It describes its solution and how blockchain revolutionizes the traditional way of doing things. Then, it says: connect your web3 wallet and make sure you have enough Ethereum (ETH) to pay gas fees. If you don’t have any, set up an account on a centralized exchange and buy some.

This path is ridiculously long and bumpy for a regular non-crypto user. Centralized exchanges are still the most common way to convert fiat money into crypto, but their cumbersome interface often leaves newcomers feeling dizzy. Even for experienced users, CEXes as a gateway are not always convenient—withdrawing funds to an external platform involves multiple confirmations and extra fees. All of this creates a great deal of friction, complicating the user’s journey into web3.

Why would a DEX need a fiat gateway?

One could argue that web3 projects aiming to go mainstream and blockchain-native platforms mostly focused on the crypto audience are different—in the sense that crypto protocols don’t really need fiat. For example, decentralized exchanges that let enthusiasts swap various L1 and L2 tokens earned in airdrops, bounty campaigns, and other activities confined to the blockchain realm.

Is that really the case? In practice, that’s not quite so. For instance, Uniswap introduced its fiat-to-crypto bridge back in December 2022 and has since partnered with various providers to expand opportunities for its users. This is a good example of how a DeFi project realized that it couldn’t reach the next level without opening a channel for inflows from the traditional economy. The move also strengthened the project’s value proposition, giving people more opportunities to safely trade in a decentralized environment.

Memecoins are another example. As the memecoin frenzy unfolded in 2024, this asset class became well-known to a wider audience, catching the attention of traditional investors. While many of them turned to centralized exchanges due to a lack of other options, the Shiba Inu (SHIB) memecoin integrated a fiat on-ramp, offering users the ability to purchase the token directly into their wallet. Investors gained an easy way to buy the asset, and the project increased the value and utility of its token.

The efforts of top crypto platforms to integrate on- and off-ramps highlight the user demand. However, they also indicate that the infrastructure for fiat-to-crypto bridges is now ready. Today, setting up an on-ramp can take just a few days using pre-built software that supports dozens of countries, payment methods, and national currencies. Good gateways are fully licensed in many regions, freeing their clients from compliance issues.

Some argue that crypto-native platforms don’t really need fiat bridges because not many people have used them so far. But what if that was the case simply because there were far too few bridges available?

We constantly think of how to make crypto more accessible. But it often doesn’t require us to reinvent the wheel—it’s about removing the friction faced by those who want to use their fiat in the crypto world. There was a time when fiat and blockchain realms barely intersected. However, as they continue to converge, only tighter integration between traditional and digital currencies will facilitate faster adoption of crypto.

Konstantins Vasilenko

Konstantins Vasilenko is a co-founder of Paybis, a pioneering fintech startup in the Baltic States, which has become a leader in the digital and cryptocurrency exchange business. Konstantin is a seasoned IT expert with over 20 years of experience spanning enterprise IT project management, CRM systems, blockchain technology, digital payments, and cryptocurrencies. Prior to Paybis, Konstantin honed his skills at Accenture. His career reflects a strong commitment to innovation and digital transformation, driving the bridge between traditional finance and the crypto economy.

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legal

Tornado Cash Loses Motion to Dismiss

Published

2 days ago

September 27, 2024

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The judge in the Tornado Cash case delivered an oral ruling today, rejecting both the Defense’s motion to compel discovery and their motion to dismiss the charges. This represents a massive setback for the Defense, and the judge’s reasoning may not bode well for developers and projects going forward.

Motion to Compel

The Defense’s motion to compel discovery sought to access a broad range of government communications, including exchanges with foreign authorities under the Mutual Legal Assistance Treaty (MLAT) and with domestic agencies like the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN). Citing Federal Rule of Criminal Procedure 16, the Defense argued that these materials were essential to understanding the government’s case and could potentially include exculpatory evidence. The judge, however, made it clear that Rule 16 imposes a stringent requirement: the Defense must show that the requested information is material to their case, not merely speculate on its potential usefulness.

The court dismissed the Defense’s arguments as speculative, noting that references to what the information “might” or “could” reveal do not meet the necessary standard for materiality. For example, the Defense argued that MLAT communications with the Dutch government might shed light on the evidence against Tornado Cash or reveal the government’s investigative theories. The judge found this reasoning unpersuasive, emphasizing that materiality cannot be established through conjecture or vague assertions.

The court similarly rejected the Defense’s request for all communications between the government and OFAC and FinCEN. Although the Defense claimed these documents were necessary to understand the government’s theories and potential witnesses, the judge concluded that the Defense failed to demonstrate how these communications were directly relevant to the charges at hand. The court reiterated that the burden is on the Defense to show a specific link between the requested documents and their defense strategy, a burden they did not meet.

When the Defense suggested an in-camera review—a private examination by the judge of the requested documents—to determine their materiality, the court refused. The judge argued that granting such a request based on speculative assertions would set a dangerous precedent, effectively forcing in-camera reviews in all criminal cases when a defendant speculates about the relevance of certain documents. This, the judge stressed, would undermine the purpose of Rule 16 and transform the pretrial discovery process into an unrestrained search for potentially helpful evidence.

The Defense also raised concerns under Brady v. Maryland, arguing that the government might be withholding exculpatory or impeachable evidence. While the court acknowledged the government’s obligations under Brady, it found no indication that these duties had been neglected. Without concrete evidence suggesting the government was withholding information, the court saw no reason to compel additional disclosures. The judge cautioned that while the Defense’s arguments were theoretically possible, they lacked the factual support needed to warrant the court’s intervention. She did say, however, that if she later finds that the government has “interpreted its obligations too narrowly” then there will be “unfortunate consequences for their case.”

Motion to Dismiss

The motion to dismiss presented a much more significant set of issues. Central to the Defense’s argument was the definition of a “money transmitter” under the Bank Secrecy Act (BSA). The Defense contended that Tornado Cash did not qualify as a money transmitter because it did not exercise control over users’ funds; it merely facilitated the movement of cryptocurrencies. The court, however, rejected this narrow interpretation. The judge clarified that the BSA’s scope does not require the control of the funds; Tornado Cash’s role in facilitating, anonymizing, and transferring cryptocurrency was sufficient to bring it within the statute’s ambit. The judge likened Tornado Cash to custodial mixers, which have been deemed money transmitting businesses.

Further complicating the Defense’s argument was their reliance on the 2019 FinCEN guidance, which uses a four-factor test to determine whether a wallet provider is a money transmitter. The Defense claimed this guidance, which includes a “total independent control” standard, should apply to Tornado Cash. The court disagreed, stating that this standard is specific to wallet providers and does not extend to mixers like Tornado Cash. Consequently, Tornado Cash’s lack of “total independent control” over funds was irrelevant to its classification as a money transmitter.

Another key point in the court’s analysis was the distinction between expressive and functional code under the First Amendment. The Defense argued that prosecuting Storm for his involvement with Tornado Cash was tantamount to punishing him for writing code, which they claimed was protected speech. The judge acknowledged that while code can be considered expressive, the specific use of code to facilitate illegal activities—such as money laundering or sanctions evasion—falls outside the bounds of First Amendment protection. The judge emphasized that the court must focus on the conduct enabled by the code, not merely the code itself. Even under intermediate scrutiny, which applies to content-neutral restrictions on speech, the judge found that the government’s interests in preventing money laundering and regulating unlicensed money transmission justified the restrictions imposed by the relevant statutes.

The court also addressed concerns about the immutability of Tornado Cash’s smart contracts, an issue raised by both parties. The judge acknowledged the existence of a factual dispute but noted that it was not a decisive factor in the current motion. However, the issue of immutability may play a role at trial in determining the extent of Storm’s control over the service and his responsibility for its operations.

In concluding remarks, the judge underscored that while the use of code to communicate ideas may be protected under the First Amendment, using that code to facilitate illegal activities is not. This distinction is critical in the context of emerging technologies like blockchain, where the line between speech and conduct can be blurred. The court’s ruling serves as a reminder that the legal system is prepared to hold participants in the digital economy accountable, even as it grapples with the complexities of applying traditional legal principles to new and evolving technologies.

The full transcript of the ruling will be released once prepared by the court reporter.

This is a guest post by Colin Crossman. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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