May 07, 2024 | Read Online

Byron Gilliam

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Judge Haller: "Mr. Gambini, that is a lucid, intelligent, well-thought-out objection."

Vinny Gambini: "Thank you, Your Honor."

Judge Haller: "Overruled."

- My Cousin Vinny

Crypto Is About to Have Its Day in Court

The emergence of transformational technologies like the printing press, the automobile or the internet often necessitates a re-litigation of the idea of "secondary liability" — should toolmakers be held responsible for what people choose to do with their tools?

Results have been mixed: Publishers sometimes have to filter the content they publish in case it's misused, and car manufacturers are required to provide safety features or be liable even in cases where a driver is at fault. But internet service providers (thanks to a special dispensation from lawmakers) are never liable for what people choose to do with the internet.

Crypto hasn't yet secured its rightful spot in that pantheon of transformational technology, but it is getting its day in court — starting next week when a panel of three judges decide the fate of the Tornado Cash developer Alexey Pertsev.

Pertsev, who's standing trial in the Netherlands on charges of laundering $1.2 billion of illicit funds for the likes of North Korea, hasn't garnered nearly as much media attention as SBF or CZ did in their trials.

But he probably should have — how judges rule in the various cases against Tornado Cash will have much bigger implications for the crypto industry than the rulings involving FTX and Binance.

If Alexey Pertsev is found guilty next week, it may mark the start of a series of attempts to bring crypto within the fold of the global anti-money laundering regime — no matter how logical the arguments that it doesn't belong there may be.

But the stakes are even higher than that.

John Paul Koning notes that the US case against Tornado Cash will determine "who, if anyone, is liable for smart contracts and the interfaces that access smart contracts, and to what degree."

Crypto won't amount to much without smart contracts and I'm not sure who would write them if they're forever liable for how the rest of us use them.

Everything that guy just said is bullshit…thank you

Ostensibly, these cases will be about highly technical questions, like what is and isn't a money transmitter according to US law.

Ultimately, however, they'll be more about whether the toolmakers of crypto are responsible for how we use the tools they make.

The defense will zoom in by making a narrow argument that crypto protocols are simply code and that code can't be held responsible for how it's used.

This might be described as the Obi-Wan Kenobi defense: Yes, a crime has been committed, but not by the accused protocol or its developers — "these are not the systems you're looking for."

Will a Jedi Mind Trick work on a judge and jury?

The prosecution will encourage them to zoom out: The entity known as "Tornado Cash" isn't just code, it's the ecosystem around the code too (relayers, front-end website, users) — the entity known as "MetaMask" isn't just the open-source code that only sends and receives messages to and from blockchains, it's the ecosystem of apps built on top of the code too (MetaMask Swaps, MetaMask Staking).

In response, the defense team will try its best to keep the judge and jury zoomed in, but you'll have to zoom out to understand what's really at stake here.

Will crypto developers have some liability for the code they write, as publishers and car manufacturers do?

Or will they get a near-total free pass like internet service providers were granted with Section 230?

Crypto Twitter is, of course, certain that crypto deserves a free pass — and the defense does have a good case to make: Crypto really is just code, Tornado Cash developers had no intent to launder money, the protocol never had control of anyone's funds.

But however lucid, intelligent and well-thought-out their arguments are, I'm not sure judges will be any more willing to listen than their colleague Judge Haller was in My Cousin Vinny.

Given the gravity of the accusation (laundering money for a rogue state), it seems more likely (to me, at least) that both judge and jury will be highly receptive to whatever logic the prosecution comes up with — even if it's infuriatingly circular.

Crypto is a blank slate: Are tokens money? Equity? Commodity? Are protocols just software? Or are they companies?

That's helpful for market valuations — everyone can buy cryptocurrency for whatever they see in it.

But it may prove less helpful in court where a jury of non-crypto enthusiasts seem likely to view crypto as a new financial system that needs to follow the same AML/KYC rules as the old one.

Crypto isn't (yet) as popular as the internet, so we probably can't expect it to be granted the same Section 230 immunity from secondary liabilities — certainly not next week.

― Byron Gilliam

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In this episode, Jason is joined by Dave Ripley, CEO of Kraken. They discuss the challenges and opportunities of operating a major crypto exchange over the past year. Dave dives into Kraken's focus on professional traders, their expansion into retail markets, and the importance of building a bridge between traditional finance and the crypto ecosystem. Dave also shares insights on navigating market cycles as a crypto business, the value of hiring crypto-native talent, and his thoughts on the future of centralized exchanges as more activity moves on-chain.

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Game of Trades @GameofTrades_

In 1790, US national debt was just $70 million

By 1980, it hit $1 trillion - a 220 year journey

Now we've just surpassed $34.5 trillion

At this rate, it's not long before the US debt crisis gets ugly

May 7, 2024

277 Likes 80 Retweets 27 Replies

Jason Choi @mrjasonchoi

I read some of the VC blogs about memecoins.

There are some interesting takes and genuine respect to all writers.

But imho the existence of these blog posts is EXACTLY why people trade meme coins.

No, memecoins are not a trojan horse for culture (yet), and I would argue they… twitter.com/i/web/status/1…

May 7, 2024

679 Likes 180 Retweets 93 Replies

Santiago R Santos | #9159 @santiagoroel

Over the past months I've been compelled to modify the portfolio for a variety of reasons (crypto and macro). It's hard to sit on your hands and do nothing…

But in those moments I have gone back to my core thesis for this cycle (NFA) and stuck with it:

> Solana is the most… twitter.com/i/web/status/1…

May 6, 2024

302 Likes 35 Retweets 35 Replies