This Week on Crypto Twitter: SEC Crypto Crackdown Met with Colossal Criticism

Illustration by Mitchell Preffer for Decrypt

Most leading coins grew in value this week, largely offsetting the losses inflicted last week—the first red week of 2023. 

Meanwhile, regulators in Europe and the Americas were having heated discussions about how to reign in crypto. The U.S. Securities and Exchange Commission (SEC) last week hit Kraken with a $30 million fine and ordered the exchange to shut down its staking service. This week, the agency lined up Terra in its crosshairs.

Across the Atlantic, the European Central Bank (ECB) told European banks to cap their crypto holdings to hedge against crypto’s inherent risks. The move came a week after the bloc published a new legal draft obliging banks to assign crypto the highest possible risk rating. 

The conversation around regulation continued over on Crypto Twitter. Coinbase CEO Brian Armstrong was looking for people in Washington to talk strategy with over a cup of coffee on Monday: 

I’m in Washington D.C. and had a meeting canceled. Will be at the Dirksen Senate Office building snack bar for the next hour or so, if anyone wants to come chat about crypto and how we get crypto legislation + regulatory clarity this year.

— Brian Armstrong (@brian_armstrong) February 13, 2023

Also that day, popular NFT collector Cozomo de’ Medici—who may be an alias of rap legend and NFT fan Snoop Dogg—announced he was donating a shedload of digital art to the Los Angeles County Museum of Art.

1/ Announcing the first donation of on-chain art from a collector to a museum, and the largest digital fine art collection to enter a museum

22 works from The Cozomo de’ Medici Collection have been added to the permanent collection of the Los Angeles County Museum of Art (LACMA) pic.twitter.com/6ePSznorrM

— Cozomo de’ Medici (@CozomoMedici) February 13, 2023

Valentine’s Day meant heartbreak for at least 22 former employees of NFT marketplace Magic Eden, as the company undergoes “restructuring.”

🧵 Today is a sad day at Magic Eden.

As part of a company-wide restructuring, we have made the difficult decision to part ways with 22 teammates. Nothing about this decision takes away from the talent, hardwork and dedication of this incredible group of people. pic.twitter.com/2LAGfK9dMV

— Jack Lu (@0xLeoInRio) February 14, 2023

Fox journalist Eleanor Terrett shared a suggestion for regulating stablecoins by Lee Reiners, a policy director at Duke Financial Economics Center. 

instead of allowing issuers to be regulated as banks or bank subsidiaries, which the President’s Working Group recommended in November 2021.

“If stablecoin issuers are forced to become banks, it would give stablecoins instant credibility, propel the growth of DeFi– a new form

— Eleanor Terrett (@EleanorTerrett) February 14, 2023

Milena Mayorga, an Ambassador of El Salvador to the U.S., tweeted that she was in Texas talking to Deputy Secretary of the Government of Texas, Joe Esparza, about opening up a Bitcoin mission, or “embassy,” in the country’s second-largest state. 

El estado de Texas, nuestro nuevo aliado.

En mi encuentro con el Secretario Adjunto del Gobierno de Texas, Joe Esparza @TXsecofstate, abordamos la apertura de la segunda Embajada #Bitcoin y de ampliar los proyectos de intercambios comerciales y económicos. 🇺🇸🤝🇸🇻 pic.twitter.com/NcmOjeadl6

— Milena Mayorga (@MilenaMayorga) February 14, 2023

If you think big crypto lobbying groups like Blockchain Association represent retail, think again, said crypto advocate Chris Bles on Wednesday. 

Here’s a list of the companies that fund @BlockchainAssn.

Lots of corporations. Zero people like you.

They are the ones out there “educating” regulators and politicians.

They represent corporate & VC interests. Not YOUR interests.

They can – and will – sell your ass out. pic.twitter.com/F5WNM1ka1r

— Chris Blec (@ChrisBlec) February 15, 2023

An account called @LeonidasNFT, who describes themself as an “NFT Historian” on Thursday tweeted news about the sale of the most expensive digital rock doodle on Bitcoin. It looks suspiciously like an EtherRock. 

On Friday, an artist who goes by the handle @Jdotcolombo accused Yuga Labs of shamelessly plagiarizing its iconic skull logo. The company blamed a freelance designer and promised to replace the drawing.

That day, Caitlin Long, founder of crypto bank Custodia, posted an open letter to Washington asking for a seat at the table when it comes to discussions about crypto regulation. She also hinted that she’d previously shared with law enforcement concerns that a huge crypto company would go bust and take its customers with it, long before it actually happened, but was met with deaf ears. 

2/ First, the revelations. Today, I’m publicly disclosing for the first time that (a) I handed over evidence to law enforcement of probable crimes committed by a big crypto fraud, starting months before that company imploded and stuck its millions of customers with losses, and…

— Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) February 17, 2023

 The SEC versus everyone

Crypto Twitter was aggressively locking horns with the SEC this week as the agency continued its regulation-by-enforcement (crackdown) strategy on the industry with several aggressive maneuvers. Kraken founder and former CEO Jesse Powell was still seeing red from last week. 

Operation Chokepoint 2.0 is in full effect. It’s no coincidence that every financial regulator in the country is attacking mundane, respectable, domestic crypto businesses in the past week. There is no interest in supervising crypto. Everything being done is to shut it down.

— Jesse Powell (@jespow) February 13, 2023

SEC Commissioner Hester Pierce on Thursday criticized her agency’s crypto custody proposal. She specifically mentioned the proposal’s timing, workability, and the agency’s jurisdiction as potentially problematic and said the public needs more time to analyze and discuss it. 

My statement on today’s custody proposal. Looking forward to comments from the public. This one affects crypto, among many other issues: https://t.co/1eWT6P45Ya

— Hester Peirce (@HesterPeirce) February 15, 2023

Coinbase’s Chief Legal Officer Paul Grewal reacted to the proposal by inviting the SEC to follow due process.

This is not a final action — it’s just the first step in a long process that requires the SEC to collect public views before considering next steps.

— paulgrewal.eth (@iampaulgrewal) February 15, 2023

That same day, news broke that the SEC also charged Singapore-based Terraform Labs and founder and CEO Do Hyeong Kwon—better known as Do Kwon—with securities fraud involving its algorithmic stablecoin Terra USD and the LUNA token.

U.S. attorney Gabriel Shapiro, General Counsel at Delphi Labs, the protocol R&D arm of crypto research and investment firm Delphi digital, shared his response to the Terra lawsuit in a thread. 

so yeah I think there are at least three firsts here:
–>alleging a stablecoin (UST) is a security
–>alleging a (stock) synth (mAsset) is a (securities) swap
–>alleging a ‘wrapped token’ (wLUNA) is a security

— _gabrielShapir0 (@lex_node) February 16, 2023

Finally, the SEC on Friday levied a $1.4 million fine against former NBA star Paul Pierce for shilling EthereumMax, the same token Kim Kardashian got fined $1.26 million for promoting.

Today we announced charges against former NBA player Paul Pierce for touting EMAX tokens on social media without disclosing the payment he received for the promotion and for making false and misleading promotional statements about the same crypto asset.

— U.S. Securities and Exchange Commission (@SECGov) February 17, 2023

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Source: https://decrypt.co/121695/this-week-on-crypto-twitter-sec-kennel-club-magic-eden