#264—Smart contracts can be classified as a “person”

Judge rules on Tornado Cash

Aug 28, 2023

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1. Smart contracts can be classified as a “person”

A decentralized project, even if it’s just code, can still be associated with “its founders, its developers, and its DAO,” a federal judge ruled.

Here’s Blockworks:

“The record sufficiently supports OFAC’s determination that the founders, the developers, and the Tornado Cash DAO have acted jointly to promote and govern Tornado Cash and to profit from these activities.”
According to the plaintiffs, smart contracts can’t be considered property as they can’t be owned. Moreover, even if deemed property, “Tornado Cash does not have a ‘legal or equitable claim or right in property’ to them,” they argued.
But Pitman said: “The court finds that OFAC’s determination that the smart contracts constitute property, or an interest in property, is not plainly inconsistent with the regulatory definition of those terms.”
He also likened smart contracts to vending machines, noting they execute a specific, preset function.
“The fact that smart contracts do so without additional human intervention, like a vending machine, or that they are immutable, does not affect its status as type of contract and, thus, a type of property within the meaning of the regulation,” he added.
Critics have argued the sanctions have a chilling effect and violate free speech rights of software developers, but the court rejected that view.

Relevant:

Judge backs US Treasury over Tornado Cash sanctions controversy

2. Why Paypal succeeded where Libra failed

Here’s Michael Casey:

Libra was one of those rare issues that generated bipartisanship — in opposition to the project, rather than for it — in part because at that time other concerns about Facebook’s treatment of user data had turned it, briefly, into a pariah for politicians.
By contrast, the stablecoin industry now seems to have won over a decent number of backers in Congress, mostly from one side. Last month, House Republicans successfully pushed stablecoin legislation through the House Financial Services Committee. And, while its passage was more contentious than many had hoped, with Waters herself leading Democrat resistance, the bill seems likely to win support in the Republican-controlled House when it goes to a floor vote.
PayPal has now complicated the outlook for this bill’s passage through the Senate. I tend to agree with observers, cited in a piece by CoinDesk’s Jesse Hamilton this week, who argued that PayPal, in upsetting Democrats by jumping the gun on the legislation, will harden the resolve of the party’s anti-crypto crusaders in the Senate, such as Sen. Elizabeth Warren (D-Massachusetts). And that could halt the bill’s passage in the upper chamber, where Warren’s party controls the majority.
But in the grand scheme of things, PayPal’s project is in a far stronger position politically than the universally mistrusted Libra ever was. Republicans are thrilled that the payments company launched its stablecoin, known as PYUSD, at this moment. The bill’s sponsor, Rep. Patrick McHenry (R-North Carolina), chairman of the House Financial Services Committee, called the move a “clear signal that stablecoins — if issued under a clear regulatory framework — hold promise as a pillar of our 21st-century payments system” and made it “more important than ever” to keep moving the legislation forward.
Just as importantly, PayPal’s move follows a slew of initiatives from financial establishment players to prod policymakers to support their own engagement in the crypto industry. BlackRock (BLK), Fidelity Investments, Invesco and many more are now pushing the Securities and Exchange Commission to support newly revived submissions seeking approval of bitcoin exchange-traded funds. Meanwhile, Charles Schwab (SCHW), Fidelity and Citadel are jointly seeking regulatory approval for a new crypto exchange. These institutions do their homework in Washington before going down paths like this, as does PayPal.

Relevant:

3. Binance being Binance

The exchange is hot water over potential Russian sanction violations. Here’s the WSJ:

Binance is helping Russians move money abroad, potentially adding to its sprawling legal problems in the U.S.
The cryptocurrency giant, led by founder Changpeng Zhao, joined many other major international companies early last year in scaling back its business in Russia, one of its largest markets by trading volume at the time. After Russia invaded Ukraine, Binance said it had stopped working there and was implementing Western sanctions requirements. It restricted trading on its platform in Russia.
But Binance’s exchange continues to handle substantial ruble trading volumes, externally compiled data show. Via layers of intermediaries, clients can turn funds at sanctioned banks into balances at Binance, while Binance also enables peer-to-peer trades of rubles for digital tokens that frequently involve banks that are on Western blacklists, company websites, user screenshots and messages in official chat groups show.
“Binance follows the global sanctions rules and enforces sanctions on people, organizations, entities, and countries that have been blacklisted by the international community, denying such actors access to the Binance platform,” a spokesperson for the cryptocurrency company said.
The spokesperson said Binance has “no relationship with any banks whatsoever, in Russia or elsewhere” around its peer-to-peer service, and doesn’t collaborate with partners in the traditional financial system who are on any sanctions lists.
The Justice Department is investigating Binance in connection with possible violations of U.S. sanctions on Russia, according to a person familiar with the probe. The investigation was first reported by Bloomberg.

Relevant:

Discussion about this post

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#264—Smart contracts can be classified as a “person”

Judge rules on Tornado Cash

1. Smart contracts can be classified as a “person”

2. Why Paypal succeeded where Libra failed

3. Binance being Binance

4. Stuff happens

Discussion about this post

Ready for more?