Welcome to Chain Letter! Great to have you. Here’s what’s new in the world of blockchains and cryptocurrencies. We'll be taking a break this Thursday, but don't worry, Chain Letter will be back next week. | | A plan for a national ICO is creating major drama in the Marshall Islands. Hilda Heine, the small island nation’s president, is facing intense political headwinds as she moves forward with a plan to create a national digital currency. Heine’s opponents say the plan, in place since February, poses too much of a risk to the Marshall Islands’ financial stability. They might be right. A report from the International Monetary Fund in September urged the nation to “seriously reconsider” the project and warned the potential risks to its financial system might outweigh the benefits.
The Marshall Islands is in the Pacific Ocean, about halfway between Hawaii and Australia. The nation, which has fewer than 100,000 people, gained its independence from the US in 1986. The US dollar is its currency, but Heine’s government wants the new crypto-token, called the Sovereign, to have the same status. At least part of the motivation seems to be the prospect of raising funds via an initial coin offering. But Heine, who just narrowly survived a vote of no confidence that would have ousted her, will have to consider the political risks as well as the potential financial ones. (also see: “Governments are testing their own cryptocurrencies”) | | Calling something decentralized doesn’t mean someone’s not on the hook if it’s used to break laws. Even if you can’t control how your blockchain-based service is used, you can still be held liable if it is used illegally. At least that appears to be the view of the Securities and Exchange Commission, which has recently come to a settlement with Zachary Coburn, the creator of a popular Ethereum based service called EtherDelta. The agency had charged Coburn with illegally operating an unregistered securities exchange. He has agreed to cooperate with investigators.
EtherDelta is billed as a decentralized exchange: essentially a smart contract that automatically matches traders and facilitates peer-to-peer exchanges of Ethereum-based tokens. That would be fine except that EtherDelta has not registered with the SEC, and had no rules in place to stop users trading securities. Which Ethereum-based tokens are securities? That’s not entirely clear. The SEC has implied that ether itself is off the hook, but the agency’s chair told Congress that most of the ICOs he’s seen qualify—and most ICOs use Ethereum tokens. (shrug emoji?)
This might be an early shot across the bow aimed at cryptocurrency exchanges. It also chimes with something that Brian Quintenz, a commissioner from one of the other federal agencies that regulates cryptocurrencies, recently said in a speech. Quintenz, who was talking about smart contract-based prediction markets, said it was fair game to go after the developers of a smart contract whose users are engaging in illegal activity.
That tactic might deter people from creating smart contracts that could be used to break laws. But once the program is on the blockchain, law enforcement can’t stop it. That’s what’s really new, from a legal standpoint, about “decentralization.” Do officials go after users? If so, all of them? The problem gets complicated—fast. That’s why, according to Quintenz, he and his colleagues are still struggling to grasp all the new questions raised by smart contracts. | | Loose Change Fill your pockets with these newsy tidbits. | | | Ethereum’s core developers have tentatively marked January 16 as the date to launch Constantinople, its next software upgrade (which has already been delayed once). (CoinDesk) | | | | Jared Polis, a standout advocate for cryptocurrency and blockchain technology while in Congress, will be the new governor of Colorado. (Finance Magnates) | | | | A Chinese high school’s headmaster has been caught using the school’s electricity to mine ether. (South China Morning Post) | | | | Mentions of “blockchain” are decreasing drastically during earnings calls as corporate America’s blockchain fever appears to be breaking. (Axios) | | | | CarbonUSD, a dollar-pegged crypto-coin that has been live on Ethereum for two months, can now be traded on the EOS blockchain too. (CoinDesk) | | | The Money Quote “At the very center of the spirit of Bitcoin Cash is that if the minority disagrees with the majority they should be free to fork away and have their own coin and do what they want. And if it wasn’t for people thinking that way, Bitcoin Cash wouldn’t exist today.” —Roger Ver, aka “Bitcoin Jesus,” a Bitcoin pioneer who became a front man for Bitcoin Cash, in a new video addressing the potential that Bitcoin Cash—which was born after splitting off from Bitcoin—may itself split into two coins. (YouTube) | | | |
