Hello everyone and welcome back to Chain reaction.
Last week we discussed $4.5 billion new crypto funds from a16z. This week we’re talking about an arrest that’s got everyone in the NFT space sweating bullets.
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crimes of the future
Over the past couple of years, the crypto space has evolved so rapidly that developers have generally thought that the existing rules do not apply to them. Well, after years of tortoiseshell lawsuits, it seems US Attorneys are starting to feel it’s time to challenge that notion.
This week, U.S. Attorney’s Office for the Southern District of New York arrested and charged a former OpenSea executive who used his position to promote NFT projects that were supposed to be listed on the marketplace’s home page. Community members discovered his activities by tracking his activity on public blockchains.
I’d love to rant about it during the podcast, but news broke during the recording, so I’ll leave you here with some thoughts.
The arrest came as a big shock to people in the NFT space, who generally believed that Nate Chastain was acting unethically, but that it couldn’t be “insider trading” because NFTs weren’t securities. This claim was held by many, including Chastain’s boss at OpenSea, who fired him.
“I really think it was misinterpreted as insider trading. We do not treat NFTs as financial assets, so this does not apply. It’s a very specific term for a very specific thing,” said OpenSea’s Devin Finzer. decipher in September.
A lot of people are reading the SDNY press release very carefully, which states that he specifically accused Chastain of “electronic fraud and money laundering in connection with a non-fungible token insider trading scheme.” They specifically describe NFTs as “digital assets” later in the release. Also, it’s worth reiterating that it’s the Department of Justice, not the SEC, that is bringing charges against him, even though the case is being handled by the Securities and Commodities Enforcement Administration’s Task Force.
Now, why don’t crypto people want NFTs to be classified as securities? Well, there’s a lot of regulatory guidance out there, and most believe that if NFTs were unilaterally subject to securities law, it would basically flip the industry; this will certainly raise the barrier to entry for creating NFTs and reduce the number of experiments going on in space right now.
Another major reason that it would be bad if NFTs were treated like securities is that it would mean that so many people have been doing illegal things for a very long time.
The NFT space survived this latest cryptocurrency bull run without any meaningful regulation. As NFT volumes begin to show signs of slowing down, there are fears that more regulation could be around the corner.
What’s up is Anita to give you a preview of the latest episode of our Chain Reaction podcast where we unpack the latest web3 news block by block for the crypto-curious.
This week we talked about Coinbase’s new approach to one of the most troubling aspects of corporate life – performance measurement. Our colleague, Amanda, wrote about how the crypto exchange is trying to emulate Ray Dalio’s hedge fund, Bridgewater Associates, allowing employees to share feedback and ratings in real time. Is this part of a Black Mirror-style descent of technology into reality? Tune in to hear our thoughts.
We also covered two recent cryptocurrency comeback stories, one from the founder and CEO of OnlyFans, who left the company after attempting to ban sexually explicit content on the platform, and the other from the creator of the highly volatile stablecoin Terra.
Our guest this week was Outdoor Voices founder Ty Haney, who shared details about her transition from sports to crypto with her new venture, Try Your Best. Haney revealed on our podcast that the startup just received its second round of institutional funding.
keep track of money
Where is startup money moving in the crypto world:
- New York Enterprise Blockchain Startup digital asset has accepted an undisclosed strategic investment from Japanese banking giant SBI Holdings.
- information stonesblockchain infrastructure provider, received $66 million in a round led by SoftBank and GGV.
- Indian music startup NFT FanTiger raised $5.5 million in a seed round led by Multicoin Capital.
- LifeCitythe metaverse-focused social startup co-founded by Foursquare founder Dennis Crowley has raised $4 million in early stage funding led by DCVC.
- Zimbabwe Flex ID received an undisclosed amount of funding from Algorand for its blockchain-based identity system for the poor.
- Web3 Augmented Reality Game Development Company Jadu raised $36 million to fund its Series A led by Bain Capital Crypto.
- village studio raised $2.3 million in an Animoca Brands-led round for its NFT-based Playken avatars.
- Web3 Payments API Merge received $9.5 million in seed funding from Octopus Ventures.
- GoSatsThe India-based bitcoin rewards platform has raised $4 million in a pre-Series A funding round from investors including Y Combinator, Accel and Gossamer Capital.
- DAO governance platform Utopia Laboratories closed out a $23 million Series A led by Paradigm.
week in web3
It’s been an unusually quiet week for web3 and it took some time for our US team members to enjoy the rare long, uneventful weekend. However, some big names have made a splash in space, for better or worse.
- OnlyFans founder Tim Stockley is turning to crypto after leaving the company last December over controversy over his push to ban sexual content on the platform. Anita wrote about a new NFT “family” startup he is launching with another former OnlyFans exec that will allow people to buy, sell and trade virtual cards featuring influencers and celebrities.
- NFT platform OpenSea fired Nate Chastain, its chief product officer, back in September after he was accused of leading deals on the platform. Now he is arrested and charged with insider trading; Lucas there are details.
Here are some of this week’s cryptanalysis, which you can read on our TC+ subscription service (written by TC’s Jacqueline Melinek):
Crypto Venture Funding Drops in May, But Many Investors Remain Optimistic
Cryptocurrency venture funding has been falling month-on-month from April to May, but many investors are not worried about this. “For investors like us, it’s time to buy,” Stan Miroshnik, partner and co-founder of 10T Holdings, told TechCrunch. According to Miroshnik, the pace of capital allocation may become more measured as investors and founders become more prudent, but venture capitalists will still be very active. While there may be bleak sentiment in the digital asset markets, true crypto funds will continue to invest heavily, Saurabh Sharma, Head of Investment at Jump Crypto, told TechCrunch.
As cryptocurrency becomes more and more popular, can it remain decentralized?
Whether it’s first-time cryptocurrency buyers or people who are learning more about NFTs, Bitcoin and the overall crypto ecosystem, there has been a surge in awareness around the world about cryptocurrencies. But as it gains momentum, regulators around the world will continue to watch the space more closely, but the headline says it all: what does this mean for the future of crypto? A number of founders and industry leaders expressed their thoughts.
Longtime Bitcoiner Dan Held Says This ‘Crypto Winter’ Won’t Be As Harsh As Others
As crypto markets remain bearish, some longtime market participants such as Dan Held, director of growth marketing for cryptocurrency exchange Kraken, are not worried. Although there is a lot of talk in the community about the crypto winter, Held said that the attitude towards the current market cycle is different. While it – and many others – have weathered major market cycles over the years, the narratives have changed a lot thanks to more prominent institutional players and the sheer amount of capital coming into the space.
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