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WY Prohibits Private Key Disclosures; Rep. Emmer Introduces CBDC Bill; SEC Sues Terraform Labs

Wyoming Law Preventing Private Keys Disclosure

What happened?

Last week, Wyoming lawmakers passed a law prohibiting state courts from compelling citizens to disclose their digital asset private keys “in any civil, criminal, administrative, legislative, or other proceeding[s]” in the state of Wyoming. The law includes private keys to digital assets, digital identities, or any other interests or rights which the private key provides.

The minor exception in the law involves a scenario where a public key is unavailable or unusable to disclose relevant information of the digital asset, digital identity, or other interest or right.

What does this mean?

We applaud Wyoming for proactively protecting consumer rights in crypto. Wyoming has long been at the vanguard of crypto-policy innovation, as it was the first to pass DAO legislation.

Rep. Emmer’s CBDC Anti-Surveillance Act

What happened?

On Wednesday, House Majority Whip Tom Emmer (R-MN) introduced the CBDC Anti-Surveillance Act. The bill would prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly to any individual, bar the Federal Reserve from using a CBDC to implement monetary policy, and require the Federal Reserve submit quarterly reports to Congress describing any CBDC-related.

The merits and pitfalls of a potential Fed-issued CBDC is among the most active crypto-related debates in Washington. Fed and Biden Administration officials have expressed interest in potentially rolling out a CBDC, and the Fed has been conducting research on the idea since at least 2020. In November 2022, the New York Fed announced its plan to launch a CBDC pilot program to assess the feasibility of an “interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger” on a regulated liability network.

Many lawmakers—including Representative Emmer—have questioned the Fed’s statutory authority to develop or issue a CBDC without congressional authorization. If made into law, this bill would expressly require the Fed to receive congressional approval before issuing a CBDC to “anyone,” presumably including the New York Fed’s pilot program with banking institutions.

What does this mean?

If poorly designed, a CBDC would encroach on Americans’ financial privacy and enable unprecedented surveillance into how they spend their money, who they associate with, their beliefs, etc. The right to privacy is fundamental to free societies and human prosperity, and that right extends individuals’ economic activities. No matter where one lands on the merits of a CBDC, it's inarguable that such questions of major economic and societal importance deserve congressional consideration.

SEC Sues Terraform Labs and Do Kwon

What happened?

On Thursday, February 16th, the SEC filed suit against Terraform Labs and its CEO, Do Kwon. The SEC alleges that the defendants violated securities laws and defrauded investors when Terraform Labs offered and sold five unregistered “crypto asset securities”—LUNA, wrapped LUNA (wLUNA), UST, MIR, and mAssets.

Importantly, the complaint includes novel allegations from the SEC in the context of crypto. The complaint includes a detailed description of how the assets allegedly qualify as securities, applying the usual Howey test to all tokens except mAssets. Notable, however, is the SEC’s reasoning as to why the UST stablecoin, wLUNA, and mAssets are allegedly securities: UST because it gives investors the “right to subscribe or purchase” another security; wLUNA because it is a “receipt for a security”; and mAssets because they are “securities-based swaps.”

What does this mean?

For takeaways on the suit, we recommend Collins Belton’s tweet thread.

1 Comment

Melinda Ervin
Melinda Ervin
Jun 04, 2023

So Wyoming are you banning CBDCs like Indiana and Florida?

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