New York Attorney General Orders Two Crypto Lending Platforms Shut

Key Takeaways

  • The Attorney General of New York State has banned two crypto lending companies from operating within the state, and has sent letters to three additional entities requesting more information regarding their business practices.
  • New York AG Letitia James contends that crypto lending products are securities, and therefore must be registered as such.
  • This is not the first time the NY AG has taken decisive action against cryptocurrency-related entities.

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New York Attorney General Letitia James announced today that two “unregistered crypto lending platforms” must cease operations within New York State. The names of the two firms had been redacted from the publically-released letters, but early images of the letters appeared to contain “Nexo” and “Celsius” in their file names.

New York Attorney General Issues Cease-and-Desists 

The Office of New York Attorney General Letitia James announced in a press release today that it had sent cease-and-desist letters to two unnamed cryptocurrency companies ordering them to cease operations in New York State. Furthermore, the AG sent letters to three additional entities requesting information on their activities and products. Although the names of the entities were redacted, early images of the cease-and-desist letter and information request letter appeared to reveal the file names “Nexo Letter” and “Celsius Letter,” respectively.

According to the press release, the AG alleges that crypto lending products that allow investors to earn a yield on their assets should be considered securities; therefore, these entities must register with the Office of the Attorney General (OAG) in order to lawfully conduct business in New York State.

Since the Attorney General made these announcements, Nexo has refuted the basis of the AG’s orders. Nexo told Crypto Briefing:

“Nexo is not offering its Earn Product and Exchange in New York, so it makes little sense to be receiving a C&D for something we are not offering in NY anyway. But we will engage with the NY AG as this is a clear case of mixing up the letter’s recipients. We use IP-based geoblocking.”

Section 1.2 in Nexo’s Exchange Terms lays out that Nexo’s exchange services are not available if one is “a citizen or resident of Bulgaria, Estonia, Australia, [or] the State of New York.”

Neither Celsius nor the Investor Protection Bureau of the OAG could be reached for comment. 

Trouble Brewing

Signs of impending regulationor even legal actionhave circulated around the crypto industry in New York for some time. In 2018, then New York AG Barbara D. Underwood issued a warning of “significant risks” to “customers of virtual asset trading platforms.” In today’s announcement, James said:

“Cryptocurrency platforms must follow the law, just like everyone else… We’ve already taken action against a number of crypto platforms and coins that engaged in fraud or that illegally operated in New York.” 

In February, the OAG reached a settlement with iFinex, Bitfinex, and Tether—all affiliated entities—requiring the companies to cease all trading activities in New York and to pay an $18.5 million fine. In March, the OAG notified those dealing in the virtual currencies industry that they must register with the Investor Protection Bureau. Further, James shut down the crypto trading platform Coinseed, Inc. last month on the same day that she helped secure the recovery of $479.9 million in settlement claims from companies that “unlawfully sold stocks and two digital instruments promoted as cryptocurrencies without registering in New York State.” Consistent with the theme of today’s announcement, James said, “No company is above the law.” 

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Notably, Tether Limited appears unredacted in the AG’s information request letter to the three unnamed entities. Section 5 reads: “State whether you and/or your lending product solicits, accepts, loans, or accepts as collateral, tethers (USDT), and provide details regarding the use of USDT in connection with your product.”  It goes on to ask for details regarding all contracts and agreements with Tether Limited (and its affiliated persons and entities), as well as details on all loans, collateral, and transactions using USDT. 

Tether has been under increasing scrutiny from a variety of regulators in recent months. Among other incidents, Tether has been subject to fines by the CFTC and has been accused by the AG of not fully backing its flagship stablecoin, USDT, with U.S. fiat currency, as it has claimed.  

In today’s announcement, James cited New York’s Martin Act, which grants the AG broad powers to investigate and prosecute securities fraud within the state. The Martin Act’s definition of securities includes traditional instruments such as stocks and bonds, but courts have held that the Act’s provisions can be interpreted broadly, as the defined categories in the Act are non-exhaustive. Today’s announcement appears to affirm that the OAG considers certain virtual currency lending products to be securities under the Martin Act, and it appears to be signalling that it is prepared to act as such. 

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies.

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New Bill in Ukraine Would Legalize Crypto and Protect Owners of Digital Assets

The Ukrainian parliament is working on a bill that would legalize cryptocurrencies in the Eastern European country.

If passed, the bill will allow Ukraine’s citizens to legally declare and exchange cryptocurrencies, and it will also increase guarantees for crypto buyers, according to Ukraine’s Deputy Minister of Digital Transformation Oleksandr Bornyakov.



In an interview with the Borderless Bitcoin Traveling Show last month, Bornyakov said that the current legal framework around cryptocurrencies in Ukraine is “neutral.”

“It’s not prohibited, but at the same time it’s not allowed. This actually was the major task for us because of this reason. It means we should step in and create a legal framework for that reason, so banks and other government institutions would recognize [crypto] as a part of civil rights [and] of economic value.”

Under the new bill, cryptocurrency projects would not require registration as a legal entity in Ukraine, but they would require a work permit, according to Bornyakov.

“Guarantees for Ukrainian cryptocurrency buyers will increase due to the fact that certain cryptocurrencies will receive a work permit in Ukraine, and accordingly we will check them and make sure that they work in good faith.”

By obtaining permits, companies would provide proof of “the necessary amount of capital” and show that none of the project’s founders are on sanctions lists, says Bornyakov.

Ukraine’s government currently holds 46,351 Bitcoin, worth $2,006,268,948 at time of writing, according to Buy Bitcoin Worldwide.

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IMF Issues New Warning Against Using Crypto Assets As National Currency

The International Monetary Fund (IMF) sent out a warning, telling us that using crypto assets as national currency would be “a step too far.” Personally, I think a step too far is the existence of an unaccountable, global body that imposes an unsustainable monetary system on the entire word, but that’s just me. Leaving that aside, let’s look at the IMF’s arguments and see if they hold any weight.

Don’t Fear Short-Term Volatility

The IMF begins by warning us that crypto assets are extremely volatile, as if we didn’t know that. The IMF said that bitcoin, “reached a peak of $65,000 in April, but then crashed to less than half that value just two months later.” So yes, it’s volatile.

But here’s the piece the IMF is missing. If you’re measuring your investments in weeks and months, you’re going to lose every single time. You need to zoom out and look at it over the long run.



Above is the price of bitcoin in yearly candles since 2009. We can see that it has continued to go up and up, with only a couple of down years. This is a very different picture than what the IMF tells you. Even considering bitcoin’s recent downturn, it’s still up about 300 percent in the last 12 months. Taking the longer view is key. The IMF is trying to scare you by looking only at short-term volatility.

“Stable Inflation” Versus Accumulation

Next, the IMF argues that, “crypto assets are unlikely to catch on in countries with stable inflation.” Inflation means that my money is losing value. It’s losing purchasing power. I wouldn’t call that stable, nor do I accept my money losing value at a steady rate of a central bank’s choosing. To me, stability means my wealth doesn’t get inflated away.

The IMF goes on to say the people would have very little incentive to save, even if a crypto like bitcoin was made legal tender. And they allege that people would much rather hold a global currency like the dollar or the euro.

They seriously expect you to believe that people living under “stable inflation” would rather hold and save in fiat currencies, which are guaranteed to lose their value, instead of putting your money into bitcoin, which has a long track record of growing over time. Which one would you choose? And what do people living in countries like Argentina, Lebanon and Venezuela feel about seeing hyperinflation and their currencies blow up? Which one would they choose?

Inflation is an absolute killer, even if you live under a “stable inflation” regime. You can see the U.S. Consumer Price Index rise rapidly after we went off the gold standard in 1971. Inflation was mellow until that point, and then it’s basically gone straight up. That’s your wealth being stolen over decades.

Source: FRED

Source: FRED

The dollar has a laughably poor performance compared to other assets. We can see on this chart put together by Michael Saylor of MicroStrategy, the dollar lost 98% of its purchasing power in just five years versus Bitcoin.

Source: MicroStrategy

Source: MicroStrategy

In a similar calculation compared to the S&P 500, the dollar lost 91% of its purchasing power over 30 years. Your fiat dollars continually lose value and underperform compared to bitcoin and equities. And yet, the IMF says you’d prefer to hold dollars instead of bitcoin, which gives you a 239% return per year. That’s nuts. I’ll happily trade some short-term volatility for the opportunity to build real wealth.

I want to be fair to the IMF here. There’s one thing in their article I agree with. They say that crypto assets may catch on with the unbanked. About two billion people have no access to the financial system. That’s a big problem. In El Salvador, where I recently visited, it costs anywhere from $25 to $50 a month to hold a bank account. That’s about half of what people earn in a month, and so banking is cost prohibitive. Bitcoin will be the key to giving the world’s unbanked access to the financial system.

Scare Tactics: IMF Says Crypto Will Fund Criminal Activity And Terrorism

The IMF is worried about crypto endangering financial integrity saying that without strict regulation, “cryptoassets can be used to launder ill-gotten money, fund terrorism, and evade taxes. This could pose risks to a country’s financial system…” So, the couple hundred bucks or thousand bucks you hold in crypto could fund terrorism, they say. Never mind the $400 million in cash the Obama administration put on a plane and flew to Iran, one of the world’s largest sponsors of terrorism. No. they’re more worried about you HODLing some bitcoin.

This concern-trolling flies in the face of all reality. In September 2020, the The International Consortium of Investigative Journalistsreleased a bombshell report titled, “Global Banks Defy U.S. Crackdowns By Serving Oligarchs, Criminals And Terrorists,” showing trillions of dollars of dirty money flowed through big U.S. banks, doing business with corrupt regimes, organized criminals and fraudsters. Trillions of dollars, not bitcoin, get laundered to fund criminal activity, and who knows what else? Yet the IMF thinks you’re the problem, you’re the criminal risk for keeping some bitcoin. It’s laughable.

Lost Productivity

The IMF also claims that adopting Bitcoin would cause macroeconomic instability and lost productivity, saying, “households and businesses would spend significant time and resources choosing which money to hold as opposed to engaging in productive activities.” You’re going to spend all day fretting over which currency to use. Sure.

I want to address the idea of productive time. Under a central bank-controlled fiat system of never-ending inflation and currency debasement, productive time is stolen from you. They literally steal your time with inflation.

For example, I recently researched the impact runaway housing inflation has had on the typical family over the years. I calculated the time needed to save for a home. The results were striking.

Source: Mark Moss

Source: Mark Moss

In 1950, it took 2.3 years of your life, your labor, to save for the cost of an average home. By 2020, that figure ballooned to nearly seven years. The system has stolen that time from you through inflation.

But the IMF isn’t concerned with the four and half years of your life lost to keeping up with housing inflation. They’re more worried about the few minutes you might have to spend to decide how you’ll allocate your money in dollars or bitcoin.

The truth is, under stable money, you would become more productive, not less.

Bitcoin Is A Threat To Their Power

After all these flimsy arguments, the IMF gets to the heart of it all, admitting “monetary policy would lose bite.” Mass crypto adoption means central banks would lose their teeth. They wouldn’t be able to dig in and enforce their actions. They wouldn’t be able to exert total control over interest rates. That’s a good thing. We want them to lose their bite. The free market should decide interest rates, not central bankers. If there are more lenders than borrowers, interest rates should come down. If there are more borrowers than lenders, interest rates should go up. The central bank should have no role here. But central banks don’t want to give up their control and that’s why they want to crack down so hard on crypto and Bitcoin, warning you of their dangers.

Senator Elizabeth Warren recently said, “We don’t want our policies to be in the hands of shadowy super-coders.” Instead, we’d rather have our policies in the hands of central banks that lack transparency? How’s that been working out for us?

The irony is that they’re making the arguments for us. The strong reaction against crypto from the central authorities tells us we’re over the target. They’re telling us that crypto is an existential threat to central banking.

Bitcoin is the one thing that can bring this whole corrupt monetary system down and the way for us to build real, lasting wealth because it’s the only cryptocurrency that solves the problems this current system has created.

This is a guest post by Mark Moss. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


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The Conundrum Of Bitcoin Legal Tender Laws

The adoption of bitcoin by El Salvador poses an interesting contradiction of freedoms, albeit solved on a secondary level.

Nayib Bukele, El Salvador’s laser-eyed President, shocked the world at the Bitcoin 2021 conference in Miami when he announced that bitcoin would become legal tender in his country. A few days later, the “Bitcoin Law” was passed, ushering in a new era for the virtual currency.

There is something about the law — mandating that vendors accept bitcoin — that goes against the voluntary “opt-in” ethos of Bitcoin. However, there are key features of the law that many people may have overlooked that protect vendors from the risk of holding the volatile asset while maintaining the benefits of using bitcoin in transactions.

First, the law confirms that vendors are indeed mandated to accept bitcoin as legal tender. However, for accounting purposes, dollars will still be the “reference” currency — meaning prices will still be expressed in dollars but “may” be expressed in bitcoin. Secondly, steps have been taken to avoid forcing vendors to hold bitcoin.

Art. 8. Without prejudice to the actions of the private sector, the State shall provide alternatives that allow the user to carry out transactions in bitcoin and have automatic and instant convertibility from bitcoin to USD if they wish. Furthermore, the State will promote the necessary training and mechanisms so that the population can access bitcoin transactions.

Art. 9. The limitations and operations of the alternatives of automatic and instantaneous conversion from bitcoin to USD provided by the State will be specified in the Regulations issued for this purpose.

Art. 14. Before the entry into force of this law, the State will guarantee, through the creation of a trust at the Banco de Desarrollo de El Salvador (BANDESAL), the automatic and instantaneous convertibility of bitcoin to USD necessary for the alternatives provided by the State mentioned in Art. 8.

Source: Nayib Bukele

In an impromptu interview with Bukele, it was revealed that the citizens of El Salvador will have open access to an official government wallet — designed by Strike — that will allow receivers to instantly and automatically convert incoming bitcoin into dollars if they don’t want to take on the risk of holding an asset as volatile as bitcoin. This is what Strike does best: turning bitcoin into a payment rail that users don’t even have to think about.

The El Salvador government is setting up a $150MM trust fund with the Banco de Desarrollo de El Salvador (BANDESAL), and anyone who converts their bitcoin to dollars with the official wallet is essentially selling their bitcoin to the trust fund.

When the trust fund has more than $150MM of bitcoin it will rebalance and use the proceeds to fund technology investments in El Salvador. The worst possible outcome is that the $150MM only spurs tourism and investment to the impoverished country. The best possible outcome is limitless upside potential.

Users will not be forced to use the government wallet either. They can use a private custodial or non-custodial Lightning wallet if they want. And any private wallet service, made by Strike or any other neobank, could offer the same conversion service.

Thus, this isn’t a full legal tender mandate in the traditional sense. Users aren’t forced to take on the risk of holding bitcoin nor provide change in bitcoin and are free to receive dollars if someone sends them bitcoin. Vendors only have to have a Lightning QR code and they can instantly and automatically receive dollars when someone gives them bitcoin.

One can envision a world where this kind of adoption model spreads to other countries — using bitcoin as an open payment rail that spurs regional investment, while third parties take on the risk.

Your average saver may not like volatility, but guess who does? Professional money managers. If banks want to stay relevant, they will eventually figure out that there is money to be made by becoming the third party that will take on and manage the risk of holding bitcoin from Lightning payments as a value-added service.

Is forcing bitcoin as legal tender still a form of government coercion? Yes, of course. Users are mandated to, at least during the transaction, accept an open payment rail as a payment option. However, Bukele’s implementation is a less forceful way to mandate it. Private wallets are open to compete with the government’s implementation and nobody is forced to hold bitcoin.

The ethos of bitcoin is to not mandate its use and to allow the free market to decide its ideal use case. If private banks or services made wallets that utilized bitcoin’s open payment rails, to reduce friction — and users had free choice to use those wallets — those wallets would be adopted organically, without anyone needing to mandate their use. However, any law that eliminates capital gains taxes, for bitcoin users, is a huge win.

This is a guest post by Level39. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


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Why Bitcoin’s Rules Are Enforced By Physics

The following article is an expanded, longer version of the original Medium article of the same name by the author, Tomer Strolight, in his series of articles on Bitcoin entitled “Why Bitcoin,” covering many aspects of Bitcoin, each with an average reading time of only three minutes.

No Speed Limits Lead To Faster, Safer, More Reliable Cars.

The German Autobahn highways have no legally-enforced speed limits. The laws of physics are the only limitations as to how fast automobiles can travel there. As such, Germans have figured out how to make very fast cars. Fast small cars, fast family cars, fast SUVs, fast trucks, etc.

They have also figured out how to make very safe fast cars, because nobody wants to die getting somewhere fast. German automakers pioneered advanced safety features, like crumple zones, that make high-speed collisions less dangerous to vehicle occupants.

The lack of legally-enforced constraints is what makes German cars faster, safer and better than those engineered in countries where speed limits and safety standards are prescribed by government edict.

Consider the challenges faced by German car engineers compared to those in a highly-regulated country where speed limits are far lower than the speeds observed on the Autobahn. German car engineers need to compete to figure out how to make cars both faster and safer than their other German competitors. But their regulated peers in other countries can stop improving their cars once they can safely hit the local speed limit. German car engineers become interested in understanding and solving challenges brought about by high speeds affecting reliability, aerodynamics, stability, fuel efficiency, high pressures, braking, acceleration and more. Their regulated counterparts simply do not have any interest in these considerations, nor are they given any budget to research them.

No Man-Made Laws Lead To Stronger, Safer, More Reliable Money

This same reasoning is remarkably why bitcoin is the best money the world will ever see. Just as automobiles are an engineered form of transportation, bitcoin is an engineered form of money.

Bitcoin’s first engineer, Satoshi Nakamoto, designed it to operate no matter what the universe could throw at it. He did not build it to only work under a constrained set of limits dictated by humans. Thus, the mechanisms that Satoshi built into Bitcoin to enforce its rules are nothing less than the laws of physics themselves. No government told Satoshi what rules to apply or how to enforce them. (And now, interestingly, no government can.) Bitcoin’s rules were chosen to ensure that Bitcoin would operate no matter what happened.

Strong, Safe Money, Guaranteed

Like the safety and speed goals of German cars travelling on the Autobahn highway network, there are safety and speed goals too for Bitcoin as it functions atop worldwide digital networks.

Bitcoin provides the monetary equivalent of safety, which is protection of private property. Bitcoin lets owners of its units of currency store them where only the rightful owners can find them. It does this using astronomically large random numbers as the storage location of these satoshis (satoshis being the base unit of currency in the Bitcoin system).

The laws of physics dictate that over the entire foreseeable future of the universe, nobody can be expected to guess one of these astronomical numbers where satoshis are being stored. Not even if they converted the whole planet into a giant computer making endless guesses.

If you HODL satoshis, you are guaranteed they will not be stolen by a thief guessing where they are stored (as long as you generated your astronomically large random number properly). Who guarantees this to you? Not some politician. Not some businessman. Not some company. Not any person. The guarantor is none other than the universe itself. As long as the laws that hold the universe together hold, your satoshis are safe.

Steady, Reliable Money, Guaranteed

When it comes to speed, Bitcoin doesn’t try to go as fast as possible. Instead, it seeks to maintain a constant speed, or pace. That steady pace that Bitcoin is after is to ensure that one block will be added to the blockchain, on average, once every ten minutes, forever. (This is perhaps why “timechain” is a better descriptor than “blockchain” and is being increasingly proposed as a substitute term.)

Once again, Satoshi utilized the eternal, unchanging laws of physics to engineer Bitcoin to always achieve this pace. He did so by combining proof of work* and a difficulty adjustment to that proof of work to ensure this pace even in the most extreme physical circumstances.

If all the world’s energy or even all of the sun’s energy was directed toward trying to accelerate this pace, Bitcoin would “slam on the brakes” within 2,016 blocks at most, slowing down the block discovery rate to one block every ten minutes. Conversely, if efforts were made to slow Bitcoin down by withholding energy from its miners, Bitcoin would, again, within at most 2,016 blocks, reduce the work requirements, effectively “stepping on the gas” to speed itself back up to one block being discovered, on average, once every ten minutes.

No government law can change this fact. Government laws cannot, after all, supersede the laws of physics. Nothing can. No billionaire, no hacker, no protester, no banker, no corporation, no army. Not even the pretentious arrogance of a bow-tie wearing, award-winning economist, eating Russian caviar at a cocktail party for New York’s elites and claiming that Bitcoin “has a fundamental value of zero” can change the actual laws of physics. Thus, Bitcoin runs, without interruption, regardless of what anybody thinks of it or tries to do to it. Bitcoin’s reliable, uninterrupted operation is as pure and as real as reality itself.

Tougher Standards Lead To The Better Money

As we did when comparing German car engineers to their peers in countries with low speed limits, let’s consider the results of the engineering efforts of Satoshi and other Bitcoin contributors with those of the designers of the incumbent monetary system — fiat money. The rules of the fiat system are dictated by regulators, legislators and bureaucrats. These rules can easily and at any time be changed by a mere change of dictate.

Whereas nobody can steal or seize satoshis, fiat money is stolen and seized so often that we don’t even keep count of how many times this happens or how much fiat money is affected. Whereas Bitcoin continues to issue its currency units reliably and predictably on a predetermined schedule, the fiat money supply goes through wildly unpredictable shocks whenever the people running that system decide to alter it.

History shows that fiat systems collapse. The monetary units of these systems become worthless upon those collapses. Science shows that the laws of physics do not collapse. They are eternal. 

To summarize, by relying on the eternal and unchanging laws of physics, Bitcoin guarantees perfect reliability that its promises of property protection and continued operation will always be in force. This frees Bitcoin, and more importantly its users, from any having to trust temporary and fallible short-lived entities like people, central banks, political parties and even nation states.

In the final analysis, it is ultimately a voluntary decision for each individual to choose whether they prefer Bitcoin and the reliability of physics over fiat money and trust in politicians. That is a decision to choose science over politics. Bitcoin itself is in no hurry for anyone to make that choice, however. Like the laws of physics themselves, Bitcoin is forever.

*Proof of work requires that someone (a ‘miner’, in the case of Bitcoin) be able to produce a very improbably low number as the output of running input data (a block header, in the case of Bitcoin) through a function (SHA256, in the case of Bitcoin) that produces unpredictable, random-looking numbers, but always the same output for the same input. If the miner can show that the result of the output from their input is lower than the threshold set by Bitcoin’s difficulty setting, it is very likely the case that they put in the expected amount of work required by running the algorithm time and again with slightly modified inputs, until they finally arrived at a result that met the proof-of-work criteria.

This is a guest post by Tomer Strolight. Opinions expressed are entirely his own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.


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Wyoming One Step Closer to Passing Landmark DAO Law

Key Takeaways

  • A bill was introduced in January to give company status to DAOs.
  • Today it passed the first hurdle in the Senate, but it still has a long way to go.

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Wyoming lawmakers today came closer to putting a law into place that would grant company status to decentralized autonomous organizations (DAOs). 

At the Wyoming Legislature’s Corporations, Elections & Political Subdivisions Meeting, the Senate approved Bill 38, introduced in January, through the first committee hearing. 

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The bill wants to make DAOs recognized by state authorities and grant them the ability to form as limited liability companies (LLCs). 

But it still has a long way to go. Matt Kaufman, an attorney and partner at Hathaway&Kunz law firm who explained the bill at the meeting, told Crypto Briefing that although he was “super pleased,” the bill “still has a way to go before it’s final.” 

He added: “Wyoming legislature continues to embrace the fast-changing digital asset landscape and think of ways we can help facilitate new innovation.” 

Nexo Earn

DAOs are essentially business structures where control is spread out across team members instead of being centered around one boss. 

It is hoped the bill would give more legitimacy to crypto startups. 

SIMETRI 10x potential

Though some lawmakers are skeptical of the bill. Preston Byrne, a partner at Anderson Kill Law, slated the bill on Twitter last month, saying it would be used to “justify selling shitcoins and half-baked code.” 

During today’s meeting, Kaufman said that the bar would be high for companies wanting to register as DAOs. “There are projects that exist in the blockchain world where someone has started an entity or smart contract and fails to maintain it,” he said. 

“We don’t want to give those types of entities or those types of projects limited liability status. We’re setting the bar high, these have to be maintained projects to qualify for the status.” 

The State of Wyoming is one of the most crypto-friendly US states. Last year, its banking board was the first to approve crypto banks, Kraken and Avanti.

Disclosure: This author held BTC, ETH, and DOT at the time of press.

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