Daily Digest - 17 February 2023

Headlines

▌The U.S. SEC sued Terraform Labs and its co-founder Do Kwon

The U.S. Securities and Exchange Commission (SEC) on Thursday sued Terraform Labs, the company behind the failed TerraUSD stablecoin, and its co-founder Do Kwon. The SEC accused Terraform and Kwon of misleading investors on a number of issues, including who was using TerraUSD for payments, and calling the yield-anchored protocol and LUNA tokens “cryptoasset securities.” The SEC charged Terraform and Kwon with fraud, sale of unregistered securities, sale of unregistered securities swaps, and other related claims. The complaint alleges that Kwon and Terraform worked with an unnamed U.S. trading firm to restore the UST peg after falling by nearly 10 cents in May 2021. Trading companies received LUNA tokens from Terraform after purchasing a certain amount of UST tokens.

Blockchain Application

▌Art Blocks Teams Up With Bright Moments to Create Generative Art IRL

NFT company Art Blocks and NFT gallery Bright Moments are creating a unique project that connects NFTs with collectors’ real-life, personal experiences. Each NFT will have a second physical activation that can only be minted in the specific city associated with that NFT. The two companies have commissioned artist Michael Kozlowski, more commonly known as Mpkoz, to release a collection for the collaboration. Titled Metropolis, the piece features generative art NFTs based on architectural influences from London, Berlin, New York, Mexico City, and Los Angeles. The 500-unit collectible will begin minting online on February 22, but in-person minting will depend on which city each Metropolis NFT corresponds to. At a designated time, holders will be able to mint “diptyches” — the counterparts to the original NFT. The second artwork is free and can only be cast in real life.

Cryptocurrency

▌Canadian Securities Authority will tighten requirements for cryptocurrency exchanges in the country

Later this month, the Canadian Securities Authority (CSA) will tighten requirements for cryptocurrency exchanges operating in the country, according to two people with knowledge of the plan. The CSA announced in the middle of last year that it would require unregistered crypto exchanges operating in Canada to make certain compliance “undertakings” when seeking registration. The CSA declined to discuss updates to the Pre-Registration Undertaking (PRU) system, but said it would "publish further details in the near future". The U.S. Securities and Exchange Commission has begun to accelerate its crackdown on crypto companies, reaching a settlement with exchange Kraken and claiming that stablecoins issued by Paxos are securities. Other G7 countries such as the UK and Canada have similarly stepped up regulation of the industry following last year's industry disaster.

▌Collab.Land launches governance tokens, which will be airdropped to more than two million eligible users

According to official news, the Discord extension application plug-in Collab.Land launched governance tokens, which will be airdropped to more than 2 million eligible users in the community using the tool. Eligible users include verified Collab.Land members and holders of project NFTs. Additionally, Collab.Land expanded the airdrop to the first 100 communities using the tool, including NFT projects such as World of Women, Doodles, Axie Infinity, and apparel brand Adidas. It is reported that the airdrop share will account for 25% of the token supply. At present, the official token distribution schedule has not yet been announced.

▌Coinbase Already in Line With SEC Proposal, Argues Company CLO

Yesterday, the SEC proposed new rules for crypto companies acting as qualified custodians for institutional funds. The push for this change in legislation is due to the recent failures of crypto platforms to safeguard users’ assets from both cyberattacks and bankruptcy. The SEC argues that the reckless financial behavior exhibited by FTX, Celsius, and the like might destabilize the economy at large if left unchecked. In an interview with Bloomberg, Coinbase CLO Paul Grewal stated that not only is the company already compliant with the proposed changes to qualified custodian law – it is also a role model for other crypto platforms. “I think that when it comes to Coinbase, we see SEC officials recognize that specifically, Coinbase is operating in a qualified manner. In a lot of ways, this is about bringing the rest of the industry to the standard Coinbase has set for itself.” Grewal followed up with a similar statement on Twitter, commending the SEC for its initiative while reminding the crypto industry that nothing is set in stone yet.