The Legal and Regulatory Fallout From Terra's Collapse: Who Will Pay? - Ep. 363
Unchained
The Consequences of Non-Disclosure in Cryptographic Exploits
This chapter examines the $90 million exploit of the Mirror Protocol and the ethical implications of developers potentially concealing knowledge of the hack. The speakers discuss the need for transparency in the cryptocurrency space and the regulatory risks associated with non-disclosure to investors.
Olta Andoni, deputy general counsel at Ava Labs, and Ari Redbord, head of legal and government affairs at TRM Labs, discuss the Terra stablecoin meltdown, implications for impending international regulations, and the history of stablecoin regulation internationally. Topics covered include:
- What the most important legal issues are for the Terra meltdown
- How the Terra implosion will trigger more regulation of the space
- How regulators seemed to think stablecoins should be regulated even before Terra
- How their approach differs between dollar-backed stablecoins vs. algorithmic vs. crypto collateral-backed coins
- How European regulators want stablecoin issuers to be treated like banks
- What the Lummis-Gillibrand bill would mean for US stablecoin regulation
- Whether Terra’s demise will mean that regulators won’t tolerate experimentation with algorithmic stablecoins
- Why regulators will be skittish about stablecoins in response to Terra’s meltdown
- Why Olta and Ari were impressed by the NY Department of Financial Services guidance on stablecoins
- What the establishment of SEC jurisdiction over Terraform Labs based on the Mirror investigation from last fall means for any enforcement action by the SEC over Terra
- Whether Do Kwon and/or Terraform could face criminal charges in multiple jurisdictions
- Why international regulatory consistency is important in the crypto space
- Whether civil and class-action lawsuits against Terraform could be expected
- How Terra 2.0 could open TFL up to further action from regulators and law enforcement
- Why more education is needed to overcome anxiety about DeFi regulations
- How hack nondisclosures could be subject to government investigation
Thank you to our sponsors!
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Episode Links
Olta
- Avalanche
- https://www.avax.network/
- Ava Labs
- https://www.avalabs.org/
- https://www.linkedin.com/in/oltaandoni/
- https://twitter.com/AndoniOlta
Ari
- TRM Labs Website:
- https://www.trmlabs.com/
- TRM Labs Twitter
- https://twitter.com/trmlabs?s=20&t=m24Ir0OerqPgEejlhL-bdQ
- TRM Talks
- https://www.trmlabs.com/category/trm-talks
- https://www.linkedin.com/in/ari-redbord-4054381b4/
- https://twitter.com/ARedbord?s=20&t=m24Ir0OerqPgEejlhL-bdQ
Lummis-Gillibrand Bill
- Bill Introduction:
- Legal Memo from DLx Law: https://dlxlaw.com/wp-content/uploads/2022/06/DLX_FSV-summary_RFIA_060722.pdf
- Lummis-Gillibrand Section by Section Overview (summary by bill authors): https://www.gillibrand.senate.gov/imo/media/doc/Lummis-Gillibrand%20Section-by-Section%20%5bFinal%5d.pdf
- Responsible Financial Innovation Act (full text): https://www.gillibrand.senate.gov/imo/media/doc/Lummis-Gillibrand%20Responsible%20Financial%20Innovation%20Act%20%5bFinal%5d.pdf
- Blog post intro (by Senator Kirsten Gillibrand): https://gillibrandny.medium.com/the-responsible-financial-innovation-act-218a764abd6c
FINMA
- FINMA:
- FINMA on Stablecoins:
https://www.finma.ch/en/news/2019/09/20190911-mm-stable-coins/
- FINMA Publishes Stablecoin Guidance:
NY DFS
- Guidance on Stablecoin Issuance:
https://www.dfs.ny.gov/industry_guidance/industry_letters/il20220608_issuance_stablecoins
- Press Release:
https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202206081
- CNBC Coverage:
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