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#59 – Crypto regulation week redux, a bookish metaverse, and special benefits

description: Image of a gavel, on top of a book, surrounded by money. Photo by Sasun Bughdaryan on Unsplash

(Photo by Sasun Bughdaryan on Unsplash)

Over the last couple of years I’ve read plenty of articles about web3 legal drama – everything from NFTs, to trademark issues, to DAOs, and more. But it feels as though there’s been an uptick as of late.

In other words: even though we just had “Crypto Regulation Week” in May, we’re doing it again.

Laws and suits

Crypto has had a rough couple of weeks.

That’s saying a lot when you consider the last couple of years. There was the Terra/Luna stablecoin crash. The ensuing problems with Voyager and Three Arrows Capital (3AC). FTX, FTX, and FTX (with promises of more FTX to come). Crypto Winter™. All of this has been fertile ground for US regulators to play their rousing game of Whose Jurisdiction Is It, Anyway?

Binance and Coinbase: The SEC came out swinging last week. They filed charges against Binance on Monday and Coinbase on Tuesday. Both cases – mind you, I’m vastly oversimplifying here for brevity – are mostly rooted in the “are cryptocurrencies securities?” debate. And the SEC’s swift action in that regard is leading some consumers to reconsider investing in the space.

The SEC accuses Binance of – as so neatly summarized by a WSJ article – having “operated an illegal trading platform in the US and misused customers’ funds.” That same piece noted an interesting point in the drama:

Bi­nance engaged in “bla­tant dis­re­gard of the fed­eral se­cu­ri­ties laws and the in­vestor and mar­ket pro­tec­tions these laws pro­vide,” [the SEC] wrote in its court com­plaint.

The SEC quoted Bi­nance’s chief com­pli­ance of­fi­cer as say­ing in 2018, “we are op­er­ating as a fk­ing un­li­censed se­cu­ri­ties ex­change in the USA bro.”

To be fair, who among us has not run a multibillion-dollar securities exchange and forgotten to get a license? I’m sure this happens every day, right?

The Coinbase case is the latest development in a long-running story. (I briefly touched on this last month.) On the one side, the SEC claims that Coinbase is operating illegally; on the other side, Coinbase says that the SEC barely raised an eyebrow at their 2021 IPO. So they’re not sure why this is now a problem.

In case you don’t have experience taking a company public, I’ll explain. You don’t wake up with a hangover, scroll through last night’s photos on your phone, and find out that you IPO’d in a Vegas chapel. That’s not how this works. The road to becoming a publicly-traded company involves a fair amount of legal scrutiny, public messaging, and time. All of those leave regulatory bodies plenty of opportunities to say “hey wait a minute.”

I don’t know whether that line of thinking will hold up in court of law. But I can at least see why Coinbase seems confused.

UK Financial Conduct Authority (FCA): Starting in October, the FCA will require companies to dial back on crypto advertising. In addition to granting consumers a one-day “cooling-off” period,

[The FCA] said “refer a friend” bonuses for crypto buyers would also be scrapped and that those promoting such assets would have to put in place clear risk warnings and ensure adverts were clear, fair and not misleading.

This may not seem like much, but I expect even a small amount of friction could help limit the damage from bad crypto investments. Will it stop the die-hards? Not at all. But could it help people on the fence? Probably.

Moonpay: You’ve probably heard about those lawsuits filed against celebrities, right? The people who filmed crypto ads for the Super Bowl? This one’s a little different.

Moonpay runs a concierge service to help celebrities buy NFTs. A class-action lawsuit claims that the company:

[…] gifted celebrities valuable NFTs at the height of the crypto craze in late 2021, according to sources with direct knowledge of the matter.

For more than a year, observers have speculated that at least some of the many celebrities MoonPay helped acquire Bored Ape Yacht Club NFTs were given the digital collectibles in exchange for promoting the company and the valuable non-fungible token collection.

Once again, crypto proves itself to be the gift that keeps on giving.

This might be a good time to remind these celebrities that “Gift” is the German word for “poison.”

Sum total: That’s a lot of crypto legal matters for just one week.

On the plus side: I didn’t see any news about FTX.

So I will count that as a win.

Having a different vision

Last week I mentioned some possible use cases of the new Apple Vision Pro mixed-reality headset.

I’d actually bumped that segment from the previous week’s newsletter for space. I didn’t realize that I would put the finishing touches on it just before Apple officially unveiled the device at its annual WWDC event.

So now that I have hard facts on what the Vision Pro can do, what else do I have to say about it?

Thus far … nothing.

But someone else sure has opinions:

Referring to video clips of the product shown at Apple’s WWDC keynote on Monday, Zuckerberg said: “By contrast, every demo that they showed was a person sitting on a couch by themself,” Zuckerberg told employees in the meeting. “I mean, that could be the vision of the future of computing, but like, it’s not the one that I want.”

Nor did his “vision” include Apple’s privacy practices taking about $10 billion out of Facebook’s ad revenue, but here we are.

In all seriousness, this is setting up to be an interesting game. Apple’s headset runs several times the cost of the Quest devices, but it has the cachet of the App Store’s developer ecosystem. And it lacks Facebook’s stigma of privacy invasion. It’s still too early to call a winner – the race arguably doesn’t begin until early 2024, when the Vision Pro is set for release – but Apple is definitely positioning itself for a run.

Playing the long game

French publisher Hachette, working with edtech-and-gaming company PowerZ, recently launched the “Au-delà des pages” (“Beyond the Pages”) metaverse property. Despite having spent hundreds of thousands of euros on the project, they’re not charging people for access. Hachette has instead chosen to treat it as a loss-leader.

Their plan? The publisher figures this will help them reach the youth market and turn them into devoted readers in the long term. From that perspective, the price tag seems like a drop in the bucket.

Not the same thing. Nope. Not at all.

Fashion house Louis Vuitton is getting into the NFTs With Benefits game. They’re offering a set of limited edition “Treasure Trunks” that’ll set you back a cool €39,000:

The NFT launch is part of a new project called “Via”, the Latin word for road, which nods to its aim to act as an elite pathway towards products and experiences that are inaccessible to others. This has become a key trend in branded NFT projects, with hard-to-acquire and expensive NFTs often positioned as the keys to other products and experiences, both physical and digital.

People sometimes ask me why a person would shell out tons of money for an NFT. When I tell them that some NFTs grant the holder special access and community membership, they remain unmoved.

Fair enough.

Completely unrelated: have you heard of the Panerai Submersible Forze Speciali Experience? It’s a fancy watch. And it does a little more than just tell time:

Luxury brands have long offered special gifts for favoured clients and friends. But this “backstage visit is in an altogether different league. For one thing, it’s not intended for business clients at all - but rather for customers, in this case those of the watchmaker Panerai who have paid £47,500 for the Submersible Forze Speciali Experience Special Edition, a diving watch that comes with the privilege of having your ass kicked by the Italian special forces.

Hmm. A pricey token that grants you access to special experiences and a community.

Interesting. Maybe this will catch on in digital form. Maybe.

The wrap-up

This was an issue of Block & Mortar.

Who’s behind Block & Mortar? I'm Q McCallum. I've spent the past two decades in the emerging-tech space. And I'm very interested in web3 use cases.

Credit where it's due. Big thanks to Shane Glynn for reviewing early drafts. Any mistakes that remain are mine.

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