Autor Cointelegraph By Turner Wright

DataVault requests US election agency's advice to send NFTs as a campaign fundraising incentive

The legal team behind nonfungible token firm DataVault Holdings has requested an advisory opinion from the United States Federal Election Commission on using NFTs for fundraising efforts.In a Sept. 21 letter to FEC acting general counsel Lisa Stevenson, DataVault’s lawyers proposed sending NFTs as “souvenirs” to individuals who contributed to political committees, as well as giving the token holder the option to use it for promoting a campaign “strictly on a volunteer basis and without any compensation.” The NFT firm requested the FEC provide guidance on how it may operate as a commercial vendor — issuing the tokens to political committee members seemingly without violating federal campaign finance laws. “DataVault’s activities to political committees will be conducted on a strictly commercial basis and DataVault will not seek to influence, affirmatively or negatively, the nomination or election of any candidate to Federal office,” said DataVault’s counsel Elliot Berke. “DataVault would provide the NFTs to political committees in the same manner and normal course of business as other non-political committee clients.”According to DataVault’s proposals, the firm planned to market NFTs “in a manner akin to a campaign hat or souvenirs,” intending to have political committees offer them to high-volume low-dollar donors. The tokens could be used for VIP access at different campaign events, or contain artwork or literature related to a candidate’s policies. Any fees from issuing NFTs or transactions would be reported as a “fundraising expenditure,” according to DataVault’s example scenario:“An NFT is priced at $10.00 and is provided by DataVault to a campaign committee. The NFT is offered by the campaign committee to contributors who make a $10.00 contribution. Once the campaign committee collects a contribution connected with the NFT, it records the $10.00 contribution and pays DataVault a fee of $3.00 as a usual and normal fundraising expenditure.”DataVault’s legal team requested the FEC provide clarification on whether the firm could “design and market NFTs to political committees” as well as provide the tokens to incentivize contributors. In a 2019 advisory opinion on NFTs, the commission determined tokens were “materially indistinguishable from traditional forms of campaign souvenirs” such as buttons.“The distribution of valueless blockchain tokens is not a form of compensation for volunteers’ services but rather a novel means for volunteers and supporters to show their support for the campaign,” said the FEC at the time. “The Commission found the valueless tokens to be analogous to more traditional forms of campaign souvenirs, and concluded that nothing in the Act or Commission regulations would limit or prohibit their distribution.”Related: Crypto and decentralization could influence voters in 2022 US midterm elections: ReportPolitical figures outside the FEC’s purview have taken similar initiatives. Prior to South Korea’s presidential election in March, Democratic Party candidate Lee Jae-myung’s campaign said it would issue NFTs showing images of the politician and his campaign pledges to those who donated money, in an effort to appeal to the younger generation. In California, NFTs were at the center of a discussion among members of the state’s Fair Political Practices Commission in March, later leading to the independent body reversing a 2018 ban on crypto donations for candidates for state and local offices.

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CFTC can issue summons through Ooki DAO’s help chat box, says judge

The United States Commodities Futures Trading Commission can serve members of the Ooki decentralized autonomous organization, or DAO, with summons through online communications, according to a federal judge.In an Oct. 3 order granting a CFTC motion, U.S. District Judge William Orrick said the commission could provide a copy of its summons and complaint through Ooki DAO’s help chat box as well as a notice on its online forum. The judge said the court’s decision was based on the CFTC effectively serving the Ooki DAO by providing the necessary documents. The CFTC filed a lawsuit against the Ooki DAO on Sept. 22, alleging the organization offered “illegal, off-exchange digital asset trading,” violated registration guidelines and broke provisions of the Bank Secrecy Act. The legal action came alongside similar charges against bZeroX and its founders, ordered to pay $250,000 as part of a civil monetary penalty.Related: CFTC brings $1.7B fraud case involving Bitcoin against South African nationalOoki DAO members discussed how to respond to the CFTC lawsuit, suggesting it allocate funds from the treasury to hire lawyers for DAO members, attempt to elicit support from the decentralized finance (DeFi) community and raise legal funds by selling nonfungible tokens. Many expect the organization will initiate a governance vote to finalize any decision on dealing with the lawsuit.Many in the crypto space have criticized the CFTC for pursuing enforcement actions against organizations and companies without clear regulatory guidelines. Jake Chervinsky, head of policy at crypto advocacy group Blockchain Association, said the legal actions against Ooki DAO and bZeroX are “the most egregious example of regulation by enforcement in the history of crypto.”

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European Parliament members vote in favor of crypto and blockchain tax policies

Members of the Parliament of the European Union voted in favor of a non-binding resolution aimed at using blockchain to fight tax evasion and coordinate tax policy on cryptocurrencies.In an Oct. 4 notice, the European Parliament said 566 out of 705 members voted in favor of the resolution originally drafted by member Lídia Pereira. According to the legislative body, the resolution recommended authorities in its 27 member states consider a “simplified tax treatment” for crypto users involved in occasional or small transactions and have national tax administrations use blockchain technology “to facilitate efficient tax collection.”For cryptocurrencies, the resolution called on the European Commission to assess whether converting crypto to fiat would constitute a taxable event, depending on where the transaction occurred, saying it was a “more appropriate choice.” In addition, the policy would request an administrative amendment to better exchange information in regard to taxes on crypto.The resolution added that the parliament’s member states could integrate blockchain solutions into tax programs:“Blockchain’s unique features could offer a new way to automate tax collection, limit corruption and better identify ownership of tangible and intangible assets allowing for better taxing mobile taxpayers […] Work must be undertaken to identify the best practices of using technology to improve the analytical capacity of tax administrations.”Related: Talking with Eva Kaili, VP of the European Parliament, on MiCA regulationPolicymakers in the European Union have moved forward to regulate the crypto market through their Markets in Crypto-Assets, or MiCA, framework. The bill, first introduced to the European Commission in 2020 and adopted by the European Council in 2021, aims to create a consistent regulatory framework for cryptocurrencies among EU member states. Many expect the policies to go into effect in 2024.

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US Treasury recommends lawmakers decide which regulators will oversee crypto spot market

Officials with the United States Financial Stability Oversight Council, or FSOC, have recommended U.S. lawmakers pass legislation to determine which “rulemaking authority” will be responsible for regulating parts of the crypto spot market.In an Oct. 3 meeting of the FSOC, Jonathan Rose, a senior economist at the Federal Reserve Bank of Chicago, said the FSOC had released a report in accordance with President Joe Biden’s executive order on crypto, detailing potential financial stability risks of digital assets and regulatory gaps. The report identified regulatory gaps including the spot market for cryptoassets that were not securities subject to “limited direct federal regulatory” — hinting at lawmakers stepping in to prevent possible market manipulation and conflicts of interest.“While some firms in the crypto asset ecosystem have attempted to avoid regulation, other firms have engaged with the existing regulatory system by obtaining trust charters or special state-level cryptoasset-specific charters or licenses,” said Rose. “The report recommends the passage of legislation in providing a rulemaking authority for federal financial regulators over this [spot] market.”According to Rose, cryptocurrencies could present financial stability risks to the U.S. economy “under certain conditions” — including growth without corresponding regulatory checks and balances. He also mentioned crypto firms operating through affiliates or subsidiaries, seemingly obfuscating offerings in the eyes of regulators, and whether companies should be allowed to offer services through intermediaries, including “broker dealers and futures commission merchants.”In a prepared statement for the council meeting, Treasury Secretary Janet Yellen said: “These reports provide a strong foundation for policymakers as we work to mitigate the risks of digital assets while realizing the potential benefits. They also provide a valuable addition to the public’s understanding of digital assets.”The council’s recommendations seemed to suggest that the Commodity Futures Trading Commission, or CFTC, could be one of the regulators given authority over the crypto spot market. U.S. lawmakers have already introduced bills aimed at clarifying the roles of the Securities and Exchange Commission and CFTC over crypto. Many in the space have also criticized the two bodies for taking a “regulation by enforcement” approach to digital assets, seemingly in an attempt to gain regulatory control over the market without legislation going through Congress.Related: Blockchain Association calls White House’s crypto framework a ‘missed opportunity’On Oct. 3, the SEC announced it had charged celebrity Kim Kardashian $1.26 million for “touting on social media a crypto asset security offered and sold by EthereumMax” without disclosing any payment she had received for the promotion. In May, a federal court ordered the three co-founders of crypto derivatives exchange BitMEX to pay $30 million in civil monetary penalties as part of a CFTC case in which the regulator said the individuals violated aspects of the Commodity Exchange Act.

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Binance burns $1.8M in LUNC trading fees following community proposal

Cryptocurrency exchange Binance has announced it completed the first burn of Terra Classic tokens’ trading fees in response to a community proposal from September.In an Oct. 3 update, Binance CEO Changpeng Zhao said the exchange had burned roughly $1.8 million worth of Terra Classic (LUNC) — formerly Terra (LUNA) — trading fees for LUNC/BUSD and LUNC/USDT spot and margin trading pairs. According to Binance, the burn included the equivalent of 1,863,213.47 Tether (USDT) — roughly 5.5 million LUNC. First LUNC burn, $1.8 million ish.https://t.co/b86RlCYqe3— CZ Binance (@cz_binance) October 3, 2022The exchange’s original announcement from Sept. 26 said the burns would be completed every Monday — making the next event on Oct. 10 — sending trading fees to a LUNC burn address. Many in the Terra community proposed the burn strategy as part of efforts to revive LUNC, whose price had dropped to almost zero in May and briefly surged by more than 250% in September. Related: Do Kwon shares LUNA burn address but warns ‘LUNAtics’ against using itTerraform Labs co-founder Do Kwon, whom many in the crypto space want held to account for his role in Terra’s collapse, has been targeted by South Korean authorities for allegedly violating the country’s capital markets laws. A warrant has been issued for his arrest and Interpol added Kwon’s name to its Red Notice list, requesting that local law enforcement — many have suggested he may be in Singapore — detain the Terra co-founder. At the time of publication, Kwon’s whereabouts are unknown, but he said on Twitter on Sept. 26 that he was “making zero effort to hide.”

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