Country knot for the old regulators

With the help of Derek Robertson

As the SEC moves to expand its overview of blockchain networksa new filing in a Texas federal court put the cryptocurrency world in crisis this week.

Deep inside one complaint filed Monday in the Western District of Texas on suspicion of an unregistered cryptocurrency offering, the agency claims that because the nodes running the Ethereum blockchain network “are more densely clustered in the United States than in any other country,” transactions on the network therefore “took place in the United States.”

Some see the argument as a basis for a broad jurisdiction claim over any business that takes place on Ethereum and other global blockchain networks with a significant presence in the United States. As the industry debates the significance of the deposit, many cryptocurrency watchers express skepticism that the SEC’s argument will hold water with a judge.

But there is a more immediate problem.

Judging by the information available from the open source data tools, Ethereum nodes are NotRight now, more densely clustered in the United States than in any other country.

To be sure, the United States hosts more Ethereum nodes than any other country, according to data from EtherScan Other Ethernodes.orgtwo analytics platforms that trace the network.

As of early Wednesday afternoon, platforms report that the United States hosts around 46% or 44% of the nodes, respectively, with Germany ranking second in both datasets. EtherScan attributes around 18 percent of the nodes to Germany, while Ethernodes estimates the number at around 12 percent.

But Germany has a much smaller population (~ 84 million people) and territorial extent (~ 130,000 square miles) than the United States, with its roughly 330 million people spread over 3.8 million square miles. . Thus, in both ways that density is defined, the data implies that nodes are clustered more densely in Germany than in the United States, both on a per capita and per square mile basis.

The SEC’s press office did not immediately respond to a request for comment on their definition of node density, but if the regulator provides more detail on its logic, I will report in an upcoming edition.

Since the SEC also has a more direct right to jurisdiction in this particular case – US investors would have bought the token – the node density argument is unlikely to be fully contested this time around.

But the questions of how to apply jurisdiction to economic activity that occurs on decentralized computer networks are not disappearing. And US lawmakers have a long tradition of making bold and creative jurisdiction claims over activities that largely take place overseas. Sometimes the judges accept those arguments, sometimes they don’t.

At some point, questions about where business on a blockchain is taking place, legally speaking, is likely to have their time in court.

“As far as I know, there has not yet been a case where the location of the node is the only judicial hitch,” said Peter Van Valkenburgh, director of research at Coin Center, a cryptocurrency advocacy group. “If there was one, it would be a good fight.”

When it does arrive, it may be a struggle over the raw number of knots rather than their density.

Dust is starting to settle from the successful Ethereum merger, and it’s encouraging environmental activists who oppose the power-hungry “proof-of-work” mining that powers most cryptocurrencies (including Ethereum, until last week).

This morning a group of environmentalists, including New York Assemblyman Anna Kelles, met virtually to urge the state governor. Kathy Hochul will sign a bill approved by the State Assembly in June that would place a moratorium on proof-of-work mining. Kelles, who likened the union to “rebuilding a spaceship in the middle of a flight,” urged not only the governor to sign the moratorium, but also the cryptocurrency industry to convert en masse to the greener method of “proof of stake”.

If the industry signs up, it could end up being for not entirely altruistic reasons: After the merger was successfully completed last week, the Blockchain Association’s chief of policy tweeted that it could also be a “significant derisking event”For the potential classification of Ethereum as a stock, which would open it up to wider regulation. – Derek Robertson

As the US proceeds (with caution) with its potential stablecoin, traders in Europe will now be able to use those backed by US dollars on the continent’s markets.

POLITICO’s Bjarke Smith-Meyer obtained a copy of the final EU draft cryptocurrency bill market (paywall), which removes what would otherwise have been a restriction on trading with dollar-backed stablecoins. Bjarke writes that “Although there are some euro-based stablecoins, most of them are linked to the dollar and are used extensively within the European market” and notes that there will still be a limit to their use for Buybut not for trading in other currencies.

That purchase limit is meant to discourage (presumably non-European) tech giants from introducing a dollar-backed currency as a regular currency, as Facebook tried and failed to do. As the EU’s efforts to isolate yourself As the dominance of the American tech world has become increasingly salient, the last-minute legislative change is a reminder of how big a challenge remains. – Derek Robertson

Indonesia is imposing it cryptocurrency exchanges to govern by the citizens of the country themselves.

Futuristic translation tools can have unexpected events, even deadlyconsequences.

Users are already subverting content restrictions for AI Image Generator Stable Diffusion.

An upgrade for Meta’s VR headset is making his own videos of the simulated world more faithful to life.

Take a closer look at the graphics card wars inadvertently fueled by cryptocurrency mining.

Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Constantine Kakaes ([email protected]); Other Heidi Vogt ([email protected]). Follow us @DigitalFuture on Twitter.

Ben Schreckinger deals with technology, finance and politics for POLITICO; he is a cryptocurrency investor.

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