Crypto Weekly News Recap: MetaMask, Infura, and OpenSea Lock Out Users

Thank you to everyone who came to my

reading at the Strand on Wednesday night! I was thrilled that my first official book reading was sold out, and it was so fun to meet many of you in person.

I'll be at the Commonwealth Club in San Francisco on Tuesday, March 8th, and at The Forum in Seattle as part of Town Hall Seattle on Wednesday, March 9th. I also have other events in the works, potentially at SXSW in Austin on March 12th and maybe in Boston/Harvard on March 26th, and I will also be doing a reading in Miami on April 5th, and a talk at the Annapolis Book Festival on April 9th. More info on all those when I have it.

This has been an unprecedented week for crypto on the global stage, as it has taken on a pivotal role in the Russia-Ukraine conflict. In Friday's episode of Unchained, Tomicah Tilleman, chief policy officer at Katie Haun's new firm, discusses the ways in which crypto is essential for humanitarian work, along with all the ways it has been used in this conflict. This is an episode not to be missed.

Be sure to catch the very end when he discusses four reasons why crypto is such a powerful tool.

And now onto all the other big news in crypto this week.

Are NFTs Securities? That’s What the SEC Wants to Know

According to Bloomberg, the US Securities and Exchange Commission is probing NFT creators and marketplaces to determine whether certain tokens qualify as securities and should be regulated as such.

Of particular importance to the SEC are fractional NFT platforms, where an NFT can be subdivided into many units that are sold independently of the original NFT – be it art, collectible, ticket, or meme.

Citing sources familiar with the matter, Bloomberg noted that the SEC had sent subpoenas to both creators and exchanges requesting information.

Interestingly, crypto-friendly SEC Commissioner Hester Peirce, aka “Crypto Mom,” had said to CoinDesk in December, “Given the breadth of the NFT landscape, certain pieces of it might fall within our jurisdiction. People need to be thinking about potential places where NFTs might run into the securities regulatory regime.”

The SEC’s look at NFTs did not shock many crypto lawyers. For example, Anderson Kill Law partner Hailey Lennon tweeted that it was “Not much of a surprise” and Stephen Palley described the regulator’s exploration “as predictable as herring in brine.”

The news comes just a few weeks after the SEC fined BlockFi $100 million for offering a security product via its interest-earning accounts.

ConsenSys Has a Messy Lawsuit on Its Hands

A group of 35 employees of the Joe Lubin-led Ethereum development company ConsenSys filed a request for a Swiss court to review a previous deal between ConsenSys and JPMorgan.

The 35 employees, who make up more than half of all ConsenSys AG shareholders, claim that a 2020 transfer of assets from ConsenSys AG to ConsenSys Software Incorporated was illegal. The deal saw JPMorgan take a significant stake in both MetaMask and Infura, two major assets originally owned by the AG, without the AG’s minority stakeholders being properly notified. In addition, the deal offset a $39 million loan from founder Joe Lubin.

According to the claims published by Arthur Falls, who is heading the suit against ConsenSys AG (CAG), the “transaction was to the detriment of the minority shareholders of CAG and to the benefit of Joseph Lubin personally.”

The legal request comes shortly after a ConsenSys fundraising round of $200 million at a $3 billion valuation. The company refutes the claims found in Falls’ letter, telling The Block: “Mesh [ConsenSys AG] refutes the allegations underlying the legal action as well as those contained in the factually inaccurate press release that was self-authored by one of the former employees. Mesh looks forward to formally refuting the allegations and accusations in Swiss courts."

Core Crypto Products Block International Users

In related news, MetaMask and Infura, both ConsenSys products, updated their support pages to reveal that services are “unavailable in certain jurisdictions due to legal compliance.” This update accidentally led to users in Venezuela and possibly Iran and Lebanon being locked out of MetaMask for a brief period of time.

“In changing some configurations as a result of the new sanctions directives from the United States and other jurisdictions, we mistakenly configured the settings more broadly than they needed to be,” explained Infura. MetaMask said that it and Infura would be “unavailable in certain jurisdictions due to legal compliance” going forward, but did not specify what areas.

Iranian users of the NFT marketplace OpenSea are also claiming that they have lost access to their accounts, with multiple verified collections allegedly being removed from the platform.

The IRS Won’t Take No for an Answer

The US Internal Revenue Service filed to dismiss a lawsuit by Joshua and Jessica Jarrett, a married couple who claims they should not have paid income tax on staking rewards.

While the IRS offered the Jarretts a refund in December, the couple refused in an effort to force a federal court to decide how staking income is taxed in the US. However, this week, the IRS filed a motion to dismiss the case, arguing that the Jarretts could not refuse its offer of a refund.

In related news, during a March 2nd panel, Carolyn Schenck, an IRS official, said the regulator would be utilizing John Doe summons to seek information from crypto exchanges on unnamed taxpayers.

And in the UK, the Financial Conduct Authority revealed that it has opened 300 cases relating to crypto companies and has 50 live investigations, including criminal probes, into unauthorized businesses. The FCA is the UK’s supervisory authority regarding anti-money laundering and counter-terrorism financing.

Bitcoin’s Best Day in 365 Days+

Bitcoin had its best trading day in over a year on Monday, gaining 14% in a 24-hour period.

Data from CryptoRank shows that it was a good week for the crypto market in general, with Bitcoin and Ethereum gaining 20%+ in the seven days spanning Thursday-Thursday while only three coins (Filecoin, Secret, and LEO) in the top 100 by market capitalization fell.

As has been the case in 2022, Cosmos and Terra tokens led the charge, with RUNE, LUNA, ANC, and JUNO making up four of the five biggest gainers of the week among tokens in the top 100 by market cap, with each experiencing price increases between 65%-79%.

The Cosmos and Terra pumps appear to be led by development and usage.

On Terra’s side, its native token, LUNA, has been locked up at an extraordinary rate and overtook Ethereum 2.0-based ETH this week as the second-largest staked token in crypto, according to Staking Rewards. Data from Smart Stake shows that Terra has burned $2.48 billion worth of LUNA since February 4th (one month ago).

And, as covered on last week’s podcast, Luna Foundation Guard, a nonprofit supporting the stablecoin UST on Terra, bought $1 billion worth of BTC with LUNA locked into a four-year vesting schedule to backstop UST. Interestingly, it appears that LFG plans to purchase more, with Terra CEO Do Kwon saying, “The Terra Protocol will be one of the largest holders of $BTC.”

On Cosmos’s side, the much anticipated Evmos launch and airdrop took place this week, marking the arrival of the first EVM-compatible hub on Cosmos.

Citadel Securities’ CEO Does an About-Face on Crypto

Kenneth Griffin, founder of Citadel Securities (and infamous winner of the US Constitution bidding war), told Bloomberg this week that his once-negative sentiment regarding crypto has since shifted, calling crypto “one of the great stories in finance over the course of the last 15 years.” He added, "And I’ll be clear, I’ve been in the naysayer camp over that period of time. But the crypto market today has a market capitalization of about $2 trillion in round numbers, which tells you that I haven’t been right on this call.”

According to Griffin, Citadel Securities, which handles 25% of equities volume traded on the US stock market each day and executes 35% of US-listed retail volume, will most likely get into the crypto market-making game soon, despite saying in October that the company would not due to regulatory uncertainty. "To the extent that we’re trying to help institutions and investors solve their portfolio allocation problems, we have to give serious consideration to being a market maker in crypto," Griffin explained. "It’s fair to assume that over the months to come, you will see us engage in making markets in cryptocurrencies."

The news comes almost two months after Citadel Securities made headlines by taking $1.15 billion in capital from two venture firms, Sequoia and Paradigm, a crypto-centric company that has backed Compound, Cosmos, Sky Mavis, and Uniswap.

This Week In Crypto Adoption…

In a week filled with headlines about Ukraine, Russia, SWIFT, the EU, and more, it was very easy to miss a slew of major companies adopting crypto in one way or another. Here are three examples:

Fun Bits

Kevin, the Meme Green Pixellated Money Printing Machine

Pixelmon, a blockchain gaming project, released a collection of 9,999 NFTs last week, generating $70 million in sales during a mint that saw collectors pay up to 3 ETH per NFT.

The mint sold out quickly, however, collectors were immediately disappointed with the quality of the art, which was later described by Pixelmon’s CEO as “unacceptable.”

The NFTs grant holders exclusive access to Pixelmon-based land and token airdrops, boost in-game earning potential, and grant access to the alpha release, among other things. However, the price floor for them, has already dropped to .299 ETH on Wednesday night – meaning that some minter’s NFTs are worth 1/10 what they paid just a week ago.

However, as this is crypto, one particular Pixelmon NFT, a species called “Kevin,” caught fire on social media and saw the floor price skyrocket due to its ugliness. At one point, Kevin NFTs were selling for over $20,000. Kevin NFTs spawned an entire meme culture on Twitter, with the green, Bowser-like 3-D character taking over Crypto Twitter (and even receiving its own song from Song a Day Mann, aka Jonathan Mann). Kevin became so popular that a derivative project called Kevin Punks was minted and instantly became a hit, with 549 ETH in volume after just a few days of trading and a price floor of .88 ETH.

Unchained tracked down a Kevin investor via OpenSea and asked them, essentially, why they would spend 8.6 ETH on a meme. John Bisu, cofounder of szns.io, seemed to think it was a good fit for his NFT platform and told Unchained that he might donate his Kevin into the “Trash Pile” on TrashDAO, where users can swap NFTs from qualified contracts in exchange for $TRASH tokens, which govern the deposited NFTs. However, if Kevin continues to grow in value, Bisu might fractionalize the NFT on szns, so that everyone can have a piece of memetic history because, as Bisu explained to Unchained, “There is a kevin in all of us.”

If you're interested in learning more about crypto and Web3:

Cover photo credit:Yuichiro Chino