First suing Kraken to stop offering staking-as-a-service to US consumers, and now suing Paxos for issuing BUSD. The US regulatory agencies are hell-bent on stifling crypto innovation in the US and actively trying to break this cradle of financial innovation.

It all started earlier this month when the U.S. Securities and Exchange Commission (SEC) announced charges against crypto exchange Kraken, alleging its staking-as-a-service program amounted to offering unregistered securities products in the U.S. To settle the charges, Kraken is paying $30 million and shutting all of its U.S. staking services.

As Kraken ended up paying the $30 million fine, Coinbase, another US-based crypto exchange, defended staking-as-a-service, saying, “Coinbase’s staking services are not securities. We will happily defend this in court if needed.”

These unprecedented charges and Coinbase’s strong stance raised a series of questions among crypto connoisseurs, such as what staking means in the eyes of regulators and how to proceed in such a grey scenario.

Well, before we all could engage in meaningful conversations around this topic, another regulator jumped in against the ecosystem, this time the New York Department of Financial Services (NYDFS) against the Paxos, directing it to cease minting new BUSD. Meanwhile, SEC, on the other hand, is suing Paxos for issuing BUSD stablecoin as it claims it to be “unregistered security.”

Wait a second, how the hell can a stablecoin be a security?

Yes, my mind raised the same questions, and unfortunately, none of us have an answer for it. Even if we consider the Howey test criteria, stablecoins don’t pass the 3rd check “with the expectation of profit.”

On the other hand, some arguments are being put forth, suggesting that the Howey test is the only precedent for investment contracts. In contrast, "securities" is a much broader category defined by the 1933 Securities Act. Adam Cochran has put forth some interesting arguments in this context, you can check them out in this Twitter thread.

Meanwhile, there is also some speculation regarding this move against Paxos. Some Twitteraties speculate that $BUSD issued on Ethereum was managed by Paxos and regulated by NYDFS. In contrast, BUSD on other chains was managed by Binance, not regulated by NYDFS, and had a billion in missing reserves.

Where do you stand on this matter? Let me know on Twitter (@0xnarender).

Ohh, BTW, it was Circle (USDC issuer) that warned NY Watchdog about Binance token issues in 2022. Take it as you want.

This week in Web3 Wednesday:

• Rumour: Sushiswap landing on Cosmos
  
• Liquid Staking platform Lido announced Lido V2
  
• Alpha: Co-founder of MySapce jumps into web3 gaming with Plai Labs
  
• Reminder: $BLUR token launch
  

Rumour: Sushiswap landing on Cosmos

According to some rumors on CT, Sushiswap is soon going to launch its derivative platform on Cosmos (technically on Sei Network while plugging into Cosmos’s IBC). The rumors are based on Sushi’s newly-acquired Vortex Protocol, a derivatives trading platform built on top of Sei Network using Cosmos’s tooling.

Now, the rumors suggest that Vortex Protocol (as a part of Sushi’s umbrella) will plug into the Cosmos ecosystem as an app chain. Earlier, dydx, another derivative platform, moved away from Ethereum to the Cosmos ecosystem.

Liquid Staking platform Lido announced Lido V2

With the onset of the Ethereum Shanghai Update and enabling of withdrawal of staked ETH, Lido, the biggest liquid staking platform on the Ethereum chain, has announced Lido V2 - Lido’s largest upgrade to date and an important step towards further decentralization.

As per the official blog post, the two major focal points of this upgrade are:

• Staking Router: Thanks to a new modular architectural design, anyone can develop on-ramps for new Node Operators, ranging from solo stakers to DAOs and  Distributed Validator Technology (DVT) clusters. Together, they will create a far more diverse validator ecosystem.
• Withdrawals: This all-encompassing Lido on Ethereum protocol upgrade will allow stETH holders to withdraw from Lido at a 1:1 ratio, realizing a key milestone of a truly open on/off ramping into the Ethereum staking ecosystem.

Alpha: Co-founder of MySapce jumps into web3 gaming with Plai Labs

If you’re looking for some web3 gaming, this might interest you.

Last month, A16Z invested in a web3 gaming startup called PLAI Labs, founded by Chris DeWolfe and Aber Whitcomb, technology veterans who previously were the founders of both the social media platform MySpace and the game studio Jam City.

PLAI Labs, Chris, and Aber’s new venture are focused on building the next generation of social platforms leveraging AI and web3. With their shared experience in social media, game design, and technology, they are creating a new platform for users to play, talk, battle, trade, and adventure together.

Learn more about Plai Labs here.

Reminder: $BLUR token launch

Unless you are living under a rock, you might be eagerly waiting for the Blur token launch. For those unaware, Blur is an NFT marketplace that took the NFT space by storm late last year. The marketplace grew at an unprecedented rate giving some serious competition to OpenSea.

In addition to being a faster marketplace than others, the Blur NFT market platform has real-time price feeds, a sorting function based on price, a more intuitive interface, and no trading fees for NFT sales.

That’s not all; Blur also giveaway care packages for NFT traders, and now, with the token launch event, we’re all eagerly waiting to open those care packages and claim our tokens. So, if you’re like me, holding some care packages dear to your heart, it’s time to connect your web3 wallet (I like Obvious) to the Blur marketplace and claims your tokens.