0x-Based OpenRelay Self-Regulates, Builds Token 'Blacklist' After SEC Charges Against EtherDelta

Entities working on the decentralized side of cryptoasset trading are already starting to fall into line, it seems, after the US Securities and Exchange Commission’s (SEC) recent action against EtherDelta (ED) creator Zachary Coburn, who was charged with operating an unregistered securities exchange and forced to pay nearly $400,000 in disgorgement and fines.

In the wake of this announcement, OpenRelay founder Austin Roberts, whose company develops and operates the 0x-powered OpenRelay order book software suite, has issued a statement broadcasting his and the company’s adherence to the SEC’s strictures.

 

OpenRelay will implement changes to both its software application programming interface (API) and “operational process” to this end. Users of OpenRelay’s trading software will have to sign updated terms of service with their private key, presumably avowing not to trade any token resembling a security (the finalized terms are forthcoming). The company will also pare a curated list of tokens that can be traded using its webpage widget, to “only include tokens that have been evaluated from a securities perspective.”

 

Furthermore, a “blacklist” capability will be coded into its software to allow the company some discretion regarding which tokens can be traded by its users. While tokens will still not have to be pre-vetted to trade using OpenRelay’s API, the new ability will allow the company to visibly respond to any new directions the SEC takes with respect to specific tokens or classes of tokens.

 

Devs Washing Their Hands

Roberts emphasized in his blog post that OpenRelay’s own software was open-source software, built upon more open-source software (the Ethereum-based 0x protocol). Therefore, although they will implement the SEC-friendly measures on their own instance of OpenRelay - the one they themselves developed - Roberts was keen to disclude OpenRelay’s culpability in whatever other users and developers may do with their forks of the software.

 

He wrote:

The constraints we are imposing will be implemented in our open source projects, but will be applied primarily through our hosted services. If someone chose to host their own instance of the OpenRelay services, we cannot constrain the tokens they allow on their platform [...] We cannot control whether third parties running our software include the same set of [curated] tokens, but they should be aware of the legal ramifications.

Austin Roberts

 

 

It is not clear at this juncture whether or not this sort of distancing will prove effective in avoiding future legal trouble. After all, in what is now the primary example of the SEC’s interaction with decentralized exchanges, at least part of Coburn’s crime seems to be that he coded up a platform that functioned properly (the other part being rather more obvious, that ED did not register with the SEC).

 

Drew Hinkes, New York University adjunct law professor and General Counsel at Athena Blockchain, outlined this issue nicely. Speaking of ED's Zachary Coburn:

 

Bitcoin Whale Reportedly Risks 800 BTC for $0.01 Payout in Dogecoin

A bitcoin whale has supposedly risked a total of 800 BTC, worth around $5.8 million, to help the cryptocurrency remain at the $7,200 mark in a bid to win a bet he made on social media.

A Twitter exchange between Dogecoin supporter Samu and bitcoin whale Joe007 shows that both agreed to bet on bitcoin’s future price, with Samu agreeing to pay 5 million DOGE (around $11,000) to the whale if BTC traded above $7,100, and the whale agreeing to pay Samu the same amount if it was below $7,100 at 13:00 UTC on December 12.

The BTC whale ended up winning the bet as the price of the flagship cryptocurrency didn’t drop below the agreed-upon mark. Some of those watching the thread, however, noted that something seemed to be going on before the bet’s deadline expired.

The bet was made according to the price of the Bitfinex cryptocurrency exchange, and a trader soon alleged on social media the BTC whale could’ve placed an 800 bitcoin order to “defend” the $7,200 so the cryptocurrency’s price wouldn’t dip.

While it isn’t possible to tell whether Joe007 was the one behind the 800 BTC order, the whale seemed to warn Samu before the bet was made that he was extremely confident he was going to win, tweeting out “you really don’t want to make this bet, believe me…”

After the deadline the posts suggesting market manipulation came out so Samu said he “got revenge” on the bitcoin whale cheating, by offering to pay him only 6 DOGE, currently worth about $0.013.

The Dogecoin addresses Joe007 showed as the destination for the funds currently has little over 10,000 DOGE in it, worth close to $22. Some argued Samu should have paid the funds as no terms were defined in the bet, while others agreed with him.

Featured image via Unsplash.