"Coding A First Amendment Right": The Electronic Frontier Foundation Defends EtherDelta

Colin Muller

The Electronic Frontier Foundation (EFF), a non-profit “digital rights” organization, has hit out against the recent Securities and Exchange Commission (SEC) charges against EtherDelta (ED) founder Zachary Coburn in a letter, calling the SEC “dangerously broad” and “unconstitutional."

EtherDelta is a decentralized exchange (DEX) allowing users to exchange Ethereum (ETH) ERC-20 tokens. Any ERC-20 token can be traded on the platform without permission, using only the token’s ERC-20 smart contract address to list.

The SEC charged Coburn with “Operating an Unregistered Exchange” for his role in developing ED (not in actually running it). He settled out of court, accepting almost $400,000 in disgorgement and penalties.

As an open platform, ED could and did (and continues to) host trading of the kinds of tokens that the SEC have been attempting to classify as securities. The SEC have met with some recent failures in this regard, however, and were denied an injunction against Blockvest last November by a San Diego District Judge.

A Key Precedent

The EFF see the Coburn case squarely as a violation of free speech, a right enshrined in the First Amendment of the US Constitution. They consider the SEC’s opinion, that “an entity that provides an algorithm” (e.g., writes code) could be in violation of securities laws, to be “an affront to the First Amendment.”

In response to the SEC’s actions, the EFF issued a letter to the SEC’s Secretary Brent Fields, outlining four potential violations of the First Amendment that could be gleaned out of the SEC’s actions: violating right of writing computer code; violating the protection of financial transactions; violating the freedom to write potentially controversial code without deploying it; and violating the right against “After-the-Fact Liability for Writing and Publishing Code.” The EFF also cited legal precedents to support all of these concerns.

Furthermore, the EFF voiced a concern that the SEC could “Chill Blockchain Innovation, Even Beyond Decentralized Exchanges” with such attempts at prosecution of coders. 

The EFF also specifically highlighted the pivotal 1995 legal case, Bernstein v. United States, a legal battle which marked the change in regulatory status of encrypted computer code; from being considered a munition (i.e., a weapon) that could not be disseminated, to a form of free speech.

Vietnam to Soon Have a Fully-Authorized Cryptocurrency Exchange

Vietnam is reportedly set to soon have a fully-authorized cryptocurrency exchange, as two firms in the country have recently signed a memorandum of understanding (MOU) for the production of a crypto trading platform, after obtaining a license for it.

According to a recently published press release, the largest distribution company in Vietnam, the Linh Thanh Group, is going to develop the trading platform along with Switzerland-based blockchain firm KRONN Ventures AG.

The move comes after KRONN Ventures formed a consortium with financial committees from various Asian countries, including Vietnam, Cambodia, Bangladesh, and Sri Lanka. Its goal was to “build an international wiring system using blockchain technology that fits with the Asian environment.”

The document notes that an official statement from the Linh Thanh Group has stated that working with KRONN Ventures will see both create “world-class cryptocurrency exchange,” as the latter is “known widely as a leader in blockchain technology in Switzerland.”

It adds:

The industry expectation is that by combining Linh Thanh Group's massive distribution network, which is the largest in Vietnam, with the world-class technology of KRONN Ventures, the impact will be widely felt not only in Vietnam but also in other surrounding Asian countries.

Notably, the Vietnamese government has last year seized the domain of the country’s oldest bitcoin exchange, after it was accused of providing e-commerce services without registering with the government.

The country’s Ministry of Justice has, back in November, suggested several ways cryptoasset could be regulated in the country. At the time Nguyen Thanh Tu, the director of the nation’s Department of Civil and Economic Laws, said authorities carefully examined the pros and cons of regulating cryptocurrencies.

 This, even though the government has been looking to ban bitcoin mining machine imports. The move was, at the time, being justified by the potential use of cryptocurrencies in illicit activities.