Title – Proposal [Non-Constitutional]: ArbitrumDAO Contribution; Safeguarding Software Developers’ Rights & the Right to Privacy
Abstract & Rationale - This proposal envisages a monetary contribution to DEF & Coin Center from the ArbitrumDAO to continue their policy, litigation & advocacy efforts in relation to open-source software & software developers’ rights.
Steps to Implement - The steps to implement the AIP, including associated costs, manpower, and other resources for each step where applicable. For the avoidance of doubt, any AIPs involving transactions with third parties (such as grants) will need to ensure that applicable legal documentation and procedures are also included.
Timeline - TBA
Overall Cost - [Dependant on DAO vote]:
Fund with 500,000ARB each; Fund with 750,000ARB each; Fund with 1,000,000ARB each; Fund with 1,250,000ARB each; Fund with 1,500,000ARB each; Don’t Fund. Proposal authored by Axis Advisory 1
Context & Preamble
The digital asset industry has been faced with recent legal challenges in relation to a software developer’s individual freedom to contribute to the development and subsequent deployment of open-source permissionless software. This goes as far back as 1990 when Phil Zimmerman released Pretty Good Privacy (PGP), one of the first openly available public-key cryptography applications that featured end-to-end (E2E) encryption. Zimmerman’s creation prompted a criminal investigation that was eventually dropped, resulting in federal court decisions that protect encryption under the U.S. Constitution’s First Amendment. This clash on personal privacy became dubbed the “encryption wars.”
Our team over at Axis Advisory has published a write-up that offers contextual information in relation to the above: Defending Open Source: A United Stand for Developer Rights and Software Freedom 4
In this regard, we are proposing a contribution from the ArbitrumDAO to DEF & CoinCenter to continue their policy & litigation efforts in relation to privacy-enhancement tooling and software developer advocacy. Some of the institutions’ most notable contributions with an industry-wide impact will be noted hereunder:
COIN CENTER
Coin Center’s case against the Office of Foreign Assets Control about adding Tornado Cash to the OFAC Sanction List, (naturally, Tornado Cash not being a person or entity but a mere set of open-source smart contracts running on the Ethereum Blockchain). Albeit the court ruling against Coin Center in the initial proceedings, Coin Center is currently in the process of appealing the judgment. [Refer: Coin Center is suing OFAC over its Tornado Cash sanction].
[Refer: https://storage.courtlistener.com/recap/gov.uscourts.flnd.447304/gov.uscourts.flnd.447304.74.0.pdf];
Coin Center’s concerns raised to the Financial Crimes Enforcement Network (FinCEN) regarding the designation of convertible virtual currency (CVC) mixing as a primary money laundering concern (PMLC). In this regard, Coin Center highlighted the rule’s extensive scope and lack of precedent. They argued that the proposed designation lacks clarity and narrowly tailored definitions, potentially leading to the misclassification of legitimate transactions as criminal. [Refer: Comments to the Financial Crimes Enforcement Network on “Proposal of Special Measure Regarding Convertible Virtual Currency Mixing, as a Class of Transactions of Primary Money Laundering Concern”]
Coin Center’s letter to the Senate Finance Committee highlighing the need for a regulatory approach that mirrors the successful, light-touch framework applied to the internet. Coin Center advocated for clear taxation guidelines on cryptocurrency transactions, emphasizing the importance of a de minimis exemption for minor gains from every transaction to facilitate the use of cryptocurrencies in daily commerce without undue tax burdens. [Refer: Coin Center Suggestions to Address Uncertain Tax Treatment of Digital Assets]
Coin Center’s contributions to Roman Storm’s and Alexey Pertsev’s legal defensen in relation to the following: Roman Storm’s legal dispute in relation to accusations levied against his person on charges of conspiracy to facilitate money laundering, operate an unlicensed money transmitter and violating sanctions [Court of New York]; and Alexey Pertsev’s legal dispute in relation to accusations levied against his person on charges of facilitating money laundering [Netherlands Court]. DEFI EDUCATION FUND
Some of the DeFi Education Fund’s most notable contributions with an industry-wide impact will be noted hereunder:
The DeFi Education Fund initiated a legal challenge against a patent held by True Return Systems, LLC regarding blockchain technology, challenging the novelty and validity of its claims. This action reflects DEF’s commitment to preserve the digital assets space’s core values: fostering innovation, ensuring open access, and maintaining an inclusive environment. By contesting what DEF consider to be an overly broad patent, they aim to prevent potential monopolistic control, ensuring the decentralization is not compromised. [Refer: https://www.defieducationfund.org/_files/ugd/84ba66_0b48beb0dd404637b4d988988b1bf3fc.pdf].
The DeFi Education Fund filed a legal complaint along with Beba LLC against the SEC, after they recently created and distributed their ‘BEBA token’ via airdrops. Beba and DEF are seeking legal relief due to concerns that the SEC may classify BEBA tokens as securities, which could end up hindering not only their business operations but also the broader digital asset market. In essence, the DEF are fighting against the SEC’s approach towards digital assets which has become overly broad without adequate rule-making procedures, stifling innovation. [Refer: https://www.defieducationfund.org/_files/ugd/84ba66_3f7a8f2ca6614d7381122cb1beeed4a8.pdf].
The DeFi Education Fund submitted an amicus brief in support of James Harper against the IRS, advocating for the Fourth Amendment rights of cryptocurrency users. DEF emphasizes the need to balance law enforcement’s reach with individual’s financial privacy in the digital realm. They are arguing for a modern interpretation of privacy protections to reflect the realities of digital transactions and the traceability of cryptocurrency activities on public ledgers. [Refer: DeFi Education Fund Files Amicus Brief In Coinbase Case].
The DeFi Education Fund also contributed to the support of Roman Storm’s legal defense arguing against the novel legal theories proposed by the government under the International Emergency Economic Powers Act and money laundering statutes. DEF emphasizes the importance of distinguishing software developers from the actions of third-party users, in order to protect software developers from being held liability for third-party misuse of their open-source. [Refer: https://www.defieducationfund.org/_files/ugd/84ba66_063f9d1fd563466cadfa3f5434f918e9.pdf].
OBJECTIVE
Coin Center Contribution
The ArbitrumDAO is being provided the opportunity to vote & effect a contribution to Coin Center; the leading non-profit research and advocacy center focused on the public policy issues facing cryptocurrency and decentralized computing technologies.
By way of a brief; Coin Center’s mission is to defend the rights of individuals to build and use free and open cryptocurrency networks: the right to write and publish code – to read and to run it. The right to assemble into peer-to-peer networks. And the right to do all this privately.
Coin Center has been at the forefront of policy research, educating policymakers and the media about cryptocurrencies, advocating for sound public policy, and engaging in litigation to defend digital civil liberties of software developers and other stakeholders within the industry.
DeFi Education Fund Contribution
The ArbitrumDAO is being provided the opportunity to vote & effect a contribution to the DEF whose mission revolves around educating policymakers globally about DeFi, promoting grassroots supports, enhancing legal support across jurisdictions, and advocating for policies welcoming of decentralized financial infrastructure.
They have initiated several key projects and grants to advance its objectives. One of their initial endeavors targeted a group of organizations and individuals, with the goal of expanding the understanding of decentralization and the DeFi ecosystem among policymakers.
Additionally, the DEF is taking a stand against how some governments interpret laws in a way that could establish a troubling precedent, potentially discouraging software developers in various fields. They pointed out the risk that developers might face legal action for their open-source code if it is misused by other for illegal activities. This could place developers are risk of being held criminally responsible for actions they didn’t partake in, possibly affecting them years or even decades later.
Please review the attached forum post for the full proposal and discussion.