FinTech Law Watch

At the Crossroads of Law, Innovation and Commerce

 

1
Federal Reserve Issues Policy Statement Limiting Crypto-Activities of State Member Banks
2
DeFi Regulatory Alert: CFTC Files Its First Ever Oracle Manipulation Case
3
“Joint Statement on Crypto-Asset Risks to Banking Organizations” Will Significantly Impact Cryptocurrency Companies and Their Banking Relationships
4
Alaska Will Require Licensing for Crypto Money Transmitters
5
CFTC Ordered to Serve Former Founders in Ooki DAO Case
6
Renewed Era of Crypto Assets Growth in Hong Kong
7
California Legislators Continue To Assess How To Regulate Digital Assets
8
Federal Reserve Doubles Down on Oversight of Crypto Activities for Banks
9
FDIC Warns Banks on Crypto-Related Deposit Insurance Customer Confusion
10
SEC v. Wahi: An Enforcement Action That Could Impact the Broader Crypto / Digital Assets Industry

Federal Reserve Issues Policy Statement Limiting Crypto-Activities of State Member Banks

By Grant F. Butler, Carly E. Howard, Andrew M. Hinkes

The Board of Governors of the Federal Reserve (the “FRB”) issued a policy statement that interprets Section 9(13) of the Federal Reserve Act to limit state member banks to engage as principal in only activities that are (a) permissible for a national bank or (b) explicitly permissible for state banks under federal law.  The activity restrictions apply equally to insured and uninsured state member banks supervised directly by the FRB. 

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DeFi Regulatory Alert: CFTC Files Its First Ever Oracle Manipulation Case

By Andrew M. Hinkes, Clifford C. Histed, Cheryl L. Isaac, and Maxwell J. Black

The Commodity Futures Trading Commission (“CFTC”) filed a civil enforcement action this week against Avraham Eisenberg, charging him with a scheme to defraud others and engage in price manipulation (as announced by the CFTC here). While there have been other enforcement actions related to decentralized finance (“DeFi”) protocols, this is the first case in which the CFTC has charged a person for fraud in connection with “oracle manipulation” on a decentralized exchange.  In addition to this CFTC action, the U.S. Department of Justice previously charged Eisenberg with criminal fraud and commodity price manipulation in connection with this same alleged scheme.

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“Joint Statement on Crypto-Asset Risks to Banking Organizations” Will Significantly Impact Cryptocurrency Companies and Their Banking Relationships

By Grant F. Butler, Andrew M. Hinkes, Jeremy McLaughlin, Judie Rinearson

The US Board of Governors of the Federal Reserve System (FRB), Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) (the “Agencies”)  today issued a joint statement reiterating their ongoing concerns with crypto-asset activities entering the banking sector.  See: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20230103a1.pdf

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Alaska Will Require Licensing for Crypto Money Transmitters

By Jeremy M. McLaughlin and Brenden R. Chainey

On November 30, Alaska amended its money transmitter regulations to, among other things, include virtual currency transactions within the definition of money transmission.  With this new change (effective January 1, 2023), companies engaged in money transmission involving virtual currency will be required to obtain a money transmission license.

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CFTC Ordered to Serve Former Founders in Ooki DAO Case

By Andrew M. Hinkes, Clifford C. Histed, Carly E. Howard, Cheryl L. Isaac, Maxwell J. Black

Following the unprecedented Ooki DAO enforcement action by the Commodity Futures Trading Commission (“CFTC”), the district court, after entertaining argument by several amici, clarified its position on another novel legal issue in the DeFi space:  how to serve process on a DAO.  On 12 December 2022, the United States District Court for the Northern District of California ordered the CFTC, as part of its efforts to serve the OOKI Dao, to personally serve the former founders of Ooki DAO as individually identifiable token holders. 

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Renewed Era of Crypto Assets Growth in Hong Kong

By Jay Lee

Recently, Hong Kong, through its Financial Services and the Treasury Bureau, pronounced a Policy Statement on Development of Virtual Assets (“VA”) in Hong Kong (the “Policy Statement”), which sets out the government’s vision and next steps to help grow Hong Kong’s VA sector again.  Hong Kong hopes to develop “a vibrant sector and ecosystem” for VA in the future.  The positions set forth in the Policy Statement are widely welcomed by market participants, who hope it will attract more talented crypto-related businesses back to Hong Kong.

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Federal Reserve Doubles Down on Oversight of Crypto Activities for Banks

By Grant F. Butler, Jeremy McLaughlin, Anthony R.G. Nolan, and Judie Rinearson

The Federal Reserve Board (the “FRB”) issued Supervision and Regulation Letter 22-6 (“SR 22-6”), providing guidance for FRB-supervised banking organizations (referred to collectively herein as “FRB banks”) seeking to engage in activities related to cryptocurrency and other digital assets.  The letter states that prior to engaging in crypto-asset-related activities, such FRB banks must ensure that their activities are “legally permissible” and determine whether any regulatory filings are required.  SR 22-6 further states that FRB banks should notify the FRB prior to engaging in crypto-asset-related activities.  Any FRB bank that is already engaged in crypto-asset-related activities should notify the FRB promptly regarding the engagement in such activities, if it has not already done so.  The FRB also encourages state member banks to contact state regulators before engaging in any crypto-asset-related activity.

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FDIC Warns Banks on Crypto-Related Deposit Insurance Customer Confusion

By Grant F. Butler

On July 29, the FDIC issued an advisory to FDIC-insured financial institutions regarding deposit insurance and dealings with cryptocurrency companies.  The FDIC also issued an accompanying fact sheet for consumers regarding FDIC deposit insurance and cryptocurrency companies. 

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SEC v. Wahi: An Enforcement Action That Could Impact the Broader Crypto / Digital Assets Industry

By Andrew M. Hinkes and Josh Durham

The SEC has made a new crypto move. On July 21, the SEC filed a complaint in the U.S. District Court, Western District of WA against Wahi, a Coinbase employee, and two others alleging insider trading and charging them with securities fraud. The SEC alleged that nine of the crypto assets that Wahi and other defendants traded were “crypto asset securities”: AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX and KROM. This action is unique; unlike prior SEC enforcement actions brought against Poloniex, Coburn, TokenLot and others, which alleged the existence of digital asset securities being traded on various types of trading platforms, but failed to identify the specific alleged securities at issue or include any legal analysis of those alleged securities, here, the SEC “names names” and offers some analysis, but does not add the issuers of those 9 assets, or the platform upon which they are traded, as defendants.

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