Category: Blockchain & Smart Contracts

1
K&L Gates Links with Global Legal Blockchain Consortium
2
Blockchain and Data Protection: Trustless Should Not Mean Distrusted
3
Global AML Regulator Amends Its International Standards for Virtual Assets
4
UK Cryptoassets Taskforce Final Report
5
Regulating the UK “Wild West” of Crypto-Assets
6
The SEC Expands its Enforcement Throughout the Digital Industry
7
NYAG Report on Virtual Markets
8
Blockchain-Based Businesses Receive Legislative Boost!
9
Court of the Blockchain Announced
10
Australia’s first crypto-custody vault is open for business

K&L Gates Links with Global Legal Blockchain Consortium

Global law firm K&L Gates LLP has joined the Global Legal Blockchain Consortium (GLBC), an organization of legal and technology industry stakeholders focused on increasing the security, productivity, and interoperability of blockchain technology.

To date, more than 120 large companies, law firms, software companies, and law schools have joined the GLBC to help in developing standards and policies that govern the use of blockchain technology in the business of law. Specific issues on which the consortium focuses include data integrity, authenticity, security, and privacy for contracts and documents; interoperability between corporate legal departments and law firms; productivity improvements in the operation of legal departments and law firms; and augmentation of existing legal technology systems.

Judith Rinearson, a partner in K&L Gates’ New York and London offices and one of the co-chairs of the firm’s FinTech practice leading K&L Gates’ involvement with GLBC, said: “We have been very strategic in how we have approached the enormous opportunities presented by the blockchain. Our membership in GLBC is a great fit in our overall strategy to harness the capabilities of the blockchain in order to benefit our clients.”

Last year, K&L Gates announced plans to implement its own private blockchain to assist in the exploration, creation, and implementation of smart contracts and other technology applications for future client use, a commitment that very few, if any, other major law firms have made.

Lawyers in the firm’s FinTech practice are part of a cross-disciplinary, global team focused on helping clients navigate regulatory, policy, and business issues surrounding the FinTech space, such as consumer financial services regulation, e-commerce regulation, fund formation, cybersecurity, finance, and intellectual property matters.

For more information please contact Becca Hatton at +1.202.778.9897 or becca.hatton@klgates.com.

Blockchain and Data Protection: Trustless Should Not Mean Distrusted

By Claude-Étienne Armingaud

Amidst the international tidal wave caused by the entry into force of the EU General Data Protection Regulation (“GDPR”) in May 2018, many half, or even false truths have been spread about hindrance on a global scale of innovative technologies. However, we must keep in mind that Europe has adopted a long-standing position of technology-neutral regulations and data protection is no exception.

Indeed, from a GDPR perspective, no technology would be prohibited or regulated by nature – only its application to a specific purpose may be regulated, inasmuch as it involves personal data -whether relating to the participants and miners or the payload data itself- and falls within its broad geographical scope (see our previous Alert for more details).

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Global AML Regulator Amends Its International Standards for Virtual Assets

By Jim Bulling and Felix Charlesworth

On 19 October 2018, the global anti-money laundering and counter terrorism financing watchdog, the Financial Action Task Force (FATF), made a series of amendments to its rules framework (Standards), in response to international developments in the use and exchange of virtual assets such as cryptocurrencies and other virtual tokens.

The Standards set out the FATF’s recommended framework of rules and measures which countries, including Australia, should adopt in order to combat money laundering and terrorist financing.

As part of the revised Recommendation 15, the FATF has written “to manage and mitigate risks emerging from virtual assets, countries should ensure that virtual asset providers are regulated for AML/CTF purposes“.

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UK Cryptoassets Taskforce Final Report

By Jonathan Lawrence

The UK Cryptoassets Taskforce has recently published its final report.  The Taskforce comprises HM Treasury, the Financial Conduct Authority and the Bank of England and was formed in March 2018.

While the use of cryptoassets for illicit activity remains low in the UK, the Taskforce concludes that these risks are increasing and the use of cryptoassets for money laundering is growing. The UK authorities will bring all relevant firms into anti-money laundering and counter-terrorist financing regulation. This action will go significantly beyond the requirements set out in the European Union Fifth Anti-Money Laundering Directive. The UK government will consult on its proposed actions and will legislate during 2019.

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Regulating the UK “Wild West” of Crypto-Assets

By Jonathan Lawrence

On 19 September, the UK House of Commons Treasury Committee published a highly critical report of the state of UK crypto-asset regulation. Crypto-assets themselves (i.e. those designed primarily as a means of payment / exchange) are not within the scope of UK Financial Conduct Authority (FCA) regulation. This is because crypto-assets generally will not meet the criteria to be considered a specified investment under the Regulated Activities Order (RAO), nor would they typically qualify as ‘funds’ or ‘e-money’ in the Payments Services Directive and the E-Money Regulation 2009.

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The SEC Expands its Enforcement Throughout the Digital Industry

By Dan S. Cohen

The Securities and Exchange Commission (“SEC” or “Commission”) is ramping up its enforcement efforts in the digital asset industry, expanding its focus to include digital asset brokers and investment companies. On September 11, the Commission issued an order against a digital asset hedge fund and announced a settlement with a self-described “ICO superstore” for violating federal securities laws. The Commission fined Crypto Asset Management LP and its principal for failing to register as an investment company, among other things. According to the SEC, Crypto Asset Management, which trades digital assets exclusively, is an investment company pursuant to the Investment Company Act because it “invest[s], reinvest[s], own[s], hold[s] or trad[es] in securities.

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NYAG Report on Virtual Markets

By Robert M. Crea

On September 18, 2018, the NY Attorney General’s office (“OAG”) published its Virtual Markets Integrity Initiative report (the “Report”) (found here).  The Report includes findings from the OAG’s April 2018 fact-finding inquiry (the “Initiative”) into the policies and practices of various virtual asset trading platforms.  The Report is anything but positive.

The Report expresses a number of concerns with the following key findings:

  • many exchanges conduct business lines and operational roles creating potential conflicts of interest;
  • trading platforms have yet to implement serious efforts to impede abusive trading activity; and
  • protections for customer funds are often limited or illusory.

The Report identifies by name certain platforms that declined to participate in the April 2018 survey on the claim that they do not allow trading from New York.  The Report acknowledges that the OAG has referred three of these platforms (Binance, Gate.io and Kraken) to the Department of Financial Services for potential violation of NY’s virtual currency regulations.

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Blockchain-Based Businesses Receive Legislative Boost!

By Cameron Abbott and Jessica McIntosh

The Midwestern state of Ohio has last week become one of the first states in the US to pass legislation which recognises the use of blockchain technology, and as a result blockchain data and transactions will now have legal bearing in the State of Ohio.

Governor John Kasich says the legislation was introduced with a clear focus, that is, to treat data and smart contracts stored through blockchain technology as electronic records and to promote the role of blockchain technology in a range of industries, not just through cryptocurrencies such as bitcoin. This legislative boost will allow the use of blockchain technology in various sectors from real estate to health care.

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Court of the Blockchain Announced

By Jonathan Lawrence

The Dubai International Financial Centre (DIFCCourts have partnered with Smart Dubai to create what they say is the world’s first “Court of the Blockchain”. According to an announcement on 30 July, they will initially explore how to aid verification of court judgments for cross-border enforcement. They say they plan to create a blockchain-based court designed to streamline the judicial process, remove document duplications, and drive efficiencies. Future research announced will investigate handling disputes arising out of private and public blockchains and out of regulation and contractual terms encoded within smart contracts.

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Australia’s first crypto-custody vault is open for business

By Jim Bulling, Edwin Tan and Maria Downie

Australian companies Decentralised Capital and Custodian Vaults have recently announced a partnership to launch Australia’s first insured crypto-currency custody vault.  This follows the earlier commencement of Coinbase’s crypto-custody service in the USA and Europe.  These offerings are in response to growing investor demand for reliable and secure crypto-currency storage.

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