Cryptocurrencies & ICOs – Page 8 – FinTech and Blockchain Law Watch

Commissioner Brian Quintenz Comments On The Liability Of Smart Contract Developers For Uses In Violation of CFTC Regulations

Oct 22 2018

By Anthony R.G. Nolan and Russell E. Deutsch

Recently, Commissioner Brian Quintenz of the US Commodity Futures Trading Commission (CFTC) commented that smart contracts that have the defining features of a swap, future or option are subject to CFTC regulation. The Commissioner posited the hypothetical that, after appropriate analysis, the CFTC has concluded that a particular smart contract, e.g., a binary option executed on a blockchain, is within its jurisdiction. He queried: If that contract is executed in violation of CFTC regulations, then against whom should the CFTC bring enforcement action?

Financial Stability Board’s View on Crypto-Assets

Oct 17 2018

By Jim Bulling and Edwin Tan

On 10 October 2018, the Financial Stability Board (FSB) released a report assessing the risks and implications of crypto-assets on financial stability. The FSB considered that the growth of crypto-asset trading platforms, the introduction of new financial products (crypto-asset funds and exchange-traded products) and growing interest by retail investors together could lead to implications on global financial stability.

In its report, the FSB assessed the primary risks in crypto-asset markets which could expose and undermine confidence in the financial system and in financial regulators.

New FCA “Dear ICO” Letter warns of financial crime associated with cryptocurrencies

Jun 14 2018

By Judith E. Rinearson and Rizwan Qayyum

On June 11 2018, the Financial Conduct Authority (the “FCA”) issued a “Dear CEO” letter, which provided guidance for banks on how to handle the growing risks associated with “cryptoassets”.

The FCA defines “cryptoassets,” using Bitcoin and Ether as an example, as “any publicly available electronic medium of exchange that features a distributed ledger and a decentralised system for exchanging value.” While acknowledging that there are “many non-criminal motives” for using cryptoassets, the letter asserts that these products can be abused because they offer “potential anonymity and the ability to move money between countries.”

An old-fashioned bank heist – in cyberspace

Jun 13 2018

By Cameron Abbott and Sarah Goegan

In the old days the bank robbers would rob the local town and ride off into the sunset. The new version is a little less easy to see. Coinrail, a South Korean cryptocurrency exchange, has announced that it was hacked on 10 June. That’s a polite phrase for “our customers lost a lot of coins”.

The cyberattack resulted in more than $40 million USD worth of altcoins (coins that aren’t bitcoin or Ethereum) being stolen. This represented around 30% of coins traded on the exchange. Quite a substantial amount, considering Coinrail is a smaller cryptocurrency exchange!

UK Cryptoassets Taskforce meets for first time

Jun 12 2018

By Jonathan Lawrence

The first meeting of the UK’s new Cryptoassets Taskforce took place on 21 May 2018. First announced in April 2018 by the Chancellor of the Exchequer as part of the UK government’s Fintech Sector Strategy, the Taskforce is a central part of the government and financial regulators’ efforts to understand and engage with the implications of new technologies in financial services. At the first meeting, the Taskforce agreed its objectives, which include:

exploring the impact of cryptoassets;
the potential benefits and challenges of the application of distributed ledger technology in financial services; and
assessing what, if any, regulation is required in response.

Weather Bureau IT mining cryptocurrencies?

Mar 13 2018

By Cameron Abbott and Allison Wallace

The Australian Federal Police are investigating two members of the Bureau of Meteorology’s IT team for allegedly running an operation in which they made use of the Bureau’s powerful computers to “mine” cryptocurrencies.

It was revealed late last week that the AFP raided the Bureau’s Melbourne CBD offices on February 28, and questioned the two employees. No charges have been laid, or arrests made. Read More

SEC on Unlawful Online Platforms Trading in Digital Assets

Mar 12 2018

By Rizwan Qayyum

The Securities and Exchange Commission (SEC) released a statement today which advises of the dangers of cryptocurrencies and other digital assets, which may be offered or sold in an ICO, being traded using online exchanges. The statement states that a number of “potentially unlawful” platforms are appearing to provide investors with unearned safety and that “the SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not,” the agency said.

The statement is targeting exchanges, and also noted that online wallets may also qualify under existing regulations if they are in a position to facilitate trading. No cryptocurrency exchange is currently registered as an approved exchange by the SEC.

You can read the SEC statement here.

Federal Court to decide whether tokens issued through an ICO are securities

Mar 07 2018

By Clifford Histed

In a criminal case in Brooklyn, New York, a federal court has been asked to decide for the first time whether tokens or coins issued through an initial coin offering constitute “securities” under U.S. securities laws.

On September 29, 2017 the SEC filed a civil complaint against Maksim Zaslavskiy, alleging that he had committed securities fraud and sold “illegal unregistered securities.” The instruments at issue were tokens that Zaslavskiy allegedly sold to the public through initial coin offerings of his companies RECoin Group Foundation LLC and DRC World, Inc. The lawsuit followed an investigation that apparently took less than 90 days to conduct, and that involved reviewing social media and online postings. The investigation appears to have been conducted parallel with a criminal investigation by the FBI, and a criminal complaint was filed 28 days after the SEC complaint. The SEC case was stayed pending resolution of the criminal case.

Wyoming Moving to Exempt Virtual Currency from its Money Transmitter Law

Feb 23 2018

By Dan S Cohen

With unanimous support, the Wyoming House of Representatives passed House Bill 19, which exempts virtual currencies from the state’s money transmission law. HB 19 defines virtual currency as a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and is not recognized by the federal government as legal tender. If enacted, the Wyoming Money Transmitter Act would no longer apply to the buying, selling, issuing, or taking custody of virtual currency, or receiving virtual currency for the purpose of transmitting that currency within or outside of the United States.

The proposed change comes almost two years after Coinbase announced its indefinite suspension of business in the state due to its belief that the Wyoming Division of Banking interpreted the Wyoming Money Transmitter Act to apply to entities offering hosted wallet services. Wyoming would become the first state to completely exempt virtual currency from its money transmitter law if the bill is adopted. To date, Illinois, Kansas, Tennessee, and Texas have issued guidance excluding some but not all virtual currency activities from their respective money transmitter laws.

HB 19 is one of several virtual currency and blockchain-related bills the Wyoming legislature is considering. Bills to exempt “utility tokens” from securities regulation, and to allow companies to store records and accept shareholder votes through blockchain technology are also under consideration. Wyoming political leaders are clearly moving quickly to adapt to the rise of virtual currency and blockchain technology.

Maltese Government releases consultation paper on DLT and ICOs

Feb 23 2018

By Rizwan Qayyum

The Government of Malta has issued a consultation paper on the framework relating to distributed ledger technology, ICOs and cryptocurrency exchanges and wallet providers dealing in such assets. This follows their initial Discussion Paper on ICOs and Virtual Currencies published in November 2017, which outlined the basis for this consultation paper.

Category:Cryptocurrencies & ICOs