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28 July 2023 • 30 minute read

Blockchain and Digital Assets News and Trends - July 2023

Editors:Margo TankMark RadcliffeElizabeth (Liz) Caires

This is our seventh monthly bulletin for 2023, aiming to help companies identify important and significant legal developments governing the use and acceptance of blockchain technology, smart contracts and digital assets.

While the use cases for blockchain technology are vast, this bulletin will be primarily on the use of blockchain and or smart contracts in the financial services sector. With respect to digital assets, we have organized our approach to this topic by discussing it in terms of traditional asset type or function (although the types and functions may overlap), that is, digital assets as:

  • Securities
  • Virtual currencies
  • Commodities
  • Deposits, accounts, intangibles
  • Negotiable instruments
  • Electronic chattel paper
  • Digitized assets

In addition to reporting on the law and regulation governing blockchain, smart contracts and digital assets, this bulletin will discuss the legal developments supporting the infrastructure and ecosystems that enable the use and acceptance of these new technologies.


INSIGHTS

Proposed legislation would subject cryptocurrency to tax rules for wash sales

By Tom Geraghty and Kali McGuire

On July 12, Senators Cynthia M. Lummis (R-WY) and Kirsten E. Gillibrand (D-NY) reintroduced the Lummis-Gillibrand Responsible Financial Innovation Act, an expanded version of legislation the senators originally introduced in 2022. The Act is designed to create a comprehensive regulatory framework for digital assets. The Act also provides for $1.4 billion in appropriations over five years to the Treasury Department, CFTC, SEC, and other agencies to implement this new framework, which would be paid for by revenue generated from two tax provisions that were not included in last year's version of the Act:

  1. Subjecting digital assets to the wash sale rule. A wash sale occurs when a taxpayer sells or trades securities at a loss and then buys them or substantially identical securities within 30 days before or after the sale. The wash sale rule prevents a taxpayer from deducting losses relating to a wash sale. Digital assets (such as cryptocurrency) are currently classified as property by the IRS and therefore are currently not subject to the wash sale rule. The Act would make digital assets explicitly subject to the wash sale rule, but would not treat such assets as securities for tax purposes.

  2. Requiring electing intermediaries to mark their digital assets to market for tax purposes. Section 475(e) of the Code allows commodities traders and dealers to elect mark-to-market accounting similar to that currently required for securities dealers. The Act would expand the definition of “commodity” for this purpose to include digital assets. Read more.

Delaware poised to join the 8 other states that adopted UCC Article 12

By Margo H.K. Tank, R. David Whitaker, Liz Caires, and Emily Honsa Hicks

As of July 24, 2023, 8 states have adopted the 2022 Amendments to the Uniform Commercial Code, including Article 12 regarding "Controllable Electronic Records" – Alabama, Colorado, Hawaii, Indiana, Nevada, New Mexico, North Dakota, and Washington. The Delaware legislature passed bill SB157 on June 30, adopting the 2022 Amendments to the UCC, and the bill is under consideration by the Governor. If signed into law, the 2022 Amendments would immediately come into effect in Delaware – triggering the interaction of the choice of law provisions in UCC Article 12 and the choice of law rules in current UCC Article 9.

We previously discussed the potential impact of UCC Article 12 and the concept of establishing priority ownership rights in a “Controllable Electronic Record.” The choice of law provisions included in UCC Article 12 and corresponding amendments to UCC Article 9 are fairly complex. The short version is that, within broad limits, the creator of a Controllable Electronic Record can select the governing law with respect to establishing control and priority of interests, even if the chosen jurisdiction does not have any other relation to the transaction evidenced by the Controllable Electronic Record. Read more.


STATUTORY AND AGENCY DEVELOPMENTS

FEDERAL DEVELOPMENTS

Digital Assets

Crypto reform bill goes to the House for consideration. On June 27, the House Agricultural Committee agreed with the House Financial Services Committee and voted to advance the Financial Innovation Technology for the 21st Century Act to the House of Representatives for consideration. The bill establishes a regulatory framework under the SEC and the CFTC to protect investors in crypto, defines when cryptocurrency or a token is a security or a commodity, and clarifies each agency’s jurisdiction. The approved text of the bill is not available at this time.

Taxation

Senate Finance Committee members solicit policy input on digital asset taxation. Senate Finance Committee Chairman Ron Wyden (D-OR) and Finance Committee Ranking Member Mike Crapo (R-ID) announced on July 11 an "effort to address uncertainties surrounding the tax treatment of digital assets with an open letter seeking input from experts, stakeholders and interested parties." The letter attaches the Joint Committee on Taxation's report on Selected Issues Regarding the Taxation of Digital Assets "to provide background on current law," and seeks input from interested parties on digital asset taxation issues related to:

  • Marking-to-Market for Traders and Dealers (IRC Section 475)
  • Trading Safe Harbor (IRC Section 864(b)(2))
  • Treatment of Loans of Digital Assets (IRC Section 1058)
  • Wash Sales (IRC Section 1091)
  • Constructive Sales (IRC Section 1259)
  • Timing and Source of Income Earned from Staking and Mining
  • Nonfunctional Currency (IRC Section 988(e))
  • FATCA and FBAR Reporting (IRC Sections 6038D, 1471-1474, 6050I, and 31 U.S.C. Section 5311 et seq.)
  • Valuation and Substantiation (IRC Section 170)

Responses are due by September 8 and must be sent to responses@finance.senate.gov.

STATE DEVELOPMENTS

Virtual currency/Money transmission

Arizona modifies escrow laws to cover certain digital assets. SB1191 was signed by the Arizona governor on June 20, and becomes effective 91 days after adjournment. The new law amends existing state law regarding disbursements from escrow accounts to support escrow accounts with deposits made via "distributed ledger technology transfers within or among a secure network of federally insured depository institutions where disbursements are recorded on a ledger and securely deposited into an escrow agent's depository account." The DLT may be a public or private ledger, permissioned or permissionless, but must be tamper resistant and protected with cryptography. The transfer "must maintain price stability by backing the value of the transferred digital asset" 1:1 with the US dollar.

Texas prohibits commingling of funds by digital asset service providers. On June 9, the Texas governor signed HB1666, which becomes effective September 1. The new law applies to digital asset service providers (ie, platforms that facilitate the trading of digital assets on behalf of customers and maintain custody of such assets) which hold a money transmission license from the state and serves more than 500 customers in the state or has at least $10 million in customer funds. The new law prohibits such digital asset service providers from commingling customer funds with funds belonging to the provider or using customer funds to secure or guarantee a transaction other than a transaction for the customer, or otherwise maintaining customer funds in a manner that the customer "may be unable to fully withdraw the customer's funds." The provider is also required to comply with annual state reporting and third party audit requirements.

Connecticut adopts framework for bitcoin ATMs. On June 27, Connecticut adopted HB6752, which authorized the Banking Commissioner to adopt regulations governing the business use of digital assets, including virtual currencies and stablecoins, establishing as money transmission the operation of virtual currency kiosks (otherwise known as bitcoin ATMS) and setting forth requirements applicable to owners and operators of virtual currency kiosks.

UCC Article 12

Nevada, Alabama, and Hawaii add UCC Article 12.

  • On June 15, Nevada adopted AB231 adopting the 2022 amendments to the Uniform Commercial Code (UCC), including the adoption of Article 12 regarding controllable electronic records. The new law becomes effective October 1.
  • Alabama adopted HB348 on June 14 which added to the state UCC Article 12 governing property rights of intangible digital assets as controllable electronic records.
  • Hawaii adopted HB525 on June 30 to implement the 2022 amendments to the UCC, including Article 12.
  • As of the date of this newsletter, 8 states have adopted Article 12 – Alabama, Colorado, Hawaii, Indiana, Nevada, New Mexico, North Dakota, and Washington.

ENFORCEMENT ACTIONS AND LITIGATION

FEDERAL

Securities

New York jury convicts Chastain of NFT insider trading. On May 3, US Attorney Damian Williams announced that a jury in the Southern District of New York returned one of the first verdicts involving insider trading of digital assets. The jury found Nathaniel Chastain, former project manager of a non-fungible token (NFT) marketplace called OpenSea, guilty of wire fraud and money laundering. The verdict stemmed from Chastain’s misappropriation of details about an NFT's public featuring on the OpenSea website. The facts showed that Chastain used his knowledge of which NFT was to be featured on OpenSea to reap substantial profits by buying them before they were featured and selling them for a higher value after their appearance. One of the main issues for the jury to determine was whether knowledge of which NFTs were to be featured on OpenSea before they were featured constated "confidential business information" under 18 U.S.C. § 1843. Chastain argued that the misappropriated information was not treated as "confidential" by OpenSea and could not constitute “property” within the meaning of the wire fraud statute, so its misuse could not give rise to insider trading. The government argued that OpenSea treated this information confidentially because it made its employees, including Chastain, sign confidentiality agreements to that effect upon starting employment. The government also argued that there is no formal "insider trading" statute, but rather the term is derived from different theories of fraud. The case and ultimate conviction reflect the government’s heightened efforts to drive enforcement in the digital space. For more information on the Chastain complaint, see our June 2022 issue.

DOJ charges Celsius founder and Chief Revenue Officer with fraud and market manipulation. On July 13, the US Attorney’s Office of the Southern District of New York unsealed an indictment against Alexander Mashinsky, the founder and former CEO of Celsius Network, charging him with securities fraud, commodities fraud, and wire fraud for misleading customers about core aspects of the Celsius company. Mashinsky and the company's former Chief Revenue Officer Roni Cohen-Pavon were also charged with conspiracy, market manipulation, and wire fraud for allegedly manipulating the price of Celsius’ native token CEL. The announcement also disclosed that the US Attorney's Office had entered a non-prosecution agreement with Celsius that requires the company to fully cooperate in the investigation of the allegedly fraudulent schemes.

SEC announces civil enforcement against Celsius founder. On July 13, the SEC announced it had filed a complaint against the founder and former CEO of Celsius Network Limited, Alex Mashinsky, for violating registration and anti-fraud provisions of the federal securities laws. The civil charges came the same day as the US Attorney’s Office for the Southern District of New York unsealed an indictment against Mashinsky for fraud and market manipulation. According to the SEC, Mashinsky failed to register his offer and sales of a crypto lending product, made false and misleading statements to investors in the product and purchasers of Celsius' native token CEL, and engaged in market manipulation of the CEL token. The CFTC also announced charges against Mashinsky and Celsius for fraud and material misrepresentation, and the parties resolved the complaint with entry of an agreed permanent injunction.

SEC secures penalty and injunction against LBRY, Inc. On July 11, the Securities and Exchange Commission (SEC) announced it had obtained an order permanently enjoining LBRY, Inc. from further violations of the registration provisions of federal securities laws and from offering further crypto asset securities. The US District Court for the District of New Hampshire further ordered LBRY to pay a civil penalty of $111,614. The court’s order was the result of SEC’s civil enforcement action against LBRY in connection with its sale of a cryptocurrency token called LBC designed to be a utility token used with the company’s video sharing app. The court granted summary judgment for the SEC in November 2022 holding that sales of LBC violated Section 5 of the Securities Act of 1933. For more information, see our November 2022 issue and our April 2021 issue.

SEC brings parallel charges against Ichioka Ventures founder. On June 22, the SEC announced it had filed civil charges against William Ichioka who allegedly raised $25 million from investors in California and Oregon through false promises made through his allegedly unregistered investment fund. According to the SEC, Ichioka promised outsize returns on cryptocurrency investments and derivatives while paying old investors from the funds from new investors. The charges parallel enforcement actions by CFTC (see below) and the US Attorney’s Office for the Southern District of New York.

SEC obtains order of damages against Coinseed and its founder. In the case of SEC v. Coinseed, Inc. and Delgerdalai Davaasambuu, 2023 WL 4348357 (USDC SD NY, July 5, 2023), the US District Court for the Southern District of New York adopted the findings of the magistrate judge on damages and ordered that Coinseed, Inc. and its founder and CEO, Delgerdalai Davaasambuu be held jointly and severally liable for disgorgement of $14,410 plus prejudgment interest, and ordered each defendant pay a civil monetary penalty of the same amount. The SEC obtained a default judgment against defendants on August 23, 2021. For more information on the Complaint, see our February 2021 issue.

Commodities

CFTC charges Ichioka Ventures founder in commodity pool scheme. On June 22, the Commodity Futures Trading Commission announced it had filed a complaint against William Ichioka in parallel with a criminal action by the US Attorney’s Office and a separate civil enforcement action by the SEC. CFTC’s complaint alleges that Ichioka fraudulently solicited and misappropriated more than $21 million from commodity pool participants. The alleged scheme ran from 2018 to 2021 and promised investors returns from digital asset commodities such as Bitcoin and Ether. According to the announcement, Ichioka is not contesting the allegations and has consented to judgment. The CFTC now seeks injunctive relief, restitution, and a civil monetary penalty.

CFTC settles charges against Bitcoin seller and former attorney. On July 6, the CFTC announced it had filed and settled civil charges against Randy Craig Levine and Philip Reichenthal, two Florida men who solicited more than $5 million for fake bitcoin purchases. According to the orders, one of the posed as a bitcoin seller while the other, a lawyer, acted as an escrow agent. Once the money was collected, the men failed to deliver any Bitcoin and refused to return the funds. The CFTC order imposes restitution and permanent trading and registration bans. This enforcement action follows earlier guilty pleas from both men in 2022.

CFTC announces first enforcement action against “pig butchering” scam. On June 22, the CFTC announced an enforcement action against a California resident Cunwen Zhu and his company Justby International Auction for their involvement in a romance scam commonly known as "pig butchering." The complaint alleges that Zhu and his company misappropriated $1.3 million by forming friendly or romantic relationships with potential customers before soliciting their investment in a fraudulent financial opportunity related to digital asset commodity and forex trading. The CFTC alleges the scheme affected at least 29 victims. The CFTC seeks restitution, disgorgement, civil monetary penalties, and injunctive relief. The civil action, which joins related criminal proceedings in Florida, is the first of its kind for the CFTC. The CFTC also issued a customer advisory warning consumers of such romance scams.

CFTC obtains default judgment of $15 million against Florida resident for manipulating the price of a native token. On July 12, the CFTC announced it had obtained a default judgment granting a permanent injunction against Adam Todd and his four companies – Digitex LLC, Digitex Limited, Digitex Software Limited and Blockster Holdings Limited Corporation - banning them from trading in any CFTC-regulated markets or registering with the CFTC. The judgment also requires Todd to pay more than $3.9 million in disgorgement and more than $11.7 million as a civil monetary penalty. "The order finds that Todd attempted to manipulate Digitex's native utility token, DGTX, by allegedly 'pumping' the token’s price through the use of a computerized bot," illegally offered futures transactions on a platform other than a designated contract market, failed to register with the CFTC, and failed to implement a know your customer program.

CFTC obtains judgment for over $50 million in digital asset trading scheme. On June 28, the CFTC announced that, on June 13, the US District Court for the Southern District of New York issued a default judgment granting a permanent injunction against Michael Ackerman of Ohio. The order bans Ackerman from trading in any CFTC-regulated markets and registering with the CFTC and requires him to pay $27 million in restitution to defrauded victims and a $27 million civil monetary penalty in connection with his actions in "fraudulently soliciting over $33 million to purportedly trade digital assets and misappropriating a substantial portion of that total." For more information on the CFTC complaint, see our March 2020 issue.

NFTs

USAO charges defendant with spoofing OpenSea to steal NFTs. On July 10, the US Attorney's Office of the Southern District of New York announced charges against Soufiane Oulahyane, a Moroccan defendant who allegedly impersonated popular NFT marketplace OpenSea to fraudulently obtain cryptocurrency and valuable NFTs. According to the indictment, the defendant spoofed the OpenSea website and then took out ads on a popular search engine to steal login credentials of unsuspecting users. In September 2021, the defendant allegedly obtained the seed phrase of a user’s cryptocurrency wallet and stole approximately $450,000 in NFTs and cryptocurrency, including a CryptoDad, a Meebit, and a Bored Ape worth 49 ETH at the time.

Florida court permits use of NFT to effect service on foreign defendant. In a cryptocurrency theft and fraud case, Sun v. Defendant 1 aka Chen (Jay) Han et al., 2023 WL 4532417 (USDC SD Fla. July 13, 2023) the US District Court for the Southern District of Florida permitted the plaintiff to effect service of process on the foreign defendants through use of an NFT delivered to the blockchain addresses of defendants' crypto wallets. The NFT contained a notice of the action with summons language, and a hyperlink to plaintiff's website URL, which website contained a notice of the action and hyperlinks to the Summons, Complaint, and all filing and orders in the action.

Virtual currency

DOJ announces indictment for defrauding decentralized cryptocurrency exchange. On July 11, the US Attorney's Office of the Southern District of New York announced that it had indicted Shakeeb Ahmed, a former computer security engineer for an international technology company, for allegedly exploiting a decentralized cryptocurrency exchange on the Solana blockchain. According to the indictment, the defendant took advantage of a vulnerability in the exchange's smart contract to insert fake pricing data which generated approximately $9 million in cryptocurrency. The indictment alleges that this exploit defrauded the exchange and its users. Notably, the defendant allegedly agreed to return most of his ill-gotten gains to the exchange to avoid a criminal referral. He is charged with wire fraud and money laundering.

Defendant behind Ichioka Ventures pleads guilty to cryptocurrency fraud scheme. On June 22, the Department of Justice (DOJ) announced that the US Attorney’s Office for the Northern District of California had obtained a guilty plea in its prosecution of a fraudulent scheme involving cryptocurrency and other investment vehicles. According to the indictment, William Ichioka raised tens of millions of dollars for a business known as Ichioka Ventures in 2019 under the promise that he would invest the money in, among other things, cryptocurrency, cryptocurrency arbitrage, futures, and derivatives. Ichioka allegedly reported false returns while living a lavish lifestyle with the funds and repaying earlier investors with new investors’ funds. Under his guilty plea, Ichioka admitted to owing more than $60 million to investors including $40 million to his own family.

UDAP

FTC settles with Celsius on UDAP violations. On July 13, the Federal Trade Commission (FTC) announced a settlement of its lawsuit against Celsius Network of claims for UDAP (unfair and deceptive acts and practices) and Gramm-Leach-Bliley (GLB) violations. The settlement "will permanently ban [Celsius] from handling consumers' assets" and enters judgment in favor of the FTC in the amount of $4.72 billion which judgment is suspended based upon compliance with various conditions. The settlement does not dismiss charges against three former executives of Celsius – Alexander Mashinsky, Shlomi Daniel Leon, and Hanoch "Nuke" Goldstein - for UDAP and GLB violations based on "tricking consumers into transferring cryptocurrency onto the platform by falsely promising that deposits would be safe and always available."

Taxation

Kraken ordered to comply with IRS John Doe summons. In the case of US v. Payward Ventures, Inc., 2023 WL 4303653 (USDC ND Calif. June 30, 2023), a California court held that Payward Ventures, Inc. (aka Kraken) must turn over user information to the IRS in response to a John Doe summons served on Kraken in 2021; however the court limited the scope of the summons to meet the legal requirement that such summons be "narrowly tailored" to seek information that pertains to the failure of an ascertainable group of Kraken platform users to comply with US tax code.

Banking

FDIC asserts OKCoin violated the Federal Deposit Insurance Act. On June 15, the Federal Deposit Insurance Corporation (FDIC) issued a letter to the CEO of OKCoin USA Inc. asserting that OKCoin and its senior executives have made false and misleading statements concerning the exchange's insured status. Specifically, the letter identifies OKCoin advertising stating that it is "Licensed across the US with FDIC insurance on OKCoin accounts" and "OKCoin provides FDIC insurance for all USD deposits," among other improper statements. The FDIC demands immediate corrective action, including the removal of all false and misleading statements. According to the letter, "OKCoin is not FDIC-insured and the FDIC does not insure non-deposit products. By not distinguishing between US-dollar deposits and crypto assets, the statements imply FDIC insurance coverage applies to all customer funds (including crypto assets). In addition, the FDIC does not insure or endorse particular blockchains."

STATE

Securities

Nevada NFID issues order against Prime Trust. On July 14, a Nevada court approved a cease and desist order issued by the Nevada Department of Business and Industry Financial Institutions Division (NFDI) on June 21 against Prime Trust, LLC and its related entities, a state-chartered trust company serving as a custodian for crypto firms. The court appointed a receiver for Prime Trust and impounded all of Prime Trust's assets, including cryptocurrency. The NFID asserted that it found Prime Trust's "overall financial condition … has considerably deteriorated to a critically deficient level," with a negative $12.1 million stockholders' equity position. The NFID also alleged that Prime Trust "materially and willfully breached its fiduciary duties to its customers" when it became "unable to honor customer withdrawals due to a shortfall of customer funds." As a result of these violations, the NFID alleged that Prime Trust lacks the necessary equity to operate as a trust under Nevada law. The court ordered Prime Trust to appear on August 22 and show cause why the relief requested by the NFID should not be permanently granted.

Alabama securities regulator warns against pig butchering scam. On July 7, the Alabama Securities Commission issued a warning against a scam conducted by BATCIPE.VIP, BATCNAL.VIP, James Yeh, and Kenju Go in offering unregistered securities. The potential investor was contacted via a dating website and the continuing conversation solicited investment in cryptocurrency on an unregistered platform. The investor soon deposited over $725,000 to the platform and was provided with account statements showing investment growth to more than $7.5 million. When the platforms became inoperable, the investor contacted customer service which requested an additional deposit to cover "personal income tax." The scheme defrauded over 88 victims nationwide with losses of more than $22.5 million.

State securities regulators issue orders against crypto bank Abra and its founder.
  • Alabama – On June 16, the Alabama Securities Commission announced the issuance of a show cause order against companies known as "Abra" and their founder Bill Barhydt for the offer and sale of unregistered investment contracts. The order alleges that Abra and Barhydt offered and sold investments in the form of digital asset depository accounts known as "Abra Earn" and "Abra Boost" which offered depositors interest on their deposits. As of May 17, Abra purports to manage $66.8 million in digital assets on behalf of 9087 investors nationwide.
  • Texas – The Texas Securities Commission issued an emergency cease and desist order against Abra and Barhydt on June 15 and an investor warning disclosing that Abra was nearly insolvent as of March 31.
  • New Jersey – The New Jersey state Division of Consumer Affairs announced on June 15 that the state Bureau of Securities had issued a summary penalty and cease and desist order against Abra and Barhydt to stop the offering and sale of unregistered securities in the form of "interest-bearing crypto accounts." The order further assessed civil penalties of $232,900 against Abra and $50,000 against Barhydt.

California DFPI issues order against CryptoFX for selling unqualified securities. On June 27, the California Department of Financial Protection and Innovation (DFPI) announced the issuance of a desist and refrain order against CryptoFX LLC and two of its promoters for violating California securities laws by offering and selling unqualified securities and making material misrepresentations and omissions to investors through a multi-level marketing scheme. The order alleges that CryptoFX targeted the Latino community to invest in crypto assets, misrepresented the expected return on investment, and failed to provide the purported returns or return the original investments. The DFPI also issued an investor alert warning against such affinity fraud crypto scams.

California DFPI sues Coinbase for its staking rewards program. On June 6, the California DFPI announced the filing of a lawsuit against Coinbase Global, Inc. and Coinbase, Inc. alleging that the Coinbase staking rewards program is an offer and sale of unqualified securities under state law. Under Coinbase’s staking rewards program, investors deposit crypto assets with Coinbase, which then facilitates the staking of these assets on the blockchain and provides the investor with a return of up to 6 percent on investments. Coinbase has publicly disputed the allegations and asserts that the program is not a security.

 

SPOTLIGHT ON INTERNATIONAL DEVELOPMENTS

MiCA and TFR: The two new pillars of the EU crypto-assets regulatory framework. After a long and much-debated legislative process, the Markets in Crypto-assets Regulation and the Transfer of Funds Regulation were finally officially published in the European Official Journal on June 9, 2023. These two new European Regulations lay the foundation for a new regulatory framework for crypto-assets in the EU. The Markets in Crypto-assets Regulation sets out a comprehensive and harmonized framework for the regulation of crypto-asset markets across the EU, regulating crypto-asset issuers and crypto-assets service providers. The revised Transfer of Funds Regulation requires crypto-asset service providers to accompany transfers of crypto-assets with information on the originators and beneficiaries. See our analysis of the key elements of these two new regimes their impact for the market and the opportunities they may bring. Read more.

UK Law Commission publishes long-awaited recommendations for the development of the law relating to digital assets. On June 28, 2023, the Law Commission of England and Wales published its Final Report on Digital Assets. The Report sets out the Law Commission’s recommendations for the reform and development of the law relating to digital assets, with the aim of creating a clear, consistent and transparent legal framework for digital assets that will provide greater clarity and security to users and market participants alike. Read more.

BIS publishes reports on CBDC. The Bank for International Settlements (BIS) published papers on central bank digital currencies (CBDCs):

FATF reports on country compliance with Travel Rule. On June 27, the Financial Action Task Force (FATF) announced publication of Virtual Assets: Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers. The report "provides an update on country compliance with FATF's Recommendation 15 and its Interpretative Note (R.15/INR.15), including the Travel Rule, and updates on emerging risks and market developments, including on Decentralized Finance (DeFi), Peer-to-Peer transactions (P2P), and Non-Fungible Tokens (NFTs), unhosted wallets, and stablecoins." Key findings include:

  • 75 percent of jurisdictions are "only partially or not compliant with" the FATF's requirements
  • Of the 151 jurisdictions that responded to the FATF's 2023 survey, more than half still have not taken any steps toward implementing the Travel Rule
RECENT EVENTS

DLA Piper ranks Tier 1 in FinTech: Crypto by The Legal 500. DLA also ranked Tier 2 for FinTech, and Margo Tank ranked as a "Leading Individual."

DLA Piper’s Commodities, Digital Assets, and Carbon Compliance and Enforcement team draws on decades of collective experience in the commodities and securities industry to help companies navigate new and complex commodities enforcement matters, including those related to agriculture, metals, energy, digital assets, and carbon/sustainable commodities, among others.

Global Digital Forum – Adapting to a digital future for real world assets and content, September 28, 2023, brings together leading representatives from government, regulatory bodies, and international business to discuss the implications from operating in the new digital environment and how this is likely to change the way products and services are structured, traded, held, and delivered in global markets and economies.

DLA Piper attorneys presented at the following events:

PUBLICATIONS

Cryptocurrency and Digital Asset Regulation, published by the American Bar Association and co-edited by Deborah Meshulam and Michael Fluhr, includes chapters by Meshulam and Fluhr and by Margo H.K. Tank

Terms of Service Are Instrumental in Determining Rights to Digital Assets – The Holding in Celsius Network LLC, published in The Computer & Internet Lawyer, May 2023, by Margo H.K. Tank, David Whitaker, Liz Caires and Emily Honsa Hicks

Digital Digest, the inaugural edition of our bi-monthly newsletter from Martin Bartlam, Dan Jewell, Sam Gokarn-Millington, and Marina Troullinou of the UK DLA Piper Finance and Litigation teams. Digital Digest provides updates on key issues to be considered when doing business in the digital and crypto space in or from the UK

Read

Action on 2022 amendments to the Uniform Commercial Code – South Dakota governor vetoes act

Supreme Court opens door to challenging FTC and SEC in district court

SDNY holds NBA Top Shots NFTs might be unregistered securities under Howey

US Supreme Court: Interlocutory appeals of denials of motions to compel arbitration automatically stay district court proceedings

Anticorruption and anti-money laundering top the UAE’s enforcement agenda: Key takeaways

Contacts

Learn more about our Blockchain and Digital Assets practice by contacting any of our editors:

Margo H.K. Tank
Mark Radcliffe 
Liz Caires 
Martin Bartlam 

Contributors to this issue

Martin Bartlam

Pierre E. Berger

Martijn Boeve

Christoph Engelmann

Tom Geraghty

Eric Hall

Nicolas Kalokyris

Dan Lynch

Kali McGuire

Kristen Reilly

James Williams

The editors send their thanks and appreciation to Marc Aronson and Raymond Janicko for their contributions to this and prior issues.

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