FinCEN Proposed Rule Halted, Exchanges and Banks Expand Crypto Products, SEC Brings Action Against Token Issuer, Crypto Threat Reports Published | BakerHostetler


Exchanges and banks expand cryptocurrency services and products

By: Jordan R. Silversmith

A major US cryptocurrency exchange recently announced the launch of its asset hub. The initiative aims to “streamline the asset listing process … and increase the number of services offered to digital asset issuers”.

A California-based bank with significant holdings of digital currency recently announced that it had accepted over $ 2.9 billion in new deposits from new and existing cryptocurrency customers in the fourth quarter of 2020. Most of these new deposits came from cryptocurrency exchanges, bringing the bank’s total amount of digital currency to currency customers to 969. According to reports, a New York-based bank announced that its cryptocurrency customer deposits are now approximately $ 10 billion.

Huobi Global, a major cryptocurrency exchange, recently announced an initiative with a UK crypto payment service provider to gain more access to European and UK banking systems. According to reports, the exchange’s over-the-counter platform can now instantly process transactions in euros and pounds. Meanwhile, this week an Austrian digital investment platform announced the launch of a debit card that allows users to shop with cryptocurrencies.

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Rule proposed by FinCEN halted, banks and crypto exchanges adjust guidelines

By: Veronica Reynolds

This week, the Biden administration frozen FinCEN’s proposed “non-hosted wallet” rule, which related to certain transactions in convertible virtual currency or digital assets with legal tender status. If in effect, the rule would have required an exchange to file “currency transaction reports” for customers making cryptocurrency transactions over $ 10,000 per day and to store identification information for customers who are cryptocurrency over $ 3,000 per day transferred to private crypto wallets.

Meanwhile, several cryptocurrency exchanges and banks have recently taken action, apparently based on the evolving regulatory landscape. In the US, a major cryptocurrency exchange announced the end of XRP trading, the latest cryptocurrency exchange to have done so. In the UK, a major bank has reportedly banned customers from transferring cryptocurrency profits made through exchanges to their bank accounts. This follows a broader trend in the UK banking industry that is discouraging customers from using debit or credit cards to purchase cryptocurrency assets. In the Netherlands, Bitstamp users are now required to provide proof of ownership of external wallets before transferring money to such wallets. This requirement is supposedly a direct response to the Dutch anti-money laundering rules that came into force in late 2020.

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SEC files lawsuit against SAFT and token issuers, related statement published

By: Robert A. Musiala Jr.

At the end of last week, the US Securities and Exchange Commission published an injunction (order) against Wireline Inc., which contains an allegedly unregistered securities offer in connection with so-called SAFT agreements. Wireline is described in the order as an “early project that focuses on the development of a decentralized, blockchain-based platform for microservices applications”. According to the order,

Wireline offered and sold securities in the form of investment contracts when it offered and sold digital assets through simple agreements for future tokens (“SAFTs”). The SAFTs stipulated that when Wireline’s marketplace was published, Wireline would distribute these digital tokens to investors who were counterparties to the SAFTs. … The offer was not registered under federal securities laws and the offer and sale could not be exempted from registration requirements. Wireline never distributed the digital tokens to investors.

With regard to the SAFTs, the engagement states that while Wireline “jointly submitted three D Forms to the Commission”, it “did not qualify for the 506 (b) exemption because it offered the investment contracts through a general solicitation and has sold ”. The Order also claims Wireline “violated the anti-fraud provisions of the Federal Securities Act in relation to the Offer by making materially false and misleading statements about the viability of its platform and the timing of the issuance of the tokens.” Among other things, the Order requires Wireline to notify its 28 SAFT investors that they will not be handing out digital tokens, post the Order’s announcement on their public website and social media, and pay a civil penalty of $ 650,000.

In a public statement, SEC Commissioner Hester M. Peirce noted “concerns about the settlement”. According to the statement “[B]y including a provision that Wireline does not distribute the tokens according to the SAFTs, [the] The settlement continues an approach that suggests that tokens are themselves securities, making crypto networks difficult to develop. “Commissioner Peirce noted, among other things, that” the security tag for tokens … is choking network effects before they have a chance to bring the network alive. “Commissioner Peirce stated,” A better way for us would be to have the original fundraising event for one that did not start Treat the network as a sale of securities, but not extend the securities analysis to the later sale of tokens for use in a started network. ”

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Reports contain details of criminal activity involving cryptocurrencies

By: Jordan R. Silversmith

A recent Chainalysis report on cryptocurrency crime in 2020 finds that while fraud and darknet markets dominated the year in terms of total sales, ransomware continues to be a problem. The report showed a decrease in the criminal share of all cryptocurrency activity in 2020 to just 0.34 percent, or $ 10.0 billion in transaction volume, compared to 2019 (2.1 percent or around $ 21.4 billion). Fraud continued to make up the bulk of all crypto-related crimes, but ransomware rose over 311 percent from 2019 as increasing work from home opened more security loopholes for hostile actors. Chainalysis recently released a report claiming personalities involved in the riot at the U.S. Capitol had received over $ 500,000 worth of bitcoin from a French donor a month before the events.

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