Sports Teams and Messaging Apps Go All-In on NFTs, Potential Hack Foiled
By Lauren Bass
A major U.S. football team has reportedly inked a lucrative sponsorship deal with a popular digital asset platform. According to reports, the partnership comes just weeks after the team’s league amended its temporary crypto ban.
In related news, a major U.S. basketball league has reportedly filed several trademark applications signaling a possible intent to launch a series of collectible non-fungible tokens (NFTs) under the registered moniker. The basketball league has also reportedly purchased two Ethereum Name Service domains. According to reports, these moves suggest that the league—which has previously partnered with entities on earlier NFT projects—may be making a play to launch an NFT campaign on its own.
According to reports, an Italian fútbol club recently partnered with a digital studio to create a unique 3D NFT featuring the image of a special team jersey that was discovered by a Danish war photographer during a trip to South Sudan. Proceeds from the NFT sale will benefit the club’s charitable foundation.
In Japan, a popular social messaging app has reportedly partnered with a major entertainment conglomerate to launch a branded NFT marketplace. According to reports, the marketplace is the latest in the messaging app’s crypto add-ons, which already include a wallet, an exchange and a cryptocurrency payment method.
In a final development, a multinational security firm recently identified a vulnerability in the coding of a major U.S. NFT marketplace. The vulnerability reportedly would have allowed a malicious actor to send any marketplace user an NFT link that when clicked would provide full access to that user’s wallet, thereby allowing a hacker to drain all assets. If exploited, the bug could have led to 2 million marketplace users losing all their NFTs in a single transaction. According to reports, the platform has since fixed the issue.
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Report on Blockchain in the European Healthcare Sector Published
By Alex Karambelas
Earlier this week, the EU Blockchain Observatory published its fifth thematic report, titled “Blockchain Applications in the Healthcare Sector.” The report covers a wide range of issues, from the regulatory hurdles facing distributed ledger technology in the European healthcare industry to the ways in which blockchain solutions are being used to combat the COVID-19 pandemic. While acknowledging legal and technological challenges, the report’s authors take an optimistic view on the potential for blockchain technologies to alleviate inefficiencies in the healthcare sector and improve patient outcomes. The report highlights the potential for distributed ledger technologies in a number of areas, including improved supply chain and inventory management, anti-counterfeiting, medical credentialing, health data accuracy, infectious disease contact tracing, and greater patient access to healthcare information. The report also discusses regulatory, privacy and ethical considerations.
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US Treasury Secretary, FDIC, Acting Comptroller and EU Address Crypto
By Teresa Goody Guillén
U.S. Department of the Treasury Secretary Janet Yellen recently gave a speech on digital assets policy, innovation and regulation. She remarked that “[d]igital assets may be relatively new, but they are part of a larger trend—the digitization of finance—that has been in the making for decades.” In her speech, Yellen shared five “lessons” to apply in navigating emerging technologies: (1) “[o]ur financial system benefits from responsible innovation”; (2) “[w]hen regulation fails to keep pace with innovation, vulnerable people often suffer the greatest harm”; (3) “[r]egulation should be based on risks and activities, not specific technologies”; (4) “[s]overeign money is the core of a well-functioning financial system and the U.S. benefits from the central role the dollar and U.S. financial institutions play in global finance”; and (5) “policymakers, businesspeople, advocates, scholars, inventors, and citizens … need to work together to ensure responsible innovation.”
Last week, a major U.S. banking regulator issued a Financial Institution Letter directing FDIC-supervised institutions that are engaged in, or intend to engage in, activities related to crypto-assets (also referred to as “digital assets”) to notify the FDIC. The letter further states the FDIC will review the information, may request additional information and will provide supervisory feedback. The FDIC cited concerns of risks posed by crypto-assets and crypto-related activities that are not yet well understood, including potential risks to safety and soundness, financial stability, consumers, and insured depository institutions.
Acting Comptroller of the Currency Michael Hsu recently delivered remarks on the architecture of stablecoins. Hsu discussed the “carefully architected monetary and banking system” currently in place and noted that policy errors in the architecture of a USD stablecoin system could “impede the potential for the dollar to serve as the base currency in a future digital economy.” Hsu emphasized the importance of balancing stability with efficiency. He also discussed concerns related to stablecoin interoperability, noting risks related to stablecoins that are not fungible across different blockchains, and risks related to stablecoins that are not interoperable with each other or the U.S. dollar. To mitigate intraday trading risk, Hsu recommended that “blockchain-based activities, such as stablecoin issuance, be conducted in a standalone bank-chartered entity, separate from any other insured depository institution (IDI) subsidiary and other regulated affiliates.”
In a final notable development, the European Union (EU) recently issued its fifth package of Russia sanctions, targeted at closing certain loopholes related to cryptocurrency wallets, banks, currencies and trusts. With regard to crypto, the EU extended requirements on EU-based crypto exchanges to prohibit deposits into certain crypto wallets, in addition to already existing sanctions that bar transactions from targeted individuals.
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State Enforcement Actions Target Bitcoin ATM Operator and NFT Sellers
By Christina Gotsis
This week, Manhattan District Attorney Alvin L. Bragg Jr. announced the indictment of Robert Taylor for operating an illegal Bitcoin ATM business across New York City, New Jersey and Miami. The indictment alleges that between 2017 and 2018, Taylor operated at least 46 Bitcoin ATM kiosks, primarily located in laundromats, that secretly converted more than $5.6 million of cash into bitcoin for clientele. The indictment further alleges that Taylor marketed his business to individuals engaged in criminal activity and charged a 10 percent to 20 percent fee for the promise of anonymity. Taylor’s kiosks allegedly did not employ any “know your customer” procedures. Taylor faces multiple counts of operating an unlicensed money transmission business, criminal tax fraud in the third degree and offering a false instrument in the first degree.
In another enforcement action this week, securities regulators in Texas issued an emergency cease-and-desist order to Sand Vegas Casino Club (Sand Vegas) and its co-founders to stop selling NFTs, deeming the sales illegal offerings of unregistered securities. According to the Texas State Securities Board, Sand Vegas promised NFT buyers that they would share in the profits of a virtual casino—up to as much as $81,000 annually—and used social media and Internet platforms to broadcast casino development, target influencers and enthusiasts, and host virtual lotteries with lucrative rewards. Sand Vegas also allegedly assured potential buyers, falsely, that its Gambler and Golden Gambler NFTs were not regulated as securities and that regulation could be avoided by implementing illusory features or using different terminology. This cease-and-desist order represents the first action of its kind related to NFTs and the metaverse.
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