Blockchain Developments in Food Safety, Ethical Sourcing, Financial Services, Social Media and Trading Platforms; DOJ Continues Actions Against Crypto Crimes

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Blockchain Enterprise Solutions Aim to Improve Safety and Address Ethical Sourcing Concerns

By: Brian P. Bartish

According to recent reports, the Food Safety and Inspection Service (FSIS), an agency of the U.S. Department of Agriculture, is working with a major global technology firm to build a proof-of-concept blockchain solution, FSIS’s first, designed to bring increased immutability of documentation and streamline the process for export certifications of America’s meat, poultry and eggs. In another recently announced pilot, as part of its 20-year plan to create a carbon-neutral passenger car fleet, a global automobile manufacturer announced a new blockchain pilot project with Circulator – a startup focused on blockchain technology – and one of its key battery cell manufacturers. The project is targeted at tracking emissions of climate-relevant gases and mapping the use of recycled material through the battery cell manufacturing chain.

Earlier this week, several key partners in the aircraft maintenance, repair and overhaul (MRO) industry announced the creation of the MRO Blockchain Alliance, along with a proof-of-concept blockchain solution to verify the authenticity of aircraft parts and provide visibility into the full chain of custody, with blockchain technologies estimated to generate $3.5 billion in costs savings (approximately 5 percent) and a $40 billion boost in revenue. Also this week, the Perth Mint, in partnership with Security Matters, a technology startup focused on physical asset tracking through digital means, announced the development of an ethical gold supply chain assurance solution as part of its TrueGold project. TrueGold is aimed at reporting on the origin of gold and how the metal moves through the entire production and distribution process.

Last week, Hyperledger marked the fourth anniversary of its enterprise digital ledger, Hyperledger Fabric, by announcing the release of Hyperledger Fabric v2.0, which offers improved decentralized consensus models and heightened data privacy offerings, among other performance improvements. Illustrating the potential benefits to enterprise-blockchain adoption, a leading research and advisory firm recently predicted that organizations participating in blockchain smart contracts could realize a 50 percent increase in data quality by 2023 while noting the downside that the same technology could lead to a 30 percent decrease in data availability.

For more information, please refer to the following links:

Financial Services and Social Media Firms Integrate Blockchain and Cryptocurrencies, US Marshalls to Auction 4,040 Bitcoins

By: Joanna F. Wasick

According to recent reports, a bank located in La Jolla, California, recently applied for the New York trust license, with intentions of providing custody and settlement for cryptocurrency, including settlement services for bitcoin trades. While the bank is already known for providing U.S.-dollar banking services for businesses that deal in cryptocurrency, the new plan will enable it to directly handle digital assets itself. The bank is also reportedly working on increasing the number of fiat currencies it supports for cryptocurrency trading. In related news, this week Ripple announced a new partnership with a major money remittance services company focused on the Latin America and Caribbean corridor. Together they aim to provide faster, more transparent cross-border remittance services between the United States and Mexico.

Late last week, Camfrog (a video chat app) and Listia (a marketplace trading app) announced plans to integrate YouNow’s “Props” token. The token was granted a Reg A+ qualification from the U.S. Securities and Exchange Commission, and is used to reward content creators for driving income on YouNow’s video-streaming platform. Camfrog plans to integrate the token this month; Listia expects it to go live in March. Also last week, the LVC Corporation, a subsidiary of a major Japanese messaging app, announced plans to trade its digital currency, LINK, in Japan as early as April 2020. LINK is issued by an LVC-affiliate and was launched on the BITBOX cryptocurrency exchange in October 2018, but had not been previously available to users in Japan.

The U.S. Marshals Service is auctioning approximately 4,040 bitcoin, worth nearly $40 million at press time, that were forfeited in various federal criminal, civil and administrative cases. The auction will take place during a six-hour window on Feb. 18. Potential bidders must register by Feb. 12. This is the first major U.S. government bitcoin auction since 2018.

According to reports out last month, 49.9 percent of the computing power on the Bitcoin Network operations is controlled by five China-based mining entities. All five entities are available through BitDeer, which allows consumers to rent mining power without buying their own mining hardware. This concentration of power has some worried, because a miner with more than 50 percent of hash power can potentially manipulate the network by, for example, double-counting coins, stopping certain payments and stalling transactions.

For more information, please refer to the following links:

US and Foreign Firms Announce Blockchain Trading Platforms and Tokenized Securities

By: Simone O. Otenaike

According to recent reports, a leading U.S.-based blockchain development firm, has acquired a U.S. broker-dealer. The recently acquired broker-dealer is registered with the United States Securities and Exchange Commission (SEC) and the acquisition will reportedly support the firm’s existing broker-dealer services. The firm hopes to facilitate a cost-efficient and effective blockchain-based solution for direct, local investment in mini-municipal bonds and promote resident engagement in local financial markets through this acquisition. In related news, tZERO recently announced plans to launch its broker dealer service, tZero Markets, in the first half of 2020. The company is reportedly working closely with regulators on tZero Markets, which will reportedly enable investors to trade digital securities and cryptocurrencies on one platform.

A Swiss information technology company based in Italy, OverFuture SA, recently received approval to incorporate for an initial public offering (IPO) of tokenized shares. According to the firm’s IPO prospectus, the offering will consist of 8,399,000 common equity share security tokens on Ethereum with smart contracts provided by the European Digital Assets Exchange. Swiss regulators reportedly approved the firm’s initial articles of incorporation, which explicitly state the digital nature of the shares and the use of blockchain technology to maintain the shareholder registry.

ICHX Tech, a Singapore-based firm, will reportedly obtain the first Singapore capital markets services provider license for its securities token platform. According to the firm, the platform will offer institutional investors more options for capital fundraising and investment in digital securities.

A leading provider of consulting services and system solutions recently announced plans to develop an objective crypto-asset investment appraisal benchmark. The benchmark will reportedly offer investors, crypto exchanges and financial information providers objective criteria to evaluate their investments. The consulting firm plans to launch the benchmark in conjunction with a Japanese asset management company and make it available to domestic and overseas institutional investors, financial information vendors and crypto exchanges in early 2020.

To read more about the topics covered in this week’s post, see the following:

DOJ Continues Enforcement Actions Targeting Cryptocurrency Crimes

By: Jordan R. Silversmith

Last week, the Southern District of New York announced that a senior adviser to the “Silk Road” website pled guilty in Manhattan Federal Court. Roger Clark pled guilty to conspiring to distribute large quantities of narcotics, a charge that arose from his role as the senior adviser to the owner and operator of the online illicit black market. From 2011 to 2013, Silk Road, a secret online marketplace on the dark web for a host of criminal activity, was used by drug dealers and others to distribute illegal drugs to more than 100,000 buyers, and to launder hundreds of millions of dollars derived from those transactions. Clark, a Canadian citizen, was paid at least hundreds of thousands of dollars for his assistance in operating Silk Road. He pled guilty to one count of conspiracy to distribute narcotics, which carries a maximum sentence of 20 years in prison.

The Eastern District of Virginia announced last week that a Richmond, Virginia, man pled guilty to distribution of drugs similar to fentanyl. Mark Faulkner, 36, advertised Adderall and fentanyl products on multiple dark web markets. He was identified through bitcoin exchange transactions and three purchases of drugs that were advertised as fentanyl. Faulkner pleaded guilty to distribution of a controlled substance analogue. He faces a maximum penalty of 20 years in prison.

Earlier this week the Eastern District of California announced that a California-based dark web drug vendor had pleaded guilty. Eric Friccero, 29, pleaded guilty on Feb. 3 to possessing with intent to distribute a controlled substance. According to court documents, Friccero distributed marijuana to customers throughout the United States through dark web marketplaces. On Jan. 31, 2019, law enforcement officers searched Friccero’s California residence and found marijuana that had been offered for sale on the dark web, along with bitcoin and cash.

On Wednesday, the U.S. Attorney’s Office for the District of Arizona announced two arrests in connection with a cryptocurrency investment fund, Zima Digital Assets. John Michael Caruso and Zachary Salter were both arrested on Jan. 30 and charged with conspiracy to commit wire fraud and money laundering.

For more information and related news, please refer to the following links:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Updated: May 25, 2018:

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