Blockchain Food Tracing Initiatives Add Members, Report Addresses Central Bank Digital Currencies, NY DFS Publishes Crypto Guidance, Enforcement Actions Continue

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Seafood Association, Restaurant Chain Announce Blockchain Supply Chain Partnerships

By: Jordan R. Silversmith

This week, a major global technology firm and the Norwegian Seafood Association announced a new collaboration using the Food Trust blockchain technology platform. Norwegian seafood exporters will now be able to use blockchain technology to keep a verified ledger sharing supply chain data throughout the country’s seafood industry. Several Norwegian companies have already announced new relationships with blockchain technology suppliers.

A major Mexican family restaurant chain also announced a new partnership with a blockchain enterprise company. The restaurant chain will work with the blockchain platform SIMBA Chain to develop a blockchain-based traceability solution for the company’s coffee supply chain. The partnership will provide for the creation of a distributed application prototype to register and trace coffee beans as the beans travel through the restaurants’ supply chain.

For more information, please refer to the following links:

Sweden Report Addresses Central Bank Digital Currencies, Fintech Firms Explore Crypto

By: Veronica Reynolds

Sweden’s Central Bank recently released its Economic Review 2020, which provides an overview of the bank’s analysis of the relevance of digital currencies and factors to consider when assessing the viability of a proposed Swedish Central Bank-released digital currency, e-krona. The report notes that cash continues to be marginalized, which raises concerns about reduced competition within the payments markets and of the role of the Central Bank, which issues cash, being potentially marginalized as well. The report offers four separate models for a Central Bank-supported digital currency, with an analysis of the advantages and disadvantages of each in relation to overall policy goals. According to the report, these policy goals include providing a stable store of value and unit of account, providing citizens access to the global monetary system, and supporting the financial stability of the payments market.

Reports circulated this week that two massive fintech companies plan to allow direct sales of cryptocurrencies directly from within their respective digital platforms. Sources say that the companies may offer built-in wallet functionality and work directly with cryptocurrency exchanges to source liquidity.

A recent report released by cryptocurrency analytics firm Chainalysis observes that 60% of all bitcoin currently mined is held long term by investors. The individuals and businesses that comprise the 60%, according to the report, have never sold more than 25% of their bitcoin holdings, with the remainder held for many years. The report also indicates that only 19% of all bitcoin currently mined is being actively traded in the market, but that this trading activity buoys the market and determines the price of bitcoin.

For more information, please refer to the following links:

NY DFS and UK FCA Publish Crypto Guidance, Firms Announce Compliance Initiatives

By: Robert A. Musiala Jr.

This week, the New York Department of Financial Services (NY DFS) announced a series of major initiatives that are intended to “make it easier for virtual currency companies to successfully operate in New York.” These include the following:

  • Final guidance related to the ability of entities currently authorized under the NY DFS BitLicense regime to “self-certify the use of new coins” that establishes an approach “by which DFS will provide a list of approved coins that all licensees can easily adopt.”
  • A notice of NY DFS license application practices “aimed at creating a more transparent and timely process for the evaluation of virtual currency license applications.”
  • A virtual currency FAQs document that will be updated on an ongoing basis to reflect questions and feedback received by NY DFS from the blockchain and crypto industry.
  • A new proposed conditional licensing framework intended to make it easier for startups to enter the New York market.
  • A memorandum of understanding with the State University of New York expressing intent to launch a virtual currency program, “SUNY BLOCK.”

In the U.K., the Financial Conduct Authority (FCA) published a notice this week to remind cryptocurrency businesses operating in the U.K. that under new rules, these businesses must register with the FCA by Jan. 10, 2021, or they “will have to cease carrying on business.” According to the notice, to ensure that registration applications are processed on time, completed applications should be submitted to the FCA by June 30.

This week, more firms announced initiatives aimed at driving compliance in the cryptocurrency industry. A Big Four accounting and consulting firm has launched “Chain Fusion, a patent pending suite of advanced analytics capabilities, built on leading cryptoasset data & technology products to streamline the ability for financial services companies and fintechs to offer cryptoasset services on an institutional scale.” Separately, according to reports, a major global bank based in the Netherlands has developed the “Travel Rule Protocol” with support from several other crypto industry firms. The solution aims “to assist with the Financial Action Task Force’s Travel Rule requirement for crypto exchanges and firms dealing in digital assets.” Finally, blockchain analytics firm Chainalysis published a blog intended to provide a guide to complying with anti-money laundering requirements in the cryptocurrency industry.

For more information, please refer to the following links:

U.S. and Foreign Agencies Take Enforcement Actions, Crypto Threat Reports Published

By: Joanna F. Wasick

Last Friday, the U.S. Securities and Exchange Commission (SEC) announced it filed an emergency action and froze the assets of two Pennsylvania brothers and three related entities in order to stop their fraudulent endeavor and theft of investor funds. According to the SEC, from at least July 2019 through May 2020, the brothers offered securities in a private fund that purported to invest in digital assets but were misrepresenting fund performance, fabricating financial statements and forging audit documents.

In New Zealand, police recently froze $140 million as part of a global investigation into Alexander Vinnick, who previously operated BTC-e, a cryptocurrency exchange that reportedly traded more than $4 billion dollars’ worth of bitcoin. In 2017, Vinnick was arrested in Greece by local police on a U.S. extradition warrant that accused him of facilitating money laundering, identity theft, drug trafficking and computer hacking. Since then, his alleged criminal proceeds were traced to New Zealand accounts targeted in the recent asset freeze—the largest recorded restraint of funds in New Zealand police history.

This month, Scamwatch, an arm of the Australian Competition and Consumer Commission, issued a report finding that Australians lost more than $14 million dollars in cryptocurrency scams in 2019. Most of these frauds were basic Ponzi schemes, with no real cryptocurrency involved. Younger Australians aged 25 to 34 were most heavily affected. While the monetary loss from this type of fraud is significant, according to the report, greater losses were recorded in business email compromise scams ($132 million), traditional investment scams ($126 million) and “dating and romance scams” ($83 million).

This week, an Israeli cybersecurity firm released a report concluding that, over the past two years, one criminal group was responsible for stealing $200 million in numerous hacks of five different exchanges. These hacks followed a particular pattern: The hacker group gains access to the exchange executives’ private email accounts, then uses spear-phishing (in which the hacker impersonates a high-ranking employee from either the target company or a company with which it regularly deals) to obtain information that grants access to user wallets. Despite the efficacy of the group, the security firm finds that the hacking group is small, i.e., less than five individuals, and likely lacks military training or support.

For more information, please refer to the following links:

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