CFTC Approves Bitcoin Futures and Prosecutes Fraud, Amicus Brief Filed in Kik Case
By: Teresa Goody Guillén
The Commodity Futures Trading Commission (CFTC) has issued an Order of Designation to Bitnomial Exchange, LLC, granting it status as a designated contract market (DCM), thus the exchange can offer bitcoin futures and options contracts. Bitnomial stated that it was the “first and only startup exchange” to receive approval to offer both margined and physically delivered bitcoin futures and options contracts in the U.S. Bitnomial is reported to be currently setting up user acceptance testing, which is expected to begin on April 27, and has opened user signups.
The CFTC recently filed a complaint in the U.S. District Court for the Middle District of Florida charging Alan Friedland and his Florida-based companies, Fintech Investment Group Inc. (Fintech) and Compcoin LLC, with fraudulently soliciting more than $1.6 million from customers and prospective customers to purchase a digital asset, Compcoin. The complaint alleges that the defendants falsely promised that Compcoin would allow customers to gain access to Fintech’s proprietary foreign-currency exchange (forex) trading algorithm known as ART, which they falsely advertised would deliver high rates of return.
The Blockchain Association, an industry advocacy group, has filed an amicus brief in the Securities and Exchange Commission’s (SEC) lawsuit against Kik in the U.S. District Court for the Southern District of New York. The Association argues that the SEC’s position conflates the pre-sale investment contracts with the underlying asset, Kin tokens, sold to the public. The Association’s brief also argues that Kik’s presale model of offering investment contracts to accredited investors under an exemption from registration, such as Regulation D, is consistent with SEC rules and guidance – as opposed to an integrated scheme to distribute unregistered securities to the public.
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Emerging Blockchain Payment and Crypto Custody Solutions Announce New Milestones
By: Robert A. Musiala Jr.
Last week, the organization building the proposed Libra cryptocurrency published an updated version of its whitepaper. According to a “cover letter” that accompanies the updated whitepaper, “[f]our key changes have been made to address regulatory concerns.” The cover letter provides the following brief description of these concerns: (1) offering single-currency stablecoins in addition to the multicurrency coin, (2) enhancing the safety of the Libra payment system with a robust compliance framework, (3) forgoing the future transition to a permissionless system while maintaining its key economic properties and (4) building strong protections into the design of the Libra Reserve. According to reports, in conjunction with the updated whitepaper, the organization “filed a license application seeking authorization from the Swiss Financial Market Supervisory Authority, FINMA, to launch its platform.”
In a recent blog post, Gemini Custody and Exchange announced that it has completed a SOC 1 Type 1 examination conducted by a Big Four consulting firm. According to the post, completing the exam “makes Gemini the world’s first cryptocurrency custodian and exchange to demonstrate this high standard of financial operations compliance.”
Last week, blockchain technology firm Ripple announced that it has partnered with a Malaysian cross-border remittance firm to integrate Ripple technology into the remittance firm’s payment services for small and medium-sized enterprises (SMEs). The integration has reportedly lowered costs and increased speed for cross-border SME payments.
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Blockchain Solutions Deployed in Egg Traceability, Energy Trading and Mobility Services
By: Robert A. Musiala Jr.
Last week, a free-range and organic egg farm in Iowa announced the launch of a blockchain-enabled traceability feature that will allow its customers “to access information regarding the day the eggs were picked up at the farm, where they were packed and from what farm, as well as giving them information on the actual farmer and his life and certifications.” According to the press release, the new feature will allow customers to “scan the QR code on their carton which will then take them to a website where … they will have access to all the information regarding the origin of their carton of eggs.”
This week, an Australia-based energy trading technology firm announced plans to integrate its blockchain-based platform into two apartment complexes that generate energy from solar panels. The integration will reportedly allow the apartment complexes to “track energy consumption and transactions” and “enable the residential developments to sell surplus solar energy to other residents.”
Also this week, a major global electronics manufacturer based in Japan announced that it has developed a blockchain-based “mobility as a service” (MaaS) platform designed to integrate with various transportation methods such as trains, buses, taxis, ride shares and bicycle rentals to “provide users with information regarding optimal routes to desired destinations and recommended transportation means and services.” According to a press release, the solution enables, among other things, “anonymized travel history and revenue allocation” features.
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South Africa and Singapore Issue New Cryptocurrency Policies and Regulatory Guidance
By: Joanna F. Wasick
Earlier this week, South Africa’s Intergovernmental Fintech Working group (IFWG), whose members include various banking and finance governmental entities, issued a policy paper providing a road map for the nation’s first set of cryptocurrency laws. In the paper, the IFWG states that digital assets and activities associated with them can no longer remain outside of government regulation and should be subject to formal restrictions on when and how they can be utilized. The paper recommends that cryptocurrencies remain without “legal tender status” and calls for a prohibition against using cryptocurrency as a settlement tool within South African financial infrastructure, although the IFWG’s recommendations do allow for the recognition of cryptocurrency for domestic payment purposes, subject to certain guidelines. The paper urges that initial coin offerings (ICOs) be regulated in alignment with South Africa’s traditional securities regulations. The IFWG’s recommendations are open for comment through May 15.
Last week, the Inland Revenue Authority of Singapore (IRAS), the country’s tax authority, published its “Income Tax Treatment of Digital Tokens,” which provides guidance on “payment tokens, utility tokens and security tokens.” Each token has a new definition and corresponding tax treatment from the IRAS. “Payment tokens” include cryptocurrencies such as bitcoin, and the guide provides that they will be treated as “intangible property” instead of legal tender, such that transactions with them are “barter trade” – meaning that the good, and not the cryptopcurrency, will be taxed. The use of a “utility token” to exchange for goods or services is “unlikely to create an income subject to tax” but may give rise to a deductible expense. The taxability of the return derived from a “security token” depends on the nature of the return, e.g., whether it is in the form of interest or dividend. The IRAS also details the tax ramifications of certain events such as airdropped payment tokens, blockchain hard forks and ICOs.
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