Crypto Initiatives Launch in Payments, Capital Markets and NFTs; OFAC and White House Address Crypto Risks; CFTC and NYAG Take Enforcement Actions

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[co-author: Lauren Bass]

Blockchain Payment Pilots Launched by Media, Government and Crypto Firms

By Keith R. Murphy

A leading social media and technology company recently launched pilots of its crypto wallet, which is intended to allow users to send and receive funds around the world securely and with no fees, according to several reports. The pilots are taking place in the United States and Guatemala, and will utilize Pax Dollars (USPD). The company reportedly is collaborating on the project with a well-known cryptocurrency exchange platform and blockchain infrastructure platform Paxos. According to a press release discussing the project, this is the first time that stablecoins have been easily available in a consumer wallet outside of the cryptocurrency ecosystem.

The U.S. Bureau of the Fiscal Service recently issued a task order to evaluate ways to streamline grant-payment processes through the use of blockchain technology. According to a recent release, the goals of the effort include improving transparency, reducing reporting burdens and combating fraud. The task order reportedly will help answer questions relating to establishing blockchain nodes and digital wallets, among other issues. According to a representative of the Office of Financial Innovation and Transformation, “This study will provide us with hands-on experience and insight on how blockchain technology can enhance security and improve government services and the customer experience, from the perspective of both the federal government and the recipient.”

According to a recent report, the dollar-backed stablecoin USDC is now part of the Hedera Hashgraph ecosystem, making Hedera Hashgraph the sixth blockchain on which USDC is supported. Hedera Hashgraph was reportedly prioritized for the use of USDC based on its enterprise focus and the potential for USDC to be used in permissioned settings.

For more information, please refer to the following links:

Blockchain Market Advances in Options, ATS Platforms, Commodities and DeFi

By Robert A. Musiala Jr.

This week, the largest U.S.-based options exchange announced an agreement to acquire ErisX, which operates “a U.S. based digital asset spot market, a regulated futures exchange and a regulated clearing house.” According to a press release by the options exchange, “Ownership of ErisX presents a unique opportunity … to enter the digital asset spot and derivatives marketplaces through a digital-first platform developed with industry partners to focus on robust regulatory compliance, data and transparency.”

According to recent reports, Prometheum Ember ATS Inc. recently received regulatory approval to operate its alternative trading system (ATS), which will provide investors the ability to buy, sell and manage digital asset securities. The ATS will reportedly implement “on-chain custody and settlement” provided by a digital bank chartered with the U.S. Office of the Comptroller of the Currency.

In foreign markets, according to reports, a Brazil-based mineral commodity trading marketplace recently integrated with a blockchain platform to enhance assurance over the provenance of mineral trades. According to reports, the integration aims to enable transparency over where metals come from and under what conditions they are produced.

And in the decentralized finance (DeFi) markets, data recently published by a community-based statistics dashboard indicates that total value locked in DeFi protocols across multiple platforms is now estimated to exceed $200 billion. The report notes that the majority of this value resides on the Ethereum blockchain.

For more information, please refer to the following links:

New Platforms Launch NFT Collections

By Lauren Bass

Earlier this week, an American nonprofit news agency reportedly launched a non-fungible token (NFT) collection on one of the largest cryptocurrency exchange marketplaces. According to press releases, the collectibles, which will be curated by an Australian NFT publisher and available for sale as mystery boxes, will feature digital versions of historic photos and news wires from the past century.

In other NFT news, a Chinese e-commerce platform has reportedly minted and released a series of NFTs on its new proprietary blockchain. According to reports, the digital collectibles will be distributed without cost to attendees of the platform’s upcoming conference.

For more information, please refer to the following links:

OFAC and White House Address Cryptocurrency Industry Risks

By Robert A. Musiala Jr.

Late last week, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published a new “Sanctions Compliance Guidance for the Virtual Currency Industry.” According to OFAC, the guidance is intended to assist the virtual currency industry in mitigating sanctions risks, including “the risk that a sanctioned person or a person in a jurisdiction subject to sanctions might be involved in a virtual currency transaction.” The guidance notes that “the virtual currency industry, including technology companies, exchangers, administrators, miners, wallet providers, and users, plays an increasingly critical role in preventing sanctioned persons from exploiting virtual currencies to evade sanctions and undermine U.S. foreign policy and national security interests.” Among other topics, the guidance addresses evaluating sanctions-related risks; building a risk-based sanctions compliance program; protecting against sanctions violations and intentional misuse of virtual currencies by malicious actors; and understanding OFAC’s record-keeping, reporting, licensing and enforcement processes.

In a related development, late last week a statement published by the White House to address ransomware threats noted that “virtual assets” were “the primary instrument criminals use for ransomware payments and subsequent money laundering.” Among other concerns, the statement acknowledged that “uneven global implementation of the standards of the Financial Action Task Force (FATF) to virtual assets and virtual asset service providers (VASPs) creates an environment permissive to jurisdictional arbitrage by malicious actors seeking platforms to move illicit proceeds without being subject to appropriate anti-money laundering (AML) and other obligations.”

For more information, please refer to the following links:

CFTC and NYAG Enforcement Actions Target Cryptocurrency Exchanges

By Kayley B. Sullivan

The U.S. Commodities and Futures Trading Commission issued orders this week settling two civil suits – one against cryptocurrency issuer Tether and the other against crypto exchange Bitfinex. Tether agreed to pay $41 million to resolve charges that it made misleading or untrue statements that it held sufficient U.S. dollar reserves to fully back up its U.S. dollar-pegged tether token. In a separate order, Bitfinex agreed to pay $1.5 million to resolve charges that Bitfinex engaged in illegal, off-exchange retail commodity transactions in digital assets with U.S. persons on the Bitfinex trading platform and operated as a futures commission merchant without required registration.

Also this week, two cryptocurrency lending platforms were asked to cease activities in New York State by the state’s attorney general, Letitia James. In a letter published by the Office of the Attorney General, James stated that two virtual currency lending platforms were directed to immediately cease unregistered and unlawful activities in New York. Three other platforms were also asked to provide information to the office about their activities and products.

For more information, please refer to the following links:

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