New Cryptocurrency Payments Systems, Tokens and Trade Associations Launch
By Lauren Bass
A leading global cryptocurrency platform has reportedly announced a partnership with a global e-commerce platform that would allow e-commerce platform merchants to accept payments via cryptocurrency. According to a press release, e-commerce platform customers can now pay for their purchases using over 20 cryptocurrency tokens, including BTC, ETH, CRO, SHIB, DOGE and APE.
In other token news, the entity behind stablecoin USD₮ is reportedly launching another North American token – this time pegged to the Mexican peso. According to reports, the new MXN₮ token will be supported by the Ethereum, Tron and Polygon blockchains. This news comes on the heels of the entity announcing that its USD₮ token would now also be supported by the Polygon blockchain.
In a final development, two leading blockchain and digital asset industry trade associations, the Global Blockchain Business Council and Global Digital Finance, recently announced that their organizations will merge. According to reports, the new union – with a combined 500 institutional members across 95 jurisdictions – will become the world’s largest blockchain technology industry association.
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Cryptocurrency Industry Report Notes Change in Consumer and Insider Views
By Veronica Reynolds
According to a report released this week by a large media publication and underwritten by Crypto.com, 14 percent of individuals surveyed support central bank digital currencies (CBDCs) and approximately one-third of these consumers expect governments or central banks to launch a CBDC within the next three years. Still, “[c]ash remains king when it comes to trust,” with 85 percent of survey respondents reporting cash as a trustworthy measure of payment. But cryptocurrencies remain the most common form of digital payment, trumping digital currency issued by tech and financial firms as well as government-issued digital currency. The report notes that knowledge of open-source digital currencies, such as bitcoin, has increased by approximately 29 percent, and the need for a secure form of personal identity online is widely viewed by survey respondents as a priority. Non-fungible tokens (NFTs) are driving the adoption curve, with 65 percent of respondents believing NFTs are trustworthy and 60 percent anticipating they will buy, hold or sell NFTs within the next three years.
In addition to consumers, the report surveyed 150 institutional investors and corporate treasury managers. According to the report, approximately 70 percent of these respondents believe CBDCs are likely to replace cash in their respective countries within the next 10 years. Approximately 82 percent of these respondents believe that CBDCs will result in increased demand for other digital currencies, and nearly all of them believe CBDC issuance is “necessary to establish a functioning market for new financial instruments such as digital bonds or other forms of digital assets.” The institutional respondents cite lack of clear regulation as a primary barrier to market entry, but fewer see lack of knowledge of the industry or lack of market trust as being a barrier (down approximately 12 percent from last year).
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Digital Asset and Blockchain Risks and Opportunities Addressed by G7, ECB, BIS
By Keith R. Murphy
The G7 finance ministers and central bank governors, together with the heads of various other entities including the International Monetary Fund and the World Bank Group, recently met to discuss multilateral economic cooperation, among other important issues. A communique from that meeting, contained in a press release from the U.S. Department of the Treasury, notes the opportunities for and implications of CBDCs and their potential cross-border use for future payment transactions. The communique further notes the G7’s support for the “swift development and implementation of consistent and comprehensive regulation of crypto-asset issuers and service providers, with a view to holding crypto-assets, including stablecoins, to the same standards as the rest of the financial system.”
A recent article published as part of the European Central Bank’s Financial Stability Review in May 2022, provides an overview of stability risks relating to crypto-asset markets. The authors note the rapidly evolving nature and scale of crypto-assets and suggest that if the trend continues, crypto-assets will pose a risk to financial stability. The authors further suggest that such risk correlates with and increases with the use of leverage, lending and the level of interconnectedness between the financial sector and the crypto-asset market. Based on the foregoing concerns, the article concludes that it is critical to close data and regulatory gaps in the crypto-asset ecosystem.
In related news, a recent study provides a legal and regulatory perspective on the ability of distributed ledger technologies (DLTs) to provide an alternative to the traditional cross-border payment system, which relies on a mutually trusted central entity. An abstract of the study notes that financial law and regulation have to date presumed that regulated activities and functions are addressed through a single legal entity responsible for operations and compliance. However, given the pressure on the entity-focused regulatory paradigm as a result of DLT-based payment systems, the authors conclude that DLT systems could provide an alternative and allow for the creation of new foundational infrastructures. According to the abstract, the authors also provide concepts for how DLT can improve the efficiency of cross-border payments.
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DOJ Brings First NFT Insider Trading Case, CFTC Action Targets Crypto Fraud
By Teresa Goody Guillén
On Wednesday, the U.S. Department of Justice (DOJ) published a press release announcing the unsealing of an indictment charging a former employee of the largest NFT marketplace with wire fraud and money laundering “in connection with a scheme to commit insider trading.” The indictment alleges that the former employee used confidential information to purchase NFTs with the knowledge that the NFTs would be featured in the future on the NFT marketplace’s homepage, at which time the NFT value would likely increase and the former employee would gain a personal financial benefit.
The Commodity Futures Trading Commission (CFTC) recently charged Oregon and Illinois residents and a Florida company with fraudulently soliciting at least $44 million from at least 170 participants for participation interests in a fund invested in digital assets and other instruments, operating an illegal commodity pool, and failing to register as a Commodity Pool Operator. The complaint alleges that the defendants misappropriated the participants’ funds by distributing them to other participants (similar to a Ponzi scheme), transferring some funds to other accounts the defendants controlled for the defendants’ benefit, and transferring millions of dollars to an offshore entity. A U.S. District Court judge reportedly signed an ex parte restraining order “freezing assets controlled by the defendants, preserving records, and appointing a Temporary Receiver.”
In a final development, the chairman and ranking member of the U.S. House of Representatives Committee on Ethics (Committee) recently released a statement addressing potential misconduct by a U.S. representative involving cryptocurrencies. According to the statement, the Committee unanimously voted to establish an investigative subcommittee to “determine whether Representative … may have: improperly promoted a cryptocurrency in which he may have had an undisclosed financial interest, and engaged in an improper relationship with an individual employed on his congressional staff.”
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