Financial Firms Integrate Crypto, NFT Market Expands, Blockchain Pilots Launch, FATF Publishes New Crypto Guidance, Crypto Enforcement Actions Continue

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[co-author: Lauren Bass]

Financial Firms Integrate Crypto Products, New Bitcoin Network Data Published

By Veronica Reynolds

This week, a large financial services corporation and a digital wallet app company announced a partnership to reduce friction among merchants, banks and financial technology firms by making increased access to digital assets available to consumers. According to a press release, the partnership will allow consumers to buy, sell and store digital assets through a custodial wallet provided by the digital wallet app company, will streamline the issuance of branded crypto credit and debit cards, and will allow for the issuance of cryptocurrency rewards to consumers, thereby creating a fungible relationship between digital assets and loyalty points.

According to reports, a large cryptocurrency investment was made late last week by a large Houston-based pension fund, making it the first pension fund in the U.S. to invest in digital assets. The fund reportedly purchased bitcoin and ether for one of its plans’ portfolios through a partnership with a leading bitcoin company that supported the purchase through the provision of a regulated, audited and insured custody system.

Another recent report noted that tuition for an Ivy League university’s blockchain program can now be paid in bitcoin and other cryptocurrencies. The university expects thousands to enroll in the program and is charging $3,800 as tuition.

A study published this week found that approximately 11,000 entities are responsible for more than half of the Bitcoin Network’s on-chain volume. In addition, the study found that roughly 15.9 percent of circulating bitcoin is controlled by the top 1,000 largest investors and that the network continues to remain highly centralized even as new investors have flooded the market in 2021. Moreover, the bitcoin mining sector appears to remain concentrated, with the study estimating that 10 percent of miners control 90 percent of the global hash rate, with 50 miners commanding 50 percent of the network’s hashing power. Still, according to the report, individual bitcoin holders represent approximately 45.1 percent of total supply.

For more information, please refer to the following links:

From Digital Art to Alcohol: The NFT Marketplace Continues to Expand

By Lauren Bass

Earlier this month, a Vancouver-based digital design agency reportedly sold out its new class of nonfungible tokens (NFTs) in just 37 minutes, generating a net profit of approximately $6.2 million. According to reports, these unique digital avatars represent a new multimedia franchise for which the design firm will retain a 5 percent royalty in perpetuity for all secondary market sales of the tokens.

Last week, an online auction house reportedly sold an NFT representing title to a rare cask of Scotch whisky for $2.3 million. According to reports, the digital collectible also included two one-of-a-kind, specially commissioned, whisky-themed digital art works from a Scotland-based artist.

To help provide attribution for digital content, developers of a popular graphic design suite have reportedly added a new feature to their software. According to press releases, the tool will allow artists to embed personal information – including social media profiles and cryptocurrency wallet addresses – into their digital creations. The metadata will then be displayed as a digital certificate on partner NFT marketplaces and media outlets to allow purchasers to verify authenticity and origin of the work.

In other NFT news, a U.S.-based cryptocurrency exchange has reportedly announced that it will discontinue listing any NFT that pays secondary market royalties to its holders. According to reports, the president of the exchange cited potential regulatory risk from the U.S. Securities and Exchange Commission as the reason for the decision.

For more information, please refer to the following links:

Blockchain Pilots Launch in News Data, Satellite Networks and Trade Finance

By Robert A. Musiala Jr.

According to a recent press release, a major U.S. nonprofit news agency has launched a Chainlink node to allow its data to be “supplied and sold directly to applications running across various blockchains.” The press release notes that the news agency “will make its trusted economic, sports and race call datasets available to leading blockchains via Chainlink, the world’s largest decentralized network of oracles, enabling smart contracts on any blockchain to securely interact with the [news agency’s] real-world data.” The data will reportedly be cryptographically signed to verify it is from the news agency, and will include “U.S. race calls, economic data, sports game outcomes and business financials.”

Another recent press release reported that a major U.S. satellite television provider has partnered with the Helium Network to utilize the Helium Network’s “unique blockchain-based incentive model with customers deploying their own 5G CBRS-based hotspots.” According to the press release, customers participating in the new platform “will earn rewards in the form of $HNT, a Helium network-based token” that will underpin “a new wireless economy through a breakthrough economic model.”

In a final recent development, a trade finance and working capital platform provider announced a pilot to integrate “blockchain, smart contracts and AI to automate trade credit policy management and compliance processes and integrate the policies into financial workflows.” The pilot will aim to enable insurers to “gain a real-time view of actual value at risk” and automate certain policy compliance requirements.

For more information, please refer to the following links:

FDIC Chair Addresses Crypto, FATF Publishes Updated Crypto AML Guidance

By Joanna F. Wasick

On Monday, the chair of a U.S. bank regulatory agency stated that U.S. bank regulators are trying to provide a new road map for banks to engage with crypto assets. The chair acknowledged that if banks cannot enter the crypto space, that activity will develop outside the banking system, and then “the federal regulators won’t be able to regulate it.” However, she also identified banks’ challenges in working with crypto assets, such as how to use them as collateral, or how to include them on balance sheets, given the asset class’s volatility. Still, these statements suggest movement by the cryptocurrency “sprint” team first announced in May, which aims to ensure cryptocurrency policy coordination among various U.S. financial regulators.

The Financial Action Task Force (FATF), a global, intergovernmental money laundering and terrorist financing watchdog, recently issued its Updated Guidance for a Risk-Based Approach for Virtual Assets and Virtual Asset Service Providers (VASPs). This guidance, a revision of the FATF’s 2019 guidance, includes updates on six areas: (1) definitions of virtual assets and VASPs; (2) how FATF standards apply to stablecoins; (3) addressing money laundering and terrorist financing risks related to peer-to-peer transactions; (4) licensing and registration of VASPs; (5) implementation of the “travel rule” in the public and private sectors; and (6) principles of information-sharing and cooperation among VASP supervisors. Overall, the guidance aims to help countries and VASPs understand their anti-money laundering and counterterrorist financing obligations, and effectively implement the FATF’s requirements as they apply to this sector.

For more information, please refer to the following links:

Global Agencies Target Darknet Market; CFTC Investigates Crypto Platform

By Keith R. Murphy

Following a coordinated international and multiagency effort to locate and stop the illegal sale of drugs and other illicit goods and services on the darknet, law enforcement agents across multiple countries arrested 150 drug traffickers and others engaged in the illicit sale of goods and services around the globe, according to a recent press release. The release notes that in addition to the arrests, the efforts resulted in the recovery of drugs, weapons and millions of dollars in cryptocurrency.

A decentralized information markets platform has come under scrutiny by the U.S. Commodity Futures Trading Commission (CFTC), according to a recent report. The CFTC reportedly commenced an investigation to determine whether the platform is allowing its customers to trade binary options and swaps that should be regulated. The platform, which is in the process of pursuing a new round of funding, has reportedly hired a former CFTC enforcement division director to help address the matter.

For more information, please refer to the following links:

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