[co-author: Veronica Reynolds]
Token Taxonomy Framework Published, Blockchain Supply Chain Pilots Expand
By: Robert A. Musiala Jr.
This week, the members of the Token Taxonomy Initiative (TTI), an organization with members that include several major firms across a diverse set of industries, announced the publication of the Token Taxonomy Framework (TTF) v1.0. According to the TTI, the TTF is intended to be a set of industry standards for building token-based systems that can “interoperate across the multiple and disparate systems that make up a typical enterprise infrastructure.” In a related development, according to a report this week, a major U.S.-based global technology firm, and member of the TTI, is testing a “mint” that will enable the creation of blockchain tokens that meet the standards of the TTF.
Several blockchain pilots announced advancements this week. According to reports, a major U.S.-based food and beverage company is expanding its blockchain pilot for tracking bottled drinks in its supply chain from two to 70 manufacturers. In another development, a Sweden-based automobile manufacturer has reportedly joined the Responsible Sourcing Blockchain Network (RSBN), “a blockchain network committed to strengthening human rights and environmental protection in mineral supply chains.” The auto manufacturer reportedly intends to trace the cobalt used in its batteries using blockchain technology.
In Peru, a major Peruvian grocery chain has reportedly announced a pilot project to trace the provenance of various meat products using blockchain. Finally, in a press release this week, a major global charity organization “announced the success of the first season of their blockchain-based delivery of microinsurance to smallholder paddy field farmers in Sri Lanka.”
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Stellar Burns Tokens, New Cryptocurrency Market Data and Studies Released
By: Joanna F. Wasick
The Stellar Development Foundation (SDF) announced earlier this week that it burned 55 billion of its Stellar Lumens tokens (XLM), reducing the number of XLM in existence by about 50%. Of the remaining XLM, about half are still in SDF’s possession. The decision follows SDF’s earlier proposal to disable the network’s inflation mechanism. SDF said its decision was due in part due to the difficulty in moving the XLM into the market.
On Wednesday, a major U.S. cryptocurrency exchange announced staking rewards, estimated at 5% annually, for eligible customers holding Tezos on the exchange. Staking lets holders earn income by participating in a network of a particular asset, and it can make the underlying blockchain of that asset more secure and efficient – in exchange for locking their assets in a staking wallet, customers are rewarded with more assets from the network. And major cryptocurrency exchange Binance continues to move into new markets, having recently registered an affiliate with authorities in South Korea. Binance is also reportedly planning to issue a won-backed stablecoin.
This week, a major U.S. fintech firm released its earnings report, which reflected that it processed $148 million in bitcoin sales in the third quarter of 2019. According to an investor letter published contemporaneously, first-time bitcoin buyers on the firm’s platform approximately doubled.
A recent study by two university professors concludes that a single large player manipulated the price of bitcoin up to its peak of nearly $20,000 in 2017. The unknown manipulator allegedly operated from a single Bitfinex account and used tether to boost bitcoin’s demand. Tether’s general counsel called the report meritless. Also this week, Juniper Research, a fintech data analysis company, issued a report in which it found that the total value of B2B business-to-business cross-border payments stored on blockchain will exceed $4.4 trillion by 2024, up from $171 billion in 2019.
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Blockchain Startup Receives Transfer Agent License, UK and Hong Kong Issue Crypto Guidance Enforcement
By: Veronica Reynolds
This week, security token startup Harbor received a transfer agent license from the Securities and Exchange Commission (SEC). Transfer agents record changes of ownership, maintain issuers’ security holder records, cancel and issue certificates, and distribute dividends. Harbor’s acquisition of this license, along with the broker-dealer license it was granted in September by the Financial Industry Regulatory Authority (FINRA), brings it closer to becoming a “one-stop shop” for digital asset issuance. It is the first blockchain company to receive both licenses.
On Nov. 1, the United Kingdom’s tax, payments and customs authority, HM Revenue & Customs, released a white paper explaining how the administrative body will tax cryptoasset exchange token transactions undertaken by companies and other businesses. The guidance provides a detailed breakdown of fact-specific circumstances that may affect taxpayer liabilities for trading, mining and other cryptocurrency-related activities. And in Hong Kong, the Securities and Futures Commission (SFC) published a position paper outlining its regulatory approach to virtual asset trading, stating that it will only grant licenses to platforms capable of meeting the standards. Its guidance will reportedly allow investors to better distinguish between platforms that are regulated from those that are unregulated.
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Multiple US Agencies Bring Enforcement Actions, Report Describes North Korea Crypto Sanctions Evasion
By: Jordan R. Silversmith
On Wednesday, U.S. law enforcement officials announced charges against an alleged fraudulent intergovernmental organization for falsely promising investors guaranteed returns and an ownership interest in a “digital coin offering.” Asa Saint Clair was charged with one count of wire fraud related to an alleged scheme to use World Sports Alliance, a fraudulent affiliate of the United Nations, to defraud lenders and investors in IGOBIT, a digital currency Saint Clair claimed World Sports Alliance was developing. Another press release from U.S. law enforcement officials, issued last week, announced the guilty plea of defendants in an extortion conspiracy where the defendants demanded payment in bitcoin.
Last week, the U.S. Commodity Futures Trading Commission (CFTC) announced that a federal court had entered a default order against two individuals and four corporate entities, ordering them to pay $4.25 million for fraud and misappropriation. The order resolves a CFTC enforcement case filed on April 16, 2018, charging the defendants with fraud relating to a binary options scam based on a virtual currency known as ATM Coin.
In a filing with the New York Eastern District Court dated Oct. 31, the SEC said it reached a settlement with Reggie Middleton; Veritaseum Inc.; and Veritaseum LLC related to a $14.8 million initial coin offering (ICO). The case began in 2017 when Middleton was accused of allegedly raising millions through an ICO without registering with the SEC while also deluding investors with false information to raise more funds. Middleton agreed to pay approximately $9.5 million to settle the case without admitting or denying the allegations. In a separate SEC action last week, the SEC charged a Switzerland-based securities dealer “for offering and selling unregistered security-based swaps to U.S. investors using bitcoins and for failing to transact its swaps on a registered national exchange.”
In Canada, the British Columbia Securities Commission (BCSC) has appointed a receiver to take control over Einstein Exchange, a cryptocurrency exchange, related to reports of customers being unable to access their funds. Finally, a report from Hong Kong indicates that North Korea has been using a Hong Kong-based blockchain company to launder money, prompting an investigation by the UN Security Council’s Sanctions Committee on North Korea. The committee reportedly said that North Korea used the “front” company to exchange stolen cryptocurrency for cash after “layering” it through at least 5,000 separate transactions through several countries to make tracking difficult.
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