Market Initiatives Announced in Crypto Compliance, Digital Asset Exchange, Blockchain Enterprise Solutions and NFTs; SEC Chairman Comments on Crypto



US Firm Acquires Crypto Co., Swiss Digital Asset Exchange Gains License

By Kayley B. Sullivan

In a recent press release, a major U.S. financial services firm announced its acquisition of CipherTrace, a blockchain analytics and cryptocurrency intelligence software provider. According to the press release, this will allow the financial services firm to “drive continued innovation with a diverse range of partners” and provide an “integrated offering” that will “provide businesses with greater transparency to help identify and understand their risks and to help manage their digital asset regulatory and compliance obligations.” The deal is reportedly set to close by the end of the year.

In international developments, SIX Digital Exchange has received approval from the Swiss Financial Market Supervisory Authority “to go live with a fully regulated, integrated trading, settlement, and custody infrastructure based on distributed ledger technology for digital securities.” And in Argentina, an owner of luxury villas in the Mendoza wine region recently announced that it would be accepting payment in the form of bitcoin for purchases of its luxury homes.

Last, according to a recent report, Bitcoin Network energy consumption in 2021 has already beaten last year’s numbers. The report cites the Bitcoin Network as having consumed an estimated 67TWh of electricity in 2020, and it predicts that if current numbers continue, Bitcoin Network mining will use approximately 91TWh of energy in 2021 — as much as is used annually in Pakistan.

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Enterprise Firms Announce Polygon Integration and Shipping Data Solution

By Robert A. Musiala Jr.

This week, a Big Four accounting and consulting firm announced that it is “using the Polygon protocol and framework to deploy … blockchain solutions on the public Ethereum blockchain ecosystem.” The press release notes the recent spike in transaction costs on the Ethereum Blockchain and that integration with the Polygon protocol will allow the firm “to offer enterprise users increased transaction volumes with predictable costs and settlement times and the option to move transactions onto the public Ethereum mainnet.” The press release also notes that the firm is “working with Polygon to create permissioned, private industry chains leveraging new models for handling transaction verification” and to “offer enterprises the comfort and security of a closed system but retain the close alignment with the public Ethereum mainnet.”

In other enterprise developments, the Global Shipping Business Network (GSBN) recently announced the launch of a new blockchain-enabled operating system for managing shipping industry data. According to reports, the new system includes a feature whereby “data is encrypted before it is sent to the GSBN platform, and as a result GSBN cannot see the data without the members’ authorisation.” In another recent development, a Singapore-based firm announced a partnership with VeChain to deploy a blockchain traceability solution in the shrimp-farming industry.

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NFT Sells for Record $1.1M, NFT Marketplace Exec Accused of Insider Trading

By Veronica Reynolds

A Degenerate Ape Academy non-fungible token (NFT) sold this week for $1.1 million, making it the most expensive Solana-based NFT sold to date. The NFT, reportedly the 13th-rarest in existence, was purchased by a European-based blockchain advisory and investment firm. Solana, an Ethereum rival, is an open-source, proof-of-stake, permissionless blockchain that facilitates transactions of the SOL token and digital assets, such as NFTs.

An executive of one of the world’s largest NFT marketplaces was accused of insider trading this week. The marketplace issued a statement acknowledging that “one of [its] employees purchased items that they knew were set to display on our front page before they appeared there publicly.” The executive reportedly profited from this insider knowledge by selling the NFTs after the front-page feature and corresponding price jump. According to the marketplace’s statement, the platform requested and accepted the executive’s resignation and is conducting an internal investigation of the incident.

For more information, please refer to the following links:

SEC Chairman Comments on Crypto Market in Senate Committee Speech

By Keith R. Murphy

In testimony this week to the United States Senate Committee on Banking, Housing and Urban Affairs, the chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, commented on cryptocurrency assets. Addressing the cryptocurrency market, Gensler said the following:

"Currently, we just don’t have enough investor protection in crypto finance, issuance, trading, or lending. Frankly, at this time, it’s more like the Wild West or the old world of “buyer beware” that existed before the securities laws were enacted. This asset class is rife with fraud, scams, and abuse in certain applications."

Addressing cryptocurrency exchange platforms, Gensler said the following:

"Many platforms have dozens or hundreds of tokens on them. While each token’s legal status depends on its own facts and circumstances, the probability is quite remote that, with 50, 100, or 1,000 tokens, any given platform has zero securities. Make no mistake: To the extent that there are securities on these trading platforms, under our laws they have to register with the Commission unless they qualify for an exemption."

Gensler also noted that the SEC is working with multiple government entities, including the Commodity Futures Trading Commission (CFTC), the Federal Reserve and the Department of the Treasury, on investor protection and policy frameworks relating to cryptocurrencies.

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US Crypto Exchange Files with NFA, UK FCA Warns on Celebrity Crypto Ads

By Keith R. Murphy

This week, a major U.S. cryptocurrency exchange filed to become a member of the National Futures Association and to register as a futures commission merchant, according to a report. The company seeks to offer futures and derivative trading relating to cryptocurrency assets on its platform, according to a statement by a company representative. The report notes that further licensing by the CFTC may be necessary as part of this effort.

The Financial Conduct Authority (FCA), a financial regulatory body in the United Kingdom, is cautioning people against blindly buying cryptocurrency assets based on a fear of missing out, according to a recent report. The report notes that the FCA is concerned that people with little knowledge of the risks may be influenced by celebrities to purchase cryptocurrencies that are unregulated and potentially could be fake, for example. The chairman of the FCA reportedly is seeking greater powers to govern the online promotion of cryptocurrencies in an effort to combat “problematic content.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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