NFT Initiatives Continue, Blockchain Tracing Solutions Expand, SEC Targets ICO, Crypto Enforcement Data Published, Regulators Across Globe Address Crypto

BakerHostetler

[co-author: Danielle A. Richardson]

NFT Initiatives Continue, Cryptocurrency Advertising Restrictions Ease

By: Veronica Reynolds and Danielle A. Richardson

In New Dehli, a blockchain-powered platform is hosting an exhibition displaying 27 art pieces by Bengal-born artist Lalu Prasad Shaw. According to a recent press release, the artwork is certified using non-fungible tokens (NFTs) and focuses on various aspects of middle-class Bengali life.

An entertainment firm that distributes non-fungible tokens (NFTs) to music fans recently released a limited collection of 3,000 NFTs and launched its own music-only NFT marketplace. According to reports, the firm is the first to use NFTs with decentralized finance (DeFi) to allow fans to obtain a share of artist royalties. Users can reportedly “stake” (hold for a period of time) their NFTs in “music pools” for a period of 90 days to five years and then access a portion of the income from royalty streams at the end of the staking period.

A large American network television corporation and its animation studio have launched a $100 million creative fund to produce NFTs around new content. The new unit will provide creators and advertising partners with a blockchain development ecosystem to build and launch NFTs. According to reports, the first NFT in development is related to a new comedy series and will be the “first animated series to be curated entirely on the blockchain.”

Earlier this month, one of the world’s largest search engines announced revisions to its ad services policy that narrow its ban on cryptocurrency-related advertisements. Reports indicate that starting Aug. 3, 2021, cryptocurrency-related businesses certified by the search engine may advertise their products and services within the search engine’s ad network.

For more information, please refer to the following links:

Blockchain Traceability Solutions Expand in Food, Shipping and Jewelry Sectors

By: Jordan R. Silversmith

A major U.S. credit card company recently announced the rollout of E-Livestock Global’s first-of-its-kind blockchain-based traceability solution to bring end-to-end visibility to the cattle supply chain in Zimbabwe. After an outbreak of tick-borne disease in 2018 led to the death of 50,000 cattle, the lack of traceability in Zimbabwe’s cattle market has left the country unable to export beef to lucrative markets in Europe and the Middle East. The E-Livestock Global solution will seek to resolve these concerns by helping buyers guarantee product quality.

A blockchain-enabled digital shipping platform, three years after its development by a major shipping company and a major business computer corporation, has recently added new members in China months after its launch for general availability in the country. According to reports, the platform recently added two Chinese port groups and eight intermodal and inland logistics providers.

A major jewelry manufacturer recently announced a partnership with a major business computer corporation to improve the jewelry company’s ability to scale its global omnichannel e-commerce capabilities. The jewelry company will reportedly use the computer corporation’s proprietary blockchain-based e-commerce platform to help increase supply chain resiliency and business agility and to better mitigate disruptions and risk.

For more information, please refer to the following links:

SEC Settles ICO Fraud, US Crypto Enforcement Reaches $2.5 Billion

By: Teresa Goody Guillén

This week, the U.S. Securities and Exchange Commission (SEC) charged an ICO issuer and its CEO with securities fraud and conducting an unregistered securities offering. The SEC alleged that the company and its CEO raised $7.6 million from investors by offering and selling digital tokens called “LOCIcoin” and, in promoting the ICO, made numerous materially false statements to investors and potential investors. The order also finds that LOCIcoins constituted securities, and the offering of those securities neither was registered with the SEC nor qualified for an exemption from registration. The order further finds that the CEO misused $38,163 in investor proceeds to pay his personal expenses. Among other things, the SEC’s order imposes a $7.6 million civil penalty against the company, and an officer and director bar as to the CEO.

A blockchain analytics firm recently published an analysis of U.S. regulatory enforcement actions showing that $2.5 billion in penalties have been imposed against firms and individuals dealing in crypto since the inception of bitcoin in 2009. This includes penalties imposed by the SEC ($1.69 billion), Commodity Futures Trading Commission ($624 million), Financial Crimes Enforcement Network ($183 million) and Office of Foreign Assets Control ($606,000). According to the report, the majority of these penalties relate to unregistered securities offerings ($1.38 billion), fraud ($928 million) and anti-money laundering violations ($183 million). The penalties are comprised of civil penalties ($722 million), disgorgements ($1.62 billion) and restitutions ($161 million).

GSA Auctions, a service of the U.S. General Services Administration (GSA), recently held its latest cryptocurrency auction for 11 lots of cryptocurrency, totaling 8.93 bitcoins and 150.2 litecoins and with a combined market value of nearly $377,000. GSA Auctions is the federal government’s online clearinghouse for surplus federally owned assets and equipment, such as office furniture, vehicles, scientific equipment and collectibles.

For more information, please refer to the following links:

Regulators in Canada, UK and Portugal Address Cryptocurrency Market

By: Joanna F. Wasick

This Monday, the Enforcement Staff of the Ontario Securities Commission (OSC) issued a Statement of Allegations (SOA), initiating a proceeding against cryptocurrency exchange Bybit Fintech Limited (Bybit) to hold Bybit accountable “for disregarding Ontario securities law and to signal that crypto asset trading platforms flouting Ontario securities law will face regulatory action. In March, the OSC notified exchanges with Canadian customers that the exchanges had until April 19, 2021, to contact the OSC to discuss their efforts and obligations to comply with Ontario securities laws and otherwise operate legally in Canada. According to the SOA, Bybit never contacted the OSC. Bybit faces various penalties, including being forced to cease operations and pay fines.

The Financial Conduct Authority (FCA), Britain’s markets watchdog, stated earlier this week that more than 100 unregistered cryptocurrency asset firms were high risk, volatile, unregulated and a threat to the broader financial system. In January, these firms were required to obtain FCA registration before being able to trade; however, according to the FCA, only a handful did so.

The Central Bank of Portugal (CBP) recently licensed two cryptocurrency exchanges for the first time. A new Portuguese law for cryptocurrency trading platforms took effect earlier this year. Since then, the CBP reportedly stated that it received five formal registration requests and a total of 60 informal requests.

For more information, please refer to the following links:

China Crypto Crackdown Continues, South Korea Seizes Tax Evader Crypto

By: Kayley B. Sullivan

According to reports this week, the People’s Bank of China (PBOC), China’s central bank, has urged the country’s major financial institutions to stop facilitating cryptocurrency transactions, citing concerns about cryptocurrency’s role in criminal activities. This announcement comes on the heels of China’s State Council’s statement last month that it intends to continue to tighten restrictions on the trading and mining of cryptocurrencies. In a related development, Chinese authorities recently arrested 1,110 people suspected of laundering the proceeds of crimes related to internet and telephone scams through cryptocurrencies. And a third recent report noted that authorities in Ya’an City, a city in the Sichuan province, have ordered local bitcoin mining operations to shut down pending inspection.

In South Korea, officials recently seized more than $53 billion (US$47 million) in cryptocurrencies from approximately 12,000 people accused of tax evasion. According to reports, the seizures are part of a months-long probe that officials have called the largest “cryptocurrency seizure for back taxes in Korean history.”

According to recent reports, the founders of a South African cryptocurrency investment firm, Africrypt, have reportedly disappeared—with approximately $3.6 billion worth of investors’ bitcoin. An investigation reportedly found that Africrypt’s pooled funds had been transferred from its South African accounts and client wallets. Global exchanges have been warned to look for any attempts to convert or liquidate the bitcoin.

For more information, please refer to the following links:

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