NY DFS Approves New Stablecoin Co., Blockchain Data Solutions Announced, New Cryptocurrency Regulatory and Enforcement Actions in U.S. and Abroad


NY DFS Approves New Stablecoin Company, Crypto Financial Products Continue Growth

By: Jordan R. Silversmith

New York’s Department of Financial Services (DFS) recently granted a charter under New York Banking Law to a Japanese cryptocurrency firm operating as a limited liability trust company. DFS’ approval allows the company to issue, administer and redeem Japanese yen- and U.S. dollar-pegged stablecoins in New York. In other fintech news, a Puerto Rico-based bank was recently given the go-ahead by the Puerto Rico Office of the Commissioner of Financial Institutions to begin providing custody services for multiple crypto-assets in early 2021. Meanwhile, a major American financial services company recently announced that its popular cash-transferal app will allow customers to earn bitcoin on every transaction.

The cryptocurrency debit card market continues to grow. According to reports from late December 2020, a crypto on-ramp service provider announced that it is partnering with a major American financial services company to offer cryptocurrency debit cards to its customers. The companies hope that the partnership will lead to greater access to cryptocurrencies by creating a “fiat-like convenience” for using cryptocurrencies online and in physical locations. The same American financial services giant also announced it had offered membership in its European program to a London-based payments platform that has issued a “crypto-enabled payment card.” Membership in the program allows companies to issue mainstream credit cards.

A major American cryptocurrency exchange recently announced its first Bitcoin Core developer grants to two developers. One plans to improve existing open source tools, including a web interface visualizing forks, while the other plans to improve the Bitcoin Core UI on Android and iOS. In a final notable development, a New York-based blockchain technology firm recently released a new guide on blockchain for decentralized finance. The guide outlines the uses of the Ethereum blockchain for developing new economic systems that shift from traditional, centralized financial institutions to P2P finance on the Ethereum blockchain.

For more information, please refer to the following links:

Blockchain Used To Enhance Auto Geofencing and Combat Whiskey Fraud

By: Teresa Goody Guillén

A major automaker announced that it conducted a three-year study showing how emerging technologies, such as dynamic geofencing and blockchain, can combine with hybrid-electric vehicles to help improve air quality. In Europe, low-emission zones are increasingly common in urban centers. The dynamic geofencing feature enables the vehicle’s zero-emission electric-drive mode to be activated automatically whenever it enters a low‑emission zone and constantly adjust the boundaries based on air quality, without any action by the driver. The study also used blockchain technology to record the time a vehicle entered or left a geofenced zone. The permanent time‑stamped records on the blockchain serve to ensure that “green miles” driven can be safely stored and potentially shared with other parties, such as city authorities and fleet owners.

According to recent reports, a technology company and university in Scotland are working together to tackle fraud within the whisky industry and estimate that as many as 40% of all rare vintage whiskies in circulation could be fake. As part of their proposed solution, rare whiskies will be authenticated for provenance and fitted with intelligent anti-tamper bottle closures. The bottles will then be protected and connected to a blockchain using near field communication tags, creating a digital record certifying the whisky’s origin and age. This further enables a digital record of any future chain-of-custody data such that the provenance of the bottle and its entire historical journey can be viewed, protecting and enhancing the bottle’s overall value by ensuring its authenticity.

For more information, please refer to the following links:

US Financial Regulators Continue Crypto-Focused Regulatory Proposals

By: Veronica Reynolds

National banks and federal savings associations (collectively, banks) have been granted permission to participate in independent node verification networks, such as those facilitated by distributed ledger or blockchain technologies, and use stablecoins (a type of cryptocurrency pegged to a stable asset) to facilitate payment activities, according to a letter published by the Office of the Comptroller of the Currency (OCC) this week. This permission allows banks to lawfully operate as “nodes” to “validate transactions, store transaction history, and broadcast data to other nodes” and use stablecoins “as a mechanism to facilitate payment activities,” such as the payment of remittances.

Just before the new year, the U.S. Financial Crimes Enforcement Network (FinCEN) noted its intent to amend the Report of Foreign Bank and Financial Accounts (FBAR) regulations with the goal of requiring the reporting of offshore accounts that hold cryptocurrency. According to reports, the proposed amendment to the regulations would likely align current FBAR regulations regarding cash held outside the U.S. by citizens or other U.S. persons with those related to cryptocurrencies and “could have the most visible impact on users of crypto exchanges like Bitstamp and Bitfinex.”

As previously reported, over the holidays FinCEN proposed rules to address what it refers to as the “illicit finance risks” posed by the existence and proliferation of cryptocurrencies. This week, multiple cryptocurrency-focused businesses publicly shared their responses to the FinCEN proposal, many of which outline opposition to the proposed rules.

For more information, please refer to the following links:

OFAC Settles With Crypto Custodian; Enforcement Actions in UK, Italy, Iran

By: Joanna F. Wasick

Last week, the Office of Foreign Assets Control (OFAC), a financial intelligence and enforcement agency of the U.S. Treasury Department, announced that it entered into a $98,830 settlement with BitGo Inc., a California-based technology company that offers noncustodial cryptocurrency wallet management services. OFAC had asserted that, as a result of deficiencies related to BitGo’s sanctions compliance procedures, BitGo failed to prevent persons in Ukraine, Cuba, Iran, Sudan and Syria from using its wallet services, thereby violating federal prohibitions against engaging in such business with people in those areas. OFAC had further determined that BitGo wrongfully failed to self-disclose these violations. The OFAC announcement goes on to list certain aggravating and mitigating factors assessed for the settlement. That BitGo had reason to know the location of its users was one of the factors weighing against the company, whereas the fact that it had cooperated with the investigation weighed in its favor.

Italian police announced early this week that a series of hacks that caused the theft of €120 million from the now-bankrupt BitGrail exchange may have been an inside job. A 34-year-old man from Florence, who had worked at the exchange and cooperated with police in 2018 during the initial investigation, was arrested on charges of computer fraud, fraudulent bankruptcy and money laundering. Authorities said the individual was either behind the breaches or purposefully took no action to prevent them after the first attack. An official stated, “It is not yet clear whether he participated actively in the theft or if he simply decided not to increase security measures after discovering it.”

In the U.K., 21 individuals were recently arrested as part of an operation targeting customers of an online criminal marketplace that advertised stolen personal credentials. Charges were brought under the Computer Misuse Act and fraud offenses. Bitcoin, valued at €41,000, was also seized. In Iran, Iranian authorities reportedly have shut down 1,620 illegal cryptocurrency mining farms that were siphoning over 250 megawatts of electricity from the subsidized national power grid over the past 18 months. While mining is permitted in Iran, miners must be registered and follow certain regulations.

Last month, Crystal, a blockchain analytics firm, released its Blockchain End of Year Report for 2020. The report states that bitcoin funds received by virtual asset service providers increased by $118.6 billion to $272.9 billion in 2020. The amount of bitcoin received by darknet entities increased by $0.3 billion to $1.6 billion. And the amount received by mixers increased by $0.5 billion, meaning mixers received $1.4 billion bitcoin in total this year. According to the report, the amount transferred by darknet entities to exchanges increased slightly, to $533 million. The report also provides information on a number of other topics in the digital asset and blockchain space, including money laundering, security breaches, dormant bitcoin addresses and usage on different international cryptocurrency exchanges.

For more information, please refer to the following links:

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