OCC Clarifies Status of Stablecoins, Registration Statement Filed for Network Token
By: Jordan R. Silversmith
The chief counsel for the Office of the Comptroller of the Currency (OCC) recently issued a letter clarifying the agency’s stance on the authority of national banks and federal savings associations (FSAs) to hold stablecoin “reserves” as a service to bank customers. The letter concluded that national banks and FSAs have legal authority to hold USD reserves on behalf of customers issuing stablecoins as long as the stablecoins are held in a hosted wallet. The OCC also noted in its letter that this interpretation only addresses stablecoins backed on a 1:1 basis by a single-fiat currency verified every day by the bank. The Securities and Exchange (SEC) Commission Strategic Hub for Innovation and Financial Technology Staff (FinHub) issued a statement in response to the OCC’s interpretation, clarifying that whether stablecoins will be considered securities for purposes of federal securities laws “is inherently a facts and circumstances determination.” FinHub also noted that any party seeking to structure and sell digital assets like stablecoins should reach out to them to ensure compliance with federal law.
A privacy-focused blockchain startup has filed a registration statement with the SEC related to its ENG tokens. According to the registration statement, “[f]rom June to September 11, 2017, the Company sold approximately 75 million ENG Tokens in exchange for Bitcoin or Ether, valued at approximately $42 million.” The registration statement notes that ENG tokens “currently serve as a payment tool in the Enigma Data Marketplace” and “serve as a way to incentivize and monetize data curation on the Enigma Network, both of which were live as of February 28, 2019.” The registration statement also notes that ENG tokens “should not be viewed as analogous to more traditional securities (i.e., capital stock, debt securities, warrants to purchase capital stock, etc.), as the ENG Tokens lack features of such securities.” When the registration statement goes into effect, the company would be subject to the Exchange Act, which requires filing an annual 10-K, quarterly 10-Q and current 8-K reports. The startup is reportedly one of the companies working on the “Secret Network,” an open source network protecting data for users of decentralized applications, or “secret apps.”
The INX cryptocurrency exchange has begun distributing tokens from its Ethereum-based initial public offering (IPO). Around 210 of the more than 500 registered and whitelisted investors in the company’s IPO have put money into the sale as of Sept. 18, three days after its first distribution transaction happened. In other news, a Nasdaq and SEC-registered fund manager is reportedly launching one of the first cryptocurrency ETFs in Bermuda. According to reports, the crypto-based ETF will be traded on the Bermuda stock exchange (BSX), will be denominated in U.S. dollars and will track an index being developed by Nasdaq.
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US Government Procures Blockchain Solutions, Blockchain Patent Study Published
By: Joanna F. Wasick
The Science and Technology Directorate (S&T), a division of the U.S. Department of Homeland Security (DHS), is offering $25,000 for designing the winning digital wallets to be used with DHS’s work in the blockchain and decentralized identity spaces. S&T states that the wallets must demonstrate ease of use and visual consistency and support interoperability, security and privacy. The search targets freelance designers, and the three finalists will receive $5,000, with an additional $10,000 going to the winner. Applications are being accepted through Oct. 15, and the winner will be named in December. In another government procurement, last week Xage Security, a blockchain-protected security platform company, announced it was awarded a contract by the Air Force Research Lab to evaluate and prepare blockchain-based end-to-end protection solutions across civilian and military assets for the U.S. Space Force, the space warfare service branch of the U.S. armed forces.
Earlier this week, a global intellectual property consulting company published results from a study on the current state of blockchain patents. According to the report, the number of such patents are “skyrocketing,” with more blockchain-related patents published in the first half of 2020 than in all of 2019 – a year that had already seen three times more blockchain patents published than in 2018. The report shows the United States has more blockchain patents than any other country. However, a major Chinese conglomerate published the most patents so far this year – between eight and 10 times as many as the next top applicant, an American computer and technology conglomerate. At this rate, the Chinese company is poised to own the most blockchain patent applications compared to any other entity.
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Hedera Hashgraph Transactions Pass Ethereum, VeChain Supports Food Traceability
By: Veronica Reynolds
After launching its mainnet in September 2019, Hedera Hashgraph, a decentralized public network, recently announced that it now processes 1.5 million daily transactions, almost double that of Ethereum, while its network fees remain relatively stable, according to reports. The Hedera network features multiple enterprise-grade applications hosted by companies across numerous industries, including healthcare, decentralized finance and supply chain management. One such company, Entrust, an Australian agricultural supply chain platform, recently announced its launch on Hedera. The company’s focus is on “securing supply chain growth and trust in the high-value wine and dairy manufacturing industries.”
In China, VeChain, an enterprise-friendly public blockchain, announced last week that it has joined the China Animal Health And Food Safety Alliance (CAFA), a Chinese government-backed organization with more than 130 members that are key players in the country’s food industry. VeChain plans to offer technical and infrastructure support to CAFA and hopes to support the organization’s strategy of “building a from-farm-to-table traceability system across the entire country.”
This week, one of the world’s leading meatpackers announced its plans to help combat deforestation in the Amazon through use of blockchain. The company cites fraud as a major issue that has arisen in the industry, whereby indirect supply-chain participants engage in “laundering” cattle from pastures that operate outside of and in conflict with protocols mandated by the industry. While participants who engage in this type of fraudulent sourcing are currently not being tracked, the hope is that blockchain can be leveraged to identify the parties who source cattle in an unlawful manner and to eradicate their participation from the supply chain.
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DOJ Announces Major Enforcement Action Against Darknet Markets
By: Robert A. Musiala Jr.
This week, the U.S. Department of Justice (DOJ) announced a major enforcement action related to “Operation DisrupTor, a coordinated international effort to disrupt opioid trafficking on the Darknet.” According to a DOJ press release, the operation “resulted in the arrest of 179 Darknet drug traffickers and fraudulent criminals who engaged in tens of thousands of sales of illicit goods and services across the United States and Europe.” As part of the action, U.S. and international law enforcement agencies seized numerous assets, including “over $6.5 million in both cash and virtual currencies.”
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International Law Enforcement Operation Targeting Opioid Traffickers on the Darknet Results in over 170 Arrests Worldwide and the Seizure of Weapons, Drugs and over $6.5 Million
