Weekly Blockchain Blog - February 2024 #2



U.S. Companies Announce Crypto Cashback and NFT Ticketing Initiatives

By Diana Milton

According to recent reports, a major U.S. credit card company has partnered with Swoo, a mobile wallet blending traditional and crypto payments, to offer crypto cashback for every contactless payment made via the Swoo mobile app with their digitized credit cards. Once users earn their cashback in tokens, they can swap their tokens for popular cryptocurrencies like USDT or BTC in the Swoo app or cash out to fiat money via partnering services.

Other recent reports note that a major U.S. sports and entertainment company has announced plans to move its NFT ticketing platform from the Polygon blockchain to Avalanche. The company has reportedly partnered with Ava Labs, the developer of the Avalanche network, which will allow the company’s NFT ticketing platform to mint its NFT tickets using the Avalanche blockchain. The company will reportedly offer exclusive benefits and engagement opportunities to NFT ticket holders.

For more information, please refer to the following links:

Report Analyzes 2023 Bitcoin Mining Trends

By Robert A. Musiala Jr.

A major digital asset trading, management and infrastructure firm recently published its Annual Bitcoin Mining Report analyzing 2023 Bitcoin mining trends. Key findings from the report include the following:

  • Following a tumultuous 2022, miners got a much-needed reprieve in 2023 driven by improvements in bitcoin price, spikes in transaction fees and the easing of energy prices. Offsetting some of these moves was the meteoric rise in hashrate, which rose 104% in 2023.
  • Transaction fees in 2023 were over 4x the sum of transaction fees in 2022 and increased 336% YoY due to the introduction of the ordinals protocol and inscriptions, which has led to the burgeoning development of Web3 applications and tokenization on Bitcoin.
  • In preparation for the halving, several large miners have utilized equity financing to make significant ASIC purchases to increase the size and improve the efficiency of their fleets.
  • Over the course of the year, public miners purchased over 94 EH worth of machines valued at more than $1.53B. Miners particularly focused on acquiring new-generation machines with efficiencies under 20 J/TH to update their fleet ahead of the halving.
  • An estimated 15-20% of the network hashrate at the conclusion of 2023 (86-115 EH) could come offline at the time of the halving.

For more information, please refer to the following link:

Hong Kong Monetary Authority Publishes Guidance on Digital Asset Custody

By Joanna F. Wasick

The Hong Kong Monetary Authority (HKMA), Hong Kong’s central bank, recently issued “Expected Standards” guidance for authorized institutions interested in offering custody services for digital assets. The guidance calls for a comprehensive risk assessment and policies in place to manage those risks. In particular, HKMA wants institutions to minimize the risk of loss of custodied digital assets due to fraud, theft, negligence and other “acts of misappropriation.” Other requirements are independent systems audits, cold storage for a substantial portion of client digital assets, secured private keys, and availability of records to HKMA upon request. This recent guidance supplements the licensing regime introduced last year that gives crypto exchanges a pathway to operate in a permissioned, regulated manner.

For more information, please refer to the following links:

DOJ, FBI, NCA Disrupt Ransomware Gang; OFAC Adds Public Keys to SDN List

By Robert A. Musiala Jr.

According to press releases by the U.S. Department of Justice (DOJ) and the U.S. Department of the Treasury (Treasury), the two agencies, in collaboration with the U.S. Federal Bureau of Investigation (FBI), the U.K. National Crime Agency (NCA) and other international law enforcement agencies, have disrupted the operations of LockBit, one of the most active ransomware groups in the world, “by seizing numerous public-facing websites used by LockBit to connect to the organization’s infrastructure and seizing control of servers used by LockBit administrators.” The press release notes that the NCA and FBI have “developed decryption capabilities that may enable hundreds of victims around the world to restore systems encrypted using the LockBit ransomware variant” and encourages victims “to contact the FBI at https://lockbitvictims.ic3.gov/ to enable law enforcement to determine whether affected systems can be successfully decrypted.” According to a press release by the NCA, “over 200 cryptocurrency accounts linked to the group have been frozen.” As part of the action, the Treasury Office of Foreign Assets Control (OFAC) added multiple cryptocurrency public keys to the OFAC Specially Designated Nationals (SDN) List.

For more information, please refer to the following links:

New Data Published on Crypto Money Laundering Trends

By Christopher Lamb

According to a recent report by Chainalysis, a blockchain analysis firm, in 2023 “illicit addresses sent $22.2 billion worth of cryptocurrency to services, which is a significant decrease from the $31.5 billion sent in 2022.” The report notes that centralized exchanges continue to be the most used offloading ramp for illicit addresses, which is a trend that “has remained relatively stable over the last five years.” The overall decrease in illicit funds may be attributed “to an overall decrease in crypto transaction volume,” and the service types of illicit funds “mostly resembled 2022 in terms of the breakdown.” However, the report indicates that there is “a huge increase in the volume of funds sent to cross-chain bridges from addresses associated with stolen funds.” While “[a] big share of crypto money laundering is relatively unsophisticated, and consists of bad actors simply sending funds directly to exchanges,” certain crypto criminals such as the Lazarus Group – a hacking gang associated with North Korea – have become “more sophisticated” and “tend to utilize a greater variety of crypto services and protocols” to launder their stolen funds.

For more information, please refer to the following link:

Digital Assets Client Alert: February 23, 2024

By: Carlos F. Ortiz, John J. Carney, Nicholas C. Mowbray, Kayley B. Sullivan, Jessica T. Mingrino

After years of explicitly warning taxpayers that failing to report or underreporting income from transactions involving digital assets would lead to criminal charges, federal prosecutors are now beginning to follow through on their promises. A first-of-its-kind (and certainly not the last) indictment was made public on February 7, wherein a Texas individual, Frank Ahlgren III, was accused of inflating his cost basis in bitcoin and underreporting capital gains of approximately $4 million. In addition, Ahlgren is accused of structuring earnings deposits by splitting large portions of his bitcoin earnings into smaller deposits to avoid drawing the attention of law enforcement and of failing to report the capital gains from these transactions.

For more information, please refer to the following link: No Further Warnings – Prosecutors Bring First Pure Legal Digital Asset Tax Indictment; More Criminal Cases to Come

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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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