Cryptocurrency Firms and Legacy Financial Institutions Worldwide Make Crypto Moves
Two cryptocurrency firms filed applications this week with the Office of the Comptroller of the Currency to become federally regulated banks in the U.S. The first, BitPay, a bitcoin payments company, submitted an application for the BitPay National Trust Bank, to be headquartered in Georgia. The second application was submitted by Paxos, a stablecoin issuer and cryptocurrency services firm, for the Paxos National Trust. As a next step in the process, each application will undergo a 30-day comment period.
In the U.K., two major financial services providers have announced plans to launch an institutional-grade custody solution for cryptocurrencies, called Zodia Custody. According to a press release, Zodia would allow institutions to invest in cryptocurrency assets, including transaction and settlement activities.
In Sweden, the Bank for International Settlements’ Innovation Hub (BISIH) Swiss Centre, the Swiss National Bank (SNB) and financial infrastructure operator SIX recently announced the successful completion of a joint proof of concept for central bank digital currencies (CBDCs). The proof of concept reportedly shows the feasibility of linking a digital asset platform to an existing payment system and issuing a tokenized CBDC.
In Singapore, DBS Group Holdings Ltd. (DBS) recently announced a partnership with Singapore Exchange Ltd. to offer new services that include cryptocurrency custody services, secondary trading of digital assets and asset tokenization. The initiative has reportedly received approval from the Monetary Authority of Singapore, allowing DBS to be among just a few banks in the region to engage meaningfully in the cryptocurrency industry.
One of the world’s oldest banks, located in Germany, plans to issue a Euro stablecoin on Stellar, according to recent reports. The bank is working with Bitbond, a tokenization and digital asset custody technology provider, to launch the initiative. Bitbond has reportedly already received approval from a German regulator to issue tokenized bonds, also through Stellar.
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Traditional and Crypto Firms Partner to Launch Tokenized Stocks and Other Products
According to a press release, the Bitwise 10 Crypto Index Fund, the first publicly traded crypto index fund in the U.S., has qualified to trade on the OTCQX® Best Market, an over-the-counter market of U.S. and global securities that connects a network of broker-dealers. In another development from the U.S. market, a major U.S. financial services firm, in partnership with blockchain startup BlockFi, has reportedly launched an offering for its institutional customers that will allow the customers to pledge bitcoin as collateral for cash loans.
According to another press release, Bittrex Global (Bermuda) Ltd. has announced that it will soon list “tokenized stocks” on its digital asset exchange in cooperation with Swiss investment firm DigitalAssets AG. According to the press release, “the tokenized stocks available through Bittrex Global will allow customers to purchase a fraction of a stock without needing to purchase entire shares, where the underlying risk of the tokens is derived from the tokenized company.” The press release includes a list of publicly traded stocks that will be offered as tokenized assets.
In Switzerland, a new bitcoin exchange-traded product, Bitcoin Zero, has begun trading on the Stockholm-based Nordic Growth Market stock exchange. In more news from Switzerland, the SIX Digital Exchange has announced a joint venture with the subsidiary of a Japanese financial services firm to launch a Singapore-based “digital asset securities and cryptocurrency assets” exchange for institutional clients. The exchange will seek to obtain approval from the Monetary Authority of Singapore. And in the Philippines, a recent press release has announced that a major global financial institution and a Philippines-based bank have completed “a proof of concept for the issuance of a retail bond on a digital platform leveraging blockchain technology for bond tokenization.”
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UN Designs Blockchain Land Registry; Solutions Address Supply Chain, Energy Efficiency
Three organizations associated with the United Nations recently announced the release of the first open-source urban land registry solution designed for the government of Afghanistan. The goLandRegistry solution is expected to record land parcels on a blockchain platform designed by the LTO Network. The Solution will reportedly allow landowners to demonstrate the authenticity of property titles through an “Open Source blockchain verification tool.” The tool will be handed off by the UN this month to the Ministry of Urban Development and Land in Afghanistan.
Steve Wozniak is aiming to reform the energy-efficiency market with his second company, Efforce, which will use a novel web-based platform that leverages blockchain and related tokens to help spur global energy efficiency. And in other enterprise news, a Japanese independent coffee company, the fifth-largest coffee roaster globally, has partnered with a major software company to launch a blockchain solution aimed to enable traceability of its coffee to its originating farm.
Two recent reports indicate that the role of blockchain usage across the supply chain is expected to continue growing over the next few years. Blockchain technology helps solve three key issues in supply chain management, according to the reports: counterfeiting, visibility/traceability and “efficiency play.” Globally, the reports expect blockchain in the supply chain market to grow from $81.4 million in 2017 to $3485.25 million in 2023.
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Crypto Privacy Wallets Spark Debate, Blockstack Says STX Will Shed Security Status
By: Marc D. Powers
According to recent reports, Treasury Secretary Steven Mnuchin is considering new regulations concerning “self-hosted wallets” of cryptocurrency owners. The Financial Action Task Force, a global multigovernmental body that sets anti-money laundering recommendations, has reportedly also suggested that self-hosted wallets be banned. These reports have sparked quick reaction from the cryptocurrency industry, including several U.S. lawmakers who have expressed concern that such overregulation or prohibition would “crush a nascent industry and leave the United States behind the rest of the world when it comes to harnessing the power of blockchain and cryptocurrency.” One commentator has said that self-hosted wallets are no different than the traditional, leather wallets each individual keeps in his or her own pocket or pocketbook.
A recent report by blockchain analytics firm Elliptic has added to the debate by publishing an analysis finding that so-called privacy wallets, such as Wasabi Wallet, appear to be growing in use by threat actors. According to the report, in 2020 at least 13 percent of all bitcoin criminal proceeds were sent through privacy wallets, up from 2 percent in 2019. The debate on cryptocurrency and privacy is also happening in France, where the French Ministry of Finance has reportedly unveiled broad and immediate know-your-customer requirements on all cryptocurrency companies operating in and servicing the country. Among other things, the new requirements reportedly address verifying beneficial owners of and prohibiting anonymous crypto accounts.
In other regulatory developments, this week Blockstack PBC announced that it plans to make its Stacks cryptocurrency (STX) available in the U.S. In a press release, Blockstack published a legal memorandum outlining why STX would “no longer be considered a security under U.S. law after the launch of the Stacks 2.0 blockchain.” A Reuters interview with Blockstack’s co-founder and chief executive, Muneeb Ali, stated: “With the launch of Blockstack’s Stacks Blockchain 2.0 on Jan. 14, 2021, the company’s network will no longer be controlled by any single entity and its Stacks token can no longer be considered a security under SEC regulations.” Blockstack had previously issued STX under an SEC-approved Reg A plus securities offering in 2019.
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U.S. and Foreign Actions Target Crypto Tax Evasion, Securities Fraud and Other Crimes
The Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC), with the assistance of the Federal Bureau of Investigation (FBI) and the Internal Revenue Service, Criminal Investigation Division (IRS), have brought parallel criminal and civil actions against the founder of the blockchain protocol Oyster Pearl. The DOJ alleged that the defendant made millions of dollars from the sale of “Pearl tokens” but evaded reporting that income to the IRS, including by filing a false tax return in 2017, failing to file a tax return in 2018, operating the business and owning assets through pseudonyms and shell companies, obtaining income through nominees, and dealing in gold and cash. The DOJ charged the defendant with two counts of tax evasion, each of which carries a maximum sentence of five years in prison. The SEC’s complaint charges the same individual with offering and selling unregistered securities and violating the anti-fraud provisions of the federal securities laws. The SEC complaint alleged that the individual unlawfully raised approximately $1.3 million through the unregistered sale of Pearl tokens, minted approximately 4 million unauthorized Pearl tokens for himself for free and immediately began selling the tokens in the secondary market.
According to a DOJ press release, the creator of Argyle Coin, LLC, who operated a fraudulent diamond investment scheme, was sentenced to serve 84 months in federal prison and pay over $23 million in victim restitution. The defendant and his partners allegedly solicited U.S. and Canadian investors in a fraud scheme involving “diamond contracts.” To further the scheme, the defendant created Argyle Coin, LLC, which was purportedly in the business of developing a cryptocurrency token backed by diamonds.
A court in France has sentenced Russian national Alexander Vinnik to a five-year prison term for money laundering as an alleged operator of the now-defunct cryptocurrency exchange BTC-e. After the defendant’s arrest, the U.S., Russia and France fought for his extradition, with France prevailing. The U.S. is still seeking to extradite Vinnik.
According to a recent report, a Hong Kong-based crypto exchange founder has been taken into custody by Chinese authorities. Because the founder holds the private keys to most of the platform’s cold wallets, the exchange stated that it cannot process and is therefore suspending all withdrawals. The platform will also reportedly close all of its over-the-counter rading services because of the risks related to uncertainties surrounding China’s regulatory policies.
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