Bahamas CBDC Prepaid Card, Ether Investment Products and Travel Rule Solutions Launch, Crypto Enforcement Settlements by OFAC and NYAG – JD Supra

Bahamas CBDC Integrates with Prepaid Card, Bitcoin Donation Data Published

By: Jordan R. Silversmith

A major U.S. financial services firm recently announced a collaboration with the Central Bank of The Bahamas to launch a new prepaid card to facilitate use of the Sand Dollar, a digital currency issued by the Central Bank of The Bahamas and treated the same as a traditional Bahamian dollar. The Sand Dollar became the first fully deployed digital version of a country’s fiat currency in October 2020; with the new prepaid card, Bahamians will be able to use the Sand Dollar wherever credit cards are accepted, whether in the Bahamas or around the world.

According to reports, the State Bank of India recently joined a major U.S. bank’s blockchain-based payment network. Officials hope joining the network will reduce transaction costs and payment settlement time.

A major U.S. financial services firm recently announced that its charity arm raised $28 million in cryptocurrency donations in 2020. The number beat 2019’s total of $13 million but was far short of previous years’ donations. According to a recent report, a U.S. healthcare provider has also benefited from recent cryptocurrency donations, having received bitcoin donations totaling over $800,000 from a single anonymous benefactor.

A Portuguese energy trading company recently announced that it would start accepting bitcoin as payment for electricity. The company plans to instantly convert received bitcoin into euros to protect it from price fluctuations.

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Ether Investment Products Launch, New Publications Detail Crypto Adoption

By: Veronica Reynolds

This week, two foreign-based investment firms announced plans to provide investors with exposure to ether, the cryptocurrency hosted on the Ethereum blockchain. The first, CoinShares, a European “digital asset investment house,” launched CoinShares Physical Ethereum (ETHE), a new exchange-traded product with each unit reportedly backed by 0.03 ether at launch. ETHE will launch with approximately $75 million assets under management. The second, a Canadian investment management firm, announced plans to launch the first exchange-traded fund (ETF) to invest directly in ether.

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In the wake of “the biggest crypto bull run since 2017,” cryptocurrency publication Decrypt highlighted nine publicly traded companies that “have adopted Bitcoin as a reserve asset, and hold direct control over their Bitcoin funds.” Such companies include a large business analytics platform that has adopted bitcoin as its primary reserve asset and a global auto manufacturer that made headlines last week upon investing $1.5 billion in cryptocurrency.

One of the world’s largest cryptocurrency exchanges, Gemini, unveiled “Cryptopedia” this week—an online repository of cryptocurrency-related information with the goal of “providing free, high-quality crypto education to the world.” Modeled after a traditional encyclopedia, Cryptopedia is a platform that provides a comprehensive educational overview of the cryptocurrency ecosystem.

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Travel Rule Solutions Launch, DeFi Market Dissolves Following SEC Inquiry

By: Joanna F. Wasick

Two solutions were recently announced to help cryptocurrency companies comply with the Travel Rule. The rule, issued by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and aimed at deterring and preventing money laundering, requires financial institutions to share information about the parties to transactions that are over a certain amount. CipherTrace, a blockchain analytics company, has backed TRISA, a testnet that includes a directory of virtual asset service providers and scenario testing for contact with noncompliant firms. BIGG Digital Assets Inc., owner of Blockchain Intelligence Group, has partnered with Netki, a provider of remote digital identity verification technology, to offer their Travel Rule solution, TransactID.

Earlier this month DiFi Money Market (DMM), a decentralized finance protocol, announced it would cease operations, following an inquiry into the company by the U.S. Securities and Exchange Commission (SEC). A post issued by DMM stated that it had received a subpoena from the SEC in December and had begun negotiations with the agency. However, DMM concluded “that an orderly wind-down of the project is best.” DMM published a link through which holders of DMM’s mTokens could redeem them.

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Earlier this week, a U.S. federal court dismissed a private class action against Bancor, an on-chain liquidity protocol organized under Swiss law, with offices in Switzerland and Israel. Plaintiffs had brought suit in New York, alleging damages arising from Bancor’s initial coin offering. However, the court ruled that it had no jurisdiction over the foreign entity, and that plaintiffs otherwise failed to allege they suffered losses caused by Bancor. The court further found that given the circumstances, including that the plaintiffs themselves are foreigners, New York was neither a reasonable nor a convenient forum to hear this case.

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Federal and State Agencies Pursue Multiple Cryptocurrency Offenders

By: Keith R. Murphy

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) recently announced a $507,375 settlement with a major U.S. cryptocurrency payment processor. According to a press release, the settlement resolved potential civil liability faced by the company for more than 2,102 apparent violations of multiple U.S. sanctions programs. The gravamen of the charges was that the company allowed persons in countries subject to sanctions programs to transact with merchants in the United States and elsewhere using cryptocurrencies, despite the company having location data about the persons, including Internet Protocol addresses, prior to effecting the transactions. According to an Enforcement Release published by OFAC in connection with the settlement, the settlement amount reflects OFAC’s determination that the company’s “apparent violations were not voluntarily self-disclosed and were non-egregious.”

The Office of the New York Attorney General announced this week that two cryptocurrency trading platforms, Bitfinex and Tether, were required to end all trading activity with New Yorkers and pay an $18.5 million fine as a result of alleged false statements and efforts to hide massive financial losses from investors. The charges included that the companies falsely represented that the “tether” stablecoins issued by one of the companies were backed one to one by U.S. dollars in a reserve, and that the companies hid the movement of hundreds of millions of dollars between them in order to cover up losses of approximately $850 million involving a third-party “payment processor.” The settlement agreement includes certain mandatory reporting requirements for the companies.

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A Department of Justice press release revealed the indictment this week of a Serbian man for alleged participation in a cryptocurrency fraud scheme to solicit U.S. investors through two companies purported to provide cryptocurrency mining and trading services. The indictment alleges that both companies were fraudulent, and that funds sent in by investors were laundered to a Philippines-based financial account and digital wallet.

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