Crypto Initiatives Announced in Exchanges, ETFs, Payments; NFT Initiatives Continue; Bitcoin Mining Difficulty Adjusts; Global Enforcement Actions Continue – JD Supra


[co-author: Lauren Bass]

Cryptocurrency Exchanges, ETFs and Payment Initiatives Announced

By: Keith R. Murphy

Cryptocurrency firm Bullish announced its intention to go public on the New York Stock Exchange as it prepares to launch a cryptocurrency exchange, according to a recent report. The company reportedly intends to accomplish the public listing via a merger with a special-purpose acquisition company.

A major global payments company recently approved Australian company CryptoSpend to begin issuing cryptocurrency debit cards for its users, based on a report this week. CryptoSpend’s app will reportedly allow its users to spend their cryptocurrency directly, without the need to convert to fiat currency, including supported cryptocurrencies bitcoin, ether, XRP, bitcoin cash and litecoin.

Following approval by Brazil’s Securities and Exchange Commission, a blockchain investment firm plans to list an Ethereum exchange-traded fund (ETF) on Brazil’s stock exchange, according to a report this week. The firm plans to purchase ether and provide its investors with exposure to the asset without the need for separate wallets and keys.

Last week, a leading auction house accepted $12.3 million in cryptocurrency following the auction of a more than 100-carat rare diamond. According to a report, it is the first time the auction house has accepted cryptocurrency as a supported payment option.

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Hollywood, Paradise and Banking: NFT Use Cases Continue to Expand

By: Lauren Bass

According to recent reports, two major Hollywood movie studios have partnered with boutique platforms to offer limited-edition digital collectibles as nonfungible tokens (NFTs) featuring characters from the studios’ upcoming film franchises. One studio will offer its digital merchandise through an NFT-focused social media platform, while the other will showcase its through an augmented reality app.

In another NFT development, an American brewing company has reportedly enlisted a specialty digital media shop to create unique branded NFTs ranging from apparel to merchandise to one-of-a-kind experiences. The company reportedly hopes that branching out into the digital sphere will drive long-term revenue by allowing it to capitalize on its intellectual property holdings in the secondary market.

In recent weeks, a blockchain technology company reportedly launched an initiative to leverage the burgeoning NFT marketplace as a means by which to sell digital timeshares at a tropical paradise resort. In a first-of-its-kind transaction, the company will offer these limited-edition shares via a 13-day online auction. According to press releases, the company hopes its efforts will make real estate more accessible to the masses.

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A boutique decentralized finance (DeFi) platform recently announced the development of a new lending and borrowing network that will allow customers to use NFTs and other digital collectibles as collateral. According to reports, the rollout will initially occur on the Binance Smart Chain, but plans are underway to expand to other blockchain networks.

For more information, please refer to the following links:

Bitcoin Network Mining Difficulty Adjusts in Wake of China Crackdown

By: Veronica Reynolds

According to reports, bitcoin mining has become more profitable as a result of the mining crackdown in China – where more than half the world’s bitcoin was previously mined. The decrease in miners triggered an automatic bitcoin code update, resulting in a 28 percent reduction in mining difficulty and, correspondingly, increased cash to miners who continue to operate the Network. In a related development, data recently published by the Cambridge Bitcoin Electricity Consumption Index indicates that Bitcoin’s power consumption has declined steeply, with estimated power consumed by Bitcoin down from its roughly 143 terawatt-hours high in May to as low as 60 terawatt hours in July – a drop of approximately 60 percent, according to CoinTelegraph. Reports indicate that this is the “lowest energy consumption rate recorded since early November 2020.” Meanwhile, according to another recent report, Bitcoin nodes are at an all-time high – crossing the 13,000 threshold for the first time ever, potentially indicating that the Network is becoming increasingly decentralized.

According to reports, the launch date for Ethereum’s fee market improvement proposal 1559 is scheduled to kick in on Aug. 4, 2021. The upgrade, among other things, will introduce a new minimum payment dubbed a “base fee” – a dynamically adjusted fee based on network activity that will be charged for sending Ethereum transactions. The adjustment is expected to “significantly increase transaction capacity.”

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DOJ, CFTC and SEC Target Crypto Fraud, Registration, Anti-Touting Violations

By: Teresa Goody Guillén

According to a U.S. Department of Justice (DOJ) press release, a Swedish man was recently sentenced to 15 years in prison for securities fraud, wire fraud and money laundering related to a $16 million fraud scheme called Eastern Metal Securities. The scheme involved receipt of investor funds in the form of cryptocurrencies and promised victims astronomical returns tied to the price of gold. As part of the sentence, the defendant was also ordered to forfeit a Thai resort and various other properties and accounts, and was issued a money judgment in the amount of $16,263,820.

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The Commodity Futures Trading Commission (CFTC) recently announced that a judge in the U.S. District Court for the Southern District of Texas entered a default judgment against Laino Group Limited d/b/a PaxForex of St. Vincent and the Grenadines (PaxForex). The order imposes permanent trading, solicitation and registration bans against PaxForex entering into transactions involving commodity interests and prohibits it from violating provisions of the Commodity Exchange Act. The order also requires the defendant to pay a civil monetary penalty of $374,864. The ruling is based on the CFTC’s complaint that alleges PaxForex engaged in illegal, off-exchange transactions in ether, litecoin and bitcoin, as well as precious metals and foreign currency, with retail customers on a leveraged, margined or financed basis, and acted as a futures commission merchant without the required CFTC registration.

This week, the Securities and Exchange Commission (SEC) announced settled charges against the operator of Coinschedule.com, a website that profiled offerings of digital asset securities, for violations of the anti-touting provisions of the federal securities laws. According to the SEC’s order, Coinschedule.com presented its website visitors with seemingly independent profiles about digital token offerings in “listing” profiles, which included a “trust score” that purported to reflect Coinschedule’s evaluation of the “credibility” and “operational risk” for each digital token offering based on a “proprietary algorithm,” but failed to disclose the compensation it received from issuers of the digital asset securities.

In a separately issued public statement addressing Coinschedule.com, SEC Commissioners Peirce and Roisman agreed that touting securities without disclosing the fact that you are getting paid, and how much, violates the federal securities laws, but expressed disappointment that the SEC’s settlement did not explain which digital assets touted by Coinschedule.com were securities. The Commissioners emphasized this as consistent with the SEC’s reluctance to provide additional guidance as to how to determine whether a token is being sold as part of a securities offering, thereby forcing market participants to rely on litigated and settled SEC enforcement actions as the go-to source of guidance, which does not produce clear answers.

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US Ransomware Task Force Announced, Crypto Crimes Continue Across Globe

By: Jordan R. Silversmith

The White House recently announced a new cross-government task force to focus on offensive and defensive measures against ransomware. Under the task force’s oversight, federal agencies are reportedly taking measures to combat ransomware threats, including promoting digital resilience among critical U.S. infrastructure companies, halting ransomware payments made through cryptocurrency platforms and coordinating activities with U.S. allies. The State Department will also offer rewards totaling up to $10 million for information leading to the identification of alleged cyber criminals, especially hackers behind state-sanctioned breaches of critical U.S. infrastructure. According to a press release, “Reward payments may include payments in cryptocurrency.”

Researchers recently released a report showing that at least 93,000 people have bought fake Android applications for cryptocurrency mining. The report identified 170 Android apps scamming people interested in cryptocurrencies. While the apps advertise themselves as providing fee-based cloud cryptocurrency mining services, researchers found that users who paid for the apps as well as various fake upgrades and services offered in the applications received no legitimate services in return. The report estimates that users were scammed out of at least $350,000 in total.

Meanwhile, abroad, Hong Kong officials have reportedly arrested four men involved in an alleged cryptocurrency money laundering syndicate. Customs authorities allege that the scheme, which took in approximately $155 million of funds from February 2020 to May of this year, operated by charging criminal clients a commission of 3 percent to 5 percent for crypto money laundering services.

Four individuals were also recently arrested in Japan related to a cryptocurrency money laundering scheme. The four men are accused of defrauding 20,000 investors out of more than $54.3 million by promising to generate large returns through artificial intelligence on their crypto trading platform.

According to reports, Ukrainian officials recently raided an allegedly illicit crypto farm in the country. The farm was located on the former premises of a Ukrainian electricity company, and the schemers allegedly hid their activities by manipulating electricity meters to steal electricity from the company, resulting in estimated losses of between $186,200 and $259,300.

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