Crypto Firms Announce New Products in Payments, Investments, Custody
By Christopher Lamb
A major U.S. digital asset management company recently announced the creation and public launch of its MakerDAO Trust, which “offers investors the opportunity to gain exposure to MKR,” the native token for MakerDAO. According to a press release, the Trust is now open for daily subscription to institutional accredited investors and other eligible individuals, and “provides investors exposure to an on-chain credit protocol, stablecoins, real-world assets, and more, through MakerDAO’s ecosystem.”
In another recent press release, MetaMask announced that their EU and UK users can now spend crypto held in their MetaMask wallet anywhere that a major U.S.-based credit card is accepted. Through a partnership with the credit card issuer and Baanx, MetaMask has launched their MetaMask Card, which “functions like a debit card” and can be used for “everyday purchases.” According to the release, the initial pilot will allow the use of USDC, USDT and WETH and will offer a few thousand select users in the EU and UK the opportunity to sign up for the MetaMask Card.
In a third notable press release, Ripple announced that it has begun beta testing of Ripple USD (RLUSD) on the XRP Ledger (XRPL) and Ethereum Mainnet. According to the release, RLUSD is backed 1:1 by the U.S. dollar (USD) and “100% backed by US Deposits, short-term US government treasuries, and other cash equivalents,” which will be audited by a third-party accounting firm.
In another press release, BitGo, a leading infrastructure provider of digital asset solutions, has announced that it has obtained the Major Payment Institution License from the Monetary Authority of Singapore (MAS). According to the release, BitGo now offers services to Singapore and clients are able to buy and sell digital assets “from the safety and security of BitGo’s insured cold storage custody solution.”
In a final notable event, Circle, the issuer of the USDC stablecoin, has announced an initiative to introduce tap-and-go USDC payments on the iPhone. The announcement follows a press release by the company behind the iPhone noting that the company intends to open up use of its NFC chip and Secure Element to third-party app developers.
For more information, please refer to the following links:
Crypto VC Fund Publishes Token Guidance
By Robert A. Musiala Jr.
A major U.S. venture capital firm recently published a new set of blog posts continuing its “Token Launch Playbook” series. According to the venture capital firm, the blog posts cover “token ‘dos and don’ts,’” token compensation, “new financial models for web3 application (vs. infrastructure) tokens,” “the art of tokencraft,” and “how to structure deals involving token rights and restrictions.” The new set of posts consists of four articles, two videos, and a podcast.
For more information, please refer to the following links:
Reports Provide Data and Analyses of Ethereum Network Ecosystem
By Robert A. Musiala Jr.
Two recent publications provide analyses of the Ethereum network ecosystem. In the first report, a major U.S. cryptocurrency exchange analyzes “Ethereum’s L2 scaling roadmap.” Among its many findings, the report notes (1) the majority of Ethereum’s activity now occurs on L2s; (2) total ETH spent on transaction fees has been decreasing despite the exponential growth in transaction counts; (3) Ethereum’s L2-focused roadmap has resulted in only a comparatively minor reduction in ETH demand; (4) ETH’s utilization in protocols may over time become a larger component of ETH demand than transaction fees; and (5) beyond DeFi, the low-fee, high-throughput blockspace environment of L2s may lay the foundation for further ETH-centric applications still in the early stages of development.
The second report presents Q2 2024 data on the Ethereum ecosystem. The report provides 68 detailed charts with data covering Ethereum operating performance, token economics, stablecoins, real-world assets, DeFi, on-chain P&L, valuation, correlations, L2s and ETH vs. SOL.
For more information, please refer to the following links:
FINRA Publishes Update on Member Firms’ Crypto Asset Activities
By Robert A. Musiala Jr.
The Financial Industry Regulatory Authority (FINRA) recently published new guidance: “Update on Member Firms’ Crypto Asset Activities.” The update includes themes identified by FINRA based on a review of information provided by member firms, including 600 member firms selected to receive a crypto asset questionnaire as well as information collected by FINRA through its ongoing regulatory operations. Key themes identified in the update include the following:
- FINRA identified around 390 member firms that either (i) have an active crypto asset business activity; (ii) plan to initiate a crypto asset business activity in the future; (iii) are under direct or indirect common ownership with a crypto asset “exchange” or intermediary; or (iv) employ one or more associated persons with a disclosed outside business activity (OBA) or private securities transaction (PST) that involves crypto assets.
- Crypto asset activities conducted by FINRA member firms include (i) private placements of crypto assets or companies involved in crypto activities; (ii) operating Alternative Trading Systems to trade in crypto asset securities; (iii) offering custody of crypto asset securities; (iv) providing access to crypto asset trading and custody services; (v) engaging in tests involving settlement on permissioned blockchains; and (vi) other activities, including introducing institutional customers to third-party crypto asset custodians and crypto asset-related investment banking and advisory services.
- FINRA identified member firms with individuals who have a disclosed OBA or PST that involves crypto assets, including proprietary trading, operating investment funds, selling crypto asset-related private placements and participating in crypto mining.
- FINRA identified member firms with parent companies or affiliates that engage in a variety of other crypto asset-related activities, including operating a crypto asset trading platform or intermediary, proprietary trading or market making, custodial services, investment banking and advisory services for crypto asset-related entities, advising or managing portfolios that include crypto assets or crypto asset-related companies, and engaging in blockchain initiatives. FINRA also identified member firms, their affiliates, or their parent companies with strategic partnerships or arrangements with companies engaged in crypto activities.
- The update also provides lists of (i) potential violations involving crypto asset-related activities observed by FINRA and (ii) resources for FINRA member firms.
For more information, please refer to the following link:
Bank Enters Agreement to Resolve Crypto BSA/AML and OFAC Violations
By Robert A. Musiala Jr.
The U.S. central bank’s Philadelphia branch recently published a consent agreement with a large U.S. bank and its holding company to address deficiencies in the bank’s activities “offering banking services to digital asset customers” and its operation of “an instant payments platform that allows … tokenized payments over a distributed ledger technology system.” According to the agreement, an examination revealed “significant deficiencies” related to anti-money laundering (AML), including the Bank Secrecy Act (BSA), rules and regulations issued by the U.S. Department of the Treasury (31 C.F.R. Chapter X), and the AML requirements of Regulation H of the Board of Governors (12 C.F.R. §§ 208.62 and 208.63). The agreement also cites “significant deficiencies” related to compliance with regulations issued by the U.S. Office of Foreign Assets Control (OFAC) (31 C.F.R. Chapter V). Among other things, the agreement requires the bank and its holding company to submit the following:
- A written plan to strengthen oversight by the bank’s board over management and operations of the bank’s BSA/AML and OFAC compliance.
- A written plan to improve risk management practices with respect to the bank’s digital asset strategy.
- A written revised BSA/AML compliance program.
- A written revised customer due diligence program.
- A written revised program to reasonably ensure identification and timely, accurate and complete reporting of all known or suspected violations of law or suspicious transactions.
- A report by an independent third party detailing findings of the third party’s review of the bank’s transaction monitoring activity from March 1, 2023, to August 31, 2023, to determine whether suspicious activity involving high-risk customers or transactions was properly identified and reported.
- A written plan to enhance the bank’s compliance with OFAC regulations.
- Prior written notice before engaging in new digital asset initiatives, the formation or restructuring of subsidiaries, or the creation, testing or launch of a new intra- or interbank payments network.
- Quarterly written progress reports detailing the form and manner of all actions taken to secure compliance with the agreement and the results.
For more information, please refer to the following links:
SEC Targets Crypto Fraud Scheme, CFTC Awards Crypto Whistleblower
By Isabelle Sterling
According to a recent press release, the U.S. Securities and Exchange Commission (SEC) charged a multilevel marketing and crypto asset investment company, along with two of its principals and six promoters, for operating a fraudulent scheme, raiding over $650 million from more than 200,000 investors globally. The director of the SEC’s Fort Worth Regional Office said, “[T]oday’s action demonstrates that we will hold accountable not just the principal architects of these massive schemes, but also promoters who spread their fraud by unlawfully soliciting victims.” The SEC said in its release that the principals operated the fraudulent scheme from 2019 through 2023, claiming they would invest funds for investors in crypto asset and foreign exchange markets and providing assurances that the money was safe while promising returns and access to capital. According to the release, the majority of funds were used to pay existing investors and commissions to promoters, with the principals siphoning off millions for themselves and most investors unable to withdraw their investments. The SEC’s release highlights that the promoters of the scheme became aware of red flags, including regulatory actions by U.S. and Canadian regulators, but ignored them and continued recruiting investors.
A recent press release by the U.S. Commodity Futures Trading Commission (CFTC) announced a whistleblower award of $1 million for significant information and assistance that led to a digital asset CFTC enforcement action. In its press release, CFTC Director of Enforcement Ian McGinley said, “Identifying unlawful conduct in the digital asset marketplace is a major priority for the CFTC, especially as everyday Americans are increasingly victimized by digital asset scams.” McGinley said that digital asset cases accounted for nearly half of the CFTC’s docket during the past fiscal year and that digital asset-related tips were the majority of whistleblower tips the CFTC received.
For more information, please refer to the following links:
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