Digital Asset Companies Announce New Products, Integrations and Initiatives
By Robert A. Musiala Jr.
In a recent press release, Grayscale Investments announced “the creation and public launch of two new crypto investment trusts: Grayscale Near Trust and Grayscale Stacks Trust.” According to the press release, “The trusts function like Grayscale’s existing suite of single-asset investment trusts, and each are among the first investment products solely invested in the tokens underpinning the Near Protocol (NEAR) and Stacks (STX).”
Another pair of recent press releases announced new integrations involving the PYUSD stablecoin. One press release announced that PYUSD is now available on the Solana blockchain. Another press release reportedly announced that BVNK, a payment infrastructure provider, has integrated PYUSD into its payment system.
In a final notable development, Kima, a “peer-to-peer money transfer and payment protocol,” recently announced that it has joined a fintech accelerator program backed by a major global financial services firm and has received a grant “to fund an initiative to connect decentralized finance (DeFi) applications with fiat systems.” According to a press release, the initiative will focus on “developing a use case linking traditional financial instruments, such as bank accounts and credit cards, to DeFi protocols, platforms, and services.”
For more information, please refer to the following links:
SEC Order Approves Ether ETF Proposals
By Robert A. Musiala Jr.
On May 23, the U.S. Securities and Exchange Commission (SEC) issued the Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, to List and Trade Shares of Ether-Based Exchange-Traded Products. The Order approves proposals by three U.S. securities exchanges to list and trade shares of certain exchange traded funds (ETFs) that would hold spot ether (ETH) in whole or in part. Among other things, the Order finds that the proposals to list the ether ETFs met certain requirements under the Securities and Exchange Act of 1934 for the listing exchange to maintain rules “designed to ‘prevent fraudulent and manipulative acts and practices’ and, ‘in general, to protect investors and the public interest’” and “to assure the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities.”
The Order finds that each exchange seeking to list an ether ETF “has a comprehensive surveillance-sharing agreement with the CME via their common membership in the Intermarket Surveillance Group. This facilitates the sharing of information that is available to the CME through its surveillance of … the CME ether futures market.” The Order goes on to state that the results of an SEC analysis “confirm that the CME ether futures market has been consistently highly correlated with [a] subset of the spot ether market throughout the past 2.5 years,” which provides “empirical evidence that prices generally move in close (although not perfect) alignment between the spot ether market and the CME ether futures market.” Based on these findings, the Order concludes that
“because the CME’s surveillance can assist in detecting those impacts on CME ether futures prices, the Exchanges’ comprehensive surveillance-sharing agreement with the CME … can be reasonably expected to assist in surveilling for fraudulent and manipulative acts and practices in the specific context of the [ether ETF] Proposals.”
The Order further finds that each ether ETF proposal “sets forth aspects of its proposed [Exchange Traded Product], including the availability of pricing information, transparency of portfolio holdings, and types of surveillance procedures, that are consistent with other spot commodity [Exchange Traded Products] that the [SEC] has approved.” Accordingly, the Order finds that the ether ETF proposals “are reasonably designed to promote fair disclosure of information that may be necessary to price the shares of the Trusts appropriately, to prevent trading when a reasonable degree of transparency cannot be assured, to safeguard material nonpublic information relating to the Trusts’ portfolios, and to ensure fair and orderly markets for the shares of the Trusts.” According to reports, the SEC still needs to approve the registration statements of the ether ETF issuers before the products can begin trading.
For more information, please refer to the following links:
U.S. Department of the Treasury Publishes NFT Illicit Finance Risk Assessment
By Robert A. Musiala Jr.
The U.S. Department of the Treasury recently published its “2024 Non-fungible Token (NFT) Illicit Finance Risk Assessment.” According to a press release, “The risk assessment explores how vulnerabilities associated with NFTs and NFT platforms may be exploited by illicit actors for money laundering, terrorist financing, and proliferation financing.” The press release highlights the following findings of the Risk Assessment:
- NFTs are highly susceptible to use in fraud and scams and are subject to theft.
- Illicit actors can use NFTs to launder proceeds from predicate crimes, often in combination with other methods to obfuscate the illicit source of proceeds of crime.
- There is little evidence of the misuse of NFTs by terrorists or proliferators, in contrast to fraudsters, to date.
- Inadequate cybersecurity protections, challenges related to copyright and trademark protections, and the hype and fluctuating pricing of NFTs can enable criminals to perpetrate fraud and theft related to NFTs and NFT platforms.
- Some NFT firms and platforms lack appropriate controls to mitigate risks to market integrity and to combat money laundering, terrorist financing and sanctions evasion.
- Mitigation measures, such as industry tools, law enforcement authorities and analysis of public blockchain data, can partially mitigate NFT illicit finance risks.
For more information, please refer to the following links:
Uniswap Labs Publishes Response to SEC Wells Notice
By Isabelle Sterling
In a recent blog post, Uniswap Labs made public its response to the Wells notice it received from the U.S. Securities and Exchange Commission (SEC) last month. In the response, among other things Uniswap Labs urges the SEC not to recommend an enforcement action against the company, argues the SEC should embrace technology and limit the SEC’s jurisdiction to exchanges and securities, and asserts that the Uniswap Protocol is not an exchange and not running afoul of any securities laws. In the blog post, Uniswap Labs calls the SEC’s legal theories aggressive, weak and wrong and states its intention to fight and continue building its technology.
For more information, please refer to the following links:
Enforcement Actions Target ‘Pig Butchering,’ BTC ATMs, Forex/Capital Controls
By Robert A. Musiala Jr.
The U.S. Department of Justice (DOJ) recently announced the arrests and the unsealing of an indictment “charging two Chinese nationals alleging they played leading roles in a scheme to launder proceeds from cryptocurrency investment scams.” According to a DOJ press release, the defendants ran an international syndicate that laundered the proceeds of “pig butchering” scams using “U.S. bank accounts opened in the names of dozens of shell companies” and “[a] network of money launderers.” The press release notes “[t]he fraud scheme involved more than $73 million laundered through U.S. financial institutions to bank accounts in The Bahamas, and converted to the virtual asset USDT, or Tether.” According to the press release, “[a] cryptocurrency wallet involved in the scheme received more than $341 million in virtual assets.”
Two recent press releases announced crypto enforcement actions in the state of New York. One release announced that “New York Attorney General Letitia James secured a settlement worth $2 billion with bankrupt cryptocurrency firms … that will help maximize recoveries for investors who were defrauded.” The other press release, from Manhattan District Attorney Alvin L. Bragg Jr., announced “the trial conviction of ROBERT TAYLOR, 37, for operating an illegal Bitcoin ATM business that he marketed towards individuals engaged in criminal activity.”
In a notable foreign enforcement action, according to recent reports, Chinese police have arrested 193 suspects across 26 provinces and dismantled two major underground operations in Fujian and Hunan related to a $1.9 billion underground operation that used the USDT cryptocurrency to bypass Chinese foreign exchange regulations. The operation reportedly was used primarily to smuggle medicine, cosmetics and investment assets overseas.
For more information, please refer to the following links:
Crypto and Tech Firms Launch Initiatives to Combat Scams and Cyber Exploits
By Christopher Lamb
According to a recent press release, a group of prominent companies in the cryptocurrency and tech industries have launched the Tech Against Scam Coalition, a “groundbreaking initiative aimed at combating scams across the tech industry.” The companies have teamed up to combat scams by “preventing online fraud and financial schemes that target consumers across various industries.” The Coalition will serve “as a primary convening body where participating tech companies will collaborate on ways to take action against the tools used by scammers” and provide education to protect consumers from evolving scams. According to the release, “illicit activity represents less than 0.5% of crypto transactions,” but it is estimated that “consumers worldwide lose $1.4 trillion to financial scams every year.”
According to another recent release, a major U.S. cryptocurrency exchange has co-founded the first-ever Crypto Information Sharing and Analysis Center (ISAC), which is a non-profit organization that supports information sharing across the crypto ecosystem to “reduce cybersecurity exploits and improve trust in blockchain and cryptoasset technology.” By committing to five key strategic objectives, ISAC seeks to strengthen the industry by collaborating to create robust cybersecurity protocols that can combat security threats.
For more information, please refer to the following links:
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