According to a recent Bloomberg Law article [subscription required], in the past year there has been a sharp decline in active civil suits against cryptocurrency exchanges, digital wallet, mobile phone providers and others involving claims related to crypto hacking incidents or cybertheft, due, in part, to increased security protocols and
Cryptocurrencies
Don’t Get Caught Up in the Mix: OFAC Sanctions Another Crypto Mixer for Potential Violations of Sanctions Regulations and FinCEN Proposes New Rule
U.S. government agencies continue to take action against cryptocurrency mixing services that enable cybercriminals to obfuscate the trail of stolen proceeds on public blockchains stemming from illicit cyber activity. On November 29, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) sanctioned another virtual currency mixing…
UK Financial Promotion Rules for Cryptoassets: Longer Implementation Period for Certain Requirements
On 7 September 2023, the United Kingdom’s Financial Conduct Authority (“FCA”) set expectations ahead of its new financial promotion rules for cryptoassets (which we wrote about here).
From 8 October 2023, new rules for the marketing of cryptoassets come into force. The new requirements include the need for marketing…
Tokenised Funds – Key UK Regulatory Considerations
In its February 2023 discussion paper (DP23/2) relating to the UK regulatory regime for asset management, the UK’s Financial Conduct Authority (“FCA”) briefly touched on fund tokenisation as an area of technological drive and change in the fund management industry. Please refer here to our update on that discussion paper.…
U.S. Senate and House of Representatives Introduce Competing Crypto Regulation Bills
On July 12, 2023, U.S. Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-N.Y.) proposed a revised version of their previously introduced crypto regulation bill to create better safeguards for the crypto industry generally while adding new, stronger consumer protection provisions and AML provisions. The Lummis-Gillibrand bill, also known as the Responsible Financial Innovation Act (“RFIA”), identifies the need for enhanced regulation of digital assets. The proposal addresses this need, in part, by creating clearly defined regulatory roles for the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”), which are two of the leading regulatory bodies currently engaged in regulating the U.S. crypto market, as well as creating a new Customer Protection and Market Integrity Authority self-regulatory organization. The need for greater clarity in the roles of the CFTC and the SEC and with respect to cryptocurrency regulations generally is certainly timely, given the recent CFTC actions against Blockratize, bZeroX (and its successor Ooki DAO), and others and recent high-profile SEC actions against major crypto exchanges.
Cryptocurrency Companies: Enforceable Terms of Use Matter
It is not unusual for users of a platform or of software to challenge the enforceability of a company’s terms of use if they take issue with the company’s product or service and decide to bring suit. As most terms of use contain an arbitration clause (or mandated dispute resolution process) and disclaimers of liability, the questions of user assent to and the overall enforceability of the terms of use become central issues early on in litigation. In each case, judges adjudicating legal challenges to site terms generally examine the circumstances behind the online contracting process closely – scrutinizing the user interface, the presentation of the terms and the reasonableness of the relevant provisions governing the transactions or online accounts at issue. In some instances, courts have ruled that online terms were unenforceable for a variety of reasons, often owing to the non-conspicuous presentation of the terms or that the terms themselves were in some way unconscionable or otherwise unenforceable. In one recent case, however, a federal judge in Georgia rejected a challenge brought by users of cryptocurrency exchange platform Coinbase Global, Inc. (“Coinbase”) and found Coinbase’s terms enforceable. (Kattula v. Coinbase Global, Inc., No. 22-3250 (N.D. Ga. July 6, 2023)).
The Ripple Effect: Implications of the SEC’s Partial Loss in SEC v. Ripple Labs Inc.
The SEC suffered a significant loss last week in its ongoing legal battle with Ripple over the XRP digital token. While the District Court held that Ripple’s initial sales of XRP to institutional investors constituted the sale of unregistered securities, it was a Pyrrhic victory as the court held…
The Crypto Wars Escalate
The gloves are off. The SEC’s recent enforcement actions against leading crypto exchanges suggest that the SEC has decided that time’s up for the crypto industry as it currently exists in the United States.
After spending years urging industry participants to come in and register, the SEC has made clear,…