Blockchain and the Law

Category Archives: Cryptocurrencies

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New York State Department of Financial Services Establishes New Research and Innovation Division

On July 23, the New York State Department of Financial Services (the “DFS”) issued a press release announcing the establishment of a new Research and Innovation Division (the “Division”) within the DFS. The Division will take on the responsibility of licensing and supervising entities engaged in “virtual currency business activity” that fall within the scope … Continue Reading

As Bitcoin’s Price Moves Dramatically, ETF Proposals Remain at a Standstill

On June 26, the price of bitcoin surged to a 12-month high of nearly $13,900 (up about 35% on the month) before losing more than $1,700 in a span of 15 minutes, then rebounding slightly and closing the day at around $12,800. All the while, retail and institutional investors seeking to gain exposure to this … Continue Reading

Dueling Bitcoin White Paper Copyright Registrations – What Does it Mean?

The plot has thickened in the longest-running “whodunit” in the blockchain space: Who is Satoshi Nakamoto, the pseudonymous creator of Bitcoin and author of the white paper that started it all, Bitcoin: A Peer-to-Peer Electronic Cash System? Published in 2008, Nakamoto’s paper proposed a form of electronic cash that would operate purely peer-to-peer, without the … Continue Reading

U.S. House Continues to Explore Blockchain Regulation

Following up on their recent introduction of the Token Taxonomy Act, Representatives Darren Soto (D-FL) and Warren Davidson (R-OH) have teamed up again to introduce a new slate of bipartisan bills related to virtual currency. The two new bills, H.R. 922 and H.R. 923, were introduced on January 30, 2019 and are cosponsored by Representatives … Continue Reading

Two New Bitcoin ETF Proposals Pending as Cryptocurrency Markets Mature

Two recent proposals for bitcoin exchange-traded funds (“ETFs”) are vying to become the first to receive approval from the U.S. Securities and Exchange Commission (“SEC”) – one filed by CBOE BZX Exchange, Inc. (“CBOE”) and the other by NYSE Arca, Inc. (“NYSE Arca”). The SEC has yet to approve a cryptocurrency ETF, although several applications … Continue Reading

New York Grants BitLicenses to Robinhood Crypto and LibertyX

On January 24, 2019 the New York Department of Financial Services (the “DFS”) announced that it had granted BitLicenses to Robinhood Crypto, LLC and Moon Inc. (d/b/a LibertyX). These are the fifteenth and sixteenth BitLicenses granted by the DFS since the final BitLicense rules were released in 2015. Robinhood Crypto is a subsidiary of popular stock … Continue Reading

Virtual Currencies Can Be Regulated by CFTC as a “Commodity”

In a notable ruling, a Massachusetts district court declined to dismiss a complaint filed by the Commodity Future Trading Commission (“CFTC”) against an entity over an alleged fraudulent virtual currency offering, ruling that cryptocurrencies fall under the definition of “commodity” under the Commodity Exchange Act (“CEA”) and therefore may be duly regulated by the CFTC. (CFTC … Continue Reading

Crypto Exchanges Join Virtual Commodity Association Seeking to Establish Industry Standards

Despite the recent setback of having their Bitcoin ETF rejected by the SEC for the second time, the Winklevoss brothers remain undeterred in their efforts to bring cryptocurrency into the investment mainstream. Their latest project is the Virtual Commodity Association (VCA), a self-regulatory organization (SRO) for the virtual currency industry aiming to serve in the same capacity … Continue Reading

First Decision in Class-Action Context Concludes Digital Tokens Can Be Securities

For digitally savvy investors itching to know whether U.S. courts would treat crypto-tokens as securities subject to the regulatory requirements of the Securities Act of 1933, the wait is over—sort of. The first federal judge to decide the issue in the class-action context landed on the same side as the SEC did back in 2017, … Continue Reading

Ripple Faces Class Action Lawsuit Alleging Sale of Unregistered Securities

A class action lawsuit was filed on May 3rd against Ripple Labs Inc.—a fintech startup that controls the third-largest cryptocurrency in the world—and its CEO Brad Garlinghouse, alleging that Ripple sold unregistered, non-exempt securities in violation of federal and California state securities laws. In their complaint, Plaintiffs characterized the sale of XRP (Ripple’s native token) … Continue Reading

Regulatory Scrutiny of the ICO Market – What Fund Managers Should Know

Last week, former CFTC Chairman Gary Gensler explained in remarks at M.I.T. that he believes the second and third most widely used virtual currencies—Ether and Ripple—may have been issued and traded in violation of securities regulations.  This comes on the heels of a crackdown on cryptocurrency-related securities by the SEC, which is particularly focused on … Continue Reading

FTC Freezes Assets and Operations of Four Promoters of Cryptocurrency Investment Schemes

The Federal Trade Commission (FTC) recently sought and received a temporary restraining order (TRO) against four promoters of alleged pyramid schemes involving cryptocurrencies. The promoters were charged with violating the FTC Act’s prohibition on unfair or deceptive acts or practices in or affecting commerce. The FTC’s complaint (filed under seal in the U.S. District Court … Continue Reading

A Proposed Statutory Framework for State Regulation of Virtual Currency Businesses: The Uniform Law Commission’s “Uniform Regulation of Virtual-Currency Businesses Act”

Last July, the Uniform Law Commission completed a uniform model state law, known as the Uniform Regulation of Virtual-Currency Businesses Act (“URVCBA” or the “Act”) (Steve Weise participated in the preparation of the Act).  Currently, state regulation in the virtual currency space is carried out under a patchwork of laws that typically do not directly … Continue Reading

Blockchain Digital Assets in Virtual Reality, Video Games and eSports – Ready Lawyer One?

Virtual worlds similar to the OASIS in Steven Spielberg’s upcoming film Ready Player One may be closer than we think – and provably scarce, blockchain-based digital assets could provide the leap forward that gets us there. Already, developers are testing early implementations. Since CryptoKitties launched at the end of 2017, promptly causing a traffic jam … Continue Reading

Federal Court Grants Preliminary Injunction, Affirms CFTC Jurisdiction over Virtual Currencies

Earlier this month, Judge Jack B. Weinstein of the U.S. District Court for the Eastern District of New York entered a preliminary injunction order against Patrick McDonnell and his company, CabbageTech, Corp. (together, the “Defendants”). In a landmark ruling, the order upheld the CFTC’s position that “virtual currencies” are commodities subject to CFTC jurisdiction under … Continue Reading

SEC and CFTC Chairmen Testify before Senate on Cryptoasset Regulation

Last month, SEC chairman Jay Clayton and CFTC chairman Christopher Giancarlo testified before the Senate Banking Committee on their agencies’ regulatory efforts with respect to cryptoassets and ICOs. The written testimonies of chairmen Clayton and Giancarlo, as well as their verbal statements at the hearing itself, shed light on various issues including:  how tokens might … Continue Reading

New SEC Probe of ICO Issuers and SAFT Structure

The Wall Street Journal recently reported that the SEC has issued dozens of subpoenas and information requests in connection with sales and pre-sales of initial coin offerings. As we have previously noted, the SEC Enforcement Division’s Cyber Unit has been targeting ICOs in recent months, and the SEC has provided a number of public statements … Continue Reading

New York State Department of Financial Services Issues Guidance to Virtual Currency Entities

On February 7, 2018, the New York State Department of Financial Services (“DFS”) issued guidance for all virtual currency entities licensed by New York State regarding the prevention of market manipulation, fraud, and other wrongdoing. According to DFS, New York has granted four licenses and two charters to virtual currency businesses to date. In its … Continue Reading

BitConnect Promoters Targeted in Class Action Suits, Twice in One Week

BitConnect International, PLC had a somewhat unique business model, even for an industry known for its unconventional nature.  On its face, BitConnect functioned as an exchange. However, the real purpose of the platform, and what led to its ultimate downfall, was its lending program. BitConnect “borrowed” the crypto investments of its customers in exchange for … Continue Reading

Alleging Fraud, SEC Shuts Down AriseBank’s Celebrity-Endorsed ICO of Purported “Decentralized Bank”

In its latest effort to combat scams in the initial coin offering (ICO) space, the SEC announced today that it has obtained a court order cutting off AriseBank’s ICO of “AriseCoin” tokens, appointing a receiver over AriseBank and freezing AriseBank’s and its co-founders’ digital and other assets. The SEC’s complaint against AriseBank and its co-founders … Continue Reading

Busy day for CFTC and SEC Cryptocurrency Regulators: Enforcement Actions, a Public Letter, and Joint Statement

The CFTC and SEC made numerous headlines Friday in their ongoing efforts to provide regulatory oversight of cryptocurrency markets. The CFTC announced the filing of two civil enforcement actions against allegedly fraudulent cryptocurrency-related investment schemes. The SEC’s Division of Investment Management, meanwhile, issued a letter raising concerns about registered investment companies’ (including ETFs’) investments in … Continue Reading

Renren Halts Initial Coin Offering Following Pressure from Chinese Regulatory Body

Renren Inc. (NYSE ticker RENN), a Beijing-based social network company, saw rapid growth in its stock price following the release of a whitepaper (in Chinese) and publicity over its intention to engage in an Initial Coin Offering (ICO) of cryptocurrency dubbed RRcoin. However, last week Renren announced it has cancelled its ICO plans, following reports … Continue Reading

Implications for Launch of tZERO, First U.S. Registered ATS

The world’s first SEC-registered cryptocurrency exchange may be just around the corner. As detailed in their October 24 Form 8-K, Overstock.com subsidiary tZERO has entered into a joint venture with The Argon Group and RenGen LLC to launch a U.S. registered Alternative Trading System (“ATS”) for digital tokens. If successful, the tZERO ATS may represent … Continue Reading
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