Blockchain and the Law

Category Archives: Regulation

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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

Guidance on Cryptoassets: UK Financial Conduct Authority Issues Consultation Paper

On January 23, 2019, the UK Financial Conduct Authority (“FCA”) issued its widely anticipated “Guidance on Cryptoassets” consultation paper CP19/3 (the “Consultation”). The Consultation followed the UK Cryptoassets Task Force’s publication last October, which set out the UK’s policy and regulatory approach to cryptoassets and distributed ledger technology and called for the FCA to issue … 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

First Punch: Floyd Mayweather and DJ Khaled Settle with SEC Over Unlawful Touting of ICOs

The SEC recently announced its settlement of charges against boxer Floyd Mayweather and producer DJ Khaled for their failure to disclose payments they received for promoting Initial Coin Offerings (ICOs) on their social media accounts. The federal securities laws contain an “anti-touting provision,” which regulates paid promotions of securities offerings. Specifically, Section 17(b) of the Securities Act of 1933 … Continue Reading

Is Blockchain Technology Compatible with GDPR? French Data Protection Regulator Provides Guidance

Uncertainty regarding the compatibility of blockchain technology and the European Union’s General Data Protection Regulation (GDPR) has often been highlighted as a potential obstacle to the development and widespread implementation of blockchain systems involving personal data. To address tensions between blockchain technology and the GDPR, Commission Nationale de l’Informatique et des Libertés (CNIL), the French … Continue Reading

CFTC Commissioner: Code Developers May be Accountable for Smart Contracts

Recently at a conference in Dubai, Brian Quintenz, who is a Commodity Futures Trading Commission (CFTC) Commissioner, expressed his personal opinion (rather than the views of the CFTC) on the conceptual challenges in applying the CFTC’s regulatory oversight to, and fostering accountability for, smart contracts that reside on decentralized blockchains. In particular, Quintenz conveyed his … Continue Reading

Ohio and California Join Other States in Passing Blockchain-Friendly Legislation

This past summer, Ohio adopted legislation (SB220) that primarily provides for a legal safe harbor from certain data-breach related tort claims to covered entities that implement a specified cybersecurity program that “reasonably conforms” to a recognized cybersecurity framework for the protection of personal information and “restricted information” or comply with certain industry-specific federal privacy laws. … Continue Reading

Betting Big on Blockchain

Blockchain and sports gambling seem to be a natural fit. Sports gambling has been at the forefront of the news cycle since the U.S. Supreme Court struck down a federal statute that banned states from authorizing sports gambling in Murphy v. NCAA. Since then, New Jersey, Delaware, Mississippi and West Virginia have passed laws allowing … 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

Modernizing Real Estate Records With Blockchain

Despite dealing in one of the most valuable asset classes in the world, the real estate industry largely relies on outdated real estate interest recording systems requiring paper-based filings with local government offices. The administrative burdens, inaccuracies and security issues raised by such systems are well known. Increasingly, both government actors and private parties have … Continue Reading

New York State Department of Financial Services Eases Backlog and Approves More BitLicense Applications

On June 14, 2018, the New York State Department of Financial Services (the “DFS”) announced that the agency granted a virtual currency license (or “BitLicense”) to bitcoin wallet and vault provider Xapo, Inc., and authorized the blockchain financial services company Paxos Trust Company LLC to expand their business to offer exchange and custodial services to … 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

SEC Flexes Funny Bone in Fictional Token Offering

The Securities and Exchange Commission (the “SEC”) has taken to using humor and sarcasm to educate retail investors about the potential risks of purchasing tokens in initial coin offerings (“ICOs”). This week, the SEC issued a press release presenting “a hot investment opportunity.”  The release pointed to a website touting the HoweyCoin—a fictional crypto token … Continue Reading

Cryptoasset Exchanges Respond to New York Attorney General’s Virtual Markets Integrity Initiative

On April 17, 2018, the New York Attorney General’s Office (“OAG”) launched a Virtual Markets Integrity Initiative and sent letters to thirteen cryptoasset trading platforms requesting, through a questionnaire, disclosures on their operations, internal controls, and safeguards to protect customer assets.  The questionnaire focused on six major topic areas, including: 1) Ownership and Control, 2) … 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

Blockchain, Personal Data and the GDPR Right to be Forgotten

The effective date of the EU’s General Data Protection Regulation (GDPR) is fast approaching (May 25, 2018), and its impacts are already being felt across various industries. Specifically, the conflicts between the GDPR and the technical realities of blockchains raise important legal considerations for companies seeking to implement blockchain solutions that involve the personal data … 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

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
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