Cryptocurrency

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On August 6, 2021, the Securities and Exchange Commission (SEC) announced that it had charged two men, Gregory Keough and Derek Acree, and their company, Blockchain Credit Partners, doing business as DeFi Money Market (collectively, the “Respondents”), for unregistered sales of more than $30 million of securities using smart contracts and so-called “decentralized finance” (DeFi) technology and for making false and misleading statements about their business to investors in violation of the federal securities laws. (In re Blockchain Credit Partners, No. 3-20453 (SEC Order Aug. 6, 2021)).

In recent days, many eyeballs were closely watching the drama behind the cryptocurrency taxation and transparency measures contained in the Senate’s infrastructure bill  and are still digesting SEC Chair Gary Gensler’s recent remarks before the Aspen Security Forum that offered some clues on where the agency will go with respect to cryptocurrency regulation and enforcement. Meanwhile, the SEC continued its enforcement efforts to shut down what it deems fraudulent and unregistered securities offerings involving digital assets. After ceasing operations in February 2021, Respondents consented to a cease-and-desist order that includes disgorgement totaling almost $13 million and civil penalties of $125,000 each of the individual Respondents.  The SEC’s order provides another example of how the now-familiar investment contract analysis applies to tokens, with some additional insights on the impact of voting rights under the Howey test and a further analysis of tokens as notes.

As you might expect during tax season, the Justice Department’s press releases seem particularly focused on tax-related issues these days.  At the start of this month, DOJ sent a stern reminder to the public that non-traditional currency users should not expect to escape federal tax law enforcement.

Read the full…

The tide of regulation of cryptocurrency and blockchain could be turning in the United States. Following comments by newly-confirmed Treasury Secretary (and former Federal Reserve Chair) Janet Yellen describing Bitcoin as “inefficient” and “extremely volatile,” the price of the coin dropped 10% in 24 hours. During her confirmation hearings, Yellen…

Late last year, the SEC filed a litigated action in the U.S. District Court for the Southern District of New York against Ripple Labs Inc. and two of its executive officers (collectively, “Ripple”), alleging that Ripple raised over $1.3 billion in unregistered offerings of the digital asset known as XRP.…

One driver for the first widely adopted cryptocurrency Bitcoin was to create a store of value that existed outside of government control. It is therefore no surprise that attempts to regulate the rapidly developing crypto asset market have required great efforts from regulators and legislators around the world to keep apace.

In this blog, we compare key drivers and results of the regulatory approach being taken in the US and UK. While the U.S. is leading the way on the enforcement of crypto regulations, the UK has taken greater steps in relation to banking approvals. With regard to tax treatment, the position is becoming much clearer in both jurisdictions.

First though, is there even “an” approach within each country?

GMO Internet Inc. (“GMO”) is a Japanese-based tech conglomerate with over 4,700 full-time employees and a market cap of over 200 billion yen.  Since May 2017, the organization has taken steps to enter the cryptocurrency space, including the creation of a cryptocurrency exchange targeted towards institutional investors and retail traders and the formation of a cryptocurrency mining business in Northern Europe.

Recently, GMO released a statement that domestic employees will have the option to receive part of their salary payment in bitcoin.  This announcement is both interesting and important for a multitude of reasons, particularly because Japan is one of the primary players in the cryptocurrency world.  According to jpbitcoin.com, a Japanese website serving as a central hub for cryptocurrency news and information, yen-based bitcoin trades accounted for nearly half of all bitcoin trades in November.  And while Japan’s Finance Minister recently remarked that bitcoin “has not yet proven to be credible enough to become a currency,” Japan’s Financial Services Agency confirmed that that bitcoin can be used as legally accepted payment in the country. 

The SEC took two additional steps today in its regulation and oversight of the initial coin offering (“ICO”) and cryptocurrency markets.

In the SEC’s latest action targeting an ICO, the SEC Enforcement Division’s new Cyber Unit intervened in an attempted ICO by Munchee, Inc., an online food review service…

CBOE Global Markets Inc. (CBOE) began trading CFTC-approved bitcoin futures on December 10th, and CME Group Inc. (CME) will begin trading them on December 18th. Bitcoin futures have generated significant attention as the first cryptocurrency-based derivative products to be traded on major U.S. exchanges. Bitcoin futures provide institutional and retail investors increased exposure to the asset class, allow existing market participants to hedge their exposure, enable short sales, and facilitate price discovery. Bitcoin futures mark a significant development in cryptocurrency’s movement toward mainstream acceptance and may pave the way for additional, more sophisticated financial instruments in the future.