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.
With the enduring popularity of certain NFTs and the promise of their use in the Metaverse and beyond, the hype around the new technology has been accompanied by rising concerns over NFTs being the centerpiece of traditional financial crimes like money laundering and wire fraud. For example, on June 30th, 2022 the Justice Department indicted six individuals in four separate cryptocurrency fraud cases, which altogether involved over $130 million of investors’ funds. These indictments include allegations of a global Ponzi scheme selling unregistered crypto securities, a fraudulent initial coin offering involving phony associations with top companies, a fraudulent investment fund that purportedly traded on cryptocurrency exchanges, and the largest-known Non-Fungible Token (NFT) money laundering scheme to date.