Weekly Blockchain Blog – June 2024 #2 | JD Supra

TradFi/DeFi Integrations Announced, Yield-Bearing Stablecoin Launches

By Isabelle Corbett Sterling

According to reports, Robinhood, a major U.S. financial services company, has entered into an agreement to acquire Bitstamp, a global cryptocurrency exchange. According to a Bitstamp blog post, Bitstamp has offices in Luxembourg, the U.K., Slovenia, Singapore and the U.S. and holds over 50 active licenses and registrations globally. The acquisition will reportedly accelerate Robinhood’s global reach, grow its crypto business and allow it to service institutional clients.

According to a recent press release, a major U.S. stock exchange is collaborating with CoinDesk to launch cash-settled index options tracking the CoinDesk Bitcoin Price Index (XBX). The press release notes the parties will develop specific product offerings in collaboration with regulators. The chief product officer of the exchange said, “Upon regulatory approval, these options contracts will offer investors access to an important liquid and transparent risk-management tool.”

Another recent press release announced that the UAE affiliate of Paxos, a digital assets financial services and infrastructure company, has launched USDL, referred to as the first stablecoin to offer holders daily yield in wallets under regulatory oversight. According to the press release, the USDL issuing entity is regulated under the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market. USDL holders will reportedly earn yield from short-term high-quality liquid U.S. government securities and cash equivalent reserve assets held in accordance with FSRA regulations. The yield will be distributed automatically to eligible wallet addresses.

A third press release announced that crypto exchange users are now able to send and receive crypto using credentials provided by a major U.S. payments company “instead of the typically long and complex blockchain addresses.” According to the press release, the credential system helps verify interactions among consumers and businesses using blockchain networks.

According to reports, another major U.S. payments company announced a partnership with Gnosis Pay, a decentralized payments provider, to allow entities to link cryptocurrency accounts to the payment company’s debit cards. Those debit cards can be used to spend cryptocurrencies at all merchants that accept debit cards issued by the payments company.

For more information, please refer to the following links:

NFT Mints Continue Despite Data Indicating Downturn; Dapper Labs Case Settles

By Robert A. Musiala Jr.

According to reports, last month a major European automobile manufacturer partnered with Mojito, a Web3 consumer engagement platform, to launch a new non-fungible token (NFT) collection. The auto manufacturer’s Web3 arm reportedly sold 780 NFTs in a mint that was open for seven days, from May 21 to May 28.

In more NFT news, recently published data indicates that global NFT sales volume dropped significantly in the month of May. According to reports, global NFT sales in May were $624 million, compared with over $1 billion in April, representing a 54 percent decrease.

In a final notable development, NFT platform Dapper Labs has reportedly settled a class action lawsuit with customers who argued Top Shot NFTs were securities. If the settlement is approved by the court, the company will reportedly pay $4 million to the class action plaintiffs and the plaintiffs will forfeit any future right to claim that Top Shot NFTs are securities.

For more information, please refer to the following links:

J5 Issues Crypto Assets Risk Indicators for Financial Institutions

By Robert A. Musiala Jr.

On May 23, the Joint Chiefs of Global Tax Enforcement (J5) released an advisory note to financial institutions highlighting five risk indicators tied to cryptocurrency assets that may be indicative of money laundering, cybercrime, tax evasion and other illicit activities. The following is a brief description of the five risk indicators:

  1. Crypto Asset Layering. Indicators include rapid movement of funds between accounts with no apparent business rationale; sending/receiving larger-than-expected transactions from private wallets; high-volume/-frequency conversion of funds across multiple crypto assets; high-volume transactions with peer-to-peer (P2P) platforms; transactions with mixers, gambling platforms, darknet markets, fraud shops or high-risk exchanges; large activity with privacy coins; and transactions flowing through multiple addresses in a short time just before being deposited to, or just after being withdrawn from, a client’s wallet.
  • Geographical Risk. Indicators include transactions with exchanges in high-risk jurisdictions; changing IP addresses; IP addresses in high-risk jurisdictions; and relationships with crypto public keys on watch lists such as the Office of Foreign Assets Control specially designated nationals list.
  • High-Risk Counterparties. Indicators include crypto assets originating from over-the-counter desks advertising privacy; direct sending/receiving of funds from crypto exchanges in high-risk jurisdictions; and interaction with public keys with links to known suspicious sources.
  • New Client Onboarding. Indicators include providing incomplete identification information; difficulties establishing beneficial ownership or contacting the customer; transactional activity inconsistent with customer profile; multiple clients registering in a short period using shared identity indicators; use of anonymity-oriented email addresses/providers; use of crypto addresses linked to illegal activities or public investigations; access to multiple crypto or bank accounts; multiple changes to account information; email addresses linked to P2P crypto platforms; accounts in countries different than that of nationality/residence; and unwillingness to provide information about source of funds or privacy coin use.
  • Ransomware and Cybercrimes. Indicators include unusual or high use of privacy coins; chainhopping; mixers; mule accounts; high-volume transfers followed by little or no further activity; crypto accounts linked to multiple bank accounts at different financial institutions; and new customers making immediate large crypto purchases followed by immediate withdrawal to an external address.

For more information, please refer to the following links:

NY DFS Publishes Customer Service Guidance for Crypto Businesses

By Robert A. Musiala Jr.

The New York Department of Financial Services (NY DFS) recently published guidance for virtual currency entities (VCEs) licensed in New York state regarding customer service requests and complaints. According to the guidance, the NY DFS’ experience “indicates that a VCE’s policies and procedures with regard to customer service requests and complaints are unlikely to be sufficient unless they effectively address the issues and incorporate the mechanisms outlined” in the guidance. The guidance addresses concepts that should be present in a VCE’s policies and procedures related to (1) phone and electronic text communications; (2) providing timely, sufficiently detailed and accurate information to customers; (3) providing frequently asked questions regarding customer service issues; (4) monitoring and quality assurance; and (5) reporting to NY DFS on customer service requests and complaints.

For more information, please refer to the following links:

DOJ Enforcement Actions Target Crypto Money Laundering Schemes

By Robert A. Musiala Jr.

The U.S. Department of Justice (DOJ) recently published a press release announcing that two Estonian nationals have been extradited to the U.S. “to face criminal charges related to their roles in a massive multi-faceted cryptocurrency Ponzi scheme.” According to the press release, the defendants “allegedly induced hundreds of thousands of victims to purchase contracts entitling…

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