Launch of new crypto and NFT products; Proposed Crypto Legislation Published; Crypto enforcement actions continue; Wallet vendor hacked for $35 million | Baker Hostetler
New products are launched for crypto futures, wallets, stablecoins and settlements
Of Christopher Lamb
According to a recent press release, a leading global options exchange has received the necessary approval from the US Commodity Futures Trading Commission to offer margined futures contracts for “physically and financially settled Bitcoin and Ether contracts.” According to the press release, this will be the “first US-regulated cryptonative exchange and clearinghouse combination platform offering leveraged derivative products.”
In additional news, two private blockchain software technology companies recently announced the integration of a “web3 wallet for organizations and the first multi-custodial institutional web3 offering on the market.” According to a press release, the integration will “allow users to access over 17,000 DeFi and web3 dapps” when they connect their accounts through the web3 wallet. The wallet provider now offers access to 12 custodians and providers of custody technology through its services.
According to another recent press release, “Asia’s leading qualified custodian and registered trust company” is launching a new stablecoin, First Digital USD (FDUSD), intended to be “backed on a 1:1 basis by a US dollar or asset of equivalent fair value , held in accounts of regulated financial institutions in Asia.” According to the press release, FDUSD reserves will be held in segregated accounts that limit any commingling with other assets, which “ensures that holders of FDUSD can remain confident in the 1:1 support of tokens and the ability to redeem stablecoins.”
In a recent latest development, a global member-owned cooperative and a leading provider of secure financial messaging services is partnering with more than a dozen major financial institutions “to test how firms can leverage their existing [] infrastructure to efficiently direct the transfer of tokenized value across a variety of public and private blockchain networks.” According to a press release, the global cooperative is “focused on enabling instant, frictionless and interoperable transactions” and wants to use its “existing infrastructure … as a single access point to multiple tokenization platforms operated by financial institutions that run on top of private blockchains.” “
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From sports to fashion to travel, brands continue to embrace NFTs
Of Lauren Bass
A major sportswear brand recently announced a partnership where the NFT (non-fungible token) platform will be integrated into video games produced by one of the top video game publishers. According to a press release, the collaboration aims to build “new immersive experiences”, allow members of the digital community to customize and “express their personal style through play” and offer unique virtual creations in the games.
According to reports, Japan’s largest airline recently announced the launch of its own NFT platform. The digital collectibles room will reportedly offer aeronautical-themed tokens.
In one last notable item, a French luxury fashion house recently announced the launch of an NFT collection featuring digital versions of its iconic travel pants. These NFTs will reportedly be released as soulbound tokens (SBTs), which will allow owners to unlock never-before-seen creations of the fashion house’s designs, offering exclusive access to unique real-world physical items. Each NFT reportedly retails for €39,000 (approx. $42k USD) and will be available for purchase through an invite-only event.
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US House of Representatives committees publish draft crypto legislation
Of Veronica Reynolds
Lawmakers recently published draft regulations for the regulation of digital assets. The proposed bill makes oversight of digital assets the responsibility of both the CFTC and the SEC, and was proposed by Financial Services Committee Chairman Patrick McHenry, R.-NC, and Committee on Agriculture Chairman Glenn “GT” Thompson, R. -ON.
The bill proposes, among other things, that digital assets offered as investment contracts should be regulated by the SEC. It also provides a path for issuers of digital assets to later request that the digital asset be considered a commodity if certain requirements for decentralization of the protocol (ie lack of centralized control) are met. Issuers must apply to the SEC to be considered for the exemption. The SEC would be required to issue a “detailed analysis” if it objects to an applicant applying for the exemption.
The bill will also provide a path to compliance for digital asset exchanges and commodity brokers and dealers (Centralized Finance or CeFi). For example, it would allow centralized exchanges to list stablecoins and digital assets if certain requirements were met. It would also require digital asset exchanges and commodity brokers and dealers to disclose certain company information to the CFTC through a preliminary registration statement, submit to agency inspection and segregate client funds. Digital assets that meet the draft law’s definition of “restricted digital assets” (ie assets that are purchased from an issuer in a private offering or distributed to end users) will trigger increased disclosure requirements from the issuer.
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SEC charges cryptocurrency exchange with securities law violations
Of Robert A. Musiala Jr.
Recently, in the space of two days, the US Securities and Exchange Commission (SEC) issued two press releases announcing charges against two major cryptocurrency exchanges. The initial press release announced 13 charges of violating US securities laws against various entities used to operate the world’s largest cryptocurrency exchange by volume. The second press release announced charges against a major US crypto exchange for multiple violations of US securities laws. The same major US crypto exchange was also issued a Show Cause Order by a multi-state task force consisting of 10 state securities regulators, giving the exchange 28 days to show cause why it should not be ordered to cease and desist from selling unregistered securities with respect to the stock exchange’s effort reward program. In a recent article detailing the SEC complaints filed in these actions, Cointelegraph listed a total of 68 digital assets that have now been labeled as securities by the SEC over the course of several SEC enforcement actions in recent years.
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DA Seizes Fake Crypto Website; South Korea sanctions public crypto keys
Of Joanna F. Wasick
On June 7, the Manhattan District Attorney’s Office (Office) announced its seizure of the website domain of Coin Dispute Network (CDN), which the office describes as “a cryptocurrency recovery scam company uncovered during an investigation that has identified multiple victims in Manhattan and multiple dozens across the country.” According to the office, the CDN purported to act as a tracking and recovery service for people whose cryptocurrency was stolen, in exchange for a fee. Instead, the office alleges, the CDN kept the fee and extracted extra ether from its customers by making false promises of asset recovery and generating inaccurate blockchain tracking reports for victims. This seizure marks the first time the bureau has taken down a cryptocurrency recovery website.
According to a recent Chainalysis report, on June 1, 2023, South Korea’s Ministry of Foreign Affairs (MOFA) sanctioned Kimsuky, a North Korean hacker group active since at least 2012 known to have stolen technologies related to weapons and satellite development as well as foreign policy information on on behalf of the North Korean government. The report states that Kimsuky operators mined cryptocurrency to generate and launder funds, ran “semi-legitimate” services to get paid in bitcoin or ether, and conducted malicious activity targeting cryptocurrency entities as well as individuals with “sextortion” campaigns. In the sanction, MOFA includes two cryptocurrency public keys as identifiers for the hacking organization.
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Crypto Wallet Provider Hacked for $35 Million; New crypto hack data published
Of Robert A. Musiala Jr.
According to recent reports, Atomic Wallet, a centralized crypto depository and wallet service, was hacked for nearly $35 million in various cryptocurrencies. Some Atomic Wallet users reportedly found their crypto stolen after a recent software update, while others reportedly said they lost money despite not running the update. In a blog post, blockchain analytics firm Elliptic stated that its investigative team “has traced funds from the $35 million Atomic Wallet hack to Sinbad.io, a mixer used to launder over $100 million in crypto assets stolen by North Korea’s Lazarus Group.”
According to a recent blog post by blockchain security firm Beosin, “22 [crypto] security incidents occurred in May, and the total amount of loss from various attacks was about $19.69 million,” with the month’s biggest attack being the attack on Jimbos on the Arbitrum chain, with a loss of about $7.5 million. According to the blog post, cryptocurrency losses in May due to carpet pulling and fraud reached over $45 million across six incidents.
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