Edition No. 33

Congress petitioned by crypto groups; Nepal blocks crypto websites; UAE implements virtual asset law; Coinbase settles; Feds urge crypto caution; and more. Here's what happened from 1/9/23 - 1/14/23

Welcome back to Around the Blockchain, the weekly letter dedicated to keeping readers like you up to date on the fast-paced world of Crypto & Law by airdropping current stories directly to your browser. We took last week off for finals and holiday shenanigans, but we’re back and better than ever.

Table of Contents:

1. On the Docket (Top Stories of the Week)

2. Podcasts, Videos, & Blogs (The faces, voices, and pens of Web3’s brightest contributors)

3. Bird Watching (Tweet, tweet!)

4. The Public Ledger

5. Closing Statements

On the Docket

Five things you might have missed last week:

1. Crypto Coalition Advocates for “Pro-Privacy” Future

Don’t Tread On… Our Privacy

A coalition of cryptocurrency-related organizations is urging US lawmakers to prioritize data protections when developing legislation to promote "a pro-privacy future". Signatories to the letter, include crypto wallet provider Ledger, the developer of privacy-protecting digital currency Zcash, and peer-to-peer crypto payment platform MobileCoin. They voiced concern that the recent collapse of the crypto exchange FTX will put pressure on lawmakers to establish guardrails for the emerging industry. Fight for the Future has come out against a bill that would require customer identity checks by digital wallet providers and limit the use of tools like mixers that are meant to make cryptocurrency transactions more anonymous. The letter calls on Congress to support end-to-end encryption and passage of "long overdue" legislation focused on safeguarding consumer privacy online.

Photo by Jason Dent on Unsplash

2. Nepal Orders Internet Providers to Block Crypto-Related Websites

NP Tells ISP to NIMBY Web3

Nepal's telecommunications regulator ordered internet service providers (ISPs) to block all crypto-trading websites and threatened legal action against anyone flouting this order. The country's central bank also encouraged citizens not to engage in crypto trading as it would be punishable by law, after Nepal banned crypto trading and mining.

Nepal is one of nine countries along with China, Algeria, Bangladesh, Egypt, Iraq, Morocco, Qatar, and Tunisia to have instituted an absolute bans on crypto, according to a report by the Library of Congress.

Even with the negative treatment of crypto by the government, Nepal is still ranked 16th in crypto adoption.

See Also: FinancialExpress; IndiaToday

Photo by Discover Savsat on Unsplash

3. New Virtual Asset Law in United Arab Emirates Introduces Federal-Level Rules For Crypto-Related Activities

Setting Their Stage For Success

The United Arab Emirates (UAE) passed a new law governing virtual assets and creating the country's first regulatory regime for the cryptocurrency space at the federal level. The law requires licensure for entities engaging in crypto activities and carries penalties of up to $2.7 million and possible criminal liability for non-compliance. Expected to become effective January 14th, the new law entails widespread mandatory compliance for all sorts of crypto entrepreneurs operating in the UAE. It also sets minimum requirements for virtual asset service providers (VASPs) regarding anti-money laundering and the financing of unlawful organizations or terrorism. Legal entities deemed VASPs will have three months to adapt and comply with the new law. Crypto industry analysts and participants anticipate the federal recognition and regulatory clarity will encourage more web3 businesses to build in the UAE.

The UAE Cabinet also said that the regulation would support the efforts of the state to provide an attractive investment economic and financial environment for international companies and institutions operating in the virtual assets sector to provide their services in the state.

See Also: ArabianBusiness; Cryptopolitan

Photo by Christoph Schulz on Unsplash

4. Coinbase Settles with NYDFS for $100 Million Over Lax AML Protections

Compliance Crackdown Costs Coinbase a Pretty Penny

Coinbase, Inc., recenly settled with the New York State Department of Financial Services (NYDFS) over allegations of lax anti-money laundering (AML) standards to the tune of $50 million. The company also agreed to invest an additional $50 million to "improve its compliance function over the next two years." The NYDFS asserts Coinbase violated New York banking law by failing to maintain an adequate compliance program, as evidenced by alleged deficiencies in its customer due diligence, transaction monitoring, sanctions screening, risk assessment, and case management.

5. Federal Banking Agencies Signal Cautious Approach to Crypto Banking Activities

Banking on Crypto? Feds Say Not So Fast

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a joint statement on January 3, 2023 that reiterates certain aspects of prior crypto-asset-related guidance and highlights risks to banking organizations. The statement signals that the agencies will take an increasingly cautious approach to reviewing crypto-asset activities and business models of banking organizations to ensure that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system.

[T]he Agencies warn that they have “significant safety and soundness concerns with business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector.” The Joint Statement does not define what level of concentration in crypto-asset-related activities would give rise to safety and soundness concerns.

The Joint Statement identifies eight key risks for banking organizations associated with crypto-assets and the crypto-asset sector, including: risk of fraud and scams, legal uncertainties related to custody, inaccurate or misleading representations and disclosures, significant volatility in crypto-asset markets, stablecoins susceptibility of risk, contagion risk within the crypto-asset sector, inadequate risk management and governance practices in the crypto-asset sector, and heightened risks for banking associated with open, public, and/or decentralized networks.

Photo by Jessica Tan on Unsplash

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Podcasts, Videos, and Blogs

The brightest voices & sharpest pens:

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Bird Watching

Tweet, Tweet, Tweet!

1. Brett Harrison on His Time at FTX:

   Brett Harrison @BrettHarrison88

   1/49 Many have asked questions about my time at FTX US and why I left when I did. As I indicated earlier this week, I’m happy to begin sharing my experiences and perspective publicly.

2. Gary Gensler Speaks on Genesis & Gemini charges:

   Gary Gensler @GaryGensler

   We @SECGov charged Genesis & Gemini for the unregistered offer & sale of crypto asset securities through Gemini Earn. Crypto intermediaries need to comply with our securities laws. This protects investors. It promotes trust in markets. It’s not optional. It’s the law.

3. Kristin Smith Shares Thoughts on Crypto Legislation:

   Kristin Smith @KMSmithDC

   1/ Congress is back in session…how should they proceed on crypto legislation? A 3-point New Year’s resolution (from me and @jchervinsky) to put our representatives on the right track:

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The Public Ledger

Highlights from the hundreds of sources gathered each week by our research AI. Always DYOR - but in case you don’t have time, here’s some of ours:

General News and Opinion

• Crypto.com cuts 20% of staff as layoffs continue to hit crypto industry

• FTX Advisers Have Found $5 Billion Cash or Sellable Crypto

• Illicit transaction volume in crypto hit ATH in 2022

• Stablecoin Risks Extend Beyond Reserving Practices

• Clawback to the future: avoidance actions in crypto bankruptcies

• Ripple Transfers $51.4M XRP Amid Legal Battle And Stalled Market Recovery

• Crypto Exchange Says Digital Currency in Talks With Creditors

• Like son, like father, as Joseph Bankman retains attorney: Report

• Yuga Labs gamifies minting NFTs with ‘Dookey Dash’

• Criminal Vs. Civil Liability Amid Growing Crypto Enforcement

• How NFTs Could Upend Copyright Law

U.S. - Federal

• SEC lawsuit against Gemini is 'super lame' confirms co-founder

• The Block: Media power group files request to reveal SBF’s secret bail signatories

• Gemini and Genesis Sued by SEC Over Crypto ‘Earn’ Program

• Watch Meet the Crypto Champion of Congress - Bloomberg

• First-of-its-Kind Crypto Insider Trading Conviction

• Judge slams senators’ letter against FTX lawyers as ‘inappropriate’

• Silvergate Hit With Stockholder Suit Citing Crypto Deposit Drop

• Watch SEC's Peirce on Crypto Regulation, Climate Disclosure - Bloomberg

U.S. - State Law

• Environmental group sues New York for approving crypto mining facility

• Crypto Firms Will Need To Be Aware Of State Attorneys General

• New York sues Celsius Network founder Mashinsky, alleges crypto fraud

• New York Department of Financial Services Issues Cryptocurrency-Related Guidance to Banks, Increases Regulatory Scope

• The Clock Is Ticking: File Now to “Complete” the Louisiana Virtual Currency Business Activity Application by the Statutory Deadline

• How Ohio Software Ruling Implicates Crypto Insurance Claims

International

• Hodlnaut creditors favor liquidation for company

• A Gambling Tycoon, Two Lords and a £10 Billion Crypto Lawsuit

• Will You Be Protected Under Law If An FTX-Like Situation Were To Happen In India?

• El Salvador Passes Law on Cryptocurrency Transfers

• Central Bank Org. Urges Action To Contain Crypto Contagion

• Australian Financial Services Regulatory Update | Q3–Q4 2022

• Dubai introduces new crypto law

• Britain to push ahead with readying ground for a digital pound

• Analysis: English High Court holds crypto-wallet provider a constructive trustee of stolen funds

• Crypto Industry Hopes Turn to French Legislators as Regulators Back Mandatory License

NOTE: For your convenience, we have started identifying articles that require a subscription or site registration (paid or free) with ** preceding the article link, and the linked site in () after.

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Closing Statements

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Quote of the Week:

"Perfection Is The Enemy Of Perfectly Adequate" - Saul Goodman

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The articles and opinions in this newsletter are not legal or financial advice. For legal and financial guidance, please consult a qualified attorney or financial advisor.