Major U.S. Firm Offers Cryptocurrency Services, Blockchain Solutions Launch Across Industries, CFTC Issues Crypto Guidance, FinCEN Fines Tumbler Service

In this issue:

Major U.S. Payments Firm Launches Cryptocurrency Service as Adoption Grows

Blockchain Supply Chain, Copyright and Satellite Comms Solutions Launch

CFTC Guidance Addresses Crypto Deposits, Travel Rule White Paper Published

Arrests Target Criminal Network Using Crypto, FinCEN Fines Tumbler Operator

Major U.S. Payments Firm Launches Cryptocurrency Service as Adoption Grows

By: Robert A. Musiala Jr.

This week a major U.S. Internet payments firm announced the launch of “a new service enabling its customers to buy, hold and sell cryptocurrency directly from their … account.” According to a press release, the company plans to make cryptocurrencies “available as a funding source” through its online payment’s platform “for purchases at its 26 million merchants worldwide” and will initially support bitcoin, ether, bitcoin cash and litecoin directly within customers’ digital wallets. The new service will reportedly become available to U.S. customers in the coming weeks. As part of the new offering, the company has become the first approved entity to receive a “conditional BitLicense” from the New York State Department of Financial Services. According to various press releases, the company will partner with a New York chartered trust company that will provide cryptocurrency trading and custodial services for customers using the new service.

In foreign markets, this week the Bahamas officially launched its central bank digital currency (CBDC), the sand dollar. The sand dollar is a digital version of the Bahamian dollar that is issued by the Central Bank of the Bahamas. In Japan, the firm that operates the country’s most popular messaging app is reportedly planning to launch a blockchain-based platform targeted at assisting central banks in launching CBDCs. And in the U.K., a publicly traded fintech firm has reportedly become “the first U.K. publicly traded company to announce a significant purchase of Bitcoin as part of its treasury investment strategy.” According to a press release, the company “has allocated up to ten percent (10%) of its cash reserves to purchase Bitcoin and adopt it as a treasury reserve asset.”

For more information, please refer to the following links:

Blockchain Supply Chain, Copyright and Satellite Comms Solutions Launch

By: Teresa Goody Guillén

Two global container carriers recently announced that they are now fully integrated onto the TradeLens blockchain-enabled shipping platform. According to the announcement, the global container carriers will help expand the ecosystem and will run validator nodes on the blockchain network.

A global retailer and a developer of enterprise-level blockchain platforms have published a case study that provides details on the creation and adoption of DL Freight, a blockchain solution for freight invoice management that tracks deliveries, verifies transactions and automates invoices in real time through the application of smart contracts. According to a press release, the solution has become “the national standard for freight invoice management” for the Canadian division of the global retailer.

This week a technology firm based in Mumbai, India, announced an initiative to leverage the R3 Corda blockchain to develop “a suite of next generation payments, working capital, and Foreign Exchange services that can be seamlessly deployed on Corda.” The solution will target midsize and small businesses.

A major Chinese blockchain business has announced the deployment of a new digital copyright services platform that combines blockchain technology with artificial intelligence to enable creators to securely authenticate and verify various forms of original content, including video as well as image-based and written material. The platform reportedly generates a unique, tamperproof digital copyright certification and notary stamp for each work that is uploaded into its database.

In a final notable development, a U.S. university’s engineering school and a nonprofit organization have secured a flight for the university’s blockchain solution on an aerospace rocket scheduled to launch on Nov. 20. The rocket is expected to carry a satellite that will include the university’s private blockchain mounted on a Raspberry Pi, which is a credit card-sized single-board computer. The pilot project seeks to reduce the cost of maintaining ground stations by allowing satellites to “talk” to each other in space.

For more information, please refer to the following links:

CFTC Guidance Addresses Crypto Deposits, Travel Rule White Paper Published

By: Robert A. Musiala Jr.

The U.S. Commodity Futures Trading Commission (CFTC) has issued an advisory to futures commission merchants (FCMs) to provide guidance on “how to hold and report certain deposited virtual currency from customers in connection with physically-delivered futures contracts or swaps” and on “designing and maintaining risk management programs concerning the acceptance of virtual currencies as customer funds.” The advisory sets out 12 requirements that FCMs must adhere to when holding virtual currency as customer funds. Among other things, the 12 requirements address approved depository institutions for virtual currencies, identification and documentation of deposits, withdrawal availability and timing, fair market value reporting, computation of daily and month-end segregation requirements, account segregation procedures, investment and margin value restrictions, procedures for return of customer funds, and required notices. The advisory notes that the CFTC “may determine to examine any FCM that accepts and holds customer virtual currency assets to determine how it is choosing to meet its obligations.”

The U.S. Travel Rule Working Group (USTRWG), whose members include 25 leading U.S. virtual asset service providers (VASPs), have published a new white paper addressing the application to VASPs of the Travel Rule, which imposes certain customer identification and data transmission requirements on cryptocurrency transactions based on the U.S. Bank Secrecy Act, regulations issued by the U.S. Financial Crimes Enforcement Network, and guidance from the Financial Action Task Force. The white paper focuses on Phase 1 of a solution that is intended to serve as a proof of concept for facilitating Travel Rule compliance among VASPs.

This week a major U.S. cryptocurrency exchange published a report providing details on requests that the exchange received from law enforcement during the period of Jan. 1 to June 30, 2020. Among other things, the report noted that 58 percent of all requests came from U.S. agencies, 16 percent came from state or local authorities, and 90 percent of all requests came from just three jurisdictions: the U.S., the U.K. and Germany.

For more information, please refer to the following links:

Arrests Target Criminal Network Using Crypto, FinCEN Fines Tumbler Operator

By: Joanna F. Wasick

Twenty suspected members of the QQAAZZ criminal network were recently arrested for attempting to launder tens of millions of euros on behalf of the world’s most notorious cybercriminals. According to press releases, the QQAAZZ money laundering network used bank accounts and sometimes converted funds to cryptocurrency using “tumbling” services to obscure the source of the funds. After taking a fee of up to 50 percent, QQAAZZ members would return the balance of the stolen funds to their cybercriminal clients. The arrests were the result of an unprecedented international law enforcement effort involving enforcement from 16 countries, including the U.S. Department of Justice, which last week announced related indictments out of its office.

Earlier this week, the Financial Crimes Enforcement Network (FinCEN) announced its assessment of a $60 million civil money penalty against Larry Dean Harmon, the founder and operator of Helix and Coin Ninja, cryptocurrency “mixers” or “tumblers” that are designed to obscure the source of cryptocurrency. According to FinCEN, Harmon operated his companies as an unregistered money services business (MSB) and violated the Bank Secrecy Act and related regulations by failing to register as an MSB, failing to implement and maintain a proper anti-money laundering (AML) program, and failing to report certain suspicious financial activity. FinCEN identified over 1.2 million unlawful transactions, including 356,000 bitcoin transactions, through Harmon’s enterprise, including transactions involving narcotics traffickers, counterfeiters and other criminals.

The trial against Alexander Vinnik, who allegedly laundered billions of dollars through his alleged operation of the now defunct cryptocurrency exchange BTC-e, is set to begin this Monday in Paris. Vinnik, who is also wanted in the United States and Russia, was arrested in 2017 while on vacation in northern Greece. After two years of litigation, Greek authorities ruled Vinnik would be extradited first to France, then to the United States and then to Russia.

This week the U.S. Securities and Exchange Commission (SEC) announced a final judgment on consent against Kik Interactive Inc., to resolve the SEC’s charges that Kik’s unregistered offering of digital “Kin” tokens in 2017 violated federal securities laws. Under the judgment, Kik must pay a $5 million penalty and must, for the next three years, provide the SEC notice before engaging in enumerated future issuances, offers, sales and transfers of digital assets.

For more information, please refer to the following links:

DOJ and IRS May Soon Begin Enforcement Actions Against Virtual Currency Tax Fraudsters

In the past several years, the use and prevalence of virtual currency have increased exponentially. The proliferation of digital assets has changed the way goods and services are exchanged and has allowed for faster and cheaper transactions. But with this new technology comes the increased risk of fraudulent activity – especially tax fraud. Recently, the Internal Revenue Service (“IRS”) has made it abundantly clear through guidance, amendments to tax forms, and even warning letters to Americans suspected of tax fraud, that it is getting very serious about virtual currency tax compliance.

The IRS and the Department of Justice (the “DOJ”) appear to be poised to commence a flurry of enforcement actions against virtual currency tax fraud offenders. Likely to be entangled in these enforcement actions are virtual currency institutions and companies that regulators suspect facilitated their customers’ tax evasion. It is thus imperative for all entities in the virtual currency industry to ensure their compliance programs are equipped to detect and prevent the facilitation of virtual currency tax fraud. Continue Reading

BakerHostetler Blockchain University: Podcast Series

What is Blockchain and Why Should I Care?

Blockchain technology is widely anticipated to disrupt major industries and business operations over the next several years. But with all of the “hype” in the blockchain market, at times it can be difficult to separate fact from fiction and identify the real value in this new technology. To help bring things into focus, we’ve crafted a five-part series to introduce blockchain from a technological, market, and legal perspective.

Our first episode provides an introduction to what blockchain is, how it works, and the key blockchain networks that everyone should know about.

Listen to the episode


Bitcoin – Understanding the Phenomenon

The Bitcoin Network is the world’s first implementation of blockchain technology, and bitcoin is one of the world’s most widely used cryptocurrencies. In many respects, the blockchain market started with bitcoin, and so the origins and concepts underlying the Bitcoin Network can provide insights into the issues that drive the larger blockchain market. There are also just some really interesting stories surrounding the Bitcoin Network—like the fact that we still don’t know who actually created it.

Listen to the episode

US Firms Invest in Bitcoin; Blockchain Consortia Expand; Industry and Regulators Address Tech Standards, CBDCs, Crypto Investments, Enforcement, Stablecoins, Taxes

In this issue

Fintech Firm Brings $50 Million BTC on to Balance Sheet, Major CBDC Report Published

US Firms Announce Crypto Investment Initiatives, Crypto Fundraising Report Published

Blockchain Consortia Expand, Reports Detail Blockchain Standards and Economic Impact

US and Foreign Guidance Addresses Crypto Enforcement, Stablecoins, Taxes and More

Fintech Firm Brings $50 Million BTC on to Balance Sheet, Major CBDC Report Published

By: Joanna F. Wasick and Jordan R. Silversmith

Late last week, a major U.S. fintech and payments firm published a “Bitcoin Investment Whitepaper” and announced that it purchased $50 million worth of bitcoin (approximately 4,709 bitcoins). The white paper cites the “rapid evolution of cryptocurrency” and “unprecedented uncertainty from a macroeconomic and currency regime perspective” as two reasons why this was the right time to expand the company’s largely USD-denominated balance sheet. The white paper also details how the purchase was executed, the cold storage used to custody the bitcoin, the policy insuring the bitcoin and how the bitcoin will be classified from an accounting perspective.

The Italian Banking Association (ABI) recently announced that, after the addition of 42 more banks, about 100 Italian banks are officially operating on the country’s banking blockchain network, Spunta, built on R3’s Corda. According to the announcement, 204 million transactions had been processed on Spunta’s infrastructure since March, and the association predicts the number to exceed 350 by year’s end.

Last week, the Bank for International Settlements, together with seven central banks, released a report on how a central bank digital currency (CBDC), which the report describes as a “digital payment instrument,” could be used to help central banks meet their public policy objectives. The report outlines foundational principles and core features of a CBDC, including that it would (1) coexist with cash and other types of money within a payment system, (2) support wider policy objectives and do no harm to monetary and financial stability, and (3) promote innovation and efficiency. The report notes that a CBDC could be an important instrument for central banks to provide a safe means of payment; it also identifies ways in which a CBDC could adversely impact bank funding and institutional financial activity. The report concludes that “far more work” is required to understand the many issues that a CBDC could generate.

For more information, please refer to the following links:

US Firms Announce Crypto Investment Initiatives, Crypto Fundraising Report Published

By: Robert A. Musiala Jr.

A New York-based cryptocurrency asset management firm recently announced that its Ethereum Trust has become a registered reporting company under the Securities Exchange Act. The move follows in the footsteps of the firm’s Bitcoin Trust, which became a reporting company in January 2020. In a separate development, late last week, as part of an announcement related to a new funding round, the bitcoin-focused subsidiary of a major New York-based asset manager noted that it acts as custodian of 10,000 bitcoin (valued at $115 million) on behalf of its parent company.

A Big Four accounting and consulting firm recently published its 2nd Global Crypto M&A and Fundraising Report. Among other findings, the report notes a “sharp decline” in volume/value for crypto fundraising and mergers and acquisitions; a slight shift in investment from the Americas to APAC, EMEA and other geographies; and trends indicating consolidation of fundraising and deal flow to later-stage companies. According to the report, “the United States remains the main incubator for crypto, with the top 10 companies receiving funding during 2019 and 2018 mostly coming from the United States.” For 2020, the report predicts continued industry consolidation and increased fundraising and M&A driven by the APAC and EMEA sectors.

For more information, please refer to the following links:

Blockchain Consortia Expand, Reports Detail Blockchain Standards and Economic Impact

By: Robert A. Musiala Jr.

A major Canadian railway has announced that it has joined the TradeLens blockchain shipping platform. In a press release, the railway notes that the TradeLens platform will help enable “secure and transparent transfer of container-shipping documents” and help the firm “create, amend and share documents with other supply chain participants, including consignees, beneficial cargo owners, customs agencies, dray operators and steamship lines.” In related news, a technology firm and creator of a machine learning-based logistics platform has joined the Blockchain in Transport Alliance, a major industry consortium focused on creating standards for the development of blockchain applications in the transportation, logistics and freight industries.

Late last week, the U.S. Department of Homeland Security awarded contracts totaling $817,712 to five different blockchain startups. The contract awards are aimed at developing proofs of concept for anti-forgery and counterfeit prevention systems.

A new white paper from the World Economic Forum (WEF) addresses blockchain technical standards. The paper “maps standards that focus broadly on distributed ledger technology (DLT) in order to take a comprehensive view of the evolution of standards” and “to map the wide ecosystem contributing to technical standards.” Among other topics, the paper addresses standards related to tokens, software, network governance and defined terms. The paper also notes some of the gaps, divergence and overlap among the various standards identified.

A recent report from a Big Four accounting and consulting firm “explores the impact blockchain technology can have on the global economy.” The report notes that blockchain “has the potential to boost global gross domestic product (GDP) by US$1.76 trillion over the next decade.” Among other findings, the report ranks the “top five” blockchain use cases, based on economic value, as provenance, payments and financial instruments, identity, contracts and dispute resolution, and customer engagement.

For more information, please refer to the following links:

US and Foreign Guidance Addresses Crypto Enforcement, Stablecoins, Taxes and More

By: Robert A. Musiala Jr.

Late last week, the U.S. Department of Justice published its Cryptocurrency Enforcement Framework. According to a press release, the framework “provides a comprehensive overview of the emerging threats and enforcement challenges associated with the increasing prevalence and use of cryptocurrency … and outlines the Department’s response strategies.”

This week the Financial Stability Board (FSB), an international body that monitors the global financial system, published a report that “sets out high-level recommendations for the regulation, supervision and oversight of ‘global stablecoin’ (GSC) arrangements.” The recommendations address legal authority, regulations proportionate to stablecoin risks, coordination across jurisdictions, accountability for stakeholders, anti-money laundering and cybersecurity frameworks, data safeguarding standards, orderly wind-down and recovery plans, disclosure requirements, stablecoin redemption rights, and licensing/registration.

A recent report from the Organization for Economic Cooperation and Development (OECD) addresses taxation of cryptocurrencies around the globe. The report was prepared “for presentation to the meeting of G20 Finance Ministers and Central Bank Governors in October 2020.” The 69-page report discusses tax policy considerations, provides an overview of how cryptocurrencies are taxed in different jurisdictions and addresses key challenges in taxing cryptocurrency-related transactions. In a related development, a recent report noted that South Korea has initiated a new 20 percent tax on gains derived from trading cryptocurrencies.

In Europe, this week the Isle of Man Financial Services Authority published new cryptocurrency guidance that classifies crypto-assets into three categories: security tokens, electronic money tokens and “unregulated tokens that fall outside the regulatory perimeter for financial services.” The report highlights registration requirements for businesses engaged in “convertible virtual currency activity” and notes that even “unregulated tokens” are subject to requirements related to anti-money laundering and countering the financing of terrorism. And in the Netherlands, the central bank recently approved the first registered cryptocurrency business under new regulations designed to implement the European Union’s 5th Anti-Money Laundering Directive.

For more information, please refer to the following links:

SEC Wins Case Against Kik and Adds Precedent for Digital Assets

On Sept. 30, the United States District Court for the Southern District of New York granted the U.S. Securities and Exchange Commission’s (SEC) motion for sum

mary judgment against Kik Interactive Inc. (Kik) and denied Kik’s cross-motion for summary judgment. As we previously reported, the SEC challenged Kik’s compliance with the federal securities laws in raising funds through simple agreements for future tokens, or SAFTs, and Kik’s 2017 public sale, valued at approximately $100 million, of Ethereum-based ERC20 tokens, known as Kin. The Court held that the undisputed facts show Kik offered and sold securities without a registration statement or exemption from registration, in violation of Section 5 of the Securities Act of 1933 (Securities Act).

Key Court Findings

The Court made numerous findings that are central to its opinion and provide additional precedent to the securities law analysis of digital assets and the offer and sale of those digital assets. Here, the Court held that the SAFT and public token offering were two offerings that were integrated. The integration doctrine prevents an issuer from improperly avoiding registration by artificially dividing a single offering into multiple offerings such that Securities Act exemptions would apply to multiple offerings that would not be available for the combined offering. Here, because the SAFT sales relied on Regulation D, the integrated public token offering would be part of the same Regulation D offering, and all sales must meet all the terms and conditions of Regulation D. In determining whether the two offerings are integrated, the court considers the following factors, not all of which need to be met: Continue Reading

Blockchain and Crypto Initiatives Launch in Foreign Markets, Guidance Issued on Ransomware and Crypto Derivatives, DOJ Indictment Alleges Crypto Tax Evasion

In this issue:

Crypto Initiatives Launched by Foreign Banks, Exchanges, Apps, Gaming Firms

New Guidance on Ransomware, Crypto Derivatives; Crypto Tax Report Published

DOJ Charges Allege Crypto Tax Evasion, Interpol Cites Crypto Privacy Threats

Crypto Initiatives Launched by Foreign Banks, Exchanges, Apps, Gaming Firms

By: Robert A. Musiala Jr.

According to a press release this week, the “Bank of Thailand (BOT) … has successfully launched the world’s first blockchain-based platform for government savings bonds issuing a total of $1.6B USD within two weeks.” According to the press release, the blockchain platform reduced the “operational complexity” and cost of issuing the bonds and reduced “a process that previously took 15 days to two days.”

According to another recent press release, a group of 14 banks has launched an initiative to create a “digital trade finance registry” to “improve transparency in commodity trade” and “serve as a secure central database for the banking industry to access records of trade transactions financed across banks in Singapore.” The press release notes that the project will be developed “on a blockchain network supported by technology provider dltledgers.”

In Japan, an affiliate business of LINE, the popular Japanese messaging app, announced plans to launch a service that will allow LINE users to lend their cryptocurrencies to BITMAX, a licensed Japanese cryptocurrency exchange that is also affiliated with LINE. Users of the service will reportedly receive a “rental fee” that is similar to interest on a traditional loan.

Late last week, the foreign affiliate of a major U.S. cryptocurrency exchange announced that it has received “a full Class F Digital Assets Business Act license to operate its acclaimed cryptocurrency exchange under the supervision of the Bermuda Monetary Authority (BMA).” Also late last week, a major video game publisher based in France announced the forthcoming public sale of its blockchain-based token, ATRI, which is scheduled to take place on Nov. 20 in partnership with a major cryptocurrency exchange.

For more information, please refer to the following links:

New Guidance on Ransomware, Crypto Derivatives; Crypto Tax Report Published

By: Teresa Goody Guillén

On Oct. 1, the U.S. Department of the Treasury issued two advisories intended to assist U.S. individuals and businesses in combating ransomware. The Office of Foreign Assets Control (OFAC) issued an advisory to highlight the sanctions risks associated with ransomware payments—a large portion of which are paid in bitcoin. The OFAC advisory reinforces that the U.S. government disfavors payments of ransom, but there is no general ban; payments to sanctioned individuals and/or entities can result in significant penalties; applications for licenses to make payments to sanctioned individuals and/or entities are considered with a presumption of denial; and cooperating with law enforcement is essential. The Financial Crimes Enforcement Network (FinCEN) issued the other advisory, which is intended to alert financial institutions to predominant trends, typologies, and potential “red flag” indicators of ransomware and associated money laundering activities.

In the UK, this week the Financial Conduct Authority (FCA) published final rules banning the sale, marketing and distribution to all retail consumers of any derivatives (i.e., contracts for difference, options and futures) and exchange traded notes that reference unregulated transferable cryptoassets by firms acting in, or from, the UK. According to the press release, “unregulated transferable cryptoassets are tokens that are not ‘specified investments’ or e-money, and can be traded, which includes well-known tokens such as Bitcoin, Ether, and Ripple.” The FCA cited several risk factors of these products, including the lack of a reliable basis for valuation; the prevalence of market abuse and crime; extreme volatility; and a lack of understanding and legitimate investment need on the part of retail consumers.

A Big Four accounting and consulting firm has released its Annual Global Crypto Tax Report 2020, which aims to evaluate and review the existing digital assets tax guidance globally and identify gaps or where guidance may need to be refined or supplemented. The report notes that the guidance issued thus far largely focuses on how to apply existing tax laws or policies to transactions, situations and structures that are unique to digital assets, instead of passing new legislation. The report includes an appendix that contains the latest global crypto tax developments, along with crypto tax information for 29 jurisdictions.

For more information, please refer to the following links:

DOJ Charges Allege Crypto Tax Evasion, Interpol Cites Crypto Privacy Threats

By: Jordan R. Silversmith

John McAfee, an English American computer programmer and businessman, was arrested this week on charges of tax evasion and failure to file tax returns. According to a press release, McAfee “evaded his tax liability by directing his income to be paid into bank accounts and cryptocurrency exchange accounts in the names of nominees.” The Department of Justice unsealed its indictment following McAfee’s arrest in Spain, where he faces extradition. This comes on the same day that the Securities and Exchange Commission (SEC) announced charges against McAfee for allegedly promoting several initial coin offerings (ICOs) without disclosing that ICO issuers were paying him to do so, in violation of federal securities laws. McAfee faces a maximum sentence of five years in prison on each count of tax evasion and a maximum sentence of one year in prison on each count of willful failure to file a tax return. He also faces a period of supervised release, restitution and fines.

A report released by Interpol this week named privacy wallets, privacy coins and other cryptocurrency items as “top threats” in its Internet Organized Crime Threat Assessment. According to the report, “privacy-enhanced wallet services using coinjoin concepts (for example, Wasabi and Samurai [sic] wallets) have emerged as a top threat in addition to well established centralized mixers.”

This week the Travel Rule Protocol (TRP), a 25-member working group favored by banks and traditional financial institutions, released the first version of its application programming interface (API). The group aims for the product to offer a clear and straightforward way for organizations to trade identification data about cryptocurrency transaction originators and beneficiaries, as required by recent guidance from the Financial Action Task Force.

For more information, please refer to the following links:

Crypto Study Published, Bahamas To Launch CBDC, New Ethereum Solutions Announced, ATS Settlement Process Approved, SEC Defeats Kik, Singapore Exchange Hacked

In this issue:

Cryptoasset Study Published, Bahamas Launches CBDC, Zcash Service Announced

Ethereum Enterprise Solutions Announced, US Air Force Expands Blockchain Initiative

SEC Approves Digital Asset Settlement Process, Crypto Brokerage Registers in Canada

Court Rules in Favor of SEC in Kik Case, SEC Settles with Two More ICO Issuers

CFTC and DOJ Bring Enforcement Actions Against Foreign Crypto Trading Platforms

Singapore Exchange Hacked, French Arrest 29 in Crypto Terrorist Financing Scheme

Cryptoasset Study Published, Bahamas Launches CBDC, Zcash Service Announced

By: Robert A. Musiala Jr.

The University of Cambridge has published its 3rd Global Cryptoasset Benchmarking Study. The report analyzes data from the cryptocurrency exchange, payments, custody and mining sectors. Among its many findings, the report notes that the cryptocurrency industry “has entered a growth stage despite the notable headwinds” and cites improved regulatory clarity as having assisted in this growth. The report highlights regulatory compliance, IT security and insurance as areas that pose “hurdles” to continued growth.

Late last week, the Central Bank of The Bahamas announced that beginning on Oct. 20 it will “gradually release a digital version of the Bahamian dollar nationally … through authorised financial institutions.” According to a press release, the Bahamian central bank digital currency (CBDC) will be named the “sand dollar” and the first phase of its rollout will involve “low value personal wallets … with more restricted transaction limits … regular personal accounts in line with … existing banking and financial services” and “business or enterprise accounts, subject to further KYC rigour and with higher limits.”

This week, major U.S. cryptocurrency exchange Gemini announced “shielded Zcash (ZEC) withdrawals.” According to a blog post, the new service will allow “confidential, encrypted withdrawals” of ZEC that give users “control of your privacy.” The blog post notes that “with the right controls in place and the proper education, regulators can get comfortable with privacy-enabling cryptos.”

For more information, please refer to the following links:

Ethereum Enterprise Solutions Announced, US Air Force Expands Blockchain Initiative

By: Jordan R. Silversmith

Earlier this week, a major Big Four professional services firm issued two press releases about new blockchain solutions under development. The first relates to a blockchain-based procurement solution on its proprietary platform that allows companies to run private, secure end-to-end procurement activities on the public Ethereum blockchain. The second announcement relates to the beta launch of a new “Explorer & Visualizer” that will allow users to track and analyze in-depth patterns and trends for data stored on a blockchain. According to the press release, the solution will make it possible for internal audit teams and forensic accountants to search for specific transactions, addresses and blocks to gather relevant information to support the management of legal, compliance and fraud risks, among others.

A recent report by Dutch academics discussing the use of blockchain technology to improve organic or fair trade food traceability under EU regulations found that organic food supply companies using blockchain to improve traceability face two key decisions: optimizing chain partner collaboration and choosing which data to capture in the blockchain. The authors noted that one practical implication of their findings is that blockchain is already being used successfully on a small scale to create whole-chain traceability of organic and fair trade food in Europe.

This week, a blockchain-based data management startup announced it had raised additional funding of $2.5 million from venture capital backers to further develop a distributed data management platform for the U.S. Air Force. The new capital pushes the company’s total seed funding to $6.5 million and also unlocks a $1.5 million defense contract pledged as matching funds through the Air Force’s Small Business Innovation Research (SBIR) program. A spokesman for the company said that they will use the funds to hire more engineers to work on its verifiable credential and distributed identity infrastructures.

For more information, please refer to the following links:

SEC Approves Digital Asset Settlement Process, Crypto Brokerage Registers in Canada

By: Robert A. Musiala Jr.

On Sept. 25, the U.S. Securities and Exchange Commission (SEC) issued a letter to the Financial Industry Regulatory Authority (FINRA) regarding the role of alternative trading systems (ATS) in the settlement of digital asset security trades. The SEC letter was in response to questions from FINRA about the application of the SEC and FINRA’s previously published Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities. According to the letter, “since the issuance of the Joint Staff Statement, several broker-dealers seeking to operate an ATS that trades digital asset securities” have expressed a preference for a certain process for settling ATS trades – termed the “Three-Step Process” – that was not specifically addressed by the Joint Staff Statement. The SEC letter describes the Three-Step Process for ATS trade settlement and confirms that SEC staff will not recommend enforcement action if “a broker-dealer operating an ATS that trades digital asset securities uses the Three-Step Process.”

According to a press release this week, Netcoins, a Canadian “cryptocurrency brokerage,” announced that it has “applied for registration from the British Columbia Securities Commission (BCSC) and the Canadian Securities Administrators’ (CSA) regulatory sandbox.” The press release notes that, if approved, Netcoins will become “the first regulated open-loop crypto asset trading platform in Canada.”

For more information, please refer to the following links:

Court Rules in Favor of SEC in Kik Case, SEC Settles with Two More ICO Issuers

By: Robert A. Musiala Jr.

This week the Court in the closely watched case SEC v. Kik Interactive Inc. ruled in favor of the U.S. Securities and Exchange Commission (SEC) on cross motions for summary judgment related to the SEC’s enforcement action against Kik. The Court agreed with the SEC and found that Kik’s $100 million initial coin offering (ICO) was an unregistered public offering of securities in violation of Section 5 of the Securities Act. The decision creates significant precedent on the application of the Howey test, which interprets the term “investment contract” under Section 5 of the Securities Act, to fundraising events commonly known in the blockchain industry as ICOs.

The SEC has recently taken action against two more ICO issuers. In a cease-and-desist order and related settlement, the SEC settled charges of fraud and securities laws violation against SoluTech, alleging its 2018 ICO, which “raised approximately $2.4 million from more than 100 investors, including U.S. residents” was a public sale of unregistered securities. Among other things, as part of the settlement, SoluTech agreed to remove its token, SCRL, from trading on digital asset trading platforms; destroy all SCRL in its custody; and take certain steps to demonstrate its compliance with the settlement terms. The owner of SoluTech agreed to a civil penalty of $25,000 and to a ban on participating in future offerings of digital assets.

In a similar action, the SEC imposed a cease-and-desist order and entered into a related settlement with Salt Blockchain Inc. related to its 2017 ICO, which raised approximately $47 million. The SEC found that the Salt Tokens sold in the ICO were securities and the ICO was an unregistered securities offering in violation of Section 5 of the Securities Act. Among other things, Salt Blockchain Inc. agreed to register its Salt Tokens as securities; initiate a process for refunding Salt Token purchasers, including reporting to the SEC; and pay a civil penalty of $250,000.

For more information, please refer to the following links:

CFTC and DOJ Bring Enforcement Actions Against Foreign Crypto Trading Platforms

By: Robert A. Musiala Jr.

This week, the Commodity Futures Trading Commission (CFTC) filed an enforcement action against a company registered in St. Vincent and the Grenadines alleging the company “offered or engaged in unlawful retail commodity transactions in ether, litecoin, bitcoin, gold, and silver.” According to a press release, the CFTC alleged the company violated the Commodities Exchange Act “by failing to conduct these transactions subject to the rules of a board of trade that had been designated or registered by the CFTC as a contract market” and acted as a futures commission merchant but “failed to register with the CFTC as required.”

In a similar action, the CFTC brought charges against a major cryptocurrency exchange platform registered in Seychelles for “operating an unregistered trading platform and violating multiple CFTC regulations, including failing to implement required anti-money laundering procedures.” According to a press release, the platform “received more than $11 billion in bitcoin deposits and made more than $1 billion in fees, while conducting significant aspects of its business from the U.S. and accepting orders and funds from U.S. customers.” The U.S. Department of Justice filed a related criminal action against the platform for “violating the Bank Secrecy Act and conspiring to violate the Bank Secrecy Act, by willfully failing to establish, implement, and maintain an adequate anti-money laundering program.”

For more information, please refer to the following links:

Singapore Exchange Hacked, French Arrest 29 in Crypto Terrorist Financing Scheme

By: Joanna F. Wasick

Late last week, a major Singapore-based cryptocurrency exchange reported large, unauthorized withdrawals of cryptocurrencies from certain exchange hot wallets to an unknown wallet beginning on Sept. 26. According to reports, the stolen funds, with an estimated value of more than $150 million, appear to be moving to decentralized exchanges. According to the exchange, the hack is being investigated by international law enforcement and the stolen money will be covered by an insurance fund.

Earlier this week, French police arrested 29 individuals for operating a cryptocurrency scheme to finance Islamist extremists in Syria. According to reports, the terrorist financing ring, reportedly active since 2019, would purchase cryptocurrency “coupons” in France and send those details by secure messaging to Syrian jihadists, who converted them into actual cryptocurrency, which was then sold for cash. Hundreds of thousands of euros are thought to have been supplied through the network, which reportedly benefited members of al-Qaida and the Islamic State group.

A leading blockchain analytics and forensics company recently issued its 2020 risk report on the know-your-customer (KYC) protocols of more than 800 virtual asset service providers (VASPs) in more than 80 countries. The report finds that, despite existing, cryptocurrency-related AML government regulations, 56 percent of VASPs have “weak or porous” KYC processes, allowing those VASPs to be used to facilitate money laundering. According to the report, the U.S., Singapore and the U.K. host the highest number of VASPs with poor KYC protocols – although the report acknowledges that this is largely due to those countries having a higher number of VASPs in general. On average, by country, the report gives its lowest VASP KYC marks to Russia and a number of other countries in Europe.

For more information, please refer to the following links:

OCC Clarifies Status of Stablecoins, US Agencies Procure Blockchain Applications, Solutions Launch on Hedera Hashgraph and VeChain, DOJ Targets Darknet Markets

In this issue:

OCC Clarifies Status of Stablecoins, Registration Statement Filed for Network Token

US Government Procures Blockchain Solutions, Blockchain Patent Study Published

Hedera Hashgraph Transactions Pass Ethereum, VeChain Supports Food Traceability

DOJ Announces Major Enforcement Action Against Darknet Markets

OCC Clarifies Status of Stablecoins, Registration Statement Filed for Network Token

By: Jordan R. Silversmith

The chief counsel for the Office of the Comptroller of the Currency (OCC) recently issued a letter clarifying the agency’s stance on the authority of national banks and federal savings associations (FSAs) to hold stablecoin “reserves” as a service to bank customers. The letter concluded that national banks and FSAs have legal authority to hold USD reserves on behalf of customers issuing stablecoins as long as the stablecoins are held in a hosted wallet. The OCC also noted in its letter that this interpretation only addresses stablecoins backed on a 1:1 basis by a single-fiat currency verified every day by the bank. The Securities and Exchange (SEC) Commission Strategic Hub for Innovation and Financial Technology Staff (FinHub) issued a statement in response to the OCC’s interpretation, clarifying that whether stablecoins will be considered securities for purposes of federal securities laws “is inherently a facts and circumstances determination.” FinHub also noted that any party seeking to structure and sell digital assets like stablecoins should reach out to them to ensure compliance with federal law.

A privacy-focused blockchain startup has filed a registration statement with the SEC related to its ENG tokens. According to the registration statement, “[f]rom June to September 11, 2017, the Company sold approximately 75 million ENG Tokens in exchange for Bitcoin or Ether, valued at approximately $42 million.” The registration statement notes that ENG tokens “currently serve as a payment tool in the Enigma Data Marketplace” and “serve as a way to incentivize and monetize data curation on the Enigma Network, both of which were live as of February 28, 2019.” The registration statement also notes that ENG tokens “should not be viewed as analogous to more traditional securities (i.e., capital stock, debt securities, warrants to purchase capital stock, etc.), as the ENG Tokens lack features of such securities.” When the registration statement goes into effect, the company would be subject to the Exchange Act, which requires filing an annual 10-K, quarterly 10-Q and current 8-K reports. The startup is reportedly one of the companies working on the “Secret Network,” an open source network protecting data for users of decentralized applications, or “secret apps.”

The INX cryptocurrency exchange has begun distributing tokens from its Ethereum-based initial public offering (IPO). Around 210 of the more than 500 registered and whitelisted investors in the company’s IPO have put money into the sale as of Sept. 18, three days after its first distribution transaction happened. In other news, a Nasdaq and SEC-registered fund manager is reportedly launching one of the first cryptocurrency ETFs in Bermuda. According to reports, the crypto-based ETF will be traded on the Bermuda stock exchange (BSX), will be denominated in U.S. dollars and will track an index being developed by Nasdaq.

For more information, please refer to the following links:

US Government Procures Blockchain Solutions, Blockchain Patent Study Published

By: Joanna F. Wasick

The Science and Technology Directorate (S&T), a division of the U.S. Department of Homeland Security (DHS), is offering $25,000 for designing the winning digital wallets to be used with DHS’s work in the blockchain and decentralized identity spaces. S&T states that the wallets must demonstrate ease of use and visual consistency and support interoperability, security and privacy. The search targets freelance designers, and the three finalists will receive $5,000, with an additional $10,000 going to the winner. Applications are being accepted through Oct. 15, and the winner will be named in December. In another government procurement, last week Xage Security, a blockchain-protected security platform company, announced it was awarded a contract by the Air Force Research Lab to evaluate and prepare blockchain-based end-to-end protection solutions across civilian and military assets for the U.S. Space Force, the space warfare service branch of the U.S. armed forces.

Earlier this week, a global intellectual property consulting company published results from a study on the current state of blockchain patents. According to the report, the number of such patents are “skyrocketing,” with more blockchain-related patents published in the first half of 2020 than in all of 2019 – a year that had already seen three times more blockchain patents published than in 2018. The report shows the United States has more blockchain patents than any other country. However, a major Chinese conglomerate published the most patents so far this year – between eight and 10 times as many as the next top applicant, an American computer and technology conglomerate. At this rate, the Chinese company is poised to own the most blockchain patent applications compared to any other entity.

For more information, please refer to the following links:

Hedera Hashgraph Transactions Pass Ethereum, VeChain Supports Food Traceability

By: Veronica Reynolds

After launching its mainnet in September 2019, Hedera Hashgraph, a decentralized public network, recently announced that it now processes 1.5 million daily transactions, almost double that of Ethereum, while its network fees remain relatively stable, according to reports. The Hedera network features multiple enterprise-grade applications hosted by companies across numerous industries, including healthcare, decentralized finance and supply chain management. One such company, Entrust, an Australian agricultural supply chain platform, recently announced its launch on Hedera. The company’s focus is on “securing supply chain growth and trust in the high-value wine and dairy manufacturing industries.”

In China, VeChain, an enterprise-friendly public blockchain, announced last week that it has joined the China Animal Health And Food Safety Alliance (CAFA), a Chinese government-backed organization with more than 130 members that are key players in the country’s food industry. VeChain plans to offer technical and infrastructure support to CAFA and hopes to support the organization’s strategy of “building a from-farm-to-table traceability system across the entire country.”

This week, one of the world’s leading meatpackers announced its plans to help combat deforestation in the Amazon through use of blockchain. The company cites fraud as a major issue that has arisen in the industry, whereby indirect supply-chain participants engage in “laundering” cattle from pastures that operate outside of and in conflict with protocols mandated by the industry. While participants who engage in this type of fraudulent sourcing are currently not being tracked, the hope is that blockchain can be leveraged to identify the parties who source cattle in an unlawful manner and to eradicate their participation from the supply chain.

For more information, please refer to the following links:

DOJ Announces Major Enforcement Action Against Darknet Markets

By: Robert A. Musiala Jr.

This week, the U.S. Department of Justice (DOJ) announced a major enforcement action related to “Operation DisrupTor, a coordinated international effort to disrupt opioid trafficking on the Darknet.” According to a DOJ press release, the operation “resulted in the arrest of 179 Darknet drug traffickers and fraudulent criminals who engaged in tens of thousands of sales of illicit goods and services across the United States and Europe.” As part of the action, U.S. and international law enforcement agencies seized numerous assets, including “over $6.5 million in both cash and virtual currencies.”

For more information, please refer to the following link:

International Law Enforcement Operation Targeting Opioid Traffickers on the Darknet Results in over 170 Arrests Worldwide and the Seizure of Weapons, Drugs and over $6.5 Million

U.S. Crypto Exchange Approved as Wyoming Bank; Firms Integrate Blockchain for Data Management; Multiple Enforcement Actions by Treasury, SEC, DOJ and CFTC

In this issue:

U.S. Crypto Exchange Approved as Wyoming Bank, MSB Regulations to be Simplified

Auto, Mining and Financial Firms Integrate Blockchain for Data Management

OFAC, DOJ, IRS and FATF Take Various Actions Against Cryptocurrency Crimes

SEC Charges ICO Issuers, DOJ and CFTC Charge Defendants in Crypto Fraud Schemes

DOJ, SEC and CFTC Charge Defendants Alleging Cryptocurrency Fraud Schemes

U.S. Crypto Exchange Approved as Wyoming Bank, MSB Regulations to be Simplified

By: Robert A. Musiala Jr.

This week Kraken, a major U.S. cryptocurrency exchange, announced that it has received approval from the State of Wyoming to form a Special Purpose Depository Institution (SPDI), Kraken Financial. According to a blog post, Kraken Financial “will be the first regulated, U.S. bank to provide comprehensive deposit-taking, custody and fiduciary services for digital assets … From paying bills and receiving salaries in cryptocurrency to incorporating digital assets into investment and trading portfolios, Kraken Financial will enable Kraken clients in the U.S. to bank seamlessly between digital assets and national currencies.”

Also this week, a nationwide organization of financial regulators from all 50 U.S. states announced an initiative, MSB Networked Supervision, that will allow “78 of the nation’s largest payments and cryptocurrency companies” to “undergo a single comprehensive exam to satisfy all state regulatory requirements” related to money transmission.

In a recent press release, the U.S. Commodity Futures Trading Commission (CFTC) “granted temporary no-action relief to Tassat Derivatives LLC, a CFTC-registered swap execution facility.” The CFTC action allows Tassat Derivatives LLC to list a bitcoin swap contract in the fourth quarter of 2020.

In international news, the Bank of Thailand recently announced the launch of a “new platform leveraging Blockchain Technology for Government Savings Bond issuance.” And in France, late last week the governor of the Banque de France indicated in a speech that European central banks should consider options for a potential central bank digital currency (CBDC).

For more information, please refer to the following links:

Auto, Mining and Financial Firms Integrate Blockchain for Data Management

By: Jordan R. Silversmith

A major French automobile manufacturer announced this week that it had developed a new blockchain project to track and certify the regulatory compliance of all vehicle components and sub-components used throughout the production chain. The project, based on the Hyperledger Fabric blockchain, creates a trusted network for parts manufacturers and vehicle manufacturers to share and track compliance information.

One of Brazil’s leading mining corporations has announced its first sale of iron ore using blockchain technology. The company reports that using blockchain for the transaction, which involved a cargo of 176,000 tons of material being shipped from Malaysia to China, “drastically reduced” the amount of paperwork and emails exchanged among the parties involved. According to the company, the letter of credit for the sale was issued through the blockchain platform Contour, and all stages of the transaction were consolidated in the Contour blockchain.

CULedger, a credit union service organization (CUSO), issued a press release this week announcing a new initiative relating to identity and fraud protection underpinned by the Hyperledger Indy blockchain. The initiative seeks to advance models for a permanent and portable digital identity that will improve trust in digital interactions with credit unions.

For more information, please refer to the following links:

OFAC, DOJ, IRS and FATF Take Various Actions Against Cryptocurrency Crimes

By: Robert A. Musiala Jr.

On Sept. 10, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) added four Russian individuals to OFAC’s Specially Designated Nationals (SDN) list of sanctioned persons. According to a press release, the individuals were added to the SDN list due to their involvement with attempts to influence the U.S. electoral process through “cultivating false and unsubstantiated narratives concerning U.S. officials” and “providing material support” to the Internet Research Agency, a “Russian troll factory.” In a similar action, on Sept. 16 OFAC sanctioned two more Russian nationals “for their involvement in a sophisticated phishing campaign” that targeted customers at two U.S. cryptocurrency exchanges and one foreign cryptocurrency exchange and “resulted in combined losses of at least $16.8 million.” As part of these actions, Treasury added multiple cryptocurrency addresses to the OFAC SDN list that were used to facilitate the activities of the sanctioned individuals.

A recent press release from the U.S. Department of Justice (DOJ) provided details on charges against a Russian national “for his alleged role in a conspiracy to use the stolen identities of real U.S. persons to open fraudulent accounts at banking and cryptocurrency exchanges.” The charges relate to “Project Lakhta,” which is described as “a Russia-based effort to engage in political and electoral interference operations.” The scheme allegedly involved the Internet Research Agency, which was mentioned in the OFAC press release described above.

According to another recent DOJ press release, the DOJ has brought charges against “five computer hackers, all of whom were residents and nationals of the People’s Republic of China (PRC), with computer intrusions affecting over 100 victim companies in the United States and abroad.” Among other things, the DOJ alleges that the hackers’ activities included ransomware, crypto-jacking, and “unauthorized use of victim computers to “mine” cryptocurrency.”

A recent solicitation by the U.S. Internal Revenue Service (IRS) is seeking to procure tools for tracing and attribution of privacy focused cryptocurrencies like Monero. According to reports, proposals accepted by the IRS will receive an initial payment of $500,000 and will be eligible for a further grant of $125,000.

In a final notable development, a recent report from the Financial Action Task Force (FATF) provides details on red flag indicators of money laundering and terrorist financing involving cryptocurrency transactions. The FATF report was published on Sept. 14.

For more information, please refer to the following links:

SEC Charges ICO Issuers, DOJ and CFTC Charge Defendants in Crypto Fraud Schemes

By: Marc D. Powers

The Securities and Exchange Commission (“SEC”) settled an enforcement action this week involving registration violations of the federal securities laws related to an initial coin offering (ICO). The SEC Order alleged that Unikrn Inc., an operator of an online eSports gaming and gambling platform based in Seattle, Washington, conducted an unregistered ICO of its UnikoinGold (UKG) token between June and October 2017. The Order found that Unikrn planned to use the ICO proceeds to add features on the gaming platform and to develop additional applications for the UKG tokens, and that Unikrn promised it would facilitate an increase in the value of UKG with a secondary trading market. Notably the ICO continued after the SEC’s issuance of The DAO Report on July 25, 2017, where it warned the public and companies against the issuance of tokens in ICOs or otherwise that might be subject to U.S. registration laws. Unikrn agreed to settle the charges by paying a $6.1 million penalty, which was alleged to be substantially all of its assets, to be distributed to investors through a Fair Fund under the securities laws. It also agreed to disable the UKG token and remove it from all digital asset trading platforms.

In a public statement, SEC Commissioner Hester Peirce disagreed that the Unikrn offering constituted a securities offering. Commissioner Peirce’s statement noted that no fraud was involved and that the enforcement action will “effectively force the company to cease operations.” In her statement, Commissioner Peirce promoted her previously published idea of a safe harbor that would have afforded a company like Unikrn a three-year regulatory window within which to further develop and refine its platform with ultimate benefits to token purchasers, token issuers and the Commission. In disagreeing with the SEC’s action against Unikrn, Commissioner Peirce said, ”[p]osterity will feel the cumulative loss to society of innovation forgone because of such actions.”

For more information, please refer to the following links:

DOJ, SEC and CFTC Charge Defendants Alleging Cryptocurrency Fraud Schemes

By: Marc D. Powers

In another series of civil, criminal and administrative actions by the SEC and DOJ, allegations of fraud, manipulation and registration violations were brought against film producer, Ryan Felton, in Georgia for two unregistered ICOs involving the tokens of FLiK and CoinSpark. Also charged with fraud is rapper and actor, Clifford Harris, Jr, known as T.I. or Tip, and three others who are alleged to have promoted the offerings. The complaint alleges that Felton promised to build a digital streaming platform for FLiK, and a digital-asset trading platform for CoinSpark, but instead misappropriated the funds, and reaped an additional $2.2 million from trading and manipulating the SPARK token.

In a DOJ action filed in Miami, a Washington, D.C. man, Jose Angel Aman, was criminally charged with running a Ponzi scheme from May 2014 through May 2019 where he solicited people in the U.S. and Canada to invest in diamond contracts purportedly valued at $25 million.  According to a DOJ press release, when the scheme was about to collapse, Aman set up a new business to perpetuate the fraud scheme by claiming to develop a cryptocurrency token backed by diamonds.

This week the Commodity Futures Trading Commission filed a complaint in Texas against four individuals for fraudulently soliciting investors to speculate in bitcoin price movements. The complaint alleges that from August 2016 through October 2017, the defendants raised almost $1 million from 27 customers by, among other things, falsely representing that their business, Global Trading Club, employed traders who had years of experience trading bitcoin “24 hours a day, 7 days a week.”

For more information, please refer to the following links:

CBDC Test Platform Launches, Crypto Adoption Report Published; Air Force Awards Contract to Study Blockchain Applications; Past Bitcoin Code Vulnerabilities Disclosed

In this issue:

CBDC Testing Platform Launches, Crypto Adoption and Bitcoin Payment Options Grow

Air Force Awards Contract to Study Blockchain, Retailer Reports Successful Invoice Pilot

Hackers Demand $4 Million Bitcoin Ransom, Past Bitcoin Code Vulnerabilities Disclosed

CBDC Testing Platform Launches, Crypto Adoption and Bitcoin Payment Options Grow

By: Robert A. Musiala Jr.

According to a recent press release, a major U.S. financial services firm has launched a “custom testing platform” that “allows central banks to evaluate use cases and test roll-out strategies” for central bank backed digital currencies (CBDCs). The press release cites research stating that “80 percent of central banks surveyed are engaging in some form of CBDCs work, and about 40 percent … have progressed from conceptual research to experimenting with concept and design.” The recently launched testing platform reportedly allows users to simulate a CBDC issuance, distribution and exchange ecosystem; demonstrate how a CBDC can be used to pay for goods and services; examine various technology designs; and evaluate technical build, security, design and operations.

This week blockchain analytics firm Chainalysis released an excerpt from its forthcoming “Chainalysis 2020 Geography of Cryptocurrency Report.” The excerpt discusses the firm’s Global Crypto Adoption Index, which seeks to quantify the differences in cryptocurrency adoption across the globe. Among other findings, the excerpt ranks the top 10 countries “where the most residents have moved the biggest share of their financial activity to cryptocurrency.” In order of one to 10, these are Ukraine, Russia, Venezuela, China, Kenya, the U.S., South Africa, Nigeria, Colombia and Vietnam.

According to recent reports, a major British online food delivery platform has enabled bitcoin payments for its French subsidiary using the services of a major U.S. bitcoin payment processor. Notably, if a bitcoin payment is canceled, “the customer will be refunded in Euros, with payment being sent to a customer’s traditional bank account.”

For more information, please refer to the following links:

Air Force Awards Contract to Study Blockchain, Retailer Reports Successful Invoice Pilot

By: Jordan R. Silversmith

A major U.S. defense contractor recently won a nearly $500,000 contract from the U.S. Air Force to study ways to implement blockchain technology within battle management systems. The contract calls for the contractor’s tech researchers to consider how distributed ledger technology (DLT) can help otherwise centralized Command and Control systems become less vulnerable to enemy attacks and better capable of ensuring the safety and success of Air Force pilots.

The Canadian division of an American retail giant that has deployed a blockchain solution to pay trucking companies has reported a 97 percent drop in invoice disputes with carriers. The corporation turned to DLT Labs, a Toronto-based startup, to deploy a customized version of its freight invoice and payment system. By the end of last month, the system had reportedly processed over 150,000 invoices, with fewer than 2 percent resulting in disputes. The system began as a pilot and now serves as the national standard for the Canadian division of the corporation’s carrier invoicing and payments. The company is also exploring new ways to leverage the platform to improve load visibility.

For more information, please refer to the following links:

Hackers Demand $4 Million Bitcoin Ransom, Past Bitcoin Code Vulnerabilities Disclosed

By: Joanna F. Wasick

Argentina’s national immigration agency recently suffered a Netwalker ransomware attack in which hackers demanded $4 million in bitcoin, and which resulted in a temporary shutdown of all border crossings. The Argentinian government learned of the attack on August 27, according to a criminal complaint published by its cybercrime agency, after receiving numerous calls from various checkpoints requesting technical support. The situation was evaluated, and it became clear that a ransomware virus had affected network systems. To prevent the further spread of the virus, the agency’s computer networks were shut down for about four hours, during which time the border was closed. In response to the $4 million ransom demand, government authorities said that they refused to negotiate with the hackers, and that they were not overly concerned with retrieving compromised data, which purportedly lacked any sensitive, personal or corporate information.

According to a paper published earlier this week by protocol engineer Braydon Fuller and core developer Javed Khan, a previously undisclosed denial-of-service vulnerability in the Bitcoin Core software was quietly patched about two years ago, and again earlier this year. The paper describes how the vulnerability was first detected by Fuller in June 2018, and was covertly patched the next day. On June 26, 2020, the vulnerability was reportedly found in other network areas by Khan, and it again was patched shortly thereafter. The vulnerability could have allowed attackers to steal funds, delay settlements or split the Bitcoin network into conflicting versions. It was given a severity level of 7.8 out of 10, which is deemed “high.”

For more information, please refer to the following links:

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