The Blockchain Monitor

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In this issue:
• <a href="#Patents">Patents Granted to Blockchain Payments Firms, Crypto Mining Expands in Texas and Russia</a>
• <a href="#First">First ICO Is Approved Under New French Law, New Crypto Bill Is Introduced in US</a>
• <a href="#DOJ">DOJ Prosecutes Crypto Dark Markets, INTERPOL Fights Crypto Mining Malware</a>
• <a href="#Lawsuit">Lawsuit Alleges Legal Malpractice Related to Crypto-Assets Deemed Securities, SEC 2020 Priorities Address Digital Assets</a>
<a id="Patents"></a>Patents Granted to Blockchain Payments Firms, Crypto Mining Expands in Texas and Russia

By: <a href="https://www.bakerlaw.com/SimoneOOtenaike">Simone O. Otenaike</a>

Last month, a U.S. patent was reportedly granted to a major U.S. cryptocurrency exchange for a new system that would allow users to make bitcoin payments with email addresses linked to corresponding wallet addresses. According to the patent, the system does not charge user fees and would take 48 hours to complete a transaction once the receiver accepts the payment. Two other patents were also granted to the exchange last month. Earlier this week, R3 also reportedly received a patent for its blockchain-based record system. The system purportedly manages transaction records in digital documents and provides companies with a shared distributed immutable data record for all stakeholders to access – thus reducing the likelihood of slight disparities that cause miscommunications and legal disputes.

A private equity firm and a Japanese internet service provider will reportedly team up to launch a new crypto mine in Rockdale, Texas. The data center will reportedly have an initial capacity of 300 megawatts with the potential to reach 1 gigawatt, which is three times the capacity of existing large crypto mines. According to reports, Texas’ cheap energy and renewable resources make it an attractive location for crypto miners. On the international front, a state-owned nuclear power plant in Russia will soon house a data center where bitcoin miners can rent space and purchase electricity. The new data center will reportedly have 30 containers on-site with room for roughly 400 mining computers in each container.

The Organization for Economic Cooperation and Development (OECD) recently released a new report on consumer attitudes, behaviors and experiences toward crypto assets in Asia. The markets selected for this research were Malaysia, the Philippines and Vietnam. The report provides a few policy considerations to promote and improve consumer protection and financial education.

For more information, please refer to the following links:
<ul>
 	<li><a href="https://www.coindesk.com/coinbase-ceo-armstrong-wins-patent-for-tech-allowing-users-to-email-bitcoin">Coinbase CEO Armstrong Wins Patent for Tech Allowing Users to Email Bitcoin</a></li>
 	<li><a href="https://www.coindesk.com/blockchain-vendor-r3-scores-its-second-patent-in-a-week">Blockchain Vendor R3 Scores Its Second Patent in a Week</a></li>
 	<li><a href="https://www.bloomberg.com/news/articles/2020-01-07/world-s-largest-bitcoin-mine-said-to-land-sbi-gmo-as-customers">World’s Largest Bitcoin Mine Lures New Clients to Texas Hotspot</a></li>
 	<li><a href="https://www.coindesk.com/a-russian-nuclear-plant-is-renting-space-to-energy-hungry-bitcoin-miners">A Russian Nuclear Plant Is Renting Space to Energy-Hungry Bitcoin Miners</a></li>
 	<li><a href="https://www.oecd.org/countries/malaysia/2019-cryptoassets-in-asia.pdf">OECD: CRYPTOASSETS IN ASIA Consumer attitudes, behaviours and experiences</a></li>
</ul>
<a id="First"></a>First ICO Is Approved Under New French Law, New Crypto Bill Is Introduced in US

By: <a href="https://www.bakerlaw.com/JoannaFWasick">Joanna F. Wasick</a>

Last month, France’s Financial Markets Authority (AMF) announced its first approval for an initial coin offering (ICO). The approval, known as an “ICO visa,” was granted to French ICO, a company that offers a platform for fundraising in crypto assets, and is reportedly capped at €1 million and in effect until June 1, 2020. In granting the ICO visa, the AMF considered whether a number of criteria had been met, including that the issuer of the tokens was incorporated as a legal entity established or registered in France, and that the issuer had proper systems in place to prevent money laundering and terrorist financing. This approval was made in conjunction with French Law No. 2019-486 of 22 May 2019, also referred to as the Action Plan for Business Growth and Transformation law, a comprehensive legal framework for cryptocurrencies that was adopted last spring.

In the United States, a bill was recently introduced to Congress called the “Crypto-Currency Act of 2020,” which, among other things, purports to clarify which federal agencies are to regulate digital assets. The bill recognizes three separate kinds of assets. The first are “crypto-commodities” (economic goods or services), which the bill proposes should be regulated by the Commodity Futures Trading Commission. The second are “crypto-currencies” (representations of U.S. currency or “synthetic derivatives resting on a blockchain”), which should be regulated by the Financial Crimes Enforcement Network (FinCEN). And the third, “crypto-securities” (debt, equity and derivative instruments that reside on a blockchain), should be regulated by the Securities and Exchange Commission (SEC). The act also provides definitions of “decentralized oracle,” “digital asset,” “federal crypto regulator,” “reserve-backed stablecoin” and “synthetic stablecoin.” It is unclear whether the bill will proceed past any current preliminary stages.

For more information, please refer to the following links:
<ul>
 	<li><a href="https://www.amf-france.org/en_US/Reglementation/Dossiers-thematiques/Societes-cotees-et-operations-financieres/Marches-d-actions/L-AMF-d-livre-son-premier-visa-sur-une-offre-au-public-de-jetons--ICO-">The AMF grants its first optional approval to an initial coin offering (ICO)</a></li>
 	<li><a href="https://www.coindesk.com/french-financial-watchdog-approves-first-ico-under-new-visa-scheme">French Financial Watchdog Approves First ICO Under New ‘Visa’ Scheme</a></li>
 	<li><a href="https://www.coindesk.com/crypto-firms-can-now-apply-for-a-license-in-france">Crypto Firms Can Now Apply for a License in France</a></li>
 	<li><a href="https://www-forbes-com.cdn.ampproject.org/c/s/www.forbes.com/sites/jasonbrett/2019/12/19/congress-considers-federal-crypto-regulators-in-new-cryptocurrency-act-of-2020/amp/">Congress Considers Federal Crypto Regulators In New Cryptocurrency Act Of 2020</a></li>
 	<li><a href="https://www.law360.com/fintech/articles/1230251/ecb-head-warns-of-libra-stablecoin-risks-in-letter-to-eu?nl_pk=d839899d-0537-414a-b7cc-d6d00bb8e8ff&amp;utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=fintech">ECB Head Warns Of Libra Stablecoin Risks In Letter To EU</a></li>
</ul>
<a id="DOJ"></a>DOJ Prosecutes Crypto Dark Markets, INTERPOL Fights Crypto Mining Malware

By: <a href="https://www.bakerlaw.com/VeronicaReynolds">Veronica Reynolds</a>

An Illinois man pled guilty this week to using the dark web and cryptocurrencies to pedal at least 4.3 million counterfeit Xanax pills throughout the United States between March 2017 and May 2018. The man was sentenced to 13 years in federal prison and ordered to disgorge more than $2.1 million in profits generated from the scheme. Last week in New York, prosecutors arraigned a woman accused of using dark markets to distribute heroin and methamphetamine to customers who paid her in bitcoin.

According to a press release published this week, the International Criminal Police Organization (INTERPOL), an intergovernmental law enforcement organization, worked with private-sector cybersecurity firms to identify a vulnerability in MikroTik routers that was facilitating massive crypto-jacking campaigns in Southeast Asia. The collaboration, led by INTERPOL, reportedly resulted in a 78 percent decrease in infected devices.

Kraken, one of the world’s largest cryptocurrency exchanges, announced this week that data requests from law enforcement rose by almost 50 percent in 2019. The United States made more requests than any other country – almost 61 percent of all requests – with the United Kingdom taking second place, submitting 12 percent of the total. Kraken’s CEO and co-founder, Jesse Powell, said that the cost associated with responding to the sharp rise in law enforcement requests in 2019 was more than $1 million.

For more information, please refer to the following links:
<ul>
 	<li><a href="https://www.justice.gov/usao-cdil/pr/champaign-man-sentenced-13-years-prison-trafficking-millions-counterfeit-xanax-pills">Champaign Man Sentenced to 13 Years in Prison for Trafficking Millions of Counterfeit Xanax Pills on Darknet, Money Laundering</a></li>
 	<li><a href="https://www.justice.gov/usao-edny/pr/alleged-dark-web-narcotics-trafficker-indicted-distributing-heroin-and-methamphetamine">Alleged Dark Web Narcotics Trafficker Indicted for Distributing Heroin and Methamphetamine in Exchange for Bitcoin</a></li>
 	<li><a href="https://blog.trendmicro.com/interpol-collaboration-reduces-cryptojacking-by-78/">INTERPOL Collaboration Reduces Cryptojacking by 78%</a></li>
 	<li><a href="https://www.interpol.int/en/News-and-Events/News/2020/INTERPOL-led-action-takes-aim-at-cryptojacking-in-Southeast-Asia">INTERPOL-led action takes aim at cryptojacking in Southeast Asia</a></li>
 	<li><a href="https://www.coindesk.com/law-enforcement-data-requests-rose-by-almost-50-in-2019-says-kraken">Cryptocurrency exchange Kraken has said the cost of responding to law enforcement requests for user data is rising sharply year on year</a></li>
</ul>
<a id="Lawsuit"></a>Lawsuit Alleges Legal Malpractice Related to Crypto-Assets Deemed Securities, SEC 2020 Priorities Address Digital Assets

By: Veronica Reynolds

Two related cryptocurrency investment companies and their founder recently filed a malpractice claim against their former law firm, after the SEC ordered the companies and their founder to pay a $200,000 fine for promoting “the first regulated Crypto Asset Fund in the United States” and raising around $3.6 million from 44 investors without first registering as an investment company with the SEC. The complaint alleges that the law firm “provided inaccurate analysis and advice” when it told the investment companies that their crypto-assets were not securities.

The SEC’s Office of Compliance Inspections and Examinations published its <a href="https://www.sec.gov/about/offices/ocie/national-examination-program-priorities-2020.pdf">2020 Examination Priorities</a>. The publication confirmed that the SEC will prioritize the evaluation of digital asset markets in order to protect retail investors. Such oversight will include assessing the safety of client funds, the suitability of investments, trading practices and portfolio management, valuation and pricing, compliance protocols, transfer agents, and outside business activities conducted by employees of digital asset market participants.

For more information, please refer to the following links:
<ul>
 	<li><a href="https://www.law360.com/fintech/articles/1230865/crypto-biz-blames-faegrebd-s-advice-for-200k-sec-fine?nl_pk=d839899d-0537-414a-b7cc-d6d00bb8e8ff&amp;utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=fintech">Crypto Biz Blames FaegreBD’s Advice For $200K SEC Fine</a></li>
 	<li><a href="https://www.theblockcrypto.com/linked/51946/crypto-fund-has-sued-law-firm-faegre-baker-for-erroneous-legal-advice">Crypto fund has sued law firm Faegre Baker for ‘erroneous’ legal advice</a></li>
 	<li><a href="https://www.coindesk.com/sec-examination-office-gets-specific-about-crypto-priorities-in-2020">The Securities and Exchange Commission (SEC) will continue its evaluation of cryptocurrency-based securities for U.S. retail investors</a></li>
</ul>

New Blockchain Patents, Crypto Mining Expands in US and Russia, French ICO Approved Under New Law, DOJ and INTERPOL Enforcement Actions