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In this issue:
• <a href="#Central">Central Bank Digital Currencies Explored in Thailand, Japan and Sweden</a>
• <a href="#US">US Crypto Firm Seeks Clearing Agency License, New Lobbying Group Formed</a>
• <a href="#DOJ">DOJ Targets Unlicensed Bitcoin Money Transmitter, ICO Extortion Scheme</a>
<a id="Central"></a>Central Bank Digital Currencies Explored in Thailand, Japan and Sweden
By: <a href="https://www.bakerlaw.com/VeronicaReynolds">Veronica Reynolds</a>
According to a recent press release, the Bank of Thailand (BOT) is seeking public comment on the issuance and development of a Retail Central Bank Digital Currency (CBDC), an easily portable “digital form of money issued by the central bank comparable to physical banknotes,” which can be used in online and offline financial transactions. The main objective of the BOT’s exploration of Retail CBDC is to provide citizens with broader access to secure financial services. The BOT seeks to pilot Retail CBDC in spring 2022.
Similarly, the Bank of Japan recently announced plans to experiment with CBDC this year “to test the technical feasibility of the core functions and features required for CBDC.” Phase 1, Proof of Concept, began this week, with the goal being to “develop a test environment for the CBDC system and conduct experiments on the basic functions that are core to CBDC as a payment instrument such as issuance, distribution, and redemption.” Phase 1 is anticipated to last one year, with the goal being to test the functionality of CBDC and document key takeaways.
Sweden, too, announced CBDC-related news this week, with the country’s central bank, Sveriges Riksbank, publishing a recent study outlining the results of its digital currency pilot on a network based on R3’s Corda blockchain. The report cites, among other things, scalability as a major bottleneck in the development and adoption of the technology. Other issues also emerged from the report, including the need to protect information implicated in e-krona transactions in order to safeguard personal data and comply with bank secrecy laws. The head of Riksbank’s e-krona pilot division, Mithra Sundberg, said that Sweden’s CBDC may require “a new legal framework” before it can be launched.
For more information, please refer to the following links:
<ul>
<li><a href="https://www.bot.or.th/English/PressandSpeeches/Press/2021/Pages/n2164.aspx">The Way Forward for Retail Central Bank Digital Currency (CBDC) in Thailand</a></li>
<li><a href="https://www.coindesk.com/thai-central-bank-to-pilot-its-retail-central-bank-digital-currency-in-2022-report">Thai Central Bank to Pilot Its Retail Central Bank Digital Currency in 2022: Report</a></li>
<li><a href="https://www.boj.or.jp/en/announcements/release_2021/rel210405b.pdf">Commencement of Central Bank Digital Currency Experiments</a></li>
<li><a href="https://www.coindesk.com/boj-starts-central-bank-digital-currency-experiments">BOJ Starts Central Bank Digital Currency Experiments</a></li>
<li><a href="https://www.riksbank.se/globalassets/media/rapporter/e-krona/2021/e-krona-pilot-phase-1.pdf">Sveriges Riksbank: E-krona pilot Phase 1</a></li>
<li><a href="https://cointelegraph.com/news/sweden-s-central-bank-completes-first-phase-of-digital-currency-pilot">Sweden’s central bank completes first phase of digital currency pilot</a></li>
</ul>
<a id="US"></a>US Crypto Firm Seeks Clearing Agency License, New Lobbying Group Formed
By: <a href="https://www.bakerlaw.com/TeresaGoodyGuillen">Teresa Goody Guillén</a>
A New York-based cryptocurrency firm recently announced that it will apply for a clearing agency license from the U.S. Securities and Exchange Commission (SEC) and hopes to secure registration in 2021. A clearing agency is an intermediary that facilitates the settlement of a trade between a buyer and a seller. Current settlement systems take two days to settle a trade. The crypto firm’s announcement follows its same-day trade settlement pilot test. This is reportedly the first live application of blockchain technology for equities markets in the United States. Reports state that, in February, the Depository Trust and Clearing Corporation said reducing the settlement time to one day would reduce market risk and lower margin requirements, especially during particularly volatile market conditions.
A group of major companies has formed the Crypto Council for Innovation to lobby policymakers. The council’s stated mission is to demonstrate the “transformational promise of crypto and communicate its benefits to policymakers, regulators, and people around the globe.” The council reportedly plans to appoint a board that would include each of the four initial members and add an executive team.
The U.K.’s Financial Conduct Authority (FCA) announced that it will increase its anti-money laundering supervision by expanding the types of companies that have to submit a special financial crime log to the FCA (known as REP-CRIM reports) to include cryptocurrency firms. The FCA stated that this will increase the number of reporting companies from 2,500 to 7,000 and brings the cryptocurrency sector further into line with banks and other finance firms. Companies that have been added to the list of reporting companies are required to start submitting financial crime reports in their first annual report after January 2022.
For more information, please refer to the following links:
<ul>
<li><a href="https://www.reuters.com/article/idUSKBN2BT1WV">Cryptocurrency firm Paxos to apply for clearing agency license</a></li>
<li><a href="https://www.theblockcrypto.com/linked/100632/fidelity-coinbase-square-crypto-council">Fidelity, Coinbase, Square form crypto council to lobby policy makers</a></li>
<li><a href="https://www.law360.com/fintech/articles/1370867/fca-extends-aml-reporting-rules-to-crypto-asset-firms?nl_pk=d839899d-0537-414a-b7cc-d6d00bb8e8ff&utm_source=newsletter&utm_medium=email&utm_campaign=fintech">FCA Extends AML Reporting Rules To Crypto-Asset Firms</a></li>
</ul>
<a id="DOJ"></a>DOJ Targets Unlicensed Bitcoin Money Transmitter, ICO Extortion Scheme
By: <a href="https://www.bakerlaw.com/JoannaFWasick">Joanna F. Wasick</a>
On Monday, the U.S. Department of Justice (DOJ) announced that a New Jersey resident pled guilty to one count of running an unlicensed money transmitting business. According to the government, the individual had operated a website through which he converted clients’ fiat currency into bitcoin, transferred the bitcoin to client wallets and charged a fee for his services. The announcement contained no allegations of fraud or other wrongdoing, other than not registering his business as required by federal law.
In another announcement issued on Monday, the DOJ reported that Michael Hlady pled guilty in a Brooklyn federal court to conspiring to extort a startup company for millions of dollars’ worth of ether (ETH). According to court documents, while the company was planning its initial coin offering (ICO) in 2017, Hlady and a co-conspirator repeatedly threatened that they would destroy the company and its community unless the company sent them additional funds and company tokens. The company transferred 10,000 ETH in response to the threats.
According to reports published this week, South Korean prosecutors have sold bitcoin for the first time in the country’s history, transferring the proceeds into the national treasury. The 191 bitcoin had been confiscated in April 2017 from the operator of an illegal pornography site. While other countries, such as the United States, have been auctioning confiscated bitcoin for years, South Korean prosecutors have held on to the cryptocurrency due to legal ambiguity regarding its treatment. However, this recent sale follows the passage of the country’s new cryptocurrency legislation, which went into effect at the end of March.
For more information, please refer to the following links:
<ul>
<li><a href="https://www.justice.gov/usao-nj/pr/new-jersey-man-admits-operating-illegal-bitcoin-exchange">New Jersey Man Admits Operating Illegal Bitcoin Exchange</a></li>
<li><a href="https://www.justice.gov/usao-edny/pr/individual-pleads-guilty-brooklyn-federal-court-extorting-cryptocurrency-startup">Individual Pleads Guilty in Brooklyn Federal Court to Extorting Cryptocurrency from Startup Company</a></li>
<li><a href="https://www.coindesk.com/korea-prosecutors-sell-bitcoin-taken-from-criminals">South Korean Prosecutors Sell (and Profit Off) Bitcoin Taken From Criminals</a></li>
</ul>

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Joanna F. Wasick

Blockchain Technologies and Digital Assets

CBDC Initiatives Announced Across Globe, US Crypto Firms Pursue Licenses and Form Lobbying Groups, DOJ Targets Unlicensed Crypto MSB

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