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Home | BakerHostetler

James Sherer Comments on Client Questions Post-Election in Law.com and The Recorder Articles

Peter Roskam and BakerHostetler’s Post-Election Webinar Mentioned in Articles on Trump’s Second Administration

Michael Snarr Comments on Tariffs and Trade Under New Administration

Sarah La Voi, Lauren Bass Pen Article for The Licensing Journal on Morals Clause

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• <a href="#New">New Products Launch for Crypto Futures, Wallets, Stablecoins and Settlement</a> • <a href="#From">From Sports to Fashion to Travel, Brands Continue to Embrace NFTs</a> • <a href="#US">US House of Representatives Committees Publish Draft Crypto Legislation</a> • <a href="#SEC">SEC Charges Cryptocurrency Exchanges with Securities Law Violations</a> • <a href="#DA">DA Seizes Fraudulent Crypto Website; South Korea Sanctions Crypto Public Keys</a> • <a href="#Crypto">Crypto Wallet Provider Hacked for $35 Million; New Crypto Hack Data Published</a>

New Products Launch for Crypto Futures, Wallets, Stablecoins and Settlement

By <a href="https://www.bakerlaw.com/ChristopherLamb">Christopher Lamb</a>

According to a recent press release, a leading global options exchange has received the necessary approval from the U.S. Commodity Futures Trading Commission to offer margined futures contracts for “physically and financially settled Bitcoin and Ether contracts.” According to the press release, this will be the “first U.S. regulated crypto native exchange and clearinghouse combination platform to offer leveraged derivative products.”

In further news, two private blockchain software technology companies recently announced the integration of a “web3 wallet for organizations and the first multi-custodial institutional web3 offering on the market.” According to a press release, the integration “will allow users to access over 17,000 DeFi and web3 dapps” when they connect their accounts through the web3 wallet. The wallet provider now offers access to 12 custodians and custody technology providers through its services.

According to another recent press release, “Asia’s leading qualified custodian and registered trust company” is launching a new stablecoin, First Digital USD (FDUSD), intended to be “backed on a 1:1 basis by one U.S. dollar or asset of equivalent fair value, held in accounts of regulated financial institutions in Asia.” According to the press release, FDUSD reserves will be held in segregated accounts restricting any co-mingling with other assets, which “ensures that holders of FDUSD can remain confident in the 1:1 backing of the tokens and the ability to redeem their stablecoins.”

In a final recent development, a global member-owned cooperative and a leading provider of secure financial messaging services is collaborating with more than a dozen major financial institutions “to test how firms can leverage their existing [] infrastructure to efficiently instruct the transfer of tokenized value over a range of public and private blockchain networks.” According to a press release, the global cooperative is “focused on enabling instant, frictionless and interoperable transactions” and wishes to use its “existing infrastructure … as a single access point to multiple tokenization platforms operated by financial institutions running on top of private blockchains.”

For more information, please refer to the following links:

<a href="https://ir.cboe.com/news-and-events/2023/06-06-2023/cboe-digital-receives-approval-launch-margin-futures-bitcoin-and-ether">Cboe Digital Receives Approval to Launch Margin Futures on Bitcoin and Ether</a>

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<a href="https://www.swift.com/news-events/news/swift-explores-blockchain-interoperability-remove-friction-tokenised-asset-settlement">Swift explores blockchain interoperability to remove friction from tokenised asset settlement</a>

<a href="https://www.prnewswire.com/news-releases/first-digital-group-is-propelling-digital-asset-innovation-with-the-launch-of-its-new-stablecoin-fdusd-bridging-stability-with-innovation-to-revolutionise-the-existing-global-financial-landscape-301839437.html">First Digital Group is propelling digital asset innovation with the launch of its new stablecoin FDUSD, bridging stability with innovation to revolutionise the existing global financial landscape</a>

<a href="https://www.businesswire.com/news/home/20230608005408/en/MetaMask-Institutional-and-Fireblocks-Integrate-to-Offer-Unrivaled-DeFi-and-Web3-Access-to-Institutional-Investors-and-Builders">MetaMask Institutional and Fireblocks Integrate to Offer Unrivaled DeFi and Web3 Access to Institutional Investors and Builders</a>

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From Sports to Fashion to Travel, Brands Continue to Embrace NFTs

By <a href="https://www.bakerlaw.com/LaurenBass">Lauren Bass</a>

A major sportswear brand recently announced a partnership by which its NFT (non-fungible token) platform would be integrated into video games produced by one of the top video game publishers. According to a press release, the collaboration aims to build “new immersive experiences,” allow members of the digital community to customize and “express their personal style through play,” and offer unique virtual creations within the games.

According to reports, Japan’s largest airline recently announced the launch of its own NFT platform. The digital collectible space will reportedly offer aeronautical-themed tokens.

In a final notable item, a French luxury fashion house recently announced the launch of an NFT collection featuring digital versions of its iconic travel trunks. These NFTs are reportedly being released as soulbound tokens (SBTs), which would allow owners to unlock never-before-seen creations of the fashion house’s designs, and which offer exclusive access to unique physical, real-world items. Each NFT is reportedly selling for €39,000 (approx. $42k USD) and will be available for purchase through an invitation-only event.

<a href="https://cointelegraph.com/news/nike-nft-swoosh-ea-sports-games">Nike NFTs to make their way into EA Sports games and its millions of fans</a>

<a href="https://about.nike.com/en/newsroom/releases/nike-virtual-studios-dot-swoosh-ea-sports-partnership">Nike Virtual Studios and EA SPORTS Will Bring .SWOOSH Virtual Creations to EA SPORTS Experiences</a>

<a href="https://cointelegraph.com/news/louis-vuitton-embraces-web3-launches-its-iconic-trunk-as-a-digital-collectible">Louis Vuitton embraces Web3, launches its iconic trunk as a digital collectible</a>

<a href="https://cointelegraph.com/news/japan-s-largest-airline-launches-nft-marketplace">Japan’s largest airline launches NFT marketplace</a>

US House of Representatives Committees Publish Draft Crypto Legislation

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

Lawmakers recently published a draft legislative framework for the regulation of digital assets. The proposed bill contemplates that oversight of digital assets be the responsibility of both the CFTC and the SEC, and was proposed by the Financial Services Committee Chair Patrick McHenry, R.-N.C., and Committee on Agriculture Chair Glenn “GT” Thompson, R.-PA.

Among other things, the draft bill proposes that digital assets offered as investment contracts be regulated by the SEC. It also provides a path for digital asset issuers to later request that the digital asset be deemed a commodity if certain requirements for decentralization of the protocol (i.e., lack of centralized control) are met. Issuers would have to apply to the SEC to be considered for the exemption. The SEC would be required to issue a “detailed analysis” if it objects to any applicant seeking the exemption.

The draft bill would also provide a path to compliance for digital asset exchanges and commodity brokers and dealers (Centralized Finance or CeFi). For example, it would allow centralized exchanges to list payment stablecoins and digital asset commodities if certain requirements were met. It would also require that digital asset exchanges and commodity brokers and dealers disclose to the CFTC certain company information through a provisional registration statement, submit to inspection by the agency, and segregate customer assets. Digital assets that meet the draft bill’s definition of “restricted digital assets” (i.e., assets that are purchased from an issuer in a private offering or distributed to end users) would trigger enhanced disclosure requirements from the issuer.

<a href="https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408838">McHenry, Thompson, Hill, Johnson Release Digital Asset Market Structure Proposal</a>

<a href="https://www.law360.com/fintech/articles/1684294?nl_pk=29db16e3-a668-4467-8edd-c9d367a4b33a&utm_source=newsletter&utm_medium=email&utm_campaign=fintech&utm_content=2023-06-05&nlsidx=0&nlaidx=0">GOP House Committee Chairs Unveil Crypto Framework</a>

SEC Charges Cryptocurrency Exchanges with Securities Law Violations

By <a href="https://www.bakerlaw.com/RobertAMusiala">Robert A. Musiala Jr.</a>

Recently, over the course of two days, the U.S. Securities and Exchange Commission (SEC) issued two press releases announcing charges against two major cryptocurrency exchanges. The first press release announced 13 charges for violations of the U.S. securities laws against various entities used to operate the world’s largest cryptocurrency exchange by volume. The second press release announced charges against a major U.S. crypto exchange for multiple violations of U.S. securities laws. The same major U.S. crypto exchange was also issued a Show Cause Order by a multi-state task force of 10 state securities regulators, which gives the exchange 28 days to show cause why it should not be directed to cease and desist from selling unregistered securities with respect to the exchange’s staking rewards program. In a recent article that accounts for the SEC complaints filed in these actions, Cointelegraph listed a total of 68 digital assets that have now been labeled as securities by the SEC over the course of multiple SEC enforcement actions in the past several years.

<a href="https://www.sec.gov/news/press-release/2023-101">SEC Files 13 Charges Against Binance Entities and Founder Changpeng Zhao</a>

<a href="https://www.sec.gov/news/press-release/2023-102">SEC Charges Coinbase for Operating as an Unregistered Securities Exchange, Broker, and Clearing Agency</a>

<a href="https://asc.alabama.gov/News/2023%20News/6-6-2023_Coinbase.pdf">Alabama Securities Commission Issues Show Cause Order to Crypto Asset Company Coinbase</a>

<a href="https://cointelegraph.com/news/sec-labels-61-cryptocurrencies-securities-after-binance-suit">Binance lawsuit: 68 cryptocurrencies are now seen as securities by the SEC</a>

DA Seizes Fraudulent Crypto Website; South Korea Sanctions Crypto Public Keys

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

On June 7, the Manhattan District Attorney’s Office (Office) announced its seizure of the website domain for Coin Dispute Network (CDN), which the Office describes as “a fraudulent cryptocurrency recovery company exposed during an investigation that has identified multiple victims in Manhattan and dozens more across the country.”  According to the Office, CDN purported to act as a tracing and recovery service for people whose cryptocurrency was stolen, in exchange for a fee. Instead, the Office alleges, CDN kept the fee and extracted additional ether from their customers by making false promises of asset recovery and generated inaccurate blockchain tracing reports for victims. This seizure marks the first time the Office has taken down a cryptocurrency recovery site.

According to a recent Chainalysis report, on June 1, 2023, South Korea’s Ministry of Foreign Affairs (MOFA) sanctioned Kimsuky, a North Korean hacking group that has been active since at least 2012, and is known to have stolen technologies related to weapon and satellite development as well as foreign policy information on behalf of the North Korean government. The report states that Kimsuky operatives mined cryptocurrency to generate and launder funds, operated “semi-legitimate” services to get paid in bitcoin or ether, and conducted malicious activity targeting cryptocurrency entities as well as individuals with “sextortion” campaigns. In the sanctioning, MOFA includes two cryptocurrency public keys as identifiers for the hacker organization.

<a href="https://manhattanda.org/manhattan-d-a-s-office-seizes-scam-cryptocurrency-recovery-site/">Manhattan D.A.’s Office Seizes Scam Cryptocurrency Recovery Site</a>

<a href="https://blog.chainalysis.com/reports/kimsuky-south-korea-sanctions-june-2023/">South Korea’s Ministry of Foreign Affairs Sanctions North Korea Hacking Group Kimsuky, Identifies Related Crypto Addresses</a>

Crypto Wallet Provider Hacked for $35 Million; New Crypto Hack Data Published

According to recent reports, Atomic Wallet, a centralized crypto custody and wallet service, was hacked for nearly $35 million in various cryptocurrencies. Some Atomic Wallet users reportedly found that their crypto was stolen after a recent software update, while others reportedly said they lost funds despite not running the update. In a blog post, blockchain analytics firm Elliptic stated that its investigations team “has traced funds from the $35 million Atomic Wallet hack to Sinbad.io, a mixer used to launder over $100 million in cryptoassets stolen by North Korea’s Lazarus Group.”

According to a recent blog post by blockchain security firm Beosin, “22 [crypto] security incidents occurred in May, and the total amount of losses from various attacks was about $19.69 million,” with the largest attack of the month being the attack on Jimbos on the Arbitrum chain, with a loss of about $7.5 million. According to the blog post, cryptocurrency losses in May from rug pulls and scams reached over $45 million across six incidents.

<a href="https://cointelegraph.com/news/rug-pull-losses-beat-defi-exploits-in-may-beosin">Losses from crypto rug pulls outpaced DeFi exploits in May: Beosin</a>

<a href="https://medium.com/@Beosin_com/blockchain-security-monthly-recap-of-may-19-69m-lost-in-total-979a1dd57b">Blockchain Security Monthly Recap of May: $19.69M lost in total, down 79% from April</a>

<a href="https://www.coindesk.com/tech/2023/06/05/atomic-wallet-users-hacked-for-35m-worth-of-bitcoin-ether-tether-and-other-tokens/">Atomic Wallet Users Hacked for $35M Worth of Bitcoin, Ether, Tether and Other Tokens</a>

<a href="https://hub.elliptic.co/analysis/35-million-atomic-wallet-hacker-funnels-crypto-to-north-korea-s-favored-mixer/">$35 Million Atomic Wallet Hacker Funnels Crypto to North Korea’s Favored Mixer</a>

New Crypto and NFT Products Launch; Proposed Crypto Legislation Published; Crypto Enforcement Actions Continue; Wallet Provider Hacked for $35 Million

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