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Home | BakerHostetler

Amy Ralph Mudge Moderates Consumer Protection Session at ABA 2026 Antitrust Spring Meeting

BakerHostetler’s Semi-Annual Crisis Response and Compliance Summit

Michael Snarr Comments on Tariff Refunds in Bloomberg Law Article

ADventures in Law

NAD Has Clear Preference for ‘No Preference’ Options in Consumer Surveys, and Other Best Practices for Survey Designs for Claim Support

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• <a href="#Financial">Financial Firm Completes CBDC Pilot; Exchanges Launch P2P Trading Platform</a> • C<a href="#Crypto">rypto Startups Pursue Bitcoin Network Stablecoins, DAO Clinical Research</a> • <a href="#California">California Governor Signs Bill Establishing Digital Financial Assets Law</a> • <a href="#Banking">Banking Regulators Publish Reports Addressing Crypto Asset Risks</a> • <a href="#OFAC">OFAC Sanctions Target Hamas Bitcoin Fundraising, Add Public Key to OFAC List</a> • <a href="#CFTC">CFTC, FTC and NY AG Bring Actions Against Major Digital Asset Firms</a>

Financial Firm Completes CBDC Pilot; Exchanges Launch P2P Trading Platform

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

A major U.S. financial services firm recently published a press release announcing that it has “successfully demonstrated capabilities of a new solution that enables CBDCs to be tokenised (or ‘wrapped’) onto different blockchains, providing consumers with a new option to participate in commerce across multiple blockchains with increased security and ease.” The press release notes that the solution was developed as part of the financial services firm’s “participation in the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre’s central bank digital currency (CBDC) pilot project.” According to the press release, among other things, the financial services firm “demonstrated in a live environment how the solution could enable the holder of a pilot CBDC to purchase a NFT listed on the Ethereum public blockchain.” The press release notes that the NFT purchase was accomplished through a process in which an amount of CBDC was “locked” on the RBA’s pilot CBDC platform and an equivalent amount of wrapped pilot CBDCs were minted on the Ethereum blockchain to buy the NFT.

In another press release, the HTX cryptocurrency exchange (formerly Huobi) recently announced “strategic cooperation” with the Poloniex exchange to launch Poloniex P2P, “a peer-to-peer market that allows users to buy and sell digital assets directly without an intermediary.” According to the press release, among other things, the Poloniex P2P platform “employs custodian services to ensure the safety of digital or fiat assets during trading until each trade is confirmed.”

According to reports, a major South Korean telecom company is collaborating with two blockchain startups to develop a digital wallet that can support cryptocurrencies, non-fungible tokens and digital credentials. And in a separate development, according to reports, a major Italian luxury sports car manufacturer recently announced that it is working with a major U.S. cryptocurrency payment processor to begin accepting cryptocurrency as payment for its cars in the U.S.

In a final notable item, a recently published analysis from 21.co estimates that the U.S. government holds approximately 194,188 bitcoin, estimated to be worth $5.3 billion. According to reports, the majority of the bitcoin held by the U.S. government is the result of seizures related to Silk Road, the Bitfinex Hack and James Zhong.

For more information, please refer to the following links:

<a href="https://newsdirect.com/news/htx-and-poloniex-launch-poloniex-p2p-to-build-an-open-and-diverse-crypto-market-261288978">HTX and Poloniex Launch Poloniex P2P to Build an Open and Diverse Crypto Market</a>

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<a href="https://cointelegraph.com/news/major-south-korean-telecom-company-plans-launch-of-blockchain-wallet-for-crypto-and-nfts">Major South Korean telecom company plans launch of blockchain wallet for crypto and NFTs&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</a>

<a href="https://cointelegraph.com/news/roblox-integrates-xrp-payment-method">Roblox integrates XRP as payment method</a>

<a href="https://www.reuters.com/business/autos-transportation/ferrari-accept-crypto-payment-its-cars-us-2023-10-14/">Ferrari to accept crypto as payment for its cars in the US</a>

<a href="https://cointelegraph.com/news/bitcoin-us-government-largest-bitcoin-hodlers-5b-in-btc-report">US government among largest Bitcoin hodlers with over $5B in BTC: Report</a>

<a href="https://21shares.com/research/onchain-insights-3">On-chain Insights #3: Bitcoin Holdings of the U.S. Government</a>

<a href="https://dune.com/21co/us-gov-bitcoin-holdings">21co / Forensic: U.S. Government Bitcoin Holdings</a>

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Crypto Startups Pursue Bitcoin Network Stablecoins, DAO Clinical Research

By <a href="https://www.bakerlaw.com/professionals/christopher-w-lamb/">Christopher W. Lamb</a>

According to a recent press release, Lightning Labs has released “the mainnet alpha of the Taproot Assets daemon, providing a feature-complete developer experience for issuing, managing, and exploring stablecoins or other assets on the bitcoin blockchain.” The press release notes that “[w]ith Taproot Assets v0.3, builders have all the tools needed to make bitcoin a multi-asset network, but in a scalable manner that upholds bitcoin’s core values.” According to the press release, the transactions will “route through existing bitcoin liquidity … allowing routing nodes to forward … [the] transactions on Lightning without ever knowing it, extending bitcoin’s global network effects … [and] secure foundation.” The press release notes that “while this release supports mainnet, the alpha tag indicates that we expect the community to test it for potential bugs.”

According to recent reports, a decentralized autonomous organization (DAO), backed by one of the world’s premier biopharmaceutical companies and dedicated to funding and advancing early-stage longevity research, has launched its first biotech firm. The launch occurred after a nearly unanimous community vote to fund an initial $300,000 to collaborate with a university’s Aging Research Center co-chair, followed by IP-NFT fractionalization in early 2024, when non-fungible tokens will be issued that represent intellectual property. The funds will reportedly be used for various preclinical studies, including research into treatment of cancer and aging-related diseases.

In other recent news, BarnBridge DAO has reportedly conducted a vote – and reached a unanimous decision – to comply with the Securities and Exchange Commission (SEC) and pay any fines associated with an SEC investigation initiated in June 2023. Two members of the DAO were reportedly nominated as special delegates to work in conjunction with the DAO’s legal counsel and to interface with the SEC on the investigation.

<a href="https://cointelegraph.com/news/lightning-labs-releases-taproot-assets-alpha-bringing-stablecoins-to-bitcoin">Lightning Labs releases Taproot Assets alpha, bringing stablecoins to Bitcoin</a>

<a href="https://lightning.engineering/posts/2023-10-18-taproot-assets-v0.3/">Taproot Assets on Mainnet: A New Era for Bitcoin and Beyond</a>

<a href="https://www.theblock.co/post/255164/pfizer-backed-dao-launches-community-funded-biotech-firm">Pfizer-backed DAO launches community-funded biotech firm</a>

<a href="https://cointelegraph.com/news/barnbridge-dao-votes-comply-sec-order">BarnBridge DAO votes to comply with SEC order </a>&nbsp;

California Governor Signs Bill Establishing Digital Financial Assets Law

By Diana C. Milton<a href="https://www.bakerlaw.com/VeronicaReynolds"></a>

On Oct. 13, 2023, California Gov. Gavin Newsom signed Assembly Bill 39, which established the Digital Financial Assets Law. According to a statement by the governor, the new law is set to begin July 1, 2025, and “requires the Department of Financial Protection and Innovation (DFPI) to create a robust regulatory framework, including licensure and enforcement authority, for certain crypto activities.” According to reports, the Digital Financial Assets Law will require individuals and firms to obtain a DFPI license to engage in digital asset business activities. Among other things, the new law reportedly empowers the DFPI to examine licensees and requires digital asset businesses to maintain certain records, including a general ledger maintained at least monthly that lists all assets, liabilities, capital, income and expenses of the licensee for five years after the date of activity.

According to reports, on Oct. 13, Newsom also signed California Senate Bill (S.B.) 401, which aims to create a regulatory framework for digital financial asset transaction kiosks, or “crypto kiosks.” S.B. 401 reportedly sets limits for transaction fees and transfer amounts, mandates certain disclosures for consumers, and requires operators to share their kiosk locations with DFPI, with the goal of limiting the facilitation of criminal activity, scams and fraud.

<a href="https://cointelegraph.com/news/california-governor-digital-financial-assets-law">California Gov. Newsom greenlights crypto regulation bill for 2025</a>

<a href="https://www.gov.ca.gov/wp-content/uploads/2023/10/AB-39-Signing-Message.pdf">Assembly Bill 39, which establishes the Digital Financial Assets Law</a>

<a href="https://www.law360.com/fintech/articles/1733399?nl_pk=29db16e3-a668-4467-8edd-c9d367a4b33a&amp;utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=fintech&amp;utm_content=2023-10-17&amp;read_main=1&amp;nlsidx=0&amp;nlaidx=1">California To Roll Out Regime Licensing Crypto Businesses</a>

Banking Regulators Publish Reports Addressing Crypto Asset Risks

By <a href="https://www.bakerlaw.com/KeithRMurphy">Keith R. Murphy</a>

According to a recent press release from the Bank for International Settlements, the Basel Committee on Banking Supervision (Committee) has published a consultative document as a follow-on from its final prudential standard on treatment of cryptocurrency assets, issued in December 2022. The Committee reportedly is proposing a standardized disclosure table as well as a set of templates for banks’ crypto-asset exposures, which, if implemented, would begin on Jan. 1, 2025. As noted in the press release, among other requirements if the proposals are implemented, banks would be required to disclose both qualitative information on their activities related to crypto-assets and quantitative information on exposures to crypto-assets, along with related capital and liquidity requirements. The Committee reportedly anticipates that the common format for disclosures would support market discipline and help “reduce information asymmetry between banks and market participants.”

In related news, a recent press release advised that the Office of Inspector General (OIG) of a U.S. banking supervisory agency has issued its report on Strategies Related to Crypto-Asset Risks. Noting that the crypto-asset sector has experienced significant volatility, including with respect to market capitalization, the report highlights risks that the crypto-asset sector may pose to financial institutions, which, if left unaddressed, could affect the stability and public confidence in the country’s financial system, according to the release. Among other findings in the report, the OIG reportedly determined that while the supervisory agency has begun to develop and implement strategies to address risks posed by cryptocurrency assets, it has not completed a risk assessment for purposes of determining whether it can properly address crypto-asset-related risks by way of actions including the issuance of guidance to supervised institutions. According to the press release, to address these and other concerns, the OIG made two recommendations to the supervisory agency: “(1) establish a plan with timeframes for assessing risks pertaining to crypto-related activities and (2) update and clarify the supervisory feedback process related to its review of supervised institutions’ crypto-related activities.”

<a href="https://www.bis.org/press/p231017a.htm">Basel Committee consults on disclosure of banks’ cryptoasset exposures</a>

<a href="https://www.bis.org/bcbs/publ/d556.pdf">Basel Committee on Banking Supervision: Consultative Document: Disclosure of cryptoasset exposures</a>

<a href="https://www.fdicoig.gov/news/summary-announcements/fdic-strategies-related-crypto-asset-risks#:~:text=We%20made%20two%20recommendations%20for,institutions'%20crypto%2Drelated%20activities.">FDIC Strategies Related to Crypto-Asset Risks</a>

<a href="https://www.fdicoig.gov/sites/default/files/reports/2023-10/EVAL-24-01-Redacted.pdf">Office of Inspector General: FDIC Strategies Related to Crypto-Asset Risks</a>

OFAC Sanctions Target Hamas Bitcoin Fundraising, Add Public Key to OFAC List

According to a recent press release, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on 10 key Hamas terrorist group members, operatives and financial facilitators in Gaza and elsewhere, including in Sudan, Türkiye, Algeria and Qatar. The press release notes that as part of the action, OFAC has designated Buy Cash Money Transfer Company (Buy Cash) and its owner, Ahmed M.M. Alaqad, for their involvement in Hamas fundraising using bitcoin. As part of the action, OFAC added a Buy Cash bitcoin address to OFAC’s Specially Designated Nationals List.

In a related development, according to reports, on Oct. 10, the Israeli government issued an order seeking to freeze various cryptocurrency wallets allegedly linked to Hamas. Separately, according to a recent press release by cryptocurrency firm Tether, “Tether has frozen 32 addresses, containing $873,118.34, that were found to be linked to illicit activity in Israel and Ukraine.” The Tether press release further notes, “To date, Tether has aided 31 agencies worldwide with investigations across 19 jurisdictions, freezing a total of $835 million in assets mostly associated with theft (blockchain and exchange hacks) with a minor portion to other crimes.”

<a href="https://home.treasury.gov/news/press-releases/jy1816">Following Terrorist Attack on Israel, Treasury Sanctions Hamas Operatives and Financial Facilitators</a>

<a href="https://ofac.treasury.gov/recent-actions/20231018">SPECIALLY DESIGNATED NATIONALS LIST UPDATE</a>

<a href="https://www.elliptic.co/blog/crypto-regulatory-affairs-israel-orders-freeze-of-hamas-linked-crypto-wallets">Crypto Regulatory Affairs: Israel orders freeze of Hamas-linked crypto wallets</a>

<a href="https://tether.to/en/tether-freezes-32-addresses-linked-to-terrorism-and-warfare-in-israel-and-ukraine/">Tether Freezes 32 Addresses Linked to Terrorism and Warfare in Israel and Ukraine</a>

CFTC, FTC and NY AG Bring Actions Against Major Digital Asset Firms

According to a recent press release, the U.S. Commodity Futures Trading Commission (CFTC) filed a complaint against the former chief executive officer (CEO) of a group of related and now-bankrupt firms that operated the Voyager cryptocurrency exchange. The complaint alleges that the CEO and the company engaged in a scheme to defraud customers through misrepresentation of Voyager’s financial health and safety and that they “pooled customer assets stored on the Voyager platform and transferred billions of dollars’ worth of customers’ digital asset commodities as ‘loans’ to high-risk third parties,” according to the release. When Voyager attempted to recall the digital assets, one of the firms defaulted, resulting in serious liquidity issues that led to bankruptcy. As noted in the release, the CFTC alleges Voyager acted as a commodity pool operator (CPO) without the required CFTC registration, and the CEO failed to register as an associated person of a CPO.

In a parallel action, the Federal Trade Commission (FTC) published a press release announcing a settlement with Voyager, permanently banning it from handling the assets of consumers. The FTC press release also announced charges against the CEO for falsely claiming that customer accounts were insured. According to the FTC press release, Voyager encouraged consumers to deposit cash and cryptocurrency, assured them that their assets were safe, and produced marketing that falsely included direct statements that the consumers’ cryptocurrency was insured. The press release further notes that the company and CEO purportedly “violated the FTC Act’s prohibition on deceptive practices and the Gramm-Leach-Bliley Act’s prohibition on obtaining a customer’s financial information through false, fictitious, or fraudulent statement.” According to the press release, the FTC complaint further alleges that the CEO transferred millions of dollars, including funds traceable to the alleged unlawful conduct, to his wife.

In another recent enforcement action, New York Attorney General Letitia James filed a lawsuit against several major cryptocurrency exchange and digital asset services companies, along with the CEOs of two of the companies, alleging that they defrauded investors of more than $1 billion, according to a recent press release. According to the press release, the companies allegedly lied to investors about the risks of an investment program and concealed huge losses from customers and the public. Among other allegations, the complaint asserts that two of the companies entered into a $1.1 billion, 10-year, 1 percent promissory note to conceal losses as part of a scheme to defraud customers of the investment program and the public. The attorney general seeks to permanently bar the companies and executives from doing any business related to the purchase and sale of securities or commodities in or from New York and also asks for restitution and disgorgement of ill-gotten gains. &nbsp;

<a href="https://www.cftc.gov/PressRoom/PressReleases/8805-23">CFTC Charges Former Chief Executive Officer of Digital Asset Platform with Fraud in Massive Commodity Pool Scheme</a>

<a href="https://www.ftc.gov/news-events/news/press-releases/2023/10/ftc-reaches-settlement-crypto-company-voyager-digital-charges-former-executive-falsely-claiming">FTC Reaches Settlement with Crypto Company Voyager Digital; Charges Former Executive with Falsely Claiming Consumers’ Deposits Were Insured by FDIC</a>

<a href="https://ag.ny.gov/press-release/2023/attorney-general-james-sues-cryptocurrency-companies-gemini-genesis-and-dcg#:~:text=Today's%20lawsuit%20is%20the%20latest,to%20protect%20New%20York%20investors.">Attorney General James Sues Cryptocurrency Companies Gemini, Genesis, and DCG for Defrauding Investors</a>

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Keith R. Murphy

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Robert A. Musiala Jr.

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New Crypto Initiatives Launch; California Governor Signs Digital Financial Assets Law; Bank Regulators Address Crypto Risks; Enforcement Actions Continue

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