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David Zaslowsky

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There has been much publicity around the cases that the U.S. Commodity and Futures Trading Commission (“CFTC”) has brought against exchanges, such as Binance. Those cases, according to the CFTC, were meant to demonstrate that the CFTC would not tolerate digital asset exchanges that fail to register with the CFTC or comply with the agency’s rules concerning the derivatives markets. On May 13, 2024, the CFTC went one step further down the chain in, for…

U.S. Security and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 121 (“SAB 121”) was issued on March 31, 2022. It requires reporting entities which perform custodial duties in relation to crypto assets to hold those assets on their balance sheet. Doing so means these entities would also be required to take on significant capital, liquidity, and other costs under the existing prudential regulatory framework. SAB 121 thus represented a significant departure from decades of generally accepted…

Last week, we reported that two crypto industry groups sued the United States Securities and Exchange Commission seeking to strike down revisions to the dealer rule. On April 26, 2024, Consensys Software Inc., a software developer whose business centers on the Ethereum blockchain network, brought a much more significant case when it sued the SEC in federal court in Texas over the regulation of Ethereum. The Complaint may be found here. In a June 2018…

The tension between the crypto industry and the United States Securities and Exchange Commission over the issue of which tokens qualify as securities has been well documented. SEC Chair Gary Gensler is on record as saying almost all crypto products are securities. On April 23, 2024, two crypto industry groups, the Blockchain Association and the Crypto Freedom Alliance of Texas sued the SEC in federal court in Texas, challenging the SEC’s rule expanding the definition…

On April 17, 2024, Republican Senator Cynthia Lummis and Democratic Senator Kirsten Gillibrand introduced the bipartisan Lummis-Gillibrand Payment Stablecoin Act, which creates a clear regulatory framework for payment stablecoins that the Senators said will protect consumers, enable innovation and promote U.S. dollar dominance while preserving the dual banking system. Heads of both the Federal Reserve and the Treasury Department have recently called for Congress to regulate stablecoins. The Bill provides, among other things: (1) For depository institutions (banks)…

BitMEX is a cryptocurrency exchange and derivative trading platform. It is owned and operated by HDR Global Trading Limited, which is registered in the Seychelles. HDR is an acronym of the last names of its founders, Arthur Hayes, Ben Delo, and Sam Reed. In 2020, Plaintiffs brought a putative class action against the founders and HDR alleging multiple violations of the Commodity Exchange Act (“CEA”), including price manipulation.  The Defendants moved to dismiss the case…

In 2021, Illusory Systems, Inc. developed a cross-chain bridge known as the Nomad Bridge. A “bridge” is a protocol that allows multiple blockchain networks to interact with each other and for users to swap one token for another without having to trade in and out of tokens on an exchange and incur multiple trading fees. While operational, the Nomad Bridge moved more than $912 million worth of crypto assets on behalf of more than 21,000…

The Texas Blockchain Council (TBC) describes itself as a nonprofit industry association that works to make the State of Texas the jurisdiction of choice for cryptocurrency, blockchain and digital asset innovation. Riot Platforms, Inc. is a TBC member and Bitcoin mining company. On February 22, 2024, the two sued the United States Department of Energy (“DOE”), the U.S. Energy Information Administration (“EIA”) and the Office of Management and Budget (“OMB”), among others, for what Plaintiffs…

On February 26, 2024, Republican Senator Ted Cruz, along with fellow Republican Senators Bill Hagerty, Rick Scott, Ted Budd and Mike Braun introduced the CBDC Anti-Surveillance State Act. The Federal Reserve acts as the U.S. central bank. The proposed legislation states that no Federal Reserve Bank may “issue a central bank digital currency or any digital asset that is substantially similar, under any other name or label, directly to an individual.’’ This same prohibition was…

We have been following for years (see here) the steps that the United States Internal Revenue Service has taken to sensitize taxpayers to the need for them to properly report sales of cryptocurrency. There did not, however, seem to be any criminal cases brought for failure to do so. That is why the federal indictment against Frank Ahlgren III that was made public earlier this month was interesting. Unlike prior cryptocurrency criminal tax cases, which…