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Cryptocurrency

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A mutual legal assistance treaty (MLAT) is an agreement between countries for the purpose of gathering and exchanging information in an effort to enforce public or criminal laws. It is often used to target crimes such as money laundering and drug trafficking. On November 4, 2020, the U.S. Department of Justice announced that, under an MLAT request from Brazil, it had seized virtual currency worth an estimated $24 million. According to documents filed in the…

Earlier this week, crypto-currency watchers noticed that there had been movement of about 70,000 Bitcoin from an account that had been dormant for many years. That mystery has now been solved. The U.S. Department of Justice announced on November 5, 2020 that it had seized the account. At the time of the seizure, the Bitcoin were worth more than $1 billion. According to the allegations of the civil forfeiture complaint, from 2011 until October 2013…

Under U.S. tax law, cryptocurrencies are treated like property. As a result, each time someone buys, sells or exchanges a digital asset, it is considered a taxable event and the capital gains tax applies. The Internal Revenue Service is of the view that many reportable transactions go unreported. One method it is adopting to try capture such taxes is that, starting in 2020, the very first question on the standard 1040 Form is whether “at…

Introduction On October 8, 2020, the U.S. Department of Justice (“DOJ”) released a Cryptocurrency Enforcement Framework (the “Framework”) authored by the Attorney General’s Cyber Digital Task Force. The Framework is the second detailed report authored by the Cyber-Digital Task Force addressing cryptocurrencies. The Framework provides a self-described comprehensive overview of what the DOJ considers to be emerging threats and enforcement challenges associated with cryptocurrencies. The Framework also details the collaboration that the Department of Justice…

On October 21, 2020, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the United States Commodity Futures Trading Commission issued an Advisory to futures commission merchants (FCMs) regarding the holding of virtual currency in segregated accounts. The advisory provides guidance to FCMs on how to hold and report certain deposited virtual currency from customers in connection with physically-delivered futures contracts or swaps. The Advisory also provides guidance that FCMs should follow when designing…

In the UK, the recent case of Toma v Murray [2020] EWHC 2295 (Ch), adds to the evolving case law in respect of cryptocurrencies. At the end of last year, the Commercial Court in AA v Persons Unknown [2019] EWHC 3556 (Comm) granted an interim proprietary injunction over Bitcoin, thereby confirming Bitcoin’s status as property (see our post here). However, in this recent case, Judge Robin Vos refused the claimant’s application to continue an injunction over…

On August 20, 2020, three Swiss companies, 21 Analytics, Crypto Finance AG, and Mt. Pelerin, conducted a live demonstration of a Bitcoin transaction valued at US$23 million. The transaction between Crypto Finance and Mt. Pelerin was powered by 21 Analytics’ regtech, and ran over Swiss FATF travel rule system OpenVASP and the TRP, another institution-focused solution led by ING Bank. The transaction is reported to be the first cryptocurrency transaction in Switzerland that automated full…

INX Limited, a Gibraltar-based private company formed in 2017, announced on August 24 that the U.S. Securities and Exchange Commission (SEC) declared as effective INX Limited’s Form F-1 registration statement. A Form F-1 is the registration required for foreign companies seeking to issue securities under U.S. federal law. This approval marks the first instance in which the SEC has cleared a full registration statement for a public offering of crypto-tokens. The SEC has previously approved…

On 27 July 2020, the Joint Money Laundering Steering Group (JMLSG), which comprises UK financial services industry trade bodies, published new sectoral guidance for cryptoasset exchange providers and custodian wallet providers regarding compliance with money laundering obligations. The Guidance provides an outline of the money laundering risks posed by cryptoassets and how cryptoasset firms can mitigate such risks. Money-Laundering Risks of Cryptoassets A 2020 study by the UK’s National Crime Agency reported that UK based…

On July 20, 2020, the UK’s HM Treasury (HMT) published a consultation paper proposing to bring the promotion of certain types of cryptoasset within the scope of the UK’s financial promotions restriction. We’ve summarised key considerations below; for further reading, our Financial Institutions Hub post takes a deeper look at the consultation. Proposed Changes The financial promotions restriction, set out in section 21 of the Financial Services and Markets Act 2000, provides that a person must not,…