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The U.S. Office of the Comptroller of the Currency (OCC) published a letter on January 4, 2021 (January 2021 Letter) clarifying the authority of national banks and thrift institutions (collectively, Banks) to participate in independent node verification networks (INVN) and use stablecoins to conduct payment activities and other bank-permissible functions. The January 2021 Letter follows a September 21, 2020 letter from the OCC (see our post here) which concludes that Banks may hold “reserves” on…

The U.S. Financial Crimes Enforcement Network (“FinCEN”) released a notice on December 31, 2020 (the “December 31 Notice”) stating that it will propose amendments to regulations of the Bank Secrecy Act (“BSA”) bearing on non-U.S. account holdings of virtual currency. FinCEN is a bureau of the U.S. Department of Treasury that, among other things, collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial…

The U.S. Securities and Exchange Commission announced on December 28, 2020 that it had filed an emergency action and obtained an order imposing an asset freeze and other emergency relief against Virgil Capital LLC and its affiliated companies in connection with an alleged securities fraud relating to Virgil Capital’s flagship cryptocurrency trading fund, Virgil Sigma Fund LP. The Commission’s action alleges that the fraud was directed by Virgil co-founder, 23-year-old Stefan Qin, an Australian citizen…

The U.S. Securities and Exchange Commission continued to the very end of 2020 to pursue companies that engaged in ICOs without proper registration. One December 23, 2020, the SEC settled charges against Texas-based blockchain startup company Tierion, Inc. for conducting an unregistered offering of securities in the form of a “token sale.” According to the SEC’s order, Tierion raised approximately $25 million through the sale of “Tierion Network Tokens” (TNT) in July of 2017. The…

ShipChain was a company engaged in developing a logistics tracking and management platform using the Ethereum blockchain technology. During the height of the ICO craze in late 2017, ShipChain raised more than $27 million in an ICO. On December 22, 2020, the U.S. Securities and Exchange Commission ordered ShipChain to cease and desist and to pay a $2.05 million penalty. As the Order explained, ShipChain first launched its ICO in October 2017, and the ICO continued through…

There has been talk over the past month about the possibility of the Trump administration issuing certain requirements relating to crypto-wallets. Just the rumors led to pushback. On November 25, 2020, for example, Coinbase CEO Brian Armstrong tweeted explanations of why he believed this was a bad idea and how the additional friction of such reporting requirements would kill many of the emerging use cases for crypto. He added, “Just like the U.S. benefited enormously…

An indictment unsealed on December 9, 2020 shows that cryptocurrency founder, Amir Bruno Elmaani (aka “Bruno Block”) has been charged with two counts of U.S. federal tax evasion. Elmaani is alleged to have made millions of dollars in income from the sale and exchange of cryptocurrencies but attempted to obscure his ownership of that income through various schemes and evaded reporting that income to the U.S. IRS. In September and October 2017, Elmaani, using his…

The Financial Crimes Enforcement Network (“FinCEN”) is a bureau of the U.S. Department of the Treasury whose mission is to safeguard the financial system from illicit use and to combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities. In prepared remarks to the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference, Kenneth Blanco, FinCEN Director, announced a new 314(b) Fact Sheet issued on December…

On December 2, 2020, three members of the U.S. Congress issued a press release concerning the introduction of the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act, which they touted as a consumer protection statute. The proposed legislation seeks to increase the oversight and regulation of stablecoins. The STABLE Act would: Require any prospective issuer of a stablecoin to obtain a banking charter;Require that any company offering stablecoin services must follow the appropriate banking regulations under the…

On November 19, 2020, the U.S. Securities and Exchange Commission issued a no-action letter to IMVU, Inc in connection with the sale of its VCOIN token. IMVU describes itself as the world’s largest avatar-based social platform with a global network of over seven million monthly active users. These users create 3D avatars to meet new friends, interact, and play games in virtual environments online and through IMVU’s app. IMVU’s No-Action Letter Request to the SEC argued that…