Blockchain Legal Resource

As reported in a Hunton Client Alert last week, on June 6, 2023, the Federal Deposit Insurance Corporation (“FDIC”), the Board of Governors of the Federal Reserve System (“FRB”) and the Office of the Comptroller of the Currency (“OCC”) (collectively, the “Agencies”) issued final guidance on managing risks associated with third-party relationships, including relationships with fintechs (the “Final Guidance”).¹ Effective as of the June 6, 2023 issuance date, the Final Guidance replaces each of the Agencies’ existing guidance on third-party risk management and provides consistency in the Agencies’ supervisory approaches.² The Final Guidance is directed to all banking organizations supervised by the Agencies and advises such organizations to consider and account for the level of risk, complexity and size of the institution, as well as the nature of the third-party relationship, when conducting sound risk management.

On June 8, 2023, Judge William H. Orrick of the U.S. District Court for the Northern District of California granted a default judgment in favor of the CFTC against Ooki DAO, a cryptocurrency decentralized autonomous exchange. The court also permanently enjoined Ooki DAO from operating its website and awarded the CTFC $643,542 in monetary damages. The court found that Ooki DAO’s lack of participation in the litigation and refusal to appear in court contributed to the default judgment. This decision brings to a close the closely-watched case that establishes new precedents for the legal liability of decentralized autonomous exchanges.

On May 30, 2023, the Commodity Futures Trading Commission Division of Clearing and Risk (DCR) issued a staff advisory (CFTC Letter No. 23-07) on the risks associated with the Derivatives Clearing Organization (DCO) clearing of digital assets. DCR will emphasize compliance with the DCO core principles related to system safeguards, conflicts of interest, and physical delivery.