Blockchain Legal Resource

Last week, the Office of the Comptroller of Currency (the OCC), the primary federal regulator of national banks, issued an advanced notice of proposed rulemaking relating to the regulation of digital activities in banking, and in particular their activities involving cryptocurrency and distributed ledger technology.  The OCC is soliciting public feedback on how national banks and their customers are currently utilizing new digital technologies to inform future updates to OCC regulations and allow banks to better harness new technologies and innovations.  The OCC has requested public feedback by August 3, 2020.

On May 29, 2020, the Digital Dollar Project, an organization seeking to advance the development of a United States central bank digital currency (CBDC), published a detailed white paper entitled “Exploring a US CBDC.”  The white paper posits that if the US dollar is to remain the world’s primary reserve currency, it cannot remain an analog instrument and unit of account for assets increasingly denominated as digital tokens. Instead, the white paper reasons that the dollar must itself become a digital tokenized currency that measures, supports, and transacts with other digital assets.

Recently, staff of the US Senate’s Permanent Subcommittee on Investigations prepared a memorandum for subcommittee members in advance of its April 30, 2020 “Roundtable on Continuity of Senate Operations and Remote Voting in Times of Crisis.” The memo provides a description of Senate proposals to allow senators to participate and vote remotely during crises such as the ongoing COVID-19 pandemic, with an emphasis on potential technological solutions such as blockchain.

On March 28, 2020, the Commodity Futures Trading Commission (CFTC) issued final interpretive guidance (Guidance) clarifying its position with respect to retail commodity transactions and the “actual delivery” exception in the context of digital assets.

On April 14, 2020, the Financial Stability Board (FSB) issued a consultative paper entitled “Addressing the Regulatory, Supervisory and Oversight Challenges Raised by ‘Global Stablecoin’ Arrangements.” The paper considers various risks and vulnerabilities of global stablecoins, or GSCs, which are defined to include a crypto-asset that aims to maintain a stable value relative to a specified asset, or a pool or basket of assets, in each case with a potential reach and adoption across multiple jurisdictions and the potential to achieve substantial volume. The white paper then surveys existing regulatory, supervisory and oversight challenges, particularly in the cross-border context; contemplates the role of international standard setters in GSC governance; and makes high-level recommendations for regulatory, supervisory and oversight responses.

On April 16, 2020, the Commodity Futures Trading Commission (CFTC) filed a civil enforcement action (Complaint) against two Florida-based crypto companies and their founder and sole owner (Defendants). According to the CFTC, the Defendants raised $1.6 million from hundreds of customers by fraudulently marketing and soliciting a digital asset to be used in connection with the Defendants’ proprietary foreign exchange (forex) algorithm called ART.

In the fall of 2018 we posted a state-by-state summary of smart contract legislation which included an overview of legislation passed in Arizona, Tennessee and Vermont, as well as an update on legislation pending in other states at the time. Over the past few years, a multitude of states have tackled smart contract legislation with varying degrees of detail and success. Most state smart contract legislation has fallen into three broad categories: formation of exploratory committees, recognition of basic smart contract concepts and comprehensive treatment of smart contracts and related technologies.

On March 24, 2020, federal Judge P. Kevin Castel issued a long-anticipated opinion in the SEC’s ongoing efforts to block Telegram’s $1.7 billion initial coin offering. Judge Castel found that Telegram’s planned distribution of Gram tokens constitutes a securities offering under federal law for which no exemption from registration is available. He therefore granted the SEC a preliminary injunction blocking Telegram from distributing its Gram tokens to investors.

On March 9, 2020, Rep. Paul Gosar (R-AZ) introduced H.R. 6154, the Crypto-Currency Act of 2020.  The bill is the latest effort to provide federal oversight to the burgeoning market for crypto-assets.

On February 20, 2020, the federal Office of the Comptroller of the Currency (OCC) announced a Bank Secrecy Act enforcement action against a federal savings bank (Bank). This is one of the first, if not the first, public enforcement actions against a bank related to banking cryptocurrency-related operations. Banks that currently provide banking services to cryptocurrency-related companies, or are considering providing banking services to such companies in the future, should carefully review this enforcement action and consider where the quality of the bank’s AML compliance program is commensurate with these high-risk customers.