On October 3, 3019, the Liechtenstein Parliament unanimously approved the Token and TT Service Provider Act (the Act). The Act, sometimes referred to as “TVTG” based on its German acronym, provides a comprehensive framework regulating the issuance, storage and conveyance of blockchain tokens in Liechtenstein. According to Liechtenstein’s embassy in Washington, Parliament’s approval began a 30-day public comment period that runs through November 8, 2019. If there is no adverse public comment by the citizens of Liechtenstein, the embassy anticipates that the Act will take effect soon thereafter.

Continue Reading Liechtenstein Parliament Approves Comprehensive Token Act

Today the CFTC, SEC and FinCEN issued a joint statement on digital assets. In particular, the joint statement reminds persons engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the Bank Secrecy Act (BSA). The entire joint statement is available here.

 

On October 9, 2019, the Internal Revenue Service (Service) released Revenue Ruling 2019-24. The revenue ruling considers whether taxpayers should realize gross income under two common scenarios involving cryptocurrency and includes a number of illustrative examples. The Service concluded that a so-called “hard fork” on a cryptocurrency blockchain does not create taxable income if a taxpayer does not subsequently receive new units of cryptocurrency, but taxable ordinary income is generated by “airdrops” following a hard fork that delivers new units of cryptocurrency to a taxpayer.

Continue Reading IRS Updates Guidance on Cryptocurrency

On September 19, 2019, the House of Representatives by voice vote approved H.R. 2613, a bipartisan bill entitled the “Advancing Innovation to Assist Law Enforcement Act.” The bill instructs the director of FinCEN to study and prepare a report to Congress on emerging technologies, including blockchain, in an effort to combat money laundering and other forms of illicit finance. Though somewhat modest in scope, the bill is among the first to be approved by one of the chambers of Congress on the topic of blockchain.

Continue Reading House of Representatives Approves Bipartisan Blockchain Bill

On September 24, 2019, the House Financial Services Committee held an oversight hearing entitled “Oversight of the Securities and Exchange Commission: Wall Street’s Cop on the Beat.” The format of the hearing was somewhat unusual in that the sole witnesses were the five sitting SEC commissioners. Though it is common for the SEC chair to testify before Congress, the other commissioners testify very infrequently, and the assembly of all five at a single hearing is extremely rare, with the last such joint testimony coming back in 2007. While the hearing covered a wide range of issues related to securities regulation and enforcement, it also touched on a number of topics of particular interest to crypto and blockchain businesses, including the application of the securities laws to digital assets.

Continue Reading SEC Commissioners Testify About Digital Assets

On September 13, 2019, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions targeting three North Korean state-sponsored malicious cyber groups responsible for North Korea’s malicious cyber activity on critical infrastructure. As part of the sanctions, OFAC alleges that the entities conducted successful operations targeting more than 16 organizations across 11 countries, including the SWIFT messaging system, financial institutions and cryptocurrency exchanges.

Continue Reading OFAC Sanctions North Korean Crypto Hackers

Effective September 1, 2019, lawmakers in Texas passed legislation clarifying the ability of businesses organized under Texas law to incorporate blockchain technology into their entity recordkeeping and communications. In doing so, Texas joins the ranks of several other states that have similarly amended their corporate formation statutes.

Continue Reading Texas Passes Legislation Providing for Use of Blockchain in Entity Recordkeeping and Communications

The Federal Trade Commission reached a settlement with the promoters of chain-based cryptocurrency schemes—Thomas Dluca, Louis Gatto, Eric Pinkston and Scott Chandler—in which the defendants promised recruits big rewards in exchange for a small payment of bitcoin or Litecoin. In reality, the defendants’ schemes, promoted through YouTube videos, social media and in conference calls, depended on continual recruitment of new participants to generate revenue. Under the FTC settlement, each defendant is permanently banned from operating, participating in or assisting others in promoting or operating any multi-level marketing program, pyramid, Ponzi or chain referral scheme, and three also were required to make payments in redress.

As we first reported in April, the New York Attorney General has been locked in a complicated dispute with a virtual currency exchange operator over the authority of the Attorney General to investigate its activities.  In its defense in court proceedings, the crypto exchange asserted that the Attorney General lacked both personal jurisdiction and subject matter jurisdiction over it because of its efforts to avoid doing business in New York state.  In a ruling ultimately siding with the Attorney General, a New York trial court on August 19 permitted the regulatory investigation to continue.  The judge’s opinion underscores the difficulty faced by crypto entrepreneurs seeking to avoid contacts with U.S. customers in order to avoid the jurisdiction of U.S. courts and regulators.

Continue Reading New York Attorney General Prevails in Investigative Dispute with Crypto Exchange

The United Kingdom (UK) tax authority, Her Majesty’s Revenue & Customs (HMRC), has taken the first steps toward recovering tax that it believes may be outstanding from UK resident cryptocurrency investors: it has been reported that several crypto exchanges have received demands from HMRC relating to customer details and their transactional activity.

Continue Reading British Tax Authorities Go Knocking On Crypto Exchanges’ Doors