The US Treasury Department recently announced its 2020 National Strategy for Combating Terrorist and Other Illicit Financing (the 2020 Strategy). The 2020 Strategy identifies the US government’s top anti-money laundering and countering the financing of terrorism priorities and serves as a roadmap of Treasury’s plan to stay ahead of evolving illicit finance threats. Digital assets feature heavily in the 2020 Strategy.
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As has been widely reported, SEC Commissioner Hester Peirce (aka “Crypto Mom”) recently delivered a thoughtful speech entitled “Running on Empty: A Proposal to Fill the Gap Between Regulation and Decentralization,” including with it a model rule on digital token sales. The model rule has made waves in the crypto community because it proposes a three-year safe harbor from SEC registration while a development team builds out a functional, decentralized network.
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As reported last week on the Hunton Insurance Recovery Blog, crypto-asset losses continue to rise and the industry is taking steps to protect clients and investors through insurance. Crypto-exchange and custody provider, Gemini Trust Company, LLC (“Gemini”), recently launched its own captive insurance provider, Nakamoto, Ltd. Captive insurance is an alternative to self-insurance whereby a company creates a licensed insurance company to provide coverage for itself.
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In 2019, Hunton Andrews Kurth LLP’s structured finance and securitization team closed a number of substantial transactions, developed novel structures for our clients and advised on important tax, regulatory and other industry developments, including emerging uses of blockchain solutions.
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In an investor alert issued on January 14, 2020, staff in the Securities and Exchange Commission’s Office of Investor Education and Advocacy warned investors in initial exchange offerings (IEOs) to “use caution before investing  . . . through online trading platforms.”  According to the SEC staff, “Claims of new technologies and financial products, such as those associated with digital asset offerings, and claims that IEOs are vetted by trading platforms, can be used improperly to entice investors with the false promise of high returns in a new investment space.”
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On October 28, 2019, staff in the SEC’s Division of Trading and Markets provided a no-action letter to Paxos Trust Company, LLC permitting it to pilot a blockchain-based clearance and settlement platform for a limited number of U.S.-listed equity securities for 24 months. The staff’s action enables the further development and commercialization of a blockchain platform for clearing and settling U.S. securities trades.
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