On December 11, 2019, the New York Department of Financial Services (DFS) published proposed guidance regarding adoption or listing of virtual currency by holders of a BitLicense. Specifically, under the proposed guidance, DFS seeks comment regarding two proposed changes affecting coin listings, both of which are intended to streamline and expedite the process.
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On December 10, 2019, the Swiss Financial Market Supervisory Authority (FINMA) published its inaugural report on market risk in the Swiss economy. The report provides an overview of what FINMA believes are the most important risks currently facing Swiss supervised institutions and describes the resulting focus of its supervisory activity.
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At a mutual fund industry conference held on December 3, 2019, Dalia Blass, director of the Securities and Exchange Commission’s Division of Investment Management, previewed a new structure for registered mutual funds seeking to invest substantially in digital assets and related investments.
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The Federal Reserve Board’s most recent semi-annual Financial Stability Report, issued November 15, 2019, includes a lengthy discussion of potential systemic risks posed by stablecoins. In the report, the Fed observed that innovations fostering faster, cheaper and more inclusive payments could complement existing payment systems and improve consumer welfare if appropriately designed and regulated. But the Fed also warned that the emergence of global stablecoin payment networks introduces important challenges and risks related to financial stability, monetary policy, money laundering and terrorist financing, and consumer and investor protection.
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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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In the wake of the recent controversy surrounding the proposed Libra cryptocurrency, two members of Congress have begun circulating draft bills that would tighten federal regulation of certain stablecoins.
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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.
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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).
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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.
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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.
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