Gary Gensler says the SEC will not herald a China-style crypto ban, however Congress might | Forex Information | Monetary and Enterprise Information

SEC chairman Gary Gensler.

  • SEC chairman Gary Gensler said the agency will not impose a China-like crypto ban because that authority rests with Congress.
  • Most tokens could be some form of security, he said at an SEC prudential hearing on Tuesday.
  • Gensler asked questions from a lawmaker who beat him up for “brutally” running over investors.
  • Sign up for our daily newsletter here, 10 things before the opening bell.

Gary Gensler said the Securities and Exchange Commission has no plans to ban cryptocurrencies as the authority actually rests with Congress, adding that most tokens pass the test of being some form of security.

The SEC chair did that Comments at a hearing in the House of Representatives Tuesday after Republican lawmaker asked Ted Budd if the U.S. Securities and Exchange Commission could follow China in imposing a blanket ban on cryptocurrencies.

“No. I mean, that would be a matter for Congress,” said Gensler.

“I think a lot of these tokens pass the tests of being an investment contract or note or other form of security that we bring into the SEC’s investor protection mandate,” he added.

The concern in the crypto world is that the U.S. government may restrict or ban digital assets, much like it did with gold in 1933. Gensler previously said that crypto exchanges must register with the agency because some of their tokens or products could be securities.

The People’s Bank of China Declared crypto transactions illegal Late last month, a move analysts said was in line with the central bank’s stance over the past decade.

“Our approach is really very different,” Gensler told the House Financial Services Committee.

He noted that the SEC is looking into how the industry can best protect investors and consumers, and comply with anti-money laundering and tax compliance laws. It would also be in the Problems that stablecoins could pose, he added.

Gensler’s comments echoed those recently made by Federal Reserve Chairman Jerome Powell, who said the Federal Reserve had no intention of banning cryptocurrencies.

At the same House hearing, Patrick McHenry asked Gensler on the SEC’s stance on digital assets and reprimanded him for being vague about what a digital asset actually is.

“Some of your comments have raised questions in the marketplace and made things less than clear,” said McHenry. “You made seemingly spontaneous remarks that move the markets, you disregarded rule-making by issuing an out of order statement, and you’ve essentially been rude to American investors.”

Gensler said the agency is following the Administrative Procedures Act, which requires a regulator to issue a general notice of the proposed rule.

McHenry asked Gensler if he a. have reviewed Safe Harbor Proposal created by SEC Commissioner Hester Pierce. The proposal aims to give developers of digital networks a three-year grace period to develop a platform with a registration exemption from federal securities laws.

“Commissioner Peirce and I discussed your thoughts on a possible safe haven,” said Gensler. “I think the challenge for the American public is that if we don’t monitor this and put in place investor protection, people will be hurt.”

Continue reading: Altcoins to Buy: These 15 little-known and undervalued tokens could see an ether-style spike due to significant developer interest, according to Bank of America

Drone Racing League lands $100 million take care of crypto platform Algorand

Drone Racing League

Source: Drone Racing League

The New York-based Drone Racing League has signed its most significant sponsorship agreement to date with the cryptocurrency platform Algorand, the company announced on Tuesday.

DRL is a first-person view racing league in which drone pilots race devices through neon-lit courses and compete for prize money. The company was founded in 2015 and is now valued at $ 200 million, according to PitchBook.

The terms of the deal with Algorand weren’t released, but people who knew about the deal told CNBC that it was a five-year pact worth $ 100 million. The league partner remains the German financial services company Allianz, which has held the title rights since the beginning of the DRL. Excel Sports Management has negotiated the deal with Algorand.

In an interview with CNBC last week, DRL President Rachel Jacobson called the pact with Algorand “transformative” and the “perfect marriage”. She added the crypto platform and DRL is aimed at a “tech-setter” fan base.

Jacobson described Gen Z audiences as digitally savvy, early adopters, “who are just as interested in an Apple iPhone launch as they are in sports and entertainment.”

“When you look at what’s going on with crypto and blockchain, you need to make sure you’re targeting the right audience,” she added.

Boston-based Algorand has a blockchain or digital ledger and is traded on the cryptocurrency exchange under the ticker symbol SOME. As crypto continues to evolve in the financial sector, companies are positioning themselves to attract more digital consumers by using sports sponsorship to create awareness.

This year, crypto companies took over the sport Naming rights assets in the National Basketball Association and Major League Baseball, and one company achieved a $ 100 million deal with Freedom media– own Formula 1.

Drone Racing League

Source: Drone Racing League

Jacobson, a former NBA executive, said sports help newer companies gain brand awareness, but added that crypto firms still need to educate younger audiences about the field and use engaging platforms to get their message across. According to DRL, it reaches around 75 million fans worldwide

“You have to put in the right programming so it doesn’t just be a logo slap,” Jacobson said. “The crypto community is too smart – they only see through a jersey patch or signage. They want to know, ‘How can I get involved? And how will that change my sports experience?'”

DRL starts its sixth season on September 29th. The league has media rights deals with NBCUniversal and a streaming deal with Twitter. miscellaneous Include sponsorships Agreements with Draft kings, T-Mobile, Body armor that US Air Force. DRL is helping the Air Force recruit and train future drone drivers.

Drones used in racing events are designed and built by DRL who build models for each race. The drones are worth around $ 2,000 and can fly up to 90 miles per hour.

The global drone market – described as the “Unmanned Aerial Vehicle” sector – is expected to become $ 58 billion by 2026, by markets and markets. Since DRL also acts as a drone manufacturer, Jacobson said it wants to use products to generate more revenue.

“The possibilities are endless,” Jacobson said, noting that more and more companies are testing deliveries with drones. “We build our drones and when we think of other lines of business it could be anything. We’re just getting started.”

Correction: This article has been updated to reflect the year DRL was introduced.

Disclosure: NBCUniversal is the parent company of CNBC.

Why Borrowing Cash to Purchase Crypto Is a Actually Unhealthy Thought

Cryptocurrencies have been a hot investment for a while now and it seems like there are stories every day of people getting rich by investing in them. With all of the hype surrounding cryptocurrencies, you might be tempted to invest as much in them as you can – and possibly even borrow a lot of money To do that.

However, the reality is that borrowing money to buy crypto is a really bad idea. It’s not something anyone should do.

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Why You Shouldn’t Borrow to Buy Crypto

Generally speaking, it is not advisable to take out loans to buy most investments. You agree to pay interest on a debt while the return on your investment is only speculative. You will need to make payments on your loan whether your investment is doing badly or making you money. And those payments can become a financial burden if you end up suffering from investment losses.

Borrowing to buy investments also means that your investment must do extremely well in order for you to make a profit. Because you would have to cover the interest costs of a loan with your investment income in order to break even before you actually make a profit. And you could be forced to sell an investment at an inopportune time if you are having trouble making payments. This can result in your losses being permanently secured if you don’t have time to wait for your investment to recover from a downturn.

While this is true of any type of borrowing that is to be invested, the risks are only increased when you borrow Buy cryptocurrency. That’s because crypto investments can be much more dangerous than many other types of investments for a number of important reasons:

  • The cryptocurrency market is extremely volatile. The prices of digital currencies fluctuate enormously from one day to the next. If you don’t schedule your purchases and sales at exactly the right time – which is really difficult – there is a very high risk of losing money. If you take out a loan and have a deadline to make a profit so that you can pay back your loan, then the chances of having to sell at the wrong time increase greatly.
  • There is a lack of regulation in the crypto market. The federal government is still trying to catch up and figure out how to do it effectively regulate virtual currencies. In the meantime, investors are vulnerable to scammers. If you take out a loan and end up losing the money because you were scammed, you still have to pay back the entire loan.
  • The cost of buying cryptocurrencies can sometimes be separated from their underlying value. Cryptocurrencies often see a price increase due to Celebrity tweets or social media hype. If virtual currencies are going up in price because they become the newest meme stock, the price can go down as people move on to the next big thing. This further increases the risk of losing the funds borrowed.

If you want invest in cryptocurrencies and having done your research, adding some to your portfolio can be a good thing. However, you should only invest in virtual currencies with money that you can afford to lose. Chances are, you can’t afford to borrow money just to lose it, so avoid buying crypto with cash you get from a. have received private loan.

‘Placing their cash the place their mouth is’: This is what three analysts should say about Coinbase’s choice so as to add $500 million of crypto to its stability sheet | Foreign money Information | Monetary and Enterprise Information

Coinbase Co-Founder and CEO Brian Armstrong

Coin base announced on Thursday that it was Add $ 500 million in cryptocurrency to its balance sheet while at the same time 10% of its quarterly net income is allocated to a portfolio of crypto assets. Insider gathered insights from three Coinbase analysts to help understand the move.

“I like that they put their money where their lips are,” said Mizuho analyst Dan Dolev.

He told Insiders that Coinbase is still heavily fiat money for a company with crypto headquarters for its business. This move changes that, although Dolev would like the exchange to go a step further and charge customer transaction fees in crypto rather than dollars.

“That would signal even more commitment to the cryptocurrency,” said Dolev.

Coinbase CFO Alesia Haas admitted that the majority of Coinbase’s financial transactions – like paying sellers and employees or investing company money – on a Friday are “heavily weighted” in fiat blog entry. But she said Coinbase wants to lead by example by enabling the adoption and use of crypto, and that investment is a step towards that goal.

“We believe that more and more companies will keep crypto assets on their balance sheets in the future,” said Haas. “We hope that by incorporating more crypto assets into our own corporate financial practices, we can take another step towards a more open crypto economy.”

Chris Kuiper, a CFRA stock research analyst, reiterated Dolev’s comment that the announcement shows Coinbase’s commitment to the cryptocurrency industry. Kupier maintained his “Buy” rating on Coinbase after it was announced that he was broadly positive on the stock.

However, adding crypto to Coinbase’s balance sheet adds an additional layer of risk as the company’s share price is already tied to the price and trading activity of Bitcoin, Chris Brendler, senior research analyst at DA Davidson, told Insider. The Coinbase share often moves in parallel with the Bitcoin price.

“That won’t necessarily make or destroy the company,” Brendler told Insider. “But it’s certainly a little scary when you put money into one of those commodities that you’re already pretty closely connected with.”

Part of this risk is offset by a cash balance of $ 4 billion that Coinbase is building in anticipation of a “crypto winter” and possible regulatory action, said Kupier.

Brendler added that since Coinbase is so tied to crypto, Coinbase will need to have more cash than other high-growth non-crypto companies in case there is a “crypto winter” or a prolonged period of low crypto prices and activity.

Crypto change Binance tightens anti-money laundering checks after regulatory stress

  • Binance is rolling out stricter background checks
  • Changes introduced with immediate effect
  • The pressure from regulators has increased in recent weeks

FRANKFURT, Aug. 20 (Reuters) – Major cryptocurrency exchange Binance said Friday it would call for stricter background checks on customers with immediate effect to aid anti-money laundering efforts.

Binance, the world’s largest platform, has come under pressure for the past few months from regulators around the world who are concerned about crypto’s potential for money laundering and the risks to consumers from volatile crypto trading.

The exchange, whose holding company is registered in the Cayman Islands, has reduced its product offerings, including leveraged trading and tokens linked to stocks, and announced that it intends to improve relations with regulators. Continue reading

The money laundering potential of cryptocurrency exchanges has long troubled regulators, including U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde, who raised concerns earlier this year.

The Dutch central bank said Monday that Binance was failing to comply with its anti-money laundering and terrorist financing laws.

Binance announced on their website that users would have to go through a verification process in order to access their products and services. Those who have not done so can only withdraw funds, cancel orders and close positions.

Until now, document-based ID checks at Binance were only required for users who wanted higher trading limits. Users will now need to upload an ID, driver’s license or passport to prove their identity, Binance said.

“This will further improve user protection and fight financial crime,” said the move.

Binance CEO Changpeng Zhao, a Canadian known by his nickname “CZ”, tweeted a link to Binance announcementsays “Actions speak louder than words”.

The steps taken by crypto exchanges to perform identity and background checks remain different, with some requiring full documentation and others allowing users to sign up for accounts with just one email address.

Binance’s spot trading volume was $ 455 million in July, almost a third less than the previous month, but still number 1 in the world according to data from CryptoCompare.

Binance’s corporate structure is opaque, although the holding company is registered in the Cayman Islands according to UK court documents and the Malaysian Securities Commission.

Reporting by Krisztian Sandor in Frankfurt and Tom Wilson in London; Writing by Tom Wilson Editing by Rachel Armstrong and Elaine Hardcastle

Our standards: The Thomson Reuters Trust Principles.

Musk says he helps crypto in battle with fiat cash

(This May 22 story corrects paragraph 6 to make it clear that Musk “Dogecoin” is a hustle and bustle, not Bitcoin.)

Tesla Inc. (TSLA.O) Board chairman Elon Musk tweeted on Saturday that he supports crypto in a battle between fiat and cryptocurrencies.

“The real battle is between Fiat and Crypto. All in all, I support the latter,” he said said on Twitter in response to a user who asked him what he thought of people who were angry with him about crypto.

Musk has previously compared Bitcoin to fiat money and tweeted frequently about cryptocurrencies that have sent values ​​up and down for Bitcoin and the meme digital currency Dogecoin.

In February, Bitcoin shot higher after Tesla announced it had bought $ 1.5 billion of the cryptocurrency and would soon accept it as payment for cars. Continue reading

Bitcoin plunged, however, after the billionaire announced in May that Tesla would no longer accept bitcoin for car purchases, citing long-standing environmental concerns over a rapid reversal of the company’s position on cryptocurrency. Continue reading

Earlier this month, he also dubbed Dogecoin a “hustle” during its guest-host spot on the comedy sketch TV show “Saturday Night Live,” which led to a drop in prices. Continue reading

Two days ago, Musk assured that he had not sold any of his Dogecoin holdings and would not sell any. https://bit.ly/3hLz6LN

Our standards: The Thomson Reuters Trust Principles.

The Anti-Cash Laundering Act and Crypto Collide: Non-Fungible Tokens | King & Spalding

As NFTs gain popularity, buyers and sellers should consider the potential issues related to federal anti-money laundering laws.

While non-fungible tokens (“NFTs”) have existed for several years, the market for NFTs grew considerably during 2020 and into 2021, as a number of high-profile NFT sales grabbed headlines and well-known brands and organizations began exploring the use of NFTs. Amid this continued growth in adoption, and the expanding range of use cases, industry participants should make sure they are aware of the legal implications for issuing, purchasing, and trading these new assets.

For now, existing laws and regulations will likely be applied to promote transparency and to address several aspects of NFTs, including the potential investment value, the risk of speculation and volatile pricing, and potentially anonymous market participants. This article, which is the first in a multi-part series highlighting the legal and regulatory implications surrounding NFTs, explores the current state of play, potential risks, and likely regulatory developments relating to NFTs and federal anti-money laundering laws.

WHAT ARE NFTS?

NFTs are digital assets encoded on a blockchain that represent ownership of a unique asset or set of rights. Most blockchain tokens that represent digital assets (including cryptocurrencies) are fungible, meaning that the characteristics of any two tokens are the same. As a result, any two fungible tokens of the same type will generally have equal value. The technology underlying NFTs, on the other hand, ensures that each token is unique, and NFT creators have leveraged those characteristics of the technology to create a broad range of unique digital assets. NFTs range from digital artwork (including the $69 million sale of an NFT by digital artist Beeple),1 to virtual real estate (one buyer recently purchased nine digital plots of land in an online game for approximately $1.5 million),2 to digital Lebron James trading cards,3 to virtual race horses,4 to an entry ticket for a virtual celebrity beer pong tournament.5 NFTs are “minted” by issuers or creators and purchased through online exchanges or marketplaces.

NFTs are not limited to the digital space; rather, they “can also represent any type of physical asset, acting as a kind of ‘digital twin’ to anything existing in the real world and enabling the ownership and exchange of physical possessions within digital marketplaces.”6 One key characteristic of NFTs is provable ownership—that is, given the reliability of blockchain technology and decentralized ledgers, an NFT holder can be confident that his or her ownership of the underlying asset(s) is secure. NFTs are accompanied by “smart contracts,” which allow the seller to place conditions on the token-holder’s ownership rights, such as generating automatic royalty payments to the original NFT creator at each subsequent sale.7 The conditions of an NFT’s underlying smart contract are designed to be automatically enforced by the NFT’s code on the blockchain.

According to one study conducted in partnership with a financial institution, the NFT market has grown rapidly in recent years:8

 

2018

2019

2020

Active Wallets*

110,551

112,731

222,179

USD Traded

$159.1 million

$62.9 million

$250.8 million

Market Capitalization

$40.9 million

$141.6 million

$338 million

* Wallets allow users to send, receive, and spend cryptocurrency. This row indicates the # of wallets that have interacted with an NFT Smart Contract, including buyers, sellers, and anyone who has played a game or interacted with a project using NFTs

And that trend has continued during 2021. Indeed, one report shows that NFT sales in the first quarter of 2021 grew to more than $2 billion, over twenty times the volume of the previous quarter.9 On one major marketplace, NFT sales grew from $8 million in January 2021, to $95 million in February, to almost $150 million in March.10 While sales volume dropped to $94 million in April, the larger trend shows a marked increase from last year, during which the same marketplace had an average sales volume of only $1 million per month.11

RISKS AND COMPLIANCE: THE ANTI-MONEY LAUNDERING ACT OF 2020

As the digital art world grows and prices soar, NFT marketplaces specializing in digital art may become subject to suspicious activity reporting standards under the Bank Secrecy Act (“BSA”). On January 1, 2021, Congress passed the Anti-Money Laundering Act of 2020 (“AMLA”) which provides the most comprehensive update to anti-money laundering laws under the BSA since the Patriot Act.12 Both the AMLA and BSA enable the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) to regulate the activity of financial institutions, including through various recordkeeping and reporting obligations. Although the AMLA does not directly mention NFTs, several provisions ought to be considered by individuals and financial institutions contemplating NFT transactions.

Is an NFT a “value that substitutes for currency or funds”?

Although the AMLA formally extended BSA reporting obligations to cryptocurrency exchanges, direct regulation of NFTs and related marketplaces will require additional action by Congress. Section 6102(d) of the AMLA expanded the definition of “financial institutions” to include businesses involved in the exchange of “value that substitutes for currency or funds,” thus codifying FinCEN’s longstanding position that cryptocurrency exchanges—which convert fiat currency such as the U.S. dollar into cryptocurrency and vice versa—are “money services businesses” subject to BSA reporting requirements.13 This requires cryptocurrency exchanges to engage in customer due diligence (“CDD”) to verify the identity of their customers, identify any beneficial owners of accounts, develop customer risk profiles, and monitor transactions to submit suspicious activity reports among other things.14

Cryptocurrencies are clearly a “value that substitutes for currency,” but it is less likely NFTs would be deemed the same. Currencies and their substitutes derive their utility, in part, from their inherently fungible nature.15 Generally speaking, NFTs would not be considered a currency nor a substitute because, by definition, they lack fungibility. NFTs are more akin to legal instruments, such as a deed, containing a unique signature demonstrating ownership of an asset. That lack of fungibility arguably pushes NFTs outside the reach of the AMLA, and further action from Congress would be necessary to apply anti-money laundering regulations to NFTs and their marketplaces directly.

FinCEN has yet to issue anything specifically on NFTs, and has similarly not indicated whether NFT players are or may become subject to the AML regime. That said, regulators have certainly begun formalizing procedures for applying current laws to digital assets. Just one example is DOJ’s recently published Asset Forfeiture Policy Manual that provided guidance regarding seizure of cryptocurrencies and digital tokens.16 And given the high degree of scrutiny and ongoing expansion of AML obligations to the cryptocurrency space, NFTs may not escape additional rulemaking or legislation.

Are NFT marketplaces “art dealers”?

Congress is in the process of expanding the BSA’s reach and could reasonably conclude that NFT exchanges should be included among the list of entities subject to the law’s reporting requirements.

The AMLA sought to address, among other things, the multibillion-dollar black market trade in art and antiquities, which is estimated to be the “third largest type of black market after illegal drugs and the arms trade.”17 Forthcoming regulations from FinCEN are expected to expand BSA reporting obligations to antiquities dealers, and in January 2022 Congress is scheduled to receive the results of an ongoing study by FinCEN that will “inform debates over whether to extend BSA requirements to art dealers.” 18 As discussed more fully below, extending reporting obligations to art dealers could have the effect of sweeping NFT exchanges into the scope of such obligations. If reporting obligations are extended, art dealers will be required to grapple with a number of anti-money laundering protocols more familiar to financial services entities. The rule would also make it far more difficult for buyers and sellers to obscure their identities through shell companies or offshore entities.

NFT marketplaces such as OpenSea, Rarible, and SuperRare function much like an auction house or an art dealer by connecting buyers and sellers who transact directly. In fact, SuperRare describes itself as “Instagram meets Christies,”19 and Mark Cuban is building an online art gallery to display his NFTs.20 Given their similarities, NFT marketplaces share many of the characteristics that make the art trade susceptible to money laundering—namely, “buyer secrecy, informal and self-regulated markets, non-transparent pricing, [and] high value transactions.”21 In early March, for example, an NFT consisting of a digital copy of a limited-edition Banksy print sold for nearly $400,000 in Ethereum on OpenSea to a bidder with the screen name “GALAXY,” whose profile lacks any identifying information.22 The buyer behind the $69.3 million sale of Everydays: The First 5000 Days by Beeple was also initially pseudonymous, although the purchaser later revealed his identity.23 Given that many of these transactions are completed using cryptocurrencies—which can be hard to trace to actual individuals—the NFT trade faces similar money laundering risks as the art trade more generally.24 Of course, as Congress considers subjecting art dealers to the BSA, it could also decide to define “art dealers” broadly to bring NFT marketplaces specializing in digital art within the BSA’s ambit. In addition, several prominent auction houses have started to participate in NFT sales,25 and those firms should be mindful that the compliance considerations applicable to traditional art sales should be applied to NFT sales as well.

NFTs and anti-money laundering risks from “tumblers”.

So-called “tumbling” poses an added layer of anti-money laundering concerns with respect to NFTs. One distinct feature of cryptocurrencies is that the ownership history of a particular coin can be traced.26 In theory, one can trace the owner-history of cryptocurrencies because each transaction involving a particular coin is publicly recorded on the blockchain.27 Cryptocurrencies are held in virtual “wallets” which function as the digital address, or identity, of the wallet holder.28 When a cryptocurrency coin is passed to another wallet, the data is recorded in a transaction “block” which lists the digital wallet addresses of the sender and recipient.29 Each transaction block is then automatically recorded and stored publicly on the blockchain, which functions as a public digital ledger of all transactions.30 Working backwards, it is generally possible to trace the ownership history of a coin by analyzing the coin’s transaction blocks to see all of the digital wallets through which it has passed.31 Although the digital addresses of each wallet do not directly identify the actual owner, wallets can be linked to real people by mapping IP addresses and other forms of data analytics.32

Cryptocurrency “tumblers” can increase the difficulty of tracing a coin’s ownership history, however, by circulating that coin through multiple transactions33 and thus “washing” its potential connection to suspicious wallets or transactions.34 Significant time, patience, data, and processing power is required to “untumble” coins—the more a coin is tumbled, the harder it is to trace.35

FinCEN guidance considers cryptocurrency tumbling to be a “money transmitting business,” thus requiring registration with FinCEN, compliance with both BSA reporting requirements and “know your customer” due diligence obligations, and implementation of an anti-money laundering compliance program.36 This guidance has been tested and upheld in United States v. Harmon, an ongoing criminal money laundering case against Larry Dean Harmon for operating Helix—a tumbling service that was allegedly used on the dark web to conceal cryptocurrencies used for black-market activities.37 Harmon was indicted for money-laundering and operating an unlicensed monetary business in violation of the BSA. In upholding the indictment, the court noted that tumblers “work by literally mixing up a user’s payment with lots of other payments from other users” to obfuscate their ownership history, thus qualifying as a “money transmitting business” by “receiving bitcoin and transmitting that bitcoin to another location or person.”38 The Harmon prosecution is still ongoing with jury selection set for later this year,39 and it is possible that the district court’s rationale in upholding the indictment could be reevaluated on appeal.

Theoretically, NFT marketplaces could be leveraged to achieve the same result as tumbling.40 Given the extraordinarily high value of some NFTs, individuals could execute multiple NFT transactions whereby a significant number of coins are spread to different accounts. Repeating this process over and over, individuals could distance themselves from coins linked to dark web activities or cryptocurrency exchanges that do not comply with anti-money laundering and customer due diligence requirements. In short, NFT transactions could be used as another way to add multiple “blocks” to a coin’s ledger, thereby obfuscating the transaction history and associated accounts.41

Although NFT marketplaces may in some cases help obfuscate ownership of cryptocurrency linked to illicit activities, NFT marketplaces are unlikely to qualify as a “money transmitting business” because they merely (1) allow NFT purchasers and sellers to connect and transact without an intermediary (i.e., a “peer-to-peer” platform) and (2) do not directly handle or otherwise process the cryptocurrencies used to purchase NFTs. Indeed, one commentator described an NFT marketplace as “eBay on the blockchain.”42 Given that NFT marketplaces pose similar money-laundering risks as auction houses and art dealers involved with in high-value transactions, however, Congress could decide to independently subject NFT marketplaces to BSA reporting requirements, “know your customer” due diligence, and other requirements.

Regardless of future regulatory changes, crypto-exchanges and traditional financial institutions handling NFT transactions should beware of obligations for reporting suspicious activity.

Both cryptocurrency exchanges and traditional financial institutions are subject to the BSA and therefore may be required to file suspicious activity reports (“SARs”) for transactions involving NFTs for digital art and other tethered assets. In fact, recent guidance from FinCEN was issued to “provide specific instructions for filing SARs related to trade in antiquities and art.”43 Under the guidance, to comply with BSA obligations, financial institutions—a definition that now includes cryptocurrency exchanges—are required to submit SARs for suspicious activity related to art and antiquities. The guidance explains that SAR filings should:

  • include a detailed description of how the questionable activity is tied to art and antiquities;
  • provide identifying information (including IP addresses) for the purchasers, sellers, and any other intermediaries or agents; and
  • state the volume and dollar amount of the suspicious transactions.

Additionally, SARs ought to identify any “other transactions or proposed transactions that may involve antiquities or art” and identify where the reported individuals or entities are currently operating. Given the similar money-laundering risks shared between high-value art transactions and NFTs, financial institutions and cryptocurrency exchanges may be obligated to file SARs when executing NFT transactions on behalf of their clients. They should therefore have in place controls for identifying suspicious activity relating to NFTs, as well as determining when and how to report it.

CONCLUSION

Traditional financial institutions are no strangers to the stringent BSA and other anti-money laundering compliance requirements. Those institutions’ involvement with NFT-related transactions may generate new compliance obligations. Unless and until NFT-specific guidance is provided, companies should look to guidance on analogous services and products. Given the money-laundering risks shared between NFTs and the art and antiquities markets, financial institutions should pay special attention to the opaque and often anonymous NFT market and should consider filing SARs if they detect any suspicious activity related to an NFT transaction. In this rapidly evolving area, both financial institutions and cryptocurrency exchanges should also consider re-examining their existing anti-money laundering compliance programs to meet the needs of their clients and federal regulators.

1 Katie Tsai, “Digital Artist Beeple Sees NFTs, Like the One He Sold for Over $69 Million, Around for ‘Many Decades,’” CNBC (Apr. 30, 2021), available at https://www.cnbc.com/2021/04/30/beeple-real-name-mike-winkelmann-sees-nfts-around-for-many-decades.html.

2 Janine Yorio, “Here Comes the Virtual Real Estate Boom,” CoinDesk (Feb. 16, 2021), available at https://www.coindesk.com/here-comes-the-virtual-real-estate-boom.

3 Jabari Young, “People Have Spent More Than $230 Million Buying and Trading Digital Collectibles of NBA Highlights,” CNBC (Feb. 28. 2021), available at https://www.cnbc.com/2021/02/28/230-million-dollars-spent-on-nba-top-shot.html.

4 Taylor Lorenz, “Digital Horses Are the Talk of the Crypto World,” N.Y. Times (May 1, 2021), available at https://www.nytimes.com/2021/05/01/style/zed-run-horse-racing.html.

5 Tanzeel Akhtar, “Social Token App Fyooz Offers Chance to Play Beer Pong with Rap Artist Post Malone,” Yahoo!Money, (Feb. 11, 2021), available at https://money.yahoo.com/social-token-app-fyooz-offers-130707216.html.

6 See Non-Fungible Tokens Yearly Report 2020 (Free Version), NonFungible.com & L‘atelier/BNP Paribas, PDF at 3 (Feb. 16, 2021), available at https://nonfungible.com/blog/nft-yearly-report-2020 [hereinafter “NFT Yearly Report 2020”].

7 See Interview of Professors Burt Rosenberg and Tarek Sayed, University of Miami (Mar. 26, 2021), available at https://news.miami.edu/stories/2021/03/nfts-are-a-new-financial-frontier-in-cyberspace.html.

8 NFT Yearly Report 2020, PDF at 26–27.

9 See Robert Frank, NFT sales top $2 billion in first quarter, with twice as many buyers as sellers, CNBC (Apr. 13, 2021), available at https://www.cnbc.com/2021/04/13/nft-sales-top-2-billion-in-first-quarter-with-interest-from-newcomers.html.

10 See Elizabeth Howcroft, After first quarter frenzy, NFT market shows signs of stabilizing, Reuters (May 4, 2021), available at https://www.reuters.com/technology/after-first-quarter-frenzy-nft-market-shows-signs-stabilising-2021-05-04/.

11 See id.

12 Anti-Money Laundering Act of 2020, Pub. L. No. 116-283, H.R. 6395, 116th Cong. § 6101 et seq. (enacted Jan. 1, 2021) (to be codified at 31 U.S.C. § 5323), available at https://www.govtrack.us/congress/bills/116/hr6395/text.

13 Fin. Crimes Enf’t Network, U.S. Dep’t of the Treasury, FIN-2019-G001, Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies 3 (2019), available at https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf.

14 See 31 C.F.R. § 1010 et seq.

15 C.f. United States v. Faiella, 39 F. Supp. 3d 544, 545 (S.D.N.Y. 2014) (finding that Bitcoin qualifies as money precisely because “Bitcoin can be easily purchased in exchange for ordinary currency, acts as a denominator of value, and is used to conduct financial transactions”); United States v. Ulbricht, 31 F. Supp. 3d 540, 570 (S.D.N.Y. 2014) (defining “money” as “an object used to buy things” and concluding that “the only value for Bitcoin lies in its ability to pay for things” because “Bitcoins can be either used directly to pay for certain things or can act as a medium of exchange and be converted into a currency which can pay for things”). See also Sebastian Omlor, The CISG and Libra: A Monetary Revolution for International Commercial Transactions?, 3 Stan. J. Blockchain L. & Pol’y 83, 90 (“The two basic functions of money are to be a unit of account and a universal means of exchange.”).

16 See U.S. Dep’t of Justice, Asset Forfeiture Policy Manual 26 (2021), available at https://www.justice.gov/criminal-afmls/file/839521/download.

17 Combating Illegal Antiquities Trade, Standard Charted Bank (Dec. 2018), available at https://av.sc.com/corp-en/others/Combating-Illegal-Antiquities-Trade_FINAL.pdf.

18 Transnational Crime Issues: Arts and Antiquities Trafficking, Congressional Research Service (Mar. 1, 2021), https://crsreports.congress.gov/product/pdf/IF/IF11776.

19 Frequently Asked Questions, SuperRare (last visited May 3, 2021), available at https://superrare.co/about.

20 Shalini Nagarajan, Billionaire Mark Cuban is setting up a digital art gallery that allows users to display NFTs in any form, report says, Business Insider (Mar. 24, 2021), available at https://markets.businessinsider.com/news/stocks/billionaire-mark-cuban-setting-up-digital-art-gallery-for-nfts-2021-3-1030240151.

21 Combating Illegal Antiquities Trade, supra at note 12, available at https://av.sc.com/corp-en/others/Combating-Illegal-Antiquities-Trade_FINAL.pdf.

22 See Jamie Redman, Burned Banksy NFT Sale Captures Close to $400K, Critics Claim Buyers Are ‘Morons’, Bitcoin.com (Mar. 8, 2021), available at https://news.bitcoin.com/burned-banksy-nft-sale-captures-close-to-400k-critics-claim-buyers-are-morons/; User Profile: “Galaxy”, OpenSea, available at https://opensea.io/accounts/GALAXY.

23 Robert Frank, Crypto investor who bought Beeple’s NFT for $69 million says he would have paid even more, CNBC (Mar. 30, 2021), available at https://www.cnbc.com/2021/03/30/vignesh-sundaresan-known-as-metakovan-on-paying-69-million-for-beeple-nft.html.

24 See United States v. Harmon, No. 19-CR-395-BAH, 2021 WL 1518344 (D.D.C. Apr. 16, 2021) (explaining the role of cryptocurrency “tumblers” in relation to multi-count money-laundering indictment against the operator of a tumbler service). For a general overview of the difficulty of tracing the ownership history of cryptocurrencies, see P. Vigna and C. Ostroff, Why Hackers Use Bitcoin and Why It Is So Difficult to Trace, Wall Street J. (July 16, 2020) available at https://www.wsj.com/articles/why-hackers-use-bitcoin-and-why-it-is-so-difficult-to-trace-11594931595.

25 See, e.g., Lucas Matney, CryptoPunks NFT bundle goes for $17 million in Christie’s auction, TechCrunch (May 11, 2021), available at https://techcrunch.com/2021/05/11/cryptopunks-nft-bundle-goes-for-17-million-in-christies-auction/.

26 See John Bohannon, Why criminals can’t hide behind Bitcoin, Science Magazine (Mar. 9, 2016), available at https://www.sciencemag.org/news/2016/03/why-criminals-cant-hide-behind-bitcoin.

27 See Study on Cryptocurrencies and Blockchain, E.U. Pol’y Dep’t for Economic, Scientific and Quality of Life Policies 17 (2018), available at https://www.europarl.europa.eu/cmsdata/150761/TAX3%20Study%20on%20cryptocurrencies%20and%20blockchain.pdf.

28 Id. at 17.

29 Id.

30 Id

31 See id. at 46.

32 See John Bohannon, Why criminals can’t hide behind Bitcoin, Science Magazine (Mar. 9, 2016), available at https://www.sciencemag.org/news/2016/03/why-criminals-cant-hide-behind-bitcoin.

33 See Mark Rash, Bitcoin Tumbling Leads to Multicount Indictment, Security Boulevard (Feb. 27, 2020), available at https://securityboulevard.com/2020/02/bitcoin-tumbling-leads-to-multicount-indictment/.

34 Toshendra Kumar Sharma, How is Blockchain Verifiable by Public and Yet Anonymous?, Blockchain Council (last visited May 2, 2021), available at https://www.blockchain-council.org/blockchain/how-is-blockchain-verifiable-by-public-and-yet-anonymous/.

35 See id.

36 See Fin. Crimes Enf’t Network, U.S. Dep’t of the Treasury, FIN-2019-G001, Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies 21 (2019), available at https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf; see also 31 U.S.C. § 5330; 31 C.F.R. § 1022.380.

37 See United States v. Harmon, 474 F. Supp. 3d 76 (D.D.C. 2020) [Harmon I]; Harmon II, No. 19-CR-395 (BAH), 2020 WL 7668903 (D.D.C. Dec. 24, 2020); Harmon III, No. 19-CR-395 (BAH), 2021 WL 1518344 (Apr. 16, 2021).

38 Harmon I, 474 F. Supp. 3d at 82, 109 (quoting Usha R. Rodrigues, Law and the Blockchain, 104 Iowa L. Rev. 679, 712 n.224 (2019)).

39 See Joint Mot. to Continue Trial and Pretrial Dates, ECF No. 89, United States v. Harmon, No. 19-CR-395 (BAH) (D.D.C.).

40 According to Tim Swanson, Head of Market Intelligence for the London-based blockchain firm Clearmatics: “NFTs are just another way of achieving the same goal, of breaking down the provenance and walking away with ‘clean’ or screened coins.” See Simon Chandler, Money Laundering Might Taint NFTs Too, Prepare for Tighter Controls, CryptoNews (Mar. 27, 2021), available at https://cryptonews.com/exclusives/money-laundering-might-taint-nfts-too-prepare-for-tighter-co-9689.htm.

41 Id.

42 See Top NFT Marketplaces: Beginners Guide, DappRadar (Apr. 4, 2021), available at https://dappradar.com/blog/top-7-nft-marketplaces-beginners-guide (“OpenSea is the first and biggest peer-to-peer NFT marketplace for crypto goods. You can think of it as eBay on the blockchain.”).

43 Fin. Crimes Enf’t Network, U.S. Dep’t of the Treasury, FIN-2021-NTC2, FinCEN Informs Financial Institutions of Efforts Related to Trade in Antiquities and Art 1 (2021), available at https://www.fincen.gov/sites/default/files/2021-03/FinCEN%20Notice%20on%20Antiquities%20and%20Art_508C.pdf.

Bitcoin (BTC) value falls after Tesla stops automobile purchases with crypto

Artur Widak | NurPhoto | Getty Images

GUANGZHOU, China – Hundreds of billions of dollars were wiped off the entire cryptocurrency market afterwards Tesla CEO Elon Musk tweeted that the electric vehicle maker would do so Suspend car purchases with Bitcoin.

According to Coinmarketcap.com, the value of the entire cryptocurrency market was around $ 2.43 trillion at around 6:06 a.m. Singapore time on Thursday when Musk made the announcement.

By 8:45 a.m., market cap had dropped to around $ 2.06 trillion and wiped out around $ 365.85 billion. The market has reduced some losses. Since Musk’s tweet, the cryptocurrency market had lost $ 165.75 billion in value at around 9:22 a.m. Singapore time.

In February, Tesla announced in a regulatory filing that it had purchased $ 1.5 billion worth of Bitcoin and planned to accept the cryptocurrency for payments.

Citing environmental concerns Thursday, Musk said Tesla was “concerned about the rapidly increasing use of fossil fuels for bitcoin mining and transactions, particularly coal, which has the worst emissions of any fuel.”

Bitcoin is not issued by a single entity such as a central bank. Instead, it is maintained by a network of so-called “miners”. These miners use specially designed computers that use a great deal of energy to solve complex math puzzles in order to make Bitcoin transactions. Bitcoin’s energy consumption is higher than in some individual countries.

Around 9:34 a.m. Singapore time, Bitcoin It fell more than 12%, according to CoinDesk data, falling below the $ 50,000 mark for the first time since April 24. Despite the recent decline, Bitcoin is still up over 400% in the past 12 months.

Other cryptocurrencies ether and XRP were also much lower.

Musk was a big advocate of digital currencies including Bitcoin and DogecoinThis has helped raise prices over the past few months.

Tesla CEO said the company will not sell Bitcoin and intends to use it for transactions “once mining moves to more sustainable energy.”

Bitcoin has grown in the last year as a company such as square and Tesla announced Bitcoin purchases and large institutional investors entered the cryptocurrency space. Big investment banks like Goldman Sachs and Morgan Stanley have also been looking for ways to enable their wealthy customers to get in Bitcoin exposure.

Turkey provides crypto companies to cash laundering, terror financing guidelines

A Bitcoin logo can be seen next to the Turkish flag in a cryptocurrency exchange store in Istanbul, Turkey, on April 27, 2021. The photo was taken on April 27, 2021. REUTERS / Murad Sezer

Turkey has added cryptocurrency trading platforms to the list of companies covered by anti-money laundering and terrorist financing regulations, according to a presidential decree released on Saturday.

The Official Gazette said the country’s recent expansion of rules on cryptocurrency transactions would take effect immediately, covering “crypto asset service providers” who would be subject to the existing regulations.

Last month, Turkey’s central bank banned the use of crypto assets for payments because such transactions were risky. In the days that followed, two Turkey-based cryptocurrency trading platforms were shut down as part of separate investigations.

The investigation into one of them, Thodex, led to the detention on Thursday of six suspects, including the siblings of its chief executive Faruk Fatih Ozer, whom the Turkish authorities are looking for after his trip to Albania. Continue reading

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