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Home | BakerHostetler

Fifth Circuit Strikes Down CTA Injunction, FinCEN Extends Deadline to Jan. 13, 2025

Bulls, Bears, and Blockchain™ – December 26, 2024

Blockchain Monitor

Weekly Blockchain Blog – December 23, 2024

What to Expect and How to Prepare: A Guide to Employing Foreign Workers in the Age of Trump

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<a href="#Stablecoin">Stablecoin Demand Increases with Initiatives Announced in Germany, Hong Kong</a>

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<a href="#Publications">New Publications Address Technical Concepts in DeFi, Staking, Block-Building</a>

<a href="#CFTC">CFTC Chairman Addresses Need to ‘Fill the Regulatory Gap’ for Digital Assets</a>

<a href="#Crypto">Crypto Exchange Hacked for $235M; Illegal Miners Steal $723M in Electricity</a>

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Stablecoin Demand Increases with Initiatives Announced in Germany, Hong Kong

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By <a href="https://www.bakerlaw.com/RobertAMusiala" target="_blank" rel="noreferrer noopener">Robert A. Musiala Jr.</a>

Recent reports highlight an increasing demand for stablecoins. According to one report, the market cap of the PYUSD stablecoin recently surpassed $500 million, with the total supply of PYUSD having increased by 97 percent since June 26. Reports attribute the expansion of PYUSD to its recent introduction on the Solana network, growing adoption on centralized exchanges and integration into decentralized finance protocols.

According to another recent report, the USDT stablecoin recently displayed a 24-hour trading volume of over $55 billion, which exceeded the combined total 24-hour trading volume of BTC, ETH, USDC, SOL and FDUSD. The report noted that USDT regularly achieves daily trading volumes exceeding $25 billion, while by comparison BTC and ETH regularly display daily trading volumes of $4 billion to $8 billion.

In more stablecoin news, according to recent reports a global asset manager owned by a major German bank is reportedly planning to introduce the first euro-denominated stablecoin regulated by Germany’s BaFin financial regulator. The company reportedly plans to launch the stablecoin by June 2025.

And in Hong Kong, the Hong Kong Monetary Authority (HKMA) recently issued a press release announcing that the HKMA and the Financial Services and the Treasury Bureau (FSTB) have issued “consultation conclusions on the legislative proposal to implement a regulatory regime for fiat-referenced stablecoin (FRS) issuers in Hong Kong.” According to the press release, the HKMA and FSTB will seek to introduce a stablecoin bill “as soon as possible” and the HKMA is currently “processing the applications for the stablecoin issuer sandbox, with the list of sandbox participants to be announced shortly.”

For more information, please refer to the following links:

<a href="https://www.theblock.co/post/304200/paypal-stablecoin-market-cap-500-million-usd-solana" target="_blank" rel="noreferrer noopener">[] PYUSD stablecoin surpasses $500 million market cap following Solana expansion</a>

<a href="https://cryptoslate.com/tether-24-hour-trading-volume-surpasses-bitcoin-solana-usdc-and-ethereum-combined/" target="_blank" rel="noreferrer noopener">Tether 24 hour trading volume surpasses Bitcoin, Solana, USDC and Ethereum combined</a>

<a href="https://www.reuters.com/markets/currencies/dws-launches-jv-first-german-regulated-euro-stablecoin-2024-07-11/" target="_blank" rel="noreferrer noopener">DWS launches JV for first German-regulated euro stablecoin</a>

<a href="https://www.hkma.gov.hk/eng/news-and-media/press-releases/2024/07/20240717-3/" target="_blank" rel="noreferrer noopener">Consultation conclusions for legislative proposal to implement regulatory regime for stablecoin issuers in Hong Kong released</a>

New Publications Address Technical Concepts in DeFi, Staking, Block-Building

By <a href="https://www.bakerlaw.com/ChristopherLamb" target="_blank" rel="noreferrer noopener">Christopher Lamb</a>

The Enterprise Ethereum Alliance (EEA) has launched its first version of the DeFi Risk Assessment Guidelines, a document that helps identify and mitigate DeFi protocol risks. The guidelines were drafted with input from several organizations across the crypto space and cover a range of risks arising from governance, tokenomics, software, liquidity, regulatory compliance and other external market factors. The guidelines seek to establish a framework as a resource for founders and developers of DeFi protocols. According to recent reports, the guidelines are already being used to help foundations seek licenses from the Abu Dhabi Global Market and United Arab Emirates regulators.

In related news, Solidus Labs recently released a white paper titled “Navigating Risks in the Staking and Block-Building Ecosystem.” The white paper seeks to provide “in-depth exploration of the current staking and block-building landscape on Ethereum.” In doing so, it provides a review of the global regulatory landscape with block-building and staking, identifies potential risks from a legal and compliance perspective, and explores recent technological innovations used to enhance risk management.

<a href="https://cointelegraph.com/news/defi-risk-assessment-guidelines" target="_blank" rel="noreferrer noopener">New risk assessment guidelines for DeFi protocols unveiled</a>

<a href="https://entethalliance.org/specs/defi-risks/" target="_blank" rel="noreferrer noopener">EEA DeFi Risk Assessment Guidelines - Version 1</a>

<a href="https://www.soliduslabs.com/reports/staking-whitepaper" target="_blank" rel="noreferrer noopener">Navigating Risks in the Staking and Block-Building Ecosystem</a>

CFTC Chairman Addresses Need to ‘Fill the Regulatory Gap’ for Digital Assets

By <a href="https://www.bakerlaw.com/RobertAMusiala" target="_blank" rel="noreferrer noopener">Robert A. Musiala Jr.</a><a href="https://www.bakerlaw.com/VeronicaReynolds"></a>

The U.S. Commodity Futures Trading Commission (CFTC) recently published CFTC Chairman Rostin Behnam’s July 10 testimony before the U.S. Senate Committee on Agriculture, Nutrition and Forestry’s Hearing on the Oversight of Digital Commodities. Chairman Behnam began his testimony by highlighting the need to “fill the regulatory gap.” Among other comments on this topic, the Chairman said, “This gap for non-security tokens continues to constitute a majority of the digital asset market measured by market capitalization …. Federal legislation is urgently needed to create a pathway for a regulatory framework that will protect American investors and possibly the financial system from future risk.”

Addressing enforcement, the Chairman noted, “In total, the CFTC has brought over 135 digital commodity cases.” According to the Chairman, “[t]he escalating rate of digital asset enforcement cases since 2020 mirrors the accelerated and sustained adoption of digital assets by U.S. investors.” The Chairman also highlighted a recent decision by the U.S. District Court for the Northern District of Illinois in which the CFTC prevailed in prosecuting fraud involving “digital asset commodities” and said, “In its decision, the court re-affirmed that both Bitcoin and Ether are commodities under the Commodity Exchange Act.”

In closing, the Chairman restated the need to “fill the regulatory gap” and provided the following “components of a framework that would ensure the CFTC has the tools to provide customer and market protections”: (1) a “principles-based oversight model” that strikes “an appropriate balance between clear outcomes-based requirements, and measured flexibility to meet those outcomes”; (2) appropriate funding in the form of a “permanent fee-for-service model, exclusively assessed on digital asset registrants, and that is commensurate with the responsibilities outlined in a bill”; (3) “[L]egislative authority for the CFTC to require registrants to provide a comprehensive disclosure regime”; (4) “[C]omprehensive authority for anti-money laundering, know-your-customer, and a customer identification program”; (5) “[A] disciplined, balanced framework for the determination of tokens as commodities or securities under existing law”; and (6) “[A] comprehensive education and outreach program” to “enable the investing public to understand both the risks and opportunities of this technology.”

<a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/opabehnam48" target="_blank" rel="noreferrer noopener">Testimony of Chairman Rostin Behnam Before the U.S. Senate Committee on Agriculture, Nutrition and Forestry’s Hearing on the Oversight of Digital Commodities</a>

Crypto Exchange Hacked for $235M; Illegal Miners Steal $723M in Electricity

By <a href="https://www.bakerlaw.com/KeithRMurphy" target="_blank" rel="noreferrer noopener">Keith R. Murphy</a>

A report by Elliptic provided details on the recent hack of Indian exchange WazirX, which reportedly resulted in the loss of $235 million in cryptocurrency assets, including Ether, Shiba Inu, Matic and Pepe. According to the Elliptic report, the hackers are linked to North Korea and have already used decentralized services to launder the stolen funds.

According to a recent report, illegal cryptocurrency miners in Malaysia allegedly stole $723 million of electricity during the period from 2018 through 2023. Utilizing methods to locate areas of abnormally high electricity usage, Malaysian authorities have been cracking down on illegal mining activity, seizing over 2,000 machines in October 2022 alone, based on the report. 

A recent blog from Chainalysis previewed the company’s new Money Laundering and Cryptocurrency Report, which focuses on the complexities of money laundering in the cryptocurrency system. According to the blog, the “comprehensive report not only shows how to trace known illicit funds on the blockchain but also introduces advanced data techniques to identify potential money laundering activities for lead generation.” The report, which is available now, aims to expand the company’s analysis of money laundering to encompass suspicious transaction patterns which may be indicative of money laundering activity tied to off-chain crime, as noted in the blog.

<a href="https://www.elliptic.co/blog/235-million-lost-by-wazirx-in-north-korea-linked-breach" target="_blank" rel="noreferrer noopener">$235 million lost by WazirX in North Korea-linked breach</a>

<a href="https://cryptonews.com/news/illegal-crypto-miners-in-malaysia-stole-723m-worth-of-electricity-since-2018.htm" target="_blank" rel="noreferrer noopener">Illegal Crypto Miners in Malaysia Stole $723M Worth of Electricity Since 2018</a>

<a href="https://www.chainalysis.com/blog/money-laundering-cryptocurrency/" target="_blank" rel="noreferrer noopener">Chainalysis: [REPORT PREVIEW] Money Laundering and Cryptocurrency: Trends and new techniques for detection and investigation</a>

Weekly Blockchain Blog – July 22, 2024

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