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<a href="#Leading">Leading U.S. Crypto Companies Announce Multiple New Products, Integrations</a>

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<a href="#Stablecoin">Stablecoin Survey Published, Banking Sector Launches Digital Asset Pilots</a>

<a href="#OFAC">OFAC Sanctions Target Human Trafficking Related to Crypto Scams</a>

<a href="#NFT">SEC Brings Third NFT Enforcement Action, Two SEC Commissioners Dissent</a>

<a href="#SEC">SEC Actions Target Crypto Scams, Charge DeFi Platform for Securities Violations</a>

<a href="#DeFi">DeFi Platform Hacked for $6 Million; Consumer Watchdog Issues USDT Warning</a>

<a href="https://www.bakerlaw.com/insights/bulls-bears-and-blockchain-august-28/" target="_blank" rel="noreferrer noopener">BakerHostetler Fireside Chat Series ‘Bulls, Bears & Blockchain’ Hosts SEC Commissioner Hester M. Peirce</a>

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Leading U.S. Crypto Companies Announce Multiple New Products, Integrations

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

A major U.S. cryptocurrency exchange recently announced the launch of cbBTC – an ERC20 token backed 1:1 by bitcoin held by the exchange. The new “wrapped bitcoin” token will be available on the Ethereum and Base blockchain networks.

BitGo, a major U.S. cryptocurrency custody provider and issuer of the WBTC wrapped bitcoin token, recently announced that it plans to launch a stablecoin, USDS, that will be backed 1:1 by U.S. dollars, short-duration T-bills, and overnight repos. According to a press release, USDS will offer “a novel reward system that deploys up to 98% of earnings to participants who support the ecosystem” and its “proof-of-reserves” will be published in real time with monthly audits by “top-tier accounting firms.”

In a separate release, BitGo announced that it has launched “a unified, automated Token Management platform, designed to streamline the fragmented and complex process of managing digital assets for every stakeholder.” According to the release, the new product is targeted at “foundations, protocols, and organizations managing digital assets” and provides “A single platform for end-to-end token management, eliminating the need for fragmented solutions across custody, distribution, staking, and liquidation.”

In more product launches, Circle, the issuer of the USDC stablecoin, recently announced a partnership with an affiliate of a major Japanese technology company to “integrate Bridged USDC Standard and establish bridged USDC” on the Soneium Ethereum layer 2 network. Circle also recently announced that USDC is now available in Brazil and Mexico through “local bank transfers via PIX and SPEI, the national real-time payment systems in Brazil and Mexico, respectively.”

In a final update, crypto exchange CEX.io recently announced an integration with a major U.S.-based, global retail money transfer provider that will allow CEX.io customers to convert fiat currency to USDC, and withdraw USDC to receive fiat cash, at physical retail locations operated by the money transfer provider. According to a blog post by CEX.io, the service is available in multiple countries but currently excludes the U.S.

For more information, please refer to the following links:

<a href="https://www.coinbase.com/blog/coinbase-wrapped-btc-cbbtc-is-now-live" target="_blank" rel="noreferrer noopener">Coinbase Wrapped BTC (cbBTC) is now live</a>

<a href="https://www.businesswire.com/news/home/20240917452036/en/BitGo-Introduces-A-New-Standard-for-Stablecoins-Meet-USDS" target="_blank" rel="noreferrer noopener">BitGo Introduces a New Standard for Stablecoins: Meet USDS</a>

<a href="https://www.bitgo.com/resources/blog/bitgo-revolutionizes-token-management-for-protocols-delivering-the-first-end/" target="_blank" rel="noreferrer noopener">BitGo Revolutionizes Token Management for Protocols, Delivering the First End-to-End, Automated Custody Solution on the Market</a>

<a href="https://www.circle.com/en/pressroom/circle-and-sony-block-solutions-labs-to-enable-usdc-on-soneium" target="_blank" rel="noreferrer noopener">Circle and [] Block Solutions Labs to Enable USDC on Soneium to Empower a Creator Economy</a>

<a href="https://www.circle.com/blog/usdc-now-available-in-brazil-and-mexico-through-national-payment-systems-with-local-currency" target="_blank" rel="noreferrer noopener">USDC now available in Brazil and Mexico through national payment systems, with local currency</a>

<a href="https://support.cex.io/en/articles/9890991-moneygram-integration" target="_blank" rel="noreferrer noopener">CEX.io MoneyGram Integration</a>

<a href="https://cointelegraph.com/news/cexio-integrates-moneygram-stellar-enhanced-usdc-cash-services" target="_blank" rel="noreferrer noopener">[] and [] join CEX.io for global crypto cash conversions</a>

Stablecoin Survey Published, Banking Sector Launches Digital Asset Pilots

A major U.S. payments company, a blockchain-focused venture capital fund, a digital asset investment firm, and a blockchain data science firm recently published the results of a survey focused on understanding “the usage of stablecoins across key global markets.” The survey sample consisted of approximately 500 adults in each of Nigeria, Indonesia, Turkey, Brazil, and India. Key findings include the following:

The most popular motivations to use stablecoins were access to crypto (50 percent), access to dollars (47 percent), and yield generation (39 percent).

Stablecoins are preferred to USD due to yield, efficiency, and lower likelihood of government interference.

Fifty-seven percent of users report an increase in stablecoin usage in the past year.

Reasons for using Tether include network effects, trust, liquidity, and track record.

Non-trading use cases include currency conversion (to dollars), paying for goods, cross-border payments, and paying or receiving a salary.

Ethereum is the most popular blockchain among sampled users, followed by Binance Smart Chain, Solana, and Tron.

The most popular wallets among respondents are Binance (exchange), Trust wallet, Metamask, Coinbase wallet, crypto.com, and Phantom wallet.

In related news, the Bank for International Settlements (BIS) recently announced that 40 private-sector financial firms will join BIS and a group of leading central banks in Project Agorá to explore how tokenisation can enhance wholesale cross-border payments. A BIS press release provides the full list of participants and notes “Project Agorá will now begin the design phase of the project.”

In a final notable development, a major U.S. bank recently announced the launch of a “blockchain-based platform which enables institutional buyers to digitally access carbon credits from leading project developers.” According to a press release, by using the platform “buyers can purchase digital carbon credits directly from project developers and retire these against their emissions footprint” with the bank acting “to record, transfer and settle digital carbon credits in its capacity as the designated custodian.”

<a href="https://castleisland.vc/wp-content/uploads/2024/09/stablecoins_the_emerging_market_story_091224.pdf" target="_blank" rel="noreferrer noopener">Stablecoins: The Emerging Market Story</a>

<a href="https://www.bis.org/about/bisih/topics/fmis/agora.htm" target="_blank" rel="noreferrer noopener">BIA: Private sector partners join Project Agorá</a>

<a href="https://www.northerntrust.com/united-states/pr/2024/northern-trust-launches-digital-solution-for-institutional-voluntary-carbon-credits-with-first-official-live-transactions" target="_blank" rel="noreferrer noopener">[] Launches Digital Solution for Institutional Voluntary Carbon Credits with First Official Live Transactions</a>

OFAC Sanctions Target Human Trafficking Related to Crypto Scams

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>

On September 12, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions against a Cambodian businessman, his conglomerate, and affiliated resorts and hotels for their role in serious human rights abuse related to the treatment of trafficked workers subjected to forced labor in online scam centers. According to a press release, in many cases the scams involve “convincing victims to invest in virtual currency, or in some cases, over-the-counter foreign exchange schemes, all with the intent of defrauding them of their funds.” The press release notes that investment fraud involving crypto increased 53 percent from 2022 to 2023. According to the press release, “Often, the frontline scammers in virtual currency confidence schemes are themselves often victims of trafficking, including forced labor, and are subjected to physical and mental abuse.”

<a href="https://home.treasury.gov/news/press-releases/jy2576" target="_blank" rel="noreferrer noopener">Treasury Sanctions Cambodian Tycoon and Businesses Linked to Human Trafficking and Forced Labor in Furtherance of Cyber and Virtual Currency Scams</a>

SEC Brings Third NFT Enforcement Action, Two SEC Commissioners Dissent

The U.S. Securities and Exchange Commission (SEC) recently published a press release announcing its third enforcement action and consent order settling charges related to the sale of nonfungible tokens (NFTs). According to the press release, the SEC “charged Flyfish Club, LLC (Flyfish) with conducting an unregistered offering of crypto asset securities in the form of … NFTs that raised approximately $14.8 million from investors to finance the construction and launch of a private members-only restaurant.” The press release notes Flyfish offered and sold to investors approximately 1,600 Flyfish NFTs, which were intended to be the exclusive means of obtaining membership in the club, but “promoted the NFTs as investments and led investors to expect profits from Flyfish’s efforts,” including by telling investors “they could potentially profit if the club were successful, by reselling their NFTs in the secondary market at appreciated prices or by leasing their NFTs to others interested in accessing the club as a ‘passive income strategy.’” The press release further noted that “42% of investors bought more than one NFT in the offering, even though they needed only one NFT to become a member of the club.” Flyfish agreed to a cease-and-desist order and a $750,000 civil penalty.

SEC Commissioners Hester M. Peirce and Mark T. Uyeda published a dissenting statement, arguing the Flyfish NFTs “are utility tokens, not securities, and statements by the founders and NFT purchasers that a successful restaurant would cause the NFT price to rise do not change that.” Commissioners Peirce and Uyeda argued that the Flyfish NFT “has a concrete use: you need it to eat at the Flyfish Club.” The Commissioners further argued that “[e]xperiments like Flyfish Club are not a threat to the American investor” and said “NFTs offer a promising way to allow creative people – such as chefs, musicians, or visual artists – to monetize their talent and a potentially efficient way for selling access to experiences and communities.”

<a href="https://www.sec.gov/enforcement-litigation/administrative-proceedings/33-11305-s" target="_blank" rel="noreferrer noopener">SEC Charges Flyfish Club, LLC for Unregistered Offering of NFTs</a>

<a href="https://www.sec.gov/newsroom/speeches-statements/peirce-uyeda-statement-flyfish-091624" target="_blank" rel="noreferrer noopener">Omakase: Statement on In the Matter of Flyfish Club, LLC</a>

SEC Actions Target Crypto Scams, Charge DeFi Platform for Securities Violations

The U.S. Securities and Exchange Commission (SEC) recently announced three enforcement actions and consent orders involving digital assets. In a press release, the SEC announced charges against “five entities and three individuals in connection with two relationship investment scams involving fake crypto asset trading platforms NanoBit and CoinW6, respectively.” In the NanoBit action, the SEC alleged the defendants “impersonated financial industry professionals in [chat] groups to build investors’ trust and then solicited their investments through the … NanoBit crypto asset trading platform.” The SEC alleges the NanoBit platform was fake and investor funds were wired to bank accounts in Hong Kong, and their crypto assets were misappropriated.  

In the CoinW6 action, the SEC alleges scheme participants contacted prospective investors via social media and pursued romantic relationships over a popular chat app, then convinced victims to open accounts on CoinW6’s crypto asset trading platform. According to the SEC, “[i]n reality, investors’ funds were misappropriated, and their ostensible investments, profits, and account balances were fictitious.” When investors tried to withdraw profits, “the schemers allegedly demanded additional payments for taxes or fees, told investors that the crypto assets were frozen as part of a law enforcement inquiry, or tried to blackmail them using compromising romantic communications.”

In a third action, the SEC “announced settled charges against Rari Capital, Inc., a supposed decentralized finance (DeFi) protocol, and its co-founders … for misleading investors and engaging in unregistered broker activity in connection with their operation of two blockchain-based investment platforms.” According to the SEC press release, “Rari Capital offered two investment products, Earn pools and Fuse pools, which functioned like crypto asset investment funds, allowing investors to deposit crypto assets in lending pools … and earn returns.” Investors in the pools received a token representing their interest in the pools and the right to receive profits earned by the pools, and certain Earn pool investors also received a governance token. The SEC alleged that “[b]y selling interests in these pools and RGT, Rari Capital conducted unregistered offers and sales of securities.” According to the press release, the SEC alleged the defendants also made false and misleading statements about the functionality of Rari Capital and “engaged in unregistered broker activity through their operation of the Fuse platform.”

<a href="https://www.sec.gov/newsroom/press-releases/2024-134" target="_blank" rel="noreferrer noopener">SEC Charges Multiple Individuals and Entities in Relationship Investment Scams</a>

<a href="https://www.sec.gov/newsroom/press-releases/2024-138" target="_blank" rel="noreferrer noopener">SEC Charges DeFi Platform Rari Capital and its Founders with Misleading Investors and Acting as Unregistered Brokers</a>

DeFi Platform Hacked for $6 Million; Consumer Watchdog Issues USDT Warning

According to recent reports, DeFi platform Delta Prime lost more than $6 million in stablecoins in a hack. The hack reportedly involved a private key exploit in which the hackers took control of the admin wallet for the Delta Prime proxy contacts, then upgraded the contracts to point to a malicious contract, which enabled the hacker to drain Delta Prime pools on the Arbitrum chain.

In a separate development, consumer advocacy organization Consumers’ Research recently issued a consumer warning focused on the crypto company Tether. According to the warning, “Tether operates a stablecoin which purports to be one-for-one backed by the U.S. dollar, but to date, and after nearly a decade of promises, the company has still failed to undergo an audit to verify that claim.”

<a href="https://cointelegraph.com/news/delta-prime-defi-hacked-6-m-arbitrum" target="_blank" rel="noreferrer noopener">DeFi platform Delta Prime suffers $6M breach</a>

<a href="https://tetherwarning.com/wp-content/uploads/2024/09/Letter-to-Governors-on-Tether-1.pdf" target="_blank" rel="noreferrer noopener">Consumers' Research: Consumer Warning re USDT</a>

Weekly Blockchain Blog – September 23, 2024

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