The Blockchain Monitor

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In this issue: • <a href="#Crypto1">Crypto Exchange Ends U.S. Operations, Swiss Bank to Expand Crypto Offerings</a> • <a href="#National">National Futures Association Rule Addresses Digital Asset Commodity Activities</a> • <a href="#DOJ">DOJ, Courts and State Securities Regulators Cripple Cryptocurrency Frauds</a> • <a href="#Crypto">Cryptocurrency Crime and Anti-Money Laundering Report Published</a>

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Crypto Exchange Ends U.S. Operations, Swiss Bank to Expand Crypto Offerings

By <a href="https://www.bakerlaw.com/JoannaFWasick">Joanna F. Wasick</a>

Late last month, Bittrex, a leading cryptocurrency exchange founded in Seattle, announced it was closing U.S. operations effective April 30, 2023, due to “regulatory uncertainty” in the country. Bittrex stated that all funds “are safe and can be fully withdrawn immediately” and that its decision does not affect customers of Bittrex Global. Bittrex co-founder and CEO Richie Lai stated that “operating in the U.S. is no longer feasible,” noting that U.S. regulatory requirements “are often unclear and enforced without appropriate discussion or input.”

In contrast to the Bittrex news, on April 5, Sygnum, a Swiss- and Singapore-licensed digital asset bank, announced its partnership with a leading Swiss retail bank in order to expand crypto offerings. The partnership is set to provide customers a range of regulated digital asset banking services through Sygnum’s “fully regulated” B2B banking platform, which will enable “flexible and efficient access to a range of cryptocurrencies” and allow customers to buy, store and sell “leading cryptocurrencies,” including bitcoin and ether. The partnership will also introduce new revenue-generating services, such as staking.

In other news, a major U.S. fashion label recently announced the opening of a new luxury-focused concept store in Miami’s Design District that will serve as the focal point for a targeted push into the city’s active Web3 community. Notably, the store will accept cryptocurrency payments (a first for the label) through a partnership with a major U.S. crypto payment processor. To kick-start its “season of interactive customer experiences,” the label also announced a multitiered partnership with Miami-based Web3 leisure community Poolsuite, the members of which will receive NFTs that will unlock access to an exclusive in-person event.

For more information, please refer to the following links:

<a href="https://www.insights.sygnum.com/post/postfinance-partners-with-sygnum-bank-to-offer-cryptocurrencies">PostFinance partners with Sygnum Bank to offer cryptocurrencies</a>

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<a href="https://cointelegraph.com/news/swiss-state-owned-bank-postfinance-to-offer-bitcoin-trading">Swiss state-owned bank PostFinance to offer Bitcoin trading</a>

<a href="https://decrypt.co/125424/ralph-lauren-debuts-in-store-crypto-payments-amid-miami-focused-web3-push">Ralph Lauren Debuts In-Store Crypto Payments and NFT 'Gifts' in Miami</a>

<a href="https://bittrex.com/discover/important-message-for-bittrex-u-s-customers">Important Message For Bittrex U.S. Customers</a>

<a href="https://www.coindesk.com/policy/2023/03/31/crypto-exchange-bittrex-to-wind-down-us-operations-next-month/">Crypto Exchange Bittrex to Wind Down U.S. Operations Next Month</a>

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National Futures Association Rule Addresses Digital Asset Commodity Activities

By <a href="https://www.bakerlaw.com/RobertAMusiala">Robert A. Musiala Jr.</a>

The National Futures Association (NFA) recently published a press release announcing the adoption of NFA Compliance Rule 2-51, which “imposes anti-fraud, just and equitable principles of trade, and supervision requirements on NFA Members and Associates that engage in digital asset commodity activities.” Among other things, the rule references prior NFA virtual currency guidance, and notes that for “purposes of this Rule, the term digital asset commodity or commodities means Bitcoin and Ether.” The rule also provides that NFA members engaged in spot digital asset commodity activities must adopt and implement appropriate supervisory policies and procedures. According to the press release, the NFA adopted the rule in part “to provide NFA with the ability to discipline a Member or take other action to protect the public if a Member commits fraud or similar misconduct with respect to its spot digital asset commodity activities.”

In foreign regulatory news, the Japan Financial Services Agency recently published a warning letter citing four cryptocurrency exchanges as operating in the country illegally without proper registration. And in Australia, the Australian Securities and Investments Commission (ASIC) recently published a notice indicating that ASIC has canceled the Australian financial services license of cryptocurrency exchange Binance in response to a request from the company. Among other things, the ASIC notice states that “ASIC has been conducting a targeted review of Binance financial services business in Australia” and cites the multiple actions against Binance taken by foreign regulators, including the recent enforcement action by the U.S. Commodity Futures Trading Commission.

<a href="https://www.nfa.futures.org/news/newsNotice.asp?ArticleID=5552">Notice I-23-10: Effective date for NFA rule establishing requirements for Members engaged in digital asset commodity activities</a>

<a href="https://www.coindesk.com/policy/2023/04/03/japan-regulator-flags-four-crypto-exchanges-including-bybit-for-operating-without-registration/">Japan Regulator Flags Four Crypto Exchanges Including Bybit for Operating Without Registration</a>

<a href="https://asic.gov.au/about-asic/news-centre/find-a-media-release/2023-releases/23-091mr-binance-australia-derivatives-afs-licence-cancelled/">23-091MR Binance Australia Derivatives – AFS licence cancelled</a>

DOJ, Courts and State Securities Regulators Cripple Cryptocurrency Frauds

By <a href="https://www.bakerlaw.com/KeithRMurphy">Keith R. Murphy</a><a href="https://www.bakerlaw.com/VeronicaReynolds"></a>

The U.S. Department of Justice (DOJ) recently seized cryptocurrency worth approximately $112 million in connection with a “pig-butchering” cryptocurrency investment scam, according to a recent press release. Judges located in Los Angeles, the District of Arizona and the District of Idaho collectively approved the seizure of six virtual currency accounts that were allegedly used to launder the proceeds of various cryptocurrency confidence scams. The fraudsters “fatten-up” victims by making them believe they are in a romantic or other close personal relationship, cultivating long-term online relationships with victims and encouraging them to invest in fraudulent cryptocurrency trading platforms, according to the press release. The release further notes that cryptocurrency scams in 2022, including pig-butchering, increased by 183 percent compared with 2021 figures, with most reported victims falling within the age range of 30-49 years old.

According to multiple reports and press releases, securities regulators in Texas, Montana and Alabama have jointly filed enforcement actions against YieldTrust.ai, alleging the company illegally solicited investments tied to a decentralized application (DApp) that “purportedly uses quantum artificial intelligence to trade digital assets” and is operating a Ponzi scheme. The regulators’ actions accuse the company and its owner of illegally soliciting investments in connection with the company’s DApp that purported to achieve extraordinary returns through the use of AI to trade digital assets. Following the collapse of the scheme, the regulators allege that the respondents are now operating a Ponzi scheme by raising capital from new investors to pay withdrawals from previous investors, as noted in the press releases.&nbsp;&nbsp;

<a href="https://www.justice.gov/usao-cdca/pr/justice-dept-seizes-over-112m-funds-linked-cryptocurrency-investment-schemes-over-half">Justice Dept. Seizes Over $112M in Funds Linked to Cryptocurrency Investment Schemes, With Over Half Seized in Los Angeles Case</a>

<a href="https://www.ssb.texas.gov/news-publications/state-regulators-stop-fraudulent-artificial-intelligence-investment-scheme">State Regulators Stop Fraudulent Artificial Intelligence Investment Scheme</a>

<a href="https://csimt.gov/2023/04/04/montana-commissioner-of-securities-joins-other-state-regulators-to-stop-fraudulent-artificial-intelligence-investment-scheme/">Montana Commissioner of Securities Joins Other State Regulators to Stop Fraudulent Artificial Intelligence Scheme</a>

<a href="https://asc.alabama.gov/news_detail.aspx?ID=16101">State Regulators Stop Fraudulent Artificial Intelligence Investment Scheme</a>

<a href="https://cointelegraph.com/news/multiple-us-state-regulators-allege-ai-trading-dapp-is-a-ponzi-scheme">Multiple US state regulators allege AI trading DApp is a Ponzi scheme</a>

Cryptocurrency Crime and Anti-Money Laundering Report Published

By <a href="https://www.bakerlaw.com/ChristopherLamb">Christopher Lamb</a>

Blockchain analytics and investigations firm Ciphertrace recently published its March 2023 cryptocurrency crime and anti-money laundering report, which addresses the state of cryptocurrency at the end of the third quarter of 2022. Among its many findings, the report provides the following key findings as of Q3 2022:

The total market cap of all crypto assets had reached approximately $1.1 trillion, with roughly $54 billion in total value locked (TVL).

The largest blockchain by volume was Ethereum, with 57 percent of virtual assets being held on Ethereum’s blockchain.&nbsp;

Key enforcement activities included the Office of Foreign Assets Control (OFAC) sanctioning Tornado Cash, a virtual currency mixer, for being used to launder “more than $7 billion worth of virtual currency since its creation in 2019” and the IRS seizing “approximately $4 billion in virtual assets vs $3.5 at fiscal year-end 2021.”

The report also mentions that the “third quarter was plagued with bankruptcy filings throughout the industry” in addition to seven major hacks or exploits that totaled $383 million.

In addition, the report indicates that while “NFTs exploded in both market volume and dollar value in 2021, values rapidly eroded in 2022.” The biggest platforms for NFT trading had their total volume reduced from $9.2 billion in the second quarter of 2022 to $2.3 billion in the third quarter – marking a 76 percent reduction.

<a href="https://ciphertrace.com/crime-and-anti-money-laundering-report-march-2023/">Crypto Crimes &amp; Anti-Money Laundering (AML) Report March 2023</a>

New York

Partner

Keith R. Murphy

Joanna F. Wasick

Chicago

Robert A. Musiala Jr.

U.S. Exchange Closes, Swiss Bank Expands Crypto Offerings; NFA Issues Digital Asset Commodities Rule; Crypto Enforcement Continues; Market Data Published