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Crypto Payments Firms Announce New Integrations and Initiatives

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Institutional Financial Firms Announce Crypto Products

Bank Enters Agreement to Resolve Crypto BSA/AML Violations

CFTC, SEC, CA AG Crypto Actions Target DEX, Earn Product, Trading Platform

FBI and FTC Issue Crypto Warnings; Reports Cover Crypto Scams and Hacks

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Crypto Payments Firms Announce New Integrations and Initiatives

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

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According to reports, fintech bank Revolut recently announced a partnership with Ledger, a major crypto hardware wallet provider, to make it easier for Revolut users to purchase and securely store cryptocurrencies. Among other things, the partnership reportedly will allow users to buy cryptocurrencies through the Revolut app and transfer them directly to a Ledger hardware wallet.

In another integration, a major cryptocurrency exchange recently announced an initiative with a major U.S. fintech firm that will allow U.S. users to connect their account with the fintech firm to their account at the cryptocurrency exchange. According to a press release, the integration will allow users to seamlessly transfer funds to the exchange to purchase “the range of crypto tokens available in their market.” The initiative “marks the latest collaboration” between the two companies following integrations involving the fintech firm’s PYUSD stablecoin. According to reports, the PYUSD stablecoin recently surpassed $1 billion in total market capitalization.

In related news, according to reports, Mercado Pago, the fintech affiliate of a major Latin American e-commerce company, recently announced plans to launch a stablecoin in Brazil that will be backed by U.S. dollars. And in a final notable development, in a recent blog post, Ripple announced plans to introduce “advanced programmability, including smart contracts, to the XRP Ledger developer ecosystem.”

For more information, please refer to the following links:

<a href="https://medium.com/@mick.pesser_15490/revolut-partners-with-ledger-to-simplify-cryptocurrency-purchases-what-you-need-to-know-6401d9e0436c" target="_blank" rel="noreferrer noopener">Revolut Partners with Ledger to Simplify Cryptocurrency Purchases: What You Need to Know</a>

<a href="https://cointelegraph.com/news/paypal-pyusd-stablecoin-1-billion-market-cap" target="_blank" rel="noreferrer noopener">PayPal’s PYUSD stablecoin hits $1B market cap</a>

<a href="https://www.coindesk.com/business/2024/08/21/latin-american-e-commerce-giant-mercado-libre-launches-us-dollar-tied-stablecoin" target="_blank" rel="noreferrer noopener">Latin American E-Commerce Giant Mercado Libre Launches U.S. Dollar-Tied Stablecoin</a>

<a href="https://ripple.com/insights/expanding-programmability-on-the-xrp-ledger/" target="_blank" rel="noreferrer noopener">Expanding Programmability on the XRP Ledger</a>

<a href="https://crypto.com/company-news/crypto-com-adds-paypal-as-payment-method?mc_cid=b574e288ce&amp;mc_eid=4e910b8d89" target="_blank" rel="noreferrer noopener">Crypto.com Adds PayPal as Payment Method</a>

Institutional Financial Firms Announce Crypto Products

According to a recent press release, a major U.S. stock exchange recently “announced its filing with the [U.S.] Securities and Exchange Commission to list and trade … Bitcoin Index Options (XBTX).” The press release notes that upon approval of the XBTX product, “investors will be able to manage positions and hedge investments in cryptocurrency through options, furthering the maturity and liquidity of the asset class.”

Another recent press release announced that a major asset management company has entered into a strategic partnership with Xapo Bank, a Gibraltar-based crypto bank, to manage “a newly-established Bitcoin-denominated hedge fund.” According to the press release, “The fund will launch this September and is anticipated to receive initial investment capital in excess of $200 million from Xapo Bank and other investors in 2024.”

<a href="https://www.globenewswire.com/news-release/2024/08/27/2936229/6948/en/Nasdaq-and-CF-Benchmarks-to-Drive-Development-and-Adoption-of-Digital-Asset-with-New-Index-Options.html" target="_blank" rel="noreferrer noopener">Nasdaq and CF Benchmarks to Drive Development and Adoption of Digital Asset with New Index Options</a>

<a href="https://hilbert.group/en/hilbert-group-and-xapo-bank-agree-strategic-investment-partnership-and-launch-of-bitcoin-hedge-fund-in-excess-of-200-million/" target="_blank" rel="noreferrer noopener">Hilbert Group and Xapo Bank Agree Strategic Investment Partnership and Launch of Bitcoin Hedge Fund in Excess of $200 Million</a>

OpenSea Receives SEC Wells Notice

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

According to recent reports, OpenSea, a nonfungible token (NFT) marketplace, has received a Wells notice from the U.S. Securities and Exchange Commission (SEC), a sign that the SEC may soon file an enforcement action against the company. OpenSea’s CEO and founder disclosed the receipt of the Wells notice in a recent blog post on the company’s site and through social media accounts, arguing that this move will “discourage artistic expression” and have a “chilling effect” on the creative expression and innovation of NFT artists. According to the blog post, “To help ensure creators can continue innovating without fear, OpenSea is pledging $5M to cover legal fees for NFT artists and developers that receive a Wells notice.” If the SEC brings an action against OpenSea, it will be the SEC’s first lawsuit against an NFT marketplace.

<a href="https://opensea.io/blog/articles/taking-a-stand-for-a-better-internet" target="_blank" rel="noreferrer noopener">Taking a stand for a better internet</a>

<a href="https://www.theblock.co/post/313515/opensea-ceo-says-nft-marketplace-received-wells-notice-and-pledges-5-million-to-help-defend-creators-against-sec" target="_blank" rel="noreferrer noopener">OpenSea CEO says NFT marketplace received Wells Notice and pledges $5 million to help defend creators against SEC</a>

<a href="https://www.law360.com/fintech/articles/1874275?nl_pk=443df714-8612-4cc7-92bb-12102189ef09&amp;utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=fintech&amp;utm_content=2024-08-29&amp;read_main=1&amp;nlsidx=0&amp;nlaidx=0" target="_blank" rel="noreferrer noopener">NFT Platform OpenSea Says SEC May Bring Registration Suit</a>

Bank Enters Agreement to Resolve Crypto BSA/AML Violations

The U.S. central bank’s Dallas branch and the Texas Department of Banking recently published a consent agreement with a Texas state-chartered bank to address deficiencies in the bank’s activities, including activities involving cryptocurrency customers. According to the agreement, an examination identified “significant deficiencies” related to “virtual currency customers,” specifically relating to anti-money laundering (AML), including the Bank Secrecy Act (BSA) (31 U.S.C. § 5311 et seq.) and related regulations (31 C.F.R. Chapter X), and the AML requirements of Regulation H of the Board of Governors of the Federal Reserve System (12 C.F.R. §§ 208.62 and 208.63). Among other things, the agreement requires the bank to submit the following:

An acceptable written plan to strengthen board oversight of the bank’s compliance with BSA/AML requirements and regulations issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).

An acceptable written revised BSA/AML program including measures to address findings of a third-party report; enhanced internal controls; a comprehensive risk assessment; enhanced independent testing procedures; management of the bank’s BSA/AML program by a qualified compliance officer; and enhanced policies and procedures to ensure effective BSA/AML training.

An acceptable written revised customer due diligence program including enhanced policies, procedures and controls; remediation of deficient due diligence for existing customers; a risk rating methodology; a risk-focused assessment of the bank’s customer base; and procedures to ensure periodic reviews of customer and account information.

An acceptable written revised suspicious activity monitoring and reporting program including a methodology for establishing and periodically reviewing monitoring rules and processes; enhanced monitoring and investigation to ensure timely detection, investigation and reporting of suspicious transactions; policies, procedures and processes for identifying subjects of law enforcement requests; and measures to ensure that alert dispositions are supported with adequate rationale and documentation.

An acceptable written revised plan to enhance OFAC compliance.

<a href="https://www.federalreserve.gov/newsevents/pressreleases/files/enf20240904a2.pdf" target="_blank" rel="noreferrer noopener">In the Matter of UNITED TEXAS BANK</a>

CFTC, SEC, CA AG Crypto Actions Target DEX, Earn Product, Trading Platform

By <a href="https://www.bakerlaw.com/professionals/isabelle-corbett-sterling/">Isabelle Corbett Sterling</a>

The U.S. Commodity Futures Trading Commission (CFTC) recently announced a consent order settling charges against the development company for one of the largest decentralized exchanges by transaction volume for illegally offering leveraged or margined retail commodity transactions in digital assets. The CFTC found the company helped develop and deploy a decentralized digital asset trading protocol that offered trading in digital assets, including some leveraged tokens and margined commodity transactions, to non-eligible contract participants without registering with the CFTC as a contract market. Under the consent order, the development company is required to pay a $175,000 civil monetary penalty and to cease and desist from violating the Commodity Exchange Act.

The U.S. Securities and Exchange Commission (SEC) announced it settled charges against Abra, a crypto trading, lending and investing platform, for failing to register the offers and sales of its retail crypto asset lending product, Abra Earn. The complaint alleges Abra Earn was offered and sold as a security not subject to an exemption from the registration requirement. The complaint also alleges Abra acted as an unregistered investment company by issuing securities and holding more than 40 percent of its total assets in investment securities. Abra settled without admitting or denying the SEC’s allegations. The company is enjoined from further violations of the registration provisions of the Securities Act and the Investment Company Act and will pay civil penalties in an amount to be determined by the court.

The California attorney general recently announced a $3.9 million settlement with crypto trading platform Robinhood for violations of the California Commodity Law. In its press release, the attorney general said the California Department of Justice concluded Robinhood violated the California Commodity Law when it sold cryptocurrencies to customers without delivering them and prohibited withdrawals of cryptocurrency, forcing customers to sell their crypto back to the platform in order to exit the platform. According to the press release, Robinhood also at times failed to fulfill its promises to investors of competitive pricing from multiple venues and holding the customers’ assets. As part of the settlement, the platform must allow customers to withdraw crypto to their own wallets, ensure accurate representations regarding trading and order handling practices, custody customers’ crypto, disclose that it may delay settlement with trading venues in the event of a concern around a crypto asset’s network security, and disclose to the attorney general’s office any incident that delays settlement for more than a week.

<a href="https://www.cftc.gov/PressRoom/PressReleases/8961-24" target="_blank" rel="noreferrer noopener">CFTC Issues Order Against Uniswap Labs for Offering Illegal Digital Asset Derivatives Trading</a>

<a href="https://www.sec.gov/newsroom/press-releases/2024-105" target="_blank" rel="noreferrer noopener">SEC Charges Abra with Unregistered Offers and Sales of Crypto Asset Securities</a>

<a href="https://oag.ca.gov/news/press-releases/attorney-general-bonta-secures-39-million-settlement-cryptocurrency-company" target="_blank" rel="noreferrer noopener">Attorney General Bonta Secures $3.9 Million Settlement with Cryptocurrency Company Robinhood</a>

FBI and FTC Issue Crypto Warnings; Reports Cover Crypto Scams and Hacks

The FBI recently published a public service announcement warning that “[t]he Democratic People’s Republic of Korea [DPRK] is conducting highly tailored, difficult-to-detect social engineering campaigns against employees of decentralized finance [DeFi], cryptocurrency, and similar businesses to deploy malware and steal company cryptocurrency.” The FBI announcement includes an overview of key DPRK tactics, indicators and mitigation measures.

The U.S. Federal Trade Commission (FTC) recently published a report warning of “a massive increase in the amount of money consumers report losing to scammers involving Bitcoin ATM machines.” According to the FTC, the amount consumers reported losing to scams involving Bitcoin ATMs has increased nearly tenfold since 2020 to over $110 million in 2023.

In related news, blockchain analytics firm TRM Labs recently published a report on illicit activity in the crypto ATM industry. Among other things, the report finds that “the cash-to-crypto industry—which is dominated by crypto ATMs—has processed at least USD 160 million in illicit volumes since 2019” and “illicit volumes in the cash-to-crypto industry stood at 1.2% of total volume, double the 0.63% for the overall crypto ecosystem.” In another recent publication, blockchain analytics firm Chainalysis provided new data on the growing use of cryptocurrencies in China-based child sexual abuse material networks, pig butchering and other scams, and Chinese language illicit markets and laundering networks.

According to a recent report by Immunefi, following recent hacks in August, crypto hackers have now stolen over $1.2 billion YTD in 2024 across 154 individual incidents, representing a 15.5 percent increase compared to the same period in 2023. A single phishing attack in August reportedly resulted in a loss of $55 million. More recently, on September 3 the Penpie DeFi protocol reportedly lost $27 million to hackers.

<a href="https://www.ic3.gov/Media/Y2024/PSA240903" target="_blank" rel="noreferrer noopener">North Korea Aggressively Targeting Crypto Industry with Well-Disguised Social Engineering Attacks</a>

<a href="https://www.ftc.gov/news-events/news/press-releases/2024/09/new-ftc-data-shows-massive-increase-losses-bitcoin-atm-scams" target="_blank" rel="noreferrer noopener">New FTC Data Shows Massive Increase in Losses to Bitcoin ATM Scams</a>

<a href="https://www.chainalysis.com/blog/2024-crypto-crime-mid-year-update-part-2/" target="_blank" rel="noreferrer noopener">2024 Crypto Crime Mid-year Update Part 2: China-based CSAM and Cybercrime Networks On The Rise, Pig Butchering Scams Remain Lucrative</a>

<a href="https://www.trmlabs.com/post/illicit-activity-involving-crypto-atms-is-double-that-of-overall-crypto-industry" target="_blank" rel="noreferrer noopener">Rate of Illicit Activity at Crypto ATMs is Double That of Overall Crypto Industry</a>

<a href="https://cointelegraph.com/news/hackers-surpass-1-2-billion-stolen-2024-immunefi" target="_blank" rel="noreferrer noopener">Crypto hackers surpass $1.2 billion stolen in 2024: Immunefi</a>

<a href="https://cointelegraph.com/news/crypto-phishing-attacks-surge-august-215-percent" target="_blank" rel="noreferrer noopener">August sees 215% rise in crypto phishing, $55M lost in single attack</a>

<a href="https://cointelegraph.com/news/crypto-whale-loses-55m-phishing-attack" target="_blank" rel="noreferrer noopener">Crypto phishing attack drains $55M from whale’s wallet</a>

<a href="https://cointelegraph.com/news/penpie-protocol-exploited-suffers-27-million-loss" target="_blank" rel="noreferrer noopener">Penpie protocol exploited, suffers $27M loss</a>

Weekly Blockchain Blog – September 9, 2024