This second edition further explores the regulatory landscape of cryptocurrency, highlighting the rise of Bitcoin, which is based on blockchain technology, and some of the many types of coins and tokens that emerged thereafter. Although Bitcoin and other cryptocurrencies have made national and international news with their dramatic rise and decline in value, nevertheless the underlying technology is being adopted by both industry and governments, which have noted the benefits of speed, cost efficiency, and protection from hacking. Based on numerous downloaded articles, laws, cases, and other materials, the book discusses the digital transformation, the types of cryptocurrencies, key actors, and the benefits and risks. It also addresses legal issues of digital technology and the evolving U.S. federal regulation. The varying treatment by individual U.S. states is reviewed together with attempts by organizations to arrive at a uniform regulatory regime. Both civil and criminal prosecutions are highlighted with an examination of the major cases that have arisen. This second edition specifically explores the creation of stablecoins, governments issuance of their own versions of digital currencies, new regulations that have been enacted and promulgated, and a clearer examination of futuristic evolutions that potentially will have a major impact upon the current cited technologies.
Author(s): Rosario Girasa
Series: Palgrave Studies in Financial Services Technology
Edition: 2
Publisher: Palgrave Macmillan
Year: 2022
Language: English
Pages: 405
City: Cham
Preface
Table of Cases
Contents
Abbreviations
1 The Digital Transformation
Introduction
Definitions and Types of Non-Fiat Currencies
Money
Back to Basics: What Is Money?
Reasons for the Rise of Digital Currencies
Types of Currencies
Digital Currencies
Virtual Currencies
Cryptocurrencies
Key Actors in Digital Technology38
Benefits and Risks of Digital Currencies
Benefits of Digital Currencies
Risks of Digital Currencies
US Government Agencies’ Risks Advisories
Commodity Futures Trading Commission (CFTC)
Consumer Financial Protection Bureau (CFPB)
Government Services Administration (GSA)
Securities and Exchange Commission (SEC)
Immigration and Customs Enforcement (ICE)
Federal Reserve Board (FED)
International Risk Assessments
International Monetary Fund (IMF)
Financial Stability Board (FSB)
European Union Supervisory Authorities (ESAS)
European Union Agency for Network and Information Security (ENISA)
Nobel Laureates’ Concerns
Notes
2 Technology Underlying Cryptocurrencies and Types of Cryptocurrencies
Blockchain Technology
Types of Blockchain Technology
Uses of Blockchain Technology
Banks and Blockchain Technology
Varieties of Cryptocurrencies
Bitcoin
How Bitcoin Works
Mining
Ethereum
Smart Contracts
Comparison of Bitcoin and Ethereum
Other Variations of Cryptocurrencies
Forks
Altcoins
Sidecoin
Sidechain
Litecoin
Bitcoin Cash (BTH)
ApeCoin
Dogecoin
Cardano
Ripple
Monero
Digital Tokens (Cryptotokens)
Types of Tokens
Non-Fungible Tokens (NFTs)
What Are Non-Fungible Tokens?
Rewards and Risks of NFTs
Legal Issues Affecting NFTs
NFT Civil Litigation
NFT Criminal Enforcement
Crypto NFT Scheme—U.S. v. Le Anh Tuan116
Money Laundering—U.S. v. Nguyen and Llacuna118
Money Laundering and NFT—FinCEN Report
International Regulation of NFTs
Web3 and Metaverse
Web3
Metaverse
North American Securities Administrators Association (NASAA) Warning
Wrapped Assets
Stablecoins, Wrapped Assets, and NFTS Comparison
Decentralized Finance
Notes
3 Federal Regulation of Virtual Currencies
Introduction
Jurisdiction
SEC v. Shavers
Gordon v. Dailey
Alibaba Group Holding v Alibabacoin Foundation
Virtual Currencies as Money
Audet v. Fraser33
US Government Agencies Concerned with Virtual Currencies
Securities and Exchange Commission (SEC)
SEC Chairman Commentaries
Risks of ICO Investments
SEC First Enforcement Action: REcoin
The DAO Conundrum
SEC v. Munchee Inc.
SEC Warnings to Social Media
SEC and Crypto Co. and SEC v. Telegram
SEC Disapproval of NYSE Proposed Rule Change
Chief Compliance Officer (CCO) Liability?
Electronic Trading Funds (ETFs)
Ponzi and Unregistered Securities Scheme—US v. Pires, Goncalves, and Nicholas97
Crypto Initial Coin Offering Scheme—US v. Stollery98
Commodity Futures Trading Commission (CFTC)
Prohibited Activities
In re Coinflip, Inc.
CFTC v. Bitfinex
CFTC v. My Big Coin Pay, Inc.106
CFTC v. LedgerX, LLC and TeraExchange
Crypto Commodities and Ponzi Scheme—US v. Saffron118
CME, CBOE, and Cantor Exchanges
Authority Over Bitcoin Interpretation
CFTC Self-Certification Announcement
Consumer Protection Resource Page
US Department of Justice Attorney General’s Cyber-Digital Task Force
Financial Crimes Enforcement Network (FinCEN)
FinCEN’s Guidance to Persons Administrating, Exchanging, or Using Virtual Currencies133
FinCEN’s Ruling Concerning Virtual Currency Software Development January 30, 2014143
FinCEN’s Ruling Concerning Convertible Virtual Currency Trading and Booking Platform145
FinCEN’s Application of Money Transmission to Virtual Currency Mining147
FinCEN and IVAN
Requirements When Designated as a Money Services Business
US v. Lord
Office of Foreign Assets Control (OFAC)
Framework for OFAC Compliance Commitments
OFAC Sanctions Compliance Guidance for the Virtual Currency Industry
Sealed Criminal Complaint Against US Unidentified Person
Federal Reserve Board (FED)
Consumer Financial Protection Bureau (CFPB)
Office of Comptroller of the Currency (OCC)
Federal Trade Commission
FTC and Butterfly Labs
Federal Deposit Insurance Corporation (FDIC)
North American Securities Administrators Association
Notes
4 Alternatives to Traditional Virtual Currencies: Stablecoins and Central Banks Digital Currencies
Stablecoins
Models of Stablecoins
Advantages and Risks of Stablecoins
Advantages of Stablecoins
Risks of Stablecoins
US Government Regulation of Stablecoins
Stablecoin Cases
Tether—Federal and NYS Sanctions
TerraUSD (UST)
International Regulation of Stablecoins
G7 Report
IMF Cautionary Note
European Union and Stablecoins
US Senate Proposed Bills
Central Banks and Cryptocurrencies
Central Banks’ Role and Mission
Central Bank Digital Currency (CBDC)
Definition and Distinction from Other Digital Currencies
Reasons for Rise of CBDC
Benefits of CBDCs
Risks of CBDCs
Foundational Principles and Features of CBDCs
European Union and CBDC
Countries’ Adoption of CBDC
US Future Adoption of CBDC?
President Biden’s Executive Order No. 14067 Concerning CBDCs54
Responses to President Biden’s Executive Order 14067
CBDC Framework
Project Hamilton
CBDCs and Stablecoins
Basel Committee on Banking Supervision
Notes
5 Criminal Prosecutions and Civil Litigation Concerning Blockchain Technologies
Criminal Prosecutions
Statutory Prohibitions
U.S. v. Murgio
U.S. v. BTC-e
US v. Lichtenstein and Morgan
BitConnect Ponzi Scheme
North Korean Prosecutions
US v. Jon Chang Hyok21
US v. Ghaleb Alaumary
Lazarus Group Hackers
March 29, 2022, Incident
Darknet Prosecutions
US v. Budovsky (Liberty Reserve)
US v. Harmon
US v. Cazes (AlphaBay)
US v. Binh Thanh Le
US v. Prihar
Darknet and Child Pornography
US v. Jong Woo Son
Darknet Continuing Arrests
Operation DisrupTor
Operation Bayonet (Alpha Bay and Hansa)
Ransomware
Sodinokibi/REvil Ransomware
Yaroslav Vasinskyi
Ransomware Task Force Recommendations
Immigration and Customs Enforcement (ICE)
ICC v. Hubbard (PDXBlack)
“Silk Road” Prosecutions
The Tor Project, Inc.
US v. Ulbricht (Computer Hardware Bitcoins)
US v. Benthall
US v. Shrem and Faiella
US v. Force68 and US v. Bridges69
First US Cryptocurrency Sanctions Criminal Proceeding
Bitcoin as Money
President Biden’s Executive Order No. 1406782
Agencies’ Response to Executive Order
Department of Justice with Input of Other Agencies
President Biden’s Comprehensive Framework for Responsible Development of Digital Assets
SEC Civil Enforcement
Ripple Labs and R3
SEC v. PlexCorps.
SEC v. Voorhees
SEC v. Sand Hill Exchange
SEC v. Willner
SEC v. UBI Blockchain Internet, Ltd.
SEC v. Wahi
CFTC Civil Enforcement
CFTC v. Gelfman
CFTC v. McDonnell
CFTC v. Dean
CFTC v. HDR Global Trading LTD.112
CFTC v. McAfee
Office of Foreign Assets Control (OFAC)
Hydra Market, Garantex, SUEX, CHATEX, Darknet Coordination
Notes
6 States’ Regulation of Virtual Currencies
Money Transmission State Laws
Proposed Uniform Virtual Currency Codes
Uniform Regulation of Virtual-Currency Business Act
Conference of State Bank Supervisors: Model Framework (CSBS)
CSBS’ Model Money Transmission Modernization Act
States Requiring Licenses for Virtual Currency Businesses21
Alabama
Alaska
Arizona
Arkansas
Connecticut
Delaware
District of Columbia
Florida
Georgia
Idaho
Illinois
Nevada
New York
North Carolina
Texas
Vermont
Virginia
Washington
West Virginia
Wyoming
Miscellaneous States Giving Recognition to Virtual Currencies
Hawaii
Massachusetts
New Jersey
States That Have Not Enacted Legislation Concerning Virtual Currencies
California
Colorado
Kansas
Maryland
Missouri
Miscellaneous States
Notes
7 Taxation of Virtual Currencies; Environmental, Social and Governance Considerations; Protection of Intellectual Property Rights; Antitrust; and Cybersecurity
Taxation of Virtual Currencies
Virtual Currency as Property for Tax Purposes
Jarrett V. USA.14
IRS Guidance on Hard Forks and Air Drops
Internal Revenue Service Guidance on Crowdfunding and Virtual Currency
Crowdfunding
Enforcement
Blockchain Advantages for Crowdfunding
Tax Aspects of Crowdfunding
The Foreign Account Tax Compliance Act (FATCA)44
Internal Revenue Service Enforcement of Regulations
Subpoenas as a Method to Investigate Tax Fraud Cases
US V. Coinbase
Chainalsis and the IRS
Congressional Proposals to Tax Virtual Currency Transactions
Taxation of Charitable Donations of Crypto-Assets
Environmental, Social, and Governance Considerations (ESG)
President Biden’s Initiatives
SEC Proposed Rule
International Efforts
Intellectual Property Rights
IPR Basics
IPRs and NFTs
Regulations Relating to Cybersecurity
Cybersecurity Information Sharing Act of 2015111
Cybersecurity Act of 2021113
President Biden’s Executive Order 14028
FED’s 2022 Cybersecurity Report to Congress
SEC’s 2022 Proposed Rule on Cybersecurity
Federal Efforts to Expand Cybersecurity Knowledge Base
The State and Local Government Cybersecurity Act of 2021
States’ Regulatory Measures
Antitrust
Summary of Basic Provisions of US Antitrust Regulation
Emerging Technologies and Antitrust Implications
Blockchain and Antitrust Implications
FTC/DOJ Guidelines
Private Litigation
OECD Blockchain Issues Paper
Notes
8 International Regulation
European Union
European Central Bank (ECB)
EU Directives on Money Laundering
Markets in Crypto-Assets (MiCA)
European Securities and Markets Authority (ESMA)
ESMA, EBA, and the EIOPA 2018 Warning21
European Union’s 2018 Blockchain Initiative
European Court of Justice Ruling
EU-US Joint Financial Regulatory Forum
The Bank for International Settlements
The Financial Action Task Force (FATF)
Organization for Economic Cooperation and (OECD)36
Financial Stability Board (FSB)
United Nations (UN)
International Organization of Securities Commissions (IOSCO)
Miscellaneous International Entities
Selected Countries Permitting and/or Regulating Virtual Currencies
Argentina
Australia
Austria
Belgium
Belarus
Bermuda
Brazil
Bulgaria
Canada
Columbia
Croatia
Cyprus
Czech Republic
Denmark
El Salvador
Estonia
Finland
France
Germany
Greece
Hong Kong SAR
Hungary
Iceland
India
Indonesia
Iran
Ireland
Israel
Italy
Japan
Jordan
Lebanon
Lithuania
Luxembourg
Malaysia
Mexico
Netherlands
New Zealand
Norway
Philippines
Poland
Portugal
Saudi Arabia
Serbia
Singapore
Slovenia
South Africa
South Korea
Spain
Sweden
Switzerland
Taiwan
Thailand
Turkey
United Arab Emirates
United Kingdom
Vietnam
Countries Banning Bitcoin and Other Virtual Currencies
Bangladesh
Bolivia
China
Ecuador
Kyrgyzstan
Morocco
Nepal
Alternative National Virtual Currency
Russia and Venezuela
Notes
Conclusion: Quantum Computing and the New Disruption
Index
