On January 23, 2023, the New York Department of Financial Services released guidance with the stated goal of helping to protect customers of virtual currency businesses in the event of an insolvency or similar proceeding by imposing new custody and disclosure requirements on virtual currency entities that act as custodians.  Specifically, the guidance focuses on four areas for virtual currency entities acting as custodians (or “VCE Custodians”):

  • Segregation of and Separate Accounting for Customer Virtual Currency: A VCE Custodian is expected to (1) separately account for and segregate customer virtual currency from the corporate assets of the VCE Custodian and its affiliated entities, both on-chain and on the VCE Custodian’s internal ledger accounts; (2) avoid comingling customer virtual currency with any of the VCE Custodian’s own virtual currency or with any other non-customer virtual currency; and (3) clearly and prominently disclose the manner in which the VCE Custodian segregates and accounts for customer virtual currency. 
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On April 28, 2022 the New York Department of Financial Services (“NYDFS”) issued its Guidance on Use of Blockchain Analytics, a document directed to all virtual currency business entities that either have a NYDFS Bitlicense or are chartered as a limited purpose trust company under the New York Banking Law. … Continue Reading

On January 4, 2021, the Office of the Comptroller of the Currency (“OCC”) published an Interpretive Letter clarifying the authority of national banks and federal savings associations to participate in independent node verification networks (“INVN”) and use stablecoins to conduct payment activities and other bank-permissible functions.

A stablecoin is a type of cryptocurrency that is backed by an asset, such as a fiat currency or a commodity, which is designed to have a stable value as compared with other types of cryptocurrency. … Continue Reading

Proposed change would expand BSA definition of “money” to include virtual currency.  The Financial Crimes Enforcement Network (“FinCEN”) and the Federal Reserve Board (“Board”) have requested comment on an important proposed new rule that would amend the “Recordkeeping Rule” and “Travel Rule” under the Bank Secrecy Act (“BSA”) and expand them significantly. … Continue Reading

On August 21, 2019, FinCEN issued an advisory (the “Advisory”) alerting financial institutions to various financial schemes and mechanisms employed by fentanyl and synthetic opioid traffickers to facilitate the illegal fentanyl trade and launder its proceeds.

As defined by the Centers for Disease Control and Prevention (“CDC”), “fentanyl is a synthetic (man-made) opioid 50 times more potent than heroin and 100 times more potent that morphine.”… Continue Reading

The Pennsylvania Department of Banking and Securities (“DoBS”) just released Guidance declaring that virtual currency, “including Bitcoin,” is not considered “money” under the Pennsylvania Money Transmission Business Licensing Law, otherwise known as the Money Transmitter Act (“MTA”).  Therefore, according to the Guidance, the operator of the typical virtual currency exchange platform, kiosk, ATM or vending machine does not represent a money transmitter subject to Pennsylvania licensure.… Continue Reading

A decision this week from a New York federal district court ruling that the U.S. Commodity Futures Trading Commission (CFTC) had jurisdiction to regulate a cryptocurrency business represents the first opinion from a federal court affirming the CFTC’s jurisdiction to regulate virtual currency spot and derivative markets.

The decision raises the possibility of jurisdictional tension between the CFTC and the SEC, which has recently brought a number of civil enforcement actions against virtual currency issuers premised on the theory that the virtual currency in question is an unregistered security. … Continue Reading