USDC Integrations Announced; Crypto Guidance Published by IRS, EU Banking Authority; Crypto Firm Consents to $8M Penalty; Illicit Crypto Data Published | BakerHostetler
USDC Report Published, Crypto Firms Announce USDC Integrations
Circle, the U.S. fintech company that manages the stablecoin USDC, recently released the “State of the USDC Economy” report, highlighting the “efforts to build USDC into the largest, most widely-used stablecoin network in the world.” Among its many findings, the report indicates that the strength of the U.S. dollar and its global reach have allowed stablecoin activity to be denominated in U.S. dollars and have influenced the role of USDC, making it “possible for nearly anyone, anywhere, to access, hold, and transact digital dollars over the internet.” Additionally, the report indicates that, across major jurisdictions, stablecoins are being pulled “into the regulatory light of day” and progress “is advancing on a number of fronts.”
In a related press release, Chainlink, a decentralized blockchain oracle network built on Ethereum, announced that it has integrated Circle’s Cross-Chain Transfer Protocol (CCTP) into the Chainlink Cross-Chain Interoperability Protocol (CCIP) to “provide users with a secure and reliable way to transfer USDC across chains.” According to the release, the integration of CCIP “opens up new use cases with USDC, such as seamless and secure cross-chain transfers, payments and other DeFi interactions for protocols building with Chainlink CCIP.”
In another related press release, a major U.S. cryptocurrency exchange announced that it is expanding access to its products to 20 countries across the African continent by partnering with African stablecoin exchange Yellow Card to “help usher in the future of money by giving millions of users access to USDC” on the “decentralized, open L2 Base through … Yellow Card products.” According to the release, across these 20 countries, users will be able to access the exchange’s wallet app and purchase USDC directly from the wallet app, as well as using the wallet app to send USDC without fees, including on prominent messaging apps used globally.
In a final notable item, a social media post recently provided an extensive list of links to crypto and Web3 market outlooks for 2024. The list includes reports by both traditional financial companies and crypto-native companies (see link below).
For more information, please refer to the following links:
New Crypto Guidance Published by IRS and European Banking Authority
According to a recent press release, the United States Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) announced that until they issue new guidelines, businesses are not required to report certain transactions involving the receipt of digital assets in the same way as they report the receipt of cash. Announcement 2024-4 provides transitional guidance while Treasury and the IRS implement new provisions from the Infrastructure Investment and Jobs Act (IIJA), which affects rules that require taxpayers engaged in a trade or business to report receiving cash of more than $10,000 by considering digital assets to be cash, based on the press release. The release further advises that the announcement does not affect the reporting rules that were in effect prior to the IIJA.
In regulatory news from the European Union, the European Banking Authority extended existing guidelines regarding money laundering (ML) and terrorist financing (TF) risk factors to crypto-asset service providers (CASPs), according to a recent press release. The release notes that because of the speed of crypto-asset transfers, as well as the ability to hide a user’s identity, CASPs can be subject to abuse for purposes of financial crimes. The purpose of extending the guidelines is to assist CASPs with identifying risks and addressing vulnerabilities by providing “a non-exhaustive list of different factors, which may indicate the CASP’s exposure to higher or lower levels of the ML/TF risk due to its customers, products, delivery channels and geographical locations,” as stated in the press release. The guidelines reportedly also explain how CASPs are to adjust their mitigating measures, including through the application of blockchain analytics tools.
For more information, please refer to the following links:
Crypto Trading Firm to Pay $8M Penalty and Surrender BitLicense
By Lauren Bass and James Sherer
According to a recent press release by the New York State Department of Financial Services (DFS), Genesis Global Trading, Inc., has entered a consent order with DFS whereby the crypto trading firm will cease its operations, surrender its New York BitLicense, and pay an $8 million penalty. The consent order stems from DFS’ nearly five-year investigation in which it allegedly found that Genesis failed to meet required standards in Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance, transaction monitoring, Suspicious Activity Report (SAR) filings, Office of Foreign Assets Control (OFAC) screening, and cybersecurity in violation of New York’s Virtual Currency and Cybersecurity Regulations (23 NYCRR § 200 et seq and 23 NYCRR § 500 et seq). From the cybersecurity and information governance perspectives, the consent order found that Genesis did not timely complete certain firmwide general and cybersecurity risk assessment activities, which led to a lack of proper controls for risk mitigation―including no written policies or personnel with responsibility. And, of particular note for information governance, the consent order asserted that Genesis did not consider the collection, storage, encryption, or secure disposal of nonpublic information (NPI) on Genesis’s information systems and criticized Genesis’s management and purging (or lack thereof) of such NPI.
For more information, please refer to the following links:
New Data Published on Use of Crypto in Illicit Activity
Chainalysis, a blockchain analysis firm, recently issued a report, “2024 Crypto Crime Trends,” in which it concluded that 2023 saw a significant drop in crypto crime. According to the report, about $24 billion worth of cryptocurrency was received by illicit addresses (down from $39.6 billion for 2022), and the share of all crypto transaction volume associated with illicit activity fell to .34% from .42% in 2022. Chainalysis also found that crypto scams and hacks both saw significant decreases last year, down 29.2% and 54.3%, respectively. In contrast, ransomware and darknet activity increased. As in 2022, stablecoins accounted for the majority of illicit transaction volume.
For more information, please refer to the following links:
[View source.]
