On Jan. 25, 2024, the Hawaii Department of Commerce and Consumer Affairs Division of Financial Institutions (DFI) and the Hawaii Technology Development Corporation (collectively, the “Agencies”) jointly issued a press release summarizing their findings on the proper regulatory framework for companies specializing in digital currency activity (Crypto Companies)—concluding that the DFI will not apply the state’s Money Transmitters Act to cryptocurrency activities. As such, Crypto Companies will no longer require a Hawaii-issued money transmitter license to conduct business within the s ..read more

U.S. Sen. Cynthia Lummis (R-WY) and Reps. Wiley Nickel (D-NC) and Mike Flood (R-NE) are working to overturn a controversial Securities and Exchange Commission (SEC) staff accounting bulletin, SAB 121, that places restrictions on the custody of digital assets by public companies, including banks and trust companies, on behalf of their customers. On Feb. 1, 2024, the lawmakers introduced a joint resolution of disapproval in both the Senate and the House, arguing the bulletin lacks legal force. If the resolution is passed by both Houses of Congress and signed by the President, SAB 121 would be nu ..read more

On Jan. 16, 2024, the U.S. Treasury Department and the Internal Revenue Service (IRS) announced the delay of the requirement for persons engaged in a trade or businesses to report information related to the receipt of digital assets on IRS Form 8300, Report of Cash Payments Over 10,000 Received in a Trade or Business. Pursuant to section 6050I(a) of the Internal Revenue Code (the Code), any person engaged in a trade or business that receives more than $10,000 in cash in one transaction (or two or more related transactions) in the course of such trade or business must file a return to report su ..read more

Continued Robust Litigation and Enforcement Actions by Federal and State Regulators and Enforcement Authorities – We will likely see a similar level of anti-fraud prosecutions by the Department of Justice (DOJ) (not necessarily to the FTX level) and a continued strident pace of enforcement actions by the Securities and Exchange Commission (SEC), including Section 5 type claims against token issuers and exchanges. We anticipate key rulings in alleged securities cases in 2024, including the ongoing SEC v Coinbase litigation and the SEC v Ripple appeal. Digital Assets – We expect limited ne ..read more

On Oct. 13, 2023, California Governor Gavin Newsom signed CA AB39, the Digital Financial Assets Law (DFAL), which is the first comprehensive framework to regulate the digital asset market in the state of California. As such, California joins New York and Louisiana as the third state to have a virtual currency specific regulatory licensing framework. While this GT Alert focuses on California, it is also worth noting that the Consumer Financial Protection Bureau is also considering using the Electronic Fund Transfer Act to protect consumers from fraudulent crypto transfers, showing that the ..read more

On Oct. 23, 2023, FinCEN published an NPRM that identifies international CVC mixing as “a class of transactions of primary money laundering concern,” and finds that imposing additional recordkeeping and reporting requirements on “covered financial institutions” would help mitigate the risks such transactions pose. The NPRM’s proposed reporting requirements would be in addition to any obligation to file Suspicious Activity Reports (SARs). FinCEN has invited comments on all aspects of the NPRM, including several questions posed. Comments will be accepted through Jan. 22, 2024 ..read more

On Sept. 18, 2023, the New York State Department of Financial Services (NYDFS) issued a press release announcing updates to its ongoing oversight of the digital asset space, including (1) industry guidance regarding a “General Framework for Greenlisted Coins” (Greenlist Guidance); (2) industry guidance regarding new “Proposed Updates to Guidance Regarding Listing of Virtual Currencies” (Proposed Updated Listing Guidance); and (3) an updated list of “Greenlisted Coins” (the Greenlist ..read more

On Aug. 29, 2023, the U.S. Court of Appeals for the District of Columbia Circuit (Court) vacated the U.S. Securities and Exchange Commission (Commission)’s denial of Grayscale Investments, LLC (Grayscale)’s application for a spot bitcoin exchanged-traded product (ETP). The unanimous three-judge panel found the Commission’s denial arbitrary and capricious, as it failed to justify differing treatment of similar products even though they were subject to identical surveillance sharing agreements with the Chicago Mercantile Exchange (CME). The Commission had previously approved the listing of two b ..read more

On Aug. 25, 2023, the Internal Revenue Service (IRS) and the Treasury Department issued proposed regulations (the Proposed Regulations) regarding the sales or exchanges of digital assets, including cryptocurrency. The Proposed Regulations relate to both information reporting requirements and the determination of amount realized, basis, and backup withholding ..read more

Digital assets are an increasingly important part of modern society. That was the conclusion the UK Law Commission reached in its final report on digital assets that was published recently following a year-long consultation. In addition, the Law Commission observes that the flexibility of common law allows for the development of a distinct category of personal property that can better recognise, accommodate and protect the unique features of digital assets including cryptocurrencies.  ..read more