Crypto Firms Launch New Initiatives; Whitepapers Address DeFi, Crypto Risks, CBDCs; OFAC Adds Crypto Addresses to SDN List Connected to DOJ Action | BakerHostetler

Crypto Firms Continue to Launch New Initiatives Across Markets

By Robert A. Musiala Jr.

In a recent press release, digital asset infrastructure firm Fireblocks announced its acquisition of BlockFold, “a smart contract development and consulting firm specializing in advanced tokenization projects for financial institutions.” According to the press release, the acquisition “enriches Fireblocks’ tokenization capabilities to provide clients with a complete service layer that includes advisory, token customization, orchestration, and distribution through the Fireblocks Network.” The press release notes that Fireblocks saw demand in tokenization projects increase by 350 percent between 2022 and 2023.

In another recent development, cryptocurrency exchange Binance announced plans to introduce stablecoins tied to USD, EUR, and Japanese Yen in the Japanese market. According to a blog post, Binance is partnering with Mitsubishi UFJ Financial Group’s trust banking division on the project.

A recent blog post by cryptocurrency exchange Bitfinex announced that the exchange plans to integrate with digital asset custodian Zodia Custody. According to the blog post, “The integration will allow Zodia Custody clients to trade on Bitfinex while their assets remain securely held via Interchange, Zodia Custody’s off-exchange settlement solution.” The blog post further notes, “Clients holding accounts with both Zodia Custody and Bitfinex will have the ability to mirror their custodied assets on Bitfinex for trading.”

In a final notable development, both Coinbase and another major U.S. crypto firm recently announced that their Singapore affiliate firms have received a Major Payments Institution license from the Monetary Authority of Singapore. According to a press release by the major U.S. crypto firm, the license allows it to “continue to provide regulated digital payment token services in Singapore.” A Coinbase blog post noted that “Singapore is home to over 700 Web3 companies, making it a pivotal market for the growth of the crypto and Web3 economy.”

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BIS, IMF and Canadian Central Bank Papers Address DeFi, Crypto, CBDCs

By Keith R. Murphy

The Bank for International Settlements (BIS) recently published a report on Project Atlas, a proof-of-concept data platform to help “shed light on the macroeconomic relevance of cryptoasset markets and decentralised finance (DeFi),” according to recent press releases. The BIS press releases note that Project Atlas combines off-chain data from cryptocurrency exchanges with on-chain data located in public blockchains, “creating a layered approach to data vetting and tailored statistics for central banks.”

According to a recent press release, the International Monetary Fund has issued working papers by two authors endeavoring to assess the macrofinancial risks from cryptocurrency assets. In addressing the contents of the working papers, the press release states that the authors are working to understand whether heightened concerns over cryptocurrency assets have been addressed in systemic risk assessment, as well as what a future pathway might look like. As noted in the release, the authors present a “conceptual macrofinancial framework to understand and track systemic risks stemming from crypto assets.”

A recently updated staff discussion paper released by the Canadian central bank addresses implications for a central bank digital currency (CBDC). As noted in the discussion paper, the authors rely on two main premises: (1) the application of the Canadian social model of disability to identify ways to remove barriers that marginalize or hinder people; and (2) the aggregation of related statistics to determine the challenges inherent in the current system. The authors note that their findings in the paper, “highlight the important areas of research and design consideration for new digital payment products and services, specifically for central banks contemplating the introduction of a central bank digital currency.”

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OFAC Adds 19 Crypto Addresses to SDN List Connected to DOJ Action

By Robert A. Musiala Jr.

The U.S. Department of Justice (DOJ) recently announced “the unsealing of eight indictments in the Middle and Southern Districts of Florida charging China-based companies and their employees with crimes relating to fentanyl and methamphetamine production, distribution of synthetic opioids, and sales resulting from precursor chemicals.” According to the DOJ press release, several of the defendants used bitcoin wallets to launder money related to the alleged narcotics trafficking operation. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated 28 individuals and entities involved in the operation and noted the operation was run in part by individuals sending and receiving funds through virtual currency. In connection with the action, OFAC added 19 cryptocurrency addresses to OFAC’s Specially Designated Nationals (SDN) List.

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OFAC Sanctions Cite Money Laundering Operation Using Virtual Currencies

By Diana Milton

According to a September 26 press release, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned ten individuals connected to Mexico’s Sinaloa Cartel for their involvement in illegal fentanyl, cocaine, and methamphetamine trafficking, including their involvement in a money laundering operation “that uses virtual currency and wire transfers … to transfer proceeds from illicit fentanyl sales in the United States to Sinaloa Cartel leaders in Mexico.” The press release notes that U.S.-based couriers “pick up cash in the U.S. and deposit that cash into various virtual currency wallets” for payment directly to leaders of the Sinaloa Cartel and for reinvestment in the cartel’s fentanyl production. Of note, OFAC added the head of the money laundering operation’s cryptocurrency address to its Specially Designated Nationals (SDN) List.

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