July 22, 2022

Digital Assets Download- July 22, 2022

Author:

Joseph A. Castelluccio

Launching today: A curated mix of insights and headlines that provide a Layer 3 Legal Perspective™ on the digital assets multiverse – created by Mayer Brown’s global Digital Assets, Blockchain and Cryptocurrency Group. Enjoy this edition of the Digital Assets Download below and find previous editions here.

The Lead Block

Original Mayer Brown content, perspectives and insights from across our global platform that touch on digital assets, decentralized finance, cryptocurrencies and related fields.

Regulatory Guidance for Systemically Important Stablecoins Finalized
On July 13, 2022, the Committee on Payments and Market Infrastructures (“CPMI”) and the International Organization of Securities Commissions (“IOSCO”) finalized guidance on the application of the Principles for Financial Market Infrastructures (“PFMIs”) to systemically important stablecoin arrangements (“Stablecoin Guidance”). This guidance is intended to help national regulators and stablecoin arrangements comply with the PFMIs while taking into account the novel features of stablecoins. In this Legal Update, we provide background on the PFMIs and discuss some key points from the Stablecoin Guidance.
US DOJ Announces Four Cryptocurrency-Related Fraud Prosecutions
Consistent with its role as a leader in the investigation and enforcement of offenses involving cryptocurrencies and other digital assets, on June 30, 2022, the US Department of Justice (DOJ) announced four separate enforcement actions related to cryptocurrency-related fraud and other misconduct, which are summarized in our Legal Update. Notably, all four prosecutions involve alleged cross-border wrongdoing in the digital asset space prosecuted pursuant to long-standing fraud-based statutes.
Request for Comment on Digital Assets Issued by US Treasury Department
On July 8, 2022, the US Department of the Treasury issued a request for public comment on the responsible development and use of digital assets (the “RFC”). The RFC is intended to help inform the Treasury Department as it prepares its report on digital assets required by President Biden’s March 2022 executive order titled “Ensuring Responsible Development of Digital Assets.” Comments on the RFC are due by August 8, 2022. In this Legal Update, we provide the background on the executive order, summarize the RFC, and discuss how the RFC fits into the larger policy discussions on the regulation of digital assets.
US CFTC Advocates for Expansion of Cryptocurrency Market Jurisdiction
More than a decade has passed since Bitcoin was created, yet lawmakers and regulators continue to wade through important questions, such as which regulator should be permitted to regulate digital assets. In this article for Reuters, we note the US Commodity Futures Trading Commission’s (CFTC) recent activity in this space.
Digital Businesses and Analog Dilemmas: The US Tax Deductibility of Expenses Incurred by Web-Based Startups
In an opinion released on June 14, 2022, the US Tax Court addressed an age-old question for a digital-age business: When are expenses incurred in web development deductible for federal income tax purposes? In one notable aspect (among others) of the court’s view, the court knocked out a taxpayer-friendly revenue procedure that allowed taxpayers to deduct software development costs. In this Legal Update, we explore the implications of the case for web-based businesses.
US Supreme Court Decision in West Virginia v. EPA Casts Doubt on SEC’s Efforts to Regulate Digital Assets as Securities
Turning to the US Securities and Exchange Commission’s (“SEC”) assertion of authority over digital assets, the decision in WV v. EPA may signal that Congress will need to enact legislation mandating how agencies should regulate digital assets rather than the SEC (and other federal financial regulators) adopting new regulations on its own. Applying the major questions doctrine to digital asset regulation, if the SEC either adopts a new regulatory scheme for digital assets or applies existing securities regulatory requirements to digital assets (to the extent they are not securities) and digital assets market participants, such regulation would arguably expand the SEC’s authority, enabling it to create rules for new assets classes never before regulated by the SEC. The “economic and political significance” of such an action could be significant, particularly because of the dollar amount of the assets falling under the regulations. This Legal Update provides a few initial observations on the practical impact of the WV v. EPA decision for the SEC regarding regulating digital assets as securities.

News Node

A curated selection of headlines and news from around this multiverse—including deals, developments and other disruptions in DeFi.

US SEC Weighs Waiving Some Rules to Regulate Crypto, Chairman Gensler Says.

Global Standards Setter Proposes New Crypto-Regulation.

G20 Watchdog to Propose First Global Crypto Rules in October.

Crypto VC Investments Drop 26% in First Half of 2022: Investments Totaled $9.3 Billion Versus the $12.5 Billion in Last Year’s Period, but the Number of Deals Increased.

Singapore Plans to Broaden Crypto Regulations After Shakeout.

Putin Signs Ban on Crypto Payments in Russia.

US SEC Enforcement Head Asks Congress for More Resources to Tackle Crypto Issues.

Bank of France Governor Announces Phase 2 of Digital Euro Development.

Select Events

Selected events for deeper dives into different parts of the digital assets and DeFi world.

Alternative Finance Summit 2022: Fintech, Blockchain and Crowdfunding

Join Mayer Brown partner Anna Pinedo during the “Turbulent Year in the Markets After Returning From COVID-19: Securities Offering and Private Placement Developments” panel on September 21, 2022 at 9:10 am, EDT. This panel will discuss the residual impact of COVID-19 on offerings and placements, US Securities and Exchange Commission guidance on SPACs, and other relevant topics. For more information, including how to register, please visit the event website.

8th OTC Derivatives Seminar

On July 5, 2022, our 8th OTC Derivatives Seminar was held in person in our office in Frankfurt am Main after two years of virtual presentations. Partner Edmund Parker and counsel Marcel Hörauf led a panel on crypto derivatives and crypto collateral. Click here for the slides.

Virtual Assets – Regulation and Developments in Hong Kong

On July 6, 2022, partner Sara Or held a webinar on the regulatory and legislative developments related to virtual assets in Hong Kong.

Learn the Lingo

For those new to the digital assets and DeFi world, each edition of the Digital Assets Download highlights a different term to help you be a part of the conversation.

Consensus (also, Consensus Mechanism or Consensus Protocol):

The process used by a group of peers, or nodes, on a blockchain network to agree on the validity of transactions submitted to the network. Once a transaction has been validated, it is recorded on the blockchain. Two of the dominant consensus mechanisms include Proof of Work (PoW) and Proof of Stake (PoS).