Open Session of the U.S. Senate’s Committee on Banking, Housing and Urban Affairs Hears Joint Testimony from Heads of the SEC, CFTC

On February 6, 2018, the United States Senate Committee on Banking, Housing and Urban Affairs conducted a hearing entitled “Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.” Hearing. The Chairman of the U.S. Securities and Exchange Commission (SEC), Jay Clayton, and the Chairman of the U.S. Commodity Futures Trading Commission (CFTC), J. Christopher Giancarlo, provided testimony. Read a full article summarizing the key takeaways from the written testimonies and the testimony and questions on our sister blog, The Fintech Report.

Blockchain Week in Review January 20th – February 2nd

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

U.S. Developments

Regulatory Updates

CFTC and SEC Chairmen Publish Joint Op-Ed
Following a joint meeting last month, SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo published a joint op-ed in the Wall Street Journal reaffirming both agencies’ mutual commitment to stricter enforcement in the distributed ledger and cryptocurrency industry.  Chairmen Clayton and Giancarlo wrote that they will continue to monitor initial coin offerings (ICOs) and continue to crackdown on unregistered sales of coins deemed to be securities, in addition to fraudulent and other criminal activities. See WSJ 1.24.18

In a sign of continued collaboration, SEC Chairman Clayton and CFTC Chairman Giancarlo will testify on the topic of cryptocurrency regulation before the Senate Committee on Banking, Housing, and Urban Affairs. The hearing is scheduled on February 6 at 10:00am ET.  The live cast of the hearing can be accessed here:  See Coindesk 1.31.18

Congress Holds Fintech Hearing
The U.S. House of Representatives Subcommittee on Financial Institutions and Consumer Credit held a hearing this week to discuss consumer protection in the context of Fintech innovation.  The hearing focused on addressing Continue Reading

Blockchain Week in Review January 8th – January 19th

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

U.S. Developments

Regulatory Updates

CFTC and SEC Enforcement Directors Issue Joint Statement Regarding Virtual Currency Enforcement Actions
This morning, the Enforcement Director of the U.S. Commodity Futures Trading Commission (“CFTC”), James McDonald, and the Enforcement Co-Directors of the U.S. Securities and Exchange Commission (“SEC”), Stephanie Avakian and Steven Peikin issued a joint statement addressing virtual currency enforcement actions (collectively “the Agencies”).  In the statement, Continue Reading

CFTC Flexes Its Regulatory Muscle in a Case Involving a Virtual Currency

Just like the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) is actively policing the virtual currency market.  On January 24, 2018, the CFTC announced an enforcement action against two individuals and a company, My Big Coin Pay, Inc., for fraudulently offering the sale of a “fully functioning” virtual currency. Press Release, CFTC Charges Randall Crater, Mark Gillespie, and My Big Coin Pay, Inc. with Fraud and Misappropriation in Ongoing Virtual Currency Scam (Jan. 24, 2018), Reading

OFAC Warns that Venezuela’s Proposed Digital Currency May Violate U.S. Sanctions

On January 19, 2018, the U.S. Office of Foreign Assets Control (OFAC), in response to a question, warned that a U.S. person’s acquisition of, or dealing in, a cryptocurrency that Venezuela intends to issue in the future may violate OFAC sanctions.  In an effort to refinance the country’s soaring debt, the President of Venezuela, Nicolás Maduro, announced a plan to offer 100 million “petros”—backed by barrels from the state-run oil company.  Based on a Venezuelan oil price of $60 a barrel, the offering would amount to around $6 billion.  Although the currency will be backed by oil, it apparentlycannot be traded for oil.  Venezuela has not indicated the exchange on which the petros will be released, but it has indicated that traders will have to register with the Venezuelan government.

This proposed currency is designed to enable Venezuela to avoid the impact of U.S. sanctions.  On August 24, 2017, President Trump signed Executive Order 13808 forbidding Americans from making new debt and equity transactions with Petróleos de Venezuela, S.A., the state-run oil company that largely underwrites the national budget. The sanctions also prohibited transactions in bonds owned by the Venezuelan government and any dividend payments to the Venezuelan government.

On January 19, 2018, OFAC warned that a U.S. person who deals in Venezuela’s prospective cryptocurrency may violate U.S. sanctions because the currency appears to be an extension of credit to the Venezuelan government.  More specifically, OFAC’s response was as follows:

  1. In December 2017, Venezuelan President Nicolas Maduro announced plans for the Government of Venezuela to launch a digital currency.  According to public reporting, Maduro indicated that the digital currency would carry rights to receive commodities in specified quantities at a later date.  Were the Venezuelan government to issue a digital currency with these characteristics, would U.S. persons be prohibited from purchasing or otherwise dealing in it under E.O. 13808?

A currency with these characteristics would appear to be an extension of credit to the Venezuelan government.   Executive Order 13808 prohibits U.S. persons from extending or otherwise dealing in new debt with a maturity of greater than 30 days of the Government of Venezuela.  U.S. persons that deal in the prospective Venezuelan digital currency may be exposed to U.S. sanctions risk. [1/19/2018]


Join us in Chicago – Understanding the Blockchain & Tokenization Revolution – February 15!

Understanding the Blockchain & Tokenization Revolution

Thursday, February 15, 2018
5:30 p.m. – 10:00 p.m.
Registration/doors open at 5:00 p.m.
There is no charge to attend.

Perkins Coie, Chicago Office
131 South Dearborn Street, Suite 1700
Chicago, IL 60603

Click here to register.

Join the blockchain teams from Perkins Coie, bloq, and the Chicago Blockchain Center for two informative sessions on blockchain. Pizza and adult beverages will be served.

5:00 p.m. Doors open for registration
5:30 p.m. – 6:30 p.m. – Blockchain 101
6:45 p.m. – 8:00 p.m. – Tokens and Tokenization – Yesterday, Today and Tomorrow
8:00 p.m. – 10:00 p.m. – Networking reception

If you’re new to blockchain, come early for Blockchain 101
What is blockchain and what makes it revolutionary? This session is geared toward professionals interested in learning the basics of blockchain. Learn the basics of blockchain & virtual currency, why it’s generating so much interest, and how companies across multiple industries are using this cutting edge technology. No technical background is needed as we will comprehensively breakdown the potential impact blockchain will have on how we organize and interact economically and socially. Now that you know the basics, stick around and join us for the next session.

Presented by:
Jim Coughlan, Partner, Perkins Coie
Laurie Rosini, Associate, Perkins Coie

If you know the basics, join us at 6:45 p.m. for an advanced session on tokenization.

Tokens and Tokenization – Yesterday, Today and Tomorrow  
Tokenization is receiving attention around the world with the popularity of Token Sales, often known as Initial Coin Offerings (ICOs). However, tokenization built on blockchain is currently under-utilized in terms of its ultimate potential.

In this session, we will discuss how the growing popularity of blockchain, cryptocurrencies and distributed systems is giving rise to new and disruptive business models and technology enterprises, and answer the following questions:

  • What is a token, how is it created and what does it mean? Is it valuable on an enterprise scale?
  • What is a token sale and where does the current regulatory landscape look like?
  • What is the future of blockchain and tokenization?

Presented by:
Marcelo Halpern, Partner, Perkins Coie
Matthew Roszak, Co-Founder and Managing Partner, SilkRoad Equity (bloq, Tally Capital and Blockchain Capital)
Jennifer O’Rourke, Blockchain Business Liaison, State of Illinois, The Illinois Blockchain Initiative

For more information, please contact Michelle O’Connor.

Click here to register.

SEC Takes Aim at Initial Coin Offerings Again

The SEC is targeting ICOs once again, but it is now adding more focus through its new Enforcement Division Cyber Unit.

  • In its enforcement settlement with Munchee, Inc., the SEC looked past the utility of a “utility token” in its “securities” analysis and instead focused on aspects such as marketing and the existence of a secondary market for the tokens.
  • SEC Chairman Jay Clayton issued a statement reinforcing that facts matter for each token sale, but also provided a warning that when things sound “too good to be true,” they usually are.

In this update, we detail the background behind the SEC’s Munchee Order and its new Cyber Unit, share some lessons from the order and consider the implications of these renewed efforts. Read the full article on

Blockchain Week in Review 1.5.18

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

U.S. Developments

Regulatory Updates

CFTC Committees to Meet This Month to Discuss Virtual Currency Futures Markets

U.S. Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo announced that two committees within the CFTC would meet in January 2018 to discuss digital currency matters. Chairman Giancarlo noted that the CFTC is concerned about the risks associated with virtual currencies for investors, specifically bitcoin, but he did not reveal any expectations or plans to introduce new regulation following the meetings.  The CFTC Technology Advisory Committee (TAC) is scheduled to meet on January 23 to address the challenges, opportunities and market developments of virtual currencies.  The second meeting is scheduled on January 31, when the CFTC’s Market Risk Advisory Committee (MRAC) will convene to consider the self-certification process for new financial products and operational rules by Designated Contract Markets (DCMs) under the Commodity Exchange Act (CEA) and current CFTC regulations.

The same day, the CFTC issued a four-page “Backgrounder” on virtual currency futures markets.  The purpose of the memo is to clarify several regulatory issues with respect to virtual currencies and virtual currency futures trading, including: state and federal oversight of, and jurisdiction over, virtual currencies; the CFTC’s approach to regulating virtual currencies; the self-certification process that DCMs follow for new products and how recent contracts for bitcoin futures fit into existing procedures; and the CFTC’s “heightened review” for virtual currency self-certifications. The memo specifically addresses the self-certification of new contracts for bitcoin futures products in December 2017 by the Chicago Mercantile Exchange Inc. (CME) and the Chicago Board Options Exchange Futures Exchange (CFE), and the Cantor Exchange’s (CX) self-certification of a new contract for bitcoin binary options. For an in-depth look at the CME, CFE and CX’s self-certified futures products, refer to our blog post

LabCFTC to Hold Meetings with FinTech Innovators

LabCFTC has scheduled meetings with FinTech innovators on January 9 and 10 in Palo Alto and San Francisco, respectively. A fintech initiative launched by the U.S. Commodity Futures Trading Commission (CFTC) in 2017, LabCFTC is tasked with promoting responsible FinTech innovation and provide a forum for FinTech firms to discuss innovations and developments in the context of regulation with CFTC specialists.  LabCFTC also serves as an outlet for the CFTC to educate market participants about FinTech developments.

SEC Commends NASAA Statement to ICO/Cryptocurrency Investors

The U.S. Securities and Exchange Commission (SEC) commended the North American Securities Administrators Association (NASAA) for its statement warning investors to be cautious when approaching initial coin/token offerings (ICO/ITOs), cryptocurrency-related investment products, and cryptocurrencies generally. In a video accompanying the statement, NASAA warned that ICO/ITOs are not suitable for all investors, highlighting some of the risks associated with token sales, and common potential red flags of fraud. In the same statement, the SEC warned investors that while it pursues sellers and other market participants violating federal securities law, its efforts may not result in the recovery of lost investments. SEC Statement 1.4.18                  NASAA Statement 1.4.18

International Developments

South Korea to Introduce New Cryptocurrency Exchange Regulation

On December 28, South Korea’s government announced tougher regulation for cryptocurrency trading, which will take effect on January 20. The new regulations will ban anonymous cryptocurrency exchange accounts and may restrict the way digital currencies can be advertised.  Investors with accounts on cryptocurrency exchanges will need to link a verified bank account to their trading account and will be required to provide identification in order to deposit or withdraw funds.  The announcement of the new regulations follow the country’s ban of ICOs in September 2017.  The goal of the new regulation to be introduced this month is to curb speculative investing in digital currency and strengthen existing know-your-customer (KYC) rules.  The Financial Intelligence Unit and Financial Supervisory Service will be responsible for enforcing the new regulations. The South Korean Justice of Ministry considered a blanket shut down of cryptocurrency exchanges in an effort to temper runaway trading in cryptocurrency, which the Ministry says remains a possibility.  In response to the new regulations, a South Korean law firm filed a constitutional challenge, arguing that the new rules infringe on property rights.

WSJ 12.28.17 Korea Times article 1.4.18

China May Limit Power Supply for Bitcoin Miners

In a private meeting held this week, the People’s Bank of China (PBoC) drafted a plan that would empower Chinese authorities to curb the power supply to some of the country’s Bitcoin miners, citing concerns that miners of cryptocurrency have taken advantage of the low cost of electricity in certain areas. Some of the world’s largest miners operate in China, including some who have established large-scale hydroelectric facilities in the Sichuan and Yunnan provinces.  The country’s National Development and Reform Commission is the entity that oversees power consumption in China and will be involved in any new measures to limit the power supply.  Local officials have also been tasked with investigating high levels of power usage related to the cryptocurrency mining industry. Bloomberg 1.3.18



Blockchain Week in Review – December 22, 2017

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest. Continue Reading

CFTC Virtual Currency Proposed Interpretation – Part 2

On December 15, 2017, the U.S. Commodity Futures Trading Commission (the “CFTC”) issued a proposed interpretation of the term “actual delivery” as used in the provision of the Commodity Exchange Act (the “CEA”) that grants the CFTC explicit authority to oversee the marketplace for “retail commodity transactions.”  This is the second blog posting in a multi-part series (read Part 1 here) that will explore the regulation of retail commodity transactions and the CFTC’s recent proposed interpretation (the “Proposed Interpretation”), the issuance of which we believe represents a potentially significant milestone in the regulation of virtual currency transactions.  We continue our series with an examination of the Proposed Interpretation and its examples for what may constitute “actual delivery” of virtual currency.  Continue reading on the Derivatives & Repo Report.