Weekly Blockchain Focus
- European Central Bank announces the investigation phase of a digital Euro project.
- SEC charges Coinschedule.com with unlawfully touting digital asset securities.
- Federal court order permanently bans PaxForex and imposes a $300,000 penalty for offering illegal leveraged transactions in Bitcoin, Ether, Litecoin, and precious metals.
- Shapeshift announces “largest airdrop in history” as it attempts to become a fully decentralized exchange.
- Saquon Barkley announces plan to accept all endorsement money in Bitcoin.
- Tom Brady and Gisele Bündchen take a stake in cryptocurrency exchange FTX.
European Central Bank announces the investigation phase of a digital Euro project.
On July 14, 2021, the European Central Bank (ECB) announced the beginning of its digital euro project. This 24 month ‘investigation’ phase follows 9 months after the initial report on the digital euro, which allowed for an experimentation phase.
ECB President Christine Lagarde explained, “In that [9 months], we have carried out further analysis, sought input from citizens and professionals, and conducted some experiments, with encouraging results. All of this has led us to decide to move up a gear and start the digital euro project. Our work aims to ensure that in the digital age citizens and firms continue to have access to the safest form of money, central bank money.”
The investigation phase will seek input from a range of stakeholders and begin the technical and legal work that would underpin a digital euro. As described, this includes prototyping, conceptual work, focus groups, and review of necessary changes to the European Legislative framework.
The announcement by the ECB highlighted a low energy footprint as a contrast to cryptocurrencies, while not discounting blockchain or decentralized architectures. While speaking positively of the opportunity and development of a digital euro, the release was careful to note that the investigation phase “will not prejudge any future decision on the possible issuance of a digital euro, which will come only later. In any event, a digital euro would complement cash, not replace it.”
SEC charges Coinschedule.com with unlawfully touting digital asset securities.
On July 14, 2021, the SEC announced settled charges against Blotics Ltd., the operator of Coinschedule.com. The order settling the charges stated that the platform profiled ICO and IEO projects which included investment contracts and securities that raised over $10,000,000,000 between 2016 and August of 2019. Coinschedule received payment to profile these offerings and failed to disclose those payments in violation of Section 17(b) of the Securities Act.
Two SEC commissioners, Hester Peirce and Elad Roisman, issued a public statement acknowledging the violation of 17(b), but criticizing the decision for its failure to define which ICO and IEO projects were subject to the Securities Act. The statement goes on to criticize enforcement actions as the primary driver defining what constitutes a securities offering, and emphasizes the need for a safe harbor alternative previously proposed by Commissioner Peirce in April, stating: “Whether we decide that all or a subset of token offerings are securities offerings, providing clear regulatory guideposts and then bringing enforcement actions against people who ignore them is a better approach than the clue-by-enforcement approach that we have embraced to date and that today’s settlement embodies.“
Coinschedule was ordered to pay approximately $200,000 in penalties and disgorgement, and to cease and desist from any future violations of Section 17(b) of the Securities Act.
Federal court issues a default judgment permanently banning PaxForex and imposing a $300,000 penalty for offering illegal leveraged transactions in Bitcoin, Ether, Litecoin, and precious metals.
On July 9, 2021, the CFTC announced that the U.S. District Court for the Southern District of Texas had ordered a default judgment against PaxForex imposing permanent trading and registration bans and imposing a civil penalty of $374,864.
The underlying complaint was filed by the CFTC on September 24, 2020, and charged illegal, off-exchange transactions in Bitcoin, Ether, and Litecoin, precious metals, and foreign currency with retail customers on a leveraged, margined or financed basis, as well as acting as a futures commission merchant without CFTC registration.
The CFTC urged consumers to verify a company’s registration before committing funds in announcing this default judgment. This announcement comes approximately one week before it was reported that Bank of America began clearing cash-settled Bitcoin futures.
Shapeshift announces purported “largest airdrop in history” as it attempts to become a fully decentralized exchange.
On Wednesday, July 14, Shapeshift announced it would be airdropping 340 million FOX tokens to all past users of the non-custodial exchange. This announcement comes shortly before liquidity mining was planned to begin for the exchange, and corresponded with a significant price increase in FOX tokens. In addition to the 340 million FOX tokens to past users, approximately 320 million FOX tokens will go to Shapeshift’s staff, 240 million to the Shapeshift Decentralized Autonomous Organization, 75 million to a foundation guiding the decentralization effort, and 13 million to the company as it winds down. Prior to this only 10 Million FOX tokens were in external wallets.
Shapeshift was founded as an alternative to custodial exchanges in 2014, and with this move aims to become a fully decentralized exchange over the next 4-12 months, with no employees, bank account, or CEO.
Saquon Barkley announces plan to accept all endorsement money in Bitcoin.
On Wednesday, July 14, New York Giants Running Back Saquon Barkley, announced he would be taking all future endorsement payments in bitcoin during a podcast appearance. Appearing alongside Strike CEO Jack Mallers, Barkley cited inflation as one reason he would be using Strike to accept, or convert, future endorsement payments in Bitcoin.
Barkley joins a list of professional athletes taking at least a portion of their earnings in Bitcoin, including Russell Okung and Trevor Lawrence. Strike CEO Mallers explained that Barkley’s Bitcoin would come through a product which converts direct deposit payments into Bitcoin. Mallers explained a broader rollout of its direct deposit-conversion product was planned in the next 30-60 days.
Tom Brady and Gisele Bündchen take a stake in cryptocurrency exchange FTX.
Football legend Tom Brady and supermodel Gisele Bündchen announced an equity stake and new role as ambassadors with the cryptocurrency exchange FTX. Bündchen also took on a role as environmental and social initiatives adviser. This follows FTX’s recent forays into professional sports by purchasing the naming rights to the Miami Heat’s arena, and a partnership with Major League Baseball.
Brady, 7-time Superbowl Champion, holder of a 264-80 lifetime record, and 5-time Superbowl MVP, said, “It’s an incredibly exciting time in the crypto-world and Sam [Bankman-Fried] and the revolutionary FTX team continue to open my eyes to the endless possibilities. This particular opportunity showed us the importance of educating people about the power of crypto while simultaneously giving back to our communities and planet.” This partnership comes as 2-year old exchange FTX discusses a funding round which, according to some reports, would value the firm at $20 Billion.