In this issue:

U.S. Fintech and Crypto Companies Continue Crypto Product Launches

By Robert A. Musiala Jr.

According to recent reports, a major U.S. fintech and payments company has launched support for USDC payments, enabling U.S. businesses to accept USDC on the Ethereum, Solana and Polygon networks. The new feature reportedly will allow merchants to accept USDC payments from customers in over 150 countries, with the merchant receiving U.S. dollars.

In related news, Ripple recently published two press releases announcing product launches. The first press release announced that “Mercado Bitcoin, Latin America’s largest cryptocurrency exchange, will be the first customer in Brazil to utilize Ripple’s managed end-to-end payments solution, which enables businesses to easily leverage blockchain for faster, cheaper, more efficient cross-border payments in a secure manner.” According to the press release, “Mercado Bitcoin will use the solution to improve its internal treasury operations between Brazil and Portugal, with plans to support international payments for its corporate and retail customers in the future.”

In a separate press release, Ripple announced “the launch of new features and functionality to Ripple Custody.” The press release notes the new features in Ripple’s digital asset custody solution include “a transaction screening service integration, added hardware security module (HSM) options, an XRPL integration for tokenizing Real World Assets (RWA), pre-configured policy frameworks, and improvements to the platform’s usability and user interface.”

In a final development, according to reports, a major U.S. fintech and payments company recently completed its first business transaction using the PYUSD stablecoin. The company reportedly paid an invoice by sending PYUSD to a Big Four accounting and consulting firm. The transaction was reportedly executed using the Big Four firm’s account at a major U.S. cryptocurrency exchange.

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Cryptocurrency Exchanges Sue SEC to Halt Potential Enforcement Actions

By Keith R. Murphy

According to a recent article and a company press release, cryptocurrency exchange Crypto.com has sued the U.S. Securities and Exchange Commission (SEC) following the company’s receipt of a “Wells” notice of potential enforcement, which alleges that the company is acting as an unregistered broker-dealer and clearing agency. Crypto.com’s lawsuit reportedly seeks to bar the SEC from bringing an enforcement action alleging secondary trading in 10 digital assets on the company’s platform constitutes securities transactions. According to a statement by the company, their lawsuit “contends that the SEC has unilaterally expanded its jurisdiction beyond statutory limits and separately that the SEC has established an unlawful rule that trades in nearly all crypto assets are securities transactions no matter how they are sold, whereas identical transactions in bitcoin (BTC) and ether (ETH) are somehow not.” According to the press release, the company asserts that such a rule did not go through the notice and comment period required by the Administrative Procedures Act and that the SEC’s application of the rule is arbitrary and capricious.

In a similar action, according to reports, cryptocurrency exchange Bitnomial has filed a lawsuit alleging the SEC has wrongfully asserted that XRP Futures are security futures subject to joint jurisdiction by the SEC and the U.S. Commodity Futures Trading Commission (CFTC). Bitnomial’s lawsuit reportedly alleges the XRP Futures at issue fall solely under the jurisdiction of the CFTC.

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DOJ and SEC Target Crypto Market Makers; SEC Charges Crypto Trading Firm

By Robert A. Musiala Jr.

The U.S. Department of Justice (DOJ) recently published a press release announcing charges against 18 individuals and entities alleging “widespread fraud and manipulation in the cryptocurrency markets.” According to the press release, the defendants include “the leaders of four cryptocurrency companies, four cryptocurrency financial services firms (known as ‘market makers’) and employees at those firms.” The press release states that “the defendants who created cryptocurrency companies made false statements about their cryptocurrencies (‘tokens’) and executed sham trades in those tokens (‘wash trades’) to create the appearance of trading activity that would make the tokens look like good investments.” The market makers and their employees are charged with allegedly wash trading or conspiring to wash trade. The press release notes that as part of the enforcement action, DOJ has seized more than $25 million in cryptocurrency and has deactivated “trading bots responsible for millions of dollars’ worth of wash trades for approximately 60 different cryptocurrencies.”

In a parallel action, the SEC published a press release announcing “fraud charges against three companies purporting to be market makers and nine individuals for engaging in schemes to manipulate the markets for various crypto assets being offered and sold as securities to retail investors.” According to the SEC press release, “crypto asset promoters … hired so-called market makers … to provide market-manipulation-as-a-service, which included generating artificial trading volume or manipulating the price of crypto assets that the [p]romoters offered and sold as securities to retail investors in unregistered transactions.” The press release notes that one market maker allegedly “used algorithms (or bots) that, at times, generated quadrillions of transactions and billions of dollars of artificial trading volume each day.”

In another recent press release, the SEC announced that it has charged a well-known Chicago-based digital asset trading company “with operating as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities, in violation of the registration requirements of the federal securities laws that are designed to protect investors.” In a quote from the press release, an SEC official said, “Despite frequent protestations by the industry that sales of crypto assets are all akin to sales of commodities, our complaint alleges … the offer and sale of the crypto assets at issue in this case as investments in securities, and [defendant] profited from its dealer activity in these assets without providing investors and the market with the important protections afforded by registration.”

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UN Office on Drugs and Crime Addresses Role of VASPs in Criminal Schemes

By Robert A. Musiala Jr.

The United Nations Office on Drugs and Crime (UNODC) recently published a report addressing transnational organized crime and the convergence of cyber-fraud, underground banking and technological innovation in Southeast Asia. According to a UNODC press release, among its many findings, the report “outlines recent cases that demonstrate how underregulated online gambling platforms and increasingly high-risk and often unauthorized virtual asset service providers (VASPs) that have proliferated in recent years are being used by major organized crime groups to move, launder and integrate billions in criminal proceeds into the financial system without accountability.” The report provides multiple examples of the role VASPs play in organized money laundering schemes involving cryptocurrencies.

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