Digital Currency + Blockchain Perspectives

In a recent decision in Securities and Exchange Commission v. Telegram Group Inc. and TON Issuer Inc., the United States District Court for the Southern District of New York granted a motion for a preliminary injunction by the United States Securities and Exchange Commission (“SEC”), thereby preventing the distribution to purchasers of $1.7 billion worth of cryptocurrency. That cryptocurrency, called “Grams,” was sold by Telegram Group Inc. (“Telegram”) in 2018 and due to be distributed to purchasers…
2019 was a year of significant regulatory and legal developments in digital currency + blockchain. The SEC issued its most comprehensive guidance to date with its Framework for “Investment Contract” Analysis of Digital Assets, followed that up with three “no action” letters for projects that in its view complied with the federal securities laws, and intensified its focus on initial coin offerings (“ICOs”) conducted in 2017 and 2018 with a series of settlements and enforcement…
Goodwin is pleased to announce that Nick Losurdo has re-joined the firm as a partner in its financial industry group, and a member of its digital currency and blockchain technology practice. Over the past 17 months, Nick has served as counsel to SEC Commissioner Elad Roisman. While at the SEC, Nick advised Commissioner Roisman on an array of legal, policy and regulatory matters, including proposed and final rulemaking, interpretations and exemptive relief, and enforcement matters.…
Speaking at the International Blockchain Congress in Chicago on February 6, 2020, SEC Commissioner Hester Peirce proposed a safe harbor from U.S. securities laws so that developers of blockchain protocols could offer and sell tokens for the purpose of developing functioning token networks and creating liquidity for users. Commissioner Peirce’s views are her own, and do not necessary represent the views of others at the SEC. However, Commissioner Peirce’s speech represents important first steps toward…
On January 21, 2020, Grayscale Bitcoin Trust (the “Trust”) became the first digital currency investment vehicle to attain the status of an SEC reporting company. The Trust’s sponsor, Grayscale Investments, LLC (“Grayscale”), is a digital currency asset manager that offers cryptocurrency investment products that provide exposure to Bitcoin and Ethereum, among other assets. The Trust holds Bitcoin in particular, and issues shares to investors that represent an ownership interest in the Trust.  The purpose of the…
Delaware amended the Delaware General Corporation Law (DGCL) and the Delaware Limited Liability Company Act (DLLCA) in 2017 and 2018, respectively, to permit corporations and limited liability companies to represent capital stock, record equity transactions, and communicate with equityholders via blockchain-based distributed ledgers. (S. 69, 149th Gen. Assembly, Del. 2017; S. 183, 149th Gen. Assembly, Del. 2018.)  The DGCL and DLLCA refer to these blockchain-based distributed ledgers as “Electronic Networks.”  Rather than treating an Electronic…
On October 9th, the IRS released a revenue procedure ruling and related FAQ, clarifying tax treatment related to cryptocurrency in certain instances. The ruling focused on tax treatment of hard forks and airdrops, and provided that in the event of a “hard fork”—where a cryptocurrency’s blockchain protocol is changed, or split, creating two distinct and incompatible versions of the underlying software—no taxable income is created, so long as no new cryptocurrency is received. In…
The method by which cryptocurrency and digital asset companies issue their blockchain-based tokens into the market has evolved, pushed along by regulatory developments and technological advancements.  We have observed the popularity ebb-and-flow of direct token sales, Simple Agreements for Tokens (‘SAFTs’), genesis tokens convertible into principal tokens, and gifted distributions.  This article summarizes a different method for issuing initial stakes of tokens and strengthening the health and distribution of blockchain networks—the “Node Agreement”.  Over the…
On July 26, 2019, the Internal Revenue Service (“IRS”) published a release announcing that it has begun to send notices to virtual currency traders that potentially failed to: (i) report income and pay the resulting tax from virtual currency transactions; or (ii) properly report their virtual currency transactions. In its release, the IRS noted that, by the end of August 2019, more than 10,000 notices will be issued to relevant taxpayers, the names of whom…
On Apr. 11, 2019, the plan d’action pour la croissance et la transformation des entreprises (Action Plan for Business Growth and Transformation act), also known as Loi PACTE, has introduced in French law the possibility for issuers of initial coin offering (ICOs) to apply for an optional visa from the Autorité des marchés financiers (AMF – French market authority). This new framework applies to public token offerings that are not subject to another legal regime,…