As another sign of the times, but arguably quite apt given the subject matter, the Consensus Blockchain Conference convened virtually in 2020, with Financial Crimes Enforcement Network (FinCEN) Director Ken Blanco delivering prepared remarks to the conference on May 13, 2020. In those remarks, Blanco confirmed that FinCEN and other federal authorities are focused on financial crimes involving virtual currency, and in particular on whether virtual currency service providers are meeting their obligations to identify…

In the last decade, traditional financial institutions such as banks and broker-dealers have faced increased scrutiny from federal regulators and prosecutors related to the adequacy of their anti-money laundering (AML) compliance programs. Until recently, however, the federal government’s enforcement efforts against cryptocurrency exchange platforms and other virtual currency firms subject to the Bank Secrecy Act (BSA), 31 U.S.C. § 5311 et seq., were relatively limited. Recent developments suggest that the days of this limited focus…

In response to an increasing number of private and public initiatives to implement global stablecoins, on April 14, 2020, the G20’s Financial Stability Board (FSB) issued a Consultative Document, “Addressing the regulatory, supervisory and oversight challenges raised by ‘global stablecoin’ arrangements.” A “stablecoin” aims to maintain a consistent value relative to a specific asset, pool or basket, whereas a global stablecoin is one that has the potential to reach across multiple jurisdictions and achieve substantial…

In November, IRS Office of the Associate Chief Counsel attorney Suzanne Sinno said taxpayers cannot defer taxes on exchanges of cryptocurrency, even for transactions that occurred before 2018. Speaking at the American Institute of CPAs conference in Washington, Sinno provided long sought clarity on the agency’s position in the matter, noting that the IRS maintains that like-kind exchange principles were never applicable to cryptocurrency. Like-kind exchanges allow taxpayers to postpone paying tax on the gain…

New York Superintendent of Financial Services Linda A. Lacewell announced on Sept. 5, 2019 that the New York State Department of Financial Services (DFS) has authorized Paxos Trust Company LLC to offer a gold-backed virtual currency, the first such virtual currency authorized by DFS, as well as Binance USD, a virtual currency pegged to the U.S. dollar. DFS issued a limited purpose trust company charter in May 2015 to Paxos Trust Company, formerly known as…

The Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy issued an Investor Alert in January that urged investors to use caution before investing in “so-called initial exchange offerings” (IEO) through online digital asset trading platforms. The regulator noted that IEOs are a recent development in the rapidly evolving digital asset space and likened them to earlier initial coin offerings (ICO) as they are initial offerings of digital assets – such as coins…

The IRS recently clarified its guidance in Rev. Rule 2019-24, noting that taxpayers must pay income tax on new coins they receive after a transaction in which one cryptocurrency splits into two – known within the industry as a “hard fork.” When new coins are distributed due to a hard fork to multiple users, the IRS terms such distribution in the hard fork an “airdrop,” although the industry typically uses “airdrop” to describe a…