Cryptocurrency owners must face death—be it their own, or that of anyone else with custody of the owner’s cryptocurrency or other digital assets. We received a stark reminder of this when the Canadian exchange QuadrigaCX recently filed court papers[1] indicating it may have lost access to nearly $200 million USD of its customers’ Bitcoin, Ether and other cryptocurrencies. The exchange claimed to have used cold wallets to store its portion of customers’ vital cryptocurrency…

U.S. Developments Regulatory Updates SEC Settles Enforcement Action with Gladius Network On February 20, 2019, the U.S. Securities and Exchange Commission (“SEC”) announced the settlement of charges against Gladius Network LLC (“Gladius”) for conducting an unregistered securities offering.  Gladius conducted a presale and public sale of digital tokens called “GLA” in late 2017, raising approximately $12.7 million to finance the development of a network where peers would rent out to other peers spare computer bandwidth…

U.S. Developments Regulatory Updates SEC Commissioner Peirce Says Guidance on Crypto Token Sales Is Coming In a speech at the University of Missouri School of Law, Hester Peirce, one of the SEC’s commissioners, said that the agency is working on “supplemental guidance” to help projects determine when securities laws might apply to crypto token sales. The commissioner said that the traditional standard for determining whether something is a security—the Howey Test—can sometimes be “overbroad” and…

The Ethereum Classic blockchain was the victim of a 51% attack (often called a majority or Sybil attack) last month that reorganized portions of the blockchain and allowed the attackers to double-spend 219,500 ETC ($1.1 million). As a result of this attack, and similar majority attacks over the past year, the concept of immutability within blockchain technology has been revealed to be a potentially costly oversimplification. This update presents a more nuanced understanding of blockchain…

The International Swaps and Derivatives Association (ISDA) has published the first in a series of guidelines for what it colloquially refers to as “smart derivatives contracts” (the Guidelines).* A smart derivatives contract is a derivative that incorporates software code to automate aspects of the derivative transaction and operates on a distributed ledger, such as a blockchain. This series of papers is intended to “provide high-level guidance on the legal documentation and framework that currently governs…

U.S. Developments Florida Court of Appeals Rules That Direct Sales of Bitcoin Constituted Money Transmission and the Sale of Payment Instruments Reversing the order issued by the Miami-Dade County Circuit Court, the Florida Court of Appeals issued an opinion on January 30 in the case of Florida v. Espinoza in which the appellate court ruled that an individual’s sale of bitcoin for cash constituted money transmission and the sale of payment instruments. Largely basing its…