Latest in Legislation 03

The U.S. Treasury Department is fixated on regulating unhosted wallets, while the first restraining order is served via NFT.
  • U.S. Treasury Department shifts focus on regulating unhosted wallets
  • Ripple's general counsel blames SEC for bankrupting crypto
  • Is the European Union finally arriving at an agreement for crypto adoption?
  • Binance.US is facing a class-action suit from Terra investors
  • Unidentified hacker receives first restraining order in the form of an NFT

The Scoop:

Holland & Knight, a multinational law firm - served the first-ever restraining order in the form of an NFT. Its asset recovery team sent the NFT to an anonymous hacker for his crimes in early January. That LCX hack resulted in almost $8 million stolen, with approximately 60% of the stolen funds frozen. Since then, LCX has been continuously working hard to protect their systems by cooperating with law enforcement and blockchain tracing specialists. The specialists carry out algorithmic forensic analyses and follow the stolen assets using the crypto mixer Tornado Crash. The mixer protocol is mainly used to hide the digital imprint and trail of blockchain transactions in the extreme cases of hacked funds. Ultimately, Holland & Knight were able to catch the criminal and identify the location of the stolen funds.

Holland & Knight NFT Law Firm Regulation
Holland & Knight was deemed "the first law firm to serve a defendant by NFT."

In 2020, the Financial Crimes Enforcement Network (FinCEN) began facilitating reporting on unhosted wallet transactions above $10,000. Since then, they've continued to work closely with banks to retrieve information on customers and their counterparties - adjusted for transactions over $3,000 involving an unhosted wallet. After unhosted wallets were sanctioned by the Russian Federation during the Ukraine-Russia war, there was much scrutiny following these events.

“…we are working to address the unique risks associated with unhosted wallets… When it comes to unhosted wallets, we are working to provide them the information they need to avoid facilitating these kinds of illicit payments.”

Wally Adeyamo, U.S. Deputy Treasury Secretary

Wally Adeyamo also explains the Travel Rule, which exposes the true identities and receivers of crypto funds. The purpose of the travel rule is to safeguard national security and enforce the Bank Secrecy Act. The agency is focused on addressing issues about privacy infringements and drafting regulations that will benefit the macro goal of national security. At the same time, it will pave the way to innovation digital transactions with secure protocols in place.

The European Union is nearly in agreement in the Markets in Crypto Assets (MiCA) with regards to a regulated framework. The framework includes a legislative package that is entrusted to regulate the crypto market and similar activities throughout Europe. 27 member states with the same digital asset regulations will be participating, with the goal of signing the agreement by the end of the month. Presently, discussions regarding stablecoin transaction sizes are being reviewed. The final draft will be coordinated between the European Commission and the European Parliament - and potentially the EU Council. The discussion will center around the climate-related disclosures that will help keep track of Bitcoin's environmental repercussions.

Stu Alderoty, Ripple's general counsel - pointed out that the United States Securities and Exchange Commission (SEC) was "bullying, bulldozing and bankrupting" crypto technologies in the United States. He expressed his views strongly when a lawsuit between the regulator and Ripple ensued on June 13th.

Ripple General Counsel Stu Alderoty SEC United States cryptocurrency cyrpto
Ripple's general counsel responds to SEC's bullying and interferences in crypto technologies.

Ripple Labs has been entangled in a legal brawl with the SEC since late last year, at the time when the securities regulator first filed their lawsuit. The lawsuit stated that Ripple executives had used XRP tokens to raise funds in 2013, at a time when it was considered an unregistered security.

Ripple retaliated 5 years later in response to a speech by Robert Hinman, the Director of Corporation Finance for the SEC. The speech had categorized ETH, BTC and XRP, as a non-securities due to being "sufficiently decentralized." Ripple expressed their disappointment in the speech's contradiction, especially considering the SEC's claim against the XRP token. In response, the SEC claimed that the speech represented the director's opinions and not their own. This contradiction later became one of the most important aspects of the SEC vs Ripple lawsuit.

A few Terra investors filed a class-action lawsuit against Binance.US on Monday, according to a legal document. The document stated that the exchange had used misleading marketing tactics to tote the stability of Terra's stablecoin, UST. UST depegged last month, resulting in a debilitating ecosystem-wide collapse that erased over $40 billion in just a few days.

In another ad, Binance.US mistakenly called UST a fiat-backed stablecoin. In reality, UST was designed to be an algorithmic stablecoin - which is completely different from USDC and other fiat-backed stablecoins. In conclusion, the lawsuit stated that Binance.US continued to reap profits from sales of UST, pre-collapse. These allegations worried thousands of Binance investors, even as the collective value of the claim reached over 5 million dollars.

New crypto adoption:

Decrypting Legalese:

The travel rule, or "Bank Secrecy Act rule [31 CFR 103.33(g)]" -requires financial institutions to report information about the senders and recipients of select transactions that involve more than one financial institution.


This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. Charts, graphs and references to any digital assets are for informational and illustrative purposes only.

Finblox Blog is associated with Finblox - a reliable cryptocurrency earnings platform where you can buy and earn passive income on your digital assets.

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