The week’s developments in the crypto currencies world including Bakkt goes live with options, cash-settled futures products

Bakkt Goes Live With Options, Cash-Settled Futures Products

Three months after launching its long-anticipated physically settled bitcoin futures product, the Intercontinental Exchange’s Bakkt has gone live with its bitcoin options and cash-settled futures contracts.

“By starting with the physically delivered Bakkt Bitcoin (USD) Monthly Futures, we have a benchmark contract which provides the foundation for us to develop complementary products based on the needs of our customers,” a Bakkt blog post said. While Bakkt’s physical futures contract saw a slow start after it was launched in late September, volume has recently picked up, with the monthly futures product trading more than $120 million three months in.
Bakkt’s options contract comes just a month before CME, which already offers cash-settled bitcoin futures in the U.S., launches its own similar product. However, while Bakkt’s pricing will be based around its existing physical product, CME’s is dependent on its bitcoin index.

Source: https://www.coindesk.com/bakkt-goes-live-with-options-cash-settled-futures-products

US Court Orders UK Judge to Depose Telegram’s Advisor About Token Sale

U.S. District Court Judge P. Kevin Castel in New York signed an order to Britain’s High Court to depose John Hyman, Telegram’s chief investment officer.

The motion, requested by the SEC last week and granted Monday, seeks testimony and documents from Hyman related to his work raising funds for Telegram’s blockchain project TON. The request was filed by SEC official Jorge Tenreiro, according to the signed order.

The request for international judicial assistance asks the High Court of England and Wales to have Hyman “appear before an examiner or other appropriate judicial authority in England and Wales” for a deposition.

“It has been demonstrated to this Court that justice cannot be done amongst the parties to the Action without the testimony of Mr. Hyman… This Court requests the assistance of an appropriate English judicial officer to compel the appearance of Mr. Hyman to give oral sworn testimony and to produce documents on the subject matters and for the date ranges as described in this Request,” the order says.

The motion is a part of ongoing litigation by the SEC seeking to halt the release of the TON blockchain and the issuance of the project’s tokens, known as grams. The SEC believes grams are unregistered securities, sold by Telegram to a number of notable American investors and ready to flood the U.S. capital market.

Telegram refuted that charge, saying it had sought guidance from the SEC on how to avoid having grams classified as securities but didn’t hear from the regulator. Telegram registered its token pre-sale as an exempt offering under the Regulation D in February and March 2018.

The court previously requested the depositions of Telegram’s leadership, including founder and CEO Pavel Durov. Telegram Telegram’s investment relations staffer Shyam Parekh was scheduled to be questioned Tuesday in London.

Vice President Ilya Perekopsky is scheduled to be questioned in London on Dec. 16. CEO Durov is expected to be deposed Jan. 7 or 8, 2020, in an undisclosed location. Telegram will meet the SEC in court Feb. 18-19.

Source: https://www.coindesk.com/uk-court-orders-us-judge-to-depose-telegrams-advisor-about-token-sale

Denmark’s Tax Agency Is Sending Tax Compliance Letters to Crypto Users

Denmark-based cryptocurrency users have begun receiving letters from the Danish tax agency, Skattestyrelsen (Skat), requesting that traders provide a full background of all their cryptocurrency transactions, sources informed Cointelegraph on Dec. 10.

In its letters, Skat specifically asked crypto users to provide information about profits and losses for fiscal years 2016 to 2018, according to FIFO (First In First Out) principles. These principles represent a method of inventory valuation assuming that all goods are sold or used in the same chronological order in which consumers purchased them.

Furthermore, the tax agency asked for the rates used for each transaction, information on the purpose of acquiring digital currencies, and documentation regarding the creation of a cryptocurrency wallet.

Skat thus might follow the United States Internal Revenue Service’s (IRS) lead. The IRS sent letters to 10,000 crypto investors to clarify crypto tax filing requirements and, in certain cases, compel them to pay back taxes. At the time, the IRS said that it asked some of the crypto investors to amend their tax filings, while compelling others to pay back taxes and/or interest and penalties.

In October, the IRS added a question on crypto ownership to the standard 1040 income tax form for the coming tax season. IRS specifically asked: “At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” The question expects a straightforward yes or no, with no additional details requested.

Source: https://cointelegraph.com/news/report-denmarks-tax-agency-is-sending-tax-compliance-letters-to-crypto-users

FinCEN Sees Jump in Crypto-Related Suspicious Activity Reports

Crypto companies have filed 7,100 Suspicious Activity Reports (SAR) since May, America’s anti-money-laundering (AML) chief said at a banking conference Tuesday. The reports, according to Kenneth Blanco, director of the Financial Crimes Enforcement Network (FinCEN), follow FinCEN’s May guidance explaining how the Banking Secrecy Act, the cornerstone of U.S. AML law, applies to the virtual currency space.

Venezuela in particular appears to be a hotbed of suspicious crypto activity, Blanco said. The Latin American country with its allegedly oil-backed token, the Petro, seems to have spawned an increasing number of unregistered money services business. Domestically, crypto companies are reporting more darknet-linked customer transactions, more scams, and more activities targeting the elderly, whose “limited knowledge” of cryptocurrency places them at higher risk.

Blanco said that all financial institutions need to consider their crypto SAR reporting, even those who do not currently report any activity. “If the answer is no, they need to reevaluate whether their institutions are exposed to cryptocurrency,” he said. The remarks come as crypto exchanges, analyst firms, and others bolster their efforts to expand suspicious activity reporting.

Source: https://www.coindesk.com/fincen-sees-jump-in-crypto-related-suspicious-activity-reports

World’s 2nd-Largest Bank CCB Launches Blockchain Refactoring

China Construction Bank (CCB), the world’s second-biggest bank by operated assets, has officially launched its blockchain-based refactoring platform. Targeting commercial factoring business, CCB aims to bolster operations and reduce major risks in its refactoring business while providing shared data access by multiple participants, Chinese news outlet Sina Tech reports Dec. 6. As reported, factoring firms represent third parties that buy businesses’ invoices at a discount in order to help those businesses raise funds.

The news comes after CCB officially released the second version of its blockchain trading platform in October. Dubbed BCTrade 2.0, the product reportedly reached $50 billion in cumulative transaction volume. According to sources, CCB’s blockchain trading financial platform reportedly facilitated domestic letters of credit, forfaiting, international factoring as well as refactoring.

By applying BCTrade, CCB, one of the “big four” banks in the People’s Republic of China, enables digitization of trade and financial services between more than 54 domestic and foreign institutions, including a number of state-run and foreign banks, as reported by Cointelegraph.

CCB’s new efforts in blockchain comes to light alongside a report on the Bank of China issuing $2.8 billion in blockchain-based special financial bonds for small and micro-enterprises. As originally reported by Sina Finance, the funds are specifically used to issue loans to these Chinese small and micro-sized companies to support their continued development in the economy.

Meanwhile, the People’s Bank of China, China’s central bank, is reportedly planning to launch a digital token to challenge the United States dollar.

Source: https://cointelegraph.com/news/worlds-2nd-largest-bank-ccb-launches-blockchain-refactoring-report

Santander Redeems $20M Bond Using Ethereum Blockchain

Spain’s multinational banking giant Banco Santander has just redeemed a $20 million bond using the Ethereum blockchain. The firm has performed an early repayment of the blockchain-based bond that was issued on Sept.10, 2019, which purportedly shows that the public Ethereum blockchain can be applied to securities issuance across the full lifecycle of a security. The news comes after Santander issued its first end-to-end blockchain bond, as announced on Sept. 12. The company said that the move intends to make issuing bonds faster, more efficient and simpler. Santander also said that the bond will remain of the Ethereum blockchain until the end of its one-year maturity.

As blockchain technology continues to gain traction with a number of industries, Santander is evidently not the sole financial institution to experiment with the tech in securities issuance. Global banking giant HSBC started exploring the use of blockchain for issuance of fixed income securities in partnership with Singapore Exchange and investment firm Temasek. Specifically, HSBC intends to bolster the bond issuance process and reduce associated costs by applying tokenized securities and smart contracts. Earlier in October, the credit rating arm of financial services giant Morningstar revealed it was working on a blockchain platform for debt securities issued as tokens on a blockchain.

Source: https://cointelegraph.com/news/santander-redeems-20m-bond-using-ethereum-blockchain/

Claire Cummings

Claire practises financial services law with a focus on regulatory issues, cryptocurrencies and tokens, trading and brokerage documentation and advising both existing and start-up funds and fund managers.

If you would like to discuss any of the points we raise, please contact me or one of our other lawyers.

Phone: 0207 585 1406
Email: claire.cummings@cummingsfisher.com

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