Lawmakers to Discuss If Crypto Is 'The Future of Money' Next Week

Cryptocurrencies will take center stage once again on Capitol Hill next week.

The U.S. House of Representatives Financial Services Committee announced Thursday that it would host a hearing titled «The Future of Money: Digital Currency» on Wednesday, July 18.

Though the Committee, headed by Chairman Jeb Hensarling, has yet to announce a full list of participating witnesses, CoinDesk confirmed that the event will be livestreamed on its website.

Past hearings by the Committee have seen lawmakers discuss cryptocurrencies through the lenses of terrorism financing and fraudulent investments, as previously reported by CoinDesk.

That being said, it seems the topic of next week's hearing is more geared towards debating the utility of cryptocurrencies as a form of money.

It is a timely topic in light of an increasing interest in cryptocurrencies as a potentially useful monetary tool for governments and more specifically, central banks, around the world. In March, the Bank of International Settlements, what some consider as the central bank to central banks, argued cryptocurrencies backed by central banks could in fact fuel faster bank runs during periods of financial instability.

Other countries including Canada, Finland and South Korea have weighed in on the matter, though responses have been mixed with trepidation.

US: Federal Employees to Disclose Crypto Holdings Following New Guidance

The US Office of Government Ethics (OGE) has ordered federal employees to report their holdings of virtual currency, according to new guidance issued June 18. The guidance will affect around 2 million federal executive branch employees, including the Departments of Homeland Security, the Army, Justice, Veterans Affairs, and others.

According to the notice, the OGE “does not consider virtual currency a ‘real’ currency or legal tender.” The reporting and conflict principles set out in the guidance will apply equally to digital assets like “coins” and “tokens,” which were received within initial coin offerings (ICOs) or issued or distributed employing blockchain technology. It states:

“Filers report their holdings in a virtual currency if the value of the virtual currency holding exceeded $1,000 at the end of the reporting period or if the income produced by the virtual currency holding exceeded $200 during the reporting period. Filers are required to identify the name of the virtual currency and, if held through an exchange or platform, the exchange or platform on which it is held.”

The development of guidance was deemed essential because, “virtual currencies are experiencing a surge in use and access, and as a result, employees who hold virtual currencies are increasingly seeking guidance from their ethics officials concerning their financial disclosure reporting obligations.”

Public filers are required to report transactions of certain investment assets, i.e. different forms of securities, although the notice says that the requirements will depend on whether a particular digital asset is recognized a security. If there is any uncertainty, the agency recommends “ethics officials advise the employee to report transactions of that asset on periodic transaction reports if the value of the transaction exceeds the reporting threshold.”

Furthermore, the guidance states that digital currency is an “investment asset” and “it may create a conflict of interest for employees who own it,” and it is not subject to any conflict of interest exemptions. According to the document, the OGE may need to issue further guidance as “the nature of virtual currency becomes better defined.”

In March, the South Korean government banned its own officials from holding and trading cryptocurrency, which is considered to be “the first time the government has formulated a virtual currency ban for all public officials.” According to the Ministry of Personnel Management, officials who are found to be involved in cryptocurrency trading are “in violation of the prohibition of forbearance obligations under the civil servants’ law” and are subject to disciplinary actions.

The Real Reason Token Issuers Are Fleeing the US

Race to the bottom or race to reality?

The rise of initial coin offering (ICOs) – as controversial as they may be – is a signpost that the age of Industrial Era capital formation is giving way to a new paradigm of decentralized and democratized investment and customer-driven business models that expand far beyond the borders of any one country.

In this arena, entrepreneurs and companies will naturally gravitate toward the jurisdictions that allow them to raise funds from investors and serve customers around the world in a fast, safe and effective manner and with minimal friction.

Recognizing that this shift to a new Decentralized Era is underway, numerous countries are positioning themselves at the forefront of this transition so as to reap the economic, financial and geopolitical benefits that come with being the go-to jurisdiction for global capital formation.

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Vermont Governor Signs Bill Clearing Way for Blockchain Companies

Vermont's governor has signed a bill allowing for the creation of so-called «blockchain-based limited liability companies,» public records show.

CoinDesk reported in January that state lawmakers were weighing the measure, which at the time referred to «digital currency limited liability companies» and contained language indicating that such businesses – effectively running on a distributed blockchain network – would pay taxes to the state in crypto. According to the text, those businesses are described as «limited liability compan[ies] organized pursuant to this title for the purpose of operating a business that utilizes blockchain technology for a material portion of its business activities.»

The most recent version of the text, according to LegiScan, shows that the language related to taxation has been stripped out, though it still contains sections regarding the limited liability companies as well as mandates for a «Fintech Summit» and a follow-up study of backing up public records using the tech (an earlier review ultimately deemed the use case too costly).

Among the requirements for setting up a blockchain-based company in Vermont: applicants must «specify whether the decentralized consensus ledger or database utilized or enabled by the BBLLC will be fully decentralized or partially decentralized and whether such ledger or database will be fully or partially public or private, including the extent of participants' access to information and read and write permissions with respect to protocols.»

Vermont governor Phil Scott signed the bill on May 30, LegiScan reveals.

The newly-signed law also calls for a study – due before January 15 of next year – into the tech's use in insurance and banking and how state officials can clear the way for such applications within the state's economy.

«The Department of Financial Regulation shall review the potential application of blockchain technology to the provision of insurance and banking and consider areas for potential adoption and any necessary regulatory changes in Vermont,» the text states.

Bank of America Patents Blockchain Security Tools

Bank of America has won a patent for a way to control access to certain aspects of a permissioned blockchain network, newly published documents show.

The patent for a somewhat innocuously titled «system for managing security and access to resource sub-components» explains how security tokens (essentially electronic keys, distinct from blockchain-based assets that mimic physical securities) would be used to grant access to certain users to the information contained in a particular block. According to the text, the system would be automated, effectively meaning that the network itself would grant and track access.

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South Carolina Sanctions Startup Over Unregistered Token Sales

Blockchain startup ShipChain has been hit with a cease-and-desist order from the South Carolina Attorney General's Office, which claimed the company violated the state's securities statutes.

The state's Securities Commissioner said in an order issued Monday that ShipChain offered what amounts to an investment contract by way of its token, which is «the only medium of exchange on the platform.»

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Ohio Could Become Next US State to Legally Recognize Blockchain Data

Ohio may become the latest U.S. state to legally recognize smart contracts and records stored on a blockchain, according to a newly proposed law.

Senate Bill 300, introduced by Senator Matt Dolan, amends sections of the Uniform Electronic Transactions Act to include blockchain records and smart contracts as electronic records. Further, the bill allows for smart contracts to be legally enforceable as any other contract may be.

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Move 'Em Out: ICOs Don't Seem So Scary Outside the US

ICO issuers are starting to look to jurisdictions outside the U.S. to set up shop.

In an environment of regulatory uncertainty, where the U.S. Securities and Exchange Commission (SEC) has begun investigating ICOs and the industry surrounding the capital raising technology but has yet to make a formal decision of how it will regulate crypto tokens, issuers and other stakeholders are finding other jurisdictions a better bet for launching their projects.

And no other place during Blockchain Week was the topic hotter than at Token Summit III (the original event took place a year ago) on May 27 in New York City.

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Judge Rules Against Alibaba in Crypto Trademark Case

UPDATE (2, May 21:57 UTC): Alibaba told CoinDesk in a statement that it would file a new motion against the Alibabacoin Foundation, saying «Alibaba Group is not affiliated with the ABBC Foundation. The court's ruling on April 30 was with respect to jurisdiction. We will be submitting a new motion and are confident we will be able to put an end to this willful, concerted and unlawful scheme by the ABBC Foundation to exploit Alibaba Group trademarks.»

U.S. District Judge Paul Oetken rejected digital retail giant Alibaba's trademark lawsuit against the Alibabacoin Foundation at the end of April, court filings show.

Alibaba failed to show that the District Court from the Southern District of New York has jurisdiction over the Alibabacoin Foundation, according to the ruling. The company first brought the suit early in April when it alleged that Alibabacoin was trying to mislead investors by implying that Alibaba was involved in the project somehow.

The foundation is based in the Cayman Islands, and while its website is accessible in New York state, that alone is insufficient to prove «personal jurisdiction.»

«Alibaba fails to cite a single case in which a court has concluded that an agreement with a third-party web-hosting company in New York bears an articulable nexus to a trademark infringement claim involving a website,» Oetken wrote.

The judge goes on to explain that Alibaba has not shown that any U.S.-based individual maintains the foundation's website, which would be needed for a jurisdiction argument.

The judge further points out that some of Alibaba's arguments would apply to securities cases, but not to a trademark suit. He also noted:

«Alibaba has failed to identify a specific economic injury in New York… nor has it alleged the existence of a New York market in which it lost actual or potential customers to Alibabacoin. To the contrary, Alibaba expressly disclaims any intention to enter the cryptocurrency market, in New York or anywhere else.»

He continued, saying «without allegations of specific, non-speculative harm in the form of actual or potential injury in a New York market for it sservices. Alibaba cannot estalbish a New York-based injury under an economic tort theory.

He concluded by releasing the temporary restraining order by Alibaba against Alibabacaoin was dissolved.

»Alibaba has not met its burden to establish a reasonable probability that the Court has personal jurisdiction over Alibabacoin," the judge wrote.