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MUFG Seeks Seamless Automatic Securities Settlement via Blockchain

MUFG (Mitsubishi UFJ Financial Group), one of Japan’s biggest banking institutions, has announced the establishment of an ST (Security Token) Research Consortium intended at protecting investors’ rights, as well as offering fund settlement and seamless automatic securities settlement via blockchain.

Blockchain is touted to be ideal in tackling counterparty risk that is presently a challenge when it comes to fundraising through tokenization.

MUFG has partnered with 21 other companies in this initiative, such as KPMG, Accenture, NTT, and Mitsubishi.

MUFG acknowledges that this development is based on the technological advancements that have instigated ongoing diversification in financial transaction methods, such as the rise of ICOs and increased circulation of crypto-assets.

MUFG, therefore, sees the combination of smart contract technology and security token as ideal in prompting efficient financial transactions.

ST research consortium’s objectives

The consortium aims at enabling both management and fundraising on the same platform, as well as utilizing digital cash for settlement. Some of the assets to be used include securitized products and bonds.

The ST Research Consortium also wants to venture into 24/7 trading with the absence of special terminals though it will be available to overseas, retail, and domestic investors.

The announcement also mentions programmable money based on its instant settlement capabilities. Expressly, immediate delivery or payment is helpful in the reduction of counterparty risk.

Image via Shutterstock

Tezos Settles Class-Action Lawsuit Over 2017 $232 Million ICO to the Tune of $25 Million

The Tezos Foundation has settled for $25 million in a class-action lawsuit that had been ongoing since 2017 over its Initial Coin Offering (ICO) which raised $232 million.

Tezos has concluded a class-action lawsuit over its 2017 $232 million ICO and will compensate investors who sold their XTZ and lost money on their investment prior to November 2019.

Throughout the litigation, the Tezos’ XTZ token offering was not considered an unregistered security sale—although how the courts define XTZ is expected to have little bearing on how the United States Securities and Exchange Commission (SEC) will ultimately define Tezos and its XTZ token’s status during the 2017 ICO.

$25 Million Up for Claim

According to the settlement, early investors who purchased XTZ tokens during Tezos’ 2017 initial coin offering and sold their tokens at a loss before Nov.25 2019 are eligible for compensation—this includes users who lost access to their passwords.

Tezos’ settlement will not include, however, investors who still hold their original purchased XTZ and also those who did not sell at a loss.

In a Medium post on Aug. 31, Alex Liu, a Lawyer and Tezos advocate and blogger revealed the court documents entailing that the settlement amount is $25 million but investors will need to fill out numerous applications to claim any of the money.

Liu explained that users will likely need to compile data and information including contribution addresses, emails, and prove their losses through self-calculation. Should the investors qualify for part of the Tezos settlement, Liu expects that they will need to pay taxes on the award and will ultimately get back a “small nominal amount.”

The settlement also excludes the early investors from launching any similar lawsuits around Tezos’ security status when and if it is ultimately determined by the United States SEC.

Throughout the litigation, it was found that the Tezos ICO did not constitute an unregistered security offering. The Tezos Foundation also continues to refute that XTZ is a security. The Tezos Community argues as does Liu in his post that the lawsuit was the blame of “unscrupulous/unsavory people that needlessly slowed the project and caused irreparable harm.”

As a result of the litigation, how the SEC views XTZ tokens is still unclear and the decision only stands to compensated investors for their losses but will have no bearing on the regulator’s definition of Tezos’ token.

Tezos and Defi

Meanwhile, the Tezos Foundation continues to make waves in the Defi space with its recent announcement of the integration Harbinger price oracles.

The Harbinger oracle is a project that delivers cryptographically signed price feeds based on real-time market data sourced from multiple exchanges. The integration by Tezos will allow the on-chain pricing data to be fed directly to the Tezos blockchain which will foster the development of further DeFi applications on the Tezos network.

ASX Delays Blockchain-Based CHESS Replacement to April 2023

The Australian Securities Exchange (ASX) announced the new go-live date for the CHESS replacement system will be pushed to April 2023, delaying the launch by one year, due to replacement scope increasing and the impact of COVID-19.

The announcement says:

“While most CHESS users indicated they could meet the proposed go-live date of April 2022, many asked for extra industry testing, more time to prepare for the new system, and additional functionality that reduces manual processes (such as electronic corporate action elections) to be delivered as soon as possible.”

On the impact of COVID-19 on the CHESS replacement system, ASX Chief Executive Officer Dominic Stevens said:

“ASX has listened to the industry, regulators and its technology partners throughout this project. It is clear that COVID-19 continues to impact the whole industry, including ASX, and this has evolved what our stakeholders want from the CHESS replacement system. In parallel, ASX has considered how we can reduce delivery risk, enhance the customer experience and continuously improve project execution. Consequently, we have increased the scope of the project and extended the timeline. The result is a program that provides a significantly enhanced CHESS replacement solution on Day 1.”

CHESS stands for Clearing House Electronic Subregister System. It is a settlement system for financial products traded on the ASX and operated by the ASX Settlement Pty Limited.

ASX first started to consider a blockchain-based CHESS replacement back in 2015. In January 2016, Digital Asset became the ASX’s technology partner for prototypes with blockchain and DLT technology.

COVID-19 Pandemic-Induced Crisis is Pushing CBDC Adoption, says Bank of Russia

It is without a doubt that the coronavirus (COVID-19) pandemic has had far-reaching worldwide implications like financial vulnerability and a higher debt burden.

Nevertheless, financial regulators are keeping a keen eye on central bank digital currencies (CBDCs) because they see them as silver linings in the expansion of electronic settlements technologies and e-commerce amid the pandemic.

Unprecedented macroeconomic policy measures needed

In a key online meeting of the Central Bank Governors’ Club, which consisted of 26 central bank representatives from Balkan, Black Sea Region, and Central Asia countries, it was concluded that the coronavirus pandemic has necessitated a paradigm shift in the way things are done in the financial markets.

Elvira Nabiullina, the Bank of Russia Governor, chaired the meeting and he noted that the current economic environment was spurring CBDCs adoption because financial regulators are no longer oblivious to them.

For instance, last month, the governor of the Bank of Canada Tiff Macklem advocated for global collaboration in the development of a Central Bank Digital Currency (CBDC), arguing that a “globally coordinated” approach would help to prevent such currencies from being exploited by criminals.

Furthermore, Spain’s central bank recently published its strategic plan outlining the design proposals and evaluations of the economic implications of a central bank digital currency (CBDC) in the country.

The notion aired by the Bank of Russia in the meeting was that the global economy had to incorporate unprecedented macroeconomic policy measures like CBDCs for the revival of the global economy.

Assessing monetary policy and financial stability

During the second session of the meeting facilitated by Alexey Zabotkin, the deputy governor of the Bank of Russia, it was highlighted that the rollout of a CBDC required the central bank to, first of all, assess its impact on the nation’s financial stability and monetary policy.

CBDCs are digital assets that are pegged to a real-world asset and backed by the central banks meaning that they represent a claim against the bank exactly the way banknotes work. Furthermore, they are blockchain-enabled, representing a new technology for the issuance of central bank money at the wholesale and retail level.

With at least 1.7 billion people being left out of the banking system, a CBDC is seen as a game-changer in fostering financial inclusion by leveraging the private currency framework.

Ripple and YouTube Agree on Settling for Lawsuit over XRP Scam Videos

Ripple CEO Brad Garlinghouse has revealed that the lawsuit Ripple has served Youtube with has been settled.

Ripple sued YouTube last April over streams of running rampant on the social media platform that impersonated Garlinghouse. Fake XRP giveaway scams were promoted through the impersonation of the Ripple CEO. Per the official complaint, Ripple alleged that YouTube benefitted from crypto scammers’ videos, as revenue could be generated from the paid ads that played in between videos. Currently, Garlinghouse has addressed the lawsuit and revealed that both parties have agreed on settling. Per his official announcement:

Garlinghouse explained that with the rise in popularity of crypto, many social platforms have increasingly come to “acknowledge their role in allowing crypto scams to persist and recognize the need to be part of the solution.” He hinted that collaborations between different entities were crucial, as government bodies have increasingly been drawn towards the crypto industry and scrutinizing it for misdoings.

The exact terms of the settlement were not disclosed, but according to sources familiar with the talks, both parties have reached an agreement where they will collaborate to further the cause of cybercrime prevention.

Twitter suffers the biggest hack in its history

Garlinghouse is not the only one to have fallen victim to cryptocurrency scams. Last year, numerous social media accounts were compromised on Twitter in what was deemed the biggest hack the social platform had ever suffered in its entire history. A Bitcoin scam overtook Twitter. As a result, the social media accounts of numerous high profile-figures such as Elon Musk and Joe Biden were compromised, as hackers leveraged celebrity accounts to demand Bitcoin funds.

BitMEX Agrees to Pay $100M in Settlements to the CFTC of the US

BitMEX has agreed to a Consent Order with the U.S. District Court for the Southern District of New York to settle charges levied by the Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN).

As revealed by the CFTC, the deal involves all the five companies that operate the BitMEX brand, and the settlement involves the payment of $100 million in a civil monetary penalty.

The charges on BitMEX in which its former founders and executives, Arthur Hayes, Benjamin Delo, and Samuel Reed, were also indicted, involves claims that the exchange allowed American residents to trade derivatives products without registering with the right agencies. The order also prohibits BitMEX from further violations of the Commodity Exchange Act (CEA) and CFTC’s regulations as charged.

“This case reinforces the expectation that the digital assets industry, as it continues to touch a broader pool of market participants, takes seriously its responsibilities in the regulated financial industry and its duties to develop and adhere to a culture of compliance,” said Acting Chairman Rostin Behnam. “The CFTC will take prompt action when activities impacting CFTC jurisdictional markets raise customer and consumer protection concerns.”

Per the press release, the Acting Director of Enforcement Vincent McGonagle noted that the deal with help reinforce the notion that “registration requirements and core consumer protections Congress established for our traditional derivatives market apply equally in the growing digital asset market.”

Authorities are particularly against the growing emergence of derivatives products in the nascent world of cryptocurrencies. Besides the claims that there are inherent risks in trading digital currencies, higher leverages have been noted to expose consumers to such risks. Exchanges are already treading on the path of caution, with outfits like Binance and FTX derivatives exchange already reducing their leverage to 20x from 125x.

The CFTC said its litigation with BitMEX is still ongoing, indicating that the settlement reached was just for the once embattled cryptocurrency exchange.

Hydrogen Technology Corporation Settles Crypto Manipulation Lawsuit

Hydrogen Technology Corporation, a firm accused of manipulating the price of cryptocurrencies, has settled a seven-month-long lawsuit with the Securities and Exchange Commission (SEC) for $2.8 million. The SEC had filed a complaint against Hydrogen and its former CEO, Michael Ross Kane, in September, alleging that they manipulated the volume and price of the firm’s ERC-20 token, Hydro (HYDRO), by using its market maker, Moonwalkers Trading Limited.

On April 20, a New York District Court Judge ordered Hydrogen and Kane to pay $2.8 million in remedies and civil penalties. The payment comprises approximately $1.5 million in “disgorged” profits, which refers to gains made from unlawful conduct, as well as a penalty of more than $1 million. Additionally, Kane agreed to pay an individual fine of approximately $260,000, and the remaining amount is made up of prejudgment interest.

The SEC’s complaint alleged that Kane and Moonwalkers CEO Tyler Ostern worked together to manipulate the volume and price of Hydro’s token, following its distribution through airdrops, bounty programs, and direct-to-market sales in 2018. According to the complaint, Ostern sold the tokens in an “artificially inflated market,” which allowed Hydrogen to net more than $2 million in profit.

A day after the complaint was filed, Ostern settled the case for $41,000. Both Hydrogen and Kane are now bound by the conditions of the settlement, which prevents them from disputing the charges levied against them by the SEC.

As part of the settlement, Hydrogen and Kane are also prohibited from selling any additional cryptocurrency until the Hydro tokens have passed the Howey test and received further approval from the SEC. However, Kane is still permitted to participate in the wider cryptocurrency market, meaning he can still buy and sell crypto assets for personal gain.

The settlement of the lawsuit marks a significant win for the SEC, which has been cracking down on cryptocurrency-related fraud and misconduct. The case also serves as a reminder to cryptocurrency companies and their executives to comply with securities laws and regulations.

It is worth noting that the Howey test mentioned in the settlement is a legal test used to determine whether an asset is a security. If an asset meets the criteria of the test, it is considered a security and must comply with securities laws and regulations. This means that Hydrogen and Kane cannot sell any additional cryptocurrency until the SEC approves the Hydro tokens as a security.

In conclusion, the settlement of the cryptocurrency manipulation lawsuit brought against Hydrogen Technology Corporation and its former CEO is a significant development in the ongoing effort to regulate the cryptocurrency market. The settlement serves as a reminder to companies and their executives to comply with securities laws and regulations to avoid legal action by regulators.

Genesis Capital's Settlement Disrupted by Creditors

Genesis Capital, a troubled digital currency company, has hit another roadblock in its settlement process, just two months after reaching an initial agreement with creditors. The company’s parent firm, Digital Currency Group (DCG), has issued a statement on Twitter announcing that Genesis has filed a motion for mediation due to renewed demands from creditors.

In February, Genesis Capital submitted a comprehensive settlement proposal to the bankruptcy court after reaching an “agreement in principle” with DCG and its creditors. Under the proposed restructuring plan, Genesis creditors were expected to recover 80% of funds lost due to the company’s collapsed operations.

However, DCG has now reported that Genesis creditors have raised their demands, significantly disrupting the ongoing court process. “While it is difficult to understand the rationale given the limited engagement from Genesis creditors since the February court filing, our understanding is that a subset of creditors have decided to walk away from the prior agreement,” DCG wrote.

The disruption has raised concerns about the timing of the settlement process, with some experts questioning whether the prolonged proceedings could harm the company’s chances of recovery. However, others have suggested that the additional mediation may ultimately help resolve outstanding issues and pave the way for a successful restructuring.

Genesis Capital’s struggles come amid broader uncertainty in the digital currency market, with many investors and companies grappling with regulatory challenges and price volatility. The company’s difficulties are particularly notable given its high profile in the industry; Genesis has been a leading provider of digital asset lending and borrowing services, with a portfolio of more than $15 billion in assets.

Despite these challenges, DCG expressed confidence in Genesis’ ability to weather the storm. “We believe that Genesis is well-positioned to continue to provide best-in-class digital asset services,” the company wrote. “We remain committed to working through these challenges in partnership with our creditors and the broader digital asset community.”

The case underscores the challenges facing digital currency companies as they navigate a rapidly evolving regulatory landscape and seek to establish themselves as viable players in the broader financial ecosystem. With Genesis’ future hanging in the balance, the industry will be closely watching to see how the settlement process unfolds in the coming months.

Breaking: Visa Expands Stablecoin Settlement On Solana

Visa Inc. (NYSE: V), a global payments giant, has announced the expansion of its stablecoin settlement capabilities, according to Blockchain.News, incorporating the Solana blockchain and initiating pilot programs with merchant acquirers Worldpay and Nuvei.

A Leap in Cross-Border Settlements

Visa’s latest move aims to modernize cross-border money movement by leveraging stablecoins like Circle’s USDC. The company has already conducted live pilots, transferring millions of USDC between its partners over both the Solana and Ethereum blockchain networks to settle fiat-denominated payments authorized via VisaNet.

By leveraging stablecoins like USDC and global blockchain networks like Solana and Ethereum, we’re helping to improve the speed of cross-border settlement and providing a modern option for our clients to easily send or receive funds from Visa’s treasury,

said Cuy Sheffield, Head of Crypto at Visa.

Building on Previous Success

In 2021, Visa initiated a pilot program with Crypto.com, making it one of the first major payment networks to test stablecoin settlement on the issuance side. The pilot was successful in leveraging USDC and the Ethereum blockchain to receive payments from Crypto.com for cross-border volume on their live card program in Australia.

Before the pilot, Crypto.com Visa cardholders faced a days-long currency conversion process and costly international wire transfers for cross-border purchases. Now, Crypto.com can send USDC directly to a Visa treasury managed Circle account, reducing both time and complexity.

Expanding to Merchant Acquirers

While Visa’s treasury operation continues to test receiving funds on-chain from multiple issuer partners, the new settlement options enable Visa to send funds on-chain to acquirers like Worldpay and Nuvei. These acquirers serve a diverse range of sectors, including blockchain and crypto economy merchants such as on-ramp providers, games, and NFT marketplaces.

Stablecoins like USDC are cutting-edge payments technology that can enable online businesses around the world to accelerate their growth,

said Philip Fayer, Chair and CEO of Nuvei.

Solana’s High-Performance Capabilities

Visa’s decision to add support for Solana was driven by the blockchain’s high performance, seeing 400 millisecond block times and averaging 400 transactions per second (TPS), with surges to more than 2,000 TPS during peak demand. This makes Visa one of the first major payments companies to directly utilize Solana for live settlement payments between its clients.

Future Outlook

Visa’s work with Worldpay and Nuvei represents a significant stride in embracing the innovative potential of digital currencies. With an eye towards an increasingly digital financial landscape, Visa is forging ahead with new partnerships, aiming to be at the forefront of digital currency and blockchain innovation.

Stablecoins Gain Traction in Traditional Finance

The move by Visa comes amid increasing signs that traditional financial institutions are embracing stablecoins. On August 7, 2023, PayPal (NASDAQ: PYPL) announced the launch of its U.S. dollar-denominated stablecoin, PayPal USD (PYUSD), as reported by Blockchain.News, aimed at transforming payments in web3 and digitally native environments.

Furthermore, Tether, the issuer of the largest stablecoin USDT, now ranks 22nd in U.S. Treasury Holdings, surpassing countries like Mexico, Australia, and Spain. Tether Holdings Limited released its Q2 2023 assurance opinion, revealing that its excess reserves have increased by approximately $850 million, reaching a total of $3.3 billion. The company’s operational profits for April to June 2023 exceeded $1 billion, marking a 30% increase quarter over quarter.

FTC Settles with Voyager Digital Over Misleading FDIC Claims, Former CEO Charged

The Federal Trade Commission (FTC) on October 12, 2023, disclosed a settlement with the beleaguered cryptocurrency firm, Voyager Digital, post allegations of misleading consumers regarding the safety of their deposits. The settlement emerges amid a broader crackdown on deceptive practices in the rapidly evolving crypto sector.

Voyager Digital, under the helm of CEO Stephen Ehrlich, is alleged to have falsely claimed that consumers’ deposits were insured by the Federal Deposit Insurance Corporation (FDIC) from at least 2018 until its bankruptcy declaration in July 2022. This misrepresentation reportedly played a significant role in attracting consumers to entrust their funds to Voyager. The debacle resulted in consumers being locked out of their cash accounts for over a month, culminating in a loss exceeding $1 billion in cryptocurrency assets.

Samuel Levine, the Director of the FTC’s Bureau of Consumer Protection, emphasized the ongoing efforts to curb deceitful claims surrounding cryptocurrency assets, which witnessed over $1.4 billion in losses due to scams in the previous year alone. The action against Voyager and Ehrlich underscores the FTC’s commitment to ensuring companies and individuals adhere to truthful claims, particularly regarding FDIC insurance.

The settlement mandates a permanent prohibition on Voyager and its affiliates from handling consumers’ assets. Furthermore, a $1.65 billion judgment has been agreed upon, albeit suspended to allow the bankruptcy proceedings to facilitate the return of remaining assets to consumers. However, former executive Stephen Ehrlich has not concurred with a settlement, thus, the litigation against him will continue in federal court. Additionally, Ehrlich’s wife, Francine Ehrlich, has been named as a relief defendant in the complaint.

Central to the FTC’s complaint is the misrepresentation of FDIC insurance, a crucial factor for consumers deliberating on where to deposit their assets. Voyager’s marketing materials, inclusive of direct assertions regarding the safety of consumers’ deposits, prominently featured claims of FDIC insurance which were found to be baseless as Voyager is neither a bank nor a financial institution. The complaint further noted that the FDIC does not insure cryptocurrency assets, rendering Voyager’s claims as misleading.

The settlement with Voyager sends a clear message to the crypto industry regarding the veracity of claims pertaining to asset safety and insurance. The FTC’s action illustrates a broader regulatory scrutiny aimed at ensuring transparency and consumer protection within the financial sector, extending beyond traditional banking to encompass emerging crypto entities.

In a simultaneous action on October 12, as reported by Blockchain.News, the Commodity Futures Trading Commission (CFTC) also charged Stephen Ehrlich with fraud and registration failures, mirroring a wider regulatory effort to uphold legal and ethical standards in the burgeoning crypto space.