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NYC court has no right to hear ‘international’ case argues Bancor firm

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The legal team for a crypto firm facing possible securities law violations is asking for the case to be dismissed on geographical grounds. 

According to court records filed Oct. 13 in the U.S. Southern District of New York, lawyers for blockchain firm BProtocol Foundation argued that a court outside the U.S. would be more suited to oversee the case due to the “international” nature of the complaint. The BProtocol Foundation legal team said the complaint was “based on a man in Wisconsin using an exchange in Singapore to purchase tokens issued by a Swiss entity,” which was not appropriate to try in New York.

“The Southern District of New York is convenient only for Plaintiff’s counsel — not for any of the parties or any of the would-be witnesses,” the legal team for BProtocol Foundation asserted. BProtocol is the parent company of decentralized liquidity network Bancor.

Co-founders Eyal Hertzog, Yehuda Levi, Guy Benartzi and Galia Benartzi suggested to Judge Alvin K. Hellerstein that the lead plaintiff in the class-action lawsuit, Timothy C. Holsworth, could file a similar lawsuit in Israel, where the four have residence. The blockchain firm also has offices there, and in Switzerland.

“Israel has a robust legal system of which Plaintiff could avail himself.”

BProtocol Foundation is one of seven crypto companies facing court in New York following a series of lawsuits filed in April. Cryptocurrency exchanges Binance, KuCoin, BiBox, and BitMEX were named in the lawsuits along with alleged crypto issuers Block.one, Quantstamp, KayDex, Civic, Status, and the Tron Foundation.

The lawsuits allege that the exchanges sold unlicensed securities without broker-dealer licensing and engaged in market manipulation in addition to a number of them selectively withholding information from investors regarding the sale of their tokens as securities. In BProtocol Foundation’s case, Holsworth alleges the blockchain firm violated U.S. securities laws with the sale of its Bancor Network Token (BNT).

However, whether or not the crypto assets in question comprise securities is not the main thrust of the argument behind the legal team’s motion to dismiss. It stated “the Court need not reach that question to dismiss the Complaint.”

“Since Plaintiff purchased his BNT on an exchange based in Singapore, his transaction was wholly foreign to the United States,” the blockchain firm’s lawyers said. ”No part of the Securities Act applies because BNT are not securities.”

The class-action lawsuits are something of a jurisdictional nightmare, with many exchanges and token issuers based outside the U.S. needing to be served using the Hague Convention. In addition, many courtrooms are still experiencing disruptions caused by the current pandemic.



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‘The cryptoruble is the future’ says Russian policymaker

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Anatoly Aksakov, the head of the Russian parliament’s Financial Markets committee, had some good news for blockchain fans in Russia. According to Aksakov, there are “no anti-blockchain voices” in the government and he believes that a digital ruble pilot will start in 2021.

During a panel held on October 21 as part of the Blockchain Life 2021 conference, the policymaker said that the central bank had already started consultations on the feasibility of launching ‘cryptoruble’ pilots. He considers it “the future of all our money circulation.”

Local media reports have pointed out the possibility of seeing a digital ruble in circulation in late 2021, which could be used on DLT platforms, and businesses could be able to leverage it to track goods and payments.

Aksakov also told the approximate 3,000 people in attendance:

“I know that a large number of serious businesspeople are preparing to issue digital assets. The Central Bank has taken a big step forward by announcing that it is starting consultations on the matter of digital assets.”

As Cointelegraph reported on October 16, at least five Russian banks are interested in taking part in Russia’s non-public digital ruble pilots in the first half of 2021.

The list of banks includes state-backed Promsvyazbank, the Credit Bank of Moscow, commercial bank Zenit, mortgage bank Dom.RF, and Crimea’s Russian National Commercial Bank.

However, Aksakov clarified that the Russian government draws a clear distinction between blockchain and cryptocurrency. For blockchain, he calls it the “technology of the future,” but for crypto, he commented:

“There are currently two equal positions on cryptocurrencies. The main opposition to cryptocurrencies is coming from the high-risk it poses for financial institutions, ordinary people. This side is trying to foresee all the risks involved and possible reactions to them.”



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US crypto derivatives merchants need to leave customer funds alone, says CFTC

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Per guidance released Wednesday evening, the Commodity Futures Trading Commission (CFTC) is advising businesses trading in crypto derivatives to hold customer funds very carefully.

The new guidance continues the CFTC’s interest in carving out rules for custodianship of virtual currencies — an area obviously distinct from any other asset class. Per the commission: 

“Custodians of virtual currencies are typically not subject to a system of comprehensive federal or state regulation and oversight, which includes safeguarding of these novel assets, and this raises potential risks to the protection of customer funds held at such custodians.”

The specific provisions of the guidance limit the locations that a “futures commission merchant” (FCM) can deposit customer virtual currency at to “a bank, trust company, or another FCM, or with a clearing organization that clears virtual currency futures.”

Moreover, the CFTC warns FCMs that they need to keep any such deposits in accounts clearly marked as customer funds, and will not allow gains in one account to make up for losses in another.

Effectively, the guidance seems most determined that customer crypto funds remain safe and untouched, barring FCMs from trading such funds in order to make collective gains. How big of a problem FCM trading of crypto deposits has shown itself to be goes unaddressed, but you can certainly imagine some catastrophic results of a crypto futures dealer deciding to play some volatile markets using crypto funds.

The CFTC has been busy trying to assemble a holistic framework for crypto assets. At the beginning of this month, the commission promised to protect the “burgeoning market” for these assets, an announcement that came immediately after the announcement of their pursuit of BitMEX for operating an unregistered derivatives exchange in the U.S. 



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Brazil is prepping an IPO for its state-run digital bank

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Brazil’s Minister of Economy, Paulo Guedes, said during an online event this Tuesday that Brazil “is about to” join the Organization for Economic Cooperation and Development (OECD) and that the Brazilian government has plans to launch a public offering of shares (IPO) for the newly-created digital bank of Caixa Econômica Federal.

Caixa Econômica Federal created a digital bank during the pandemic to help the government send financial aid to around 64 million Brazilians. Guedes’ comments came during the Milken Institute Global Conference, during which he said that the Central Bank is working to attract new investors for the country.

One of the minister’s bets is on the digital bank recently created by the state-owned Caixa Econômica Federal, which is part of Guedes’s privatization plans.

During the pandemic, the government spent heavily to combat the economic effects of COVID-19. The largest part of that fiscal support was emergency payments for low-income Brazilians, with Caixa playing a central role in identifying beneficiaries and paying benefits.

The initiative, Guedes assured the audience, generated a digital bank with 64 million users, opening up market opportunities.

According to Reuters, Guedes says that Caixa’s customer base has led to plans for an IPO for the digital bank, which wacreated “in six months” to pay government benefits:

“We digitalized 64 million people. How much is a bank with 64 million people worth? Low-income people, but people that were (bank-registered) for the very first time, so they are going to be loyal for the rest of their lives.”

According to Brazilian website InfoMoney, Guedes also said that the Central Bank will work to “guarantee” less risks to foreign investors:

“If the private sector abroad wants to pay extra money to have a guarantee […] we can give it to them for a certain price. If they want it, we’ll provide it.”

Guedes also said that Brazil has already fulfilled two thirds of the requirements to be accepted in the Organisation for Economic Co-operation and Development (OECD) and should definitely enter the organization “in one year”.

Among the benchmarks that Brazil must meet to enter the OECD are transparency, regulation, combating corruption and the establishment of acquisition protocols.



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