Blockchain & cryptocurrencies legal and regulatory round-up: June

iLaw, a cryptocurrency law firm in London specializing in technology, has launched a new series of articles, in which our Blockchain, Cryptocurrency and Digital Assets team will be highlighting some of the latest legal and regulatory developments in the UK and globally. In this round-up, Mariya Lazarova and Allan Murray cover:

  1. The announcement of the EU’s regulatory regime for cryptocurrencies;
  2. The spike in consumer uptake of cryptocurrencies in the UK;
  3. The FCA’S Money Laundering Regulations for crypto businesses carrying out certain activities in the UK;
  4. The response of several US Bar associations to the use of digital currencies as a form of payment for legal services;
  5. The new Swiss laws removing legal barriers on blockchain and DLT; and
  6. Bitcoin theft in Russian criminal courts.

EU’s Regulatory Regime for Digital Finance and Cryptocurrencies

On 23 June 2020 during his speech at the Digital Finance Outreach 2020, Valdis Dombrovskis, the EU’s Executive Vice President of the European Commission for An Economy that Works for People, announced that there new measures on the regulation of cryptocurrencies are imminent. Although Mr Dombrovskis’s speech did not give much detail, of particular interest was the mention of regulating stablecoins. In October 2019, Mr Dombrovskis also alluded to the regulation of stablecoins, following Facebook’s plans to introduce Libra. The digital finance strategy and supporting legislation is expected to be revealed later this year. Currently, unregulated cryptoassets will be covered according to the proportionality of their risk to turn Europe into the leader for digital finance.

FCA’s Cryptoasset consumer research 2020

3.86% of the UK general population, or 1.9 million people, are estimated to own cryptocurrencies according to the FCA’s latest report. Most of the holders possess the relevant technical knowledge of the assets as well as an understanding of the associated risks. These findings are significant as they represent a spike of 2.35% of the population over one year. The role of exchanges, particularly non-UK ones, is notable as more than half of crypto owners use their services. With such an increase in popularity, the importance of introducing appropriate regulatory safeguards for cryptoasset trading is equally on the rise.

Deadline for MLR registration with the FCA

Businesses carrying out certain cryptoasset activities in the UK were required to submit their registration applications to the FCA by 30 June 2020. In January this year the FCA became the AML/CTF supervisor for such businesses. Although the technical registration deadline is 10 January 2021, the FCA set the June 2020 deadline to give itself ample time for processing the applications and liaising with applicants on any follow-up requests. The risk for those businesses who failed to submit an application by 30 June 2020 is that their subsequent application may not be processed by 10 January 2021, in which case they will have to cease trading.

Legal costs and digital currencies

Four bar associations in the US have now issued statements on payment in cryptocurrencies for the legal services of their members. The DCB (the District of Columbia Bar Association) was the most recent one, stating that it is “not unethical for a lawyer to accept cryptocurrency”.  Prior to the DCB, official statements were made by the bar associations in Nebraska, New York and North Carolina. There is a slow but steady payment revolution on the rise in the legal sector and, recently, iLaw became one of the first law firms in the UK accepting payment in the form of BTC, ETH or other cryptocurrencies.

Swiss laws and blockchain startups

We have previously noted Switzerland’s attractiveness for banking purposes in the crypto and blockchain sphere.  New legislation has been introduced by the Swiss Federal Council which aims to cut the red-tape on security token transfers, facilitate claims of ownership over a bankrupt’s crypto estate and details how trading platforms and DLT providers can secure a license. The legislative move went through without opposition.

Bitcoin theft is not a crime?

Bitcoin might be a form of property in English law, but in Russia, a criminal court denied restitution to a victim who had to pay ransom to his kidnappers in the amount of 5 million rubles in cash and 99.7 BTC ($900,000 at the time in 2018). The court ruled partially in the victim’s favour on the claim for the rubles. However, the claim for the return of the BTC was not successful as, with no legally recognized status, it was not deemed a crime against property.

If you require legal assistance, contentious and/or transactional, in the field of blockchain, cryptocurrencies and digital assets, please contact our Senior Associate, Allan Murray via email at  allan.murray@ilaw.co.uk or our Trainee Solicitor, Mariya Lazarova at mariya.lazarova@ilaw.co.uk.