WASHINGTON, Feb. 5, 2021 — Digital assets, cryptocurrencies and their underlying blockchain technologies are transforming the global monetary system, finance and trading. To keep pace with this rapidly changing landscape, the American Bar Association Business Law Section Derivatives and Futures Law Committee’s Innovative Digitized Products and Processes Subcommittee Jurisdiction Working Group released an update to its comprehensive white paper addressing jurisdictional issues associated with digital products and processes.
The update covers several new developments since the working group published the original white paper in March 2019. Regulators are expected to focus on the following areas:
· Stablecoins. Stablecoins were developed in response to the price volatility of bitcoin and other cryptocurrencies. In 2019, the Swiss Financial Market Supervisory Authority released stablecoin guidelines noting that stablecoins will be treated the same as any other blockchain-based tokens.
· Actual Delivery. In March 2020, the Commodity Futures Trading Commission (CFTC) addressed the uncertainty surrounding the concept of “actual delivery” in the context of digital asset transactions by issuing an interpretation mandating that the actual delivery exception applies only when a customer secures possession and control of, and has the ability to use freely in commerce, the entire quantity of the commodity no later than 28 days from the date of the transaction.
· Digital Asset Framework. In April 2019, the U.S. Securities and Exchange Commission’s (SEC) Strategic Hub for Innovation and Financial Technology (FinHub) published the Digital Asset Framework, which provides guidance regarding FinHub’s view as to whether a given digital asset would be considered a security, and thus subject to SEC regulation. The SEC staff also recently issued its first digital-asset-related no-action letters, confirming that two digital assets that essentially function as stored-value cards would not be deemed securities.
· Travel Rule. FinCEN’s Travel Rule has been a recent focus of international attention, with the Financial Action Task Force adopting an interpretive note in June 2019 that confirms that countries should apply provisions similar to the Travel Rule to virtual asset services providers.
The white paper, which reflects the view of the Business Law Section only and does not represent ABA policy, can be accessed online.
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