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Crypto-Focused Bank Achieves Approval in Wyoming, US HHS Implements Blockchain, NY Challenge to OCC Fintech Charter Continues, ICO Issuer Charged in Fraud Scheme

Crypto-Focused Bank Approved in Wyoming, Initiatives Advance in Foreign Markets

Former Wyoming regulator Caitlin Long, now the CEO of a payments processing company, recently announced that her company has received approval from the Wyoming Division of Banking for a banking license. Long said she expected the new company to be open for banking business as early as October 2020. Her company also announced a new product to modernize U.S. dollar payments, called Avit, which she claims will likely be treated as a cash equivalent and issued under existing U.S. commercial laws.

In international developments, according to reports 85% of Italian banks are now exchanging interbank transfer data on Corda’s R3 blockchain. This has reportedly reduced the average time for reconciliation from 30 to 50 days to within one day. In Australia, two Australian Securities Exchange-listed companies have announced an expansion of their partnership to launch “The trueGold Consortium,” with the goal of establishing a “mine-to-marketplace ethical gold supply chain assurance solution” that utilizes blockchain technology to promote trust around provenance, responsible sourcing and production standards.

According to a recent report, one of the largest telecom companies in Austria will now allow its users to make payments using cryptocurrencies including bitcoin, ether and dash on its cashless payments application. This new policy will allow about 2,500 merchants to accept cryptocurrencies. The telecom will convert the cryptocurrencies to euros in real time so retailers receive payment in fiat.

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US HHS Implements Blockchain; Clothing, Food and Shipping Platforms Expand

According to recent reports, the Chief Information Officer at the U.S. Department of Health & Human Services (HHS) has confirmed that HHS is using blockchain technology to track COVID-19 hospitalization data on a technology platform named HHS Protect. According to reports, “HHS Protect coordinates data from 6,200 hospitals across the United States, including numbers of ventilators, hospital beds, ER admittance, and discharge, lab test data across the U.S., warehouse implications, and nursing home data.”

A Los Angeles-based clothing brand recently integrated blockchain-based functionality from a German technology firm, Retraced, into its e-commerce platform. According to reports, the new functionality provides customers with information “about the product’s journey, the production processes needed to create each item and environmental implications for all products that are mapped out on the platform.”

In other supply chain news, a U.S. blockchain startup focused on tracking premium Wyoming beef recently demonstrated its product at the Cardano Virtual Summit. And in the shipping industry, a Mumbai-based digital freight forwarder is the latest firm to join the TradeLens blockchain platform for tracking maritime shipping.

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NY Challenges OCC Fintech Charter in 2nd Circuit, Fintech Report Covers First Half of 2020

The New York Department of Financial Services (DFS) filed a brief last week with the Second Circuit Court of Appeals challenging the U.S. Office of the Comptroller of the Currency’s (OCC) right to grant fintech charters to non-depository financial institutions under the National Bank Act. DFS argued in its brief that the OCC’s powers do not extend to non-depository institutions under applicable law and that the OCC, if allowed to exert such power, would limit DFS’ jurisdiction to enforce consumer protection and usury laws against subpar financial institutions, such as online lenders that provide small consumer loans at high interest rates. These and other efforts of the OCC are supervised by the agency’s relatively new acting head, Brian Brooks, former chief legal officer at one of the largest cryptocurrency exchanges in the world.

A report published this week by Law360 discussed Brian Brooks’ move to the OCC and recapped other major fintech developments spanning the first half of 2020. Notable developments covered by the report include Congress’ hearing on the potential of a digital dollar, increased oversight by federal agencies of fraud perpetuated through use of digital currencies, and a growing trend on the state level to increase focus on consumer protection oversight and the development of innovation offices.

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ICO Issuer Charged With Fraud in US, Chinese Police Arrest 27 for PlusToken Fraud

Late last week, a U.S. federal grand jury returned a five-count criminal indictment charging three Canadians in connection with the initial coin offering (ICO) of PlexCoin, a cryptocurrency issued through their company, PlexCorps. According to the indictment, the defendants conspired in 2017 to induce investors to purchase the coin, making numerous false statements on social media and public Internet sites, including that investments could yield a 1,354% return. The ICO allegedly brought in the equivalent of US$8 million, which the government asserts was used, at least in part, to fund the defendants’ living expenses. Also last week, French officials began the process for the trial of Alexander Vinnick, who stands accused of extortion, aggravated money laundering and other crimes in connection with his operation of the exchange BTC-e, closed by law enforcement agencies in 2017.

According to a report released this week by a local Chinese media source, over 100 individuals, including 27 key executives, have been arrested by the Chinese police for their involvement with PlusToken, purportedly one of the largest scams in the cryptocurrency industry. PlusToken launched in 2018 as a South Korea-based cryptocurrency exchange/wallet, offering high investor returns; by May 2019, it reportedly had about 3 million users. Eventually, though, the entire operation was exposed as a scam after millions of users found themselves unable to withdraw funds. Roughly $5 billion was reportedly stolen.

According to a recent report issued by a leading blockchain analytics firm, nearly 900,000 bitcoin is held by Dark Web markets and cybercriminals who stole funds. Note, though, that the total bitcoin in circulating supply is around 18.4 million, and according to the report, only .32% of all current bitcoin transactions and flow are tainted by criminal activity. The report also finds that, historically, the top destination for illicit bitcoin is cryptocurrency exchanges, but that in recent years, these exchanges have strengthened their Know Your Customer and Anti-Money Laundering programs, making it increasingly difficult for criminals to continue to use exchanges to launder stolen funds.

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