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January 22, 2021

Cryptocurrent Affairs of State | NYPD’s Approach to Crypto Crimes | Livecoin is Dead | CBDC Update | FinCEN Rulemaking on Pause


  • On the Blog: Cryptocurrency Under the Biden Treasury
  • NYPD Publishes Policy Document Regarding Tools to Tackle Crypto Crimes
  • Russia’s Livecoin Shuts Down After $3.3M Loss to Users 
  • Central Bank Digital Currency News Round-Up
  • Quick Read: Proposed Virtual Currency Rule Proposals Frozen by Biden Administration


On the Blog: Biden’s Treasury Pick Plans to Encourage Legitimate Use of Crypto, Curtail Criminal Use

During her confirmation hearing on January 19, Janet Yellen, President Joe Biden’s pick for Secretary of the Treasury, stated cryptocurrencies are “a particular concern” when it comes to terrorism and criminal financing.  While the comment had initially elicited apprehension among the crypto community, Yellen later clarified that “it [is] important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system.” She also added that she believes “the United States must be a leader in the digital asset and financial technology areas.”

This isn’t the first-time government and business leaders have inadvertently spread the common misconception that crypto = criminal. In our research, only 0.17% of funds received by exchanges in 2019 came directly from criminal sources. Read our analysis, and learn why when it comes to criminal usage, crypto is actually less of an offender than cash:


NYPD Policy Document Shows How They Solve Crypto Crimes

The New York Police Department released a six-page policy document that outlines how they use cryptocurrency transaction analysis tools when solving cryptocurrency-related crimes. Previously, the NYPD had noted the use of unnamed “approved vendors” when deploying cryptocurrency analytics, but the New York City Council passed a bill in June 2020 that requires the NYPD provide details on any technology they use, whether it be cryptocurrency analytics, drones, or facial recognition.

The document conveys that the use of these analysis tools is done in accordance with the United States Constitution and the New York State Constitution.

Why it Matters:

Though the NYPD policy document does not disclose information about the types of crimes investigated using the transaction analysis software, the department has issued public warnings about the dangers of phone scams involving bitcoin payments. SIM card swapping has been particularly damaging to victims, with millions lost due to stolen identity. The best way users can protect themselves from such thefts is to store their cryptocurrency in a hardware wallet and save their private keys in a secure location where they will not be misplaced.

Read more in The Block:


Livecoin Shuts Down After Suffering Huge Losses

Russian crypto exchange Livecoin announced that they will be shutting down after being the victim of what they characterized as “a carefully planned attack” in December 2020. This specific attack led to users losing a total of $3.3 million.

According to The Block, “Livecoin users lost 106 bitcoin (BTC), 380 ether (ETH), 236 bitcoin cash (BCH), 567,000 XRP, 66.8 million DOGE, 56,000 Tether (USDT), and some other ERC-20 tokens.” Livecoin has told its users to contact them via email to receive their payments after going through a verification process. However, they are only accepting payment claims for the next two months, ending on March 17, 2021, and there is little information available about how much value remains after the attack.

Why it Matters: 

Russia is still the “wild west” of the crypto world. Lack of crypto-friendly laws and consumer protections in the country mean Livecoin victims may be hard pressed to recover their lost funds.

Read more in The Block:


China Enters Next Phase of CBDC Development

Blockchain Service Network (BSN), the Chinese government’s blockchain research and development company responsible for supporting the rollout of a myriad of blockchain initiatives, announced the launch of the next phase of China’s CBDC. BSN aims to build a universal digital payment network (UDPN) in five years, and expects to launch a beta-test version of the UDPN later this year.


Ecuadorian Presidential Candidate Favors Crypto

Geovanni Andrade, the President of the Ecuadorian-Chilean Chamber of Mining and current Ecuadorian Presidential candidate, announced that he was in favor of developing a national digital currency should he win the election. He believes a CBDC would make it much easier for people to transact within the country and to audit these transactions. Although Andrade is losing political support for his candidacy, his statement marks the first time the idea of a national digital currency has been proposed in Ecuador.


Only 40 Countries Have Clear Legal Pathway to CBDC Issuance, Says IMF

There have been many countries jumping on the CBDC bandwagon, but the International Monetary Fund (IMF) recently stated that only 40 member-countries have legal structures in place allowing them to deploy CBDCs. According to reporting from The Daily Hodl, “The IMF estimates that ‘80% of the world’s central banks are either not allowed to issue a digital currency under their existing laws, or the legal framework is not clear.'” In addition, the IMF said that if a country chooses to provide a digital currency, every citizen in that country should be given the ability to easily access it. The IMF reiterated that there remain many people around the globe who lack access to the devices needed to use digital currencies and reminded governments that they cannot force citizens to use CBDCs.

Why it Matters:

The jury is still out on the ultimate impact CBDCs will have on the global economy. China’s digital payment networks rollout across countries participating in its expansive Belt and Road initiative will add to the country’s global influence. The development of CBDCs by different countries at varying rates poses questions about global adoption and interoperability. Additionally, the IMF’s reminder that many countries lack the legal structures to allow for CBDCs poses another hurdle.


Quick Read: FinCEN’s Wallet Rule On Ice

The Biden administration, which took control of the executive branch of the U.S. government on Wednesday, declared a freeze on agency rule-making, which could include recent proposed changes to lowering travel rule thresholds and new recording and reporting requirements for cryptocurrency transactions to unhosted wallets. However, the freeze is only temporary, pending review by a department or agency head appointed or designated by President Biden.

Notably, there is an exception to this freeze for “financial, or national security matters,” as permitted by the Director of the Office of Management and Budget (OMB). It is still unclear if these proposed crypto rules would be included under this exception. All other rules changes that have already been published in the Federal Register but have not yet taken effect—including notices of proposed rulemaking (NPRMs)— should be postponed for 60 days and opened to a new 30-day comment period for further evaluation. 

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