15 June 202216 minute read

Blockchain and Digital Assets News and Trends - June 2022

Achieving Digital Transformation and Securing Digital Assets

This is our sixth monthly bulletin for 2022, aiming to help companies identify important and significant legal developments governing the use and acceptance of blockchain technology, smart contracts and digital assets.

While the use cases for blockchain technology are vast, this bulletin will be primarily on the use of blockchain and or smart contracts in the financial services sector. With respect to digital assets, we have organized our approach to this topic by discussing it in terms of traditional asset type or function (although the types and functions may overlap), that is, digital assets as:

  • Securities
  • Virtual currencies
  • Commodities
  • Deposits, accounts, intangibles
  • Negotiable instruments
  • Electronic chattel paper
  • Digitized assets

In addition to reporting on the law and regulation governing blockchain, smart contracts and digital assets, this bulletin will discuss the legal developments supporting the infrastructure and ecosystems that enable the use and acceptance of these new technologies.


Responsible Financial Innovation Act, the new proposed crypto regulation bill, provides some clarity on tax issues

By Tom Geraghty and Kali McGuire

On June 7, 2022, Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced a highly anticipated bill, the Responsible Financial Innovation Act, which would if enacted establish a regulatory framework for digital assets and cryptocurrency.  Also included in the bill are a number of tax provisions that have been generating attention and support from various stakeholders.  The proposed tax provisions would, if enacted, address at least a few of the industry’s largest complaints. Learn more.


Digital assets

Bipartisan Responsible Financial Innovation Act introduced as framework for digital assets. On June 7, US Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) announced the introduction of the Responsible Financial Innovation Act, proposed bi-partisan legislation that would create "a complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust consumer protections while integrating digital assets into existing law." (Tax aspects of the bill are discussed in this issue’s Insight article, above.) According to the press release, the Act "creates regulatory clarity for agencies charged with supervising digital asset markets, provides a strong, tailored regulatory framework for stablecoins, and integrates digital assets into our existing tax and banking laws." Among other things, the proposed bill’s key provisions seek to clarify when a digital asset should be deemed a security or a commodity; grant the US Commodity Futures Trading Commission (CFTC) specific oversight of digital asset trading and related markets; regulate stablecoin issuers; mandate the creation of a digital asset self-regulatory agency overseen by the CFTC and the SEC; and expand SEC oversight authority by requiring periodic disclosures from ancillary asset issuers whose initial token sale constitutes an investment contract until the issuer demonstrates that it is decentralized.

DOC issues request for comment on crypto framework. On May 19, the US Department of Commerce (DOC) published in the Federal Register a request for comment on Developing a Framework on Competitiveness of Digital Asset Technologies, asking a series of 17 questions on digital assets that cover the topics of competitiveness, comparisons to "traditional" financial services and financial inclusion considerations, and technological development. Comments must be received by 5 pm July 5.

DOJ issues report on international cooperation to pursue digital asset crimes. On June 3, the US Department of Justice (DOJ) issued a Report of the Attorney General Pursuant to Section 8(b)(iv) f Executive Order 14067: How to Strengthen International Law Enforcement Cooperation for Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets. Issued in response to President Biden's Executive Order on digital assets, the report calls for greater interagency and international coordination to combat crime in the world of digital assets and cryptocurrencies. The report focuses on cooperation with foreign law enforcement agencies and the development of consistent international standards to address the cross-border nature of digital asset and cryptocurrency transactions and technologies. It "recommends expanding [US] operational and capacity building efforts with international partners; increasing information sharing, coordination, and deconfliction; and closing regulatory gaps across jurisdictions."

Virtual currency

CFPB issues warning on improper use of FDIC name. On May 17, the Consumer Financial Protection Bureau released an enforcement memorandum that addresses prohibited practices related to claims of Federal Deposit Insurance Corporation (FDIC) insurance. The memorandum focused on such practices by stablecoin issuers.

DOT announces results of G7 meeting. On May 20, the US Department of the Treasury (DOT) issued a press release announcing the results of the recent meeting of the G7 finance ministers and Central Bank governors, and the heads of the International Monetary Fund (IMF), World Bank Group, Organisation for Economic Cooperation and Development (OECD), and Financial Stability Board (FSB). The communique noted a commitment to deepen multilateral economic cooperation, including to "address the tax challenges arising from globalisation and the digitalisation of the economy" and the "opportunities and implication of Central Bank Digital Currencies (CBDCs) and the potential role in cross-border payment transactions. The communique further supported the work of the FSB to monitor and address financial stability risks arising from crypto-assets, and "urges the FSB, in close coordination with international standard-setters, to advance the swift development and implementation of consistent and comprehensive regulation of crypto-asset issuers and service providers, with a view to holding crypto-assets, including stablecoins, to the same standards as the rest of the financial system."

FTC reports more than $1 billion in losses due to cryptocurrency scams. On June 3, the US Federal Trade Commission (FTC) announced that consumers reported losing over $1 billion to fraud involving cryptocurrencies from January 2021 through March 2022, with most losses resulting from bogus cryptocurrency investment opportunities. Other schemes included romance scams and business or government impersonation scams, often originating on or operating through social media channels.


CFTC commissioner discusses crypto regulation and customer protections. On May 31, the CFTC announced that, during a May 24 interview with CNBC and Yahoo! Finance  at the Blockchain Summit, CFTC Commissioner Caroline D. Pham said that regulation is needed to prevent shadow banking in the crypto space.  She also discussed regulation on stablecoins and consumer protection. Pham affirmed that regulation is needed to protect retail customers and noted that the CFTC monitors and surveys crypto markets constantly to bring any necessary enforcement actions.

CFTC and SEC commissioners call for public roundtables with SEC on crypto. In an op-ed published by The Hill on May 26, CFTC Commissioner Pham and SEC Commissioner Hester M. Peirce called for greater cooperation among regulators and the industry to achieve “strong, effective, pragmatic crypto regulation.”  As a first step to achieve this, the commissioners said, "We are calling on our agencies to hold a joint set of public roundtables to evaluate recent market events and risks, and to discuss how to regulate crypto responsibly.” These roundtables, they said, “would be open to the public, and panelists would include crypto users, investor and customer advocates, industry members, and other regulators.”  The ultimate goal of the roundtables “would be to assess whether new regulations are necessary to protect the public and the markets, how existing regulations might be modernized to better account for innovation, and how technology is likely to reshape our markets.”


Virtual currency

NYDFS issues regulatory guidance on stablecoins. On June 8, New York State Department of Financial Services (DFS) Superintendent Adrienne A. Harris announced new DFS Regulatory Guidance on the issuance of US dollar-backed stablecoins. The guidance purportedly sets foundational criteria for US dollar-backed stablecoins issued by DFS-regulated entities, which includes stablecoin backing and redeemability, reserve requirements, and independent audits.

NY AG issues alert on cryptocurrency investment risks. On June 2, New York Attorney General Letitia James issued an investor alert to remind New Yorkers of "the dangerous risks of investing in cryptocurrencies after the market reached record lows last month and investors lost hundreds of billions” and asserting that "[c]ryptocurrencies are subject to extreme and unpredictably high price swings that make them among the most high-risk investments on the market." The alert highlights the following risk factors: (1) highly speculative and unpredictable value; (2) difficulty cashing out investments; (3) higher transaction costs; (4) unstable “stablecoins”; (5) hidden trading costs; (6) conflicts of interest, and (7) limited oversight.

Digital assets

California DFPI seeks public comment on oversight of crypto. On June 1, the California Department of Financial Protection and Innovation (DFPI) announced the issuance of an invitation for comments on crypto asset-related financial products and services under the California consumer financial protection law. The DFPI seeks input from stakeholders and the public in developing guidance and, as appropriate, regulatory clarity and supervision of covered persons and service providers involved in the offering and provision of crypto asset-related financial products and services in California. Specifically, the DFPI seeks comments on regulatory priorities, California Consumer Financial Protection Law (CCFPL) regulation and supervision, and market-monitoring functions. The DFPI will then proceed with rulemaking. The deadline for comments is August 5.




Former employee of NFT marketplace charged in digital asset insider trading scheme. On June 1, the US Department of Justice (DOJ) announced the unsealing of an indictment charging Nathaniel Chastain, a former product manager at Ozone Networks, Inc. d/b/a OpenSea, with wire fraud and money laundering in connection with a scheme to commit insider trading in non-fungible tokens (NFTs) by using confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain. Chastain is charged with one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison.

Virtual currency

Federal court finds probable cause that US citizen violated OFAC sanctions. On May 13, the US District Court for the District of Columbia issued a Memorandum Opinion, In re: Criminal Complaint, 2022 WL 1573361, (USDC Distr. Of Columbia, May 13, 2022), against a US citizen finding probable cause to believe the US citizen conspired to violate the International Emergency Economic Powers Act (IEEPA) and defraud the US in violation of 18 USC §371, through operation of an online payments and remittances platform in a sanctioned country using virtual currency. The platform advertised its services as designed to evade US sanctions, including through purportedly untraceable virtual currency transactions. The US citizen transmitted over $10 million in bitcoin between the US and the sanctioned country for the platform's customers. The order concluded that OFAC sanctions apply to virtual currency and that virtual currency is traceable. The Court stated, “The question is no longer whether virtual currency is here to stay (i.e., FUD) but instead whether fiat currency regulations will keep pace with frictionless and transparent payments on the blockchain.” Further, the "instant complaint demonstrates that the civil liability is not the ceiling. The Department of Justice can and will criminally prosecute individuals and entities for failure to comply with OFAC's regulations, including as to virtual currency." The docket in this case remains under seal as of this writing.

DOJ charges CEO of cryptocurrency and forex trading platform with fraud. On May 12, the DOJ announced the unsealing of a complaint in Manhattan federal court charging Eddy Alexandre, the leader of a purported cryptocurrency and forex trading platform called EminiFX, with commodities fraud and wire fraud offenses. As alleged, Alexandre solicited more than $59 million in investments from hundreds of individual investors after making false representations in connection with the EminiFX trading platform which did not exist. Alexandre is charged with one count of commodities fraud and one count of wire fraud, which carries a maximum sentence of 20 years in prison.


CFTC charges Oregon and Illinois residents and Florida company in $44 million digital asset and commodity futures fraud. On May 19, the CFTC announced that it filed a civil enforcement action against Sam Ikkurty, Ravishankar Avadhanam, and Jafia LLC for fraudulently soliciting participation interest in an income fund that invested in digital assets and other instruments. The complaint alleges that the defendants solicited more than $44 million from at least 170 individuals to purchase, hold and trade digital assets, commodities, derivatives, swaps, and commodity futures contracts. According to the complaint, the defendants did not invest the pooled funds as represented and instead transferred the funds to other accounts under their control and for their sole benefit. The CFTC seeks restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.



Class action lawsuit alleges DAO is a partnership and partners are liable for losses. On May 2, Sarcuni et al vs. bZx DAO et al, Case No. 3:22-cv-00618-BEN-DEB, a putative class action lawsuit, was filed in the Southern District of California alleging that a decentralized autonomous organization (DAO) constitutes a general partnership, thus making the partners jointly and severally responsible to the class action plaintiffs who were the victims of a hack. The complaint alleges that the plaintiffs deposited $1.6 million in cryptocurrency with a protocol known as bZx, and a bZx developer negligently fell for a phishing scam which permitted access to the plaintiffs' cryptocurrency account passphrases. The defendants include the co-founders of the bZx protocol and members of, and investors in, the bZx DAO.  The complaint seeks class certification, compensatory and punitive damages, and attorneys' fees. Notably, this approach differs from the SEC’s Investigative Report into one DAO, in which it stated for that particular DAO, “Investments in The DAO were made pseudonymously (such that the real-world identities of investors are not apparent), and there was great dispersion among those individuals and/or entities who were invested in The DAO and thousands of individuals and/or entities that traded DAO Tokens in the secondary market – an arrangement that bears little resemblance to that of a genuine general partnership.”


Merger of largest trade associations for blockchain and digital assets. On May 25, the Global Blockchain Business Council and Global Digital Finance announced the merger of their organizations. According to the press release, the combined association will have nearly 500 institutional members and 178 ambassadors, operating across 95 jurisdictions and disciplines.


Satellites, blockchain and ESG – a marriage made in heaven? Perhaps the biggest issue facing corporations and government today is verification of ESG initiatives. While reporting on the governance and social elements of ESG can usually be satisfied by company and external reporting, measuring environmental impact is far more challenging. Recently, interest has surged in satellite and blockchain in the ESG space. This is partly due to investor and stakeholder pressure for verifiable environmental metrics to substantiate green initiatives. [Read more]

Japan introduces legal framework for stablecoins. On June 2, the Japanese parliament reportedly passed a bill which established a legal framework for stablecoins. The framework requires, in part, that issuers guarantee the stablecoins are linked to the yen or another fiat currency and holders of the stablecoins have the right to redeem them at face value. The framework becomes effective in a year.


DLA Piper ranked in 2022 Chambers USADLA Piper is pleased to announce that the firm's FinTech Legal Blockchain & Cryptocurrencies practice has been ranked nationwide by the prestigious legal publisher Chambers and Partners. Overall, the firm received 107 practice rankings and 218 individual lawyer rankings in the Chambers USA 2022 edition.

DLA Piper ranked in The Legal 500.  DLA Piper’s FinTech practice has been ranked Tier 2 nationwide in The Legal 500 United States 2022 guide.  The publication ranks Margo Tank, US Co-Chair of the Financial Services sector and co-chair of the Financial Regulation and Technology group,  as a "Leading Lawyer." Overall, the firm received 52 practice rankings and 42 individual lawyer rankings in this edition.


Cryptocurrency and Digital Asset Regulation, published by the American Bar Association and co-edited by Deborah Meshulam and Michael Fluhr, including chapters by Meshulam and Fluhr and by Margo H.K. Tank and Andrew Grant.


Money laundering in trading works of art – US Treasury report addresses NFT marketplaces

Exploring the metaverse: What laws will apply?

Shyft Network Federation’s due diligence attestation verifications to be carried out via DLA Piper using digital asset creation engine TOKO

Is blockchain the key to a more ESG-compliant supply chain?

English court remedies when cryptocurrencies are misappropriated

SFC and Hong Kong Monetary Authority Joint Circular on intermediaries' virtual asset-related activities


Listen to our podcast, Crypto Savvy Bringing a Token to Life, featuring HashKey Group, which discusses TOKO and its tech. The podcast is now available on Spotify, Apple and Google Podcasts. Feel free to check out more on LinkedIn.

Listen to our podcast, Understanding the Bitcoin Phenomenon - Insights from a Crypto Native, featuring Dan Held, Director of Growth Marketing at the cryptocurrency exchange Kraken.

Michael Fluhr is featured on “Hsu Untied” podcast.


Learn more about our Blockchain and Digital Assets practice by contacting any of our editors:

Margo H.K. Tank

Mark Radcliffe

Liz Caires

Martin Bartlam

Guy E. Flynn

Contributors to this Issue

Tom Geraghty

Andrew W. Grant

Kali McGuire

The editors send their thanks and appreciation to Marc Aronson for his contributions to this and prior issues.