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OFAC Announces First Ever Enforcement Action Targeting a Digital Asset Company

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On December 30, 2020, the US Department of the Treasury’s Office of Foreign Assets control (OFAC) announced a $98,380 settlement with BitGo, Inc. (BitGo). This civil settlement, regarding apparent violations of multiple sanctions programs related to digital currency transactions, is the first published OFAC enforcement action against a business in the blockchain industry.

BitGo, based in Palo Alto, California, is an “institutional digital asset custody, trading, and finance” company. The apparent sanctions violations relate to 183 instances in which BitGo failed to prevent individuals and/or entities located in Crimea, Cuba, Iran, Sudan, and Syria from using its non-custodial secure digital wallet management service. All of these jurisdictions were subject to comprehensive embargoes under OFAC regulations during at least part of the time that the transactions occurred. OFAC stated that BitGo had reason to know that users in these comprehensively sanctioned jurisdictions were using its services through Internet Protocol (IP) address data collected for security purposes, and allegedly had failed to implement controls to prevent users in such jurisdictions from accessing its services. (The violations and settlement did not involve enterprise or custodial services provided by BitGo Trust Company, Inc., an affiliate of BitGo, Inc.)

According to OFAC, between approximately March 10, 2015, and December 11, 2019, BitGo processed 183 digital currency transactions totaling $9,127.79 using its hot wallet management service for users in the comprehensively sanctioned jurisdictions who had signed up for hot wallet accounts.

At the time of the violations, BitGo tracked users’ IP addresses for security purposes. However, OFAC asserted that this same information was not also tracked for sanctions compliance purposes. As such, users with IP addresses located in Crimea, Cuba, Iran, Sudan, and Syria were able to create accounts and use BitGo’s digital currency wallet platform, despite BitGo having the ability to identify the location of these users. Moreover, before April 2018, BitGo required only a name and email address for users to open an account and access their services. After April 2018, BitGo also required users to identify the country in which they were located, but relied on customer-provided information and attestation rather than performing additional verification or diligence.

OFAC has previously cited companies for violations based, at least in part, on a failure to implement IP geo-blocking in a number of non-blockchain contexts, including civil settlements involving Amazon and Standard Chartered Bank. Although these settlements did not involve the handling or use of cryptocurrency, they could be viewed as falling under a similar theory of liability – that a US person exported services without authorization to OFAC sanctioned jurisdictions.

OFAC found that BitGo did not voluntarily self-disclose the apparent violations. Even though the circumstances did not constitute an egregious case, OFAC determined that the apparent violations warranted a public resolution and civil penalties. Pursuant to OFAC’s Enforcement Guidelines, OFAC identified two factors that it determined to be aggravating factors. First, BitGo failed to exercise “due caution or care for its sanctions compliance obligations” by not implementing “appropriate, risk-based sanctions compliance controls” to prevent persons in comprehensively sanctioned jurisdictions from opening accounts and using its platform to send digital currencies. Second, OFAC determined that BitGo had reason to know that some of its users were located in comprehensively sanctioned jurisdictions because it had already collected users IP addresses for security purposes.

However, OFAC also found a number of mitigating factors. BitGo is a relatively small company and had not received a penalty notice or Finding of Violation in the five years prior to the date of the earliest transactions subject to the enforcement action. BitGo also hired a Chief Compliance Officer and implemented a new OFAC compliance policy. Lastly, BitGo implemented a number of remedial measures in response to the apparent violations, including, among others, IP address blocking and “email-related restrictions” for sanctioned jurisdictions, screening all of its accounts, including “hot wallet” accounts, against OFAC’s Specially Designated Nationals and Blocked Persons List, and sanctions-related training for certain personnel.

OFAC determined that the statutory maximum civil monetary penalty and the base civil monetary penalty amount applicable in this case are $53,051,675 and $183,000, respectively, but based on the mitigating factors and other considerations that were taken into account, the civil penalty was reduced to $98,380.

Notably, OFAC’s announcement took the opportunity to highlight the importance of having an appropriate compliance program and the sanctions risks associated with providing digital currency services, and emphasized that companies providing such services should take steps to mitigate these risks. OFAC noted that companies that engage in online commerce or transaction processing using digital currency are responsible for ensuring they do not engage in dealings prohibited by OFAC, including “dealings with blocked persons or property, or engaging in prohibited trade or investment-related transactions.”  OFAC states that in order to mitigate these risks, exchangers, administrators, and users of digital currencies “should develop a tailored, risk-based sanctions compliance program.”  While such compliance programs will vary depending on the company’s size and sophistication, products and services offered, customers, and geographic location, they should be based on and incorporate at least five essential components of compliance outlined in OFAC’s A Framework for OFAC Compliance Commitments, including: 1) management commitment; 2) risk assessment; 3) internal controls; 4) testing and auditing; and 5) training. OFAC added that the BitGo enforcement action “emphasizes the importance of implementing technical controls, such as sanctions list screening and IP blocking mechanisms” as one element within the framework.

While this is the first enforcement action against a digital asset company, the US has taken a number of other measures related to digital currency, including banning transactions involving the Venezuelan petro and identifying wallet addresses associated with sanctioned persons. The BitGo enforcement action, coupled with OFAC’s past blockchain-related actions, highlight the importance of digital asset companies having a robust US sanctions compliance program and ensuring such programs are fully and effectively implemented.

Source: https://www.steptoeblockchainblog.com/2021/01/ofac-announces-first-ever-enforcement-action-targeting-a-digital-asset-company/

Blockchain

Aave and Chainlink hit new highs as Bitcoin price fights to hold $32K

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Bitcoin (BTC) price opened the weekend trapped within the $33,500 to $32,000 range but at the time of writing the digital asset is struggling to hold above $32,000. 

A few analysts have warned that the recent price loss of momentum may be a sign of ‘institutional exhaustion’ as selling pressure from Asia has increased since Jan. 19.

Despite Bitcoin’s current downtrend, some institutional investors are sticking to their prediction that BTC price will reach $100,000 before the end of 2021. This suggests that institutions are buoyed by rising investor sentiment and the new proposals for a Bitcoin ETF.

BTC/USDT 4-hour chart. Source: TradingView

While Bitcoin still faces resistance around the $33,000 level, on-chain analyst Willy Woo sees one potentially positive development for BTC. Woo said that the Bitcoin Spent Output Profit Ratio (SOPR), a metric that shows the profit ratio of BTC by dividing the price sold by the price paid, had “a touchdown”.

According to Woo there was a:

“Full on-chain SOPR reset. Coins moving between investors per hour (24h MA) no longer carry profit on average. To push SOPR lower, investors would have to be willing to sell at a loss.”

Bitcoin adjusted SOPR. Source: Glassnode

Woo also suggested that investors are less likely to sell at a loss, an early signal that Bitcoin could be close to finding a bottom.

Altcoins and DeFi tokens soar

DeFi tokens and altcoins continued to forge their own path as Bitcoin searched for support. Polkadot (DOT), AAVE, Curve DAO Token (CRV) and Sushiswap (SUSHI) all rallied roughly 5% to 7%.

The surge in the price of many DeFi-related tokens has in large part been the result of an increase in DEX activity. Data from Dune Analytics shows monthly DEX volumes have increased since July 2020 and currently the total value locked in DeFi is at $23.89 billion.

Monthly DEX volume by project. Source: Dune Analytics

Chainlink (LINK) continued its strong rally, setting a new all-time high at $25.50 and surpassing Litecoin (LTC) in terms of total market cap to become the seventh-largest project listed on CoinMarketCap. Aave price also broke to a new all-time high at $229.39 and the total value locked in the platform is $3.44 billion.

The overall cryptocurrency market cap now stands at $936.8 billion and Bitcoin’s dominance rate is 63.5%.

Source: https://cointelegraph.com/news/aave-and-chainlink-hit-new-highs-as-bitcoin-price-fights-to-hold-32k

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Ultra-rare alien CryptoPunk NFT sells for 605 ETH, or $750,000

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Amid a wild market-wide bullrun for non-fungible tokens (NFTs), an ultra-rare “alien” CryptoPunk has sold today for 605 Ether, worth over $750,000 at today’s prices. 

CryptoPunks are widely considered to be the original NFT project, released even before Cryptokitties, the blockchain-based collectibles project that propelled NFTs to mainstream consciousness. CryptoPunks developers Larva Labs report that Punks have accounted for $26 million in lifetime sales on their native marketplace, and the average sale price for Punks over the past year has been $6,199.

Each Punk has unique attributes, such as background color, accessories, and even some ultra-rare features, such as an “alien” or “zombie” appearance. The Punk that sold today, #2890, is one of nine alien Punks in existence.

The bidding for the Punk was competitive throughout the last week, with DeFi megawallet-turn-Twitter personality 0x_b1 putting in a 500 ETH bid. The Punk was last sold in July of 2017 for 8 ETH, meaning the owner made a 75x return on their investment. 

The new owners are a group of investors that include FlamingoDAO, a “NFT collective that supports and collects premium NFTS,” according to a Flamingo spokesperson. The official FlamingoDAO Twitter handle confirmed the purchase with a meme:

“It’s simple: Cryptopunks is a groundbreaking project; it pre-dated the ERC 721 standard and crypto kitties,” said the spokesperson on the investment thesis. “Aliens are the rarest form of Cryptopunk and we believe that the acquired Alien will be prized by collectors over time and mature into an iconic digital art piece.”

Crypto art collector @gmoneyNFT, who himself dropped 140 ETH on a Punk earlier in the month, thinks that the alien is a fine investment despite the sky-high valuation.

“I think it was a great purchase. As the world moves more digital, the digital “flex” will be more and more important. It’s how humans operate in the physical world. It won’t change in the digital realm,” he said.

Long-derided as a secondary usecase for blockchain, sales like today’s demonstrate that NFTs are just beginning to have their day in the sun. NBA Topshot, a collectible highlight project from Dapper Labs, has proven to be tremendously popular, and Axie Infinity’s native critters have been selling for remarkable prices as of late as well.

Some critics have called into the question the sky-high prices rare NFTs have been fetching, however, arguing that simple digital scarcity is a shaky foundation on which to justify a $750,000 sale. @gmoneyNFT dismisses these criticisms, saying that there are plenty of real-world analogues that make just as much — or as little — sense.

“Why would someone pay millions of dollars for an original Andy Warhol screen print when you can buy the same one online for $20? Why would someone buy a pair of yeezy’s for $300 when you can buy a fake from the same factory, made with the same materials for much less? Humans like to feel special. The provenance has value.”

Source: https://cointelegraph.com/news/ultra-rare-alien-cryptopunk-nft-sells-for-605-eth-or-750-000

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Voyager Token (VGX) gains 926% as mergers and acquisitions bring new users

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Voyager Token (VGX), also known as BQX at some exchanges, is the native token of Voyager cryptocurrency exchange. 

The exchange separates itself from its competitors by claiming to be a commission-free crypto broker platform and its smart order router also allows clients to trade at multiple exchanges.

Since the turn of the year, VGX has gained 620% and on Jan. 15 the token reached a new all-time high at $1.48.

Voyager (BQX) token price at Binance. Source: TradingView

In addition to having a fiat gateway, the platform also offers market data, interactive charts,crypto research and up to 9% interest on stablecoins, along with staking returns for Bitcoin and other cryptocurrencies if users leave them in their exchange wallets.

Token activity sees exponential growth

On-chain data shows that activity started to pick up just a few weeks ago, with the number of daily active addresses surpassing 1,500 while transfers quickly reached $60 million.

VGX daily transfers and unique addresses. Source: etherscan.io

The Invest Voyager app allows traders to earn interest with no lock-ups and users staking a certain quantity of VGX token unlocks higher yields. Furthermore, the platform is owned by a listed company in Canada, Voyager Digital Ltd. (CSE:VYGR), a $600 million market capitalization fully-regulated entity.

The Canada TSX exchange listing deal also hides an interesting story. By acquiring a defunct shell company, Voyager was able to manage a reverse merger in Feb. 2019. More interestingly, not a single USD has been paid for the deal, which involved shares of the new company.

In Oct. 2019, Voyager announced a partnership with Celsius Network to manage a portion of its clients’ assets. Thus, the broker was able to diversify its staking offering.

Another notable milestone was Circle Invest acquisition completed in Feb. 2020, converting more than 40,000 accounts. Circle Invest was previously involved with the USD Coin (USD) stablecoin, besides Poloniex exchange, although both projects had already been divested. It is worth noting that the deal did not involve cash, being settled in Voyager Digital shares.

These developments explain the current uptick in user accounts and token activity and similar to Coinbase, Voyager’s fiat on-ramp and regulated status could make the exchange a top choice for future crypto investors located in the United States.

VGX price growth follows new acquisitions and European expansion

Currently, Voyager exchanges is available to every U.S. state except New York, as the company waits for its BitLicense approval. In October 2020, Voyager Digital acquired France-based LGO, a fully licensed European digital asset exchange focused on institutional investors.

LGO CEO Hugo Renaudin explained that the French company would discontinue its dedicated institutional exchange, while LGO would operate under the Voyager brand, although focusing mostly on retail.

The overall traded volume on Voyager’s platform reached $120 million in Nov. 2020, while its asset under management surpassed $485 million on Jan. 15. To date, more than 200,000 users have downloaded the iOS and Android applications and further expansion into Europe should increase the platform’s user base.

Voyager (VGX) Twitter user activity vs. price (USD). Source: TheTie

Data from TheTIE, an alternative social analytics platform, shows that the recent price spike was preceded by increased social network activity. Apart from a few users complaining of KYC-related withdrawal issues, the general sentiment around Voyager and VGX are positive.

Offering up to 9.5% annualized interest returns on stablecoins and being a fully-licensed broker offering altcoin trading and staking to U.S. citizens seem to be the primary drivers behind the platform’s momentum.

As for the economics behind the VGX token, the possibility of a debit card with cashback rewards, withdrawal fee discount, and interest booster on staking might be needed to drive its valuation further.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Source: https://cointelegraph.com/news/voyager-token-vgx-gains-926-as-mergers-and-acquisitions-bring-new-users

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