Blockchain Legal Resource

On June 1, 2022, the Department of Justice announced its first criminal indictment for insider trading of nonfungible tokens, or NFTs. The case opens yet another front in the Government’s efforts to police the burgeoning marketplace for digital assets and NFTs.

What Happened: 

On May 16, 2022, the US Department of State, US Department of Treasury, and the Federal Bureau of Investigation issued combined guidance (“IT Workers Advisory”) on efforts by North Korean nationals to secure freelance engagements as remote information technology (“IT”) workers by posing as non-North Korea nationals. The IT Workers Advisory provides employers with detailed information on how North Korean IT workers operate, highlights red flag indicators for companies hiring freelance developers and for freelance and payment platforms to identify these workers, and provides general mitigation measures for companies to better protect against inadvertently engaging these workers or facilitating the operations of the North Korean government in violation of US sanctions.

In one of the first criminal cases brought under US sanctions laws involving cryptocurrency transactions, a federal magistrate judge approved the Department of Justice’s criminal complaint. In the opinion unsealed on May 13, 2022, US Magistrate Judge Zia M. Faruqi ruled that the Department of Justice demonstrated probable cause in accusing an unnamed defendant of transmitting more than $10 million in bitcoin to a “comprehensively sanctioned” country.

On May 4, 2022, California Governor Gavin Newsom signed executive order N-9-22 regarding blockchain and crypto assets, with the objective to “spur responsible web3 innovation, grow jobs, and protect consumers.” According to the accompanying press release, the executive order “aims to create a transparent regulatory and business environment for web3 companies which harmonizes federal and California approaches, balances the benefits and risks to consumers, and incorporates California values such as equity, inclusivity, and environmental protection.”

A small but growing number of employees are asking for cryptocurrency as a form of compensation.  Whether a substitute for wages or as part of an incentive package, offering cryptocurrency as compensation has become a way for some companies to differentiate themselves from others.  In a competitive labor market, this desire to provide innovative forms of compensation is understandable.  But any company thinking about cryptocurrency needs to be aware of the risks involved, including regulatory uncertainties and market volatility.

On February 28, 2022, the Emirate of Dubai enacted Law No. 4 of 2022 on the Regulation of Virtual Assets (“VAL”) and established the Dubai Virtual Assets Regulatory Authority (“VARA”). By establishing a legal framework for businesses related to virtual assets, including crypto assets and non-fungible tokens (NFTs), this landmark law reflects Dubai’s vision to become one of the leading jurisdictions for entrepreneurs and investors of blockchain technology.

Please join Hunton Andrews Kurth LLP for a webinar:

Intellectual Property and the Blockchain, Part 1

Cryptocurrency, NFTs, and Retail:  Protecting Your Brand With Trademarks

Tuesday, April 26, 2022
12:30 pm ET

It is well-known that a trademark is a word, name, symbol, design, or phrase used to identify and distinguish a product or service, and to indicate the source of the product or service. But, do you know whether your cryptocurrency brand may function—or receive protection—as a trademark? Or how you may use your existing retail brand in connection with an NFT?

In this ...

On March 31, 2022, the staff of the Division of Corporation Finance and the Office of the Chief Accountant of the SEC issued Staff Accounting Bulletin (SAB) No. 121 (SAB 121), which “adds interpretive guidance for entities to consider when they have obligations to safeguard crypto-assets held for their platform users.” SAB 121 highlights the enhanced technological, legal and regulatory risks associated with safeguarding digital assets, as compared with more traditional asset classes. Specifically, SAB 121 asserts that a company is subject to “significant increased risks... including an increased risk of financial loss” when that company controls the cryptographic keys associated with a user’s digital assets. As a result, the staff believes that reporting companies should quantify and disclose that obligation, and record a liability and corresponding asset on their balance sheets at fair value.

On March 24, 2022, the US Attorney for the Southern District of New York announced charges against two defendants and alleged an ongoing fraud involving the sale of nonfungible tokens (NFTs). The federal criminal case is among the first involving NFTs and foreshadows further regulatory scrutiny of the popular digital asset class.

Two leading international brands have filed lawsuits in 2022 to prevent the sale of digital NFTs depicting their physical products, and both cases will test existing trademark law and impact online retailers of NFTs.