Compliance weekly – 21 February 2022

Why compliance is important in the digital asset industry

In this report we observe and track all relevant events that have unfolded in the compliance and digital asset space during the past seven days.


As BTC circles back to the 39K mark, an interesting piece featured this week that focused on the recent warnings from Canadian officials on freezing of digital assets. The Canadian government, in an attempt to prevent protestors filling the streets of Ottawa, ordered that a crypto fundraiser in support of the protesting action be shut down and all wallets be frozen.

“This court orders that the Mareva Respondents and their servants, employees, agents, assigns, officers, directors and anyone else acting on their behalf or in conjunction with any of them, and any and all persons with notice of this Order, are restrained from directly or indirectly, by any means whatsoever: (a) selling, removing, dissipating, alienating, transferring, assigning, encumbering, or similarly dealing with the assets of the Mareva Respondents listed in Schedule ‘A’; (b) instructing, requesting, counselling, demanding, or encouraging any other person to conduct themselves contrary to paragraph 2(a) above; and (c) facilitating, assisting in, aiding, abetting, or participating in any acts the effect of which is to contrary to paragraph 2(a) above, until final disposition of this action or further Order of this Court,”

As this may not always be possible, especially on self custody projects and DeFi protocols, the following statement was made by Nunchuk after it was ordered by injunction of the Ontario Superior Court to freeze all assets of its wallets:

“Dear Ontario High Court Judge, Nunchuk is a self-defence, collaborative, multi-sig bitcoin wallet … we are a software provider, not a security finance intermediary. Our software is free to use. While protecting privacy, it helps people to eliminate single points of failure and save bitcoin as safely as possible.We do not collect any user identification information beyond email addresses. We have no keys. So: ‘Our users’ assets cannot be disabled. [We] Cannot ‘block transactions’. We do not know the ‘presence, nature, value and location’ of our users assets. See how self-defence and personal keys work. ”

In the US, the Justice Department announced its first Director of National Cryptocurrency Enforcement Team (NCET), Eun Young Choi. The focus of the NCET will be to identify, investigate, support and pursue the department’s cases involving the criminal use of digital assets, with a particular focus on virtual currency exchanges, mixing and tumbling services, infrastructure providers, and other entities that are enabling the misuse of cryptocurrency and related technologies to commit or facilitate criminal activity. As the taxation of virtual assets remains a hot topic, India’s crypto tax currently provides little legal clarity for traders and exchanges as the government recently announced a 30% taxation rate on crypto returns.


Some interesting questions have been raised regarding the possible opportunities and risks associated with NFT’s in the metaverse. Some of these controversial topics include where NFT’s are created by third parties or in collaboration with fashion houses and the information used to create the NFT is incorrect. In some instances this false information may have an impact on the future price, i.e., if they do not hold the patent rights from the beginning, will the NFT actually hold value. Staying with the metaverse, JP Morgan has become the first bank to open in the metaverse and you can now buy plots of land and other crypto purchases.

Binance still remains in the spotlight, but this time it has come under the FCA’s radar who is concerned about the exchange gaining access to the UK’s payment network. The SEC is also investigating trading firms linked to Binance’s Founder and the nature of Zhao’s involvement and whether the relationships were properly disclosed to customers. Other big exchanges and custodians such as Coinbase, Fidelity and Robinhood are backing the US AML group that addresses the AML data sharing requirements as prescribed by FinCEN. The data sharing solution will focus on the ability to identify who’s on the other side of the transfer prior to initiating it and that there’s no centralized storage of personal data.


BlockFi has agreed to pay US$100 million in penalties and pursue registration of its Crypto Lending Product. The largest South Korean Telecommunications Co. has agreed to pay the SEC to settle FCPA charges. KT Corporation (KT Corp.) will pay US$6.3 million to resolve charges that it violated the Foreign Corrupt Practices Act (FCPA) by providing improper payments for the benefit of government officials in Korea and Vietnam. Chainalisis has confirmed that US Agencies have seized more that US$30 million in crypto from the NetWalker ransomware and British authorities have seized NFTs for the first time, in a £1.4 million fraud probe.


The SEC have charged BlockFi, a crypto lending agency, with violating Investment registration provisions.  BlockFi have agreed to pay a penalty of $100M.  Notice to all crypto lending platforms to take heed and consider registration requirements and to Investors, be aware of your lending platforms regulatory status. As is characteristic of entrepreneurs and pioneers operating in this sector, BlockFi have immediately expressed an absolute commitment to working with the regulators to bring their operations into compliance with the Investment Company Act provisions, within the next 60 days. This latest penalty demonstrates a further move towards more regulatory clarity for operators and investors and sets a precedent for crypto lending platforms. This can only be viewed as a positive.


Another busy week in the crypto compliance space makes way for countries attempting to freeze crypto wallets and banks opening in the metaverse. Interesting legal and fashion topics are being discussed in the NFT space and India is still quite not sure how its 30% tax on crypto revenue will work.

If you have any questions about crypto compliance, please feel free to have a look at our services or contact us to set up a free call to discuss your needs.

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