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The Long Arm of Justice: How Far Can the DoJ Really Go in Prosecuting Foreign Actors?

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In early October, the U.S. Department of Justice revealed its Cryptocurrency Enforcement Framework, a report laying bare the government’s vision for emerging threats and enforcement strategies in the cryptocurrency space. The document is an important source of insight into how the laws governing digital finance will be soon implemented on the ground.

One of the fundamental principles that the government asserts in the document is its broad extraterritorial jurisdiction over foreign-based actors who use virtual assets in ways that harm U.S. residents or businesses. The guidance sets an extremely low bar for perpetrators of cross-border crime to clear before they face prosecution.

According to the framework, it can be enough for a crypto transaction to “touch financial, data storage, or other computer systems within the United States” to provoke enforcement action. Is the stringency of this approach unprecedented across other domains of financial crimes enforcement? What actual tools does the U.S. government have to counter criminals acting from overseas?

Business as usual

The idea that U.S. law enforcement is justified in prosecuting criminal actors beyond the nation’s borders if their activity has adversely affected individuals, companies, or infrastructure at home is nothing new, especially when it comes to cyber and financial crimes.

Arlo Devlin-Brown, a partner in the white-collar practice of law firm Covington & Burling, commented to Cointelegraph:

“The DOJ has consistently taken the position that U.S. criminal jurisdiction extends to activity with minimal ties to the U.S., and U.S. courts have in many cases embraced the DOJ’s expansive interpretation of its authority. Cryptocurrency businesses that operate outside the U.S. but have any ties to this country — bank accounts, customers, marketing activity — are at risk of enforcement action.”

Dan Newcomb, attorney at law firm Shearman & Sterling, said that there is nothing particularly extraordinary about the extraterritorial approach enshrined in the Cryptocurrency Enforcement Guidelines, as the DoJ has previously used a “wide variety of tools to hold foreign-based actors responsible for crimes punishable under U.S. law.”

The authors of the report note that the U.S. has used anti-money laundering measures against foreign actors dealing in fiat currencies for decades. Asserting similar jurisdiction over those who use digital currencies appears to be a defensible extension of the principle already at work.

Not new for crypto, either

The U.S. government has, on many occasions, gone after foreign persons and entities implicated in cryptocurrency-related crimes. Gail Fuller, a vice president at K2 Intelligence Financial Integrity Network, said that she considers the extensive extraterritorial jurisdiction asserted in the DoJ framework as “broadly consistent with the overall U.S. financial crimes compliance regime,” which is designed to protect the integrity of the U.S. financial system. Fuller commented:

“We’ve seen U.S. enforcement actions for sanctions violations and money laundering that have targeted foreign individuals or entities in cases in which their transactions touched the United States or its banks. In fact, we’ve already seen it in the cryptocurrency context, including with the 2017 indictment of foreign cryptocurrency exchange BTC-e and its Russian executive, Alexander Vinnik.”

In Fuller’s view, the BTC-e case is particularly interesting because on top of money laundering charges, the Department of Justice charged the exchange platform with failing to register as a money services provider in the United States, based on the volume of U.S.-connected transactions it facilitated.

James Farrell, deputy general counsel at trading solutions provider Apifiny, sees the enforcement guidelines as the reminder to the crypto industry about something that has been well-known to the traditional finance for over a decade: If an act of financial misconduct has a substantial effect in the U.S., the SEC and DoJ can and will go after those responsible. “Stating that a single U.S. server is enough just highlights how thin a reed the DOJ needs to assert jurisdiction,” Farrell added.

To Farrell, the novel – and striking – part of the report is invocation of “protective jurisdiction” – effectively worldwide criminal enforcement power – if the DOJ believes that the activity involving crypto may have national security implications. Farrell said:

“You see this concept enshrined in international treaties related to the taking of hostages, terrorist bombings and financing of terrorism. To hear that the same basis may be applied to the cryptocurrency industry was jarring and a marker of how seriously the DOJ is taking potential criminal misuse of this transformative and developing technology.”

Enforcement tools at DoJ’s service

Proclaiming jurisdiction over persons and entities that may be physically located thousands of miles away from U.S. shores is merely a symbolic move if there are no actual means for holding them accountable. U.S. law enforcement, however, commands quite an arsenal.

One heavy weapon is the degree of control that the United States’ financial authorities exercise over the traditional global monetary system. Shearman & Sterling’s Dan Newcomb observed to Cointelegraph:

“The key enforcement tool the U.S. has is the dominant role the U.S. dollar plays in international commerce and the fear conventional financial institutions have of being excluded from U.S. dollar transactions. Most holders of digital assets still need and want to convert those assets at some point into conventional currencies at financial institutions. Barring a digital player from access to conventional financial institutions is a powerful tool.”

Covington & Burling’s Devlin-Brown said that the Justice Department can rely on a number of powerful statutes that can be used to prosecute foreign-based cryptocurrency actors:

“For example, the U.S. money laundering statute can reach almost any dollar-denominated transaction that U.S. authorities can establish as linked to many types of criminal activity. Even a dollar-denominated payment from, say, Germany to Argentina is covered because the transaction would likely involve a U.S. bank as an intermediary.”

Michael Yaeger, a white-collar crime attorney at law firm Carlton Fields and formerly an assistant U.S. attorney for the Eastern District of New York, told Cointelegraph that the DoJ report does not reveal any new instruments for prosecuting foreign-based actors. However, Yaeger noted, the collection of past cases showcased in the document provides “useful examples of its powers, and perhaps signals which instruments will be used more in the future.”

One thing that caught Yaeger’s eye is the fact that the report seems to mention forfeiture efforts more than past DoJ reports on cyber crime:

“When forfeiture is combined with pre-judgment seizure of assets it is not only a powerful remedy, but an unusually fast one. The US has multiple cooperation agreements with other countries including data sharing agreements with foreign law enforcement and intelligence agencies, and has entered specific agreements related to forfeiture and the sharing of financial information.”

There is little doubt that the government is poised to leverage these and other international agreements in enacting its newly itemized enforcement strategy. Promoting cooperation with foreign governments and intergovernmental organizations like the FATF is listed among the crypto framework’s focal points.

The DoJ framework’s language on extraterritorial jurisdiction and cross-border enforcement may sound harsh to some. Yet, in fact the government is not articulating any principles dramatically different from those that are already being invoked in some high-profile crypto-related cases. Stating that these standards will be applied more systematically is only logical considering the expansion and maturation of the borderless realm of digital finance.

Source: https://cointelegraph.com/news/the-long-arm-of-justice-how-far-can-the-doj-really-go-in-prosecuting-foreign-actors

Blockchain

1 Million ETH Gets Locked up in Ethereum 2.0

Over $600 million is now staked on the world’s most-used blockchain, just days after its ‘beacon chain’ launched.

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A million ETH have found their way to the smart contracts of Ethereum 2.0, four days after the protocol successfully launched its beacon chain, as per on-chain explorer service Etherscan.

The amount is currently worth over $600 million and would reward stakers in the future when other phases are launched and the staked amounts open up for withdrawals. However, the annual yields on these staked funds remain unspecified as of today.

The locked up ETH is part of Ethereum’s multiphase move towards a proof-of-stake protocol, away from its current proof-of-work design. Such a shift would allow Ethereum to become a faster, low fee, and more scalable blockchain.

The much-awaited staking launch was initially met by a poor response, with only 50,000 ETH coming in the first week and 3,200 ETH of that coming from Ethereum’s creator, Vitalik Buterin, himself. But the Ethereum army piled on in the last few days before the December 1 deadline, pushing the deposits over the minimum required 524,000 ETH. This did, however, require some help from whales: Celsius Network, a lending protocol, claimed to fork up 25,000 ETH towards the Ethereum 2.0 cause, along with other large token holders and crypto funds.

As of today, the staked funds are 116% higher than the network required, as per on-chain analytics firm Dune Analytics. The amount consists of a total of 3,028 depositors, who staked a minimum of 32 ETH each (although the presence of pooling services like Stakefish may mean the number of depositors was higher).

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Bitcoin Price to Hit $36,000 in 2021: Kraken Crypto Sentiment Survey

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From what happened in the last couple of weeks, it appears that the crypto bull market is upon us. Bitcoin has been consistent with its volatility-induced rallies, and this is infusing confidence in investors.

So much, so that VIP clients in Kraken’s latest Crypto Sentiment Survey say that BTC will skyrocket to about $36,000 in 2021. They also feel that ETH could revisit its previous highs of $1500.

Bitcoin And ETH To Trade At Average Prices Of $15K and $549 By 2020 End

The latest Kraken Crypto Sentiment Survey covers investor sentiment for the second half of 2020. The exchange had already conducted a similar survey back in March this year. But then investors were way more optimistic about BTC and ETH price growth by December.

Now, the same respondents have retracted their bullish calls for bitcoin and ether (ETH) this year. According to the latest numbers,

The average bitcoin price target among 309 responses fell -35% surveyover-survey to $14,866, well below February’s average of $22,866. The median price target also retraced -28% from $19,424 to $14,000, and the most commonly cited price target was $15,000, down -25% from $20,000.

With respect to ether (ETH), the average price target among 289 responses was $549, off -32% from the previous survey’s average of $810. The median price target was unchanged at $500 and the most frequently cited price target was $500, up +66% from $300.

At 72 percent, traders and investors (down from 81 percent when the survey was conducted in March) comprised a majority of the survey responses. 18 percent of responses came from Institutions (broker, custodian, family office, hedge fund, lender, market maker, private equity firm, proprietary trading firm, or venture capitalist).

And the rest 4 percent – from crypto service providers (ATM, exchange, lender, payment processor) and miners. As compared to March, the researchers at Kraken anticipated a lower price growth optimism from the said respondents since the year is so close to its end.

The Outlook For 2021 Remains Super Bullish

When asked about how they see bitcoin and ether prices in the next year, respondents didn’t shy away from expressing their mega bullish calls. Survey participants called for an average bitcoin price target of $36,602 in 2021. Some put the median bitcoin price target at $25,000, but a lot of folks (approximately 61 percent) felt if not anything else, BTC will at least hit $20,000.

A small section of respondents reported hopium-induced ultra bullish calls.

Approximately, 8% of respondents provided a price target greater-than-or-equal-to $100,000, roughly 20% of respondents reported a price target greater-than-or-equal-to $50,000…

Survey participants were very optimistic about ETH’s outlook as well in the next year. This sentiment came from the discussions around Ethereum’s network upgrade and the growing popularity of the DeFi ecosystem. Respondents think ETH will trade at an average price of $1454 in 2021. Also, at the same time:

Close to 59% believe that ether will, at least, hit $800. Additionally, 22% of respondents see ether surpassing its previous all-time high of $1,595 set in early-January 2018 and just under 92% see ether, at the very least, trading higher than current price in 2021.

What becomes evident from the aforementioned numbers is that participants in a price prediction survey tend to project bullish figures for a longer-term.

Will Bitcoin(BTC) and ether (ETH) hit the above price targets in 2021? That still remains to be seen.

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Source: https://cryptopotato.com/bitcoin-price-to-hit-36000-in-2021-kraken-crypto-sentiment-survey/

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Bluzelle Launches Second Swarm of Duty Validator Program as Mainnet Looms

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Distributed database service Bluzelle has released details of its second validator program, Swarm of Duty II. The sequel to the maiden testnet, which ran in July, will provide developers, token-holders, and validators the chance to put Bluzelle through its paces and see what the network is capable of.

“Kicking the tires” of blockchain networks has become something of an event in crypto circles, as the incentives for participating in testnet events are ramped up. Whereas in the past, early supporters would interact with a project’s testnet because they were tech-minded and passionate about seeing it succeed, today’s crypto communities can participate out of enthusiasm or for more mercenary reasons.

From Bluzelle’s perspective, its team wants to spur as much engagement as possible, to stress test the network before the mainnet launch occurs. As CryptoPotato reported earlier, the project has also managed to enter Polkadot’s ecosystem.

Calling All Validators

More than 200 validators participated in Bluzelle’s first Swarm of Duty event over the summer. Bluzelle has structured its testnet events like military exercises, pitting different army factions against one another. Each of the groups participating in the event has different duties to perform, which sometimes conflict with those of other units. This is deliberate to determine how the network performs under adversarial conditions.

At the top of the pecking order are Special Forces (Tier 3), reserved for hardcore Bluzelle DevOps and developers who know the protocol inside out and are heavily invested in its success. Then comes the Armory (Tier 2), made up of validators who are experienced at running blockchain nodes and in earning fees for maintaining the network’s consensus rules. Finally, there is the Infantry (Tier 1), comprising end-users who wish to run their own node using their own hardware or cloud servers.

An Almighty Battle With Prizes at Stake

Bluzelle has devised an array of tasks for each of the groups participating in Swarm of Duty II to complete. For example, its Special Forces have been tasked with providing oracle price feeds by connecting to external data sources via API.

Oracles are crucial in enabling blockchains to execute smart contracts based on the outcome of real-world events, ranging from sports results to the weather.

Ultimately, Bluzelle is seeking feedback and suggestions of all kinds from its community on matters ranging from technical infrastructure to UX. As a result, it’s created an open category for creative ideas that will help to improve the network in every conceivable way. Swarm of Duty II is expected to be the final incentivized testnet before Bluzelle releases its mainnet. At that point, its 10,000 TPS blockchain will be rolled out to dApp developers.

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Source: https://cryptopotato.com/bluzelle-launches-second-swarm-of-duty-validator-program-as-mainnet-looms/

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