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Bitcoin Pioneer Jeff Garzik Subpoenaed in $4 Bln Lawsuit Against Craig Wright

Bitcoin core developer Jeff Garzik has been subpoenaed to appear in court in connection with a $4 billion lawsuit against Craig Wright.

Software engineer and Bitcoin (BTC) pioneer Jeff Garzik has been subpoenaed by a United States District Court in connection with the $4 billion lawsuit against Craig Wright, according to a document Garzik posted in a tweet on March 15.

The suit was initially filed last February with the U.S. District Court of the Southern District of Florida, with the family of David Kleiman —  a computer scientist, whom many suspect to have been one of the developers of Bitcoin and blockchain technology — alleging that Wright stole up to 1.1 million BTC after he passed away.

Following Kleiman’s death in 2013, Wright, who proclaimed himself to be Bitcoin creator Satoshi Nakamoto, contacted his estate, allegedly claiming to want to help dispose of the Bitcoin fortune. Kleiman’s family claims that Wright did not return the funds.

The official complaint states that Wright “forged a series of contracts that purported to transfer Dave’s assets to Craig and/or companies controlled by him. Craig backdated these contracts and forged Dave’s signature on them.”

Wright subsequently requested the court to dismiss the lawsuit against him, however the court rejected the request. The court document confirms that “the Court finds that Plaintiffs have sufficiently alleged a claim for conversion.”

Now, the subpoena calls Garzik to appear in court and reveal any evidence to the “personal theory” that Kleiman was Satoshi Nakamoto. The subpoena also requests to provide all communications, agreements and documents related to both Wright and Kleiman.

Additionally, the document asks Garzik to provide information concerning Bitcoin mining for the period between January 1, 2009 and April, 2013, and refers to the search for documents related to Silk Road, Liberty Reserve,  Mt. Gox, and the Prometheus Project.

The subpoena also asks for any communications with financial cryptographer Ian Grigg, CEO of Centre for Strategic Cyberspace + Security Science, Richard Zaluski, and early Bitcoin investor Roger Ver, among others.

Last November, commenting on various hypotheses as to the Bitcoin creator’s identity, Garzik said:

“My personal theory is that it’s [Satoshi Nakamoto] Floridian Dave Kleiman. It matches his coding style, this gentleman was self taught. And the Bitcoin coder was someone who was very, very smart, but not a classically trained software engineer.”

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Blockchain and Crypto Business Reps Protest Nevada Bill

Representatives from blockchain- and crypto-related companies protested a bill in a committee hearing in the Nevada State Senate.

Representatives from the blockchain and cryptocurrency industries voiced their concerns about a bill in the Nevada State Senate in a Judiciary Committee hearing on Tuesday, March 12.

The bill, SB 195, would introduce several uniform standards to the virtual currency industry, and would require crypto-related business like exchanges to register with the state’s Department of Business and Industry.

The Uniform Regulation of Virtual-Currency Businesses Act, sponsored by Democratic senator James Ohrenschall, is an effort put forward by the Uniform Law Commission to introduce consistent regulations for the virtual currency industry.  In the hearing, Ohrenschall states that other iterations of the bill were introduced in state legislatures in Hawaii, Oklahoma and California.

Following an initial explanation of the bill before the committee, representatives from the crypto industry protested the legislation. The Nevada Technology Association (NTA) said that the bill was premature and would put Nevada at a competitive disadvantage as blockchain was still in its nascent stages. The NTA continued that a bill that tried to regulate the rapidly evolving technology in such detail could do more harm than good.

Matt Digesti, vice president of government affairs and strategic initiatives at Blockchains LLC said that no blockchain- or cryptocurrency related businesses were consulted during the bill’s drafting process.

A written statement from Wendy Stolyarov, director of government affairs at blockchain firm Filament, said the law would “unintentionally classify us as a money transmitter because we build hardware wallet technology that enables machine-to-machine autonomous transaction.”

The bill is still in the early stages of its legislative lifecycle, having only been introduced in mid-February. No action was taken on the bill in committee and it has yet to be amended, according to public records.

Early this year, the Associated Press found that some counties in Nevada were issuing marriage licenses on the Ethereum (ETH) blockchain. While the technology purportedly enhances the provenance of such documents, their acceptance reportedly varies across different government agencies.

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SEC Chairman Highlights Investor Protection in Regard to Bitcoin ETF

United States SEC Chairman Jay Clayton said that he is still concerned about the potential for manipulation in the crypto space.

United States Securities and Exchanges Commission (SEC) Chairman Jay Clayton is still concerned about investor protection when it comes to the commission approving a Bitcoin (BTC) Exchange-Traded Fund (ETF). The SEC chairman spoke about crypto in an interview with FOX Business on March 14.

In the interview, Clayton claimed to be neutral toward digital currencies, saying that he is not a spokesperson against the asset. The SEC chairman explained that he is concerned with the potential for manipulation associated with the space, and wants to guarantee investor protection:

“What I’m concerned about at the moment is if it can be reasonably demonstrated that the underlying trading is generally not manipulated, it’s happening on reliable venues with good rules and that custody is something we can feel comfortable about.”

While Clayton declined to comment on any specific Bitcoin ETF application, he still noted that there “may be a case where a Bitcoin ETF could satisfy our rules.” The chairman elaborated:

“I think this technology has and is already demonstrating pretty significant promise, but it’s demonstrating significant promise in the places where it’s consistent with our approach to capital raising in the past.”

Recently, the SEC announced it will soon start the countdown period to approve or disapprove the VanEck/SolidX Bitcoin ETF. After withdrawing the ETF application due to the U.S. government shutdown in late January, the Chicago Board Options Exchange (CBOE) re-submitted the application a week later.

Earlier this week, Jay Clayton confirmed his previous statement that Ethereum (ETH) and similar cryptocurrencies are not securities under U.S. law. However, Clayton stipulated that he meant that a digital asset’s definition as a security can change over time.

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Russia Adopts Digital Rights Law That ‘Forms the Basis’ of Digital Economy Development

The State Duma approved the new legislative changes, which focus on how digital rights can be exercised and transferred.

Russia’s parliament, the State Duma, has voted to enact new digital rights legislation in October this year, according to a press release on the Duma’s official website on March 12.

The changes to Russia’s civil codex passed their third and final Duma reading on Tuesday. The law reportedly establishes the concept of “digital rights” in Russian legislation with the addition of a new article, 141.1, of the Civil Code of the Russian Federation.

The law determines how digital rights can be exercised and transferred, as well establishes rules for digital transactions, including contracts.

The press release quotes the Chairman of the State Duma, Vyacheslav Volodin, as stating that the digital rights law “forms the basis for the development of the digital economy. This is a new area for our rights, thus it is important for us to consolidate the basic concepts.”

Commenting on how the legal landscape will look in Russia after October, Aleksandr Zhuravlev, a senior partner at a Moscow-based legal firm, told Russian-language crypto news outlet Forklog that while imperfections remained, the country’s approach was notably better than some others.

“Of course the current project has flaws […] that could lead to ambiguity in some areas: determining the legal nature of cryptocurrencies and mining, as well as several other aspects (digital financial asset inheritance etc.),” he told Forklog, adding:

“However, it’s worth noting that Russia has not gone down the route of China or India, which have selected a prohibitive approach to digital assets.”

The decision follows a lengthy debate over how to treat digital currencies as they pertain to civil property rights, with legislative proceedings in the form of a draft bill on crypto — titled “On Digital Financial Assets” — seeing multiple delays and missed deadlines.

As Cointelegraph reported, the Duma passed the crypto bill during a second of three readings earlier this month. This week, the head of the Duma’s committee on financial markets, Anatoly Aksakov, told Russian news agency RNS that he expects that the crypto bill will be adopted by the end of March.

Prior to that, Russia’s president, Vladimir Putin, had issued comments expressing a desire to enact cryptocurrency regulation by July.

China has issued a de facto ban on cryptocurrency use, despite the fact that holding digital assets in the country remains technically legal. India’s central bank banned banks from servicing cryptocurrency businesses, such as exchanges, in July 2018.

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Client Demand for Crypto Payments Needs Cautious Response From Lawyers, Expert Says

The trend may mean lawyers must move with the times, but risks remain, says one legal source.

Cryptocurrency payments are a topic of increasing interest for United States lawyers following a recent conference panel, Bloomberg Law reported on March 11.

Referencing participants in the 18th Annual Legal Malpractice & Risk Management (LMRM) Conference, which ran from March 5-7 in Chicago, the publication noted the prevalence of cryptocurrency payments in the legal profession, stemming from client demand.

As the cryptocurrency industry and markets mature, more clients are asking to use digital assets for payment.

Doing so can nonetheless yield mixed results, experts advised, with upfront bill payments differing from retainers, which remain in segregated funds for long periods.

“Cryptocurrency does not fit with the model for trust funds — lawyers should not accept cryptocurrency as trust money,” Matthew K. Roskoski, deputy general counsel for Latham & Watkins, who joined the LMRM panel, summarized.

Continuing, Roskoski highlighted the risks, but suggested dealing with initial coin offerings (ICOs) constituted another level of difficulty for legal professionals.

“Working in ICO space [sic] is subject to risk and a liability scheme we have no track record in,” he said, adding:

“[But] there’s real money to be made there so people don’t want to wash their hands of it entirely.”

As Cointelegraph reported, the U.S. in particular continues to languish in a gray area regarding the acceptance of cryptocurrency as payment.

Ongoing state-by-state differences, as well as the changeable nature of the regulatory landscape, have meant interaction with tokens themselves can be a headache for prospective investors.

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Russia: Central Bank Suggests Limiting Sale of Crypto Assets for ‘Unqualified Investors’

The Central Bank of Russia has suggested that the parliament set a yearly limit of $9,100 for crypto assets transactions performed by “unqualified investors.”

The Central Bank of Russia wants to set an annual limit for so-called “unqualified investors” that want to purchase digital assets, local business media giant RBC reported on Tuesday, March 12.

According to the documents obtained by RBC, the bank wants to amend the current draft crypto bill, dubbed “On Digital Financial Assets,” which recently passed a second of three readings in Russia’s parliament, the State Duma.

The central bank’s paper recommends equating investor limits to the ones set in a draft bill on crowdfunding, which is also being reviewed by the Russian parliament. The head of the State Duma’s committee on financial markets Anatoly Aksakov told RBC that the threshold will likely be established at around 600,000 rubles (about $9,100) per year — the same as the yearly investment limit in crowdfunding projects.

If the parliament passes the bill with the central bank’s current recommendations, unqualified investors will still be able to purchase and digital assets that were issued within the country, the report notes. Moreover, investors will be allowed to sell or purchase such tokens without intermediaries.

The Central Bank of Russia considers an investor “unqualified” if they have less than a one year minimum of investment experience. In order to be considered a qualified investor, one needs to obtain a qualification certificate — given they meet the minimum individual investment time requirements — or have at least two years of work experience in a company that is considered a qualified investor by the state.

As per RBC, the government also wants to establish requirements for financial intermediaries involved in crypto asset trading. According to the current version of the draft, banks, depositories and stock exchanges will be obliged to track all crypto transactions and reveal the amounts traded by unqualified investors to other counterparties, institutions or government bodies, if necessary.

The bill “On Digital Financial Assets,” which was initially approved in a first reading by the State Duma back in May, has raised a major discussion within Russian legal discourse. Its second reading was repeatedly postponed by legislators.

In February, Russian President Vladimir Putin set a deadline for the government to adopt regulations for the digital assets industry, urging MPs to adopt the bill during the spring session of 2019.

More recently, Aksakov told Russian news agency RNS that the crypto bill reaching the final stages before being put into law. The chairman of the financial committee expects that the bill will be adopted by the end of March.

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German Gov’t Hearing Takes Regulators to Task for Lack of Legal Framework on Blockchain

During a recent hearing, German regulators and lawmakers have been accused of failing to create a workable legal framework that would foster blockchain adoption in the country.

German regulators and lawmakers have thus far failed to create a workable legal framework that would provide legal certainty for applications of blockchain technology, representatives from the country’s Free Democratic Party (FDP) have argued.

An FDP proposal, entitled “Creating a Sustainable Framework for Distributed Ledger Technology in the Financial Market,” was put forward during a public hearing held by the Bundestag’s Finance Committee on March 11.

The hearing gathered regulators, entrepreneurs, legal experts and others to respond to the FDP’s proposal, which argued for the importance of creating a legal and regulatory climate that would be conducive to the development of blockchain applications across the economy and public sector.

The proposal notably affirmed the positive potential of cryptocurrencies and initial coin offerings as a “flexible financing alternative for for small and medium-sized enterprises.”

Characterizing blockchain as a “technology of the future,” the FDP’s proposal argued that a lack of legal clarity is hampering blockchain adoption and innovation, noting that:

“The potential of blockchain technology can only be realized if there is legal certainty for its application and a workable legal framework for its use. The Federal Financial Supervisory Authority (BaFin) and the Federal Ministry of Finance have so far failed to develop competencies and make the necessary legal adjustments.”

At the hearing, Oliver Fußwinkel, from BaFin’s Financial Technologies Innovations Unit, responded that his engagement with blockchain dates back to its connection with Bitcoin (BTC) in 2011, and argued that the regulator has since developed structures to keep pace with innovation.

Other speakers provided more nuance to the FDP’s argument, with Ralph Baerliga — from consultancy firm BearingPoint Inc. — expressing doubt as to whether laws specific to blockchain would be beneficial, proposing that a “particular technology should not be hindered or preferred by law.”

Eric Romba — from law firm Lindenpartners — affirmed that while blockchain-specific legislation may not be necessary, there is a nonetheless a great need to provide more legal certainty for the blockchain space, isolating taxation as a particular concern.

Martin Fries, lecturer at the Law Faculty of the Ludwig Maximilians University Munich, for his part focused on the need to address the “considerable tensions” between blockchain technology and the General Data Protection Regulation (GDPR) — a European Union-wide legal framework for personal data privacy, which took effect in May 2018.

As reported yesterday, a press release ahead of the hearing — drafted by the Union parties’ finance spokesperson Antje Tillmann and her colleague Matthias Hauer — proposed that more robust legal frameworks would help prevent a further brain drain of blockchain talent from Germany.

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US State of Colorado Passes Crypto Exemptions Bill Into Law

The governor of Colorado, Jared S. Polis has signed the “Colorado Digital Token Act” into law.

The governor of the State of Colorado, Jared S. Polis has signed the “Colorado Digital Token Act” into law, according to a document published on March 6.

The act — which was initially proposed in January and sponsored at the state Senate level by Republican Jack Tate and Democrat Steve Fenberg — provides limited exemptions for securities registration and traders, as well as salesperson licensing requirements for persons dealing in digital tokens.

The bill identifies a “digital token” as “a digital unit with specified characteristics, secured through a decentralized ledger or database, exchangeable for goods or services, and capable of being traded or transferred between persons without an intermediary or custodian of value.”

A previous bill that would govern blockchain tokens was voted down in the Colorado state Senate last May. The bill defined an “open blockchain token” and exempted certain open blockchain tokens from being defined as a security. Some members of the private sector were disappointed with the outcome, wherein Venture capitalist and blockchain investor David Gold said:

“This is an opportunity for Colorado to say, ‘Look, we’re going to provide an environment that provides clarity for the sector. That doesn’t mean charlatans can violate security laws.’ Those who oppose it simply don’t understand it.”

Earlier this month, Senator Jack Tate (R), together with representatives Jeni James Arndt (D) and Marc Catlin (R), filed a bill that tasks the Colorado Water Institute at Colorado State University with studying the potential implementation of blockchain to manage a database of water rights.

In February, Cointelegraph reported that two blockchain-related bills had been passed in the U.S. state of Wyoming. Both bills — one pertaining to the tokenization of assets and the other relating to depositories serving blockchain businesses — were introduced in January this year and will come into effect later in 2019.

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CFTC Requires Trading Platform to Pay $990K for Illegal Bitcoin-Related Transactions

The U.S. Commodity Futures Trading commission fined a Marshall Islands-based startup and its owner for illegally trading with U.S. customers.

The United States Commodity Futures Trading Commission (CFTC) has announced Monday, March 11, that international securities dealer 1pool Ltd. and its CEO Patrick Brunner must pay a total of $990,000 for illicit Bitcoin (BTC) transactions with U.S. customers.

The Marshall Islands-based startup, which was offering BTC-funded security-based swaps, and its owner have been fined for illegally offering BTC-margined retail commodity transactions to U.S. investors. Moreover, the CFTC states that 1pool Ltd. failed to register as a futures commission merchant and did not comply with the required Anti-Money Laundering (AML) procedures.

The CFTC imposed a civil penalty of $175,000, while also obliging 1pool Ltd. to reimburse $246,000 of gains. Moreover, the company has to return approximately 93 BTC, valued by the CFTC at approximately $570,000, to all known U.S. customers.

CFTC Director of Enforcement James McDonald has additionally warned intermediaries that the watchdog will hold them accountable in case they fail to comply with licensing requirements and U.S. trading policies.

As Cointelegraph previously reported, the U.S. Securities and Exchange Commission (SEC) and Federal Bureau of Investigation (FBI) were also involved in prosecution.

During the investigation an undercover FBI agent purchased security-based swaps on the Marshall-based platform from the U.S., though he did not comply with the discretionary investment thresholds required by the U.S. securities laws. According to SEC, the users could also open accounts on the platform with their email address and a user name only, without providing additional information, which does not comply with U.S. customer identification regulations.

The two parallel actions were filed by CFTC and SEC in September 2018. The chairman of CFTC Christopher Giancarlo explained that the CFTC charged the portion of the activity involving derivatives, the SEC charged the portion relating to equities, and the Department of Justice and the FBI secured an order to seize platform’s website and shut it down.

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German Blockchain Strategy Should Include Framework for Crypto Trading, Say Politicians

German parliamentary speakers have argued that the country’s blockchain strategy should include an appropriate legal framework for cryptocurrency trading and token issuance.

German parliamentary speakers have argued that the country’s blockchain strategy should include an appropriate legal framework for cryptocurrency trading and token issuance that would encourage the sector’s domestic development.

The suggestion was put forward by the Union parties’ finance spokesperson Antje Tillmann and her colleague Matthias Hauer at a public hearing initiated by the Bundestag’s Finance Committee on March 11.

The hearing was exclusively devoted to the opportunities that blockchain technology can offer to Germany as a financial and business hub. It centered on the current and desired state of blockchain development in the country and the federal government’s initiatives in the sector to date.

In their remarks, Tillman and Hauer emphasized that while still in its early stages, blockchain is poised to make a significant and constructive impact as a base technology for national digitization strategies across multiple fields, and that the foundations for its future implementation should therefore be laid today.

While commending the German federal government’s promotion of blockchain pilot projects across applications such as electromobility, electricity trading and at the Federal Office for Migration and Refugees, Tillman and Hauer argued that efforts to ensure that Germany can compete globally should be stepped up:

“…there has been an increasing outflow of promising [blockchain] startups to European and non-European countries for some time now. Financing rounds based on blockchain technology (so-called initial coin offerings [ICOs]) are meanwhile taking place almost exclusively abroad.”

The lawmakerse proposed that, in order to remain at the forefront of innovation and prevent a further brain drain of blockchain talent, the German government’s blockchain strategy should encompass an appropriate legal framework that would set clear terms for cryptocurrency and token trading:

“The potential of blockchain technology can only be fully realized if there is legal certainty and potential risks are mitigated. The goal must be to retain the entire added value of this promising technology in Germany and to develop our country into a pioneer of the blockchain economy. “

As Cointelegraph reported earlier this month, Germany’s finance ministry has just published a paper on the treatment and regulation of blockchain-based securities, which exempted most token issuance from federal security laws but nonetheless highlighted the risks that ICOs may pose for investors.

Also this month, Germany’s justice and finance ministries proposed to launch a state-run register to regulate the blockchain sector and protect investors from possible abuses.

A nationwide blockchain strategy from the German government is expected to be introduced by mid-2019.