Authors: Michael Bacina, Louisa Xu, Tom Skevington
Michael Bacina, Tom Skevington and Louisa Xu of the Piper Alderman Blockchain Group bring you the latest legal, regulatory and project updates in Blockchain and Digital Law.
Another CHESS replacement delay at the ASX
The ASX has confirmed in a June 30 announcement that it has decided to officially delay the rollout of its DLT replacement for CHESS until April 2022, one full year behind the initial target launch date.
Despite the delay, the ASX identified the following milestones which have been reached since it’s previous timeline update in March 2020:
- The CHESS replacement application and the distributed ledger have been successfully deployed to several ASX technology environments across multiple data centres;
- A seventh software drop has been deployed on schedule into the customer development environment (CDE), which represents 89% of the core clearing and settlement functionality used by customers;
- Thirty-four organisations have connected to the CDE, including software providers, brokers and share registries.
Tax Time: The most wonderful time of the year?
With the 2020 financial year behind us and the 2021 financial year looming, now is the time that digital asset users, businesses and advisers ought to be considering the preparation of their tax returns, and making sure they’ve accurately reported their digital currency related activity.
Taxpayers ought to be particularly aware of their obligations this year, following the ATO’s forewarned crypto-crackdown in March 2020, which involved more than 350,000 letters being sent to Australian taxpayers identified by the ATO’s data matching protocol as being associated with digital currency activity. The ATO warning letters closely resemble the American IRS 6174 and 6174-A letters, and follow the Joint Chiefs of Global Tax Enforcement’s bid to tackle cryptocurrency and cybercrime-related risks.
Australian PM considers importance of Blockchain during COVID
On 15 June 2020 the Prime Minister of Australia, the Hon Scott Morrison, announced that he is bringing the existing Deregulation Taskforce into the Department of the Prime Minister as part of the Job Maker Program with a substantially increased potential of adopting blockchain for Regtech and business efficiency.
The Prime Minister said:
“COVID has shown that our laws have not kept pace with digital technology when it comes to business communications. For example, by requiring businesses to use paper for storing information instead of using electronic delivery or adopting new technologies such as Blockchain … Today I am announcing that I am bringing the deregulation taskforce into my own hands into my own department… as part of the Job Maker agenda”
In a statement released on the same date, the Federal Government has identified one of the priorities of the Deregulation Taskforce as modernising business communications.
Trash to treasure: Garbage PailKids NFTs sell out in 28 hours
Taking nostalgia value to a whole new level, after announcing plans to launch Non-Fungible Tokens (NFTs) representing the iconic (and awesome) GarbagePailKids (GPK) trading cards, WAX Exchange sold 12,000 GPK Card Packs containing 110,000 cards to collectors in just 28 hours in May.
The NFTs for GPK, a Topps brand, were launched on the WAX Blockchain this month. There were in total 12,000 packs containing 110,000 cards. The GPK cards continue to be traded (currently at a premium) on various secondary marketplaces like SimpleMarket.io. Word on the street is that a new release is coming soon, so stay tuned.
WAX exchange was initially built on Ethereum, but WAX notes that:
“We soon realised this was not sustainable for us. With the high fees and low speeds we could not run our trading platform where hundreds of thousands of digital items (called NFTs or non-fungible tokens) would be traded.”
Ultimately, this led to WAX exchange transitioning to its own WAX Blockchain to avoid congestion issues.
Security Token liquidity: Are we there yet? Are we there yet? When are we going to get there?
For the last few years, the potential for security tokens to disrupt traditional financial markets has been a beacon of hope to blockchain enthusiasts and investors and a mantra chanted at many blockchain conferences.
Of course, the prospect of tokenising conventionally illiquid assets, so as to make those assets accessible and tradeable with minimal transaction costs, virtually no minimum investments, and everywhere at anytime is a tantalising prospect. To date, those hopes have yet to crystallise at scale.
Among countless theories as to why, Brian Farber, General Counsel at Securitize, recently published his thoughts summarising the four key reasons why he believes that security token liquidity has failed to meet expectations to date, including:
- Security Tokens are inherently different to cryptocurrencies;
- Information asymmetry prevents effective valuation;
- Security Token marketplaces are young, and not designed optimally; and
- Blockchain is both a blessing and a curse.
Chainalysis expands services to cover zcash and dash
Blockchain analysis company Chainalysis has expanded its Reactor and Know Your Transaction (KYT) service offerings to cover multiple additional digital assets, including Algorand, and (in)famous privacy tokens zcash and dash.
In its announcement, Chainalysis suggests that privacy coins such as zcash and dash are not as private as most users might expect. In particular, Chainalysis claims that:
The two cryptocurrencies’ [zcash and dash] privacy features – both in how they’re built as well as how they’re used in the real world – leave room for investigators and compliance professionals to investigate suspicious or illicit activity and maintain compliance,
Chainalysis’s blog post unpacks the above further, and includes an explanation of how Chainalysis can undermine the privacy features of each asset. For Dash, Chainalysis identifies that as a fork of Bitcoin, Dash’s inherent structural similarity to Bitcoin allows the techniques that Chainalysis uses on CoinJoin bitcoin mixers can be applied to work on dash. Further, Dash’s key privacy feature ‘PrivateSend‘ is only used by a minority of its users.
