Blockchain Bites: Australia introduces digitally secured statutory declarations, Congress examines cryptos role in tackling illicit finance, Citi pilots tokenisation of private assets, Circle dumps Tron network as IPO approaches, Swoo and Mastercard swoon customers with token-based loyalty program – Fin Tech


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Michael Bacina, Steven Pettigrove, Tim Masters, Jake
Huang, Luke Higgins, Luke Misthos & Kelly Kim of the Piper
Alderman Blockchain Group bring you the latest legal, regulatory
and project updates in Blockchain and Digital
Law.

Australia introduces digitally secured statutory
declarations

Following legislative changes
in November 2023 allowing wider use of electronic signatures and a
digital execution option for Commonwealth statutory
declarations, the government has now formally enabled the
use of myGov to create digital Commonwealth statutory
declarations, using your digital identity in place of a
witness.

What did the new law change?

The
Statutory Declarations Amendment Act 2023
(Act) amends the Statutory Declarations
Act 1959
to expand the ways in which statutory declarations
can be executed under Commonwealth law. These now include:

  1. traditional paper-based execution, requiring wet-ink signatures
    and in person witnessing;

  2. electronic execution, through the application of an electronic
    signature and witnessing via an audio-visual communication link;
    and

  3. digital execution through the use of an approved online
    platform.

All three methods will be an equally valid and legally effective
form of making a Commonwealth statutory declaration. Among them,
the 3rd option means instead of having a witness verify your
identity, you can now use an approved digital identity – the use of
myGov falls under this option.

The government
confirmed that myGov is at present the only approved online
platform that can create a digital statutory declaration. However,
this is unlikely to remain the case forever. If other private,
for-profit, digital execution platforms (e.g DocuSign) also satisfy the prescribed
technical requirements in the Act and the Statutory
Declarations Regulations 2023
(Regulations),
then they may be approved for use as well.

What are some of the technical requirements?

The Act and the Regulations apply strict requirements for fraud
and privacy protections to approved online platforms and digital
service providers. For example:

  • Before they are approved, providers must demonstrate their
    compliance and accreditation under the Commonwealth digital
    identity accreditation framework – the Trusted Digital
    Identity Framework (TDIF) – which contains strict rules and
    standards for usability, accessibility, privacy protection,
    security, risk management, fraud control and more.

  • The Act does not allow an approved online platform to save any
    copies of Commonwealth statutory declarations made using the
    platform.

How to use myGov to sign statutory declarations?

To create a digital Commonwealth statutory declaration without a
witness you must have a digital identity connected to your myGov
account. Your digital identity also needs to be at least standard
digital identity strength.

Once you have created a digital Commonwealth statutory
declaration using myGov,
it will have a QR code. The QR code is encrypted with the
information provided in the declaration. To verify the authenticity
of the declaration, anyone with a paper or digital copy of the
declaration can scan the QR code with the myGov app. The text and
details on the QR code page can then be compared with the
declaration received.

The information displayed through the QR code is not stored on
myGov. Instead, it is saved on the QR code itself. myGov retains
only the additional information (the key) that is used to decode
the information from its encrypted form into readable text.

The important role of Commonwealth statutory
declarations

Commonwealth statutory declarations are an important and
frequently-used tool by Australians – it is a legal document that
contains a written statement about something that the declarant is
asserting to be true.

These documents are used to create reliable statements and
attest to a variety of events for administrative, commercial, civil
and private purposes. It is a criminal offence to intentionally
make a false statement in a Commonwealth statutory declaration,
carrying a maximum penalty of 4 years imprisonment.

Historically, these documents have been strictly paper-based,
requiring them to be witnessed in person and signed in ink.
However, the old rules were time and cost consuming. According to
modelling
undertaken for a 2021 Government consultation process, more than
3.8 million statutory declarations are completed each year by small
and medium enterprises (SMEs) and consumers in Australia. It was
estimated that SMEs and consumers spent around 9 million hours a
year printing and collecting declarations, travelling to authorised
witnesses, discussing and filling out declarations with witnesses,
making copies and submitting completed declarations.

The Attorney-General also provided important numbers around the
time and costs that the Act will save:

Digital statutory declarations could save over $156 million each
year, hundreds of thousands of hours and be a productivity winner
for the private sector.

Conclusion

The Attorney-General expects the reforms to benefit all
Australians seeking a more convenient, and efficient, statutory
declaration process – particularly those in rural, remote or
regional parts of Australia. He also emphasised that the Act is

in line with the Data and Digital Government Strategy we are
committed to embracing digital technologies to improve service
delivery.

Each State and Territory has their own rules on statutory
declarations, so the new Commonwealth Act will not directly apply
to statutory declarations made under these rules. However, it is
possible that States and Territories will follow the lead of the
federal government and reform their own rules in due course.

Written by Steven Pettigrove and Jake Huang

Congress examines crypto’s role in tackling illicit
finance

A
recent session of the House Financial Services Committee delved
into the role of cryptocurrency in illicit finance, seeking
a balanced understanding of its implications for illicit finance
and the broader financial landscape.

Chairman French Hill’s opening remarks encapsulated the need
to address the potential misuse of cryptocurrencies by terrorist
organisations and criminals alike. However, his comments also
underscored the importance of debunking exaggerated claims about
its prevalence in the grand scheme of global money laundering and
terrorism financing:

Just yesterday, here in this room, Under Secretary Nelson
testified that terrorists still prefer to use traditional finance
rather than digital assets.

Just yesterday, here in this room, Under Secretary Nelson
testified that terrorists still prefer to use traditional finance
rather than digital assets.

Just yesterday, here in this room, Under Secretary Nelson
testified that terrorists still prefer to use traditional finance
rather than digital assets.

Users on X were quick to support this comment, noting the
inherent traceability of blockchain-based systems:

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Leading industry players such as TRM Labs, Coinbase, and Circle provided their
insights into complexities surrounding crypto transactions and
blockchain-related crime. The discussion notably emphasised the
importance of contextualising crypto-related crime, acknowledging
blockchains’ unique characteristics compared to traditional
financial systems.

One significant aspect highlighted during the hearing was the
debate around the accountability of various actors within the
crypto ecosystem. While some argued for stricter oversight, others,
like Michael Mosier from Arktouros and a former acting head of
FINCEN,
cautioned against subjecting miners and validators to regulatory
frameworks designed for traditional financial institutions.
Mosier likened their role to that of internet service providers,
advocating for a nuanced approach to their regulation.

A consensus appeared to emerge among lawmakers regarding the
need for
enhanced scrutiny of tools like mixers (such as Tornado Cash),
often associated with illicit activities. However, there was a
notable recognition that the majority of illicit finance still
occurs through centralised exchanges and traditional finance,
rather than decentralised crypto networks.

Some experts pointed to deficiencies in the US Anti-Money
Laundering/Know-Your-Customer (AML/KYC) framework for digital
currencies and the potential of digital identity systems as a
solution.

Carole House, a senior fellow at the Atlantic Council,
underscored the unique risk factors inherent in crypto due to its
quick, borderless nature and lack of intermediaries. These very
features that attract legitimate users also make it susceptible to
exploitation by illicit actors.

Yaya Fanusie, from the Crypto Council for Innovation,
highlighted the dilemma of balancing regulatory measures to curb
illicit activities while preserving the innovative potential of
crypto technologies. He emphasised the importance of a nuanced
approach to regulation that recognizes both the risks and benefits
associated with cryptocurrencies.

Overall, the hearing underscored the need for a multifaceted
understanding of crypto-related crime, acknowledging its
complexities and advocating for a balanced regulatory approach that
also harnesses the benefits of the technology in mitigating illicit
activities.

Written by Luke Higgins and Steven Pettigrove

Citi pilots tokenisation of private assets

Citi, in collaboration with Wellington Management and
WisdomTree, has announced the successful completion of a proof of
concept for tokenising private funds aimed at increasing efficiency
in the $10 trillion private asset market.

The private asset market,
according to Citi’s press release, is complex and manual,
with a lack of standardisation and transparency which causes
inefficient distributions and operations.

Recently, the tokenisation of private assets has gained
significant attention.
Hong Kong’s Securities and Futures Commission has issued
guidance on tokenising traditional financial instruments, while the

UK has proposed a sandbox to test modified regulatory settings
for tokenisation.
Thailand’s Securities and Exchange Commission announced
plans to enable tokenisation to facilitate development in key
sectors.

Citi’s proof of concept, which was completed on the
Avalanche Spruce institutional test Subnet, tokenised a private
equity fund issued by Wellington Management allowing units to be
represented as tokens on a blockchain. The fund’s distributions
were programmed using smart contracts and transferred to WisdomTree
clients using simulated identity credentials.

Market efficiency through deeper liquidity and streamlined
compliance processes appear to be the leading motivation for the
proof of concept. According to Citi Digital Asset’s Emerging
Solutions Lead, Nisha Surendran.

Smart contracts and blockchain technology can enable enhanced
rule-enforcement at an infrastructure-level, allowing data and
workflows to travel with the asset. We believe that by testing the
tokenization of private assets, we are exploring the feasibility to
open-up new operating models and create efficiencies for the
broader market.

The Head of Business Development, Digital Assets at WisdomTree,
Maredith Hannon Sapp stated:

We believe blockchain-enabled finance is the future of the
industry, and This Proof-of-Concept showcases the ability to
explore the transferability of tokenized funds and related
compliance in different markets. This will inform future
in-production use cases of how blockchain technology and smart
contracts can be used in on-chain transactions.

While tokenisation of traditional financial assets has been a
topic of considerable interest in Australia, the Government has
been slow in following peer jurisdictions in exploring the benefits
of tokenisation for traditional markets.

In successfully completing its proof of concept, Citi joins a
number of market leaders like
BlackRock and State Street in exploring the use of blockchain for
tokenising private assets. Citi has
estimated that asset tokenisation in private markets could be a $4
trillion market by the end of the decade. The race is on to
establish fit for purpose regulatory frameworks, standards and
processes to facilitate this future.

Written by Michael Bacina, Steven Pettigrove and Luke
Misthos

Circle dumps Tron network as IPO approaches

Circle, the issuer
of the US dollar-pegged stablecoin USD Coin (USDC), is set to end
support for USDC on the TRON
blockchain. Circle announced its decision via X:

1431290b.jpg

Circle stated that the decision is part of a strategic effort
aimed at ensuring the continued trustworthiness and transparency of
USDC. In its extended
blog post, Circle announced the immediate cessation of USDC
minting on the TRON network.

This move comes amidst Circle’s
filing to go public in the US, highlighting the significance of
its USDC stablecoin and its role in mainstreaming cryptocurrency.
As of this week, USDC boasted a market capitalisation of USD $28
billion (approximately AUD $43 billion) according to CoinMarketCap,
which, as a stablecoin, is second only to Tether (USDT).

While no explicit rationale was provided by Circle for
withdrawing its support of TRON, Circle emphasised its ongoing
evaluation of blockchain network suitability within its risk
management framework. Circle reassured that its commitment to
growing USDC “remains steadfast” and that it aims to
continue expanding USDC’s reach to additional blockchain
networks.

Founder of TRON, Justin Sun, and several of his companies, were
sued by
the SEC in March 2023 for alleged fraud and other securities
law violations. Several high-profile celebrities were also caught
up in the scandal for alleged “illegal touting” of the
native TRX token, including Lindsay Lohan, Akon, Soulja Boy, and
Jake Paul.

Following allegations linking Circle to TRON founder Justin Sun,
Circle
clarified late last year that it had severed its ties with
Sun’s group in February 2023, prior to the SEC action. The
open letter followed claims from the “Campaign for
Accountability” ethics group, that
Circle’s relationship with TRON compromised the integrity of
USDC. The Campaign for Accountability referenced TRON’s
alleged involvement in international regulatory enforcement
actions, concerning significant financial sums and transactions by
alleged organised crime groups and internationally sanctioned
entities.

Since Circle’s recent announcement, Justin Sun has taken to
X to post his thoughts:

1431290c.jpg

Circle’s decision to discontinue USDC support on TRON
reflects the heightened pressure on the crypto industry over
AML/CTF compliance, as its enter tighter integration with
traditional markets. Meanwhile, Circle’s preparations for its
debut in public securities markets would be appear to be continuing
apace.

Written by Luke Higgins and Steven Pettigrove

 

Swoo and Mastercard swoon customers with token-based
loyalty program

Mastercard has recently teamed up with Swoo to offer a cashback
scheme to consumers in the form of ‘Swoo Loyalty Tokens’ on
everyday transactions. Swoo is an all-in-one mobile wallet service
that streamlines digital payments by allowing loyalty cards, crypto
and traditional bank cards to be stored in one place. The company
has 14 million monthly active users in the Middle East, Africa and
South East Asia.

A successful pilot was completed in January, which saw over
17,000 participants increase card spend by 56% and avail
themselves of the 5% ‘Tokenback’ program.

1431290d.jpg

Swoo’s co-founder, Filipp Shubin, announced that the
Mastercard partnership will target:

Emerging countries like Nigeria, Kenya, Philippines and
Indonesia, [where] there are billions of users who have MasterCard
and Visa cards, but don’t have access to Google Pay

And

Countries with big market share of Huawei smartphones, since due
sanctions from the US government, there are no Google services on
top of these phones.

Through the program, consumers will gain loyalty points in
cryptocurrency (Swoo Loyalty Tokens) for every contactless purchase
made via the app with Mastercards. The rewards can be instantly
exchanged to other cryptocurrencies, like Bitcoin or USDT, on the
Swoo app or exchanged for fiat through partner services.

Mastercard has embraced the potential of Web3, with previous
projects like the
Music Pass NFTs in partnership with Polygon to support Web3
musicians and
‘Mastercard Crypto Credential’ to enhance trust for
consumers and businesses transacting using blockchain technology.
Managing director, Denis Filippov, affirmed that the partnership
with Swoo is a further example of Mastercard’s commitment
to:

expanding the possibilities of using digital payment instruments
in order to make the process of payments as convenient,
technologically advanced and safe as possible.

The Swoo partnership is the latest example of increasing
integration of blockchain technology and traditional payment
services. With global payments giants Visa
and Mastercard advancing various Web3 strategies, this gap is
likely to continue to narrow in the coming years. The partnership
is also another example of innovative loyalty schemes using
blockchain based solutions to drive customer loyalty and
engagement.

Written by Kelly Kim and Steven Pettigrove

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