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US Government labels Virgil Griffith’s argument to dismiss sanctions charges ‘absurd’

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Lawyers representing the United States government have filed a legal memo opposing the dismissal of charges for Virgil Griffith, a former Ethereum Foundation researcher accused of conspiring to violate U.S. sanctions against the Democratic People’s Republic of Korea, or DPRK.

According to court records filed Nov. 19 in the Southern District of New York, prosecutors’ referred to Griffith’s Oct. 22 argument to dismiss the charges against him as “unavailing.” The legal team is alleging the former Ethereum Foundation researcher provided a service to the DPRK by using an analogy of a U.S. citizen providing nuclear secrets to scientists in the reclusive nation:

“A simple hypothetical lays bare the absurdity of Griffith’s position. By Griffith’s logic, the [North Korea Sanctions Regulations] would permit an American physicist to travel to the DPRK and explain the science behind nuclear weapons to a conference of North Korean physicists, so long as the science could be found on the Internet, he received no fee, and the regime’s desire to build nuclear weapons was not economic in nature.”

The U.S. district court indicted Griffith in January on charges of conspiracy to violate the International Emergency Economic Powers Act following a presentation he made at a North Korean conference in April. The speech allegedly contained information North Korean agents could use to circumvent economic sanctions with cryptocurrency and blockchain technology.

Federal authorities are alleging Griffith knew that the DPRK was specifically interested in methods to get around sanctions using blockchain. They claim Griffith texted an associate, stating he was planning to facilitate the transaction of 1 Ether (ETH) “between North and South Korea,” knowing that it would violate sanctions.

Griffith has argued that his presentation was a “highly general speech based on publicly available information,” that he received no fee for his participation, and the speech had no “economic utility.” Therefore, he claims the charges are without merit and the speech protected under the First Amendment.

However, the legal memo states Griffith admitted he “introduced concepts” on crypto and blockchain to the conference attendees in his interviews with the Federal Bureau of Investigations last May and November, and some North Koreans likely left with a better understanding of how to use the technology to circumvent sanctions.

The case against Griffith is ongoing. He has pleaded not guilty to the charges and is currently free on a $1 million bond.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.