Recent Trends in Virtual Currency Regulation, Enforcement, and Litigation

21 May 2018
Dr. Sharon Brown-Hruska, et. al.

Virtual currency regulatory guidance and legal actions in the US have developed at a breakneck pace through 2017 and into the first part of 2018. As virtual currency market capitalizations rose dramatically, regulatory framework governing the industry developed just as rapidly. In "Recent Trends in Virtual Currency Regulation, Enforcement, and Litigation,” NERA Managing Director Dr. Sharon Brown-Hruska and Consultant Trevor Wagener review over 70 enforcement and private actions to report on the overall state of virtual currency regulation as of early 2018. The authors provide an overview of the industry’s evolving regulatory frameworks, identify fraud allegations, BSA/AML violations, and other regulatory compliance failures.

Major findings from the report include the following:

  • Despite private actions connected to virtual currencies being primarily securities class actions, unique features of digital currency raise distinct issues;
  • More than half of the 46 total virtual currency enforcement actions have been brought since 1 July 2017;
  • Financial penalties imposed in resolved enforcement actions have yet to show any strong patterns;
  • Noteworthy civil litigation of virtual currencies is a recent trend, with 23 of 25 NERA-identified cases brought since July 2017;
  • Of 25 the civil cases, 16 lawsuits alleged securities violations, 11 alleged fraud or misappropriation, and eight alleged negligence or breach/rescission of contract; and
  • States vary in their treatment of virtual currency regulation, from the specific licensing framework in New York to broad state regulation exemptions.