Developments in Future of Money

Our biweekly survey of notable happenings in the world of digital assets

The United States Treasury

Compiled by the Oliver Wyman Forum

US sanctions against a crypto mixer provoke a debate in decentralized finance (DeFi) while a number of traditional and digital financial institutions launch new initiatives in crypto-assets.

Legal Briefs

Tornado Cash Sanctions Stir Up a Storm in DeFi

The US government’s move to sanction cryptocurrency mixer Tornado Cash for alleged money laundering could serve as a test case of authorities’ ability to impose penalties on decentralized finance (DeFi) protocols. It was Treasury’s second move this year against a mixer, which pools funds from multiple parties to enhance privacy around their transactions.

On August 8, the US Treasury’s Office of Foreign Assets Control alleged that Tornado Cash was used to launder more than $7 billion worth of virtual currency since it was founded in 2019, including more than $455 million of cryptocurrency stolen by North Korean hacking groups in 2019 and $96 million stolen earlier this year from a so-called bridge for exchanging cryptocurrencies run by the US firm Harmony.  The sanctions blocked all property of Tornado Cash in the United States or controlled by US persons, as well as any entities controlled by such persons.

A number of cryptocurrency platforms reportedly complied with the sanctions and blocked addresses linked to Tornado Cash from transacting, but several industry executives said the government had overreached in sanctioning a DeFi software protocol and could invite legal challenges.

US Requests Examiner to Investigate Celsius Bankruptcy

The US Department of Justice office that oversees the administration of bankruptcy cases is seeking the appointment of an independent examiner to investigate the bankruptcy of Celsius Network, the crypto lending business. “There is no real understanding among customers, parties in interest, and the public as to the type or actual value of crypto held by the Debtors or where it is held,” the US Trustee claimed in a bankruptcy court filing on August 18. It said an investigation was needed to ensure public confidence in the bankruptcy system and “neutralize the inherent distrust” creditors have in the company.

Separately, Caisse de Depot et Placement du Quebec revealed on August 17 that it had written off a $150 million investment it made in Celsius last year and will no longer invest in crypto firms. "We were interested in seizing the potential of blockchain technology, but clearly things did not go as expected," said Charles Edmond, chief executive of the $300 billion pension fund.

FDIC Orders Five Crypto Firms to Cease Misleading Statements

The US Federal Deposit Insurance Corp. on August 19 ordered cryptocurrency exchange FTX US and four other firms to stop making false and misleading statements.

The agency sent the firms cease-and-desist letters claiming their websites and social media accounts had suggested certain crypto-related products or stocks held in brokerage accounts were FDIC insured. It noted insurance covers only depositors at FDIC-insured banks.

FTX US President Brett Harrison deleted a tweet in response to the letter and FTX Chief Executive Sam Bankman-Fried tweeted that “FTX does not have FDIC insurance.” The FDIC sent similar letters to,,, and

Policy Front

Fed Gives Banks Guidance on Crypto-asset Activities

Banks considering engaging in crypto-asset activities should give prior notification to the Federal Reserve and make sure the proposed activities are legally permitted, the US central bank announced in a supervisory guidance letter on August 16. Banks also need to ensure they have adequate systems, risk management, and controls in place to address a variety of issues, including operational and cyber risks, and compliance with anti-money laundering and other requirements, it said.

Banks already engaging in crypto-asset activities should notify the Fed promptly if they haven’t already done so, the letter said.

In a speech on August 17, Fed Governor Michelle Bowman acknowledged significant consumer demand for crypto services and said banks would like to offer such services to stem outflows of deposits to crypto-asset firms, but institutions first need to carefully consider the risks to the bank and its customers. “The recent turmoil in the digital-asset industry only underscores that point,” she said.

SEC Proposes Crypto Reporting Rule for Hedge Funds

The US Securities and Exchange Commission and Commodity Futures Trading Commission are proposing amending rules to require hedge funds to report their digital asset holdings. The proposal, released on August 10, also aims to define digital assets as assets that are issued using distributed ledger or blockchain technology, including but not limited to virtual currencies, coins, and tokens, commonly referred to as “crypto assets.”

The proposal seeks to update Form PF, which was adopted in the wake of the 2008-2009 financial crisis to enable regulators to monitor potential systemic risks in the private funds industry. SEC Chairman Gary Gensler said the changes would help regulators keep up with the growth and complexity of the industry, which has seen its assets expand by nearly 150% since the rule was first adopted in 2011.

The proposal cited an industry estimate that approximately a fifth of hedge funds were investing in crypto assets in 2021, with an average exposure of 3% of assets under management.

Fed Offers an Opening to Cryptocurrency Firms

The US Federal Reserve on August 15 approved new guidelines to evaluate financial firms’ requests to open accounts with the central bank, potentially opening the door for cryptocurrency firms and fintechs to obtain such accounts.

Cryptocurrency custody banks and trade associations were among a variety of financial institutions that reached out to the Fed during a comment period to support transparent and consistent criteria for obtaining so-called master accounts, which provide access to Fed payments services. The new guidelines adopt a tiered framework, with firms engaging in novel activities required to undergo more extensive reviews.

Business Moves

Asset Managers Place Fresh Bets on Digital Assets

Big-name money managers are expanding into digital assets, finding new ways to monetize investor interest even as trading volumes and prices for Bitcoin and other cryptocurrencies have slumped, the Financial Times reported on August 12. The paper cited a move by UK fund manager Abrdn to buy a stake in the regulated UK crypto exchange Archax and the launch by brokerage Charles Schwab of an exchange-traded fund giving investors exposure to cryptocurrencies without actually buying them.

BlackRock Launches Bitcoin Trust

BlackRock on August 11 announced the launch of a private Bitcoin trust for US institutional clients designed to track the performance of the cryptocurrency. The world’s largest asset management firm said it was seeing substantial interest in digital assets from some clients, notwithstanding the market’s sharp downturn this year. 

The firm, which one week earlier struck a partnership with Coinbase on digital asset services, said it was focusing its work on four areas of potential benefit for clients: permissioned blockchains, stablecoins, cryptoassets, and tokenization.

Revolut, Win European Approvals

Revolut, the European digital bank, said on August 12 that it won authorization from the Cyprus Securities and Exchange Commission to offer cryptocurrency services services across the European Economic Area. It is the first crypto company to obtain an approval from the Cyprus regulator., the Singapore-based digital asset exchange, announced on August 17 that it had received regulatory approval from the UK’s Financial Conduct Authority to provide products and services to UK customers.

Dapper Labs Drafts Mahomes to Promote NFL NFTs

Dapper Labs, a company specializing in sports-themed non-fungible tokens (NFTs), teamed up with Kansas City Chiefs quarterback Patrick Mahomes on August 18 to promote its collection of NFTs based on video highlights of US National Football League plays. The company will offer a free Mahomes NFT to users who sign up for its new NFL All Day marketplace, just as it did with the Brooklyn Nets’ Kevin Durant when it launched its NBA Hot Shot series in 2021.

Crime Beat

Illicit Activity Falls Despite Rise in DeFi Thefts

Illicit cryptocurrency transactions have gained market share this year even as overall volume has declined, blockchain data specialist Chainalysis reported on August 16. Illicit activity through July was running 15% below the same last year compared with a 36% decline for legitimate transactions.

In contrast to the overall trend, the amount of money stolen in cryptocurrency hacks rose by more than 50% to $1.9 billion, led by a rise in theft from DeFi protocols. The firm estimated that North Korean-affiliated groups have stolen about $1 billion this year from DeFi entities.