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Bitcoin after Brexit: Safe Haven or Harbinger of Future Distress?

What a difference a week can make! On June 17, 2016, bitcoin was trading at more than $750. Five days later, as polls showed the Brexit vote leaning heavily to “remain,” bitcoin dropped as low as $585. After the vote to leave the European Union became final, the British Pound, the Euro, the Chinese Yuan, and global stocks dropped precipitously. Bitcoin, on the other hand, spiked to more than $676. Could this mean bitcoin is being perceived as a new safe-haven asset?

A Brief Background on Bitcoin Generally

Bitcoin often is described as a “digital currency.” On a more technical level, bitcoin is a digital asset within a peer-to-peer computer network payment system created in 2008 by an anonymous cryptographer going by the pseudonym Satoshi Nakamoto. Because the computer network uses open-source, peer-to-peer software, no truly central authority administers and oversees transactions, and no government controls or backs the digital “currency.” Instead, users or “nodes” on the network verify transactions by solving complex computer algorithms. The verified transactions are then recorded on a public ledger (called the blockchain) for all to see. Because transactions employ lengthy key codes rather than traditional personally-identifiable information, users can trade bitcoin quasi-anonymously.

Because bitcoin lacks government or centralized control, conceptually it is accessible to anyone with an internet connection and eliminates many of the transaction costs associated with traditional currency trading. For the same reasons, however, it can be highly volatile. At the inception of the network in 2009 and through 2012, a single bitcoin was worth mere pennies. In 2013, amid a financial crisis and the seizure of bank accounts in Cyprus, holders of Cypriot accounts began buying massive amounts of bitcoin, which drove the price of bitcoin to more than $260 for the first time. By November 2013, the value of bitcoin peaked at $1,242. The price of bitcoin declined thereafter amid hacking scandals, the insolvency proceeding of Mt. Gox (bitcoin’s then largest exchange), and negative perceptions created by the high-profile criminal case involving the elicit online marketplace known as Silk Road. Despite its volatility over the last seven years, however, bitcoin has endured and shows no signs of disappearing.

Bitcoin as a Safe Haven?

Bitcoin’s sharp rise after the Brexit vote appears to evidence a new confidence in bitcoin as a safe haven. Investment professionals, however, have been extremely reluctant to give bitcoin such status. One recent research note observed that calling bitcoin a safe haven “obfuscates the fact that bitcoin is a high-risk and volatile investment” and ignores that “bitcoin’s correlation to other traditional safe-haven assets has fluctuated significantly.” Instead, bitcoin can be viewed as “something entirely different that does not fit into the normal buckets that investments are typically bracketed into.”

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July 2014 Client Alerts

Practice groups throughout Bryan Cave often prepare alerts on issues of interest to our clients and friends. Listed below are the Client Alerts published in July 2014.  Please click on the title to read the full text of the Alert.

Good News for In-House Counsel:  The D.C. Circuit Court Restores Attorney-Client Privilege for Internal Investigations, published by the White Collar Defense and Investigations, Securities Litigation and Enforcement and Government Contracts practice groups on July 2, 2014.

Federal Antitrust Laws:  A New Tool to Prohibit Pre-Petition Coordination Among Creditors?, published by the Bankruptcy, Restructuring and Creditors’ Rights group on July 14, 2014.

No More Blurred Lines?  Federal Courts Rule That Conditional Discovery Objects are No Longer Proper Under Federal Rules of Civil Procedure, published by the Commercial Litigation practice group on July 30, 2014.

Fraud Outweighs Fairness:  Government Contractor Cannot Recover the Value of Its Services, published by the White Collar Defense and Investigations practice on July 16, 2014.

Seventh Circuit Rejects Judge Shuffling in Multidistrict Litigation Cases, published by the Securities Litigation and Enforcement group on July 3, 2014.

No False Claims Act Liability for Claiming Private Money:  Fifth Circuit Rejects Broad FCA Interpretation, published by the While Collar Defense and Investigations practice group on July 8, 2014.

SEC Brings Enforcement Action Under MCDC Initiative, published by the Broker-Dealer Litigation, Arbitration and Regulatory practice on July 16, 2014.

No FCPA Liability or Penalties for Former Noble Executives:  SEC Settles FCPA Claims on Eve of Trial, published by the Global Anti-Corruption/Foreign Corrupt Practices Act Team and the White Collar Defense and Investigations practice on July 7, 2014.

The D.C. Circuit Imposes Some Due Process in the CFIUS Review Procedures But the Impact May be Limited and, in Any Case, Short-Lived, published by the National Security practice on July 18, 2014.

BNP Paribas Pleads Guilty to Criminal Charges and Collar Clearing Rights Are Suspended in the Largest U.S. Sanctions Case to Date, published by the White Collar Defense and Investigations Global Anti-Corruption/Foreign Corrupt Practices Act Team and the International Trade practice on July 2, 2014.

Failure To Appear At a Hearing — A Risky Tactic?, published by the International Arbitration Commercial Litigation practice on July 8, 2014.

Arbitration and Competition Law – New Prospects of Recovery for Victims of Antitrust Infringements, published by the Antitrust and Competition and International Arbitration groups on July 16, 2014.

Enforcement of CIS Court Judgments in England, published by the International Arbitration practice on July 4, 2014.

New UK Guidance on coping with Small Bribes and Facilitation Payments, published by the Global Anti-Corruption/Foreign Corrupt Practices Act Team on July 3, 2014.

EU & Competition Law Update – July 2014, published by the European Antitrust and Competition groups on July 7, 2014.

 EU Adds Individuals and Entities to Sanctions List and Expands Grounds for Sanctions (IRB No. 525), published by the International Trade CEE and CIS Team on July 28, 2014.

Interns Can Turn Out to Be Expensive for Companies, published by the Labor and Employment Client Service Group (Hamburg, Frankfurt) on July 21, 2014.

UK Labor and Employment Bulletin – July 2014, published by the London  Labor and Employment group on July 21, 2014.

EU Commission Proposes Radical Reform of EU Merger Regulation, published by the Antitrust and Competition practice group on July 14, 2014.

 

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January 2014 – Bryan Cave Client Alerts

Client service groups throughout Bryan Cave LLP often prepare alerts on issues of interest to our clients and friends.  Listed below are the client alerts published in January, 2014.  Please click on the title to read the full text of the Alert.

Qualified Plan Limits, published by Employee Benefits and Executive Compensation, January 21, 2014

California “Do-Not-Track” Law Has Gone Into Effect, Requiring Some Websites to Revise Privacy Policy, published by the Data Privacy and Security Team, January 9, 2014

Federal Trade Commission Increases Interlocking Directorates Thresholds, published by Antitrust and Competition, January 24, 2014

Eleventh Circuit Holds that Affiliates of Indicted Contractor May Be Suspended from Government Contracting Indefinitely, Despite No Wrongdoing, published by Government Contracts, January 3, 2014

‘Single Asset Real Estate’:  A Concept in Need of Redefinition, published by Bankruptcy, Restructuring and Creditors’ Rights, January 15, 2014

Tax Court Upholds Captive Insurance Arrangement Despite Parent Guarantee and Captive’s Investment in Stock of Parent, published by Tax Advice and Controversy, January 16, 2014

Investment Funds Maintained by Charitable Organizations, published by the Fund Formation Team and Tax Exempt and Charitable Planning, January 7, 2014

Circuit Decision Requires Production of Foreign Bank Account Records, Thus Emphasizing Importance of IRS Amnesty Program, published by Tax Advice and Controversy and White Collar Defense and Investigations, January 9, 2014

SEC ALJ Imposes Six Month Bar on China Affiliates of Big Four Accounting Firms, published by White Collar Defense and Investigations and International Trade, January 24, 2014

Premerger Notification Thresholds Increased, published by Antitrust and Competition, January 24, 2014

EPA Adopts New ASTM Phase I Standard, published by the Environmental group, January 15, 2014

While Some Things Changed, Much Stays the Same as the EU and the United States Relax Sanctions Against Iran (IRB No. 517), published by International Trade, January 28, 2014

SCOTUS Limits the Exercise of General Personal Jurisdiction Over Multi-National Parent Corporations:  Daimler AG v. Bauman, published by Commercial Litigation, January 29, 2014

SEPA — Is There Some Respite for European and US Companies?, published by Financial Services, January 13, 2014

EU & Competition Law Update – January 2014, published by Antitrust and Competition, January 14, 2014

Overhaul of the BIS Unverified List Imposes New Requirements for Exporters (IRB No. 516), published by International Trade, January 21, 2014

UK Labor and Employment Law Bulletin – January 2014, published by Labor and Employment, January 23, 2014

Lokpal:  Finally a force to combat corruption in India, published by the India Practice Group, January 8, 2014

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April 2012 Client Alerts

IRS Releases Proposed Rules on New Comparative Effectiveness Fee for Health Plans

On April 12, 2012 the IRS released proposed regulations regarding the collection of the fee for the Patient-Centered Outcomes Research Trust Fund (the “Fund”) under the Patient Protection and Affordable Care Act.  The Fund will be used to pay for the Patient-Centered Outcomes Research Institute which has the goal of helping health care providers and consumers make informed health decisions by synthesizing research comparing the outcome effectiveness of various treatments.  To learn more about proposed  regulations, the plans that will be impacted and the fee, please click here to read the Alert published by the Employee Benefits and Executive Compensation Client Service Group on April 23, 2012.

The Absolute Priority Rule:  An Endangered Species in Individual Chapter 11 Cases?

The absolute priority rule of Section 1129(b) of the Bankruptcy Code is a fundamental creditor protection in a Chapter 11 bankruptcy case.  The rule implements the general state-law principle that creditors are entitled to payment before shareholders unless creditors agree to a different result.  Recent litigation has raised the issue of  whether the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which otherwise is a very creditor-friendly statute, modified the Bankruptcy Code in such a way as to eliminate the absolute priority rule if the debtor is an individual.  For a discussion of the issue, please click here to read the Alert published by the Bankruptcy, Restructuring and Creditors’ Rights Client Service Group on April 9, 2012.

Estate Planning in 2012

Generally, there are three basic goals of estate, generation skipping transfer and gift tax planning:  (1) the reduction of estate and gift taxes upon transfer; (2) the deferral of the estate, generation skipping transfer and gift tax burden; and (3) ensuring for the necessary liquidity to pay the taxes when they become due.  As a result of the present low interest rates and the drop in value of most types of assets, there may be opportunities to engage in some estate planning that may not be available to clients when interest rates rise and values are driven higher.  To learn about how to take advantage of these opportunities in 2012, while we are sure we have them, please click here to read a memorandum  published by Bryan Cave’s  Private Client Group on April 10, 2012.  

Data Breaches:  Will You Be Sued, And Can You Lower Risk?

According to a widely reported study, 90% of organizations have had at least one data breach in the last year and almost 60% had two or more breaches over the year.  In light of headlines describing multimillion-dollar data security breach settlements, it is no surprise that businesses fear the worst.   For a discussion of the litigation risks, range of liability and how businesses can lower the risks associated with security breaches, please click here to read an article written by the Data Privacy and Security Team attorneys and published in Law 360 on April 25, 2012.   

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