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"Crypto Winter" by edwinchuen is licensed under CC BY 2.0.

Patent Wars Come to Crypto

Veritaseum
Brings lawsuit against Circle
In patent dispute

One of the first patent disputes involving cryptocurrencies is being litigated in federal court in Texas.

Cryptocurrency firm Veritaseum Capital sued Circle Internet Financial Ltd for alleged infringement of its digital-asset trading patent.

Veritaseum’s website says that the company “builds blockchain-based, peer-to-peer capital markets as software on a global scale.”

As the World Intellectual Property Review explains,

Veritaseum’s software enables blockchain-based, peer-to-peer capital market transactions such as crypto payments, trading, or “staking” (a method of earning rewards for holding certain cryptocurrencies).

The 2021 patent at issue is for

Devices, systems, and methods enabling parties with little trust or no trust in each other to enter into and enforce value transfer agreements conditioned on input from or participation of a third party, over arbitrary distances, without special technical knowledge of the underlying transfer mechanism(s), optionally affording participation of third-party mediators, the substitution of transferors and transferees, term substitution, revision, or reformation, etc.

Veritaseum is seeking at least $350 million in damages. As Reuters reported, the company earlier sued Coinbase for allegedly infringing the same patent. Coinbase moved to dismiss the complaint.

As Reuters notes,

Veritaseum formerly issued the token VERI. In 2019, its founder Reggie Middleton and two Veritaseum entities paid the U.S. Securities and Exchange Commission more than $9.4 million to settle charges of a “fraudulent scheme” to sell the token.

The SEC had accused them of misleading investors about the demand for the tokens and manipulating their price. They settled the case without admitting to or denying the charges.

Circle, based in Boston, sells a stablecoin called USDC. As Investopedia explains,

Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. Stablecoins aims to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for common transactions.

However, “stable” coins aren’t necessarily stable.

As the Washington Post reported, in May of 2022 a stablecoin called TerraUSD, algorithmically designed to be pegged to the dollar — crashed

As the Post notes,

The total value of the world’s cryptocurrencies tracked by data company CoinMarketCap is now around $850 billion, down from $3 trillion a year ago. The average value of cryptocurrency trades per day has fallen from $131 billion in May to $57 billion in December — a drop of more than half…

This lawsuit is just the latest challenge for the crypto industry, which is suffering through what some have called the “crypto winter.”

As the Washington Post reports,

A year ago, the crypto world was booming, with prices for bitcoin and Ethereum at all-time highs, celebrities stumbling over each other to promote expensive digital art, and logos from blockchain companies gracing sports stadiums and Super Bowl ads.

That era is over.

In the last year, cryptocurrency prices have fallen by more than half, trading volume has cratered, and several high-profile companies have collapsed in liquidity crises. The arrest last week in the Bahamas of Sam Bankman-Fried, the former CEO of what until very recently was one of the biggest and best-respected cryptocurrency exchanges in the world, has only deepened the sense that the crypto bubble has definitively popped, taking with it billions of dollars of investments made by regular people, pension funds, venture capitalists and traditional companies.

Experts are debating whether this is just a cyclical downturn, like a bear market on Wall Street, or whether it’s more of an ice age.

The patent case is Veritaseum Capital LLC v. Circle Internet Financial Ltd, U.S. District Court for the Eastern District of Texas, No. 2:22-cv-00498.


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