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SEC Tells ETFs to Drop Blockchain Tag

SEC Tells ETFs to Drop Blockchain Tag

The US Securities and Exchange Commission (SEC) is once more flexing its regulatory might, this time by warning fund providers offering so-called blockchain exchange-traded funds (ETFs) to lose their “blockchain” tags in their names.

The move is seen as a preventive measure to avoid misleading investors keen on gaining asset exposure to cryptocurrencies and their underlying blockchain technology. Bloomberg reports that the SEC is raising more questions as blockchain-themed fund names are proliferating. Due to the increased scrutiny, there is a growing number of ETFs who are changing their names before their funds even begin trading. In 2018 alone, every third fund changed their names during the SEC approval process, with one fund removing “blockchain” and replacing it with “transformational data sharing”.

CEO of fund provider Exchange Traded Concepts, J Garrett Stevens, said that the SEC enquiries are obviously on the rise:

“We get questions more than we used to where we have to be able to defend our name. Now almost all names, they’ll come back and say ‘Can you justify, give us your explanation on why this name is OK?’”

With more than 2,000 competing funds, thematic names have been an area for providers to differentiate in the USD 3.9 million ETF market that is already showing some signs of stress, according to Bloomberg.

Under the 80-year old Investment Company Act of 1940, issuers are forbidden to use names that are “materially deceptive or misleading”. The SEC adopted Rule 35d-1 in 2001, the Names Rule, to further define this. Funds must also ensure that 80% of their assets are in the same category of investments represented by their names.

 

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SEC Publishes Framework for Digital Assets Investment Contracts

SEC Publishes Framework for Digital Assets Investment Contracts

Ascertaining the status of digital asset as an investment contract and as a security will now be easier courtesy of the framework published on 3 April by the United States Securities and Exchange Commission (SEC) titled ‘Framework for ‘Investment Contract’ Analysis of Digital Assets’.

Two SEC Commissioners led the framework development; Valerie Szczepanik, senior advisor for Digital Assets and Innovation and Bill Hinman, director of the SEC’s Division of Corporation Finance.

The authors emphasized that the guidance is not a rule, regulation, or statement of the US Commission since it has neither approved nor disapproved the contents. They also added that the framework is neither exhaustive nor is supposed to be legal advice, but only serves as an analytical guide for initial coin offerings (ICO) operators and token issuers to determine whether the offering is subject to federal securities laws.

Only after reading the formal rules and regulations on the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub), market participants can completely determine the status of their offerings. The framework also only focuses on determining one type of security, an investment contract, and doesn’t cover the full range of possible security classifications.

According to the 71-year old Howey Test, a contract exists for an investment in a common enterprise when investors are expecting profits. The framework deals with all aspects of the Howey test in detail for digital assets, starting with money investment and the unique element of a joint enterprise for investment contracts. For the later, the authors add, “in evaluating digital assets, we have found that a ‘common enterprise’ typically exists”.

The authors also added that a large part of the criteria deals with the economic reality of the transactions and “what character the instrument is given in commerce by the terms of the offer, the plan of distribution, and the economic inducements held out to the prospect”.

 

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‘Regulatory Refugee’ Blames SEC for Crypto Winter

'Regulatory Refugee' Blames SEC for Crypto Winter

Pillar founder David Siegel has targeted much of the blame on the United States Securities and Exchange Commission (SEC) for the flagging performance of the cryptocurrency sector over the past year.

Siegel dubs himself the world’s first web designer, is the author of five books on the web and business, and has started 23 companies, including Studio Verso based in London, one of the world’s first digital agencies. He calls himself a “regulatory refugee from the United States”, a fairly clear indication on his views on US government regulation.

His frustration comes from the way in which he perceives that innovation in the industry has been largely stifled by both the SEC and what he calls the government’s “self-fulfilling prophecy… that crypto would be bad for investors”, in turn making it “very bad for investors”.

Innovation is the key to industry’s success, Siegel urges, but sees the SEC stifling it through a lack of support for new entrepreneurs and developers coming through. He sees the US becoming left behind as other nations become willing to take on talent which struggles to find a place there To illustrate this, he argues that he can get far more achieved in the UK and Europe than he can in the US.

Siegel found his own way of dealing regulatory hurdles by not listing on exchanges and sees the industry as a whole gaining in strength, despite ICO fundraising fast becoming a thing of the past, with the proviso that the SEC change their approach to open source projects and cryptocurrency regulating. Regarding his company’s future, he has a positive note:

“We’re finally hitting our stride. We’ve launched several new features in the past few weeks, we are getting strong attention from the Ethereum and open-source blockchain communities, and we are collaborating with more industry players. We’re starting to realize the dream of our ICO, so it’s very exciting. I think we’ll be one of the few ICO projects that becomes part of the blockchain ecosystem.”

The SEC is set to launch its second public forum on cryptocurrency and blockchain on 31 May.

 

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SEC Announces Second Forum on Crypto and Blockchain

SEC Announces Second Forum on Crypto and Blockchain

The United States’ Securities and Exchange Commission is set to launch its second public forum on cryptocurrency and blockchain on 31 May.

The forum held in conjunction with the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub) has caused the industry to speculate if major changes in regulation are being considered by the regulatory body.

Until now the SEC has bordered on hindering any progress that the cryptocurrency industry’s major institutions and exchanges have fought for in attempting to bring digital currency into mainstream use. This includes delays on exchanges’ ETF approvals which are still waiting for green stamping and a lack of clear guidelines for the industry as a whole.

On a positive note, it’s thought that the fact the forum is open to the public and follows the SEC announcement of a “crypto tour” to engage with industry professionals, shows that the regulators are moving towards dealing with some of the growing regulatory issues which until now have been stalled.

One of the SEC’s concerns has been the risk of driving potentially innovative startups overseas in order to seek more relaxed regulations; a reason that the SEC, whilst it has been unclear on rulings and guidelines for the industry, has largely kept a hands-off approach. A change in attitude is clearly emerging over the past year following the SECs fairly intractable view regarding both security and utility tokens in the past. SEC Chairman Jay Clayton recently commented that a cryptocurrency can be sold as a security if it meets the definition of an investment contract after launch, and that the digital asset can later be sold without being defined as an investment.

The forum itself will include a live online broadcast and a panel of industry professionals and academics who are yet to be announced. Topics such as ICOs, crypto platforms, and blockchain will be the main focus of the event.

 

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US SEC’s FinHub Ready to Hit the Road to Engage Crypto Entrepreneurs

SEC

The US Securities and Exchange Commission (SEC) will arrange a road trip to reach more and more crypto entrepreneurs around the country and get their feedback according to an official notice.

The SEC’s branch responsible for interactions with tech startups, known as FinHub, will visit major US cities and set up face-to-face meetings with crypto entrepreneurs.

On 26th March, the road trip will begin at the SEC’s local office in San Francisco. Next stop will be Denver.

SEC’s senior advisor for digital assets and innovation, Valerie Szczepanik, explained that FinHub staffers will not provide any legal advice during the meeting. They will only answer startups’ projects related queries. Primary purpose is to provide general guidance, maintained Szczepanik.

In the past, crypto startups have self-reported potential securities law violations to SEC. One such example is that of Gladius Network LLC, which reported irregularities itself and SEC refrained from fining the startup. Moreover, other startups which cooperated with the agency were charged relatively less.

Szczepanik stated that “Local P2P” aims at helping crypto startups to “put a human face on the regulator”. It is important to collect data regarding “friction points” directly from the stakeholders. SEC can then think about the appropriate regulatory response to those friction points, believed Szczepanik.

However, it is still unclear that how many startups will be interested in the meeting, scheduled on 26th March. According to the reports, only a few startups have provided feedback to FinHub so far.

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Gold-Backed Crypto Could Be On the Way in 2019

Gold-Backed Crypto Could Be On the Way in 2019

One New York-based firm already offering a stablecoin is taking the next step by looking at the feasibility of a gold- backed digital token this year.

Having launched Paxos Standard stablecoin in 2018 Paxos is now keen to offer “any type of asset and put it into a blockchain.” According to the company’s CEO Chad Cascarilla, a new kind of offering could be simple. “How you do it with a gold token is how much gold you have in a vault equals how many gold tokens outstanding,” he argues. This could be up and running by 2019, the Paxos CEO is suggesting.

Although any commodities could be feasibly be put on the blockchain, Cascarilla suggests that “gold is probably the most obvious.” Having become the first virtual currency company to be licensed in New York, his company could be the first to potentially become the forerunner of enabling stock trading on the blockchain if these plans come to fruition.

One hurdle to tying cryptocurrencies to traditional securities remains the U.S. Securities and Exchange Commission (SEC) currently swamped by ETF applications, knocked back by the recent government shut down. Paxos is still awaiting a response to their application to proceed with a gold-backed digital token.

The tokenization of precious metals could revolutionize asset lending given for example the logistical complications dividing gold and its transportation. Cascarilla suggests that tokenization kills two birds with one stone:

“Having it sit in a vault but also having it be on a blockchain kind of bridges those two worlds,” he added.

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The Year of Blockchain Is Here Claims Capitol Hill Top Gun

Congressional Blockchain Caucus chairman on Capitol Hill, Tom Emmer is making waves again, this time predicting that 2019 will be blockchain’s year.

He was addressing an audience on the initial day of this year’s Washington DC Blockchain Summit. Emmer has become the main voice in Washington’s political circles when it comes to criticizing the heavy-handedness of SEC regulators regarding all things cryptocurrency. Emmer commented that this year:”…stands to be the year of blockchain, the year we separate hype from reality, and begin harnessing blockchain in the right-use cases to lower costs and increase efficiency,”

Notably, Emmer introduced the Blockchain Regulatory Certainty Act bill (H.R.528 ) in January, which if it goes through will save blockchain developers from money transmitter registrations in US states. Another recent Emmer bill would provide tax relief for forked asset holders and a non-binding resolution backing blockchain and cryptocurrencies.

Emmer was stating his point for clear cryptocurrency and blockchain regulations, not for the first time, and warned delegates of the threat of what he called “a patchwork of regulations” by the government. He argued that with this approach:“…the industry will suffer, and prove government to be ineffective. This confusion will undoubtedly lead to more regulation, which will only stifle innovation and potential application of the technology.”

Commenting on the money transmitter laws which his bill was introduced to challenge back in January, he suggested that the laws were originally enacted for a completely different purpose and don’t relate to blockchain, arguing, “If no funds are being entrusted to another, it should be certain that these regulations do not apply.”

He ended his comments on a topical, if not well-worn note; concerns of the government that Bitcoin was still being used for illegal activity. Emmer warned:

“Many, including those in this town, would like to focus only on blockchain and ignore or criticize cryptocurrency,” he said. “They will tell us the bitcoin is used by criminals, and the blockchain is the real innovation. It’s true there are illicit transactions. But that should not be reason to totally dismiss cryptocurrency.”

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Thai SEC Approves ETC, LTC, BCH for ICOs, Trading

Thai SEC Approves ETC, LTC, BCH for ICOs, Trading

Thailand’s Securities and Exchange Commission (SEC) has expanded its list of approved cryptocurrencies for use in initial coin offerings (ICOs) and as base trading pairs, according to an official statement from the SEC today.

These latest updates to the SEC’s approved list include Ethereum Classic (ETC), Litecoin (LTC), and Bitcoin Cash (BCH), joining Bitcoin (BTC), Ethereum (ETH), Ripple (XRP) and Stellar (XLM) as cryptocurrencies that can be used in compliance with the country’s national regulations. The SEC reiterated that it does not, however, class any of the above as legal tender, as stipulated in its statement.

The decision comes in accordance with the Royal Decree on Digital Asset Business BE 2561 but does not accord either of the currencies a guarantee of any other status.

Thailand is slowly moving its policies in a pro-cryptocurrency direction, last December announcing a public hearing to attempt to remove the obstacles associated with holding ICOs whilst keeping investors protected. The SEC hopes to allow private ICOs to take place without the registration statements and draft prospectus’ that are currently required.

A recent amendment to the Securities and Exchange Act also allows for tokenized securities such as stocks and bonds to be issued via blockchain, effective later this year.

 

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Thailand Moves Forward With Tokenized Digital Securities

thailand

Thailand is finally moving forward with legalizing tokenized digital security assets as it endorses the amendment of the country’s security laws, according to Bangkok Post.

The National Legislative Assembly (NLA) is “paving the way for scripless securities issuance and tokenized securities leveraging blockchain technology,” says the post. This will invariably allow for stocks and bonds to be tokenized and traded on the blockchain thereby contributing to its development and by proxy, the adoption of cryptocurrency in the nation.

Optimism for the crypto industry continues to grow in Thailand, as this development is expected to build up the digital asset ecosystem, says SEC Deputy Secretary-General Tipsuda Thavaramara. Moreover, with more clarity from the SEC, it would be easy to determine what class of securities from the traditional sense has the potential for digitization and be offered as tokens.

The currently amended securities act, formerly allowed only Thailand Securities Depository LTD to be the sole company for scripless securities depository according to the set Stock Exchange of Thailand (SET) standards. The new adjustments allow other businesses operating depository of securities to extend their services to scripless securities. However, there would be a need for prospective operators to obtain a depository license from the regulator in order to issue their securitized assets to the public.

Security tokens are perceived to be one step higher than the regular utility tokens, being that they confer certain rights to holders, just like shares in a traditional stocks issuing company. Once operational, they could go as far as changing how traditional securities work in the capital market. It is expected that the amended security laws will take effect later this year. Last month, the Jamaica Stock Exchange (JSE) suggested that it will look at the possibility of listing security tokens on its platform after a successful trial with regulated market participants including the Jamaica Central Securities Depository (JCSD).

Thailand continues to develop its digital asset ecosystem by showing support for the emerging asset classes. More so, it has shown support for startups willing to set-shop in the jurisdiction as long as they comply with the regulatory standards being set. Earlier in January, the progressive efforts from the SEC and the ministry of finance saw four of seven crypto-related businesses operate in the region.

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What’s Happening to Digital Securities?

What's Happening to Digital Securities

At the cusp of the initial coin offering (ICO) witch-hunt in 2018 by the US securities market regulator, many prospective ICOs considered switching to seemed like a safe haven — securities token offering model. With the much-needed hype to make the transition back then, many wondered if STOs would replace ICOs as the next evolutionary state of the industry.

Business expert and contributing author to Forbes Jim Preissler provides insight into the subject of stagnating growth in the STO niche. According to his post, he suggests the hype about security tokens doesn’t match current development, saying that “there has been little actual tokenized security activity to date”. His opinion was that the bear market may have been largely responsible for this.

As observed in the post, old paper-based systems have been the order of service in capital markets. With the introduction of blockchain-type of digitization which makes processes immune to tampering, improves transparency and efficiently facilitates settlements, the capital market cannot afford to miss this upgrade.

Surprisingly, the transition has been rather slow, given how the ICO industry had radically changed the scape of crowdfunding, maybe forever. The ICO industry has pooled over USD 28 billion to date, according to data from CoinSchedule.

Jamie Finn, president and co-founder of Securitize, shared Preissler’s opinion, saying:

“Capital raising has become increasingly hard and ICOs [may have] showed a new way of raising money.”

They were a mind-boggling new tool for fundraising, however, the need to educate investors may have been left somewhat unattended. In his opinion, Finn may have suggested that digital securities following due process may be one of the safest ways to own a security asset.

More so, the slow development and low on-ramp onto the digital securities niche may have more to do with regulatory gray areas, as Preissler puts it. The emerging market these tokenized securities may provide would certainly come under the jurisdiction of the SEC, but clearly, the watchdog has struggled with providing an oversight standard for the industry.

There are maneuvers that could possibly scale the regulatory process, but the question that remains in a manner of speaking would be how to trade these tokenized securities from a legal standpoint. The conflict of interest emerges when deciding whether to treat STOs like private securities market that they are or conform them to behave like the public market.

For STOs, it’s not about “when lambo” or “when moon” as observed during the trending-hype seasons of ICOs in 2018, as most retail investors are beginning to understand in the very hard way — through frauds, scams, and illiquid assets — that maturation of the industry is the only way up.

Likewise, in spite of growing interests from institutions and sophisticated investors aiming at portfolio diversification into crypto, the determining factors are now more about security, liquidity that mirrors the public capital market, and a robust regulatory oversight that supports the growth of the industry.

Summarily, the bars are indeed high for the forerunners in the digital securities market as the industry needs high-quality operators willing to do what it takes to sustain it indefinitely.

 

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