Category: SEC

Grayscale Investments’ Ethereum Trust Filed With the SEC to Obtain Reporting Status

Grayscale Investments' Ethereum Trust Filed With the SEC to Obtain Reporting StatusThe digital currency asset manager Grayscale told investors on Thursday that the firm has publicly filed a Registration Statement on Form 10 with the Securities and Exchange Commission (SEC) for the company’s Ethereum Trust. The recent filing is voluntary and if the SEC approves the registration, the Ethereum Trust will be the second crypto asset […]

The post Grayscale Investments’ Ethereum Trust Filed With the SEC to Obtain Reporting Status appeared first on Bitcoin News.

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Law Decoded: Pushing the Legal Limits, July 10–17

In this week’s newsletter, we look at a series of developments that test the limits of governmental authority over crypto, as well as the contest with social media.

Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law.

Editor’s note

New developments in crypto this week are challenging a number of critical boundaries of legal authority. We are, consequently, looking at several cases that promise to set new lines for government reach and overreach.

Cassius lamented Caesar bestriding the narrow world like a colossus. While nothing on the docket today is going to be as dramatic as the death of the Roman Republic, we did actually see a pretty eerie yet oddly comical dress rehearsal for bad actors masquerading as state leaders. We’re also looking at some national regulators who are looking to go well outside of their obvious borders.

In last week’s Law Decoded, I pointed out that the crypto industry has a bad habit of forgetting that regulators handling crypto are handling other colossal financial systems at the same time. In some sense, today’s newsletter is a retracing of that sentiment. There’s a lot of power at play.

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Elon Musk is not going to give you Bitcoin, and other harsh realizations

By far the loudest news to come out of the crypto world this week was a Twitter hack that, while ingenious enough to access and tweet from the accounts of many of the most powerful people in the world, lacked the ingenuity to use that power for anything other than a simple scam, offering to multiply Bitcoin sent to an address.

As many pointed out, this was an extremely hackneyed scam executed on an extraordinary scale. Indeed, as the hack expanded beyond characters familiar to the crypto world like CZ to global figures like Barack Obama, Elon Musk and Jeff Bezos, many looked upon Donald Trump’s timeline and despaired.

Given that the president has used Twitter to announce policies, as well as engage in high-profile conflicts with leaders of Iran and North Korea — during which times, U.S. troops were suddenly forced to plan for new mobilizations — the reminder of Twitter’s vulnerability as a centralized platform was ominous.

For the record, Trump’s timeline remained untouched. But there has been a great deal of talk in recent months about limiting the authority of social media platforms due to their importance to public discourse. But this is almost the inverse problem of government characters like Joe Biden potentially having their public personae highjacked. Expect this recent hack and the implied threat to global order to factor into future conversations on the subject. On the flip side, the blockchain industry is likely to use this to promote decentralized analogs to social media giants.

Either way, keep in mind that whoever was behind this hack only netted some $121,000. It’s certainly not great news for crypto’s reputation in the public eye, but it’s hard to see this event as fundamentally being about immediate gains.

A rupee supreme

The author of an infamous proposed total ban on crypto in India has spoken out, telling the industry that it’s not a total ban at all.

Former Finance Secretary Subhash Chandra Garg said that the actual objection to crypto in the bill is its use as a currency. He said that the ban would allow investment into crypto as a digital commodity.

If so, this is a message that media including Cointelegraph have garbled in the past. But also, that seems like a remarkably fine line to draw. If you can trade crypto as a commodity, what about peer-to-peer transactions? How do you possibly filter all of those into categories like “suspiciously currency-like?” And then how do you actually hold such a devious criminal accountable?

Garg’s concerns are common among regulators, who see crypto as a threat to monetary sovereignty. In places like Venezuela or Zimbabwe today, avoiding the monetary authority of the reigning government is a hugely bullish argument for Bitcoin. But also, it seems clear that the full implications of any such ban in India, a country of nearly 1.4 billion people, have yet to be properly laid out.

Not my citizens, still my problem

After considerable back-and-forth, the two federal U.S. investment regulators, the SEC and the CFTC, jointly fined crypto-based app Abra for its synthetic swap service, which translated price movements in U.S. stocks and ETFs into changes in collateral that investors put up in BTC and Litecoin.

The fines themselves were fairly nominal, totaling $300,000, which is unlikely to cripple the app, but the case is definitely a strong warning shot for several reasons, not least of which is the fact that mixed swaps are one of those areas that provoke both the SEC and CFTC to action. The nature of jurisdictional limits on U.S. financial regulators is also in question.

Abra had backed down from its synthetic securities service in February of 2019 at the gentle behest of the SEC. The firm picked it back up later that year, having excluded U.S. investors and registered the subsidiary offering the service in the Philippines. The new intervention from both the SEC and the CFTC clearly puts down a flag in new territory: Neither agency suggests that the firm was offering these services to U.S. investors, but they claim jurisdiction over Abra and its subsidiaries because of the firm’s offices in California.

Once again, $300,000 is not a particularly draconian settlement, but neither was Block.one’s. It’s the precedent of expanding authority.

Further reads

Coin Center’s Peter Van Valkenburgh lays out what recent legislative threats to encryption mean (and don’t mean) for crypto and decentralized networks.

JDSupra has updated its information on state vs. federal laws as they pertain to crypto to include, among other things, new licensing in Louisiana.

Patrick Tan reflects on how a Chinese CBDC could spark a push to crypto on the part of citizens worried about their privacy.

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Law Decoded: Regulators Are Guarded But Getting There, July 3-10

This week has seen some major breakthroughs in disguise, reminding us of how regulation doesn’t all happen at once.

Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law. 

Editor’s note

Policy changes slowly. Crypto wants to move fast. Sometimes fairly, sometimes not, the crypto industry often portrays traditional financial regulators as calcified relics unprepared to deal with the coming new world. 

To be fair, everyone seems to acknowledge that markets and trading systems need comprehensive upgrades, but national and international regulators are accountable to a wider range of concerns than any specific industry. The crypto industry sometimes takes that as a personal slight, waiting for some sudden burst of the regulatory dam. Progress is more like erosion.

That being said, this week has seen some hopeful if oblique changes in regulatory posture. I’ll be trying to piece together some major developments from the SEC’s attitude toward security tokens, as well as the unconfirmed first public offering by a crypto exchange, and also deciphering the newly announced strategy from the CFTC.

Kollen Post, Policy Editor, @the_postman_

  

 

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Security tokens see light at the end of the SEC tunnel

Not that long ago, a certain strain of industry hype promised that tokenized securities would be blockchain’s killer app. However, the plight of reconfiguring global securities markets has ended up taking some time. This week saw the launch of a new product by Arca in the U.S., a tokenized fund based primarily on Treasury securities. 

Arca had been working with the Securities and Exchange Commission for two years, trying to satisfy them that the fund and its attached ArCoin — with peer-to-peer trading — would be able to meet all necessary AML/KYC requirements and provide investors with secure trading. The fact that the fund is based on low-volatility government securities certainly helped, as does the fact that trading will remain relatively siloed in a single portal for the time being. 

An extensive roster of firms is courting the SEC with inventive formats to offer retail investors new forms of digitized investments. The carnage of manila folders and red tape over a Bitcoin ETF continues, while Wilshire Phoenix recently changed tacks to file a BTC trust with the commission, but those are both investments that are at least somewhat based on a cryptocurrency. 

There are a number of functioning digitized securities unconnected to any given crypto asset within the U.S. already. Limited markets on which to trade are a major part of that current hold-up partially because it takes so long to get any proposal through the SEC. This week, the SEC also voted on changes to registration under the 1940 Investment Company Act. They promise “an expedited review procedure for applications that are substantially identical to recent precedent.” Which is to say, these pioneer projects may have just gained some leverage.

CFTC promises new crypto framework as chairman finishes his first year

With its more limited purview, the Commodity Futures Trading Commission is generally a less aggressive regulator than the SEC. Indeed, CFTC Chairman Heath Tarbert commented this week that his commission is waiting on the SEC to determine the status of most tokens as securities or commodities. Nonetheless, the recent priority the CFTC placed on solid rules for crypto asset and futures trading is major news for the industry. 

The CFTC’s new strategy guidelines are especially noteworthy, given Tarbert’s well-documented interest in the sphere and the fact that the new strategy lines up with the rest of his term as chairman. July 15 is in fact the end of his first year, so the commission’s presence in the public eye over the past week could be seen as a sort of anniversary celebration.

At this point, the term “regulatory clarity” has lost more or less all meaning, becoming a convenient and inoffensive buzzword. Similarly, “innovation” is a word that stakes no specific ground, but nobody can really object to it. As a point of policy, the vision that the CFTC or Tarbert himself are working toward — the “holistic framework,” as the recent publication puts it — for crypto assets remains cryptic. 

But by the same token, while political language depends on vague goalposts, the inclusion of digital assets as a priority in a four-year plan, which has certainly been the subject of long-standing backstage debate, is nothing if not meaningful.

Coinbase is going public, maybe

Coinbase, the flagship crypto exchange of U.S. compliance, may be looking to go public later this year. Per unnamed sources speaking with Reuters, Coinbase has been in conversations with the SEC to issue the first public stock in a crypto exchange in the country. 

The information is difficult to confirm. Coinbase is notoriously uncommunicative with the media, but rumors of an IPO may well be part of a strategy to build hype. Still, going public would be the next logical step. 

The benchmark for a unicorn is a privately held company valued at over $1 billion. A 2017 funding round put the valuation on Coinbase at $1.6 billion, a number that the firm shattered with a $300-million investment round that raised that overall valuation to $8 billion in 2018.

Based in San Francisco, Coinbase has long been focused on making crypto work within the confines of U.S. regulation. Whatever happens to their IPO is likely to be either a rallying cry or a cautionary tale for the industry.

Further reads 

Jerry Brito, the leader of Coin Center, writes on the way that the CBDC conversation has misconstrued obligations to do AML/KYC on private transactions.

For Brookings’ TechStream, Carlos Ignacio Gutierrez asks whether current legal structures are ready for the long-promised AI revolution. 

The Cyberlaw Podcasts discusses recent law enforcement breaches of encrypted networks housing criminal activity.

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