Choosing Offshore From The Get-Go; UK Regulating Crypto Ads


Hong Kong-based Animoca Brands is glad it made a bet on non-US jurisdictions for its crypto token project says an article in the South China Morning Post. The company’s Sand token was named a security in this week’s SEC lawsuits against Binance and Coinbase. The Post explains, “Sand is the native crypto token used by Animoca’s metaverse platform The Sandbox, and it was one of more than a dozen such tokens to have been explicitly named by the SEC as securities, with others including Solana, Polygon and Mana, the token used in the Decentraland virtual world.” Read it.

regulating crypto ads

Saying its issuing “tough new rules” for advertising cryptoassets, the United Kingdom’s Financial Conduct Authority (FCA), the equivalent of the Securities and Exchange Commission (SEC) in the U.S., said that the new rules will go into place this October and ban such marketing tactics as “refer a friend.” Overall, the agency hopes that the introduction of what it’s calling a “cooling off period” will give investors pause before diving into what the FCA sees as highly speculative investing. Read the announcement. And, get the rules (PDF).

Read a summary from CoinDesk.

more tips:

At the end of April, Senators Kyrsten Sinema (I, AZ) and Cynthia Lummis (R, WY) introduced their own crypto advertising bill. See: S.1357 – Responsible Digital Asset Advertising Act of 2023

exchange comment

Rodrigo Seira, special counsel for investment firm Paradigm, announces on behalf of his company its formal comment on a Securities and Exchange Commission rule change proposal (PDF) on the definition of an exchange. “Through this haphazard rulemaking, the SEC inappropriately attempts to bring crypto trading platforms, including DEXs, under its remit and regulate them as securities exchanges. It thus appears that after suing Coinbase for failing to do the impossible – registering as a securities exchange when it was incapable of doing so – the Commission now intends to force DEXs into the same Hobson’s choice.” Read a short post. The comment is here (PDF).

more tips:

What is Hobson’s choice? – Wikipedia

use case – authentication

Investor Mike Novogratz hasn’t given up on the “decentralized revolution” amidst the regulatory crackdown in the U.S., but he believes more needs to be developed to show cryptocurrency’s usefulness.

Novogratz tells Blockworks that “one strong prospect for crypto’s appeal as a utility is authentication, he says. ‘With all these deep fakes,’ he says, ‘how do I validate that this is actually my work? (…) But now I want to see people actually show me the app that does it – and even if it doesn’t get complete adoption – then we’re telling stories that people can sink their teeth into again.'” Read it.

moving offshore

The oft-stated result of regulation by enforcement in the United States is that crypto companies will move to countries with industry-friendly regulation. The New York Times notes that Gemini’s interest in new crypto exchange license in the United Arab Emirates, Coinbase’s Bermuda plans and Bittrex’s decision to shutdown its U.S. exchange (and declare bankruptcy) are examples of what may be the leading edge of the offshore trend. Read more.

how long?

Vox provides an overview of the steady destruction of crypto entities.  The article predicts scenarios for Binance and Coinbase including the end of Coinbase. The big wildcard is, sure, what happens with the lawsuits, but also how long will it take? Columbia University professor, Ciamac Moallemi, tells Vox “I think one data point is to look at the accusations against Ripple,” he says. The SEC filed a complaint accusing the digital payment network of selling unregistered securities back in December 2020. That case is still pending.” So, 2.5 years and counting… Read it.

HFSC hearing witnesses

The House Financial Services Committee published its memorandum for next Tuesday’s hearing late yesterday. Get it.

Focused on digital assets market structure, witnesses include Jeremy Allaire, CEO, Circle; Coy Garrison, Partner, Steptoe & Johnson and former Counsel to Commissioner Hester Peirce; Emin Gün Sirer, CEO, Ava Labs; and Thomas Sexton, CEO, National Futures Association (NFA). One more witness is TBD.

At this past Tuesday’s House Agriculture Committee hearing on digital assets, NFA was mentioned by Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam as an example of a well-run and important CFTC partner when it comes to self-regulatory organizations (SRO).

And back in early April, CFTC Commissioner Caroline Pham noted about a digital assets-related NFA initiative,“It’s critical to have an effective SRO like the NFA as a partner in the CFTC’s mission. I commend NFA for taking action now on spot digital asset commodity markets, including Bitcoin & Ether, to protect retail with this anti-fraud, conduct, disclosure & supervision rule.” Read more about the context here.

more tips:

Will SEC Chair Gary Gensler unleash another enforcement action next Tuesday?

use case – tokenization

UK-based insurance services firm abrdn (formerly Standard Life Aberdeen plc) is “currently working towards creating a tokenised strategy where digital tokens can be transferred, held and managed on chain,” reports Investment Week.

abrdn’s Russell Barlow, who runs alternative investments at the firm, sees a big future: “The focus of our digital asset strategy is on the developing, and long-term, opportunity we foresee as blockchain and other [distributed ledger technologies] comes to play a central role in how markets function.” Read more.

now banning-ish

Some banks in Australia are claiming its time to rein in crypto purchases in the name of consumer protection. Commonwealth Bank announced yesterday that it has “introduced new measures to help protect customers from scam risks associated with making certain payments to cryptocurrency exchanges.” The result, ultimately, is a limit ($10,000 Australian dollars) on how much consumers may send to exchanges in any one month. Thanks, Big Brother.

Commonwealth’s GM of Fraud Management, James Roberts, said in a release: “Consumer interest in cryptocurrencies has been increasing and unfortunately scammers globally are capitalising on this trend and masquerading as legitimate investment opportunities or diverting funds into cryptocurrency exchanges.” Read it.

(W)all (S)treet (J)umping

Brian Armstrong Says He’ll Challenge the SEC for ‘Clarity’ on Crypto (VIDEO) – The Wall Street Journal

Gensler on Crypto: ‘I’ve Never Seen So Much Noncompliance’ – The Wall Street Journal

It Is Time to Admit It: Bank Regulation Doesn’t Quite Work – The Wall Street Journal

still more tips

Are congressional Republicans about to greenlight a CBDC? – Peter St. Onge, Heritage Foundation in The Hill(June 5)

Digital currency pilots: On course, with potential to achieve something huge – Forbes India

A flawed argument for central-bank digital currencies – The Economist

Quantum miners would yield ‘massive’ energy savings for blockchain: Study – Cointelegraph

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