Tag: cryptocurrency

Hinman on crypto -or not

At long last, “certain documents” from William Hinman, the former director of the U.S. Securities and Exchange Commission (SEC)’s Division of Corporation Finance from 2017 to 2020, have been released. Amidst the Ripple lawsuit by the SEC, pro-Ripple forces believe his public statements around what makes a cryptocurrency a security were misguided and, indeed, disputed internally at the SEC.

The story starts with a speech Hinman made in 2018 at a “Yahoo Finance All Markets Summit: Crypto.” See it.

“Prior to making the speech, Hinman said in an email to multiple SEC employees that the speech suggests ‘we do not need to see a need to regulate Ether, as it is currently offered, as a security,'” according to The Block, which concludes, “The public release of the Hinman documents may ignite a significant debate about the classification of cryptocurrencies as securities…” Read more.

The upshot of the Hinman notes from pro-crypto forces: Congress needs to step up with regulation. Continue reading “Hinman Documents Released; Market Structure Bill Seeks Bipartisan Support”

Gensler – speaks

In a speech before the Piper Sandler Global Exchange & Fintech Conference in Washington, D.C., Securities and Exchange Commission (SEC) Chair Gary Gensler gave perhaps his most prolonged defense of the his position on crypto and its oversight – which is especially relevant given last week’s enforcement actions against Binance and Coinbase.

On staking-as-a-service, which has been popularized on the Ethereum blockchain, he sees only a security: “It doesn’t matter what kind of assets investors put into a lending or staking-as-a-service platform-cash, gold, bitcoin, or anything else. It’s what the intermediary says that they are going to do with the assets that determines what protections are provided by the law. Customers invest their assets with the platform, which then onlends them or pools and stakes them, in each case promising a return. These are classic securities, irrespective of whether crypto is involved.” Read the speech. Continue reading “Gensler Makes Impassioned Crypto Speech; House Republicans Seek His Removal”

tomorrow’s hearings

With the United States digital assets ecosystem in the dumps following the Securities Exchange Commission’s (SEC) lawsuits against Coinbase and Binance, tomorrow’s House Financial Services hearings could offer some uplifting highlights.

Morning – At the 10 a.m. hearing, what’s Treasury Secretary Janet Yellen thinking about digital assets legislation? She told CNBC last Thursday she wants to see legislation. To which some Members may ask at tomorrow’s hearing,  “What exactly are you looking for, Madame Secretary?” See the hearing page. The Committee Memorandum notes that particular focus will be on the International Monetary Fund (IMF).

Afternoon – Beginning at 2 p.m., the stablecoin (PDF) and market structure (PDF) bills being pushed forward by Republicans will be the subject of the afternoon hearing.  See the hearing page.

tomorrow’s hearings – Dems

The big question is where House Democrats will land on these bills. Continue reading “Digital Market Structure And Stablecoin Hearing Tomorrow, RFIA Returns This Month”

out-of-reach

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. Continue reading “Choosing Offshore From The Get-Go; UK Regulating Crypto Ads”

Treasury speaks

U.S. Treasury Secretary Janet Yellen appeared on CNBC’s Squawk Box yesterday and talked crypto after the recent enforcement actions against Binance and Coinbase. She said, “[Treasury recently] wrote a set of reports in response to the President’s Executive Order to examine the risks inherent in crypto. And we identified a number of risks – some of which – risks to consumes, investors – our laws are already strong. The SEC, The CFTC, other regulators have the ability and tools to protect consumers and investors. I’m very supportive of seeing those agencies use the tools they have. (…) I see some holes in the system where additional regulation would be appropriate. We’d like to work with Congress to see additional regulation pass.” See it.

intro to crypto

A new publication,  “Introduction To Cryptocurrency,” hit the Congressional Research Service database in late May. “Currently, there is no comprehensive regulatory framework for crypto, but regulators may apply existing regulatory frameworks when applicable to crypto,” writes author Paul Tierno, an analyst in financial economics at CRS. Download it (PDF).

Tierno explains several key policy issues facing Congress including: “The regulatory policy debate has focused on whether a regulatory regime that is tailored for crypto is necessary. Other key policy issues can be summed up in three unanswered questions: Is the current authority sufficient, or is congressional action required? If new regulatory authority is required, who should be the primary regulator? Is it better to create a new, overarching structure, or is a refinement of the existing framework sufficient?”

Tierno also wrote the lengthy and detailed “Cryptocurrency: Selected Policy Issues (PDF)” which was released in February. The new “Intro To Crypto” appears to “peel out” a digestable version of his February tome.

europe salivating

In the wake of the U.S. regulatory crackdown on digital assets, Europeans are beginning to salivate at the potential to tilt the global economic order their way. Joachim Schwerin, a principal economist in the European Commission’s department responsible for economic growth tells CoinDesk, “What we hear from businesses is that now a lot of them are looking to grow, to stay safe, and to manage their risks. (…) They don’t know what will happen in the U.S., so they come to us. This is good for us, this is good for competitiveness.” Read more. Continue reading “Secretary Yellen On Crypto: Additional Regulation Would Be Appropriate”

SEC charges Coinbase

Coinciding with another round of hearings aimed at creating legislation for digital assets – and Monday’s action against Binance – the Securities and Exchange Commission (SEC) delivered an enforcement action against Coinbase. The agency said in a statement that Coinbase was “operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency.” The SEC also charged Coinbase for “failing to register the offer and sale of its crypto asset staking-as-a-service program.”

Read the statement. And, see the 101-page lawsuit (PDF).

The suit was not unexpected given the “Wells notice” Coinbase received in March suggesting an enforcement action was on the way.

It was only two years ago that Coinbase’s registration statement allowing it to go public was approved by the SEC.

SEC charges Coinbase – states

The lawsuits for Coinbase didn’t stop with the SEC yesterday either. Though likely well-coordinated with the securities agency, “a multistate task force comprising state regulators from Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin have issued a Show Cause Order against cryptocurrency exchange Coinbase,” reports Cointelegraph. Note the inclusion of both “red” and “blue” states in the group.

“The Order gives Coinbase 28 days to show cause why they should not be directed to cease and desist from selling unregistered securities in Alabama” and in coordination with the other states mentioned. The action stems from the Coinbase’s staking rewards service says the Order. Read the order (PDF). Continue reading “SEC, States Aim Enforcement Actions Against Coinbase; SWIFT Testing Tokenized Asset Systems”

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SEC charges Binance

The Securities and Exchange Commission (SEC) charged cryptocurrency platform Binance and its CEO Changpeng “CZ” Zhao with thirteen separate charges related to securities violations yesterday.  Director of the SEC’s Division of Enforcement Gurbir Grewal said, “We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximize their own profits.” Read the release. And, see the 136-page lawsuit (PDF).

In a tweet yesterday afternoon, the SEC (quoting from the press release) quoted a “Binance chief compliance officer 2018” who allegedly said, “We are operating as a fking unlicensed securities exchange in the USA bro.”

The Wall Street Journal notes, “For the SEC, the lawsuit is another significant bet that U.S. courts will agree it has jurisdiction over the crypto industry, which often disputes that digital assets are securities.” Read it.

SEC charges Binance – reaction

Binance rejected the SEC’s suit in a company blog post yesterday and said in part, “Most recently, we have engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations.  But despite our efforts, with its complaint today the SEC abandoned that process and instead chose to act unilaterally and litigate.  We are disheartened by that choice.” Read the blog. And, read an early “take” on the lawsuit by industry participants on CoinDesk.

Meanwhile, Reuters also reports that from 2019 to 2020, Binance executive Guangying Chen operated five Silvergate Bank accounts belonging to Binance’s “purportedly” independent US affiliate. Read more. Continue reading “Binance and CEO CZ Charged By SEC; House Digital Assets Hearings Today And Tomorrow”

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market structure – the draft

It’s a BIG bill.

Please meet the “Digital Asset Market Structure Proposal” – a 162-page discussion draft of a bill intended to provide “a statutory framework for digital asset regulation intended to provide clarity, fill regulatory gaps, and foster innovation, while providing adequate consumer protections,” according to the release.

See the 162-page discussion draft (PDF).

Notably, the bill combines the efforts of House members and the staffs of the Agriculture and Financial Services (HFS) Committees led by Chairs Glenn “GT” Thompson (R, PA) and Patrick McHenry (R, NC), respectively.

On Friday, Chair McHenry tweeted his thanks across both committees including the related, digital asset subcommittee chairs Rep. Dusty Johnson (R, SD)  and Rep. French Hill (R, AR) adding, “I encourage the public to provide constructive feedback to help us get this right.”

market structure – law?

Judging from the crypto Twitter legal community, this bill is suitably dense and will effect a demonstrable change in the U.S. financial system – if adopted – by defining the market structure for digital assets.

Cutting to the chase…. Will it become law anytime soon?

Alexander Grieve of government relations firm Tiger Hill tweeted a near-term schedule for the bill explaining that “the committees will ‘mark up’ (i.e. live-edit/offer amendments) the legislation in early July; House floor vote potentially some time in late July or Sept…”

Amidst the bill’s challenging road ahead, the two Chairs want input. House Democrats have not been given an opportunity to react to this bill yet, which could, maybe, help create support in the Democratically-controlled Senate. Continue reading “Digital Asset Market Structure Proposal From House; CFTC Advising On Risk”