Stock Tokens, Even on Decentralized Platforms, Must Adhere to Securities Laws: SEC Chair

Stock Tokens, Even on Decentralized Platforms, Must Adhere to Securities Laws: SEC Chair

The US Securities and Exchange Commission (SEC) is renewing its efforts to impose “long overdue” rules for the registration and regulation of security-based swap execution facilities, including tokenized stocks, said Chair Gary Gensler on Wednesday.

In his prepared speech, Gensler said he wanted the SEC to coordinate such derivatives rules with those already in place at the Commodity Futures Trading Commission (CFTC), which has the bulk responsibility for overseeing derivatives.

When it comes to the cryptocurrency industry, Gary Gensler emphasized that any crypto token priced off the value of securities, be it a stock token, a stablecoin backed by securities, or any other product providing synthetic exposure to securities; must adhere to securities laws, even if offered on a decentralized platform.

“These platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime,” he said in a speech at the American Bar Association Derivatives and Futures Law Committee Virtual Mid-Year Program.

While the SEC has brought some cases involving retail offerings of security-based swaps, “there may be more,” added Gensler.

Regarding tokenized stocks, the leading cryptocurrency exchange Binance has been asked by authorities in Germany and Hong Kong to stop offering these products.

Last week, the exchange announced that they are “winding down” support for these tokens on effective immediately and would no longer be available on its website after October 14.

In other news, the US Banking, Housing, and Urban Affairs Committee will be conducting an open session called “Cryptocurrencies: What are they good for?” next week on July 27.

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Author: AnTy

Poloniex To Face Regulatory Action For Violating Securities Laws In Canada

Poloniex To Face Regulatory Action For Violating Securities Laws In Canada

The Canadian securities regulator, the Ontario Securities Commission, has accused the cryptocurrency exchange Poloniex of flouting Ontario securities law.

Ontario Regulator Files Statement Of Allegations Against Poloniex

The regulator filed a statement of the allegation on Tuesday, claiming that Poloniex failed to seek approval as a crypto trading platform operating in the province.

The Canadian agency identified Poloniex’s crime of holding digital assets in custody as a third party and argued that any assets held on a trading platform could be securities. The regulator went on to explain:

“While Poloniex purports to facilitate the trading of the crypto assets in its investors’ accounts, in practice, Poloniex only provides its investors with instruments or contracts involving crypto assets. These instruments or contracts constitute securities and derivatives.”

The regulator currently seeks CA$1 million ($830,000) fines for each “failure to comply.” The first hearing on the matter is scheduled for June 18.

The OSC had previously warned crypto exchanges in the province that trade securities and derivatives to get in contact with the regulator or face regulatory action.

The agency set a deadline of April 19, 2021, for exchanges to comply with the registration requirement, which had more than 70 exchanges in compliance. However, Poloniex did not take part.

Cryptocurrencies Labelled As Securities

As the crypto market encounters a volatile period amid worldwide support, regulators have become more cautious about enforcing regulations.

However, one thing that has stirred confusion regarding cryptocurrency regulations is identifying what type of digital assets are labeled as securities. In the US, regulators like the Securities and Exchange Commission have targeted crypto firms for selling tokens as unregistered securities.

A good example is Ripple Inc, the payment solutions provider sued by the SEC in December last year for allegedly selling its XRP tokens in unregistered security offerings to investors. In March, the SEC also sued crypto startup LBRY Inc, accusing the company of selling unregistered securities in the form of its token.

Unlike the US, Canada has been more friendly regarding crypto regulations. The North American country is also the first to support Bitcoin exchange-traded funds (ETF) in the region.

This year the OSC already approved three Bitcoin ETF issuers. The first two approved include the Purpose Bitcoin ETF (BTCC) and the Evolve Bitcoin ETF (EBIT), both listed on the Toronto Stock Exchange.

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Author: Jimmy Aki

Miami Mayor Confirms Work on Pro-Bitcoin Laws, Urges Others to Follow Suit

Miami Mayor Confirms Work on Pro-Bitcoin Laws, Urges Others to Follow Suit

Mayor Francis Suarez has confirmed the city’s work in pro-crypto regulations. The city is taking a progressive initiative, with Suarez believing that a tech-forward regulatory approach could be beneficial.

Francis Suarez, the mayor of the City of Miami, has been pushing an interesting pro-Bitcoin agenda for some weeks now. In a recent article, the politician spoke about his plans for the currency and possible interactions in his city.

Following Wyoming’s Footsteps

Over the weekend, Mayor Suarez spoke with Forbes Magazine about his love for Bitcoin and hopes for the currency.

In the interview, Suarez plans to make Miami a crypto-friendly city in the United States, following in the footsteps of states like Wyoming and New York.

Expatiating, Suarez confirmed that lawmakers in Miami are working on implementing progressive crypto laws that will run citywide.

The mayor explained that they believe cryptocurrencies are here to stay, and they’re putting plans in place to ensure that no one gets the upper hand over Miami concerning progressive regulation.

Suarez particularly praised the state of Wyoming, which he claimed was being “smart” in adopting cryptocurrencies quickly. The Cowboy State has been in the news recently, following the admission of Cynthia Lummis, a Republican pro-Bitcoin Senator, into the Senate Committee on Banking, Housing, and Urban Affairs.

Lummis has been vocal about her support for cryptocurrencies, having owned Bitcoin as far back as 2013. Speaking with Anthony Pompliano recently, the Senator explained that she was looking to form a Financial Innovation Caucus that will educate several Congress members on cryptocurrencies and blockchain developments.

As Cynthia Lummis explained, the focus is to ensure that crypto regulations that come out of Capitol Hill are from educated and nuanced standpoints – not just hearsay and speculations that paint cryptocurrencies in a bad light. The Senator added that she had been speaking with Treasury Secretary Janet Yellen on crypto laws, and that the policymaker seemed to have an open mind on the subject.

Suarez Has Big Plans for Bitcoin in Miami

Suarez is not ashamed to identify with bitcoin. Last December, he praised the leading cryptocurrency for being a “stable investment” during an “incredibly unstable year,” referencing the significant capital flight into the crypto sector last year due to the coronavirus. The politician added that Miami lawmakers were exploring the idea of the city having America’s crypto-centric government. Last week, Mayor Suarez announced some friendly Bitcoin-focused initiatives in the city. Some of these programas could see government employees receive their salaries in bitcoin payments.

The city is also reportedly working on a crypto payment channel for taxes and the possibility of placing some outfits capital and revenues in the asset. These ideas are still in its early stages, but the Mayor has raised the possibility of a public-private partnership that would allow private firms to bear risks from the government’s crypto investments and be eligible for rewards

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Author: Jimmy Aki

Indian Government Looks to Ban Cryptocurrency Trading With New Law

India is not new when it comes to harsh and unfriendly cryptocurrency laws. Now, Bloomberg reports that the country is set to introduce a new law which will ban cryptocurrency trading within its borders.

Citing anonymous sources, the report states that India’s federal cabinet is set to discuss the bill prior to being sent to the parliament.

The report states that the Indian government will continue encouraging and supporting the growth of blockchain technology but will discourage crypto trading.

In 2018, Indian central bank instituted a ban on all crypto transactions following numerous cases of frauds prior to the sudden decision to ban about 80% of the country’s currency by Prime Minister Narendra Modi. However, the decision was rescinded in March this year after a successful filing of a suit in the Supreme Court by various crypto-based firms operating in the country.

The lifting of the ban saw almost a 450% increase in crypto trading in just two months from March. Paxful, a Bitcoin marketplace, registered a staggering 883% growth from January to May this year representing a growth from $2.2 million to about $22.1 million in revenues. Similarly, India’s largest crypto exchange WazirX registered a growth of 400% and 270% in March and April respectively.

The renewed effort to ban crypto trading comes at a time when the Indian Parliament has reopened following a prolonged break due to COVID-19 pandemic. The bill is likely to be introduced to parliament in this monsoon session which kicked off yesterday and is set to affect over 1.7 million Indians who actively trade in digital assets as well as institutions coming up with platforms to ease crypto trading.

Today’s report appears to be in tandem with June’s news where the nation’s finance ministry was reportedly urging for inter-ministerial consultations on how to ban crypto.

In the recent past, India’s federal government has been exploring possible ways of using blockchain technology to enhance service delivery in different sectors like management of land records, enhancement of pharmaceutical drugs supply chains, management of educational certificates, among others but remains adamant against crypto trading.

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Author: Joseph Kibe

Russia’s New Amendment On Crypto Laws Could See Bitcoin Miners Lose All Their Rewards

  • New reports from Russia confirm amendments in the country’s crypto laws that could ban Bitcoin (BTC) miners from receiving mining rewards.
  • The amendment is yet to be finalized, but experts argue if the law is passed, it could have a drastic impact on the overall use of crypto assets in the country.

As first reported by a Russian news outlet, Izvestia, the Ministry of Finance in Russia, is proposing an amendment to the federal law on digital financial assets (DFA) that could see Bitcoin miners receive no rewards on their efforts. According to the letter, the amendment allows Bitcoin mining using Russian infrastructure, but miners are not allowed to receive rewards in crypto.

The amendment further bans all transactions using virtual currencies in the country with three main exceptions. However, the amendment to DFA is yet to be finalized. The letter has been sent out for interdepartmental coordination and approval across different government departments.

A Closed Mining Cycle

The new amendment raises several questions on the implementation and wording of the document. As stated above, Bitcoin, Ethereum, and other crypto miners will be allowed to mine their tokens but will be stripped of its financial value as miners cannot receive BTC or ETH.

Several experts have since condemned the amendment as a “revenue loss” for the country, calling for revisions on the bill. Speaking on the issue, Dmitry Zakharov, CEO of Moscow Digital School, stated the “wording does not bode well for miners” as no other alternative has been offered on how to receive mining rewards. He added,

“Perhaps experts will try to come up with some interesting legal constructions, but all of them will be fraught with significant risks of bringing to administrative and criminal liability.”

If the amendment passes, then Russia could lose a share of its revenues, another expert on the matter said. According to Anton Babenko, partner of the Padva and Epstein law office, prohibiting receiving crypto could lead to more people not reporting their revenues, leading to tax losses.

A Leeway? Or Not?

Russia implemented a total crypto ban last year causing a public outcry that caused the parliament to shut down the ban. The latest amendments stipulate a similar ban – prohibiting any individuals, companies, or entrepreneurs from performing any transactions with virtual money. However, the amendments stipulate three exceptions to the rule – an inheritance of crypto assets, enforcement proceedings, and if a debtor goes bankrupt.

Any use of crypto in the country could lead to legal and criminal liability on the user with a 100 thousand rubles fine on individuals or five to seven years prison time and up to 1 million in fines for legal entities.

The new rules aim at tightening the use of cryptocurrencies in Russia in a bid to stop illicit items and illegal activities using Bitcoin and crypto in Russia. According to a law expert, the new amendment constitutes a “total ban on cryptocurrencies” which could have a severe impact on the countries crypto space.

The country’s policies on crypto could be a missed opportunity for the country, economist, Vladislav Ginko said earlier this month even as Russia extends its efforts in hoarding physical gold.

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Author: Lujan Odera

Irish Govt to Target Cryptocurrencies Use in Money Laundering And Terror Financing

The Irish government aims to implement stricter and more stringent laws to curb money laundering and terrorism financing in its financial system, including digital assets. In a report first published by Irish Examiner, the Cabinet is set to approve Justice Minister Helen McEntee’s bill, Money Laundering and Terrorist Financing Amendment Bill 2020, to place more stringent AML/CFT laws within Ireland.

As the only remaining English-speaking state in the EU, Ireland aims to see through the implementation of the proposed EU AMLD 5 directives by including cryptocurrency service providers. The bill also follows the Travel rule, which targets the regulation of virtual asset service providers (VASPs) such as crypto wallets and exchange providers and custodians.

The report further states there will be an introduction of new government ‘designated bodies’ to keep in check money laundering and terrorist financing after the bill is signed into law.

While the bill focuses on cryptocurrencies at length, traditional financial systems will also be under the spotlight, the Justice Minister said. Some provisions in the law state that traditional banking systems will also introduce tougher customer due diligence (CDD) processes to ensure the integrity of the financial transactions.

Moreover, the law prevents banks and financial institutions from creating anonymous safe deposit boxes for their customers in a bid to increase transparency. Corporate entities registered in the country will also be forced to disclose their ownership and funding fully.

The Irish authorities started clamping down on VASPs earlier in the year as these crypto services were denied any services by the banking institutions, slowing down trading processes. Most of the banks blamed the slow process of implementing the EU AMLD5 directive and lack of a clear path to regulate crypto in the country.

Expressing his frustrations at the time, CEO of Irish crypto exchange, Boinnex, Bryan Tierney said,

“Entering into a formal relationship with entities carrying out this type of business activity is outside of our risk appetite at this time.”

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Author: Lujan Odera

Ripple Submits A Policy Framework To Guide Indian Lawmakers In Regulating Digital Assets

  • The lack of robust laws or policies to guide the growth of crypto in India leaves enthusiasts with frightening thought of the Parliament probably taking steps towards banning crypto altogether.
  • In a bid to prevent this, American startup, Ripple, and largest custodian of XRP released a policy paper to guide digital assets legislation in the country.

India’s blockchain and digital assets industry is currently in limbo as the uncertainty rises from the country’s regulators’ view on crypto assets. Despite the Supreme Court of India ruling in favor of lifting the “unconstitutional” draconian ban on crypto by the Reserve Bank of India (RBI), the authorities are yet to draft a legal document regulating digital asset ecosystems.

“The Path Forward for Digital Assets Adoption in India”

The paper (titled as above) proposes short and medium-term policy frameworks to lawmakers in India in a bid to boost the overall development of blockchain and digital asset solutions in the country. The paper is filled with Ripple settlement networks and XRP advertisements but still offers a clear path on India coming into the global play in regulating the digital asset taxonomy.

In a statement on the release of the policy framework Sagar Sarbhai, Ripple’s Head of Government & Regulatory Affairs in the APAC region said:

“India is currently presented with an opportunity to develop a regulatory framework for a native digital assets ecosystem. We are optimistic about that after careful deliberation and consultation with industry participants.”

The draft submitted to the Indian legislation employs a “technology-agnostic, principles-based, and risk-adjusted” framework to provide a crisp and clear guidance structure in India.

Short and Medium-Term Plans

Ripple’s paper also offered short and medium-term plans for the Indian legislators, including attracting talent to the Gujarat International Finance Tec-City (GIFT) by drafting a short term digital asset framework for service providers.

The proposal focuses on the development of enterprise use cases for digital assets such as XRP. The paper further touted XRP’s potential in solving the cross border settlement problems across the region.

Furthermore, the paper also calls for the removal of digital assets, cryptocurrencies, and services arising from the “negative listing” in the RBI fintech regulatory sandbox framework. This allows developers the needed freedom to innovate and test their networks within a safe, regulated space. Navin Gupta, Ripple’s managing director in Asia, said:

“Under a clear regulatory framework, individuals and businesses can confidently take full advantage of and operate within a safe environment that encourages the use of innovative technology.”

The digital asset field in India is begging for a regulated platform with exchanges in the country recently approaching the central bank regarding taxation clarity.

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Author: Lujan Odera

Are Lawmakers in the US Allowing Pro-Crypto Bills To Be Written by Insiders?

  • Wyoming is the only crypto hub found in the United States.
  • Companies are still subjected to federal laws, when it comes to launching projects in the states.

With less than 600,000 people in Wyoming, the state has one of the lowest populations in the US. However, the many developments in the cryptocurrency industry locally have made it like a haven for these businesses. So far, there have been 13 separate laws that should help with the development of blockchain technology, introducing businesses from throughout the country.

Unfortunately, this victory comes with a little bit of a downside, as the state pushes quickly to secure their place as a mecca for crypto businesses. The founding member of the Wyoming Blockchain Coalition, Robert Jennings, remarked that many cryptocurrency holders with some kind of stake in the market have been bringing forth bills without any resistance from lawmakers that still don’t understand the technology being promoted. Jennings added,

“There is no dissent or questioning of the ramifications of making Wyoming a so-called ‘cryptocurrency haven.’”

Even though it is clear that Wyoming is setting the bar for other states that may be hesitant to get involved with cryptocurrency, the new laws are still not very significant. A Blockchain lawyer at Kobre & Kim, Benjamin Sauter, stated that the permissive laws make it hard for companies to reap the benefits. Furthermore, the firms are required to follow the federal securities laws already in place. With this small progress, the US Securities and Exchange Commission still hasn’t fully gotten on board with cryptocurrency.

Wyoming established itself as the first US state to decide to consider digital assets to be legal property. Caitlin Long, a veteran of Wall Street, is the current leader of the Wyoming Blockchain Coalition, and she recently stated that a new crypto-focused bill made it possible for state residents to secure 401k services involving cryptocurrency from Fidelity.

At this point, Wyoming seems to be a loner amongst states, since it is the only cryptocurrency hub in the U.S. Still, that doesn’t mean that there’s no one in positions of power in their corner. Warren Davidson (R-OH), a US Congressman, suggested tokenizing the US dollar in remarks made in September. Davidson is known for creating the Token Taxonomy Act.

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Author: Krystle M