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 Binance.com 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

SEC Extends Decision On WisdomTree’s Bitcoin ETF Application

The U.S Securities and Exchange Commission (SEC) has postponed its decision on WisdomTree’s Bitcoin exchange-traded fund (ETF) application.

SEC Seeks Public Comments On WisdomTree’s Application

The SEC pushed back its decision to get feedback from the public on WisdomTree’s application. According to the federal securities regulator, public comments would help ascertain whether the ETF would be safe for investors.

The public would be required to communicate their position on whether the ETF should be approved or denied.

The SEC also wants to know if the public thinks that the proposed Bitcoin ETF would be susceptible to market manipulation. It also intends to determine if the ETF is designed to prevent fraudulent and manipulative acts and practices. The SEC explained,

“The Exchange asserts that the manipulation concerns previously articulated by the Commission are sufficiently mitigated to the point that quantifiable investor protection issues outweigh them.”

Members of the public are expected to submit their comments to the Federal Register within 21 days, while rebuttals would be filed 35 days from publication.

The SEC is still struggling to decide on whether to approve an ETF or not. This is the second time the regulator is asking for public comment on the same WisdomTree’s application.

The first time the commission asked for public comments was in April this year, a month after WisdomTree first filed its Bitcoin ETF application. On May 26, the SEC designated even a longer time to approve or disapprove WisdomTree’s proposed rule change.

WisdomTree has been working on ETFs since last year.

In June 2020, the firm applied for an ETF focused majorly on agriculture, energy, and metals, in which 5% of the assets would be invested in Bitcoin futures contracts. In addition to its Bitcoin ETF, the firm also filed for an Ethereum ETF in May this year.

WisdomTree Investments was founded in 2006 as an asset management firm based in the US. The company has subsidiaries in Canada, Europe, and Japan and was established by Jonathan Steinberg.

The SEC Continues Stalling ETF Applications

The SEC is still reviewing several applications for both Bitcoin and Ethereum ETFs. Some of the applications have come from firms like VanEck, Kryptoin, and Fidelity. The regulator is yet to approve any crypto ETF within the US.

Proponents claim that a Bitcoin ETF can help investors by creating a more regulated market. Yet, the SEC continues to stall while citing volatility and market manipulation as key concerns in rejecting the ETF applications.

Former chairman of the US Commodity Futures Trading Commission (CFTC), Timothy Massad, recently urged the SEC to approve a Bitcoin ETF. In a Bloomberg opinion piece, Massad said the SEC should look into approving an ETF in a way that would enhance transparency and integrity in the industry.

SEC Commissioner Hester Peirce has also made solid points supporting the approval of a Bitcoin ETF. According to CNBC, Peirce said a Bitcoin ETF approval is overdue and argued that the rejections for such funds are a kind of double standard.

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Author: Jimmy Aki

SEC Delays VanEck Bitcoin ETF Decision Again, Another 45 Day Wait Period

The US Securities and Exchange Commission (SEC) seems to be struggling to make its mind up about Bitcoin exchange-traded funds (ETF). The agency has once again extended the review period for the VanEck Bitcoin ETF application by 45 days.

This is the second time the SEC is delaying its decision on the VanEck Bitcoin exchange-traded fund (ETF) application. The regulator first extended its decision in April 2021.

SEC To Accept Comments On The VanEck Bitcoin ETF Application

According to the order filed on Wednesday, the SEC said it would now accept public input on the proposed rule change surrounding the VanEck Bitcoin ETF. This would help guide its decision on whether to approve the fund or not.

The regulator asked the public for comments on the vulnerability of the ETF to market manipulation and if Bitcoin is suitable as an underlying asset for an ETF.

The commission also wants to know commenters’ views on whether the regulatory landscape relating to Bitcoin and other digital assets has changed since 2016.

The regulatory answer to that question could have deep implications for Bitcoin and other cryptocurrencies like Ethereum, which is also yet to get approval to be used in exchange-traded funds.

Interested people who wish to comment on the proposed Bitcoin ETF have until 21 days after the order is published in the Federal Register and 35 days after publication in the same register for rebuttals.

VanEck had filed for the Bitcoin ETF in December 2020. In March, the Chicago Board Options exchange (Cboe) pleaded for VanEck when it filed a request to list and trade shares of the VanEck Bitcoin fund, thereby putting the SEC on the 45-day clock.

The SEC’s 45-days window, which started in April 2021, was expected to end on June 17, 2021. The latest extension means we don’t know the fate of the VanEck Bitcoin ETF until August 3, 2021.

The SEC typically renders a decision on future applications within 45-day windows but can also take up to 240 days to decide.

The US Continuous Delay In Approving A Bitcoin ETF

Despite the change in leadership at the SEC, the agency has so far shown no sign of approving any Bitcoin ETF anytime soon.

The agency has often cited fraud and market manipulation as obstacles to its approval, but applicants have made arguments as to why those issues are blown out of proportion.

Apart from VanEck, there have been at least seven other applications of firms seeking to launch competing funds but none has been approved.

Given the SEC’s continued delay in approving the ETFs of firms like VanEck, WisdomTree, Kryptoin, and Fidelity Investments, many do not expect approval soon.

However, Canada remains one of the most progressive countries in terms of ETFs. Over the past few months, the North American nation has approved both Bitcoin and Ether ETFs.

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Author: Jimmy Aki

SEC’s 2021 Regulatory Agenda Does Not Include Bitcoin or Crypto

With cryptos like Bitcoin deemed not securities, they fall out of the SEC’s jurisdiction, and the agency has no legal authority to regulate the crypto space while continuing to postpone the decision on Bitcoin ETFs.

The US Securities and Exchange Commission (SEC) has released its regulatory agenda for 2021, but Bitcoin is not part of it.

Its focus is rather on short-selling, a topic that gained momentum after the retail mania with meme stocks GameStop and AMC Theaters.

The SEC’s agenda shows the regulator will focus on climate risks, market structure modernization, and transparency around stock buybacks, short sale disclosure, securities-based swaps ownership, and the stock loan market.

Investment fund rules, enhancing shareholder democracy, special purpose acquisition companies, and mandated electronic filings are other things on the agenda. SEC Chair Gary Gensler said,

“To meet our mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation, the SEC has a lot of regulatory work ahead of us.”

“I look forward to collaborating with my fellow commissioners and the dedicated staff to propose and finalize rules that will strengthen our markets, increase transparency, and safeguard investors.”

The fact that the SEC deems cryptocurrencies like Bitcoin, not securities, fall out of the SEC’s jurisdiction. Basically, SEC has no legal authority to regulate the crypto space, and there’s no clarity around which regulatory body non-security crypto assets fall under.

“Laws need to change before the SEC has authority over bitcoin,” said Jeff Dorman, CIO at Arca.

Meanwhile, the approval of a Bitcoin exchange-traded fund (ETF) is in no way close to being done despite several companies having filed for both Bitcoin and Ether ETFs.

SEC has already postponed its decision on VanEck’s Bitcoin ETF, and on Monday, it delayed another one, Kryptoin ETF, by 45 days to July 27.

SEC’s new chairman Gary Gensler, who has taught blockchain classes at MIT and was expected to be crypto-friendly, recently said that cryptocurrencies are a “highly volatile asset class” and that the public would benefit from more investor protection on the crypto exchanges.

“There’s a lot of authority that the SEC currently has in the securities space, and there are a number of cryptocurrencies that fall within that jurisdiction but there are some areas, particularly bitcoin-trading on large exchanges, that the public is not currently really protected.”

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Author: AnTy

SEC Extends Kryptoin’s Bitcoin ETF Application By 45 Days

The US Securities and Exchange Commission (SEC) has extended the review period for Kryptoin’s Bitcoin exchange-traded fund (ETF) application.

The regulator disclosed the update in a notice dated June 9. The SEC said its decision would be delayed for another 45 days, ending July 27, 2021.

SEC Delays Another ETF Application

The delay of the Delaware-based investment advisory firm’s application makes it the latest extension the SEC has announced in the last few weeks.

Last month, the SEC postponed WisdomTree’s Bitcoin ETF application review by 45 days. VanEck’s bid got a similar treatment in April.

According to the agency’s notice, Kryptoin’s application was delayed to allow it to have adequate time to consider the proposed rule change. The notice said,

“The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the comments received.”

Kryptoin first applied for a Bitcoin ETF in 2019, and after a year and a half of inactivity, the firm filed for an amendment in April this year.

In its first filing, Kryptoin chose to list its shares on the New York Stock Exchange but later changed it to Cboe BZX in its amended filing. Both WisdomTree and VanEck also named Cboe as their planned listing exchange.

The Kryptoin ETF provides exposure to Bitcoin using the CF Bitcoin US Settlement Price as its pricing mechanism.

Founded in 2016, Kryptoin Investment Advisors is a financial services company run by Jason Toussaint.

Will The SEC Approve A Crypto ETF This Year?

The US is yet to allow a Bitcoin-based ETF, with the SEC pointing to the Bitcoin market’s vulnerability to manipulation, among other concerns, as its rationale for rejecting all such applications.

At the moment, there are eight active ETF applications before the SEC. Apart from the previously mentioned VanEcK and WisdomTree, other firms that have filed for Bitcoin-based ETFs include NYDIG, Valkyrie, SkyBridge Capital, Simplify, and Fidelity.

WisdomTree and VanEcK are the only two companies that have also filed for Ethereum ETFs in addition to their Bitcoin ETFs.

This signifies that Ethereum ETFs are gaining more popularity as retail and institutional investors look to gain exposure to the digital asset without investing in it directly.

Several factors have driven Ethereum’s popularity and increasing institutional adoption among investors. These include decentralized finance (DeFi), non-fungible tokens (NFTs), and improvement in the crypto asset’s infrastructure. A planned upgrade from proof-of-work (PoW) to proof-of-stake (PoS) has also piqued investors’ interest.

If VanEcK and WisdomTree’s Ether ETF applications are approved, they would be the first set of Ether ETFs in the US, but not the first in North America.

Three Ethereum ETFs have already been approved and are available in Canada on the Toronto Stock Exchange (TSX).

Canada has also approved several Bitcoin ETFs, and these funds have grown exponentially in a few months with massive investor interests. In the US, investors continue to be optimistic that the SEC’s new crypto-conscious chairman, Gary Gensler, will approve an ETF soon.

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Author: Jimmy Aki

Thailand SEC to Targets Decentralized Finance (DeFi), Drafts New Regulations

Thailand’s Securities and Exchange Commission (SEC) is set to draft new regulations regarding decentralized finance (DeFi) projects.

DeFi Platforms May Require License Soon

According to reports from Bangkok post, DeFi platforms may require a license to operate in Thailand soon.

Per the SEC statement, the new regulation would target DeFi protocols that issue tokens. The statement reads,

“The issuance of digital tokens must be authorized and overseen by the Securities and Exchange Commission, and the issuer is required to disclose information and offer the coins through the token portals licensed under the Digital Asset Decree.”

The SEC clampdown on the country’s DeFi sector follows the listing of the token of local DeFi protocol Tuktuk (TUK) Finance on cryptocurrency exchange Bitkub Chain.

Following its debut, TUK soared in value to the tune of “several hundred dollars” before crashing to $1 a few minutes after.

Speaking on the new wave of regulations, the CEO of Ava Advisor, Niran Pravithana, said that it was important that the announcement was made due to the several fraudulent tokens issued recently.

Pravithana added that criminals behind the fraudulent tokens use messenger applications like Telegram and manipulate the token prices.

Dome Charoenyost, the founder of Tokenine, also supported the new policy, saying that the law gives the SEC the authority to regulate coin issuance and supervise licensed intermediaries.

Thailand Tightening Crypto Regulations

Thailand laid out more regulations in the cryptocurrency industry this year, which could be attributed to the booming crypto adoption in the country.

In April, data compiled by the Thai SEC and released by Bloomberg indicated a combined volume across licensed Thai crypto exchanges increased from 574.5 million in November 2020 to $3.96 billion in February this year.

The number of registered Thailand crypto accounts on exchanges in Thailand also spiked from 160,000 in 2020 to nearly 700,000 at the start of May 2021.

Upon seeing the increasing usage of crypto exchanges, Thailand’s financial regulators introduced new rules regarding account creation at crypto-asset exchanges.

Last month, Thailand’s Anti-Money Laundering Office introduced strict know-your-customer (KYC) protocols. The regulator wants crypto exchanges to verify the identities of new customers in-person using a “dip-chip” machine.

The dip-chip machines require customers to be physically present for the verification process. This is because the machines operate by scanning the Thai citizen ID cards. Despite the government’s move on the DeFi space, financial institutions have remained receptive to the sector.

The Siam Commercial Bank announced a $50 million investment fund in February, and Thailand’s Fourth-Largest Bank Kbank disclosed its usage of DeFi services in exploring a new project.

In the same vein, the Brooker Group, a financial consultancy firm, revealed plans to invest nearly $50 million in decentralized finance (DeFi) and decentralized application (dapp) projects last month.

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Author: Jimmy Aki

After Several Years, The SEC Charges BitConnect Promoters

The US Securities and Exchange Commission (SEC) charged five individuals for promoting the global unregistered digital asset securities offering, BitConnect, that raised over $2 billion from retail investors between January 2017 to January 2018.

BitConnect organized a global network of promoters through referral commissioners and used them to sell securities in its “lending program” without registering the securities and themselves as broker-dealers with the Commission as required by federal security laws, the SEC said on Friday.

The agency alleged Trevon Brown, Michael Noble, Crag Grant, and Ryan Maasen, among the promoters advertising to prospective investors through YouTube videos. Joshua Jeppesen, who represented BitConnect at conferences and acted as a liaison between the company and promoters, is also charged by the agency.

In its charges, the SEC said BitConnect told investors that it would use their funds to trade in, profit from the volatility, and promised to pay investors the profits. Reportedly, BitConnect promised as much as 40% per month.

“We will seek to hold accountable those who illegally profit by capitalizing on the public’s interest in digital assets,” said Lara Shalov Mehraban, Associate Regional Director of SEC’s New York Regional Office.

The SEC’s complaint charges the promoter defendants with violating the registration provisions of the federal securities laws and seeks injunctive relief, disgorgement plus interest, and civil penalties.

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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

VanEck Files for the First Ethereum ETF in the US

While awaiting a decision on its Bitcoin ETF, which the Securities and Exchange Commission has postponed to July, VanEck filed for an Ethereum exchange-traded fund (ETF).

If approved, the VanEck Ethereum Trust would hold Ether and value its shares daily based on the MVIS CryptoCompare Ethereum benchmark rate and list those shares on the Cboe BZX Exchange, as per the filing with the SEC.

While the first one in America, already three Ether ETFs are trading in Canada after making their debut last month.

“Canada approving Ethereum ETFs so quickly on the heels of Bitcoin ETFs is part of the reasoning for this filing,” said James Seyffart, ETF analyst for Bloomberg Intelligence.

“I don’t see the SEC approving an Ethereum ETF until we have a Bitcoin ETF that has already begun trading. It’s possible that other issuers will follow suit because VanEck has been leading the charge with these filings in the last five months or so.”

While at least eleven companies are looking to launch a crypto ETF, US regulators have yet to approve a single one. Nine companies have filed for applications since the end of 2020.

Meanwhile, a small exchange-traded fund that changed its ticker to BTC last month is now reversing the move.

The issuer of ClearShares Piton Intermediate Fixed Income ETF said in a brief filing with the SEC this week that it will revert to the ticker PIFI from May 11, without any explanations for the same.

While initially, it looked like a bull market thing, a company trying to ride the coattails of crypto’s success, later, as we reported, there was speculation that Grayscale Investment might be the one looking to launch its ETF through ClearShares.

Grayscale said at the time that it was taking a stake in ClearShares and then later announced that it was “100% committed” its GBTC product into an ETF.

This switch to ETF resulted in assets in the Piton Intermediate Fixed Income ETF almost doubling to $62 million, with all of the new inflow coming in a single day shortly after the symbol change to BTC.

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Author: AnTy

SEC Moves To Expunge XRP Holders From Ongoing Ripple Lawsuit With Latest Filing

The US Securities and Exchange Commission’s ongoing lawsuit against blockchain firm Ripple Labs and its executives has taken a new twist.

SEC Files Opposition To Motion To Intervene

In a recent release, the agency filed a motion to stop XRP holders from intervening in the ongoing lawsuit. The filing termed the “Memorandum of Law in Opposition of the Motion to Intervene” seeks to ensure no third party is involved in the ongoing case.

The government agency said this is because the movants have no stake whatsoever and cannot be called in as reliable witnesses due to their association with the defendants.

It also noted that their grievances are properly represented by Ripple Labs and the company’s chairman Chris Larsen and CEO Brad Garlinghouse.

The SEC noted that this is not the first occasion the movants have tried infusing themselves into the case, citing their first filing in the Rhodes Island District Court.

It, however, said that the XRP holders might force the agency to take up a legal case against the body of interested movants since there has not been any reason to bring them into the matter.

The SEC said that this intervention is summarily against the agency’s sovereign immunity, and if the courts decide to let them state their case, it may be forced to bring in other disgruntled investors who feel the defendants were not honest in their dealings with them.

The financial agency also explained that the movants’ cause is a lost one given the fact that whatever funds they lost following the lawsuit on secondary markets cannot be recovered as they are not a party to the case.

The SEC said the recent filing by the lead counsel for the movants Jordan Deaton lacked any new substantive argument as they have repeatedly borrowed from the defendants’ narrative of XRP not being a “security.”

It says this sustained discourse is similar to XRP’s position and shouldn’t, therefore, be allowed to stand in order not to foster delay and confusion.

The regulatory body also jabbed at Deaton’s motive, subtly stating that this could be a platform for the lawyer to gain Twitter prominence following the growing media attention surrounding the case.

Ripple Scaling Up Despite SEC Lawsuit

The SEC’s lawsuit in the closing days of 2020 adversely affected Ripple Lab’s partnerships and its utility token’s valuation in the secondary market.

Following the December filing by outgoing Chairman Jay Clayton, crypto exchanges in the US swiftly delisted the XRP token from their platforms. If that weren’t enough, key partnerships with US companies, went underwater with MoneyGram reneging its agreement with the embattled company.

Ripple CEO Garlinghouse had noted that most of the blockchain company’s business was executed overseas, citing the regulatory haze in the American nation as a deterrent to innovative banking in the country.

He also pointed out that only the US SEC has a problem with the XRP token given that Asian nations, the area XRP has the most influence, do not classify the digital token as a “security.”

In the months that followed, XRP dropped from the 4th most valuable crypto position to the bottom ten, and its value traded way below a dollar.

But following preliminary victories in the opening case with the SEC, the XRP has rallied significantly, and calls for the digital payment firm to be relisted on exchanges have begun making the rounds.

And as the general crypto market has rallied, the XRP token has surged after it rose 17% in April and momentarily reclaimed its position as the 4th most valuable cryptocurrency.

The San Francisco-based fintech company has also been strategically repositioning itself since the SEC lawsuit was made public. Ripple said it was launching a private version of its XRP Ledger Protocol tailored for national banks in a release on its website. This private protocol would help apex banks in the issuance, maintenance, and monitoring of central bank digital currencies (CBDCs), set to serve a secondary role to fiat.

The US tech company also recently appointed former US Treasurer Rosa Gumataotao Rios as a board member. Alongside, financial veteran Kristina Campbell will serve as the company’s Chief Financial Officer (CFO).

Rios’ former role as the currency maker is seen as a strategic move to sell the idea of digital currencies to anti-crypto critics. Campbell would be tasked with the responsibility of accelerating the company’s growth while delivering value to shareholders.

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Author: Jimmy Aki