According to press accounts, the SEC recently issued dozens of subpoenas and Requests For Information seeking details about the targeted initial coin offerings. The correspondence accompanying the subpoenas and RFIs also reportedly make an unusual offer – in lieu of producing voluminous documents the subpoena recipients may voluntarily appear at the SEC’s office to answer questions.
By Jim Bulling and Edwin Tan
The Australian Securities Exchange (ASX) has recently provided several comments in relation to entities that are listed or looking to list on the ASX that are involved in cryptocurrency-related businesses, such as developing cryptocurrency tokens, conducting Initial Coin Offerings and operating cryptocurrency exchanges.
By Rizwan Qayyum
The Swiss Financial Market Supervisory Authority (“FINMA”) have published guidelines on initial coin offerings, after receiving numerous requests for guidance from start-ups aiming to launch their own ICO and considering Switzerland as their jurisdiction. Having reviewed the document, its evident that FINMA have aimed to create a regulatory environment which balances the central tenet of consumer protection whilst existing in an ecosystem conducive to innovation. The guidelines can be found here.
FINMA CEO, Mark Branson commented: “The application of blockchain technology has innovative potential within and far beyond the financial markets. However, blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework. Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system”.
FINMA notes that they have identified a sharp increase in the number of ICOs planned or executed in Switzerland, alongside the increased activity relating to enquiries about the current regulatory framework and its applicability.
The French Autorité des Marchés Financiers has recently published a synthesis of the contributions it received in response to its public consultation on Initial Coin Offerings (ICOs) to obtain stakeholder views on how these new types of blockchain offerings might be regulated.
The consultation included a presentation of ICOs, a warning on the risks they present, a legal analysis of ICOs with respect to the rules overseen by the AMF and the regulatory options proposed by the AMF. Respondents were invited to give their views on all of these points.
The English version of the synthesis can be found here and our previous coverage of the consultation can be found here.
By Rizwan Qayyum
On February 20, Germany’s financial regulator, the Federal Financial Supervisory Authority (“BaFin”) published a letter of advice on ICOs. This is the second statement from BaFin on the matter and it provides more substance to how they expect to manage the growing interest in ICOs within Germany.
The letter (an English version is not available at this time) notes that BaFin will conduct a “precise case-by-case examination” of tokens issued via ICOs to determine their legal status and application under current regulations. As such they have stopped short from issuing any sector specific guidance.
The letter is available here
By Dan S Cohen
With unanimous support, the Wyoming House of Representatives passed House Bill 19, which exempts virtual currencies from the state’s money transmission law. HB 19 defines virtual currency as a digital representation of value that is used as a medium of exchange, unit of account, or store of value, and is not recognized by the federal government as legal tender. If enacted, the Wyoming Money Transmitter Act would no longer apply to the buying, selling, issuing, or taking custody of virtual currency, or receiving virtual currency for the purpose of transmitting that currency within or outside of the United States.
The proposed change comes almost two years after Coinbase announced its indefinite suspension of business in the state due to its belief that the Wyoming Division of Banking interpreted the Wyoming Money Transmitter Act to apply to entities offering hosted wallet services. Wyoming would become the first state to completely exempt virtual currency from its money transmitter law if the bill is adopted. To date, Illinois, Kansas, Tennessee, and Texas have issued guidance excluding some but not all virtual currency activities from their respective money transmitter laws.
HB 19 is one of several virtual currency and blockchain-related bills the Wyoming legislature is considering. Bills to exempt “utility tokens” from securities regulation, and to allow companies to store records and accept shareholder votes through blockchain technology are also under consideration. Wyoming political leaders are clearly moving quickly to adapt to the rise of virtual currency and blockchain technology.
By Rizwan Qayyum
The Government of Malta has issued a consultation paper on the framework relating to distributed ledger technology, ICOs and cryptocurrency exchanges and wallet providers dealing in such assets. This follows their initial Discussion Paper on ICOs and Virtual Currencies published in November 2017, which outlined the basis for this consultation paper.
The time and expense of applying for state money transmitter licenses can be an incredibly steep barrier to entry for many fintech and cryptocurrency businesses. Seven states—Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas, and Washington (collectively, “Signatory States”)—have taken an initial step to lower that barrier. They have signed an agreement (“Protocol”) aimed at expediting and simplifying the application process for money services businesses. The Conference of State Bank Supervisors (“CSBS”) announced the agreement and indicated other states are expected to join.
By Rizwan Qayyum
Hong Kong’s Securities and Futures Commission (“SFC”) have issued formal warnings to seven cryptocurrency exchanges and seven issuers of initial coin offerings. This follows their initial statement on ICOs released on 5 September 2017, and represents their first regulatory action.
The SFC has sent letters to seven cryptocurrency exchanges “in Hong Kong or with connections to Hong Kong”, which provides a warning that they should not be trading cryptocurrencies which are “securities” as defined in the Securities and Futures Ordinance (“SFO”) without a licence. The exchanges responded immediately, either by confirming that they do not provide trading services for such currencies or took rectification measures, including removing relevant cryptocurrencies from their platforms.
By Jim Bulling and Edwin Tan
The Australian Government has today released a report into Open Banking in Australia that sets out recommendations in relation to the method of implementation and proposed timelines. Some key points are:
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