ether – FinTech and Blockchain Law Watch

Metamorphosis: Digital Assets and the U.S. Securities Laws

Jun 28 2018

By Robert M. Crea, Anthony R.G. Nolan and Eden L. Rohrer

In the past year, the U.S Securities Exchange Commission (“SEC”) and Chairman Jay Clayton have repeatedly cautioned the cryptocurrency and initial coin offering (“ICO”) industries about the securities law implications for digital assets. On February 6, 2018, in testimony before the Senate Banking Committee, Chairman Clayton notably asserted that “[e]very ICO I’ve seen is a security.”

However, on June 14, 2018, William Hinman, the SEC’s Director of the Division of Corporation Finance, stated that, putting aside the fundraising that accompanied the creation of Ether, “current offers and sales of Ether are not securities transactions.” This statement was based on a novel theory of evolving decentralization that may very well have significant ramifications for cryptocurrency and ICO markets.

Please see our latest K&L Gates HUB article for a discussion about the context and implications for Director Hinman’s conclusions surrounding Ether. It also analyses the specific factors he suggests weighing in determining whether a given digital asset is a security.

New FCA “Dear ICO” Letter warns of financial crime associated with cryptocurrencies

Jun 14 2018

By Judith E. Rinearson and Rizwan Qayyum

On June 11 2018, the Financial Conduct Authority (the “FCA”) issued a “Dear CEO” letter, which provided guidance for banks on how to handle the growing risks associated with “cryptoassets”.

The FCA defines “cryptoassets,” using Bitcoin and Ether as an example, as “any publicly available electronic medium of exchange that features a distributed ledger and a decentralised system for exchanging value.” While acknowledging that there are “many non-criminal motives” for using cryptoassets, the letter asserts that these products can be abused because they offer “potential anonymity and the ability to move money between countries.”

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