Archives: Regulatory Compliance

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U.S. Securities and Exchange Commission Publishes Joint Statement on Broker-Dealer Custody of Digital Asset Securities

On July 8, 2019 the U.S. Securities and Exchange Commission (the “SEC”) and the Financial Industry Regulatory Authority (“FINRA”) (both, the “Regulators”) published a Public Statement titled, “Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities” (the “Joint Statement”).  The Joint Statement follows many months of discussions with certain digital asset securities industry participants … Continue Reading

Financial Action Task Force Publishes Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers

On June 21, 2019 the Financial Action Task Force (the “FATF”), published its long-awaited Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (the “Guidance”).  The FATF is tasked with setting standards and promoting effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related … Continue Reading

FINRA Issues First Litigated Enforcement Action Against Crowdfunding Portal

 On June 5, 2019, a Financial Industry Regulatory Authority (FINRA) panel handed down its first enforcement action against a funding portal. DreamFunded, a crowdfunding platform, was banned from FINRA membership, and Manny Fernandez, DreamFunded’s CEO, was barred from association with any FINRA funding portal member. DreamFunded and Fernandez were further ordered to cover $15,900 in … Continue Reading

Consultation Paper published by UK Jurisdiction Taskforce to clarify the legal status of cryptoassets and smart contracts

The UK Jurisdiction Taskforce (UKJT) recently published a consultation paper requesting submissions from stakeholders working with, or interested in, cryptoassets, distributed ledger technology (DLT) and smart contracts. Submissions will inform a legal statement by UKJT which will aim to settle questions on the legal status of cryptoassets and smart contracts. UKJT is drawn from industry, government and … Continue Reading

R. Raphael & Sons plc fined over £1.8 million by FCA and PRA for their card services programme

R. Raphael & Sons plc (Raphaels) has received fines totalling £1,887,252 from the FCA and PRA for repeated failings in relation to inadequate systems and controls supporting the oversight and governance of its outsourcing arrangements. Raphaels outsourced certain functions that supported payment services for its prepaid and charge card programmes in the UK and Europe to … Continue Reading

SEC Releases Commentary Applying Howey Test to Digital Assets

On April 3, 2019, the U.S. Securities and Exchange Commission (SEC) took a first step toward providing greater clarity on the key question of how to evaluate whether transactions involving issuance or sales of digital tokens are sales of securities subject to U.S. securities laws and regulations. To read the full client alert, please visit … Continue Reading

European Banking Authority revised Guidelines on Outsourcing – Quickfire Briefing

Background – the European Banking Authority (EBA) issued at the end of Feb 2019 its revised Guidelines on Outsourcing arrangements (Guidelines). These are the first wholesale update since 2006 when the guidelines applied exclusively to credit institutions.  They now apply to a broader range of in-scope financial institutions (FIs). Timings – the Guidelines will apply … Continue Reading

CFTC Technology Advisory Committee Discusses Automated Trading, Cryptocurrency, Cybersecurity, and Blockchain Technology

The Commodity Futures Trading Commission (“CFTC”) held a public meeting of the Technology Advisory Committee (“TAC”) on March 27, 2019.  The TAC is sponsored by CFTC Commissioner Brian Quintenz and Daniel Gorfine, Director of LabCFTC, is the Designated Federal Officer.  The TAC, comprised of industry business, technology, and legal minds, meets periodically to discuss pressing … Continue Reading

Ringgold II: Court Reverses Course on Preliminary Injunction of Digital Token

As detailed in a prior post on this blog, the United States District Court for the Southern District of California previously denied the U.S. Securities and Exchange Commission’s (SEC) request for a preliminary injunction against Blockvest, LLC and its founder and chairman Reginald Buddy Ringgold, III (Ringgold).  Recently, upon reconsideration, the court changed course, finding … Continue Reading

Lessons Learned – The Importance of Governance and Regulatory Oversight in Storing Crypto Assets

Quadriga “Loses” Keys to Stored Digital Assets Quadriga, Canada’s largest cryptocurrency exchange, is unable to gain access to about $145 million (USD) of bitcoin and other digital assets following the sudden death of Gerald Cotten, its co-founder and CEO, in December 2018.  According to Quadriga, Cotten stored those digital assets in a “cold wallet” on … Continue Reading

The sandbox goes global – Launch of the Global Financial Innovation Network

The UK’s Financial Conduct Authority (FCA) has announced the launch of the Global Financial Innovation Network (GFIN), an association of 29 regulatory bodies (Members) which will cooperate to promote innovation and share experiences and approaches to supervising new technologies in the financial services sector. The proposal to launch the GFIN was set out in a … Continue Reading

UK Treasury Committee to appoint special advisor to oversee financial services technology shortcomings

At the end of 2018 the UK Treasury Committee announced that it would launch an inquiry into information technology (IT) failures in the financial services sector. The Treasury Committee has stated that it will appoint a specialist advisor to help provide analysis and aid the inquiry. The past 18 months have seen numerous IT failures in the … Continue Reading

Federal Court denies SEC Injunction in Blockvest ICO

On November 28, 2018, the United States District Court for the Southern District of California denied the U.S. Securities and Exchange Commission’s (SEC) request for a preliminary injunction against Defendants Blockvest, LLC (Blockvest) and Blockvest’s founder and chairman Reginald Buddy Ringgold, III (Ringgold). Securities and Exchange Commission v. Blockvest, LLC, et al.[1] The SEC alleged … Continue Reading

SEC settlement of two ICOs based on sales of unregistered securities: No fraud claims asserted

On Friday, November 16, 2018, the U.S. Securities and Exchange Commission (SEC) announced that it settled two cases against digital token issuers. The settlements, one with CarrierEQ Inc. (AirFox) and the other with Paragon Coin Inc. (Paragon), are the first time that the SEC has imposed civil penalties on companies solely for offering digital tokens … Continue Reading

SEC in First Enforcement Action Against Token Exchange

On November 8, 2018, the U.S. Securities and Exchange Commission (the “SEC”) settled its first case against an unregistered cryptocurrency exchange.  Zachary Coburn, founder of EtherDelta, agreed to pay $313,000 in disgorgement and interest, along with a civil fine of $75,000, in order to settle SEC allegations that EtherDelta was acting as an unregistered securities … Continue Reading

September report details UK digital currency regulations

Last month (September 2018), the House of Commons Treasury Committee issued a report on its inquiry into the regulation of crypto-assets. The inquiry examined, amongst other subjects, the role of digital currencies in the UK; the impact of distributed ledger (blockchain) technology; and how these should be regulated. The report recommends improvements to consumer and anti-money … Continue Reading

German criminal court defies regulatory practice of the financial regulator (BaFin) ruling that Bitcoins are not financial instruments

Unlike in most other European jurisdictions the regulatory practice in Germany has been to treat Bitcoins as units of account and as such financial instruments pursuant to Section 1 German Banking Act (Kreditwesengesetz, “KWG”). The practical consequence of this is that most commercial services surrounding Bitcoins and other cryptocurrencies (including trading, brokerage, operating exchanges, investment … Continue Reading

Federal Regulation of Virtual Currency and Digital Tokens: Preemption, Jurisdiction, and Clarity. But will States Push Back?

In September of this year, certain congressmen expressed their intention to preempt state regulation of virtual currency regulation.  Rep. Darren Soto (D-Fla.) expressed a need for “partial federal preemption” of state laws and Rep. Warren Davidson (R-Ohio) plans to introduce a bill that may seek federal preemption of state licensing and oversight requirements of virtual … Continue Reading

Virtual Currencies and Digital Assets: NFA Disclosure Requirements Further Evidence of Increasing Attention from Self-Regulatory Organizations

In March of this year, the NFA issued a notice reminded futures commission merchants (“FCM”), introducing brokers (“IB”), commodity pool operators (“CPO”) and commodity trading advisors (“CTA”) that trade in, solicit or accept orders in virtual currency products (spot and derivatives) of their ongoing obligation to notify the NFA of such activities by amending the … Continue Reading

Regulation A+: A Path to Market for Crypto Companies?

Most companies considering an Initial Coin Offering to U.S. purchasers have resigned themselves to the fact that their proposed token or coin offering is likely to be considered an offering of securities by the Securities and Exchange Commission (“SEC”) and must be made in compliance with U.S. securities laws. The logical next question then becomes … Continue Reading

Digital Tokens and Coins Advisories and Regulatory Proposals – CFTC and Financial Stability Board Pronouncements

CFTC Customer Advisory On Monday, the Commodity Futures Trading Commission (“CFTC” or “Commission”) issued its fourth virtual currency customer advisory, Customer Advisory 7756-18, as part of its outreach effort to educate market participants.  Titled, Use Caution When Buying Digital Coins or Tokens, the advisory warns customers of the risks of speculation of future value and … Continue Reading
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