2018 has seen the production of many ideas for a Bitcoin Exchange Traded Fund (ETF) that could be established to make institutional investment easier for large companies and corporations. The notion of a Bitcoin ETF is that it would make Bitcoin investment more mature and more accessible to big companies, all of whom would no doubt put a lot of money into Bitcoin, should investment be made a little safer for them. This, in essence is exactly what the Bitcoin ETF aims to achieve.
What we have seen through 2018 is a number of applications to open a Bitcoin ETF filed with the United States Securities and Exchange Commission (SEC). These applications have been held for review by the SEC for a number of months, as the SEC cannot decide on the grounds through which they should approve an ETF. This is a heavily unregulated industry and therefore, the SEC don’t have a rule book to refer to, therefore the applications must be reviewed by people, over a long period of time to ensure the SEC don’t mess it up.
The most prominent ETF application currently comes from VanEck, a New York based Investment Management Company who work with institutional investors on a daily basis. Just yesterday, the SEC announced that they would be further delaying the decision for this application, pushing the deadline back to the 27th of February 2019. This is important, given that a final decision was set to be made in August 2018, before being pushed back to the end of Septeember 2018, and then, December 2018.
SEC Is Rallying International Cooperation To Crackdown On Dodgy ICO Token Sales
SEC Rallying International Cooperation To Crack Down On Dodgy ICOs
initial coin offering (ICO) sector has been instrumental in setting up the crypto industry. Coins, small and big, have been able to present their case for public attention and funds. This has led to some extraordinary gains, both in terms of financial, for the initial backers, and the technology offered by these projects. However all this, unsurprisingly, has attracted unwanted attention from scammers and con artists. Things today are at a stage where more than 75% of ICOs in 2017 were marked as scams. This year almost $5 million was lost to some sort of a con job. Thus when the head of U.S. Securities and Exchange Commission (SEC) discussed the importance of international cooperation to ensure successful investigations into these plays and general vigilance with the ICO sector, it was well received.
Certa Bonum Certamen
Speaking at the prestigious Harvard Law School, Steven Peikin, co-director of the enforcement division was discussing the challenges faced by his team when dealing with the unenviably “daunting task of ferreting out misconduct and, where appropriate, recommending civil enforcement actions that variously seek injunctions or cease-and-desist orders, penalties, disgorgement of ill-gotten gains, suspensions and bars of bad actors, and the temporary suspension or delisting of securities.”
In his speech, the head of SEC discussed the two most common types of violations of the securities law that these offerings typically try to pull off. The first one might meet the textbook definition of what a security is, but as he points out, it is ” being sold, brokered, or traded to U.S. investors without complying with the registration requirements of the federal securities laws.” The second is more damaging to the whole industry, where “ICOs appear to be simply outright frauds — where the issuers are using excitement around the crypto-asset space to simply rip off money from investors.”
Mr. Peikin had no illusions about the possible hurdles in the pursuit of justice. However, he was confident that, with international collaboration, they will be able to fight the good fight and bring fraudulent ICOs to justice. The simple fact that many of these sham offerings are located outside borders of the U.S. makes the help of overseas regulatory bodies essential. The SEC feels this helps everyone as the money that is ripped off, is from investors everywhere.
Canada Shows How It Is Done.
To highlight his point about international assistance, Mr. Peikin noted its immense value to the SEC in regulating the ICO sphere. He gave the example of the friendly Canadian neighbors, where regulators in Quebec, the Autorité des marchés financiers actively assisted his team. This was directly responsible for exposing the fraudulent Plexcoin token sale and allowed them to charge two Canadian residents. This he hopes will let them set a precedent and help them foster a better understanding with other regulators so that they can develop other cases.
Its Still A High-Risk Investment
From a modest $95 million, in 2016, ICOs have raised more than $20 billion today. This astronomical rise has been due to the booming interest in blockchain and allied fields. Although the number of ICOs have recently, as Mr. Peikin suggested, “exploded from a mere concept to a phenomenon.” It is still like any other industry, a perilous venture.
“The growth in the ICO market can obscure the fact that these offerings are often high-risk investments,” he warned. “The issuers may lack established track records. They may not have viable products, business models, or the capacity for safeguarding digital currencies from theft by hackers. And some of the offerings can be simply outright frauds.”
The industry has been crying out for stricter regulations and any cross-border backing that hinders the acts and actions of those with nefarious intentions, is always welcome. Whether this is a one-off act or the building blocks of a shared future remains to be seen.
SEC Expected to Rule that Ripple XRP is Not a Security
Ripple XRP is one of many cryptocurrencies floating in regulatory limbo. In key markets like the United States, regulators have been conspicuously reticent to formally define these digital assets. Are cryptocurrencies the same thing as stocks – tradable assets based on equity? Are they currencies – fungible tokens used first and foremost as money? Clarity on these matters could allow people to buy Ripple with greater confidence.
The Securities and Exchange Commision (SEC) has waited to regulate this sector because they don’t want to stunt potentially useful innovations. Labeling cryptocurrencies as securities would greatly restrict their distribution, and impose heavy tax burdens to blockchain companies and their investors. For this reason, the cryptosphere has been hoping for a different conclusion.
We’re pleased to announce that Ripple may be building the best possible future for cryptocurrency regulations.
The Importance of Ripple’s Viamericas Partnership
you follow us as a news source, you’ve noticed our reports about Ripple partnerships with banks and other institutions. Ripple products generally, and RapidX specifically, allow such financial institutions to send money back and forth overseas, nearly instantaneously and practically free of charge.
This is accomplished by using Ripple XRP as a common trading asset between all other currencies. XRP has real time exchange rates with all currencies traded across borders by these financial institutions. Money is “transformed” from currency A to XRP to currency B in just a few seconds. Ripple’s high liquidity and blisteringly fast blockchain make it all possible.
The newest financial services company to partner with Ripple is Viamericas. Viamericas has a presence in 49 of the 50 United States, as well as much of Latin America. Another remittance industry partner for Ripple isn’t huge news in itself (we’re getting used to this kind of thing), but Viamerica’s has an Ace up its sleeve.
The CEO of Viamericas is a man named Paul S. Dwyer Jr. In addition to his role at Viamericas, Dwyer is the chairman of the United States Money Service Business Association. The MSBA works directly with American regulators to help lawmakers understand the financial industry, so that fitting laws and regulations can be put into place.
The MSBA works directly with the SEC. If the SEC were to declare that Ripple was a security, then it would be taxed for capital gains every time it was bought and sold. Such an outcome would render cross-border transfer services like Ripple obsolete, because tax fees (30% of profits from same-year capital gains) and accounting friction would eliminate Ripple’s “fast and free” value proposition.
American Legal Precedent for Securities Law
We’re making certain assumptions here, but we can hope that Viamericas chose Ripple because they were confident that future SEC rulings would be in Ripple’s favor. This seems like a reasonable conclusion, but what other events can we find that further confirm our suspicions?
Earlier this month, Michael Didiuk (a former SEC employee) made the following statement about Ripple: “I don’t think XRP is a security, I think XRP is a currency. The reason why is… Howey Test… It’s a four factor test – investment of money in a common enterprise with the expectation of profits based on the efforts of others.”
The Howey Test to which Didiuk refers was established by the United States Supreme Court in the 1930s. It describes financial ventures where investing parties supply capital to another group, who will then use it to make money for themselves as well as the investing party.
This definition may describe certain cryptographic tokens, but not Ripple. Ripple Labs could sink into the Earth tomorrow, and Ripple XRP (the currency) would be just as useful as ever. Ripple’s leadership does hold a great deal of XRP, but the Ripple network is becoming more decentralised by the day. The SEC has ruled in the past that Ethereum may once have been a security, but that as decentralisation progressed, it is a security no longer.
If the SEC were to rule that a decentralised Ripple is not a security, this would create… well… ripples throughout the industry. Tax obligations would likely be lighter. Exchanges could expand without fear of being squashed. ICOs and blockchain companies could create long term plans without fear of a sudden change to their financial foundation.
Love it or hate it, Ripple is a major innovator in the blockchain space, one working for solutions that could improve the situation for all cryptocurrencies.
SEC Suspends Cryptocurrency-Related OTC Stock for False Claims
The Securities Exchange Commission (SEC) this morning suspended trading in the securities of American Retail Group, Inc (OTC: ARBG) as a result of allegations that the company made false statements involving cryptocurrency, including that it had partnered with an “SEC-qualified custodian.”
The accompanying statement from the agency references two August 2018 press releases from the Nevada-based firm, wherein the company claimed that its cryptocurrency products would be offered “under SEC regulations” and that its token sale was “officially registered in accordance [with] SEC requirements.”
This comes after both the SEC and Commodity Futures Trading Commission (CFTC) expressed concerns about the fact that more companies are making fraudulent claims regarding the organizations. Specifically, an investor alert was issued from the two organizations’ respective offices, the SEC’s Office of Investor Education and Advocacy and the CFTC’s Office of Customer Education and Outreach. The agencies warned about the use of their seal, or advertising advance knowledge of the markets. In addition, the alert pointed out that officials from either agency would never suggest or demand payment, or endorse any investment, product, or service, in any way.
The SEC can suspend trading in a stock for 10 days, or until reporting requirements are met, according to federal law. Robert Cohen, Chief of the SEC Enforcement Division’s Cyber Unit, said of the suspension, “The SEC does not endorse or qualify custodians for cryptocurrency,” and cautioned investors to “use vigilance” with regards to initial coin offerings.
While many believe that the main issues with regards to trading in cryptocurrency are volatility and vulnerability to hacking , false claims about regulatory organizations seem to be a growing trend. Earlier this month, the CFTC filed charges against two men for actually impersonating regulators and forging documents in an attempt to deceive investors. The complaint, filed in the U.S. District Court for the Northern District of Texas, levied charges against two persons, Morgan Hunt and Kim Hecroft, and the complaint made clear that it was unsure whether the fraud involved two individuals, or one individual utilizing two aliases.
The defendants, who operated two businesses, called Diamonds Trading Investment House and First Options Trading, contacted clients and deceived them into believing that their funds could not be withdrawn unless a tax was paid to the CFTC. Hunt not only had an associate impersonate a CFTC investigator during a phone call conversation but also subsequently forged a document that bore the official CFTC seal.
The OTC sector is much different in that the companies are not required to disclose as much information as firms listed on securities exchanges, and the SEC had made similar investor warnings in the past regarding marijuana in 2014, when many marijuana-related OTC companies were making false claims in their press releases.