No more racing around the long arm of the law…….or securities regulators to be precise. Times are rapidly changing in the digital asset management world. Yes, DIGITAL ASSET MANAGEMENT. Not just cryptocurrencies and bitcoin. With cryptos, ICOs (initial coin offerings) ushering in new ways to raise capital, and smart contracts becoming mainstream, the only way for wealth managers, institutions, RIAs, etc to get involved is to have some form of regulation (make them legit). And the SEC can (NEEDS TO) lead the charge BUT not make things too cumbersome and costly. (OMG, I am advocating regulation……what have I done?). Bottom line, with legendary investors, hedge funds, institutions and wealth managers all jumping into the digital asset/crypto space credibility and acceptance has arrived. Next step? Banks will begin having crypto trading desks right next to their forex desks. Now, lets hope the SEC and regulators will be “nice cops”.
(Bill Taylor/Managing Editor)
“To date, conscientious traders of digital assets and cryptocurrencies have mostly sought regulatory refuge under the quilt of state money transmission laws.
In the not-too-distant past, business was primarily limited to exchanging fiat currencies for virtual currencies, such as bitcoin and ether. Driven by law enforcement and consumer protection concerns, numerous state regulators decided that only licensed money transmitters could engage in those activities. Concluding that virtual currencies presented a unique set of regulatory considerations, New York state hatched the BitLicense. Thus, in order to operate on a national scale, crypto exchanges and trading businesses have had to secure dozens of separate state permits — a complicated and expensive process that hardly promotes regulatory efficiency.
Times have changed quickly, though, and digital asset markets have witnessed the rapid rise of the initial coin offering, or ICO. As a particularly effective means of raising substantial capital for startup companies, ICOs have lately captured the SEC’s attention — with the agency insisting that most of the marketed tokens constitute “investment contracts,” and thus “securities” under the 1933 Securities Act. Because the sale of unregistered securities is a serious violation of federal law, the SEC has recently launched numerous ICO investigations and enforcement actions. This aggressive campaign seems like an effort by the SEC to corral digital asset traders into its jurisdiction.
Those currently involved in cryptocurrency trading must rely on ambiguous and overlapping guidelines.
In fact, there is an emerging turf battle, which can lead to no good. On the one hand, SEC Chairman Jay Clayton has observed that “many U.S.-based cryptocurrency platforms have elected to be regulated as money transmission services,” and therefore “the currently applicable regulatory framework for cryptocurrency trading was not designed with trading of the type we are witnessing in mind.” The obvious implication of Chairman Clayton’s remarks is that, in order “to get protections offered by the federal securities laws and SEC oversight when trading digital assets that are securities, investors should use a platform or entity registered with the SEC, such as a national securities exchange, alternative trading system . . . , or broker-dealer…”
Source: American Banker