Legal Issues with Blockchain and Cryptocurrency
Tokenization
Tokenization limits the exposure of sensitive information and makes digital transactions more secure. Whether people realize it or not, millions of Americans already use tokenization technology on a daily basis. Recent developments in blockchain systems and decentralized finance create new uses for tokenization, raising legal questions as to how existing regulatory frameworks will apply or adapt.Continue Reading Tokenization: Opportunity and Regulation, Finding a Balance
The leaders of the U.S. Commodity Futures Trading Commission, the Financial Crimes Enforcement Network, and the U.S. Securities and Exchange Commission (the “Agencies”) issued a joint statement to remind persons engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the Bank Secrecy Act (BSA). This joint statement provides further clarity on some of the many laws potentially applicable to crypto currency and other digital assets and highlights the need for anyone operating in the space to obtain legal advice to understand their legal compliance obligations. According to the statement, AML/CFT obligations apply to entities that the BSA defines as “financial institutions,” such as futures commission merchants and introducing brokers obligated to register with the CFTC, money services businesses (MSBs) as defined by FinCEN, and broker-dealers and mutual funds obligated to register with the SEC. Among those AML/CFT obligations are the requirement to establish and implement an effective anti-money laundering program (AML Program and recordkeeping and reporting requirements, including suspicious activity reporting (SAR) requirements.)
Continue Reading Joint Statement on Digital Assets from CFTC, SEC and FinCEN – a Warning to the Crypto Industry regarding Anti-Money Laundering and Countering the Financing of Terrorism Obligations
According to a recent report, the new chair of the CFTC, Heath Tarbert, has declared that he believes that ether is a commodity. He also anticipates ether futures trading on U.S. markets in the near future. The CFTC has previously taken the position that bitcoin also is a commodity. He further indicated that he agrees with the SEC that bitcoin and ether are not securities. He also opined that similar assets should be treated similarly.
Continue Reading CFTC Chairman Says Ether Is a Commodity
The Commodity Futures Trading Commission (“CFTC”) obtained an important court win and boost to its regulatory authority over Cryptocurrencies this month. A federal district court in Massachusetts recently issued a decision in CFTC v. My Big Coin Pay Inc. which affirmed the CFTC’s position that all virtual currencies are commodities and subject to CFTC jurisdiction.[1] The opinion follows another recent district court opinion in New York, CFTC v. McDonnell, in which a court also interpreted the Commodity Exchange Act (“CEA”) to find that cryptocurrencies constitute a commodity under the CEA.[2] CFTC Chairman Giancarlo in a speech last week in Minneapolis further emphasized the CFTC is continuing to increase civil enforcement actions with 83 having been filed in the last CFTC fiscal year resulting in over $900 million in civil penalties.[3] The current political efforts to dismantle the Dodd Frank Act apparently have done little to slow down the CFTC Division of Enforcement, in particular when it comes to regulating cryptocurrencies.
Continue Reading CFTC Cryptocurrency Enforcement Receives Further Judicial Support
The regulatory landscape surrounding cryptocurrency continues to evolve. Most of the activity to date has involved regulatory enforcement actions brought by the Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) and focused primarily on exposing fraud rather than providing guidance. Some people have questioned whether the CFTC has jurisdiction in this space. A federal district court in New York has ruled that they do.
Continue Reading Court Rules Cryptocurrencies Can Be Regulated By The CFTC As Commodities
Much uncertainty exists throughout the world on the legality and legal classification of crypto tokens. In the United States, Ripple was sued recently for allegedly selling unregistered tokens (XRP) in a violation of U.S. securities laws. The US SEC and CFTC have held hearings and are assessing whether to classify certain tokens as securities and/or commodities. Both agencies have issued guidance on this (see, for example SEC and CFTC), but many issues remain.
Some industry experts have commented on the classification of three of the biggest tokens- bitcoin, ether and ripple. Many believe bitcoin and ether are not a security. However, debates exist as to whether ether or ripple are. Over 1500 crypto tokens exist, each with a different set of characteristics, function and purpose. The SEC has said most tokens are likely securities under the Howey Test.
Continue Reading How Crypto Token Function and Transferability Could Impact Classification as a Security
The Commodity Futures Trading Commission’s LabCFTC recently released, “A CFTC Primer on Virtual Currencies.” This primer provides an overview of virtual currencies and their potential use-cases, helps outline the CFTC’s role and oversight of virtual currencies, and cautions investors and users of the potential risks involved with virtual currencies.
Continue Reading CFTC Issues Primer on Virtual Currency, Virtual Tokens and ICOs
