On February 6, 2018,  Chairman Clayton of the Securities and Exchange Commission (SEC) and Chairman Giancarlo of the Commodity Futures Trading Commission (CFTC) testified before the Senate Banking Committee (the Committee) on their agencies’ oversight role for virtual currencies.  Consistent with his prior statements, Clayton took a strong stance on SEC regulation of Initial Coin Offerings (ICOs).  But, when it came to cryptocurrencies themselves, he and Giancarlo struck a somewhat more circumspect tone.  In particular, despite acknowledging that their existing jurisdiction does not extend to spot transactions in cryptocurrencies, the Chairmen did not yet seek additional regulatory authority.

However, Chairman Clayton particularly expressed concerns about whether virtual currency exchanges provided adequate protections for investors and whether state regulation as payment services was sufficient.  While the Chairmen did not request new authority, it is clear that there would be support within the Committee for legislation in this area, and Clayton and Giancarlo committed to work with each other and other authorities (including bank regulators and law enforcement authorities) to develop an appropriate approach.  When the Chairmen of the SEC and CFTC express that they are “open” to exploring whether increased federal regulation is needed, there is a clear message. Continue Reading SEC and CFTC Testimony on Virtual Currencies: Is More Regulation on the Horizon?

Recent media reports, including in State-connected media, suggest that China is about to block access to all cryptocurrency trading platforms, including those operating overseas.  In September 2017, the People’s Bank of China (“PBOC”) and six other government agencies jointly issued guidance  immediately banning fundraising through offerings of tokens, such as initial coin offerings (“ICOs”), and requiring the closure of cryptocurrency exchanges in China by the end of September 2017.  Continue Reading Chinese Government Moves To Effectively Ban Cryptocurrency Trading

On Friday, January 12th, during an appearance at The Economic Club in Washington, D.C.  United States Treasury Secretary Steven Mnuchin announced that the Financial Stability Oversight Council (FSOC) was forming a virtual currency working group.  The announcement follows FSOC’s discussion of virtual currency issues, including “price volatility, investor protection and the potential for illicit use”, and commitment to continue reviewing these risks at its meeting in December.[1]

In his remarks to The Economic Club, Secretary Mnuchin emphasized that Treasury was concerned about the potential for money laundering and the risk to consumers investing in virtual currencies.  Continue Reading Secretary Mnuchin Announces FSOC Working Group to Combat Money Laundering and Speculative Risks in Virtual Currencies

Following the December 2017 listing of futures contracts based on Bitcoin by two exchanges regulated by the Commodity Futures Trading Commission (CFTC), several fund sponsors and securities exchanges applied to the Securities and Exchange Commission (SEC) to list exchange-traded funds (ETFs) that would invest in those futures contracts.[1]  By investing in futures contracts regulated by the CFTC, instead of Bitcoin itself, these ETFs seemed designed to address concerns that had previously led the SEC to deny applications to list ETFs linked to Bitcoin.  This change was not sufficient, however, as the SEC raised new concerns in early January that led to the withdrawal of these new applications.[2]   Exchanges, ETF sponsors and investors are now left wondering:  what will it take for an ETF linked to Bitcoin to pass muster with the SEC? Continue Reading SEC Requests Withdrawal of Bitcoin Futures ETFs

On January 4, 2018, the North American Securities Administrators Association (NASAA) released an investor reminder regarding the risks associated with cryptocurrencies, initial coin offerings (ICOs), and cryptocurrency-related investment products.  In the warning, the NASAA described factors that investors should consider before making investments in cryptocurrencies and cryptocurrency-related investment products, as well as common red flags of investment fraud. Continue Reading Regulators Remain Focused on Risks Associated with Cryptocurrencies, ICOs, and Cryptocurrency-Related Investment Products

On Friday, December 15, 2017, the Commodity Futures Trading Commission (CFTC) issued a proposed interpretation of the term “actual delivery” for purposes of determining whether certain virtual currency transaction could be deemed “retail commodity transactions” subject to the CFTC’s jurisdiction under the Commodity Exchange Act (CEA).[1] Continue Reading The CFTC Issues a Proposed Interpretation Regarding Retail Commodity Transactions Involving Virtual Currency

On December 12, 2017, the U.S. District Court for the Southern District of New York dismissed the New York Department of Financial Services’ (NYDFS) suit against the Office of the Comptroller of the Currency (“OCC”) challenging the proposed special purpose national bank for financial technology companies (“OCC FinTech Charter”).  The OCC FinTech Charter would apply a bank regulatory framework to financial technology companies to help ensure that they operate in a safe and sound manner. Continue Reading U.S. District Court for the Southern District of New York Dismisses NYDFS OCC FinTech Charter Suit

On Monday, December 4, 2017, the U.S. Securities and Exchange Commission (SEC) obtained an emergency order from a U.S. District Court in New York to enjoin an allegedly fraudulent initial coin offering scheme.  The SEC’s complaint alleges that Dominic Lacroix, a recidivist securities law violator, and his company PlexCorps violated the anti-fraud and registration provisions of the U.S. federal securities laws in collecting up to $15 million in investor funds purportedly in exchange for digital tokens and promised returns in excess of 1,000% in 29 days.  The complaint also charges Lacroix’s partner Sabrina Paradis-Royer with securities fraud.  Among other relief, the district court has granted the SEC’s request to freeze the defendants’ assets. Continue Reading Newly Created SEC Cyber Unit Takes First Action Against Allegedly Fraudulent ICO

Last Friday, December 1, 2017, the U.S. Commodity Futures Trading Commission (CFTC) announced that three futures exchanges—the Chicago Mercantile Exchange Inc. (CME), the CBOE Futures Exchange (CBOE) and the Cantor Exchange (Cantor)—self-certified that they will be listing futures contracts (CME and CBOE) and options (Cantor) referencing bitcoin.  Trading in bitcoin futures will commence at the CBOE on December 10 and on CME on December 18, with Cantor’s options trading to follow.  Listing these contracts will allow both institutional and retail investors to obtain long or short exposure to bitcoin without buying or selling the underlying bitcoin itself. Continue Reading Bitcoin’s Future: CME and Other Exchanges Self-Certify Bitcoin Futures and Options with the CFTC

On December 2, 2016, Comptroller Thomas J. Curry of the Office of the Comptroller of the Currency (“OCC”) announced that the OCC will move forward with chartering financial technology (“FinTech”) companies that offer bank products and services and meet the OCC’s chartering requirements. However, while encouraging, the announcement, and the OCC paper released with it, left many issues unresolved.

Continue Reading The OCC’s New FinTech National Banking Charter