Blockchain and cryptocurrency are now mainstays in financial markets and initial coin offerings (“ICO’s”) are giving companies and firms a new avenue to raise capital. Within the cryptocurrency market, “stablecoins” offer a unique form of cryptocurrency to investors. Stablecoins are cryptocurrencies pegged to real-world assets such as the dollar (“USD”) or gold. (Oscar Williams-Grut, Business Insider). Breaking from the volatility seen in other cryptocurrency markets, stablecoins are an attempt to combine the benefits of digital transfer offered by cryptocurrency with the stability of mainstream currency. (Oscar Williams-Grut, Business Insider).
Read MoreCountries around the world are being forced to decide what role, if any, cryptocurrencies and initial coin offerings (“ICOs”) will play in the future of their financial markets. Russia is no exception. Russian officials’ initial actions included proposals that would prohibit private investors from investing, ban cryptocurrencies altogether, and even imprison users (Maria Prusakova, Medium). Recently, however, changes appear to be on the horizon as Russian President Vladimir Putin began pushing for legislation addressing cryptocurrencies, crypto mining, and ICOs. While the official drafts are still working their way through Parliament, the proposed regulations will allow for some form of ICOs and digital asset trading. (Id).
Read MoreWith the revolutionary technology known as blockchain quickly spreading across the globe, regulators are struggling to find an ideal balance between regulation and innovation. The critical question is whether cryptocurrencies and initial coin offerings (“ICOs”) are unique enough to warrant the creation of a new categories or if they should be considered securities and therefore subject to existing securities laws and requirements. Because new cryptocurrencies do not require government backing, many leaders in the cryptocurrency arena fear additional regulatory delay, or excessive regulations, will lead many cryptocurrency founders to take their innovation and multibillion dollar businesses overseas to countries with more established and favorable regulations (Kate Rooney, CNBC).
Read MoreThe emergence of cryptocurrency and blockchain poses questions for financial regulators around the world. Regulators are struggling to understand both where cryptocurrency fits within their regulatory framework and how to set up parameters for transparency and investor integrity. (Bob Pisani, CNBC). Recently, American regulators increased scrutiny for broker-dealers working with cryptocurrency. (Benjamin Bain, Bloomberg). Financial powers in other countries are also responding individually to the crypto-movement, and France exemplifies a recent response.
Read MoreLast month the Securities and Exchange Commission (SEC) obtained a permanent officer-and-director and penny stock bar against Tomahawk Exploration LLC founder, David T. Laurance, for perpetrating a fraudulent initial coin offering. (SEC Press Release). On its face, the decision shows the SEC merely enforcing its previous statements that anything resembling a security will be labeled as such and regulated under the Securities Act. The ruling, however, extends the umbrella of SEC oversight to explicitly include “Bounty Programs”—a mainstay practice for many initial offerings.
Read MoreCrypto exchanges—which operate much like traditional stock exchanges—are online platforms where crypto currencies are traded. Traditional exchanges deal almost exclusively with exchanging fiat, or legal tender currency, for highly regulated securities, such as stocks and bonds. Similarly, crypto exchanges primarily deal with trading one cryptocurrency for another. It is unclear which agency has, or should have, authority to regulate this arena because these exchanges primarily trade one currency for another. Regulating crypto exchanges is difficult because of the subtly different and often overlapping definitions surrounding initial coin offerings (ICOs) and cryptocurrencies (Michael del Casillo, Forbes). The unprecedented growth and increasing number of new crypto exchanges and cryptocurrencies is another factor making unified regulation increasingly difficult.
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