Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law.
Policy changes slowly. Crypto wants to move fast. Sometimes fairly, sometimes not, the crypto industry often portrays traditional financial regulators as calcified relics unprepared to deal with the coming new world.
To be fair, everyone seems to acknowledge that markets and trading systems need comprehensive upgrades, but national and international regulators are accountable to a wider range of concerns than any specific industry. The crypto industry sometimes takes that as a personal slight, waiting for some sudden burst of the regulatory dam. Progress is more like erosion.
That being said, this week has seen some hopeful if oblique changes in regulatory posture. I’ll be trying to piece together some major developments from the SEC’s attitude toward security tokens, as well as the unconfirmed first public offering by a crypto exchange, and also deciphering the newly announced strategy from the CFTC.
Kollen Post, Policy Editor, @the_postman_
Security tokens see light at the end of the SEC tunnel
Not that long ago, a certain strain of industry hype promised that tokenized securities would be blockchain’s killer app. However, the plight of reconfiguring global securities markets has ended up taking some time. This week saw the launch of a new product by Arca in the U.S., a tokenized fund based primarily on Treasury securities.
Arca had been working with the Securities and Exchange Commission for two years, trying to satisfy them that the fund and its attached ArCoin — with peer-to-peer trading — would be able to meet all necessary AML/KYC requirements and provide investors with secure trading. The fact that the fund is based on low-volatility government securities certainly helped, as does the fact that trading will remain relatively siloed in a single portal for the time being.
An extensive roster of firms is courting the SEC with inventive formats to offer retail investors new forms of digitized investments. The carnage of manila folders and red tape over a Bitcoin ETF continues, while Wilshire Phoenix recently changed tacks to file a BTC trust with the commission, but those are both investments that are at least somewhat based on a cryptocurrency.
There are a number of functioning digitized securities unconnected to any given crypto asset within the U.S. already. Limited markets on which to trade are a major part of that current hold-up partially because it takes so long to get any proposal through the SEC. This week, the SEC also voted on changes to registration under the 1940 Investment Company Act. They promise “an expedited review procedure for applications that are substantially identical to recent precedent.” Which is to say, these pioneer projects may have just gained some leverage.
CFTC promises new crypto framework as chairman finishes his first year
With its more limited purview, the Commodity Futures Trading Commission is generally a less aggressive regulator than the SEC. Indeed, CFTC Chairman Heath Tarbert commented this week that his commission is waiting on the SEC to determine the status of most tokens as securities or commodities. Nonetheless, the recent priority the CFTC placed on solid rules for crypto asset and futures trading is major news for the industry.
The CFTC’s new strategy guidelines are especially noteworthy, given Tarbert’s well-documented interest in the sphere and the fact that the new strategy lines up with the rest of his term as chairman. July 15 is in fact the end of his first year, so the commission’s presence in the public eye over the past week could be seen as a sort of anniversary celebration.
At this point, the term “regulatory clarity” has lost more or less all meaning, becoming a convenient and inoffensive buzzword. Similarly, “innovation” is a word that stakes no specific ground, but nobody can really object to it. As a point of policy, the vision that the CFTC or Tarbert himself are working toward — the “holistic framework,” as the recent publication puts it — for crypto assets remains cryptic.
But by the same token, while political language depends on vague goalposts, the inclusion of digital assets as a priority in a four-year plan, which has certainly been the subject of long-standing backstage debate, is nothing if not meaningful.
Coinbase is going public, maybe
Coinbase, the flagship crypto exchange of U.S. compliance, may be looking to go public later this year. Per unnamed sources speaking with Reuters, Coinbase has been in conversations with the SEC to issue the first public stock in a crypto exchange in the country.
The information is difficult to confirm. Coinbase is notoriously uncommunicative with the media, but rumors of an IPO may well be part of a strategy to build hype. Still, going public would be the next logical step.
The benchmark for a unicorn is a privately held company valued at over $1 billion. A 2017 funding round put the valuation on Coinbase at $1.6 billion, a number that the firm shattered with a $300-million investment round that raised that overall valuation to $8 billion in 2018.
Based in San Francisco, Coinbase has long been focused on making crypto work within the confines of U.S. regulation. Whatever happens to their IPO is likely to be either a rallying cry or a cautionary tale for the industry.
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Japanese soccer star Keisuke Honda launches his own crypto
Crypto and blockchain matter for the global soccer community.
A Japanese professional soccer player is launching his own cryptocurrency to boost fan engagement.
Keisuke Honda, former Japan midfielder and currently a captain of the Brazilian professional league team Botafogo, has launched his own token to build new connections with his fans, Cointelegraph Japan reported on Oct. 22.
The so-called “KSK Honda Coin” was launched on Thursday via Rally.io, a blockchain platform for creating video streaming and gaming applications. The new coin is intended to enable fans to interact with Honda.
Holders of KSK Honda token will be able to get exclusive content from Honda as well as interact with the player via private channels on Discord. “We decided to create a social token to build new connections with our most loyal fans,” Honda said.
The world-known soccer player said that the new token will allow him to connect with fans in a more open manner, providing a 100% transparency in knowing who holds coins in the fan community.
The global soccer community is moving deeper into the crypto and blockchain industry in search of new ways of connecting stars with their fans.
On Oct. 15, a top soccer club in Russia’s Premier League — Zenit St. Petersburg — signed on to the blockchain-based gaming platform Sorare to issue collectible and tradeable digital cards. In September 2020, Italian professional sports club SS Lazio signed a multiyear deal with crypto trading platform StormGain, enabling new fan engagement options through crypto.
Grayscale invests $300m in a day to grow its crypto portfolio
Grayscale Investments continues to grow its cryptocurrency portfolio by adding $300 million in assets…
The post Grayscale invests $300m in a day to grow its crypto portfolio appeared first on Coin Journal.
Grayscale Investments continues to grow its cryptocurrency portfolio by adding $300 million in assets under management (AUM) in a day
Grayscale Investments revealed that it had added $300 million worth of cryptocurrencies to its digital assets portfolio over the past 24 hours and over $1 billion in the last week. This information was relayed by Grayscale CEO Barry Silbert via a tweet yesterday.
The crypto fund manager noted that it had $6.3 billion in AUM as of October 15. However, it has added $1 billion in cryptocurrencies over the past week, and the company now controls $7.3 billion worth of digital assets.
Silbert stated that the company “Added a cool $300 million in assets under management in one day. The additional sum brings the total assets held under management to $7.3 billion”.
The funds are held in the company’s trust for Bitcoin (BTC) and Ethereum (ETH), in addition to Grayscale’s digital large-cap fund. This latest development comes less than 48 hours after PayPal announced its entry into the cryptocurrency market, with Bitcoin surpassing the $13,000 mark afterwards.
Each Grayscale report is delayed by 24 hours, which means that this data refers to the previous day’s figure.
The cryptocurrency funds manager reported that its Litecoin (LTC) Trust recorded the highest growth since the last report. Grayscale reported that its LTC Trust increased by 7.5%, while their Zcash (ZEC) Trust increased by more than 6% over the past 24 hours. Grayscale also has extensive holdings in other cryptocurrencies such as Ripple (XRP), Ethereum Classic (ETC), Bitcoin Cash (BCH), Horizen (ZEN) and Stellar Lumens (XLM).
Grayscale might be increasing its cryptocurrency holdings after raising massive funds in the third quarter of the year. Grayscale’s financial report for Q3 2020 revealed that it had bought over $1 billion in investment across all its cryptocurrency trusts. This year, Grayscale has raised $2.4 billion, which is more than twice the total amount they obtained for the years 2013 – 2019.
The investment firm revealed that 81% of investment in the third quarter came from institutional investors, while another 57% came from people investing in multiple products.
With the crypto fund manager now holding over $6 billion in AUM, it means that Grayscale controls around 2.5% of the total Bitcoin supply, currently above 18,000 BTC. The Bitcoin supply is capped at 21 million, which means that roughly 2.5 million bitcoins are left to be mined.
Grayscale isn’t the only company that is increasing its stakes in cryptocurrencies at the moment. MicroStrategy recently bought $425 million worth of Bitcoin, and Jack Dorsey’s Square Inc. invested $50 million in Bitcoin.
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