In April, the severity and frequency of cryptocurrency enforcement measures by state and federal law enforcement agencies continues to grow steadily. (See the March 2022 Crypto Enforcement Actions Roundup blog Here This section discusses regulatory guidance and jurisdiction over federal and state agencies to implement these issues. )
Sec enforcement priority
April 4, 2022, SEC Chair Gary Gensler Overview SEC enforcement priorities related to blockchain and cryptocurrencies in speeches at the Penlo Capital Markets Association Annual Meeting. Gensler’s comments address the SEC’s new approach to crypto trading platforms, stablecoin, and crypto tokens, and there is no doubt that the chair considers the entire industry within the authority of the Commission. ..
Gensler’s comments suggest that the SEC may prioritize enforcement actions on trading platforms over individual tokens.[w]Given the Commission’s experience with the various tokens that are securities, the legal status of each token depends on its own facts and circumstances, and so many tokens are traded that securities on a particular platform It is very unlikely that it will be zero. “
The purpose of Gensler is to enforce registration requirements and other regulations on trading platforms. To that end, he asked the committee staff to “work on many platform-related projects.”
- Registering and regulating the platform like an exchange, and whether and how the protection provided to individual investors on traditional exchanges also applies to crypto platforms.
- By working with the Commodity Futures Trading Commission (CFTC) to consider the best way to register and regulate such platforms, we will regulate platforms that list both cryptocurrency tokens and crypto security tokens.
- Whether to require the management and management of cryptocurrencies, which is a common practice of cryptocurrency exchanges, and the separation of storage and other market-making functions.
Stablecoin and other tokens
Gensler called Stablecoin raising three policy issues:
- Financial stability and its impact on monetary policy.
- Potential misuse with illegal activity by providing a means to avoid or postpone on-ramp or off-ramp in the Fiat Banking system.When
- Market integrity and investor protection concerns arising from conflicts of interest that arise when stablecoins traded on the platform are owned by the platform itself and customers fall into a private counterparty relationship with the platform.
Generally speaking about tokens, Gensler reiterated the position of his and his predecessor Jay Clayton. Howie test. To summarize this, Gensler said in the current environment, “Many entrepreneurs are collecting money from the general public by selling crypto tokens. Managers, tokens are useful and more users. Business. “
Gensler concludes with a new invitation to the blockchain and crypto industry, working with the SEC to register these tokens, and further states:[i]In fact, if there are any formats or disclosures that crypto assets really do not comply with, our staff is here to discuss and evaluate those concerns. Considering the uneven work record of SEC Token issuer trying to registerMany in the industry, at the invitation of Gensler, may work with the SEC using large grains of salt.
State enforcement activities
State legislators also launched a wave of enforcement this month with regulators in New York, Texas and Alabama targeting crypto companies with new legislation and enforcement measures.
The OCC order mentioned above reflects the recent actions taken by the Manhattan District Attorney in New York by state regulators. Indicted Bitcoin ATM operator Customer identification information could not be collected and maintained and operated without a remittance license from the New York State Financial Services Authority or the Treasury Department’s Financial Crimes Execution Network.
In addition, New York lawmakers have proposed a new bill this month aimed at cracking down on crypto fraudsters. Senate Bill No. 8839 It targets deceptive and fraudulent practices that utilize digital assets. In particular, the bill criminalizes a particular type of crypto fraud scheme called “rag pull.” In this scheme, developers promote their tokens to the public and unload their tokens as soon as the price goes up to end the project. .. However, the proposed bill removes the scheme’s abandonment component and instead the act of the developer developing a class of virtual tokens and owning and selling more than 10 percent of the supply of virtual tokens in such classes. Defines “rag pull” as more than 10 percent of the total supply of virtual tokens of such a class in the five years since the same one was last sold. .. .. ..
By eliminating the abandonment requirement, SB8839 definitely creates a nuisance As such It is always a violation if the developer sells more than 10% of the token class.
Texas and Alabama
on the other hand, Texas Securities Commission When Alabama Securities Commission Both have issued cease and desist orders to individuals who sell NFTs to fund the creation of the Metaverse Casino. The order claims that the membership NFT sold by the developer is actually an unregistered securities. This is because the profits to NFT holders included the proportional distribution of the profits generated at Metaverse Casino. The developers have also promised NFT buyers to receive a shared profit of $ 100 to $ 6750 per month from online casinos, depending on the level of NFT purchased. The Texas order is particularly devastating, calling on defendants on charges of misleading the general public, as well as unregistered offerings.
Although NFTs make up securities, respondents advise buyers that securities laws do not currently regulate NFTs and are considering further steps to thwart NFT regulations. .. .. .. Regulatory advice isn’t just true, NFT offerings are high-tech scams. Parties hide their locations, hide their managers’ identities, misunderstand potential buyers about their experience, and mask the significant risks associated with investing in NFTs.
This looks like a worse case, but it’s ours predict Last month, regulators at all levels took serious steps against NFTs and other more innovative token companies that believed the breach had occurred.
Cryptographic regulation and enforcement remains a complex patchwork. There are many legal considerations regarding NFTs, encryption, and other Web3 technologies. But what isn’t ambiguous is the clear stance of US regulatory agencies that the basic principles still apply, despite the novelty of technology and asset classes. Developers, protocols, projects, and platforms, whether registered or not, cannot deceive individual investors. They cannot support or prevent money laundering. And they cannot violate sanctions. Stay tuned for next month’s crypto roundup installments.