Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets Regulations
LA-Based Entertainment Company, Impact Theory, Faces SEC Charges Over Unregistered NFT Securities Offering
SEC Enforcement | Aug 28, 2023
Image: Pixabay/TheDigitalArtist
The SEC has charged Los Angeles-based entertainment firm, Impact Theory, for conducting an unregistered offering of securities through NFTs.
Overview
- Impact Theory's NFT Offerings
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- Between October and December 2021, Impact Theory introduced three tiers of NFTs named "Founder’s Keys." The company promoted these NFTs as an investment opportunity in their business, likening their vision to building the "next Disney."
- They raised nearly $30 million in Ethereum from the sale of almost 14,000 NFTs.
See: Consultation Until Sep 20, 2023: OSFI Proposes New Guidelines for Crypto-Asset Exposures in Canada
- SEC Enforcement
- In a significant move that underscores the evolving regulatory landscape for digital assets, the U.S. Securities and Exchange Commission (SEC) has taken enforcement action against Impact Theory, LLC.
- Impact Theory is now under scrutiny for allegedly offering crypto asset securities in the guise of non-fungible tokens (NFTs) without proper registration, and promoted "Founder’s Keys" as an investment in the company. The company even likened its venture to building the "next Disney" and assured potential buyers of the "tremendous value" these NFTs would hold if the business succeeded.
- While Impact Theory neither admitted nor denied the allegations, they consented to a cease-and-desist order. They were also fined $6.1 million and are required to refund all proceeds from their NFT sales to investors.
SEC's Decision Was Not Unanimous
- This development not only highlights the SEC's proactive stance on crypto regulations but also serves as a cautionary tale for other entities operating in the rapidly expanding NFT space.
- However, the SEC's decision has not been unanimous. Commissioners Hester Peirce and Mark Uyeda have expressed their dissent, arguing that the NFTs in question did not represent shares in a company nor produced any dividends. They emphasized the need for the Commission to provide clear guidance on NFTs and their intersection with securities laws, and that the mere hype around NFTs should not be a basis for pulling them into the SEC's jurisdiction.
See: Hester Peirce Reaffirms That the SEC’s Current Approach to Crypto Is ‘Not a Good Way of Regulating’
- The statement also raised several pertinent questions about NFTs, such as (see the full list of questions here):
- How should the SEC categorize NFTs concerning the application of securities laws?
- What kind of guidance should the SEC provide to NFT creators about potential intersections with securities laws?
- How can the SEC's registration requirements be tailored to accommodate the unique nature of NFTs?
Broader Implications for NFTs and Crypto
- It remains to be seen how this enforcement action will influence the broader NFT market. While the SEC has not yet taken legal action against major industry players like Dapper Labs, reports suggest that the agency is investigating other companies, such as Yuga Labs, for potential violations.
See: Ex-OpenSea Manager Convicted in Landmark NFT Insider-Trading Case
- An article in The Verge article points out that the SEC's action against Impact Theory might not necessarily mean that the SEC views all NFTs as securities offerings. The focus seems to be on how NFTs are marketed and the intended use of the proceeds from their sales. Some NFT projects, like NBA Top Shot, position their products more as collectibles rather than investment opportunities.
Conclusion
- The SEC's move has undoubtedly stirred discussions in the crypto community. As the line between NFTs and securities becomes blurrier, companies operating in this space must tread carefully and ensure compliance with regulatory standards. The action against Impact Theory has set a precedent, and it remains to be seen how this will shape the future of NFTs and their classification under securities laws.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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FCA’s Expectations for UK Cryptoasset Businesses and the Travel Rule
Regulation | Aug 18, 2023
Image: Unsplash/Shubham Dhage
Starting from 1st September 2023, UK cryptoasset businesses will be mandated to gather, authenticate, and disseminate information related to transfers, a directive known as the 'Travel Rule'.
The Financial Conduct Authority (FCA) has outlined its expectations for UK cryptoasset businesses in light of the recent changes in money laundering legislation introduced in July 2022. Starting from 1st September 2023, these businesses will be mandated to gather, authenticate, and disseminate information related to cryptoasset transfers, a directive known as the 'Travel Rule'. This initiative is in alignment with the Financial Action Task Force's (FATF) call for a standardized approach to cryptoasset transactions, similar to other financial services sectors.
What is the Travel Rule and Why is it Important?
The Travel Rule (see Targeted Update on the Implementation on FATF Standards on Virtual Assets and VASPs) is designed to bring about increased transparency in cryptoasset transfers. Its primary objective is to make it challenging for criminals to exploit cryptoassets for illegal activities. Specifically, the Travel Rule promotes global anti-money laundering (AML) and counter-terrorist financing (CTF) initiatives by aiding cryptoasset businesses in identifying suspicious transactions and conducting effective sanctions screening.
- Enhanced Transparency: By mandating the collection and verification of transactional information, the Travel Rule ensures that every cryptoasset transfer is traceable and accountable.
- Combatting Illicit Activities: The rule makes it difficult for criminals to use cryptoassets for money laundering, terrorist financing, and other illegal activities.
- Standardization Across Financial Services: The Travel Rule brings the practices of cryptoasset businesses in line with traditional financial services, creating a uniform standard for transactional information.
The implementation of the Travel Rule is a step towards elevating standards in the UK's cryptoasset sector, ensuring consumer protection, market integrity, and the sector's sustained competitiveness.
FCA's Expectations for UK Crypto Businesses to Implement the Travel Rule
- Crypto businesses must diligently adhere to the Travel Rule.
- Even if third-party suppliers are used, firms remain accountable for Travel Rule compliance.
- Full compliance is required for crypto transfers within the UK or to countries that have adopted the Travel Rule.
- Firms should consistently monitor the global adoption of the Travel Rule and adjust their operations accordingly.
- The Travel Rule aims to enhance transparency in crypto transfers, thereby curbing illicit activities and bolstering anti-money laundering (AML) and counter-terrorist financing (CTF) measures.
See: Coinbase Implements KYC Travel Rule in the Netherlands
The FCA, in collaboration with the Joint Money Laundering Steering Group (JMLSG) and HM Treasury (HMT), is also working on guidance to assist firms in complying with the Travel Rule. Feedback on this guidance can be submitted until 25th August 2023.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Coinbase Canada Suspends Stablecoin Trading Shortly After Launch
News | August 18, 2023
Image: Unsplash/Behnam Norouzi
Coinbase, a global leader in cryptocurrency exchange services, recently made headlines with its official launch in Canada. However, just days after its debut, the platform has announced the suspension of trading for Tether (USDT), DAI, and RAI for its Canadian users.
Coinbase's entry into the Canadian market was highly anticipated, with the platform officially launching just a few days ago. The excitement was palpable, with Canadian crypto enthusiasts eager to explore the platform's offerings. The subsequent announcement of the stablecoin trading suspension has taken some by surprise, raising questions about the platform's strategy and the challenges it faces in the Canadian regulatory environment.
Why the Sudden Suspension?
While the timing is unexpected, the decision to suspend stablecoin trading is rooted in regulatory compliance. Coinbase Canada, Inc. is actively seeking registration in specific Canadian jurisdictions and has committed to adhering to regulatory requirements until the necessary permissions are secured.
See: Canadian Regulators Set Expectations for Crypto Asset Investment Funds: A Comprehensive Overview
On March 29, 2021, the OSC informed cryptocurrency trading platforms that they are required to reach out to the Staff to begin the registration procedure, otherwise they risk facing regulatory penalties. These mandates require exchanges to enter legally binding agreements that include restrictions on certain stablecoin transactions. This move underscores the regulatory body's intent to ensure consumer protection and financial stability in the face of the rapidly evolving crypto industry.
The OSC's Registered Firms and Pre-Registration Undertakings
The Ontario Securities Commission (OSC) has a list of crypto asset trading platforms that have received exemptive relief to offer crypto products to investors in Ontario. As of May 25, 2023, the following platforms are registered:
- Bitbuy Technologies Inc. (Bitbuy)
- Bitvo Inc.
- Coinberry Limited (Coinberry)
- Coinsquare Capital Markets Ltd.
- Fidelity Clearing Canada ULC (Fidelity Digital Assets)
- Fidelity Digital Asset Services, LLC
- Netcoins Inc. (Netcoins)
- Newton Crypto Ltd.
- Shakepay Inc.
- Simply Digital Technologies Inc. (CoinSmart)
- VirgoCX
- Wealthsimple Digital Assets Inc. (Wealthsimple)
See: Consultation Until Sep 20, 2023: OSFI Proposes New Guidelines for Crypto-Asset Exposures in Canada
Additionally, several platforms have entered into a pre-registration undertaking with the OSC. This allows them to continue operations while their registration applications are under review. Notably, Coinbase Canada, Inc. is among these platforms, along with others like ByteX, CatalX, Crypto.com, DigiFinex, Gemini, Kraken, NDAX, Satstreet, Shakepay, and Uphold.
Looking Ahead
Coinbase Canada's swift decision post-launch underscores the challenges crypto platforms face in navigating regulatory waters yet it highlights Coinbase's commitment to compliance and user safety. The crypto community in Canada and globally will be keenly watching how Coinbase navigates these challenges and what this means for the future of crypto trading in the region.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Historic Nod from Regulators. Coinbase Secures Approval for Crypto Futures Trading
Regulatory News | Aug 16, 2023
Image: Unsplash/PiggyBank
Coinbase Global Inc., a leading cryptocurrency exchange, has secured the green light to offer crypto futures trading to its clientele.
A First in the U.S. Crypto Space
This monumental approval comes nearly two years after the company initially applied. The National Futures Association (NFA) has granted Coinbase Financial Markets the permission to operate as a Futures Commission Merchant (FCM). This role is pivotal as FCMs are responsible for buying or selling futures contracts, akin to market makers.
See: Coinbase’s CEO Speaks Out on the SEC’s Request to Delist Assets (Except Bitcoin)
With this approval, Coinbase has etched its name as the first crypto-centric platform in the U.S. to provide regulated and leveraged crypto futures alongside traditional spot trading. Andrew Sears, CEO of Coinbase Financial Markets, emphasized the significance of this move, stating, "Offering US investors access to secure and regulated crypto futures is key to unlocking growth and enabling broader participation in the crypto economy."
Positive Response and Future Outlook
Following the announcement, Coinbase's stock witnessed an uptick, opening over 4% higher. The company views this approval as an "important milestone," especially considering that approximately 75% of global crypto trading volume stems from the derivatives market. Furthermore, Coinbase remains committed to working with regulators, emphasizing its dedication to operating a regulated and compliant business.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Options for Ripple Labs in Response to SEC’s Request for Interlocutory Appeal
Regulation | Aug 15, 2023
Image: Unsplash/Katarina Miloševic
The SEC seeks to challenge a recent court decision that favored Ripple Labs, reigniting discussions on how Ripple's XRP token should be classified and highlighting the complexities of digital asset regulation.
Background
- The central issue of the dispute revolves around the classification of Ripple's XRP token. Judge Analisa Torres had previously ruled in favor of Ripple, stating that the sale of the XRP token on public exchanges complied with federal securities laws.
- However, in a bid to establish a clear regulatory framework for cryptocurrencies, the SEC has decided to appeal this ruling.
- This decision was perceived as a potential game-changer for the digital asset industry. The SEC's appeal will undergo a rigorous judicial review. The outcome will not only determine the fate of Ripple's XRP but will also set the tone for the regulatory treatment of digital assets in the U.S. and potentially beyond.
Options for Ripple Labs in Response to SEC's Request to Appeal
James Murphy, a well-known lawyer and crypto enthusiast, has provided an in-depth analysis of the SEC's request for an interlocutory appeal against Ripple in the XRP lawsuit. Here's a summary of his insights and Ripple's potential responses:
- Option 1: the Motion to Certify the Appeal: Ripple might choose to oppose the SEC's appeal request. Murphy suggests that Ripple could present various reasons for this, including alternative strategies if they accept the appeal. Reasons that this might be the green lit next step:
- Their belief that Judge Torres' ruling, based on the Howey test, is fair and aligns with past decisions.
- The possibility of Congress introducing a new crypto law.
- Anticipation of a change in the 2025 administration's crypto stance.
- Murphy's view that the appeal has a low likelihood of success, influenced by Judge Rakoff's remarks.
See: Consultation Until Sep 20, 2023: OSFI Proposes New Guidelines for Crypto-Asset Exposures in Canada
- Option 2: Agree with the SEC: Another option for Ripple is to concur with the SEC that an interlocutory appeal is appropriate. While Murphy believes Ripple might not lean towards this option, he wouldn't be surprised if they did. The main question here is the timing of the appeal process – whether it would begin immediately, after a year or more, or post the trial of Brad Garlinghouse and Christian Larsen.
- Option 3: Clause to the Second Option: If Ripple agrees to an interlocutory appeal, they might push for the court to certify the SEC's win on institutional sales for cross-appeal. This would mean no need for a penalty phase or further trial if the 2nd Circuit reverses the SEC's win on institutional XRP sales.
Critical Moment in Digital Asset Regulation
The SEC's appeal against the Ripple Labs ruling is not just a legal skirmish; it's a defining moment in the evolution of digital asset regulation. The outcome will have significant implications on innovation, investment, and the future trajectory of the crypto industry.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Federal Reserve Launches Novel Activities Supervision Program Targeting Digital Assets and Non-Bank Partnerships via Banks
Regulation | Aug 15, 2023
Image: Pixabay/sergeitokmakov
The Novel Activities Supervision Program is the Federal Reserve's latest initiative, signaling a transformative approach to banking oversight.
The Federal Reserve has launched the Novel Activities Supervision Program, targeting banking institutions to address the evolving challenges of modern finance. While financial innovations backed by new tech can benefit the U.S. economy and its consumers, they can also introduce new risks that might affect the stability and integrity of banking institutions.
The letter applies to all banking organizations supervised by the Federal Reserve, including those with $10 billion or less in consolidated assets to enhance the oversight of innovative activities undertaken by banking organizations under its supervision. The program will work in tandem with existing Federal Reserve supervisory teams. It will be risk-based, and the intensity of supervision will differ based on the level of engagement in innovative activities by each supervised banking organization.
See: The Federal Reserve Issues State Member Bank Guidance for ‘Dollar Tokens’ (Dollar-pegged Stablecoins)
Who's caught in scope?
- Partnerships with Non-Banks. Collaborations where a non-bank offers banking products and services to end-users, typically using technologies like application programming interfaces (APIs).
- Crypto-Asset Activities. This includes crypto-asset custody, crypto-backed lending, facilitating crypto trading, and involvement in stablecoin/dollar token issuance.
- DLT Projects. Exploration or utilization of DLT for various applications such as dollar token issuance and asset tokenization.
- Services to Crypto Entities and Fintechs. Banking organizations that primarily offer traditional banking services like deposits, payments, and lending to crypto-related entities and fintechs.
View the letter --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Sam Bankman-Fried Accused of Witness Tampering Now Awaits Trail Behind Bars – Lessons Learned
News | Aug 13, 2023
In a dramatic turn of events, Sam Bankman-Fried (SBF), the celebrated founder of cryptocurrency exchange FTX, has had his bail revoked and now awaits trial behind bars.
Sam Bankman-Fried, hailed as a titan in the cryptocurrency world, now finds himself facing serious legal challenges.
The Charges and Allegations
As reported by CBC, his bail was recently revoked due to allegations of witness tampering. The decision to jail Bankman-Fried has sent shockwaves through the fintech industry, raising questions about the implications for other high-profile figures in similar situations. With over 100 emails sent to the media and more than 1,000 phone calls made to members of the press, Bankman-Fried's interactions with journalists have been extensive. The defense argues that he was merely exercising his First Amendment rights, while prosecutors see it as a clear attempt at witness intimidation
See: Claw-back Risk: 1 in 3 Members of Congress Received ‘Cash Donation’ from FTX/SBF
Here are the ways in which he allegedly tampered with witnesses:
- SBF is alleged to have shown a journalist the private writings of a former girlfriend, who is also a key witness against him. This act was perceived as an attempt to influence the witness by sharing deeply personal information about her with the public.
- In January, after his arrest, SBF reached out to FTX's general counsel using encrypted communication. This act was seen as an attempt to ensure that their recollections of events were aligned or "on the same page."
- SBF shared excerpts of Caroline Ellison's communications with a reporter (his former girlfriend and the ex-CEO of Alameda Research) . The judge believed that the nature of the shared material was such that someone would only share it to "hurt, discredit, and frighten the subject of the material."
These actions led to the conclusion that there was probable cause to believe Bankman-Fried had tried to tamper with witnesses on multiple occasions. The judge's decision to revoke his bail was based on these allegations and the belief that he posed a risk to the community, including potential witnesses for the prosecution. This statement underscores the gravity of the allegations and the potential impact on the trial's outcome.
Judge Lewis Kaplan, as quoted in a CNBC article, stated:
"My conclusion is there is probable cause to believe the defendant tried to tamper with witnesses at least twice."
Media's Role A Double-Edged Sword
- The media's role in high-profile cases, as exemplified by the Sam Bankman-Fried (SBF) saga, is undeniably a double-edged sword.
- On one side, the media serves as a crucial watchdog, shedding light on complex issues and ensuring transparency in the justice system. Their coverage can amplify voices that might otherwise go unheard and hold powerful figures accountable.
- However, on the flip side, intense media scrutiny can risk prejudicing the public, potentially influencing the outcome of legal proceedings. The line between informative reporting and sensationalism can blur, leading to a media circus that detracts from the core issues at hand.
- In such high-stakes situations, it becomes imperative for the media to strike a delicate balance: to inform without bias and to respect the sanctity of the judicial process, allowing regulators and courts to operate without undue external pressure.
Broader Implications
The case against Bankman-Fried is more than just a legal battle; it's a reflection of the volatility and risks inherent in the fintech sector. As the founder of a major cryptocurrency exchange, his fall from grace serves as a cautionary tale for industry players. The intense media scrutiny also raises ethical considerations about the role of journalism in such high-stakes situations. The Sam Bankman-Fried (SBF) case presents several implications for the fintech industry:
See: Effective Altruism: SBF’s Downfall Endangers his Philanthropic Gifts
- High-profile legal battles, especially involving figures like SBF who were once celebrated in the fintech space, can erode public trust. This diminished trust can make it harder for new fintech startups to gain traction and for existing ones to retain their user base.
- Such cases can draw increased attention from regulators, leading to stricter regulations and oversight for fintech and cryptocurrency entities. This could mean more compliance hurdles and increased operational costs for businesses in the sector.
- Investors might become more cautious about where they put their money, seeking more transparency and assurance from fintech firms. This could lead to increased demands for audits, transparency reports, and other forms of verification.
- The allegations of witness tampering and the interactions with the media underscore the importance of ethical conduct and governance in business operations. Fintech firms might need to invest more in ethical training and establish clearer guidelines for their executives and employees.
- Fintech companies might need to bolster their legal teams and be better prepared for potential legal challenges, ensuring that they operate within the confines of the law at all times.
May Take Years to Unravel
In conclusion, the Sam Bankman-Fried case offers a multifaceted look into the complexities of legal proceedings in the age of media saturation. As the trial progresses, the fintech world will be watching closely, not just for the verdict, but for the broader implications for the industry as a whole.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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