New rules in response to Russia’s invasion of Ukraine cover all notionally valuable digital assets
California Gov. Gavin Newsom is set to sign a recently passed bill that would require digital asset exchanges and other crypto companies to obtain a license to operate in the state. 
Which tokens are securities?
The SEC chief has gone from rhetoric to enforcement, targeting token projects from the present and past. Crypto companies are shook.
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
Gary Gensler, Chairman of the SEC Speech
SEC | Sep 8, 2022
Image: Unsplash/Clu Soh
Select Highlights and Quotes:
Joseph Kennedy, the first Chairman of the SEC, had a saying: “No honest business need fear the SEC.
Not liking the message isn’t the same thing as not receiving it.
Crypto Tokens
- Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities (Howey test). Offers and sales of these thousands of crypto security tokens are covered under the securities laws. Some tokens may not meet the definition of a security — what I’ll call crypto non-security tokens. These likely represent only a small number of tokens, even though they may represent a significant portion of the crypto market’s aggregate value.
- Some in the crypto industry have called for greater “guidance” with respect to crypto tokens.
- For the past five years, though, the Commission has spoken with a pretty clear voice here: through the DAO Report, the Munchee Order, and dozens of Enforcement actions, all voted on by the Commission. Chairman Clayton often spoke to the applicability of the securities laws in the crypto space.
- Investors deserve disclosure to help them sort between the investments that they think will flourish and those that they think will flounder. Investors deserve to be protected against fraud and manipulation. The law requires these protections.
Stablecoins
- Stablecoins have features similar to, and potentially competing with, money market funds, other securities, and bank deposits, and raise important policy issues.
- As discussed in the President’s Working Group Report on Stablecoins, it is important to ensure that we have appropriate safety and soundness protections, investor protections, and safeguards against illicit activity.
See: ECB Publishes Macroprudential Bulletin on Stablecoins, Climate Risk, and DeFi
- Some stablecoins purportedly are backed by reserves of U.S. dollars. Other stablecoins, so-called algorithmic stablecoins, are not backed fully by fiat moneys and bear heightened risks related to whatever mechanisms are used purportedly to maintain a stable value.
- Depending on their attributes, such as whether these instruments pay interest, directly or indirectly, through affiliates or otherwise; what mechanisms are used to maintain value; or how the tokens are offered, sold, and used within the crypto ecosystem, they may be shares of a money market fund or another kind of security. If so, they would need to register and provide important investor protections.
Intermediaries
- Crypto intermediaries — whether they call themselves centralized or decentralized (e.g., DeFi) — often are an amalgam of services that typically are separated from each other in the rest of the securities markets: exchange functions, broker-dealer functions, custodial and clearing functions, and lending functions.
- These platforms match orders in crypto security tokens of multiple buyers and sellers using established non-discretionary methods. If that sounds legalistic, that’s because it is — these are the regulatory criteria for being an exchange.
See: SEC Charges 3 In Crypto Insider Trading Scheme
- Crypto investors should benefit from exchange rulebooks that protect against fraud, manipulation, front-running, wash sales, and other misconduct.
- Crypto intermediaries also engage in the business of effecting transactions in crypto security tokens for the account of others, which makes them brokers, or engage in the business of buying and selling crypto security tokens for their own account, which makes them dealers.
- Finally, many crypto intermediaries provide lending functions for a return.[19] Make no mistake: If a lending platform is offering and selling securities, it too comes under SEC jurisdiction.
- If you fall into any of these buckets, come in, talk to us, and register.
Continue to the full article --> 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
 |  |  |
|---|---|---|
 |  |  |
Suspected Sanctions Breach? The UK Forces Crypto Exchanges to Immediately Report
The Guardian | Jasper Jolly | Sep 4, 2022
New rules in response to Russia’s invasion of Ukraine cover all notionally valuable digital assets
- Crypto exchanges must report suspected sanctions breaches to UK authorities under new rules brought in amid concerns that bitcoin and other cryptoassets are being used to dodge restrictions imposed in response to Russia’s invasion of Ukraine.
- The rules, set by the Treasury’s Office of Financial Sanctions Implementation, will mean crypto exchanges are committing a criminal offence if they fail to report clients designated for sanctions. Official guidance was updated on 30 August to explicitly include “cryptoassets” among those that must be frozen if sanctions are imposed on a person or company. As well as digital currencies, such as bitcoin, ether and tether, cryptoassets could include other notionally valuable digital assets such as non-fungible tokens.
See: Analysis: Into the Eye of a Tornado | Sanctions Compliance Best Practices for Crypto Businesses
- Under the rules, crypto exchanges must immediately act if they suspect that one of their customers is under sanctions, or if they suspect a breach of sanctions – giving them similar obligations to professionals such as estate agents, accountants, lawyers and jewellers.
Includes Non-fungible tokens
Using cryptocurrencies to evade sanctions and move money around the world was already illegal in the UK under laws that cover all “economic resources”. However, the change underlines authorities’ concern about the relatively new assets, which could be useful for evading sanctions because users do not rely on regulated entities to make transactions.
See: Rune Christensen: MakerDAO Founder’s ‘Endgame’ Proposal
Treasury spokesperson:
It is vital to address the risk of cryptoassets being used to breach or circumvent financial sanctions. These new requirements will cover firms that either record holdings of, or enable the transfer of cryptoassets and are therefore most likely to hold relevant information.
Continue to the full article --> 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
| | |
|---|---|---|
| | |
The Digital Dollar Project Launches Sandbox Program to Explore CBDC Solutions in the U.S.
Original Release | Digital Dollar Project | Aug 31, 2022
WASHINGTON, Aug. 31, 2022 /PRNewswire/ -- The Digital Dollar Project (DDP) announced today the launch of its Technical Sandbox Program to jumpstart further exploration of technical implementations of a U.S. central bank digital currency (CBDC). The program is slated to begin in early October with the inaugural cohort focused on cross-border payments.
See: Digital Canadian Dollar: The Required Steps for Canada
- The program will serve as a collaborative space for the DDP participants and financial service providers, offering a neutral environment for the evaluation of technological, business, and policy approaches to CBDCs. Program participants will examine real-world technology, explore potential implications to business strategies and operations, and experiment to uncover possible use-case specific solutions.
- Each cohort of the DDP Technical Sandbox Program will consist of two phases: an education phase and a pilot phase.
- Education phase - develop a business and functional understanding of the technology and evaluate the differences in possible design choices.
- Pilot phase identify and test specific CBDC use-case hypotheses with the aim of gathering data on business-level impacts.
- The results gathered will be broadly shared and used to inform both private and public sector stakeholders on how advancing technical solutions can unlock business value in a transformative way.
- For more information on The Digital Dollar Project, please visit https://digitaldollarproject.org/.
See: IMF Magazine: Money Revolution in the Age of Crypto and CBDCs
Jennifer Lassiter, executive director of The Digital Dollar Project:
The launch of our Technical Sandbox Program marks the next step in our effort to convene the private and public sector in exploration of a central bank digital currency in the U.S. We understand how important it is to include a diverse set of views and expertise as we look to answer key questions about how the technology could work, the problems we hope to solve, and the ultimate business and individual outcomes we want to achieve. The marriage of these sectors in our collaboration is essential and will lay the foundation for robust pilots that improve the outcomes and usability of CBDCs.
View the original release --> 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
| | |
|---|---|---|
| | |
California State Assembly Passes Crypto Regulation Bill That is Criticized by Industry Stakeholders
Coindesk | Sam Reynolds | Sep 1, 2022
California Gov. Gavin Newsom is set to sign a recently passed bill that would require digital asset exchanges and other crypto companies to obtain a license to operate in the state.
- The Digital Financial Assets Law, dubbed California’s "BitLicense," takes after New York’s BitLicense regulation, which came into effect in 2015. California’s law, if signed by Newsom, a Democrat, would go into effect in January 2025.
- Among the requirements is a prohibition, which would be phased out in 2028, on California-licensed entities dealing with stablecoins, unless that stablecoin is issued by a bank or is licensed by the California Department of Financial Protection and Innovation.
- This is similar to a proposed (and never passed) bill in the U.S. Congress that would require stablecoin issuers to have a bank charter.
See: California governor Newsom embraces blockchain and issues executive order on crypto
- The bill would require stablecoin issuers that hold securities as a reserve to have an amount "not less than the aggregate amount of all of its outstanding stablecoins issued or sold in the United States.
- aggregate market value must be computed using the generally accepted accounting principles (GAAP) of the United States.
The Blockchain Association, an industry trade group, tweeted :
[The bill would] create shortsighted and unhelpful restrictions that would impede crypto innovators’ ability to operate and push many out of the state.
This is the second attempt California has made to create a "BitLicense" regime. The first, in 2015, failed and was made dormant after opposition from a state senator.
Continue to the full article --> 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
| | |
|---|---|---|
| | |
Canadian Crypto Industry is Working Towards Legitimacy
DLA Piper | Don Collie, Ryan J. Black, Saje Gosal | Aug 19, 2022
Which tokens are securities?
- CSA Staff Notice 46-308: Securities Law Implications for Offerings of Tokens provides guidance on the way Canadian securities regulators approach the question of whether any individual token is a security or something else entirely.
- Recent CSA guidance, including Consultation Paper 21-402: Proposed Framework for Crypto-Asset Trading Platforms (“CP 21-402”), has not taken a position on whether any individual crypto asset is a security or otherwise. Instead, securities regulators in Canada have honed in on identifying the means through which a crypto asset is held on a centralized exchange to assert jurisdiction.
See: Alleged US$16 million crypto theft case to test ‘Code is law’ defence in Canada
- CP 21-402 and subsequent CSA Staff Notice 21-327: Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets elaborate on where a Crypto Contract exists, and whether securities laws apply.
- If the crypto asset is immediately delivered to the end user such that the end user is free to use the asset without the involvement or reliance of a CTP, then no Crypto Contract exists. This means that transactions that end in a user-controlled wallet (i.e. browser extension wallets or cold storage wallets where the user maintains their own private keys) independent of the CTP are not Crypto Contracts.
Defining “security” in Canada
- In Canada, securities laws take a “catch and release” approach by providing a wide definition of “security”, but including numerous exceptions based on the policy purposes of enforcing the rules.
- Currently in Canada, crypto assets are generally taxed as commodities.
- Whether a particular asset is a commodity or a security will likely depend on a number of factors, including the ways in which network revenues or fee generation can be attributed to a token (an expectation to profit), whether the mechanism through which validators secure the network is sufficiently decentralized, and whether there is a central third party operating the network and making decisions (depending upon the efforts of third parties).
See: Digital Asset Classification vs Wire Fraud: What’s the Most Powerful Law in Crypto Right Now
- Regulators typically apply the test found in Pacific Coast Coin Exchange of Canada v Ontario (the “Pacific Coast test”):
- an investment of money;
- with an intention or an expectation of profit;
- in a common enterprise in which the fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the
- investment or of third parties; and
- where the efforts made by those other than the investor are undeniably significant, essential managerial efforts which affect the failure or success of the enterprise.
Enforcement action
Two recent decisions of the Ontario Securities Commission’s (the “OSC”) Capital Markets Tribunal (the “Tribunal”) have shown how securities regulators are applying their guidance.
See: OSC Publishes Statement of Allegations Against KuKcoin For Failing to Comply with Ontario Securities Law
The Tribunal reached a settlement agreement including a comprehensive undertaking with Bybit Fintech Limited (“Bybit”), and filed administrative penalties, a cease trade order and a permanent ban on Mek Global Limited and PhoenixFin Pte Ltd (collectively, “KuCoin”) for failing to begin conversations around registration and regulation with the OSC by their stated deadline.
Continue to the full article --> 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
| | |
|---|---|---|
| | |
Sheriff Gensler of ‘Wild West’ Cryptoville Has Drawn His Guns
Decrypto | Daniel Roberts | Aug 27, 2022
The SEC chief has gone from rhetoric to enforcement, targeting token projects from the present and past. Crypto companies are shook.
When Gary Gensler was sworn in as SEC Chair in April of last year, many in crypto celebrated. The general reasoning: He had taught a course called "Blockchain and Money" at MIT in 2018, so he must be friendly to crypto. They aren't celebrating now. In the eyes of the crypto industry, he began as a wild card, became a figure of concern, and is now a proud villain.
He has already spent the past year making very clear through his rhetoric that he views pretty much all tokens other than Bitcoin as securities. (He has avoided giving his own view on Ethereum.) Now the rhetoric is turning to enforcement. Last month, the SEC fingered nine tokens listened on Coinbase as securities, and reportedly launched an investigative probe into the company. Last week, it sued blockchain platform Dragonchain for its $16.5 million ICO (initial coin offering) back in 2017.
See:
-
SEC Charges 3 In Crypto Insider Trading Scheme
-
Bloom Protocol: SEC Orders Startup To Register ICO Tokens or Pay US$31 Million Penalty
The message is clear: all those token sales from the ICO boom are on notice. Some prominent people in crypto have been careful to curb their criticism. Other crypto advocates have had enough, and are saying so—loudly. Gensler's latest Wall Street Journal op-ed included a call for crypto lenders "to come in and talk to SEC staff." It was roundly mocked by people in crypto who point out Gensler's SEC has had anything but an open-door policy.
- Mike Novogratz, speaking to me onstage at Messari Mainnet last September, said Gensler "wants to be the sheriff of Cryptoville." Now the sheriff has his guns drawn.
- Mark Cuban tweeted in response, "Come in and talk to who? Set up an appointment how? Since you understand crypto lending/finances, why don't you just publish bright line guidelines you would like to see and open it up for comments?"
- Cuban had also encouraged Coinbase, last fall, to "go on the offensive." Coinbase CEO Brian Armstrong described the SEC's approach as "intimidation tactics behind closed doors."
- An op-ed in Forbes this week by tech consultant Roslyn Layton declares it's "time to end the SEC's 'clarity' charade on crypto" and urges Gensler to resign.
Continue to the full article --> 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
| | |
|---|---|---|
| | |
Digital Asset Classification vs Wire Fraud: What’s the Most Powerful Law in Crypto Right Now
Reuters | Ian McGinley | Aug 23, 2022
Regulation and enforcement in the cryptocurrency space are hot topics, with the debate centered around the complex issue of whether to classify digital assets as securities, commodities, or a separate asset class entirely. In the middle of this debate, the Department of Justice (DOJ) has sent a message — the classification does not matter for its purposes. In recent prosecutions, DOJ has used the wire fraud statute, 18 U.S.C. § 1343, a law with origins dating back to the 1800s, to bring innovative cases in the cryptocurrency space that do not depend on how a digital asset is classified.
See: Analysis: Into the Eye of a Tornado | Sanctions Compliance Best Practices for Crypto Businesses
DOJ has used wire fraud to prosecute the first two rug pulls involving NFTs and to prosecute two digital asset insider trading cases. DOJ has not recently used wire fraud in a large-scale market manipulation case, but it is likely to be a next area of focus, given public reports of market manipulation and spoofing (creating orders with the intent to cancel) by crypto whales, who are individuals or entities that own substantial amounts of a particular cryptocurrency.
Recent Rull Pull Cases
- In the first half of 2022, DOJ charged two innovative NFT rug pull cases using the wire fraud statute, both of which are still pending. First, in March 2022, the U.S. Attorney's Office for the Southern District of New York (SDNY) in U.S. v. Nguyen charged the first fraud case involving NFTs. SDNY alleged that the creators of the Frosties NFT collection committed a $1.1 million rug pull by falsely promising purchasers that in addition to cartoon-like images, they would receive perks, such as giveaways and access to a metaverse game.
- Second, in June 2022, the DOJ Fraud Section in U.S. v. Tuan charged the second NFT rug pull against the creator of the "Baller Ape" NFT project, alleging a $2.6 million rug pull. The allegations in that case are even more egregious: the creators did not provide anything to purchasers, not even images.
- In neither case did the DOJ allege that the NFTs at issue were securities or commodities, as the classification of NFTs was immaterial to the wire fraud charges. DOJ charged a basic theory of wire fraud — that purchasers of these NFTs did not receive what they were promised.
- While these were not large-scale frauds, they underscore DOJ's focus on the accuracy of the statements and disclosures defendants made to purchasers in digital assets -- regardless of the identity of the underlying asset.
See: Crypto Exchanges Comply But Ethereum Community Unhappy About Harsh Canadian Rules
Going forward, we can expect DOJ to focus on larger disclosure issues, likely at the corporate level. Crypto companies communicate with the public frequently, over various forms of social media. Companies often respond in real time to market events. While communicating quickly and frequently with the public has commercial benefits, it can also lead to inaccuracies. DOJ has already used wire fraud to prosecute alleged misrepresentations made over social media in other contexts (seeU.S. v. Milton, S.D.N.Y. 2021), and it may seek to do so as well in the crypto space.
Continue to the full article --> 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
| | |
|---|---|---|
| | |
