Washington Post OpEd | Aaron Brown | Aug 11, 2022
Retail investors should have access to exchanges free from those problems. But Gensler’s stated extension is that alternative exchanges should be outlawed. Most people want regulation to give people the ability to trade safely, but only “nanny staters” want regulations to prevent people willing to take chances from trying new things.
The SEC should look at actual problems from crypto exchanges and offer technology-specific solutions. That may mean importing from traditional financial markets, but it may require new approaches.
One of the most exciting crypto innovations goes by the scary name of “homomorphic encrypted orders” (HEOs). Instead of sending an order anyone can read to your broker or an exchange, you first encrypt it so no one — not even the recipient — can know what it says. A computer algorithm can match up transactions without knowing what those transactions are, nor who made them. From your point of view, a smart contract changes what you sold into what you bought and no one—not the exchange, not anyone who intercepted any messages, not the person on the other side of the trade—can know what you did. Only aggregated transactions are made public, giving price information to the market.
While this obviously raises money-laundering and insider-trading concerns — which can be addressed — it has enormous potential advantages. People are incented to reveal their entire interests since that information will never be known to anyone else. There’s no value to games like spoofing, manipulating or high-frequency trading. No one can front-run, because no one sees the trade even after it executes.
Some of these innovations have been tried on small scales with traditional assets. But only in crypto are we getting full-scale tests of these and other innovations. After a period of evolution, I have no doubt that some of them will prove so useful that all financial markets will move to them.
This is a much more promising solution to ancient problems of exchanges than a few more SEC regulations on top of what we already have. Gensler’s determination to force crypto exchanges to look like the NYSE is in no one’s interest.
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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Blockworks | | Aug 10, 2022
Crypto startup Bloom Protocol has been ordered by the SEC to register its tokens or face a $31 million fine.The regulator issued a cease-and-desist order to the company on Tuesday, accusing it of offering unregistered securities.
Bloom violated the Securities Act by offering and selling Bloom Tokens (BLT) in an unregistered initial coin offering (ICO) between November 2017 and January 2018, the order said.
The Gibraltar-registered firm managed to raise $30.9 million from nearly 7,400 investors around the world, including in the US, which means the SEC plans to fine Bloom for the amount of crypto raised in its ICO.
Founded in 2017, Bloom describes itself as a blockchain-powered solution for credit scoring that aims to reduce the risk of identity theft. It claims its system minimizes fraud and reduces the cost of customer onboarding.
Bloom promoted BLT as investment contracts which inherently marks them as securities, in line with the Howey Test, according to the SEC.
“A purchaser in the offering of BLT would have had a reasonable expectation of obtaining a future profit based upon Bloom’s efforts…to create an online identity attestation system that would increase the token’s value on crypto asset trading platforms,” the regulator said.
Bloom allegedly told prospective investors its limited presale was “oversubscribed” and that it raised a “hard cap of $50m total.” The average investment during the pre-sale was $340,000, and the average during the public sale was $2,000, regulators found, which when calculated, doesn’t add up to the advertised cap.
Bloom is expected to register BLT as a class of securities within 270 days and inform investors about potential claims to recover their money within 60 days. It has been ordered to fulfill all payments to investors within three months of the claim form’s submission deadline.
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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Reuters | Christopher Bing and Daphne Psaledakis | Aug 8, 2022
WASHINGTON, Aug 8 (Reuters) - The United States on Monday imposed sanctions on virtual currency mixer Tornado Cash, accusing it of helping hackers, including from North Korea, to launder proceeds from their cyber crimes.
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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Forkast | Lachlan Keller | Aug 3, 2022
The U.S. bill to bring cryptocurrencies under the oversight of the Commodities Futures and Trading Commission is likely to hasten legislation of such digital assets around the world.U.S. regulators have unveiled a new bill that would define Bitcoin and Ether as digital commodities, placing them squarely under the jurisdiction of the Commodities and Futures Trading Commission (CFTC) alongside other commodities such as corn and aluminum.
Senate Agriculture Committee Chairwoman Debbie Stabenow and the committee’s top-ranking Republican John Boozman released the plan on Wednesday as lawmakers around the world race to regulate crypto in the fallout from the collapse of Terra-LUNA.
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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Finbold | | Jul 3, 2022
Despite its skeptical approach to digital currencies, exacerbated by the recent cryptocurrency market crash, it looks like the Bank for International Settlements (BIS) intends to extend its hand to the new asset class by allowing banks to hold up to 1% of reserves in cryptocurrencies such as Bitcoin (BTC).
Indeed, BIS’s Basel Committee on Banking Supervision (BCBS) has made the proposal for limiting the banks’ total exposures to “Group 2 cryptossets to 1% of Tier 1 capital” in its consultative document titled “Second consultation on the prudential treatment of cryptoassets,” published on June 30.
Specifically, Group 2 refers to the assets that do not meet classification conditions and includes specific tokenized traditional assets and stablecoins, as well as unbacked crypto assets. As opposed to Group 2, Group 1 includes tokenized traditional assets and stablecoins that meet classification conditions.
Image: BIS
Coindesk OpEd| Frances Coppola | Aug 3, 2022
Banks won't HODLNew proposals from the Bank of International Settlements are unlikely to lead banks to hold bitcoin. But they could open the door to CBDCs, says our columnist.
“Bank for International Settlements to allow banks to keep 1% of reserves in bitcoin,” cries the headline on an article about the BIS’ newly proposed regulations for banks holding crypto assets. The article was retweeted by Changpeng "CZ" Zhao, CEO of crypto exchange Binance, with the comment, “Banks now use bitcoin for reserves. Probably nothing.” Crypto Twitter went wild. Zhao's comment was retweeted thousands of times and “liked” by more than 10,000 people.
If the BIS really intends to “extend its hand” to bitcoin by allowing banks to hold it as reserves, as the article claims, that would indeed be great news for bitcoin as an asset class, though perhaps not for those hoping it would eliminate banks. But sadly, the BIS, which is an organization of the world's major central banks, has no intention of doing any such thing. The article unfortunately misunderstands the BIS’ proposals.
Far from extending a helping hand to bitcoin, the BIS is cutting the rope.
The 1% exposure limit applies only to Group 2 assets. It means that because Group 2 assets are extremely risky, banks won't be allowed to have much in the way of exposure to them. In the example above, J.P. Morgan has Tier 1 capital of 13.7% of total risk-weighted assets. So for J.P. Morgan, total Group 2 crypto asset holdings (including bitcoin) can’t be more than 0.137% of its total risk-weighted assets – and considerably less of its total assets unweighted for risk. Admittedly, for a bank the size of J.P. Morgan, that is still a lot of bitcoin. But it’s worth remembering that the previous version of the BIS proposals, issued in June 2021, didn’t impose a total exposure limit. So, far from encouraging banks to hold bitcoin, the revised proposals actually make it more difficult.
In fact the BIS’ proposals make it extremely expensive for banks to hold or trade bitcoin on their own account at all. The regulations for Group 2a and 2b assets in the chart above force banks to write off bitcoin holdings fully against capital. The BIS’ 2021 proposals explain that the 1,250% risk weighting for Group 2b assets is effectively a 100% capital charge: “A $100 exposure would give rise to risk weighted assets of $1,250, which when multiplied by the minimum capital requirement of 8% results in a minimum capital requirement of $100 (i.e. the same value of the original exposure, as 12.5 is reciprocal of 0.08).”
In layman’s terms, this means that banks cannot use customer deposits or issue senior bonds to finance the acquisition of bitcoin or any other cryptocurrency. They can finance them only from capital. That ensures that in the event of the value of their crypto holdings crashing to zero, none of their customers or creditors will be affected.
But equity finance is considerably more expensive than debt finance – and shareholders might look askance at a bank taking such risks with their funds.
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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FP | | Jul 28, 2022
Canada’s antitrust watchdog is looking at the cryptocurrency world, too— a sign of both the increasing relevancy of that space and of the more active posture of the bureau under new leadership.
“WonderFi was also notified that every future acquisition would require such a review,” Koshy said in an email.
A Competition Bureau spokeswoman, Camilla Corrigan, said in a statement that the watchdog must be given notice for deals above a certain size: $92 million for companies being bought or $400 million for the parties combined, either in terms of valuation or the firms’ domestic revenue.
WonderFi, however, suggested that the Competition Bureau should focus its energy elsewhere. It pointed a finger at competitors — yet another merger in the world of Canadian crypto exchanges, with the Bahamas-based FTX announcing in June it would buy Calgary’s Bitvo for an undisclosed sum.
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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Brookings Institution | Jul 25, 2022
More than a decade into its existence, cryptocurrency has burst into the mainstream. Meanwhile, America’s financial system still has not figured out how to regulate it. Is crypto an asset, security, commodity, or currency? Is crypto an opportunity for financial inclusion or a scam full of consumer abuse? As crypto continues its ascent, the answers to these questions will be paramount for regulators to ensure fair access to the digital currency and adequate consumer protection.
On Monday, July 25, Aaron Klein, senior fellow at the Brookings Center on Regulation and Markets sat down with Commodity Futures Trading Commission Chairman Rostin Behnam to discuss the future of crypto regulation. We then heard from Hilary Allen, professor of law at the American University Washington College of Law; Michael Piwowar, executive director of the Center for Financial Markets at the Milken Institute; and Sheila Warren, chief executive officer of the Crypto Council for Innovation for their perspective.
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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