Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Voices
NFX: Start Thinking ‘Service-as-a-Software’
AI | Jul 11, 2024
Image: Freepik (AI assisted)
SMEs will be Turbocharged as we move from 'AI Tools' to 'Guided AI Agents'
We agree with NFXs recent post that using "Guided AI Agents" instead of "AI tools" can automate a large amount of work and advance automation beyond simple job execution to produce efficiencies and specific business outcomes. For the first time ever, there's a technology that can help solve the problem of 'delivering uniqueness at scale', and small-and-medium-enterprises (SMEs) need to take advantage of this momentous opportunity.
1. Automation Potential
“This very moment, we could easily automate away 60% to 70% of the global economy’s work hours with AI.”
- With today's technology, around 50% of all work activities may be automated.
- By 2025, AI will generate 97 million new jobs while replacing 85 million existing ones.
- By 2024, organizations will use hyper-automation technology to reduce operating expenses by 30%.
- SMEs should reduce costs and increase productivity by using AI to automate repetitive processes like compliance checks and customer service.
2. From “Tasks” to “Outcomes”
Guided AI Agents represent a shift in focus from completing tasks to achieving outcomes. This approach enables businesses to measure success based on tangible results rather than the effort spent on individual tasks.
See: Report: Responsible AI Insights and Tips for Investors
“You can measure success in new customers gained, articles placed, deals closed. Outcomes.”
- Marketing with AI increases conversion rates by 20% and customer satisfaction by 10%.
- According to the Small Business Council, 93% of SMBs concur that AI is increasing profitability and saving them money.
- Small businesses should provide AI services with the goal of producing quantifiable business results, making sure that fintech solutions complement the expansion goals of SMBs.
3. Delivering Uniqueness at Scale
SMBs have a variety of demands, and guided AI agents can meet those needs by offering customized solutions at scale. With the help of AI, small firms may now effectively compete with larger corporations by using AI to complete hard jobs.
“We can finally deliver uniqueness at scale.”
“Now, Guided AI Agents run in the background, requiring no additional time investment from the SMB.”
- Guided AI agents can meets specific and unique requirements of SMEs in conjunction with best practices.
- Provide AI-powered financial process management solutions that handle everything 'holistically' from payroll to invoicing, improving user experience and operational effectiveness.
See: Google’s AI Boom Drives 50% Rise in Carbon Emissions
- SMEs should incorporate AI solutions that run on their own, freeing up SMBs to concentrate on their core business operations while the AI takes care of intricate financial responsibilities in the background.
Outlook
The concept of "service-as-a-software" is driving this transformation, emphasizing the shift from traditional human-centric services to automated, scalable software solutions. Guided AI Agents embody this inverted thinking by offering tailored, automated services that can handle complex tasks and deliver specific outcomes without continuous human involvement leading to an increase in productivity.
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, artificial intelligence, 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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Inside Federal Securities Laws and Crypto’s Tightrope
Regulation | Jul 11, 2024
Image: Gurbir S. Grewal Director Enforcement Division, SEC
Insights from SEC's Director of Enforcement: Federal Securities Laws in the Age of Crypto
in a recent speech titled "What's Past is Prologue: Enforcing the Federal Securities Laws in the Age of Crypto", Gurbir S. Grewal, Director of the SEC's Division of Enforcement, delivered an overview of the present legal environment for crypto assets at the Third Annual Symposium of the William & Mary Business Law Review.
See: Challenges in Global Crypto Regulations – Lessons from Dubai
He highlighted the importance of strong enforcement, the continuous applicability of federal securities laws, and the delicate balancing act between innovation and compliance. Below are select quotes across five themes from the depths of the SEC's securities enforcement division that shine light on the implications for the cryptocurrency industry.
1. Historical Continuity of Securities Regulation
Grewal emphasizes the continued applicability of the basic principles that informed the development of US securities laws.
“The history of our securities laws makes clear that Congress always intended the definition of what is a security to be principles-based and flexible to cover the many kinds of schemes where promoters seek others’ money and promise profits in return. Whether something is a security depends on the substance of the transaction – not its name, not its form, and not its underlying technology.”
He implies that crypto assets have to live by the same regulatory frameworks as conventional securities, even though blockchain technology is unique. This guarantees strong investor safeguards while preserving market integrity in the face of technological improvements.
2. Investor Harm and Market Integrity
Grewal laments the substantial financial impact that the volatility of the cryptocurrency market has caused to regular investors.
“The current turmoil in the crypto markets is taking a real toll on everyday Americans. According to one survey, approximately 16% of U.S. adults have invested, traded, or used crypto, and among that group approximately 46% report their investments have done worse than they expected. In the end, investors, large and small, defrauded, and billions in customer assets misused or stolen.”
To stop further exploitation and rebuild investor confidence, there needs to be more governmental oversight of the cryptocurrency markets due to the massive losses and fraudulent activities that have occurred there. These comments highlight how important it is to follow securities rules strictly in order to protect investors.
3. Compatibility of Innovation and Compliance
A key theme in Grewal’s speech is the compatibility of technological innovation and regulatory compliance.
“Innovation and compliance with the securities laws are not mutually exclusive. The quarrel, therefore, is with noncompliant actors, not the technology or its promises.”
See: SEC Enforcement Director Grewal On Crypto Regulation
Grewal argues for a moderate strategy that promotes innovation while guaranteeing investor protection by differentiating between non-compliant behaviour and the promise of blockchain technology.
4. Public Trust and Regulatory Enforcement
Grewal is talking about the critical role of public trust in financial markets, which is reinforced by strict securities laws.
“Public trust requires robust enforcement of the securities laws. We must act with all the tools at our disposal to protect investors and enhance public trust and confidence in our markets."
This means that for the cryptocurrency industry, following regulatory guidelines is crucial for both legal compliance and preserving investor confidence and market participation. Strong enforcement measures reassure investors about the integrity of the market and function as a deterrent against unwanted behaviour.
5. Socioeconomic and Racial Disparities
Grewal brings attention to the disproportionate impact that crypto market volatility has on minority and marginalized communities.
“Crypto assets are the only major financial products that Black Americans are more likely to own than white Americans. And there is some evidence that Black and brown investors have now been disproportionately harmed during the downturn of crypto markets."
See: Canada’s Proposed Mutual Fund Crypto Regulations 2024
He also critiques:
“Predatory inclusion tactics of crypto entities directed at Black, brown, and other marginalized communities.”
Market participants and authorities have moral obligations to make sure that financial progress does not take advantage of vulnerable populations. In order to achieve equitable financial inclusion and protect all investors from predatory activities, gaps must be addressed.
Conclusion
Gurbir S. Grewal presents a case for a strict yet flexible regulatory framework that would safeguard investors while upholding the integrity of the market, and encourage innovation in the crypto sector. Grewal describes a regulatory approach that takes into account the historical background, investor harm, compliance, public trust, and socioeconomic inequality.
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, artificial intelligence, 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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Inside OMFIF’s Tokenisation Report: New Rails of Finance
Report | Tokenisation | Jul 4, 2024
Image: OMFIF Tokenisation The New Rails of Finance, Cover
9 Insightful Quotes from the OMFIF Report on the Future of Finance
OMFIF's "Tokenisation, New Rails of Finance" report takes a comprehensive look at how tokenisation and blockchain technology are poised to disrupt the financial industry. Here, we highlight 9 key statements from the report and their significance to provide insight into the future of finance. #blockchain #digitalmoney #stablecoins #smartcontracts
1. Stablecoins as Financial Enablers
"Stablecoins, as blockchain-native representations of government obligations, equip traditional fiat currencies with internet advantages." - Lewis McLellan, Editor of the Digital Monetary Institute at OMFIF.
Importance:
By providing a link between blockchain technology and conventional fiat currencies, stablecoins facilitate easier and more convenient transactions in the digital economy. Stablecoins provide a new means for people to transact on blockchain platforms, and fintechs view them as an alternative to conventional banking products. To remain relevant in the market, financial institutions may need to build their own digital currencies or modify their offerings to compete with stablecoins.
Further Reading: Tokenizing Assets and Unlocking Value on the Blockchain
2. Programmability of Stablecoins
"The programmability of stablecoins could make them a natural fit for creating a new, interoperable technology layer that works in the background." - Paul Green, Chief Technology Officer at IBM.
Importance:
Stablecoins with programmable features can automate complex financial transactions and connections, rendering them an adaptable instrument within the financial infrastructure. Fintech companies can create novel solutions by utilizing smart contracts and programmable stablecoins to automate financial procedures. Programmable stablecoins can be used by financial organizations to improve interoperability and streamline operations with other financial technology.
Further Reading: Swift’s Blockchain Breakthrough Boosts Global Tokenization
3. Economic Activity on Blockchain
"The World Economic Forum, Citigroup and Boston Consulting Group estimate that trillions of dollars’ worth of economic activity will take place on the blockchain in the coming years." - David Anderson, Strategic Positioning and Global Thought Leadership at Circle.
Importance:
The substantial amount of business activity that is anticipated to take place on blockchains highlights how revolutionary this technology can be for a variety of financial transactions. Fintechs can benefit from the increasing uptake of blockchain technology by creating next gen financial services and products that make use of tokenisation. Financial institutions need to invest in technology and expertise to enable the change to blockchain-based economic activity and stay competitive. This is a major transformation that they should be ready for.
Further Reading: Citi Report: Blockchain’s Next Billion Users: Money, Tokens, Games
4. Broader Tokenised Assets
"Beyond tokenised cash, other types of tokenised assets are also poised to scale significantly." - Linda Thompson, Digital Currency Expert at the Federal Reserve.
Importance:
The fact that additional tokenised assets can be scaled suggests that tokenisation's advantages go beyond stablecoins to encompass a range of asset classes. Tokenisation for a range of digital assets opens up new avenues for investment and financial engineering. Financial institutions are building infrastructure in order to facilitate the maintenance and trading of various tokenised assets today.
Further Reading: Real World Implementation of Real Estate Tokenization
5. Driving Financial Inclusion
"The potential for tokenised assets to drive financial inclusion and move global finance forward is significant." - Rachel Lee, Director of Fintech at Deloitte.
Importance:
By democratizing access to financial services, tokenised assets will foster more participation from from underrepresented sectors in the global economy. Tokenisation is a tool that fintechs can use to provide financial services to underprivileged communities, thus encouraging greater financial inclusion.
Further Reading: JPMorgan Announces First Transaction on TCN Network
6. Need for Regulation
"Central banks need to set strict prudential rules around the composition and auditing of the reserves backing stablecoins." - Financial Analyst at Citigroup.
Importance:
Stablecoins must be properly regulated in order to guarantee their dependability and safety as well as to stop their abuse for illegal purposes. Strict regulatory requirements must be followed by fintechs issuing stablecoins in order to reduce risks and guarantee adherence to financial laws. To avoid abuse and guarantee financial stability, financial institutions and authorities must set up thorough systems for tracking and managing stablecoin transactions.
Further Reading: Insights from the Tokenization Report Act of 2024 Hearing
7. Enhancing Transaction Efficiency
"Tokenising commercial bank deposits can enhance the efficiency and security of financial transactions, reducing costs and increasing transparency." - Mark Wilson, Head of Digital Assets at HSBC.
Importance:
Tokenising central bank funds and commercial bank deposits can improve the security and efficiency of financial transactions while lowering costs and boosting transparency. Fintechs can create systems that enable tokenised commercial bank deposits, enabling consumers to transact on the blockchain easier than today. To meet customer demand for blockchain-based transactions and technological improvements, central and commercial banks may need to step up their tokenisation activities and services.
Further Reading: JPMorgan Announces First Transaction on TCN Network
8. Importance of Interoperability
"Interoperability is hard to deliver – but absolutely essential for the future of blockchain technology." - Olivia Brown, Lead Blockchain Engineer at Microsoft.
Importance:
The smooth operation of several blockchain networks, which allows for effective and integrated financial ecosystems, depends on interoperability. Fintechs should concentrate on creating products that make it easier for various blockchain platforms to communicate with one another, for more seamless and effective transactions. Financial institutions can only provide complete and integrated services in a multi-blockchain environment if they invest in relationships and technology that foster interoperability.
Further Reading: MAS Update: Asset Tokenization in Project Guardian
9. Future of Banking Models
"The broader question remains: is the business of banking, complete with lending and fractional reserves, inextricably linked to payments or is there room for alternative models?" - Anna Roberts, Economist at the Bank of England.
Importance:
This statement questions the conventional banking paradigm (i.e., branches, direct consumer interactions, legacy systems etc) and encourages innovators to consider possibilities for fresh, cutting-edge financial services that keep lending and payments distinct. Fintech companies can create substitute financial frameworks that disentangle loans from payments, providing more specialized and effective services. In order for financial institutions to stay competitive in a changing financial landscape, they should reevaluate their business strategies and look into the potential of alternative structures.
Further Reading: BlackRock Launches New Fund on Ethereum, Bullish on Tokenization
Conclusion
OMFIFs latest tokenisation report shines light on the revolutionary possibilities of tokenisation and blockchain technology for the financial industry. Stablecoins and its programmable characteristics are becoming more popular, and blockchains are predicted to see significant economic activity as well. These developments will undoubtedly promote efficiency, transparency, and inclusion in global banking. Both fintechs and traditional financial institutions must innovate and adapt to stay competitive in this rapidly evolving 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, artificial intelligence, 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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Fortune 100 & 500 Embrace Blockchain, Driving Onchain Growth
Report | Jun 25, 2024
Image: Coinbase Jun 2024 State of Crypto Report
Insights from the Coinbase Report on Fortune 500 Blockchain Adoption
As blockchain technology continues to evolve, its integration into the operations of Fortune 500 companies marks a significant milestone in the financial industry's transformation. The Coinbase report, "The State of Crypto: The Fortune 500 Moving Onchain," provides a comprehensive analysis of this trend, revealing crucial insights and predicting the future landscape of fintech.
Key Takeaways
1. The number of onchain initiatives are experiencing major growth. Fortune 100 businesses increased by 39% year on year, reaching a record high in Q1 2024. According to a poll, 56% of Fortune 500 executives claim their organizations are working on blockchain projects, highlighting the fast acceptance of blockchain technology by emerging and prominent corporations.
2. The tokenization of real-world assets is the new frontier, such as US Treasury securities, has skyrocketed, with the value of tokenized Treasury products topping $1.29 billion, a more than 1,000% rise since early 2023. Spot bitcoin ETFs have approximately $79 billion in assets under management, indicating strong investor interest.
3. Stablecoins are revolutionizing payments. Global payment companies including as PayPal and Stripe are making stablecoins more accessible, allowing for frictionless cross-border transactions while lowering costs. Stripe now accepts USDC on several blockchains with instant fiat conversion, while PayPal offers free cross-border stablecoin transfers in around 160 countries.
4. Small businesses are increasingly looking at cryptocurrency solutions, with 68% believing that it can alleviate financial issues such as high transaction costs and processing times. This trend highlights blockchain technology's potential to improve financial processes for small businesses.
5. Regulatory and Talent Challenges. Despite increased interest and investment in blockchain, the United States' share of crypto developers has declined by 14 points over the last five years. Clear regulatory frameworks are crucial for retaining and attracting people, and maintaining the US's leadership in technological innovation.
Implications and Opportunities for Fintech
- Innovation Boost. The rapid expansion of tokenized assets, as well as the widespread acceptance of stablecoins, will result in novel fintech products that make financial services more accessible, efficient, and secure. This includes new investment alternatives and more liquid financial instruments that appeal to a wider audience.
See: Insights from the Tokenization Report Act of 2024 Hearing
- Increased Adoption of Stablecoins. With stablecoins enabling lower-cost, faster international transactions, fintech firms can disrupt the existing remittance sector, giving a cheaper and faster alternative for both consumers and enterprises.
- As blockchain becomes more integrated into business operations, the demand for talented professionals in this industry will grow. To remain competitive, fintech companies must spend in talent acquisition and development, as well as promote educational initiatives and relationships with academic institutions.
- The increased interest in blockchain among major organizations paves the way for more acceptance and integration of DeFi solutions. Fintech enterprises can create platforms that provide decentralized lending, borrowing, and trading services, broadening market reach and increasing financial inclusion.
Links:
Citi’s PoC Success in Private Market Tokenization
MAS Update: Asset Tokenization in Project Guardian
- The spike in tokenized US Treasury goods, which have increased in value by more than 1,000% since early 2023, demonstrates how onchain government securities might become a financial market staple. This trend suggests a considerable move toward digital assets that provide better liquidity, transparency, and accessibility. Fintech companies may capitalize on this by developing platforms that facilitate the trading, settlement, and maintenance of tokenized government securities, giving investors more efficient and secure options.
Conclusion
As this most recent Coinbase research report shows, there has been huge growth by fortune 100 and 500 companies incorporating blockchain technology into their operations, indicating a significant emerging shift in the traditional financial sector.
See: Coinbase Gains Restricted Dealer License in Canada
The key to capitalizing on this transformation will be to navigate regulatory hurdles, invest in talent, and constantly innovate to meet the demands of a digitally transformed economy. As blockchain technology becomes more widely adopted, it has the potential to transform financial services, drive innovation, and improve global financial inclusion.
Download the 13 page PDF Coinbase report --> 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, artificial intelligence, 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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2023 BIS Survey: CBDC and Crypto Trends Revealed
2023 BIS Survey Results | Jun 20, 2024
Image: BIS Paper 147
5 Key Trends in CBDCs and Crypto Regulation
The 2023 BIS study on central bank digital currencies (CBDCs) and cryptoassets gives readers a good review of the current trends, innovations, and regulatory initiatives in it's latest report titled, "Embracing Diversity, Advancing Together - Results of the 2023 BIS Survey on Central Bank Digital Currencies and Crypto" (BIS Paper 147).
See: Federal Reserve on U.S. CBDC and Global Comparison
With 94% of surveyed central banks researching CBDCs, the report shows a significant growth in wholesale CBDC research in advanced economies (AE). The results also provide insights into the motives and design elements of mature and emerging markets, increased stakeholder participation, and shifting regulatory frameworks for stablecoins and cryptoassets.
1. Increased Wholesale CBDC Activity
There has been a huge surge in wholesale CBDC trials in advanced economies. For example, the percentage of AE central banks running proofs of concept increased to 81%, while pilots increased to 33% by 2023. Several central banks, like the Swiss National Bank (Project Helvetia Phase III), the Bangko Sentral ng Pilipinas (Project Agila), and the European Central Bank, are actively participating in these trials.
2. Differentiation Between Advanced and Emerging Economies
The survey shows varying motivations and design characteristics between AEs and emerging market and developing economies (EMDEs).
See: Saudi Arabia Joins mBridge CBDC Project, Digital Oil Trade
- 68% of AEs prioritize interoperability with existing domestic payment systems.
- 63% of EMDEs are more inclined to use holding limits to maintain financial stability. Furthermore, EMDEs are more likely to embrace distributed ledger technology, demonstrating their desire to leapfrog legacy systems.
3. Stakeholder Engagements Are Increasing to Inform CBDC Design
- Overall, 88% of central banks are conducting CBDC research, with 54% carrying out pilots.
- In retail CBDCs, 75% of AEs and 78% of EMDEs are consulting with governments and public officials.
- Examples of such involvement include the Bank of Japan's CBDC Forum and the National Bank of Georgia's collaboration with a technology firm on its digital GEL initiative.
4. Developing Regulatory Frameworks for Cryptoassets
- More than 60% of jurisdictions have or are developing regulatory frameworks for stablecoins and other cryptoassets. This includes 48% creating bespoke regulations due to the unique opportunities and risks posed by cryptoassets.
See: The Ripple Effect of CBDCs on Bank Lending and Profitability
- Notable examples are the UK's proposed regulatory regime for stablecoins and the EU's Markets in Crypto-Assets Regulation (MiCA). The main regulatory objectives are investor protection (89%), financial stability (83%), and countering illicit finance (82%).
5. Current Use of Stablecoins
- The report indicates that the use of stablecoins for payments outside the crypto ecosystem remains minimal. More than half of central banks reported that stablecoins are rarely used beyond crypto trading or decentralized finance, mainly for niche use cases like remittances.
- For example, Chainalysis reported that around 5% of remittances to Mexico in 2022 were made using stablecoins or other cryptoassets.
- About 18-25% of central banks are uncertain about the extent of stablecoin usage due to a lack of appropriate data.
Closing Outlook
The 2023 BIS survey highlights active and varied approaches to CBDC exploration and cryptoasset regulation.
See: CBDCs in Canada and Impact Drivers on Banking Choices
Continued collaboration and stakeholder involvement will be critical for any sort of practical rollout and adoption, which has potential for both established and emerging nations.
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, artificial intelligence, 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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SEC Ends Ethereum 2.0 Probe with Non-Exoneration Clause
Enforcement | Jun 19, 2024
Image: SEC letter to Consensys, In the matter of Ethereum 2.0
SEC Ends Investigation into Consensys and Ethereum. Implications for the Crypto Industry
On Jun 18, 2024, Consensys announced that the United States Securities and Exchange Commission (SEC) has dropped its investigation into Ethereum 2.0 and will not take legal action over Ethereum. This is big win for the Ethereum community and will have implications for the future of cryptocurrency regulation in the United States.
Background
In 2018, the SEC when Jay Clayton was Chair and in public speeches SEC Director Bill Hinman expressed that Ether was not a security. However, when Gary Gensler, the current SEC Chair, took over, the regulatory attitude became clear as mud. In 2023, the SEC began looking into Ethereum 2.0, implying that it could be a security. Consensys received many subpoenas and a formal order of investigation on March 28, 2023. Consensys replied by launching a lawsuit in April 2024, arguing that Ethereum is a commodity and outside the SEC's authority.
SEC's Decision
On June 18, 2024, the SEC issued a letter to Consensys stating that it would not take enforcement action against Consensys or Ethereum 2.0.
- The letter officially closes the SEC's inquiry of Consensys and Ethereum 2.0, noting that based on the facts now available, the SEC will not propose enforcement action against Consensys Software Inc.
See: U.S. House passes FIT21 with Bipartisan Support
- The letter says that the conclusion of the study should not be interpreted as an exoneration of Consensys or its conduct. It implies that, while no action is advised at this time, future measures may be taken if additional evidence becomes available.
Implications
- The SEC's ruling confirms that Ethereum is a commodity, not a security, might set a precedent for other cryptocurrencies. This judgment coincides with previous SEC recommendations under former Chairman Jay Clayton, who stated that Ethereum was sufficiently decentralized and not regarded a security.
- The SEC's actions have been views as inconsistent, causing confusion and uncertainty in the market. The closure of this investigation boosts developer and investor confidence in the Ethereum ecosystem, will promote more innovation and investment. The price of Ether reacted favourably after the announcement.
See: Canada’s Proposed Mutual Fund Crypto Regulations 2024
- The non-exoneration clause highlights the SEC's continued caution and the provisional nature of their judgment, emphasizing the significance of Consensys and other crypto firms conforming to regulatory norms.
Conclusion
Moving ahead, regulators must work with industry stakeholders to create open and equitable policies that promote innovation while protecting investors. Addressing legal and regulatory ambiguity is crucial for creating a more stable and healthy crypto sector.
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, artificial intelligence, 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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Sherwood Neiss Responds to WSJ’s Critique of Regulation A
Reg A | Jun 17, 2024
Image: Freepik/rawpixel.com
Crowdfunding Pioneer Sherwood Neiss responds to the WSJ's critique of Regulation A
As reported on Crowdfund Insider, on June 13, 2024, Sherwood Neiss, a pioneering voice in the investment crowdfunding field, responded to a Wall Street Journal (WSJ) piece criticizing Regulation A (Reg A) crowdfunding. The WSJ story raised concerns about Reg A's effectiveness and honesty, which Neiss strongly defended, citing the regulation's role in democratizing access to capital.
Understanding Regulation A/A+
Regulation A provides an exemption from registration for public offerings. Regulation A has two offering tiers: Tier 1, for offerings of up to $20 million in a 12-month period, and Tier 2, for offerings of up to $75 million. Companies with offers of up to $20 million can choose to proceed under Tier 1 or Tier 2 standards.
See: Insights and Challenges of Raising Capital via Reg A+
This rule enables corporations to offer and sell securities to the public without meeting the stringent standards of a full public offering, making it an appealing choice for startups and small businesses. Among the many checks and balances, companies who use this exemption to raise capital, to fuel the launch or growth of their business, must submit documentation to the Securities and Exchange Commission so that the offering can be "qualified" and approved so that they can raise money online through an intermediary or directly on their own platform.
WSJ's Critique
The Wall Street Journal article opined about the challenges with Regulation A.
- According to the report, fraudulent entities abused Reg A, resulting in significant investment losses.
- It criticized the SEC's apparent lack of severe control, claiming that this laxity has allowed inferior corporations to take advantage of the regulations.
- According to the article, Regulation A has not been as successful as expected in assisting businesses in raising significant capital.
Sherwood Neiss's Response
Sherwood Neiss, a principal at Crowdfund Capital Advisors and a well-known personality in the equity crowdfunding industry (who has also served as an advisor to NCFA since 2017), responded in depth to the WSJ report - you can read his response here. Neiss, who has helped shape global equity crowdfunding regulations, gave a counter-narrative stressing Reg A's positive influence. Neiss runs a data aggregator business so his insights are backed by significant data collection and analysis, so it's more of an accurate picture than anecdotal evidence.
See: CCA Report: Investment Crowdfunding 2024: Key Insights
Neiss mentions that investment crowdfunding has had a $7 billion economic impact - that's growing and pretty significant in our opinion. He also pointed out that these investments do more than just raise capital; they stimulate local economies, create jobs, and support diverse entrepreneurs including women and minorities far more than traditional venture capital.
He continues to say that there have been 8,500 offerings and more than $2 billion raised indicating that equity crowdfunding is growing at scale. Neiss attacks the WSJ for cherry-picking examples to present a bad picture, claiming that the vast majority of businesses benefit tremendously from these chances. This broad perspective demonstrates the potential for major innovation and economic contributions from these early-stage businesses. This all contrasts with the WSJ's portrayal.
Neiss addresses concerns about investor protection by highlighting the stringent requirements under Reg CF and Reg A, such as audited financial statements and mandatory annual reports. These measures enhance transparency and investor safety, countering the WSJ's implications of lax oversight.
"Unlike Regulation D (Reg D) offerings, Reg CF and Reg A impose stringent requirements to protect investors. Issuers under Reg A are mandated to provide audited financial statements and adhere to rigorous SEC disclosure requirements. Additionally, Reg CF issuers must provide annual reports to keep investors informed—another layer of transparency absent in Reg D offerings. In both these offerings, retail investors are capped at how much they can risk."
See: Fintech Fridays EP62: The Future of Investment Crowdfunding: Innovations, Data, and Opportunities
Neiss advocates for a balanced view that takes into account the inherent risks in all types of startup funding, including traditional techniques such as venture capital and angel investments. He emphasizes the democratizing effect of equity crowdfunding, which makes investment opportunities available to a broader audience beyond accredited investors.
"Your article needs to acknowledge the high failure rates of startups funded through traditional avenues such as VC and angel investments under Reg D."
The Future of Regulation A
While obstacles still exist, the law has clearly created new ways for small firms and entrepreneurs to acquire funding. As the sector evolves, stakeholders must work together to address concerns, strengthen protections, and promote a balanced narrative. It is equally crucial to acknowledge and celebrate the successes and possibilities of such regulations. By promoting openness, education, and balanced reporting, the crowdfunding community may contribute to a more inclusive and effective capital-raising landscape.
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, artificial intelligence, 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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