SEC Issues No-Action Letter, Financial Services Firms and Major Exchanges Make Moves, New Products Launched in Europe
This week, the U.S. Securities and Exchange Commission (SEC) issued to Pocket Full of Quarters Inc. (PoQ) a no-action letter related to PoQ’s distribution of its Quarters product, an ERC20 token. The SEC Division of Corporation Finance stated that it will not recommend enforcement action based on offers and sales of Quarters that take place without PoQ registering the Quarters under Section 5 of the Securities Act and Section 12(g) of the Exchange Act. This is only the second no-action letter issued by the SEC related to a blockchain token distribution event.
According to reports, late last week the “crypto arm” of a major U.S. financial services firm filed an application to become a New York trust. This would allow the firm to expand its digital asset custody business to serve institutional clients in New York state. Another report this week highlighted a recently published patent application by a major U.S. financial services firm that describes a blockchain-based settlement system for interbank transactions.
This week, a major U.S. cryptocurrency exchange announced plans to move a majority of its operations offshore to Bermuda, becoming the first major cryptocurrency exchange to receive a “Class F” license under the Bermuda Digital Assets Business Act of 2018. The move was reportedly taken due to regulatory pressures and the lack of regulatory frameworks in the U.S. The world’s largest cryptocurrency exchange by volume, Binance, recently announced the launch of a new stablecoin, Binance GBP, that will be backed 1:1 by British pounds. Binance GBP will be offered by Binance Jersey, the exchange’s Jersey-based platform.
This past Tuesday, a German blockchain startup, Fundament, received approval from Germany’s financial regulator to issue what is being reported as Germany’s first tokenized real estate-backed bond that is approved for offer to individual investors. According to reports, the Fundament tokens will be ERC20 tokens that will be available for purchase with bitcoin, ether, U.S. dollars or euros. In more news from Europe, a Norwegian air carrier has announced plans to begin allowing customers living in Norway to purchase airline tickets using bitcoin. According to reports, the air carrier also plans to launch its own cryptocurrency exchange.
For more information, please refer to the following links:
- Pocketful of Quarters, Inc. – Response of the Division of Corporation Finance
- Fidelity’s crypto arm has officially applied to operate in New York as a trust
- Bank of America Files Patent for Settlement System Citing Ripple
- Circle Moves Exchange Operations Offshore With New Bermuda Office
- Circle Paves The Way For International Crypto Offerings, Becoming First Major Exchange To Receive Bermuda Business License
- Binance Jersey Lists Exchange’s Own GBP-Backed Stablecoin
- German Regulators Approve $280 Million Ethereum Token Sale
- Norwegian Air to accept bitcoin, opening crypto exchange
New Pilots Announced for Voting, Autonomous Vehicles and Digital
Utah County is the latest governmental entity to pilot Voatz, a blockchain-based mobile application for voting. According to reports, the county will offer the blockchain-based voting platform to active-duty military, their eligible dependents and overseas voters during its August municipal primary election. To date, Voatz has conducted more than 40 pilots, including municipal elections in Denver and two primary elections in West Virginia.
Early this week, a German multinational automotive firm announced plans to partner with Riddle & Code to create a hardware wallet for automobiles. According to reports, the wallet creates a cryptographic identity for vehicles and could offer autonomous and semiautonomous vehicles the ability to relay traffic patterns in real time, integrate with smart city infrastructure, transfer accident information to authorities and insurance providers, and verify vehicle maintenance.
Also this week, a major American newspaper, in conjunction with a multinational technology firm, launched the News Provenance Project, a research initiative that evaluates the use of blockchain technology to track and validate the provenance of digital media. The initiative reportedly aims to build an immutable record for each image published by an established news organization. The record will reportedly include metadata, detailed tamper-evident history, and a “visual signal” that will link to the original source, context and full journey of the image.
A recent report on blockchain patents indicates that the compound annual growth rate of blockchain-related patents from 2013 to 2018 is estimated to be 285.6%. As of April 30, 2019, reportedly 14,035 blockchain-related patent applications are on file, with roughly 62% of the applications originating in China and roughly 22% of the applications originating in the U.S.
To read more about the topics covered in this week’s post, see the following:
- Utah County to Offer Blockchain Voting App in Municipal Elections
- Daimler to Produce Crypto Hard Wallet for Automotive Industry
- The New York Times, IBM explore blockchain as a means to verify trustworthiness in digital media
- Revealed: the countries leading the race for blockchain patents
Multiple U.S. Enforcement Actions Target Cryptocurrency Crimes
The U.S. Commodity Futures Trading Commission (CFTC) has reportedly been investigating whether BitMEX (a cryptocurrency exchange based in Hong Kong, registered in the Seychelles but unregistered in the U.S.) violated securities rules that prohibit transactions by Americans. While BitMEX bars trading by U.S. residents and nationals, some have allegedly skirted the ban by masking their location and assigning their computers an internet protocol address from a country where use of BitMEX is permitted. In related news, Treasury Secretary Steven Mnuchin recently announced that U.S. regulators will likely issue new rules on cryptocurrencies to prevent their negative impact on the overall financial system. Mnuchin emphasized concerns that cryptocurrencies were being used for criminal activity.
In New York last week, the U.S. attorney announced the arrest of Hugh Brian Haney for laundering, through cryptocurrencies, more than $19 million of proceeds made from illegal drug sales conducted on the “Silk Road,” the infamous Dark Web site that was shut down in 2013. The U.S. attorney’s office stated, “Today’s arrest should be a warning to dealers peddling their drugs on the dark web that they cannot remain anonymous forever.”
Last week, the New Jersey attorney general filed a lawsuit against Pocketinns Inc., a New Jersey-based blockchain online rental marketplace, and its president, Sarvajnya G. Mada. The complaint alleges that the defendants sold more than $400,000 in unregistered securities called PINNS Tokens. While defendants represented that the tokens were sold pursuant to a registration exemption for sales to accredited investors, the government charges that the defendants failed to take reasonable steps to ensure that investors met this criteria. Also, in New Jersey, William Green was charged earlier this week with operating an unlicensed money-transmitting business by operating a website, Destination Bitcoin, through which Green would receive customers’ funds and convert them into bitcoin for a fee. Officials charge that Green never obtained the proper licenses for his money-transmitting business. He faces a maximum penalty of five years’ imprisonment and a $250,000 fine.
Israeli enforcement agencies indicted Eliyahu Gigi last week for allegedly stealing NIS 6.1 million ($1.75 million) in cryptocurrencies from various foreign citizens. Gigi allegedly created and managed a criminal enterprise involving numerous websites through which he distributed software enabling him to access victims’ computers and steal their cryptocurrency. Gigi also was charged with various tax-related crimes. In South Korea, the government recently issued a report finding that nearly 2.7 trillion won ($2.3 billion) has been lost to cryptocurrency-related crimes, including Ponzi schemes, embezzlement, illegal exchange transactions and other scams. The total did not include losses caused by exchange hacks.
For more information, please refer to the following links:
- S. Regulator Probing Crypto Exchange BitMEX Over Client Trades
- AG Grewal, NJ Bureau of Securities Announce Cryptocurrency Lawsuit Against Princeton-Based Business for Allegedly Violating Securities Law in Sale of Tokens
- S. Attorney Announces Arrest And Money Laundering Charges Against Dark Web Narcotics Trafficker
- Monmouth County Man Charged With Operating An Unlicensed Bitcoin Exchange
- New Crypto Rules Likely Coming From U.S. Agencies, Mnuchin Says
- Israeli hacker indicted for suspected theft of NIS 6m cryptocurrency
- South Korea Estimates 2-Year Losses from Crypto Crimes at $2.3 Billion