EFCA Considers Cryptocurrency Derivatives Ban Due to Market ‘Integrity Issues’
In a recent speech given by FCA executive director of strategy and competition Christopher Woolard, expressed concern that “retail consumers are being sold complex, volatile and often leveraged derivatives products based on exchange tokens with underlying market integrity issues. Given this, the FCA will also consult on a prohibition of the sale to retail consumers of derivatives referencing certain types of cryptoassets (for example, exchange tokens), including contracts-for-difference, options, futures and transferable securities.” He further stated that the FCA will consult on perimeter guidance by the end of 2018 to help firms better understand which cryptoassets fall within the FCA’s regulatory perimeter and those that fall outside.
(Source: “Conclusions from the Cryptoassets Taskforce”, Speech by Christopher Woolard, Executive Director of Strategy and Competition at the FCA, delivered at The Regulation of Cryptocurrencies event, London., available at: https://www.fca.org.uk/news/speeches/conclusions-cryptoassets-taskforce).
Binance Invests $3 Million in US Crypto Trading Desk
SBinance Labs, the venture wing of Binance, has made a $3 million investment in Koi Trading, an OTC trading operation based in San Francisco, CA that aims to be a compliant global option for private cryptocurrency liquidity. Koi’s CEO and founder Hao Chen believes that “with Koi’s robust AML program, extensive banking relations in the US, investment from Binance Labs, and strong trust amongst counterparties in the Greater China, we aim to be the market nexus that reduces trust and information asymmetry and improves cryptocurrency OTC deal close rate.”
(Source: “Binance Invests $3 Million in US Crypto Trading Desk”, available at https://www.ccn.com/binance-invests-3-million-in-us-crypto-trading-desk/).
US Regulators Investing Whether Bitcoin Prices Propped Illegally
The U.S. Justice Department is reportedly looking into whether traders used another cryptocurrency called tether to bid up bitcoin prices during its 1,300 percent rally last year. Federal prosecutors launched a broader criminal probe into cryptocurrencies earlier this year but now suspect that traders on crypto exchange Bitfinex may have been moving prices illegally. Other U.S. agencies have cracked down on certain aspects of cryptocurrency in recent weeks. On Friday, the Securities and Exchange Commission announced its first civil penalties against cryptocurrency founders as part of a wide regulatory and legal crackdown on abuses in the industry.
(Source: “As bitcoin nosedives, regulators said to be investigating whether it was propped up illegally”, available at https://www.cnbc.com/2018/11/20/regulators-investigate-whether-bitcoin-price-was-propped-up-illegally.html).
SC Johnson will Offer Crypto for Recycling in Indonesia Soon
SC Johnson has teamed up with Plastic Bank to reduce the global ocean plastic crisis happening around the world. The companies are currently trying to increase recycling rates in impoverished communities within Indonesia, while also trying to address the challenges of poverty. According to the press release, local plastic collectors can exchange their waste for digital tokens, which can then be used to purchase services and goods via a decentralized system.
(Source: “SC Johnson will Offer Crypto for Recycling in Indonesia Soon”, available at https://cryptocurrencynews.com/sc-johnson-crypto-recycling/).
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Pressure builds on regulators over cryptocurrency irregularities
A recent incident at Hong Kong-based OKEx has prompted questions on how the Securities and Futures Commission can respond to trading problems in the cryptocurrencies market. Focus on regulation has shifted to Hong Kong following an incident that rocked traders and caused estimated losses of $400m.A change in the protocols used by the currency bitcoin cash last week led to confusion in the market and in turn helped wipe $15bn from the market capitalisation of the original bitcoin. The SFC has declined to comment on the OKEx case but published a framework for regulating virtual asset exchanges earlier this month. Under that, the SFC would allow exchanges that trade securities-like tokens to apply for licences, moving them out of the grey area that most exchanges trade in. However, exchanges that trade bitcoin and other non-securities virtual assets are not included in the SFC’s proposal.
(Source: “Pressure builds on regulators over cryptocurrency irregularities” Financial Times, available at https://www.ft.com/content/a7530198-ec7b-11e8-8180-9cf212677a57)
European Parliament Plenary debate: VP Dombrovskis statement on regulating virtual currencies and ICOs
On November 13, the European Commission (EC) published a statement by Vice-President Valdis Dombrovskis on the regulation of cryptoassets and initial coin offerings (ICOs), which he presented at the European Parliament Plenary debate in Strasbourg. Mr Dombrovskis notes that crypto-assets and ICOs offer opportunities and risks, and that although the technology is still in its infancy, it is here to stay. He further stated that crypto-assets cannot be separated from blockchain technology and that pursuing the opportunities presented by blockchain will have a corresponding interest in crypto-assets, both the advantages and disadvantages. He noted that it is unclear if the current European financial regulation is suitable for crypto-assets and they are assessing this together with the European Supervisory Authorities.
(Source: “European Parliament Plenary debate: VP Dombrovskis statement on regulating virtual currencies and ICOs” available at : https://ec.europa.eu/commission/commissioners/2014-2019/dombrovskis/announcements/european-parliament-plenary-debate-vp-dombrovskis-statement-regulating-virtual-currencies-and-icos_en).
Fieldfisher and TeamBlockchain launch Blockchain and Crypto Telephone Surgery to offer rapid bespoke legal advice to businesses in the cryptocurrency and digital payment platforms sector
International law firm Fieldfisher and consultancy TeamBlockchain have launched a Blockchain and Crypto Telephone Surgery for companies looking for expert professional guidance on cryptocurrency and digital payments. Focusing primarily on issues affecting tokenisation and distributed ledger financial technologies (fintech), the surgery will also offer advice and insights on the wider fintech universe. Fieldfisher partners and TeamBlockchain consultants will give advice on different regulatory and legal issues in the context of specific industries, supported by relevant, real life examples of how organisations are using blockchain and the increasing role of cryptocurrency in digital business. Surgery sessions will last between 40 minutes, in the form of one-on-one appointments or small group discussions, as clients prefer. Sessions will be interactive, enabling participants to get a better understanding of the subjects under discussion. Clients will be asked to provide some prior briefing on their sector of interest, objectives and concerns in order to maximise the benefits they receive from surgery appointments. This type of consultative support has proved helpful for professional advisors and their clients, who want to be more active in the cryptocurrency and blockchain sectors but lack the in-house skills to realise their ambitions.
Fieldfisher and TeamBlockchain’s experts are independent advisors who provide clients with honest, pragmatic advice on a range of fintech issues day-to-day. These surgeries are designed to provide, swift, tailored advice on an as-need, no obligation basis, with follow-up support available as required. The cost of each surgery is £500 +VAT and includes a pre-briefing, phone consultation and follow-up materials. For more information, please contact one of the Surgery Team: email@example.com; firstname.lastname@example.org; and email@example.com.
Ron is a partner at Cummings Fisher and heads the derivatives and documentation practice. Drawing on his work in private practice with buy-side clients and in house at investment banks, he has broad experience in providing legal advice in relation to derivatives and structured finance transactions, prime brokerage and asset custody arrangements.
If you would like to discuss any of the points we raise, please contact me or one of our other lawyers.
Phone: +44 (0)207 861 4170