CryptoURANUS Economics: Unregulated CryptoCurrency: Defined


Saturday, August 11, 2018

Unregulated CryptoCurrency: Defined

Unregulated CryptoCurrency: Defined

OptEditor: Crypto Uranus,

SEC says cryptocurrency exchanges are an unregulated mess:

  • The U.S. "Securities and Exchange Commission",(SEC), issued a warning on cryptocurrency exchanges.
  • The SEC Warns:
  • Many exchanges are unregulated and can do whatever they want with your money.
  • SEC assumes cryptocurrencies and tokens offered through ICOs are securities.
  • As securities, cryptocurrency exchanges should follow the same rules as exchange.
  • ICO's should register through the SEC as a national securities exchange, an alternative trading system (ATS) or a broker-dealer.
  • SEC says that current situation is a mess.
  • “The SEC staff has issued concerns many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not”.
  • The SEC wrote: “Many platforms refer to themselves as ‘exchanges,’ which can give the impressionism to investors that they are regulated or meet the regulatory standards of a national securities exchange.”
  • Many exchanges have set up their own rules when it comes to listing new cryptocurrencies, and ONLY SEC makes rules through private banks.
  • The SEC has no say, no regulation, no control, and no taxation methods for private banking families.
  • The SEC issues warning in this process that can not guarantee that those are safe investments.
  • The SEC never reviews trading tools on cryptocurrency exchanges. The exchange could give priority to bigger investors or screw up the order book without any consequence.
  • The SEC reminded cryptocurrency exchanges that they’re supposed to register as an ATS for example.
  • After Circle’s acquisition of Poloniex Nathaniel Popper saw a confidential Circle presentation.

Circle plans to work with the SEC to register Poloniex:

  • “The SEC is favorable on this approach and indicated that they would not pursue any enforcement action for prior activity,” Circle wrote. 
  • “They said we are the first and only company in the space to approach them, and were very progressive on working closely with us.”
  • So it seems like there could be a grace period for U.S.-based exchanges before an eventual crackdown. 
  • Many U.S. investors rely on foreign exchanges to trade cryptocurrencies.
  • It’s unclear how the SEC plans to protect U.S. investors from creating accounts on foreign exchanges.

U.S. Government SEC’s issued list of questions to cryptocurrency investors to help them pick an exchange:

  • Do you trade securities on this platform?  If so, is the platform registered as a national securities exchange (see our link to the list below)?
  • Does the platform operate as an ATS?  If so, is the ATS registered as a broker-dealer and has it filed a Form ATS with the SEC (see our link to the list below)?
  • Is there information in FINRA’s BrokerCheck ® about any individuals or firms operating the platform?
  • How does the platform select digital assets for trading?
  • Who can trade on the platform?
  • What are the trading protocols?
  • How are prices set on the platform?
  • Are platform users treated equally?
  • What are the platform’s fees?
  • How does the platform safeguard users’ trading and personally identifying information?
  • What are the platform’s protections against cybersecurity threats, such as hacking or intrusions?
  • What other services does the platform provide?  Is the platform registered with the SEC for these services?
  • Does the platform hold users’ assets?  If so, how are these assets safeguarded?

U.S. (SEC) Chairmen, and (CFTC) testifies before Congress:
Date: Tuesday, February 6, 2018.
Time: 10:00 AM.
Location: Dirksen Senate Office Building 538.
Subject: CryptoCurrencies.

The message we will likely get from the chairmen won’t be apocalyptic.

  • Fact is federal regulators have been thoughtfully on top of cryptocurrency issues for years.
  • If and when oversight is needed in digital currency markets then the power would best rest with the federal authorities and not the private institutions.
  • The SEC and the CFTC work overseeing digital currency.
  • The SEC shown several public sales of tokens inspired by bitcoin fit the definition of securities issuance, and should have been registered offerings.
  •  The SEC and the CFTC started with a thoughtful investigative report last summer opposed to a fusillade of enforcement actions.  
  • The SEC and the CFTC have since followed up with targeted enforcement actions. 
  •  The SEC and the CFTC have begun a process drawing a distinction between “initial coin offerings” that are securities on the one hand, and decentralized cryptocurrencies on the other.
  • Some cryptocurrencies are more suitably regulated as digital commodities as digital gold (bitcoin), digital fuel (ether), or digital real estate (filecoin/storj). 
  • The CFTC has already classified bitcoin and similar cryptocurrencies as commodities and it has, accordingly, been regulating derivative financial products, such as swaps and futures offerings from several exchanges, such as the CME, CBOE and LedgerX. 
  • The CFTC clarified that they have the authority to police cryptocurrency spot markets for fraud, market manipulation and insider trading — and investigations are underway. 
  • Cryptocurrency is not unregulated. 
  • There is, however, one thing that distinguishes a bitcoin spot market from a securities or commodities futures exchange: marketplace supervision.
    The SEC only supervises exchanges that trade in securities. 
  • The SEC has not determined all cryptocurrencies to be securities, and there are compelling legal and policy reasons why such sweeping classification is unreasonable. 
  • Who is the issuer of bitcoin? Miners? Software developers?
    This is like asking if gold is a security and then trying to determine who in the gold industry is the issuer of gold. 
  • Gold, a valuable asset that exists in the world independent of any promises from a third party issuer or promoter, is rightly classified and regulated.
  • Gold is as a commodity, just like bitcoin and similar cryptocurrencies are and should be. 
  • The CFTC, while it supervises commodities futures exchanges, only has after-the-fact enforcement authority over fraud in spot markets — it does not license and supervise those markets directly. 
  • The supervisory regulators of digital currencies are a historical accident, state-by-state money transmission regulators.
  • Digital currency exchanges must acquire a license in each and every state in which it has customers, comply with each different state’s differing regulations. 
  •  Digital currency exchanges explain their business to over 50 different regulators. 
  • If that seems odd and inefficient to you, you're not alone. 
  • In a recent joint op-ed for the Wall Street Journal, Chairmen Clayton and Giancarlo said they “would support policy efforts to revisit these frameworks and ensure they are effective and efficient for the digital era.”
    They’re right
  • State-by-state regulation of inherently global internet money transmitters is inefficient and hurts innovation, financial inclusion, consumer protection and American competitiveness. 
  • The big problem with respect to investor protection is that state money transmission licensing is focused pretty exclusively on solvency and custody risks, not markets.

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