Business
How does the SEC determine if a token is a security? Why is DeFi particularly hard to regulate? What will regulators do about stablecoins? On Unchained, Greg Xethalis, chief compliance officer at Multicoin Capital, and Collins Belton, founding partner at Brookwood P.C., dive into crypto regulation, discussing securities laws, DeFi regulation, and why the US should be promoting stablecoins rather than trying to shut them down. Highlights: why the SEC and CFTC have not announced bigger crypto enforcement news at the end of their fiscal years why the SEC is going after DINO (decentralized in name only) companies what the Howey and Reves tests areand how the SEC uses themto determine whether an asset is a security or not why Collins and Greg think the SEC has recently begun been applying Reves more often why they think centralized crypto lending products should not be considered securities under the Howey test whether new legislation needs to be written for cryptocurrency-based products what makes Collins think the SEC is being “disingenuous” regarding the SEC registration process for crypto companies, like Coinbase how regulators will end up handling DeFi and why both Greg and Collins are long-term optimistic how the US government has a “great history” of respecting privacy and encryption why regulatory pressure is likely to build up around centralized crypto exchanges and what we can learn from the EtherDelta case why Collins thinks most cryptocurrency companies should be regulated why the SEC is the best motivator for forcing protocols to fully decentralize how smart contracts could theoretically be used to standardize SEC Commissioner Hester Peirce’s Safe Harbor proposal how blockchain data makes cryptocurrency companies more transparent and easier to regulate than centralized entities what Collins and Greg think will happen with stablecoin regulation going forward why the US should be pushing to make dollar-pegged stablecoins more prominent Take the Unchained survey! 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Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 Nodle: https://bit.ly/3AXGydJ Episode Links Greg Xethalis Twitter: https://twitter.com/xethalis LinkedIn: https://www.linkedin.com/in/xethalis/ Collins Belton Twitter: https://twitter.com/collins_belton LinkedIn: https://www.linkedin.com/in/collins-belton-10226283/ Cases Mentioned SEC charged DeFi Money Market https://www.coindesk.com/markets/2021/08/06/sec-charges-so-called-defi-company-for-allegedly-fraudulent-30m-offering/ SEC charged EtherDelta https://www.coindesk.com/markets/2018/11/08/sec-charges-etherdelta-founder-over-unregistered-securities-exchange/ Howey Test and Reves Test https://securities-law-blog.com/2014/11/25/what-is-a-security-the-howey-test-and-reves-test/ https://skrypto.sewkis.com/howeys-cousin-reves-may-be-another-way-for-the-sec-to-argue-that-tokens-are-securities https://www.creditslips.org/creditslips/2021/09/coinbase-and-the-sec-.html DINO https://twitter.com/hesterpeirce/status/1423637816492318722?lang=en Regulatory Stories SEC SEC Chair Gary Gensler indicated that crypto lending and staking platforms most likely fall under US securities law https://www.theblockcrypto.com/post/117675/crypto-lending-staking-custody-gensler-sec Gensler noted that Coinbase lists “dozens of tokens that might be securities.” https://decrypt.co/80924/gensler-coinbase-sec-securities Gensler thinks crypto exchanges need to register with SEC https://www.theblockcrypto.com/linked/117524/before-senate-chair-gensler-will-argue-that-many-crypto-trading-platforms-need-to-register-with-sec dYdX airdrops token, but not to US customers https://www.coindesk.com/business/2021/09/08/users-celebrate-massive-dydx-token-airdrop-as-transfer-restrictions-lift/ Uniswap Labs investigation https://www.theblockcrypto.com/post/116633/how-the-secs-reported-uniswap-labs-investigation-could-signal-a-new-era-of-enforcement Treasury Preparing a stablecoin report https://www.coindesk.com/policy/2021/09/16/us-treasury-turns-its-gaze-to-stablecoin-issuers/ Lending Platforms BlockFi NJ extension https://www.coindesk.com/business/2021/09/22/blockfi-gets-another-extension-from-nj-regulators-on-new-interest-accounts-ban/ NJ, TX, AL move against Celsius https://www.coindesk.com/policy/2021/09/17/3-states-alabama-securities-commission-also-claims-celsius-violated-securities-laws/ BlockFi CEO wants federal regulators to weigh in on crypto lending regulation https://www.coindesk.com/business/2021/09/13/blockfi-ceo-wants-sec-to-weigh-in-on-crypto-lending/ Preston Bryne believes lending products are securities https://twitter.com/prestonjbyrne/status/1435452184607576066 CFTC Investigation of Binance https://www.bloomberg.com/news/articles/2021-09-17/u-s-s-binance-probe-expands-to-examine-possible-insider-trading?sref=f8taTPHn Coinbase Contract with the Department of Homeland Security https://www.coindesk.com/business/2021/09/20/coinbase-signs-deal-with-homeland-security-to-provide-analytics-software/ Coinbase will not be launching Lend https://blog.coinbase.com/sign-up-to-earn-4-apy-on-usd-coin-with-coinbase-cdad79e5f5eb Original blog post: https://blog.coinbase.com/the-sec-has-told-us-it-wants-to-sue-us-over-lend-we-have-no-idea-why-a3a1b6507009 Collin’s tweet: https://twitter.com/collins_belton/status/1440009283291078656 Coinbase is prepping a pitch for regulators https://www.coindesk.com/policy/2021/09/21/coinbase-to-propose-crypto-regulations-to-us-officials-sources/ Filing with National Futures Association https://decrypt.co/81022/coinbase-files-application-trade-crypto-futures Armstrong tweetstorm referencing “sketchy” SEC behavior https://twitter.com/brian_armstrong/status/1435439291715358721 Other Possible stablecoin regulations proposed by NYT https://www.nytimes.com/2021/09/17/business/economy/federal-reserve-virtual-currency-stablecoin.html Wall Street Journal article on stablecoins https://www.wsj.com/articles/biden-administration-seeks-to-regulate-stablecoin-issuers-as-banks-11633103156 a16z on stablecoin regulation https://future.a16z.com/stablecoins-stability-and-financial-inclusion/ Former regulators joining a16z https://www.theblockcrypto.com/linked/117098/fresh-out-of-the-cftc-brian-quintenz-joins-a16z-cryptos-advisory-team https://www.theblockcrypto.com/post/109661/andreessen-horowitz-new-crypto-vc-hires Former regulators joining Binance https://markets.businessinsider.com/news/currencies/crypto-binance-jay-clayton-fireblocks-regulators-sec-cftc-wild-west-2021-08 Sam Bankman-Fried on the importance of USD to crypto markets: https://twitter.com/SBF_FTX/status/1427179474538287104?s=20