Blockchain Week in Review – September 2017 #7

by Perkins Coie
Contact

Perkins Coie

[author:

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

U.S. Developments

Regulatory Updates

SEC Suspends Trading of Four Bitcoin Firms and Warns About ICOs
The U.S. Securities and Exchange Commission (SEC) issued a press release this week warning investors about potential ICO scams, including ‘pump-and-dump’ and market manipulation schemes. This warning follows the SEC’s recent temporary trading suspensions of four publicly-listed technology companies. In its press release, the SEC identified certain circumstances that could lead to a suspension of trading, including lack of information resulting from a company’s failure to file periodic reports; doubts about the accuracy of public information including operational and financial information in a company’s press releases or reports; and questions about trading, including trading by insiders and potential market manipulation. The four companies subject to the SEC’s recent wave of suspensions are First Bitcoin Capital Corp., CIAO Group, Strategic Global Investments, Inc. and Sunshine Capital. All four of the SEC’s trading suspensions reference questions about the accuracy of information to investors. The most recent suspension was issued to First Bitcoin Capital on August 24 and is scheduled to last until September 7. Among its reasons for the suspension, the SEC cited doubts about the accuracy of press releases to investors about plans for an initial coin offering (“ICO”). The trading suspensions issued to CIAO Group, Inc., which was in effect from August 10 through August 23, and to Strategic Global, effective August 4 through August 17, also referenced questions about the accuracy of ICO information released to investors. SEC Press Release 8.28.17; Coindesk 8.24.17

New Hampshire Law Exempting State Money Transmitters Takes Effect
On August 1, New Hampshire’s money transmitter law (House Bill 436) took effect. The new law, which was signed into law in June, exempts digital currency platforms from registering with the state as money transmitters. New Hampshire HB 436 (Regular Session 2017); Virtual Currency Report (6/16/17)

Digital Currency Updates

Increase in Consumer Complaints About Bitcoin Exchange
The U.S. Consumer Financial Protection Bureau (CFPB) has reported receiving 293+ consumer complaints against Coinbase Inc. in 2017 alone, as of August 31. This number represents a steep rise in complaints since last year, when only 6 complaints against Coinbase were made to the Bureau in all of 2016. Digital currency exchanges have experienced significant increases in trading volume this year as the value of Bitcoin and other cryptocurrencies has spiked. Only 15% of complaints have involved accusations of fraud; most complaints have reported transaction and/or service problems. Greater trading volumes have caused slower processing times, delays in delivery of funds to bank accounts, and instances when certain exchanges were down and customers could not access their digital wallets. Fortune article 8.31.17

Fintech Updates

Basel Committee Issues Fintech Recommendations
This week, a task force within the Basel Committee on Banking Supervision (BCBS) released a consultation paper addressing Fintech developments and implications for the banking industry. The paper makes 10 primary observations and recommendations for banks with respect to regulation and business practices. The recommendations include balancing the integrity of the banking system and consumer protection while fostering innovation in Fintech; maintaining strong governance structures; establishing due diligence and monitoring procedures for operations outsourced to third parties, including fintech firms; and cooperating with public authorities charged with overseeing regulation. The paper also emphasized the need for banks to have solid risk management processes and IT protocols to combat money laundering and activities linked to terrorism, in addition to breaches in cyber-security. Basel Committee Paper – August 2017; ABA Banking Journal article 8.31.17

International Developments

Israel Regulators Form Committee to Study Token Sales
On August 30, the Israeli Securities Authority (ISA) announced the formation of a task force to research and make recommendations for potential regulation of ICOs. The committee identified several issues that it will focus on, including: the overlap of token offerings and other activities subject to securities law; examine applicability and enforceability of securities law with respect to token sales; recommendations for regulation that strikes a balance between encouraging innovation and protecting investors and the public; and potential collaboration with other regulators and the blockchain industry in Israel. The committee will also conduct a survey of worldwide regulations and include a comparison of the regulatory approaches of other countries in the report, which is due by the end of the year. ISA Release; ETHNews article 8.30.17

ICOs in Canada Could Be Subject to Securities Regulation
The Canadian Securities Administration (CSA) issued a notice on August 24 in which it indicated that many initial coin offerings (ICOs) and initial token offerings (ITOs) could be subject to Canadian securities or derivatives law. The notice made recommendations for companies planning ICOs, which included creating a prospectus for the ICO and limiting the sale to accredited investors. This announcement provides clarification as to how Canadian securities law applies to token sales, but it does not establish nationally-binding law, as securities in Canada are regulated on a provincial level.Notice 8.24; Fortune 8.28.17

Chinese Regulators Discuss the Future of ICOs
Chinese regulators reportedly discussed a plan to suspend all initial coin offerings within China, at a meeting on August 18 hosted by the People’s Bank of China (PBoC). Discussions at the meeting including placing limits on the size of ICOs and imposing stricter rules for information disclosure, token supervision, and publishing risk alerts to investors. However, reports have indicated that regulators could ban ICOs outright amid concerns about market risks. Any action would derive its authority from an executive order issued in 1998 permitting the banning of illegal financial activities, including fundraising endeavors conducted without legal approval. 1998 Order Coindesk 8.29.17

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Perkins Coie | Attorney Advertising

Written by:

Perkins Coie
Contact
more
less

Perkins Coie on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.