US court rejects unregistered securities case against Blockvest

A court in the United States has rejected a claim brought by the Securities and Exchange Commission (SEC) against blockchain assets exchange Blockvest, in a case that could help shape precedent on unregistered securities.

SEC, the regulator tasked with upholding securities law in the U.S., accused Blockvest of promoting an unregistered security, contrary to the law. The firm’s BLV token has come in for scrutiny by the regulator, initially leading to a temporary asset freeze against the company after a preliminary order by the U.S. District Court for the Southern District of California.

However, in the latest twist in the case, a court has found that the SEC failed to demonstrate BLV tokens were unregistered securities, citing the Howey Test model for determining whether an asset falls within the remit of securities law.

According to court documents, a copy of which was secured by CCN, the court is unable to consider the BLV token a security, a material element for any asset being subject to the remit of the SEC.

“At this stage, without full discovery and disputed issues of material facts, the Court cannot make a determination whether the BLV token offered to the 32 test investors was a ‘security,’” the documents noted. “Thus, Plaintiff [the SEC] has not demonstrated that the BLV tokens purchased by the 32 test investors were ‘securities’ as defined under the securities laws.”

Judge Gonzalo P. Curiel went on to decline an application for an injunction against Blockvest, as well as several other related claims against the firm.

The development is a setback for the securities regulator, which has been increasingly active in enforcement action against fraudulent ICOs in recent months. Other cases have been more successful the regulator, with several notable examples of successful enforcement action against ICO promoters.

Just this month, Airfox and Paragon, which both raised millions through their ICOs, were ordered to repay investors, as well as a $250,000 fine each for failing to appropriately register securities, and for selling securities without being a registered dealer or agent.

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Ohio lawmaker eyes bill allowing ICOs to ‘sidestep’ securities laws

A congressman in Ohio is preparing a bill that will regulate initial coin offerings (ICOs) in the same way as any other product as a means of “sidestepping” U.S. securities laws, according to a Washington Examiner report.

Republican Rep. Warren Davidson, of the 8th district of the state of Ohio, is reportedly weighing up a prospective bill which would treat ICOs as a type of product, rather than a form of security, thereby reducing the influence and oversight of the Securities and Exchange Commission (SEC).

The bill would aim to apply at both state and federal level, which would allow companies to avoid engaging with securities laws when launching ICO projects.

While Davidson is reported to be seeking bipartisan support, local media reports suggest this is unlikely, in light of the number of incoming Democrats into the House of Representatives, who would be expected to vote against deregulatory proposals.

Nevertheless, the bill would complement the recent tendency of crypto and blockchain firms to turn to venture capital (VC) funding rather than ICOs, in a bid to circumvent the complexities of securities laws and the increasingly stringent oversight of the SEC.

From the beginning of the year, SEC Chairman Jay Clayton has led the regulator through its initial attempts to enforce securities laws on ICOs, after suggesting that every ICO the regulator had ever seen could be defined as a security.

While several commissioners have sought to soften the position since, the proactive enforcement of the SEC is reported to have driven companies away from the ICO model, with private equity being used to raise funds without the same regulatory burden and legal uncertainty.

If the bill becomes law, it would allow crypto firms to use ICOs without concern for the SEC’s definition of ‘securities’, delivering more flexibility to companies choosing to use the ICO funding model, rather than pursuing alternative routes to capital.

The proposals come a matter of weeks after Davidson hosted some 45 delegates from the cryptocurrency and financial sectors, as part of a ‘crypto roundtable’ to discuss regulatory issues.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Ohio lawmaker eyes bill allowing ICOs to ‘sidestep’ securities laws

A congressman in Ohio is preparing a bill that will regulate initial coin offerings (ICOs) in the same way as any other product as a means of “sidestepping” U.S. securities laws, according to a Washington Examiner report.

Republican Rep. Warren Davidson, of the 8th district of the state of Ohio, is reportedly weighing up a prospective bill which would treat ICOs as a type of product, rather than a form of security, thereby reducing the influence and oversight of the Securities and Exchange Commission (SEC).

The bill would aim to apply at both state and federal level, which would allow companies to avoid engaging with securities laws when launching ICO projects.

While Davidson is reported to be seeking bipartisan support, local media reports suggest this is unlikely, in light of the number of incoming Democrats into the House of Representatives, who would be expected to vote against deregulatory proposals.

Nevertheless, the bill would complement the recent tendency of crypto and blockchain firms to turn to venture capital (VC) funding rather than ICOs, in a bid to circumvent the complexities of securities laws and the increasingly stringent oversight of the SEC.

From the beginning of the year, SEC Chairman Jay Clayton has led the regulator through its initial attempts to enforce securities laws on ICOs, after suggesting that every ICO the regulator had ever seen could be defined as a security.

While several commissioners have sought to soften the position since, the proactive enforcement of the SEC is reported to have driven companies away from the ICO model, with private equity being used to raise funds without the same regulatory burden and legal uncertainty.

If the bill becomes law, it would allow crypto firms to use ICOs without concern for the SEC’s definition of ‘securities’, delivering more flexibility to companies choosing to use the ICO funding model, rather than pursuing alternative routes to capital.

The proposals come a matter of weeks after Davidson hosted some 45 delegates from the cryptocurrency and financial sectors, as part of a ‘crypto roundtable’ to discuss regulatory issues.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Ohio lawmaker eyes bill allowing ICOs to ‘sidestep’ securities laws

A congressman in Ohio is preparing a bill that will regulate initial coin offerings (ICOs) in the same way as any other product as a means of “sidestepping” U.S. securities laws, according to a Washington Examiner report.

Republican Rep. Warren Davidson, of the 8th district of the state of Ohio, is reportedly weighing up a prospective bill which would treat ICOs as a type of product, rather than a form of security, thereby reducing the influence and oversight of the Securities and Exchange Commission (SEC).

The bill would aim to apply at both state and federal level, which would allow companies to avoid engaging with securities laws when launching ICO projects.

While Davidson is reported to be seeking bipartisan support, local media reports suggest this is unlikely, in light of the number of incoming Democrats into the House of Representatives, who would be expected to vote against deregulatory proposals.

Nevertheless, the bill would complement the recent tendency of crypto and blockchain firms to turn to venture capital (VC) funding rather than ICOs, in a bid to circumvent the complexities of securities laws and the increasingly stringent oversight of the SEC.

From the beginning of the year, SEC Chairman Jay Clayton has led the regulator through its initial attempts to enforce securities laws on ICOs, after suggesting that every ICO the regulator had ever seen could be defined as a security.

While several commissioners have sought to soften the position since, the proactive enforcement of the SEC is reported to have driven companies away from the ICO model, with private equity being used to raise funds without the same regulatory burden and legal uncertainty.

If the bill becomes law, it would allow crypto firms to use ICOs without concern for the SEC’s definition of ‘securities’, delivering more flexibility to companies choosing to use the ICO funding model, rather than pursuing alternative routes to capital.

The proposals come a matter of weeks after Davidson hosted some 45 delegates from the cryptocurrency and financial sectors, as part of a ‘crypto roundtable’ to discuss regulatory issues.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

The post Ohio lawmaker eyes bill allowing ICOs to ‘sidestep’ securities laws appeared first on Coingeek.

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Ohio lawmaker eyes bill allowing ICOs to ‘sidestep’ securities laws

A congressman in Ohio is preparing a bill that will regulate initial coin offerings (ICOs) in the same way as any other product as a means of “sidestepping” U.S. securities laws, according to a Washington Examiner report.

Republican Rep. Warren Davidson, of the 8th district of the state of Ohio, is reportedly weighing up a prospective bill which would treat ICOs as a type of product, rather than a form of security, thereby reducing the influence and oversight of the Securities and Exchange Commission (SEC).

The bill would aim to apply at both state and federal level, which would allow companies to avoid engaging with securities laws when launching ICO projects.

While Davidson is reported to be seeking bipartisan support, local media reports suggest this is unlikely, in light of the number of incoming Democrats into the House of Representatives, who would be expected to vote against deregulatory proposals.

Nevertheless, the bill would complement the recent tendency of crypto and blockchain firms to turn to venture capital (VC) funding rather than ICOs, in a bid to circumvent the complexities of securities laws and the increasingly stringent oversight of the SEC.

From the beginning of the year, SEC Chairman Jay Clayton has led the regulator through its initial attempts to enforce securities laws on ICOs, after suggesting that every ICO the regulator had ever seen could be defined as a security.

While several commissioners have sought to soften the position since, the proactive enforcement of the SEC is reported to have driven companies away from the ICO model, with private equity being used to raise funds without the same regulatory burden and legal uncertainty.

If the bill becomes law, it would allow crypto firms to use ICOs without concern for the SEC’s definition of ‘securities’, delivering more flexibility to companies choosing to use the ICO funding model, rather than pursuing alternative routes to capital.

The proposals come a matter of weeks after Davidson hosted some 45 delegates from the cryptocurrency and financial sectors, as part of a ‘crypto roundtable’ to discuss regulatory issues.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

The post Ohio lawmaker eyes bill allowing ICOs to ‘sidestep’ securities laws appeared first on Coingeek.

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Ohio lawmaker eyes bill allowing ICOs to ‘sidestep’ securities laws

A congressman in Ohio is preparing a bill that will regulate initial coin offerings (ICOs) in the same way as any other product as a means of “sidestepping” U.S. securities laws, according to a Washington Examiner report.

Republican Rep. Warren Davidson, of the 8th district of the state of Ohio, is reportedly weighing up a prospective bill which would treat ICOs as a type of product, rather than a form of security, thereby reducing the influence and oversight of the Securities and Exchange Commission (SEC).

The bill would aim to apply at both state and federal level, which would allow companies to avoid engaging with securities laws when launching ICO projects.

While Davidson is reported to be seeking bipartisan support, local media reports suggest this is unlikely, in light of the number of incoming Democrats into the House of Representatives, who would be expected to vote against deregulatory proposals.

Nevertheless, the bill would complement the recent tendency of crypto and blockchain firms to turn to venture capital (VC) funding rather than ICOs, in a bid to circumvent the complexities of securities laws and the increasingly stringent oversight of the SEC.

From the beginning of the year, SEC Chairman Jay Clayton has led the regulator through its initial attempts to enforce securities laws on ICOs, after suggesting that every ICO the regulator had ever seen could be defined as a security.

While several commissioners have sought to soften the position since, the proactive enforcement of the SEC is reported to have driven companies away from the ICO model, with private equity being used to raise funds without the same regulatory burden and legal uncertainty.

If the bill becomes law, it would allow crypto firms to use ICOs without concern for the SEC’s definition of ‘securities’, delivering more flexibility to companies choosing to use the ICO funding model, rather than pursuing alternative routes to capital.

The proposals come a matter of weeks after Davidson hosted some 45 delegates from the cryptocurrency and financial sectors, as part of a ‘crypto roundtable’ to discuss regulatory issues.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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EtherDelta founder faces raps over unregistered securities exchange

The U.S. Securities and Exchange Commission (SEC) has charged the founder of crypto trading platform EtherDelta with running an unregistered securities exchange, in the latest example of the regulator taking direct enforcement action against those who flout securities law.

According to an announcement from the regulator, the platform, which enables trading in ERC-20 tokens as a secondary market, has been operating without authorization from the commission—authorization the regulator says it needs on account of the legal status of the instruments traded on its exchange.

The SEC has been stepping up its oversight of cryptocurrency and token sales, effectively deeming many to fall within legal definitions of a security.

While this is far from clear in all instances, especially given that existing laws speak little to the unique digital assets created by blockchain technology, the enforcement action nevertheless serves as a reminder that it is incumbent on promoters and founders in the first instance to ensure they are compliant.

According to the securities regulator, EtherDelta’s exchange used smart contracts to automatically process, execute and record transactions for assets the regulator said fall specifically within the definition of ‘securities.’

“EtherDelta’s smart contract was coded to validate the order messages, confirm the terms and conditions of orders, execute paired orders, and direct the distributed ledger to be updated to reflect a trade,” the SEC noted, adding that “almost all of the orders placed through EtherDelta’s platform were traded after the Commission issued its 2017 DAO Report, which concluded that certain digital assets, such as DAO tokens, were securities and that platforms that offered trading of these digital asset securities would be subject to the SEC’s requirement that exchanges register or operate pursuant to an exemption.”

The platform hasn’t registered as an exchange with the SEC, nor has it filed for any exemption from the rules with the regulator. As a result, founder Zachary Coburn now faces charges from the commission which could carry criminal sanctions.

For his part, Coburn has already settled with the SEC, paying $300,000 in disgorgement, $75,000 as a penalty fine, and a further $13,000 in prejudgement interest.

The case comes at a time of increasing interest from the SEC in clamping down on unregulated exchanges and those operating outside of U.S. securities law.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Germany’s Deutsche Börse completes settlement trial on blockchain

The German central bank, Deutsche Bundesbank, has partnered with the operator of the Frankfurt Stock Exchange to successfully test the application of blockchain technology in securities settlement. The pilot project utilizes the Hyperledger Fabric and the Digital Asset (DA) blockchain platform.

Deutsche Bundesbank and Deutsche Börse partnered in March 2016 to create a blockchain based project called Blockbaster, which stands for blockchain based settlement technology research, which seeks to develop “a conceptual prototype” for transferring and settling securities and fiat currency.

According to the two firms, the DA-based platform was tested extensively in 30 scenarios while the Hyperledger Fabric-based prototype fulfilled all basic regulatory features required for financial transactions, including Know-Your-Customer (KYC), confidentiality of transfers (need to know principle), and participation of admitted peers only (permissioned network0).

Berthold Kracke, CEO of Clearstream Banking and head of Clearstream Global Operations at Deutsche Börse Group, explains, “The tests have shown that blockchain technology is a suitable basis for applications in the field of settlement and other financial infrastructures.”

The prototypes were developed over a two-year period and functioned as a sandbox for testing blockchain-based securities settlement. Following the trial, the central bank and Deutsche Börse Group concluded that decentralized solutions should be tailored to fit the needs of the financial market.

“During the time of the project we have encountered a further development of the basic technologies which always renders test results as outdated since the technology has already improved,” the report noted. “Providers of blockchain or DLT-based solutions improve their offers and increasingly develop specialized software to serve particular use cases. There seems to be a trend towards products highly customized for individual use cases.

Burkhard Balz, a member of the executive board, Deutsche Bundesbank, explained, “During this project, Deutsche Bundesbank and Deutsche Börse learned a lot about the usage of this technology and its concrete implementation. We expect the rapid development to continue, and also see the potential in using it for high-volume applications. The approach of a permissioned architecture, which takes into account the requirements of the financial sector from the outset, has proven to be right.”

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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3 more ICOs shut down by North Dakota securities watchdog

A North Dakota security watchdog is keeping tight reins on initial coin offerings (ICOs) in the U.S. state. Last Thursday, the commissioner of the North Dakota Securities Department (NDSD), Karen Tyler, issued a cease and desist order against three firms that were discovered to be involved in promoting fraudulent securities and illegal business practices related to ICOs in the state. The North Dakota financial regulator carried out an investigation, Operation Cryptosweep, to identify ICOs and cryptocurrency-related investments that pose a risk to North Dakota investors.

The investigation revealed that the companies involved—Crystal Token, Advertiza Holdings (Pty) Ltd., and Life Cross Coin aka LifecrosscoinGmbH—were selling securities without obtaining a license. Also, the companies were accused of using fraudulent statements on their websites whereby they all claimed to give high returns without any proof of how they would achieve them. Crystal Token was not registered with the Securities and Exchange Commission (SEC) and so the firm could not offer securities in the state, according to the NDSD. Equally, Advertiza claimed to offer securities which promised high returns through its virtual currency called “Tizacoin” (TIZA), while Cross Coin was found to have used a Berlin IP address that was already linked to ransomware and trojans. Generally, the investigation found out that the firms could be harmful to investors, according to the state regulator.

This was not the first time the department took action against ICOs in the state. Last month, the NDSD issued cease-and-desist orders against three other companies: BitConnect, Magma Foundation and the Pension Rewards Platform. Tyler said about the orders, “The continued exploitation of the cryptocurrency ecosystem by financial criminals is a significant threat to Main Street investors.”

The commissioner noted, “In formulaic fashion, financial criminals are cashing in on the hype and excitement around blockchain, crypto assets, and ICOs – investors should be exceedingly cautious when considering a related investment.”

Regulators are putting up more frameworks to protect investors. The SEC has announced that it will sue crypto companies offering pump-and-dump schemes, as well as ICO projects who have false SEC approvals.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Chinese state bank issues $1.3B mortgages on blockchain

The Bank of Communications, a bank owned by the Chinese government, has successfully issued mortgage-backed securities worth over $1.3 billion on infrastructure powered by blockchain.

In one of the biggest moves of its kind to date, the bank used an independent blockchain platform called Juicai Chain to issue the securities, worth a total of 9.3 billion yuan ($1.3 billion), China Securities Times reported.

Through the platform, all parties to the underlying loan are trackable, and can manage their cash flow as well as performing a number of other business operations on the blockchain. According to local press reports, the hope is that the system will improve security, limit risk exposure and improve the efficiency with which mortgage backed securities can be issued.

The technology also allows instant verification of the authenticity of the assets, as well as providing several other key benefits to would-be investors in these securities.

China has been notoriously hardline on cryptocurrencies and initial coin offerings (ICOs), effectively banning outright a large portion of activity in the cryptocurrency sector. However, conversely, the Chinese state is regarded as an increasing supporter of blockchain technology, with several notable deployments by government-backed organisations in the country.

Back in July, the Agricultural Bank of China issued a loan worth $300,000 on the blockchain, while in September, Chinese authorities signaled they may be willing to accept blockchain data as admissible evidence in legal cases.

The system pioneered by the Bank of Communications is one of many blockchain developments around real estate and real estate-backed securities, and the expectation now is that their successful launch will inspire similar moves from other financial institutions.

As reported in local media, Juicia Chain was first launched by the bank back in June, with initial due diligence beginning in August. Going forward, the digital mortgage base will now be opened to a number of intermediaries including law firm Zhonglun and global professional services company PricewaterhouseCoopers.

With the Agricultural Bank of China and the Bank of Communications accounting for the fourth and fifth largest banks in the country respectively, the new platform is now likely to have a significant effect on the way similar securities are issued in future.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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