On November 8, 2018, the SEC announced settled charges against an unlicensed digital token exchange (the “Platform”). It represents the SEC’s first enforcement action based on findings that such a platform operated as an unregistered national securities exchange. This action follows first-of-their kind enforcement actions that the SEC brought in September against an unregistered broker-dealer and an unregistered investment company that each transacted in digital securities. Continue Reading SEC Brings First Enforcement Action Against Unregistered Token Exchange

On November 1, 2018, the New York Department of Financial Services (“DFS”) announced its approval of the first virtual currency license for an operator of Bitcoin teller machines (“BTM”). According to DFS, to date it has now approved 12 charters or licenses for companies in the virtual currency space. Continue Reading New York DFS Licenses First Bitcoin Teller Machine Operator

The SEC’s Division of Enforcement (Division) released its latest Annual Report (Report) on November 2, 2018. The fiscal year that ended September 30, 2018, was a busy one for the SEC in the crypto and distributed ledger technology space, and the Report includes a discussion of the SEC’s initiatives on this front.

Continue Reading SEC Annual Enforcement Report Highlights Crypto and DLT Cases

Hunton Andrews Kurth partner Scott Kimpel, chair of the Firm’s blockchain working group, recently participated in a panel discussion hosted by the Washington Legal Foundation regarding the latest legal issues associated with ICOs and security token offerings. Co-panelists included Alan Cohn, formerly of the Department of Homeland Security and Daniel Alter, former general counsel of the New York Department of Financial Services. Continue Reading Initial Coin Offerings: Can Securities Regulators Balance Market Growth and Investor Protection?

On October 11, 2018, the Senate Banking Committee held a wide-ranging hearing entitled “Exploring the Cryptocurrency and Blockchain Ecosystem.” The hearing featured testimony from Dr. Nouriel Roubini, an NYU professor who famously predicted the 2007-2008 financial crisis, as well as a counterpoint from Mr. Peter Van Valkenburgh, the Director of Research from Coin Center. Continue Reading Senate Banking Committee Explores Blockchain

A recent bipartisan letter from Members of Congress seeks clarification from SEC Chairman Jay Clayton as to the status of digital tokens and cryptocurrencies under the federal securities laws. The signatories expressed their view that not all digital tokens should be deemed securities, and voiced their concern that the SEC should not use its enforcement mechanism alone to craft policy on this issue. Instead, the Members advocated in favor of formal SEC guidance to clear up “uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught.” Continue Reading Members of Congress Request SEC Guidance on Crypto Assets

For many public companies, the annual meeting voting process is littered with intermediaries and inefficiencies that can result in a lack of shareholder engagement. Proposals are often voted on by proxies instead of by shareholders, oftentimes weeks in advance of the meeting. Few shareholders attend annual meetings in person. Large institutional shareholders may be granted engagement opportunities with management of the company that are not afforded to individual shareholders. These factors can result in a lack of transparency in the voting process and asymmetrical voting power amongst shareholders. Blockchain technology has several potential applications that can remedy these inefficiencies and restore shareholder trust and engagement. Continue Reading The Promise of Blockchain Technology in Annual Meetings and Corporate Governance

Interest in the crypto economy continues to grow in Congress. On September 25, 2018, Representative Warren Davidson (R-OH) hosted a roundtable, “Legislating Certainty for Cryptocurrencies,” with more than 50 financial institutions and crypto start-ups invited to attend. Additionally, the House Financial Services Committee has scheduled a hearing on financial innovation on September 28, 2018, entitled Examining Opportunities for Financial Markets in the Digital Era. Continue Reading Recent Congressional Action Involving Digital Assets and Blockchain Technology

A new report from the New York Attorney General (“NYAG”) summarizes the findings of its recent Virtual Markets Integrity Initiative (the “Initiative”). The NYAG concluded that crypto trading platforms vary significantly in their risk management strategies and in the ways they fulfill customer responsibilities. The NYAG also identified three broad areas of concern: (1) potential conflicts of interest, (2) lack of serious efforts to impede abusive trading activity, and (3) limited protections for customer funds. Continue Reading New York Attorney General Reports on Crypto Exchanges