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The Wyoming Division of Banking issued a No-Action Letter in October 2020 in response to a request from a Wyoming-chartered public trust company seeking the Division of Banking’s position on the ability of the company to custody digital assets as well as hold itself out as a “qualified custodian.” The NAL prompted the Staff of the Securities and Exchange Commission to issue a public statement seeking public comment on matters concerning the definition of “qualified custodian” under the Investment Advisers Act of 1940 and Rule 206(4)-2 thereunder.…
Continue Reading SEC and Wyoming Division of Banking Address Custody of Digital Assets

On Monday, September 21, 2020, the Office of the Comptroller of the Currency issued an interpretive letter on the authority of national banks and federal savings associations to hold stablecoin reserves. That same day, the Securities and Exchange Commission’s Strategic Hub for Innovation and Financial Technology issued a statement on the OCC’s interpretive letter. While not an official joint statement, the federal agencies were clearly aligned as FinHub’s statement on the OCC Interpretive Letter was posted on its website before the OCC published its letter.…
Continue Reading OCC and SEC’s FinHub Issue Guidance on Stablecoins

On April 18, 2019, the Financial Crimes Enforcement Network (“FinCEN”) announced its first enforcement action against a peer-to-peer virtual currency exchanger, which also included its first civil monetary penalty against a virtual currency exchanger, for failure to file Currency Transaction Reports (“CTRs”).…
Continue Reading FinCEN Announces First Enforcement Action Against Peer-to-Peer Virtual Currency Exchange

After months of teasing, on April 3 staff of the Securities and Exchange Commission (“SEC”) issued a long-awaited Framework for “Investment Contract” Analysis of Digital Assets. The Framework provides further guidance under the SEC’s Howey test as to whether digital assets constitute securities under federal law.…
Continue Reading SEC Staff Issues Security Token Framework

The Council of Institutional Investors (CII) and Templum, Inc. (Templum) each recently submitted comments to the SEC to call for the agency to embrace blockchain technology in a variety of contexts regarding the registration and transfer of securities. The dominant system for clearance and settlement of securities in the United States has its roots in the “paperwork crisis” of the early 1970s, and the resulting regulatory regime based on immobilization of securities is largely inconsistent with a blockchain-based system of traceable shares.…
Continue Reading Seeking Clarity in the Use of Blockchain Technology for Securities Trading

To date, virtual currency exchanges in the United States have structured their operations in an effort to avoid being required to register as an exchange with either the Securities and Exchange Commission or the Commodity Futures Trading Commission. While these efforts may be entirely legal, without the regulatory protections of exchange registration, they could create enhanced risks for customers, particularly in the case of a fund’s insolvency or collapse. …
Continue Reading Federal Court Lacks Personal Jurisdiction Over Defunct Virtual Currency Exchange