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SEC Subpoenas Shepherd ICOs Towards A+ Regulation


SEC Goes on a Subpoena Spree

SEC Subpoenas Shepherd ICOs Towards A+ RegulationSubpoenas are generally issued as an evidence gathering tool with the intention to prosecute if wrongdoing is established. On Wednesday, the Wall Street Journal (paywalled) reported that the SEC had issued scores of subpoenas against companies that had filed initial coin offerings. No specifics were provided however, leaving commenters to speculate on the scope and target of the offensive. In such scenarios, it is common for a single company to receive multiple subpoenas, so it is unlikely that the SEC has taken on the entire ICO landscape.

With the SEC yet to comment on the matter, speculation has mounted. The regulatory agency’s position on initial coin offerings, as voiced by its chairman Jay Clayton, is well documented. At the recent Senate hearing on cryptocurrencies, he stated that the agency’s Division of Enforcement would “continue to police these markets vigorously and recommend enforcement actions against those who conduct ICOs…in violation of the federal securities laws”.

Business as Usual for ICOs

As U.S. investors will attest, trying to find a crowdsale that will accept their contribution is nigh impossible now. The free and easy days of summer 2017, when anyone, anywhere could swap their ether for the hottest new tokens from the coolest new crowdsale seem like a distant memory. Startups that have diligently refused to accept funds from U.S. investors should have nothing to fear, but excluding this major and monied demographic isn’t an ideal solution. Moreover, U.S.-based ICOs desire the freedom to launch in their native country without fear of being shut down should the SEC decide their utility token is actually a security.

Rather Than Flee the SEC, ICOs Are Seeking A+ Regulation

Instead of keeping a low profile and praying the SEC doesn’t come calling, some startups have been beating a path straight to their door, seeking their tacit approval. There are three types of federal securities permissions that ICOs – or indeed any company seeking to trade a security – can apply for: Regulation D, Regulation S, and Regulation A+. Regulation S is only applicable when the security is offered in a country outside of the U.S., but the other two – D and A+ – offer a possible route to compliance.

Knowbella Tech, an open science project, has gone for the A+ option, but its CEO, Mark Pohlkamp concedes that it is entering uncharted waters. “Regulation A+ is similar to a pre-sale or perk crowdfunding campaign offered on platforms like Kickstarter or Indiegogo, but also allows us to offer participants equity in our company in the form of Helix tokens, similar to cryptocurrencies,” he said. Sovereign, a philanthropic cryptocurrency targeted at Fortune 500 companies, is also considering going down this route.

Regulation A+ isn’t without its problems though. For one thing, issuers are limited to raising $50 million in a 12-month period, although this solution does at least negate the need for investors to be accredited by the SEC. The alternative, Regulation D, allows the issuer to avoid being registered with the SEC, but investors must be accredited and may not sell their stake for 12 months afterwards. According to attorneys Pepper Hamilton LLP, “Since the beginning of 2018, four companies have filed Form 1-As with the SEC seeking to utilize Regulation A+ to raise funding and go public.”

The costs of obtaining regulatory approval for an initial coin offering aren’t cheap. But compared to the cost of having to cancel a crowdsale, return contributions to investors, and seek legal defense counsel after being prosecuted by the SEC, the next crop of ICOs may have little choice but to cough up and comply.

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Crypto Tax Breaks Proposed by Officials in Russia


Tax Breaks For Corporate Earnings and Private Incomes

Proposals to amend the draft law “On Digital Financial Assets” have been mounting in Russia, as legislators are preparing to review the bill authored by the Finance Ministry. A working group composed of representatives from other ministries, government agencies, banks and companies have come up with new ideas to tweak the legislation.

Tax breaks on profits from crypto transactions have been proposed during a meeting of the group at the Russian Ministry of Economic Development, Vedomosti reported. A ministry official said that exemptions should cover not only corporate earnings, but personal incomes, as well. Participants also called for increasing the limit for individual shares of “unqualified” investors in ICOs from 50,000 to 500,000 Russian rubles ($8,800 USD).

Crypto Tax Breaks Proposed by Officials in Russia

The experts insisted on lifting restrictions for foreign investments in Russian ICOs. Also, the working group proposed Russian token holders be allowed to set up accounts with foreign cryptocurrency exchanges and invest in coin offerings abroad.

Representatives of the Ministry of Communications, the Justice Ministry, the Central Bank of Russia, the Federal Antimonopoly Service, “Skolkovo” Fund, Gazprombank, Sberbank, telecom companies and payment providers took part in the meeting on Tuesday. Their proposals will be reviewed by a government panel. The Finance Ministry, which has prepared the bill, is not a member of the working group.

Bill to Be Introduced In the Duma within Days

The Russian “Minfin” has been ordered by President Vladimir Putin to prepare the legislation needed to regulate the cryptocurrency sector. It is also working on its own amendments to the draft which should be introduced in Russian parliament very soon.

Crypto Tax Breaks Proposed by Officials in Russia
Alexei Moiseev

The ministry has not seen the latest proposals yet, Deputy Finance Minister Alexei Moiseev admitted. “Introducing tax exemptions is expedient, but the idea to increase the limit for individual investments in ICOs is debatable and we can discuss it,” said Moiseev, whose bill is much more restrictive in that respect.

The law is meant to regulate the new crypto sector of the Russian economy. It covers public coin offerings and the circulation of tokens separately from cryptocurrencies. The bill defines the legal status of smart contracts, too. On Wednesday Moiseev told Tass that the draft will be presented in the State Duma within days.

Finance Ministry Draft Law Draws Criticism

The bill on digital financial assets has drawn some criticism in the past few weeks. Experts from the crypto sector think that the draft of the Finance Ministry needs serious revision, as it leaves many unresolved issues. Lawyers working with crypto companies said that legal rights and obligations of market participants are unclear. The authors have provided guidelines for ICOs, but have not defined the status of tokens and smart contracts very well. Russian authorities in general have been criticized for their slow progress towards adopting crypto regulations.

Crypto Tax Breaks Proposed by Officials in Russia

The public debate has exposed some major differences between relevant institutions, notably Minfin and Centrobank, which disagree on the circulation, exchange and trade of cryptocurrencies. In Tuesday’s meeting the CBR representative has once again insisted that tokens should only be exchanged for fiat money – rubles or foreign currency, and not cryptocurrencies. On the other hand, the Finance Ministry has been pushing for allowing crypto trade on Russian exchanges. “We intend to separate tokens from digital currencies and mainly discuss tokens in the draft law. But we are ready to talk about digital currency in this or in another format”, Alexei Moiseev stated in December.

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Genesis Launches Whale Sized Crypto-Loan Service


Market Maker Lending Services

Genesis Launches Whale Sized Crypto-Loan ServiceGenesis Capital will be a new lending firm for institutional investors that provides the opportunity to borrow a wide variety of digital currencies. The new subsidiary believes individuals and businesses will need cryptocurrency loans so they can deploy market making strategies, short spot, or use as additional capital to jumpstart a project. As the digital asset scene continues to grow, Genesis Capital thinks it’s time to strike the iron while it’s hot.

“We believe now is a great time to offer an institutional-focused lending service because it will increase general liquidity in the marketplace, encourage new financial institutions to participate in a two-sided market and increase the working capital that companies use to scale their digital currency-centric businesses,” explains Genesis Capital’s announcement.

Genesis Capital can now offer borrow on bitcoin, ether, ether classic, litecoin, ripple, bitcoin cash, zcash and other digital currencies in sizes from $100,000 upwards over fixed terms.

Genesis Launches Whale Sized Crypto-Loan Service

Up to $5 Million for Two Week to Six Month Loans

The company says being an existing cryptocurrency institutional market maker it can envision hedge funds, both spot and derivative brokerage services, and other use cases for large loans. Interested firms can fill out a form that asks for digital currency lending amounts between $100,000 to $5Mn+ USD worth of digital currencies according to the website’s submission page.

Genesis Capital says it plans to leverage its own OTC services and describes one example of lending a large block short-sale position. Borrowers will have access to Genesis Trading’s OTC platform after completing the onboarding process and will be able to initiate shorts utilizing various cryptocurrencies.

The firm’s website also details it is a regulated company that follows Federal MSB/Fincen regulatory statutes. Loan durations can be between two weeks to six months and the company explains it takes USD collateral. After the onboarding is complete Genesis says the digital currencies will be delivered “straight to your wallet.”

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Walmart Is Using Blockchain Tech to Make Shipping ‘Smarter’


A new patent filing finds retail giant Walmart seeking to utilize blockchain technology to perfect a smarter package delivery tracking system.

In an application released by the U.S. Patent and Trademark Office (USPTO) on Thursday, Walmart describes a “smart package” that would include a device which would record information on a blockchain regarding the contents of the package, its environmental conditions, its location and more. It also suggests that its smart package could be used in tandem with other emerging technologies including “autonomous vehicles,” such as drones.

The patent was first submitted in August of 2017, and notably builds on a filing Walmart submitted for a blockchain-based drone package delivery tracking system last year.

Walmart explains in the filing that online shopping has created shipping challenges for retailers, particularly with regard to perishable products requiring temperature control, thus necessitating further innovation.

Walmart writes in the application:

“These online customers many times seek to purchase items that may require a controlled environment and further seek to have greater security in the shipping packaging that the items are shipped in.”

The application states that the blockchain component will be encrypted into the device, and will have “key addresses along the chain of [the package’s] custody, including hashing with a seller private key address, a courier private key address and a buyer private key address.”

In addition to its delivery drone aspirations, Walmart has sought to apply blockchain technology to other areas of its business.

Last year, it joined Kroger, Nestle and other food industry firms in a partnership with IBM to use the blockchain to improve food traceability. It backed a similar effort in China with in December.

Walmart storefront image via Shutterstock
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