Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law.
Policy changes slowly. Crypto wants to move fast. Sometimes fairly, sometimes not, the crypto industry often portrays traditional financial regulators as calcified relics unprepared to deal with the coming new world.
To be fair, everyone seems to acknowledge that markets and trading systems need comprehensive upgrades, but national and international regulators are accountable to a wider range of concerns than any specific industry. The crypto industry sometimes takes that as a personal slight, waiting for some sudden burst of the regulatory dam. Progress is more like erosion.
That being said, this week has seen some hopeful if oblique changes in regulatory posture. I’ll be trying to piece together some major developments from the SEC’s attitude toward security tokens, as well as the unconfirmed first public offering by a crypto exchange, and also deciphering the newly announced strategy from the CFTC.
Kollen Post, Policy Editor, @the_postman_
Security tokens see light at the end of the SEC tunnel
Not that long ago, a certain strain of industry hype promised that tokenized securities would be blockchain’s killer app. However, the plight of reconfiguring global securities markets has ended up taking some time. This week saw the launch of a new product by Arca in the U.S., a tokenized fund based primarily on Treasury securities.
Arca had been working with the Securities and Exchange Commission for two years, trying to satisfy them that the fund and its attached ArCoin — with peer-to-peer trading — would be able to meet all necessary AML/KYC requirements and provide investors with secure trading. The fact that the fund is based on low-volatility government securities certainly helped, as does the fact that trading will remain relatively siloed in a single portal for the time being.
An extensive roster of firms is courting the SEC with inventive formats to offer retail investors new forms of digitized investments. The carnage of manila folders and red tape over a Bitcoin ETF continues, while Wilshire Phoenix recently changed tacks to file a BTC trust with the commission, but those are both investments that are at least somewhat based on a cryptocurrency.
There are a number of functioning digitized securities unconnected to any given crypto asset within the U.S. already. Limited markets on which to trade are a major part of that current hold-up partially because it takes so long to get any proposal through the SEC. This week, the SEC also voted on changes to registration under the 1940 Investment Company Act. They promise “an expedited review procedure for applications that are substantially identical to recent precedent.” Which is to say, these pioneer projects may have just gained some leverage.
CFTC promises new crypto framework as chairman finishes his first year
With its more limited purview, the…