The U.S. Securities and Exchange Commission, on April 3, 2019, released its long awaited framework to assist crypto currency companies and industry players in determining whether a particular digital asset is offered and sold as an investment contract, making it a security under U.S. securities laws.
The framework highlights a number of factors that may support a finding that a particular digital asset constitutes a security, and makes clear that a variety of activities relating to digital assets could implicate U.S. securities laws. However, the framework falls short of describing how these various factors should be weighted, and is expected to create additional uncertainty for industry players. Nevertheless, the framework is encouraging, as it signals that the S.E.C. is seeking to better understand the industry, is being transparent about the myriad factors it is considering, and is inviting further conversations on what regulations make sense.
It is important to note that, as the S.E.C. itself emphasized, this framework is not law.
Looking ahead, the S.E.C. is expected to continue to issue additional guidance as it receives feedback and develops its thinking around the complex legal and regulatory questions raised by crypto currencies. In the meantime, companies should be more thoughtful about how they structure their businesses and approach activities like securities offerings.
In a blog post, Facebook announced that it updated its policy that lifted restrictions on cryptocurrency and blockchain-related ads.
Specifically, ads related to blockchain technology, news, educational content, or events, no longer require prior written approval to be posted.
However, ads promoting initial coin offerings and token sales will still be banned, and ads related to exchanges and mining software will still undergo a review process.
This latest ease of banning cryptocurrency content comes amid Facebook's reports that it will launch its own crypto currency stablecoin to be funded at one billion U.S. dollars.
Caltech researchers developed the world's first blockchain-powered platform for sharing scientific data.
The blockchain technology was utilized on a database called the Electron Tomography Database, which contains a vast amount of pictures of microscopic samples that uses the imaging technique of electron tomography, also known as ET.
However, ET technology is expensive to operate, which makes it a challenge for data from these images to be accessible to the scientific community.
By using blockchain technology to distribute and track ownership of data in a decentralized fashion, more researchers can have access to the database.
A paper titled "ETDB-Caltech: A blockchain-based distributed public database for electron tomography." shares the results of using a blockchain-powered database.
In a fast changing space like crypto currency, it is important to look for guide posts and reflect on recent developments, as new trends may last for at least a week or two.
One such emerging trend is the increase in more conventional venture financing structures, that use digital assets as a sweetener to an investment, as opposed to the digital assets serving as the primary investment vehicle. In this model, the investor is receiving the equity, SAFE, convertible note, etcetera, and has the benefit of consuming a digital asset, or participating in the potential appreciation of a digital asset. Also, while certainly not dispositive by any stretch of the imagination, having a plan of distribution of a digital asset, that does not contemplate sales of the digital asset for capital raising purposes, will be helpful for the Howey analysis to determine whether a transaction qualifies as an investment, and for the risk profile of the digital asset.
Another trend is the initial exchange offering, or IEO. An IEO is structured as a direct sale of a digital asset, to or through an existing crypto currency exchange. There are a number of potential benefits of the IEO structure, namely, that the issuer is only negotiating the deal terms with one counterparty, as opposed to a wide array of purchasers in the ICO context. The issuer also gets the benefit of leveraging the exchanges user base and infrastructure. And finally, transactions with a collaborative exchange can be responsibly designed to comply with applicable securities laws, anti-money laundering, and know your customer best practices, and other financial regulatory guidelines.