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SEC Announces 2018 Examination Priorities – Crypto and ICOs in Focus

On February 7, 2018, the Securities and Exchange Commission's Office of Compliance Inspections and Examinations ("OCIE") announced its 2018 examination priorities, which include a focus on cryptocurrencies and initial coin offerings.  OCIE will continue to monitor the sale of these products, and where the products are securities, examine for regulatory compliance. In addition, as the number of broker-dealers and investment advisers engaged in this space continues to grow, OCIE will be examining registrants involved in their offer and sale.  Areas of focus will include, among other things, whether financial professionals maintain adequate controls and safeguards to protect these assets from theft or misappropriation, and whether financial professionals are providing investors with disclosure about the risks associated with these investments, including the risk of investment losses, liquidity risks, price volatility, and potential fraud.

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Jan 24, 2018
Crypto Worldwide - South Korea

As home to one of the world’s most tech-savvy, digitally-connected populations and several of the top global digital currency exchanges, South Korea has been a hotbed for blockchain technology developments and cryptocurrency trading.

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More Warnings From US Regulators Regarding Cryptocurrency

In a Wall Street Journal article [subscription required] Jay Clayton, the chair of the Securities and Exchange Commission, and J. Christopher Giancarlo, the chair of the Commodity Futures Trading Commission, remind participants in the burgeoning cryptocurrency market that their agencies are being vigilant in the pursuit of their regulatory mandates to enforce the law and to "set and enforce rules that foster innovation while promoting market integrity and confidence."

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SEC to Target Lawyers Assisting with ICOs

On January 22, 2018, Jay Clayton, Chairman of the Securities Exchange Commission (the “SEC”), issued a warning statement to lawyers assisting clients with ICOs and to companies who have, or are looking to, shift their focus to distributed ledger or blockchain technologies in his opening remarks at the Securities Regulation Institute. The SEC has the power to impose liability and penalties on lawyers who fail to satisfy their responsibility as gatekeepers to the capital markets. These remarks signal that lawyers may be a focus of the SEC as it seeks to regulate the world of ICOs.

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FINRA to Emphasize ICO Monitoring in 2018

On January 8, 2018, the Financial Industry Regulatory Authority (“FINRA” or the “organization”) released its 2018 Annual Regulatory and Examination Priorities Letter addressing the areas of focus for the organization for 2018. Of note, FINRA emphasized the need to “deepen [its] understanding” of initial coin offerings ("ICOs"), as the financing mechanism has dramatically increased in popularity over the course of 2017.

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U.S. Court Orders Certain Identifying Information to be Provided to the IRS

On November 29, 2017 a US federal judge in San Francisco ruled that Coinbase, Inc. (“Coinbase”) a popular online cryptocurrency exchange, must supply the Internal Revenue Service (the “IRS”) with identifying information on users who had more than US$20,000 in annual transactions on the Coinbase platform between January 1, 2013 and December 31, 2015.

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SEC Issues Guidance on Celebrity Endorsements

On November 1, 2017, the U.S. Securities and Exchange Commission (the “SEC”) released a statement addressing the recent influx of celebrities that are endorsing and promoting investments in stocks and other investments, particularly Initial Coin Offerings (“ICOs”).

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OSC Gives Relief to First Initial Token Offering

On October 17, 2017, the Ontario Securities Commission (“OSC”) granted relief to an initial token offering (“ITO”), its first decision of this kind.  The OSC granted exemptive relief to Token Funder (“Funder”) in connection with its ITO of FNDR tokens (as defined below) through a private placement offering (the “Offering”). The exemptive relief was sought through the Canadian Securities Administrators’ regulatory sandbox (the “CSA Sandbox”), which is an initiative of the CSA to support fintech businesses seeking to provide innovative products, services and applications by offering a faster and more flexible process to register and/or obtain exemptive relief from securities laws requirements.

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Aug 24, 2017
CSA Provides Guidance on How Canadian Securities Law Applies to Cryptocurrencies

On August 24, 2017, in response to the growing number of cryptocurrency offerings, the Canadian Securities Administrators (the “CSA”) issued Staff Notice 46-307 - Cryptocurrency Offerings (the “Staff Notice”). Cryptocurrency offerings can appear in a number of forms, such as initial coin offerings (an “ICO”) or the sale of securities of cryptocurrency investment funds. In an attempt to clarify its position on these offerings, the CSA issued the Staff Notice to provide guidance on how securities law in Canada may apply to this emerging field and to specify the required obligations that must be met under the current applicable regulations.

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Australian Cryptocurrency Reforms

On Thursday, August 17, 2017, the Australian government proposed a set of reforms aimed at regulating the purchase and sale of digital currencies on online exchanges, in an attempt to deter individuals from using these currencies for illicit purposes such as money laundering and the financing of terror-related activities.

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SEC Issues Report - Declares DAO Tokens to be Securities

On July 25, 2017, the Securities and Exchange Commission (the SEC) released its Report of Investigation (the “SEC Report”) on the 2016 offering of tokens by a group known as “the DAO.” The SEC determined that the tokens offered by the DAO (“DAO Tokens”) were investment contracts, and therefore were securities under the United States Securities Act of 1933 and the Securities Exchange Act of 1934.

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