BitOoda Global & Regulatory Analysis, 3/9/2020: Asian regulators continue adapting for crypto while SEC proposes new offering framework

Asian regulators and judicial bodies made a series of significant decisions this week that we assess will have a lasting impact on the regional market, even as the effects of the coronavirus outbreak continue to wreak havoc on the global economy. Back home, we noted with great interest the SEC’s proposed new offering framework, which could simplify ability of digital asset firms to identify compliant options for token development and issuance.

· Big news out of India, as the country’s Supreme Court struck down the long-standing ban on banking services for crypto firms. The announcement led to an immediate move by exchanges CoinDCX, Unocoin, and Wazirx to resume fiat deposit services and enable users to purchase cryptocurrencies with rupees. While some additional legal and regulatory hurdles remain before one of Asia’s largest economies fully opens up its crypto market, we see this as an extremely bullish development that could reshape Asia’s crypto landscape.

· South Korean lawmakers passed a law to regulate virtual asset service providers, taking a key step in moving beyond general guidelines to provide legal clarity and specific rules for crypto activity (including trading, exchange operations, and custody) in the country. The new laws focus on updated KYC/AML requirements, but are designed to bring transparency and reason to the Korean market.

· Following the G20’s recent communique out of Riyadh, Hong Kong and the United Arab Emirates both updated its crypto regulations to comply with the new FATF standards. These are notable developments, as we continue to monitor how global crypto participants are handling implementation of the FATF guidelines, particularly the new travel rule.

Meanwhile, the SEC proposed a set of amendments to modify the framework for exempt securities offerings. We acknowledge that our regulatory assessments typically do not give SEC high marks for their actions related to digital assets, but we do commend this proposal, which (based on our initial review) has a real potential to, in Chairman Clayton’s words, “create a more rational framework that better allows entrepreneurs to access capital while preserving and enhancing important investor protections.”

Mark Boiron’s Twitter thread provides a great summary of the key points, which include:

· Increasing the offering and investment limits for Reg A, Reg CF, and Rule 504 offerings.

· Consolidating the number of potential safe harbors from 10 to 4.

· Setting clearer rules for communications between investors and issuers, including clarifying disclosure and eligibility requirements.

· Simplifying the process for moving from one exemption/offering to another.

· Including a “test the waters” provision through a “general solicitation of interest.”

While this is certainly not a cure-all for the ambiguity and inconsistency of the SEC’s approach to digital asset, and neither this reform nor SEC Commissioner Peirce’s safe harbor proposal will throw the door open for a return of ICOs (nor should they), we are encouraged to see the Commission take a more thoughtful and strategic approach to reforming the rules that apply to digital assets.

As one of few firms in the U.S. crypto market regulated by both the SEC and CFTC, we at BitOoda will continue to stay on top of these developments and proactively communicate the opportunities and challenges they present for our clients.

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