In looking at the launch and approval this week of several new crypto platforms and products, we see the makings of real progress in terms of the ability of firms to navigate the U.S. regulatory arena. The announcements of a gold-backed virtual currency, a new USD-backed stablecoin, the launch of Binance U.S. with stringent KYC, and a limited bitcoin ETF could signal a greater degree of comfort and confidence by both regulators and industry to venture into uncharted territory or (just as importantly) to proactively address known regulatory concerns (e.g. exchange KYC programs) to facilitate launches and offerings.
- New York’s Department of Financial Services on Thursday announced the approval of Paxos Trust Company’s request to offer a gold-backed virtual currency (PAX Gold). The token is thought to be the first tokenized gold product, and reflects the respective efforts by Paxos to work through established regulatory channels, and by DFS to consider — and ultimately approve — a first-of-its-kind digital asset product.
- Similarly, the approval by DFS of Binance’s USD-backed stablecoin (BUSD) signals that Binance and Paxos have satisfied DFS’s standards for AML, security, and consumer protection — another potential indication that industry and regulators are on the way to being on the same page when it comes to new crypto products and activities.
- Binance U.S. announced its planned launch in “the coming weeks,” with compliance and strict KYC requirements as key parts of its initial operating model. Its transparency with the currencies it plans to list and the states in which it plans to operate further reflects the growing ability for firms to anticipate the red flags and areas of concern for regulators in considering new products and activities.
- Lastly, Van Eck and SolidX plan to use SEC’s Rule 144A — which allows the sale of privately placed securities to qualified institutional buyers — to issue shares of a limited version of a bitcoin ETF. This strategy directly addresses the justifications SEC has repeatedly used when rejecting crypto ETF proposals, which are a lack of investor protection and the prevalence of fraud and market manipulation. By using the SEC’s own rule — which was put in place specifically because institutional investors do not require the same level of information and protection as individuals in the retail market — this limited sale has the potential to serve as a successful proof-of-concept for a full ETF offering in the future.
As a leader in the development of innovative structured products across a wide range of crypto assets, we at BitOoda obviously support the expansion of the digital asset ecosystem. We remain optimistic that regulators and industry will continue to bridge the gap in the understanding, interpretation, and enforcement of digital asset regulations in the U.S. and look forward to continuing to drive the development of orderly markets and the evolution of more sophisticated products and platforms.