BitOoda Regulatory Analysis, 7/20/20: SEC and CFTC bring coordinated enforcement, while U.S. and global bodies continue to monitor the space

This week saw few significant developments on the regulatory front, as the digital asset community focused on the Twitter hack and countries around the world (such as Japan and Thailand) continued to move forward with various CBDC efforts. Perhaps the pandemic has spurred Washington DC to get a head start on the typical August break, perhaps regulators are trying to be consistent with the relatively calm BTC prices these days, or perhaps the high-profile nature of the Twitter scam was all-encompassing for those governing the space.

Three topics that we did find notable were:

· The SEC and CFTC have settled coordinated charges against San Francisco-based app provider Abra and its parent company over its offering of illegal swaps. The company was charged with selling unregistered securities-based swaps to retail investors with the out verifying their status as Eligible Contract Participants, selling them on a regulated exchange, entering into illegal off-exchange swaps, and registration violations. The settlement amounts were not significant ($150k per regulator), but we find any non-ICO enforcement action to be notable, particularly those coordinated jointly between SEC and CFTC.

· The CFTC’s Technical Advisory Committee (TAC) held a virtual meeting in which it discussed: (1) the resiliency and scalability of DLT systems, (2) an overview of CBDCs, and (3) a price correlation analysis of Bitcoin compared to other assets. While the TAC does not make policy decisions, it is nonetheless a governmental body that is on the forefront of exploring some of the more sophisticated digital asset-related questions regulators are grappling with, and a forum that allows industry representatives to have a direct voice with the CFTC (which, as we discussed last week, seems to be poised to step up on domestic crypto regulatory leadership).

· The Financial Action Task Force (FATF) published its 12-month review of global adherence to its virtual currency standards. The group found “evidence of progress” in most of its jurisdictions in terms of addressing the primary requirements that include a national registration/licensing regime, an AML/CFT program, and adherence to the Travel Rule. The group will conduct a second 12-month review by 2021 and update its guidance to address stablecoins, anonymous P2P transactions, and travel rule implementation. With U.S. firms such as BitGo beginning to provide specific technological compliance solutions, it appears that some of the apocalyptic forecasts on the impact of the travel rule on the digital asset industry were exaggerated.

As we continue to monitor regulatory activity around the world, notable enforcement actions, and the efforts of global and national authorities to govern digital assets, we encourage clients to reach out with any questions on how to compliantly engage in the space using BitOoda’s broad regulatory stack.