Lemurs’ Blockchain Newsletter #3
#1: Bitcoin Futures
The first bitcoin futures contracts on a regulated U.S. exchange were set to launch on Sunday, 10th of December. Chicago based CBOE Futures Exchange (CFE) was the first one to supporttrading for a crypto-derived futuresproduct. Indeed, the hype continues as today, 18th of December another exchange, the CME, listed bitcoin futures contracts on their platform. A Wall Street Journal report reveals Nasdaq and Cantor Fitzgerald & Co. will also be listing bitcoin futures within the first half of 2018.
There are endless debates around the effects on the bitcoin price these listings might have. The interesting turn, however, was presented by Mark Cuban sayingbitcoin futures trading on major exchanges will potentially have a positive impact on the flagship cryptocurrency. His stance is accompanied by one of JPMorgan’s top strategists, Nikolaos Panigirtzoglou, who is reported to say this will lend credibility to cryptocurrency, making it more appealing to both institutional and retail investors:
“The prospective launch of bitcoin futures contracts by established exchanges in particular has the potential to add legitimacy and thus increase the appeal of the cryptocurrencymarket to both retail and institutional investors.”
#2: The Future of Bitcoin
In order to bolster their foreign reserves, Eugene Etsebeth, a formercentral banker with the South African Reserve Bank predictsG7 central banks will start buying cryptocurrencies in the following year of 2018.
The G7 club of countries holds a so-called foreign exchange reserves, massive reserves of each other’s currencies. Besides, the G7 central banks normally hold special drawing rights (SDR) and marketable securities such as foreign currency loans, government bonds, corporate bonds treasury bills, and corporate equities. One of the fundamental functions of a central bank is to inter alia manage their nation-stateofficialgold and foreign exchange reserves.
Reserves are necessary for ensuring a nation-statefinancial stability, sustain foreign exchange liabilities as well as monetary and exchange rate policies. The above mentioned SDR however, is an internationalreserveasset, created by the International Monetary Fund (IMF) to supplement its member countries’ official reserves.
Just recently bitcoinmarket capitalisation exceeded the value of all SDR’s that have been created and allocated to members (equivalent to about $291 billion). Therefore, central banks witness bitcoin and other cryptocurrencies becoming the biggest international currency by market capitalisation. Along with bitcoin being offered in form of futures and the fact it is being traded globally with a 24/7 tradingaccess, it might as well become a central banks investment tranche.
#3: U.S. with even stronger language against ICOs and Virtual Currencies
The most notable news from the last weeks came from the USA as SEC and other U.S. regulators seem to be more focused on virtualcurrencies than ever. They entered December with several remarkable announcements:
- November, 28: US Senate Bill S.1241 to Criminalise Concealed Ownership of Bitcoin
- November, 30: White House is Monitoring Bitcoin via Homeland Security
- December, 4: SEC’s Cyber Unit Files Charges Against PlexCorps for Marketing and Selling Securities — PlexCoin
- December, 4: A Year and a Day Sentence for Operating an Unlicensed Bitcoin Business
However, two of the latest SEC’s press releases, both from December 11, could be viewed as a clue into even more high-profile moves ahead of us, with quite probably a much bigger impact on the market.
#4: SEC Chairman: No ICOs have been registered with the SEC
In a lengthy statement, Jay Clayton, the chairman of the US Securities and Exchange Commission, warned of the dangers associated with cryptocurrencies and ICO markets and announcedfurther enforcement actions:
I have asked the SEC’s Division of Enforcement to continue to police this area vigorously and recommend enforcement actions against those that conduct initial coin offerings in violation of the federal securities laws.
He compared some ICO projects to “interests in a yet-to-be-built publishing house with the authors, books and distribution networks all to come” and stressed out that it is “especially troubling when the promoters of these offerings emphasize the secondary markettrading potential of these tokens”.
Mr. Clayton stated that SEC also has not to date approved for listing and trading any exchange-traded products holding cryptocurrencies or other assets related to cryptocurrencies and added that “if any person today tells you otherwise, be especially wary”.
# 5: SEC’s Cyber Unit: The MUN Tokens were Securities
Although less publicised, the impact of the SEC’s cease and desist order against Munchee Inc. and its token sale, which was recognised as constituting unregistered securities offers and sales, could come near to the one the famous DAO report had.
Munchee offered MUN tokens seeking $15 million to improve an existing mobile app for meal reviews and promised to create an “ecosystem” in which the tokens would be used for in-app transactions. However, on the second day of their ICO, after being contacted by SEC, Munchee determined to shut down its offering and return to purchasers the proceeds that it had received.
In determining whether MUN token was a security, once again, the Howey test was applied. Despite the fact there was no direct profit-sharing promised and that certain utility features behind the token could be recognised, SEC concluded “the potential purchasers would have had a reasonable understanding that their future profit depended on Munchee creating a MUN ecosystem”.
As an example, SECmentioned a person who posted a video on YouTube to describe the MUN tokenoffering and discussed that MUN token purchasers would profit only after Munchee did years of work. The SEC stressed out how the Munchee promoted its token sale by describing how MUN purchasers could “watch their value increase over time” and could count on the “burning” of MUN tokens to raise the value of remaining MUN tokens. Also, Munchee created a public posting on Facebook, linked to a third-partyYouTubevideo, and wrote “199% GAINS on MUN token at ICO price!” promoting their pre-sale.
#6: EU with stricter rules for Exchanges and Virtual Currencies, will be effective within 18 months
On December 15, European Union states and legislators finally agreed on stricter rules to prevent money laundering and terrorism financing on exchangeplatforms for bitcoin and other virtualcurrencies, Reutersreported.
The new rules are required to be formally adopted by EU states and European legislators and then turned into national laws within 18 months, including the provisions, under which Bitcoinexchangeplatforms and wallet providers will be required to identify their users. Věra Jourová, Europe’s Justice Commissioner, said on Friday:
According to Reuters, the EU lawmaker in charge of the issue, Judith Sargentini, said Britain, Malta, Cyprus, Luxembourg and Ireland were among those opposing the changes.
#7: Bitcoin regulation as a topic at a G-20 summit
Regulation of bitcoin could be one of the topics at next G-20 summit in 2018, according to French finance minister. This is not a surprise, since France is playing active role around the fintech regulation.
“I am going to propose to the next G20 president, Argentina, that at the G20 summit in April we have a discussion all together on the question of bitcoin. There is evidently a risk of speculation. We need to consider and examine this and see how … with all the other G20 members we can regulatebitcoin.”
#8: U.K. financialmarkets regulator starting regulatoryaction against ICOs
UK’s financial watchdog FCA recently announced regulatoryaction in order to analyse the applicability of national laws to ICOs. In published Feedback Statement on Distributed Ledger Technology (DLT) FCA stated, that “on the Initial Coin Offering (ICO) market, they will gather further evidence and conduct a deeper examination of the fast-paced developments. Its findings will help to determine whether or not there is need for further regulatoryaction in this area beyond the consumer warning issued in September.”
U.S., U.K. going after ICOs, Bitcoin becoming mainstream asset class was originally published in Lemur Legal on Medium, where people are continuing the conversation by highlighting and responding to this story.