Crypto News: June 15, 2018

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Big day in the cryptocurrency markets yesterday.

William Hinman, the Director of Corporate Finance at the SEC, stated that Ethereum wasn’t a security during a talk in San Francisco. This led to an explosion of social media excitement and plenty of Twitter thought leaders trying to opine on what this would mean for other cryptocurrencies.

Hinman’s prepared statement included this quote: “Based on my understanding of the present state of ether, the ethereum network and its decentralized structure, current offers and sales of ether are not securities transactions.”

There are a few key points worth calling out:

  1. This is not an official SEC ruling, but rather the statement of an influential person at the organization. It is important to pay attention to the statement but the official SEC ruling will be the most important one to watch.

  2. Regardless of what the SEC officially rules, nothing will be set in stone until the ruling is tried in a court of law. The legal precedent for securities law is always important, but even more so in the cryptocurrency market since there are many new nuances (decentralization, non-profit foundations, utility usage, etc).

  3. The SEC has explicitly stated that an asset can evolve from a security (at issuance) to utility (in the steady state). There are currently no laws or legal precedent for this scenario - expect this to be a big area of focus for lawyers & regulators over the next few years.

  4. The prepared statement yesterday highlighted that Ethereum may or may not have been sold as an unregistered security in the past - and the SEC does not appear to be interested in making a ruling on it. This leaves the door open for enforcement on other projects that sold unregistered securities during their issuance process.

The cryptocurrency regulatory saga is far from over. Yesterday was a positive step in the right direction but expect this to continue playing out over the next few years. I personally anticipate we will see a Supreme Court hearing at some point. Should be fun to watch.

THE RUNDOWN:

Stephen Bannon buys into Bitcoin: Stephen Bannon, 10 months removed from the job of chief strategist to President Trump and five months after his ouster from the arch-conservative news site Breitbart News, is betting that Bitcoin and other cryptocurrencies can disrupt banking. Bannon has had private meetings with crypto investors & hedge funds where he has discussed working on ICOs through his investment business. Read more.

Bitcoin's latest price crash may be over. But there’s still reason to worry: Bitcoin’s latest crash may be over after the value of the cryptocurrency stabilized Thursday. The plunge began Sunday, with several factors possibly feeding into it, including a cyber-heist that hit South Korea’s Coinrail cryptocurrency exchange—even though no bitcoins were stolen—and a U.S. regulatory probe into Bitcoin price manipulation. Read more.

Stellar Lumens cryptocurrency approved for trading in NY: New York financial regulators have approved Stellar Lumens, a cryptocurrency created by the founder of rival blockchain company Ripple, to trade on the itBit exchange—the first time the state’s authorities have given Lumens the green light. Read more.

Bank of Canada: Blockchain not more effective than central bank system ‘at this time’: A Bank of Canada official questioned the effectiveness and security of using blockchain tech for banking. James Chapman, senior research director at the BoC’s funds management and banking department, also called cryptocurrency assets “a new opportunity and a threat to the financial market.” Read more.

Binance CEO: ‘We try very hard to not be number one all the time:’ In less than a year since its inception, cryptocurrency exchange Binance has become the biggest exchange by volume in the world. Even CEO Changpeng Zhao is still surprised by the astronomical speed in which his exchange has grown. Read the Q&A.

Michigan introduces bill to prosecute persons who ‘falsely alter’ data on blockchain: The Michigan state legislature has introduced two bills that classify modifying data on a blockchain as a crime. HB 6257 says that any person who “falsely makes, alters, forges, or counterfeits a public record” and intends to “injure or defraud another person,” would be prosecuted of a “felony punishable by imprisonment for not more than 14 years.” Read more.