SEC Delays VanEck ETF Proposal Seeking Public Comments

The U.S. Securities and Exchange Commission (SEC) has again postponed making a decision on the VanEck, SolidX, and Cboe joint proposal bitcoin exchange-traded fund (ETF) proposal.

The proposal was filed in January and was delayed in March. In a new document filed Monday, the SEC stated that it was in the process of establishing proceedings on whether to approve or disapprove a proposed rule change that would allow the VanEck SolidX Bitcoin Trust to issue and list its shares on the New York Stock Exchange (NYSE).

Currently, the commission is seeking more comments from public on the proposed ETF as they have received only 25 comments so far. The deadline to submit comments is due 21 days from when the order is published and rebuttal to the comments are due 35 days after the publication.

Following this, the new deadline for the SEC to make its decision has been set up for August 19th , and it could be delayed one more time for a final deadline of October 18th, according to attorney Jake Chervinsky.

Originally, the bitcoin ETF proposal was first filed with the SEC last year, however due to the U.S. government shutdown it was withdrawn in January this year. VanEck/SolidX refiled the proposal later that month, only to receive a delay notice for March 29th. Similarly happened to the proposal filed by Bitwise Asset Management with NYSE Arca.

The commission has postponed making any decision on the two proposals so far this year, with the latest delay on Bitwise’s proposal coming on May 14th. Following this news, the VanEck/SolidX proposal joins the long list of failed attempts to get an ETF approved by the SEC.

Meanwhile, the commission has issued several extensions and rejections on ETF proposals, citing concerns that the proposals did not meet and satisfy SEC standards to prevent fraud, market manipulation, financial crime, liquidity amongst others.

Following today’s announcement, the SEC has reiterated these concerns:

“The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade,” and “to protect investors and the public interest.”

The SEC’s repeated delays in sanctioning a bitcoin ETF may reflect its lack of confidence in the maturity of the crypto market. As such, the regulator has turned down at least 10 ETF proposals to date and it has yet to approve one.

In response to the repeated delays, VanEck digital asset strategy director Gabor Gurbacs has stated that “we continue the hard work towards better-regulated, safer and more liquid digital assets markets. Bitcoin is too big to ignore.”

Malta’s Registry of Companies to Use Blockchain-Based System

According to local news reported on May 8th, Malta’s Registry of Companies is going to operate on a blockchain-powered system from now.

The Registry of Companies is a public registry holding official information and documentation pertaining to new and existing companies. At the end of last year, the agency established itself as an independent from the Malta Financial Services Authority’s (MFSA).

Now, the registry is seeking out a new method of organizing and documenting their information, as they plan to use a blockchain-based system. The act of demerging from the MFSA and becoming an independent establishment will lead to strengthening the internal management structure of the data.

Silvio Schembri – Secretary of the Parliamentary Secretary for Financial Services, Digital Economy, and Innovation – stated that the use of blockchain technology will provide greater efficiency, while “lessen[ing] unnecessary bureaucratic procedures.”

He further added that the agency will operate on a new system, which will handle all of the processes executed by the Registry of Companies. He noted that with the new system in place, new services will be provided, which was not possible before as this is the first agency in the world to be run on a blockchain based system.

In addition to that, Silvio Schembri has noted that the new premises will form an integral part of Malta’s technological and innovative activity.

“While previous administration disregarded the South of Malta, this administration sought to exploit the potential of this area by bringing commercial activity to the part for the benefit of all,” said the Parliamentary Secretary.

The Registry of Companies will be located in Zejtun together with the International Taxation Unit, Tech.MT Foundation, Finance Malta and Gaming Malta.

Last December, Malta together with seven other southern European Union member states, released a declaration encouraging the use of Distributed Ledger Technology’s (DLT) within the region. The declaration outlines several industries such as education, transport, mobility, shipping, Land Registry, customs, company registry, and healthcare, which can benefit and improve from implementing blockchain technology.

Meanwhile, the International Monetary Fund (IMF) stated that the growth of blockchain in Malta had created significant risks of money laundering and terrorism financing in the island’s economy. Subsequently, the IMF had issued several recommendations to the authorities such as applying more sanctions and gaining a better understanding of possible risks and regulatory breaches that come with blockchain technology.

Despite that, the Prime Minister of Malta has voiced a positive stance regarding the fintech and has argued that there is a potential for corporate, political, and civic systems to benefit from blockchains implementation, adding that it could ultimately solve “decades-old problems.” He further claimed that this potential is what drove the country to “launch itself as a Blockchain Island,” stating that the island became “the first jurisdiction worldwide to regulate [the] technology.”

LedgerX Plans to Launch Bitcoin Futures Contracts

LedgerX, a United States-regulated crypto derivatives and clearing platform, is seeking to launch a physically-settled bitcoin (BTC) futures contract, according to news reported on April 15th.

LedgerX co-founder Juthica Chou has revealed in an interview that the company filed for a designated contract market (DCM) license from regulators, which would allow it to offer the new bitcoin futures product. According to her, the company first submitted the request in November 2018 and is focused on bringing the product to a retail investor market.

In the trading of physically-delivered futures, customers are paid out in Bitcoin (BTC) at the expiry of a contract, whereas cash settled futures pay out in USD. For reference, CME Group offers a cash-settled product.

Meanwhile, the new futures product is part of a retail-focused version of its derivatives trading platform, called “Omni.” The new platform will support trading of futures, swaps, and options for retail users. In addition to that, the new platform will utilize LedgerX’s existing institutional liquidity pool to “offer retail customers a top tier experience from day one,” Chou said.

Over the recent months, LedgerX has slowly shifted its focus away from large investors and bulge bracket banks.

I think at this current time we don’t see the demand growing among really large institutions and banks. We are still a $85 billion market cap for bitcoin — really just the size of a large stock,” Chou said. “Right now we see the opportunity towards the other end of the spectrum.”

LedgerX claims over 200 institutions as clients for its physically-delivered swaps product. In regards to the future product it plans to support, Chou stated that the company has an advantage over its rivals as it has been trading similar products longer than anyone else.

This January, LedgerX released its first bitcoin price volatility index, having launched reportedly the first ever CFTC-licensed bitcoin savings product in May 2018.

The announcement comes after other trading firms have announced the launch of similar products.

As previously reported, the Commodities Future Trading Commission (CFTC) is currently still in talks with the yet-to-be-launched institution-oriented trading platform Bakkt — established by New York Stock Exchange operator Intercontinental Exchange, which has its sights on its own physically-settled BTC futures product.

Other platforms aiming to launch physically settled BTC futures include ErisX and Seed CX, both also institution-oriented.

Blockstack Files with SEC for Its Token Sale

Blockstack, a blockchain-based applications platform launched in 2017, has announced its intent to raise $50 million in a token sale, by filing with the SEC for Regulation A+ crowdfunding exemption.

First Token Sale Filed with the SEC

The token sale, would be operated via a wholly-owned subsidiary, the “Blockstack Token LLC,” and entail the sale of 295 million Stacks (STX) tokens.

If approved, this could be the first token offering that has been registered with SEC. While the move still requires regulatory review, the sale would enable Blockstack to raise capital through the U.S. securities markets.

The Regulation A+ exemption enables equity crowd funding campaigns to offer and sell securities to U.S. investors via two tiers, either for $20 million or $50 million, each over a 12-month period.

The total amount of tokens being offered stands at 295 million. According to the SEC filing, Blockstack will be offering 215 million tokens at $0.12 to its early backers. Another 40 million tokens will be made available at $0.30 each. The final 40 million tokens will be reserved for incentivizing developers building applications on the platform.

Some of the investors that will be participating in the sale include Hardvard’s endowment fund, Lux Capital, Foundation Capital along with other individual investors.

 “The net proceeds of the offering will be used to accelerate the development of its decentralized computing stack and app ecosystem,” the company said in a release.

Previous Token Sale

The company has already raised $52 million in December 2017 by selling 440 million tokens at the time. Investors included Union Square Ventures, Foundation Capital, Winklevoss Capital and Blockchain Capital, among others.

Muneeb Ali, co-founder and CEO of Blockstack, believes this could help the cryptocurrency industry establish a proper framework for both investors and other blockchain startups.

“We’ve been working with securities lawyers to create a legal framework that can enable blockchain protocols to comply with SEC regulations.”

 “This can potentially set a precedent for others in the industry, not just for public offerings, but also as a path to launch new public blockchains and establish a path to bootstrapping decentralized ecosystems.”

According to the filing, Blockstack now employs 21 employees and has $32 million in total assets. The company has launched its native blockchain, the Stacks protocol, and has seen more than 80 decentralized applications built on its platform.

SEC Publishes Regulatory Framework for Digital Assets

On April 3rd, the U.S. Securities and Exchange Commission (SEC) has published new regulatory guidance for token issuers, under the title “Framework for ‘Investment Contract’ Analysis of Digital Assets.”

This regulatory guidance for crypto tokens has been in the works since last November, as stated by SEC Director of Corporation Finance William Hinman. Other members of the agency, including FinHub head Valerie Szczepanik and Commissioner Hester Peirce, have repeatedly stated that SEC staff was working on the document.

According to the published document, a framework issued by FinHub will be employed to analyze if digital assets fall under the securities category under the US federal security laws depending on the nature of the digital asset.

Speaking at New York University in March, FinHub Commissioner Peirce explained:

“Now staff guidance is staff guidance. The Commission can go ahead and bring enforcement actions anyway but staff guidance does carry a bit of weight, but I would like to do something more formal at the Commission level so people have a little bit more certainty.”

Apart from analyzing the nature of digital assets, this framework is intent to provide assistance to anyone who seeks to comply with the U.S. securities laws. However, the agency cautions the public to use this framework as a guideline or a tool that helps market participants recognize which digital asset offer or sale falls under the federal security laws.

Therefore, the regulatory guidance is merely a representation of the staff’s view and not a rule or an official statement made by the commission; meaning the framework is not legally binding on the divisions or the commission.

The new document outlines a number of factors that token issuers must take into consideration when analyzing whether or not their offerings qualify as securities, which includes an expectation of profit, whether a single or at least central group of entities are responsible for specific tasks within the network, and whether a group is creating or supporting a market for a digital asset.

It is also emphasized that token issuers should look at tokens previously sold: to check if previous tokens should have been registered as securities or if a digital asset previously sold as a security should be reevaluated.

The criteria for reevaluation include whether:

  • the distributed ledger network and digital asset are fully developed and operational (meaning individuals can immediately use the token for some function);
  • the token is focused on a specific use case rather than speculation;
  • Prospects for appreciation in the token’s value are limited; and if billed as a currency, the token actually operates as a store of value.

Meanwhile, the SEC has issued as well its first-ever no-action letter, which has highlighted reasons not to consider some digital assets as security. The no-action letter is not binding on courts but rather is only applicable to the recipients.