‘Illusionary’ Customer Protections: NY Attorney General Dampens Bitcoin ETF Hopes

cboe bitcoin etf

Following a recent report of New York State’s Attorney General, an economist believes that the document confirms “zero” chances of a Bitcoin ETF approval in 2018. ‘Odds of Bitcoin ETF Approval in 2018 = 0’ A new report of the New York States Office of the Attorney General (OAG) Barbara D. Underwood, outlined the issues which existing cryptocurrency exchanges face compared to traditional venues. According to the document, digital currency exchanges are up against serious problems

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Final Draft of ICO Legislation Could Signify Next Step for Philippines Fintech Sector

The Philippine government is about to reveal industry-defining regulation for cryptocurrency

The Philippine Securities and Exchange Commission (SEC) is due to unveil the hotly anticipated draft regulation for cryptocurrencies in the next few days, if the information provided by The Manilla Times is correct. If the regulation reflects the previous enthusiastic efforts to implement cryptocurrency in the Philippines, it stands to play a seminal role in defining the country’s status as a major player in the fintech sector. The SEC chairman, Ephyro Luis Amatong, has previously emphasised the need to regulate cryptocurrency exchanges as traditional trading platforms.

The draft comes in the wake of several Philippine lawmakers calling for the creation of a properly structured and above-board regulatory environment for Initial Coin Offerings (ICO) as the country opens up to the new technology. In spite of several successful DApps being developed in the country and the start of a promising upward trend for the Filipino fintech industry, officials are aware of the need to create a competent legislative framework to both protect their citizens from scams and for the sector to develop profitably.

In stark contrast to the majority of other central banks worldwide, the Philippines central bank — Bangko Sentral ng Pilipinas (BSP) — has been extremely proactive in ushering in both the implementation and regulation of cryptocurrencies. The central bank has developed a partnership with the SEC in order to establish “cooperative oversight.” SEC Chairman Amatong explains their cooperation:

“We already discussed the matter with the BSP, since the BSP is also interested and we are also interested […] The discussion […] [involves] joint cooperative oversight over [cryptocurrency exchanges] engaged in trading.”

Back in 2016, the BSP deputy director Melchor Plabasan made clear his positive outlook on the potential of cryptocurrencies in a televised interview, stating that:

“If you want something that is fast, near real-time and convenient, then there’s the benefit of using virtual currencies like Bitcoin.”

Final draft builds on months-long efforts to create effective legislation

As previously reported by Cointelegraph, this upcoming draft is the just the latest installment of the SEC’s attempt to regulate the cryptocurrency sector.

In November 2017, the SEC announced that it would move to legalize digital currencies by classifying them as securities, using the example of new regulation in the United States, Malaysia and Hong Kong. The SEC chairman and then-commissioner Emilio Aquino shed light on the developments in a news conference:

The direction is for us to consider this so-called virtual currencies offerings as possible securities, in which case we will apply the Securities Regulation Code. The heightened frenzy and increasing popularity surrounding Initial Coin Offerings has pushed authorities to lay down new rules to protect consumers.”

In August 2018, the SEC released their draft rules for public feedback. According to the official statement released by the local SEC, any company registered in the Philippines seeking to run an ICO must submit an initial request to the commision, establishing whether their token qualifies as a security. Companies must submit their assessment requests no less than 90 days before they plan to launch their sale period. The SEC will then review the request within 20 days and provide its findings in a written report.

The report also said that if ICOs were only to be distributed among 20 people or less, then registration with the SEC may not be compulsory.

The proposed legislative framework seeks to set out clear rules to avoid the creation of fraudulent ICO projects. The SEC has been proposing to regulate crypto assets since late 2017. In April, the Philippines also floated the notion of defining cloud mining contracts as securities, given that the investors of the data centers operate the process via “investment contracts.”

The SEC specified that they invited banks and investment houses, along with the investing public, to submit feedback on the proposed rules and set a deadline of Aug. 31.

Crime and punishment: The government cracks down on scams

Like most countries in which cryptocurrency is a burgeoning platform, the Philippines has been victim to a number of scams, as naive investors seek quick returns on offers that are too good to be true while regulators scramble to keep up.

In May, an email circulated using the name of President Rodrigo Duterte, along with high-profile members of the Senate, encouraging them to part with their hard-earned pesos in order to invest in cryptocurrency, with the promise of high returns.

The presidential spokesman for the Philippines was forced to step in and make a statement denouncing the email scam after President Duterte’s brother’s name was used in conjunction with the scandal.

In his official statement, Roque said:

“For your information, now that the President’s brother [is being dragged into that cryptocurrency scam], the President has asked me at least three times to announce and inform the public not to entertain any person peddling their alleged influence with the President, including his relatives.”

In another scandal, the Philippine’s SEC issued a warning to investors about Onecash Trading, another digital currency provider promising attractive returns of over 200 percent to investors in only eight weeks:

“Facebook Account Onecash Trading is inviting the public to sign up to their website through a sponsored link and deposit an amount of P1,000 [$20] as an enrollment fee. Upon activation thereof, a member may opt to become a Trader with a promise receiving 25 percent return of investment every Thursday for eight consecutive weeks without doing anything, or to be a Builder wherein a member shall be receiving P 50.00 [$1] per direct and indirect invites, up to the 10th level.”

The SEC stated that all investment schemes that make use of either fiat money or cryptocurrencies are deemed securities and are subsequently required to comply with existing regulations in the Philippines. The statement also came with a warning: Those who fall foul of the law could end up serving 21 years in prison as well as paying up to $100,000 in fines.

Cryptocurrencies are a relatively recent phenomenon for most countries. Their sudden skyrocketing into the very center of both public consciousness and the world of finance has often caught governments and issuers by surprise. As a result of this, governments are often on the back foot when it comes to legislation, leaving the door wide open for scammers. An example of this is the January hack of Coincheck in Japan, which led to the theft of $532 million worth of NEM. Anger at the hack was compounded by the fact that Coincheck was not registered with Japan’s Financial Services Agency and was therefore not subject to the same level of scrutiny as other exchanges in the country. The exchange froze all transactions and issued an apology. The Coincheck security compromise is indicative of wider issues in the crypto world, with over $1.2 billion worth of cryptocurrency stolen worldwide in 2017 alone. However, investors and regulators alike are learning from their mistakes. With the Philippine government taking steps to crack down on cyber crime, the wild west environment that has allowed startups and scammers to flourish in equal measure is soon to draw to a close.

The current legislation put in place by the Philippine government to deter cyber criminals has been deemed too tepid for some. Opposition politician Senator Leila de Lima is pushing a bill through the senate that seeks to impose drastically stricter punishments for crimes relating to cryptocurrencies.

In her authority as a former justice secretary, de Lima used the April 4 arrest of two individuals for an alleged P900 million ($17.2 million) Bitcoin scam to emphasize the need for Senate Bill No. 1694 to be passed:

“I hope that this occurrence will push my esteemed colleagues in the Senate to take my proposed bill seriously and help pass it into law soon. Knowing that virtual currency resembles money, and that the possibilities in using it are endless, higher penalty for its use on illegal activities is necessary.”

De Lima provided a list of illicit activities that could use cryptocurrencies:

“Where unscrupulous individuals entice unsuspecting people to purchase fake Bitcoins, sending a virtual currency as payment for child pornography or a public officer agreeing to perform an act in consideration of payment in Bitcoins [direct bribery].”

De Lima’s bill would determine the severity of the criminal activity by the equivalent value of the funds raised through illegal activity. Depending on the amount illicitly raised and the circumstances in which the funds were raised, individuals could face lengthy prison sentences or even the death penalty.

Cryptocurrency and blockchain could help unite the Philippines fragmented payments sector

In a bid to keep the country at the forefront of the ever-expanding crypto frontier, the Philippine government has created the Cagayan Economic Zone Authority (CEZA). With countries like Malta and Switzerland already ahead of the curve in welcoming both blockchain and cryptocurrencies, the CEZA is the country’s response to the ‘Crypto Valley’ of Switzerland’s Zug canton. The Philippine government permitted 10 blockchain and cryptocurrency companies to operate in the zone, with the aim of promoting economic growth and generating jobs for its citizens. In spite of appearances, the zone isn’t just a tax haven free-for-all. Companies are required to contribute no less than $1 million over a two-year period, which, in turn, is topped up by up hundreds of thousands of dollars in fees.

CEZA deputy administrator for planning and business development Raymundo T. Roquero explained what businesses must do to be able to operate in the zone:

“When they apply, they will pay an application fee of $100,000 (P5.35 million) [and a] license fee of $100,000. Then you go into probity checks, then application programming integration (API), which costs an additional $100,000.”

In a ceremony granting licenses to operate in the zone in April, Roquero commented on some of the applications that had been successful:

“These are offshore companies, and they have committed investments of $1 million (P534.6 million) each. GMQ intends to build [its] infrastructure in Sta. Ana, Cagayan […] and will have an incubation period of two years, so they are already allowed to operate here in Manila.”

Crypto activity in the Philippines, however, is not confined to the CEZA alone. The U.S.-based company ConsenSys has launched Project i2i — short for “island-to-island,” a payment network built on Ethereum that aims to connect the 400 rural community banks across the Philippines. Although there are evidently banks to serve the country’s many rural communities, they are neither connected to any wider electronic networks nor international money transfer systems, meaning that thousands of people are without a means of making quick and reliable payments.


Pic2The project uses a web API in order to allow banks to connect to a blockchain backend. This allows users to both carry out transactions and to make use of smart contracts on permissioned blockchain via ConsenSys’ Kaleido platform.

Transactions signed through this system will allow for the pledging of digital tokens corresponding to an amount of Philippine pesos in an off-chain account, as well as redeeming and transferring tokens among other platform users.

Success stories help the government to keep an open mind about cryptocurrencies

In spite of a stumbling start to the outright acceptance of cryptocurrencies, the Philippine government is clearly waking up to the many advantages that the technology can bring. This change has not gone unnoticed by some of the industry players.

In an interview with Nikkei, FintechAlliance chairman Lito Villanueva said:

“With these startups come huge investments in their portfolio. Surely, each country would want to take a piece of the action. Taking blockchain and fintech players in with enabling regulations and potential investment incentives would surely make the game more exciting.”

Some of the nation’s startups have already brought in considerable investment. Perhaps the Philippines’ most well-known fintech startup success story, Coins.ph, raised $5 million in a Series A funding round, securing investment from Naspers and Quona Capital. Other Philippine crypto pioneers include Bloom Solutions and Satoshi Citadel Industries.

Aiai Garcia, global business development lead for Consensys in Asia-Pacific commented on how the Philippines central bank’s openness toward cryptocurrencies had benefited the industry within the country:

“Today, the Philippines has one of the most advanced blockchain payments apps in the world [Coins.ph], which provides 1.5 million Filipinos alternative access to their finances and other value-added services. [Philippine] regulators were also among the first to announce the regulation of Bitcoin as security.”

It appears that the government is aware that the opportunities for fintech companies can bring benefits for itself. Department of Finance spokesperson Paola Alvarez said:

‘’Secretary [Carlos] Dominguez is really pushing for the application of financial technology. He wants to harness fintech to improve business, for example, payment of taxes online.”

As both cryptocurrency and blockchain technology gain footing across the globe, the potential benefits for the underdeveloped Philippine fintech industry are hard to deny. The disparate and fragmented nature of the island’s financial system could be revolutionized thanks to initiatives such as i2i, along with the nation’s many payment apps that have sprung up in recent years. With eager anticipation from high-profile government figures, the ICO regulations seem set to take the next step in defining the role of cryptocurrency in the nation’s future.

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Robinhood is Making Millions Selling Users’ Data to Financial Companies

No Such Thing as a Free Lunch: Robinhood User Info Sold

The low-cost Robinhood investing app popular with millennials makes up for the lost profits of commission-free trades by selling users’ data to other financial companies. What’s the Logic of Robbing Peter to Pay Paul? A Second Quarter SEC filing shows that Robinhood Financial (Robinhood) is actually making millions of dollars from selling users’ data to high-frequency trading (HFT) firms. Recall, this is the same company that espouses values of ethical trading practices that benefit the

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CEO Behind GAW Miners, PayCoin Ponzi Scheme Sentenced to 21 Months in Prison

The CEO of now-defunct GAW Miners has been sentenced to 21 months in prison and ordered to pay $9.2 million in restitution to investors.

Homero Joshua Garza, the CEO of the now-defunct U.S. crypto firm GAW Miners, has been sentenced to 21 months in prison for defrauding investors, local news agency Hartford Business reports Thursday, September 13.

Garza received the verdict in the Hartford federal court, following his guilty plea to a wire fraud charge related to creating and selling a scamcoin dubbed PayCoin (XPY).

Instead of serving the original 20 year sentence, Garza will report to prison on January 4, 2019 and be jailed until 2021, with an additional three years of supervised release, including six months in home detention.

In addition to prison time, the former CEO of GAW Miners will have to repay a $9.2 million restitution to investors, which is the approximate amount of financial damage wrought by the nine-month crypto scam.

Founded in 2014, Bloomfield-based GAW Miners was a firm that specialized in manufacturing, supplying and selling special hardware for crypto mining. The company was shut down in 2015 following allegations of operating as a Ponzi scheme, which was followed by a lawsuit in 2016.

Created by GAW Miners developers, the PayCoin cloud mining cryptocurrency was launched in 2014. The digital currency was based on the SHA-256 algorithm and both proof-of-work (PoW) and proof-of-stake (PoS) protocols.

While GAW Miners had reportedly “guaranteed” investors a $20 floor price for PayCoin, the highest XPY price was $15.92 instead, according to CoinMarketCap.

In late August, the alleged former owner of crypto exchange BTC-e Alexander Vinnik was indicted and subjected to a “fake” interrogation by French prosecutors in a Greek Court. Following a protracted legal battle and several lower court rulings, the Greek Supreme Court eventually ruled to extradite Vinnik to Russia.

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Two US-Audited Stablecoins Debut, Experts See Massive Impact on Crypto Market

New York approved two fully audited stablecoins from Gemini and Paxos, which experts say may largely impact the crypto market.

As Cointelegraph reported on Sept. 10, with the approval of the New York Department of Financial Services (NYDFS), Paxos and Gemini officially announced the introduction of two stablecoins called the “Gemini dollar (GUSD)” and the “Paxos Standard (PAX).” Both stablecoins are backed by the U.S. dollar on a 1:1 basis, with every unit of GUSD and PAX representing the value of one U.S. dollar.

Experts believe that the emergence of fully audited, legitimate and licensed stablecoins will have a profound impact on the crypto market, especially in the long-term, as it provides investors a way to retain value without being exposed to the volatility of the market.

Significance of GUSD and PAX deploying on Ethereum

Cameron Winklevoss, the co-founder and president of United States-based regulated cryptocurrency exchange Gemini, said in an official statement that it has launched GUSD on the Ethereum blockchain network utilizing the ERC-20 token standard.

Prior to the launch of GUSD and PAX, only two stablecoins — Tether (USDT) and TrueUSD (TUSD) — existed in the market, both of which have been integrated by major cryptocurrency exchanges like Binance, Bitfinex, OKEx, Huobi and HitBTC.

Tether and TrueUSD deployed USDT and TUSD on the Omni and TrustToken blockchain networks rather than relying on the reputable ERC-20 token contract of Ethereum.

Brandon Arvanaghi, the core developer of GUSD, stated that the Gemini dollar is the first stablecoin, alongside PAX, to be deployed on Ethereum as an ERC-20 token, with the entire system being integrated into the smart contracts of Ethereum.

The compatibility of GUSD and PAX with the Ethereum blockchain allows for the transfer of the two stablecoins through the Ethereum network with the existing infrastructure designed for tokens. For instance, the Gemini dollar can be transferred on the Ethereum network through wallets like MetaMask and systems such as MyCrypto and MyEtherWallet, without relying on third-party service providers and exchanges.

Tether and TrueUSD have their own wallets on their respective blockchain networks. But, for usability and accessibility, it is advantageous to have stablecoins that can be seamlessly sent and received on an infrastructure that the vast majority of cryptocurrency users are already familiar with. The white paper of GUSD reads:

“Gemini dollars are created at the time of withdrawal from the Gemini platform. Gemini customers may exchange U.S. dollars for Gemini dollars at a 1:1 exchange rate by initiating a withdrawal of Gemini dollars from their Gemini account to any Ethereum address they specify. The U.S. dollar amount of Gemini dollars is debited from a customer’s Gemini account balance at the time of withdrawal.”

Charles Cascarilla, the co-founder and CEO of Paxos, emphasized that immutability and transparency in the structure of stablecoins is crucial for decentralized accounting. As PAX operates as a token on the Ethereum network, anyone on the Ethereum blockchain can verify and evaluate the smart contract of GUSD and PAX.

“In the current marketplace, the biggest hindrances to digital asset adoption are trust and volatility. As a regulated trust with a 1:1 dollar-collateralized stablecoin, we believe we are offering an asset that improves on the utility of money.”

Integration of Global Finance to Crypto Finance

In the early days of Bitcoin, many investors in the cryptocurrency market called for an autonomous economy that operates independently from the broader financial market and government-controlled markets.

As the market started to grow and regulated financial institutions began to take interest in the market, the cryptocurrency market has become more intertwined with the global finance sector.

In terms of value, cryptocurrencies generally make up a practical store of value due to their lack of correlation to the broader financial markets, as Bitwise Asset Management vice president of R&D Matt Hougan explained:

“Non-correlation is not the same as inverse correlation, so there’s no guarantee that when the market goes down crypto will go up. Over the long term, we think the fundamental drivers of crypto are different from the fundamental driver of equities and other assets, and we would expect the low correlation to persist.”

The lack of correlation between cryptocurrencies and the global market has been considered to be one of the strongest points of the asset class that may enable major cryptocurrencies to potentially find competition in the offshore banking market, given the increasing crackdown on overseas savings accounts by governments like China and the ability of cryptocurrencies to hold value in a secure and efficient manner.

But, the integration of global finance into crypto finance through the adoption of fiat currency-backed cryptocurrencies, custodian solutions offered by banks and strict financial regulations will not lead to an increase in correlation of the value between cryptocurrencies and conventional assets.

Rather, it will ease the process for institutional investors to commit to the cryptocurrency market and individual users, like merchants and casual users, to escape extreme volatility in the market to utilize decentralized financial networks.

Erik Voorhees, the CEO of ShapeShift, noted that the integration of global finance into crypto finance is monumental and that it needs to continue for the asset class to survive and eventually compete against reserve currencies and traditional stores of value.

“It’s a big deal and an important step. Global finance is becoming further integrated with crypto finance. All that crypto needs in order to win is for this to continue.”

The role of Gemini in the institutionalization of crypto

Throughout 2018, Gemini and the Winklevoss twins have directed their efforts toward institutionalizing the cryptocurrency sector, enabling digital assets to be more favorable toward institutions and large-scale investors.

The Bitcoin exchange-traded fund (ETF) proposal by the Winklevoss twins filed with the U.S. Securities and Exchange Commission (SEC) is well documented. To increase the probability of its approval, Gemini secured various partnerships with regulated financial institutions, including Nasdaq, to better monitor and oversee the cryptocurrency market.

In July, the SEC ultimately rejected the Bitcoin ETF proposal of the Winklevoss twins filed by Bats BZX Exchange, Inc. (BZX), citing issues in its pricing model, saying that it will not allow ETFs to base the value of Bitcoin on a cryptocurrency exchange, which is vulnerable to manipulation:

“Rather, the Commission is disapproving this proposed rule change because […] BZX has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act […] in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.”

Still, despite the rejection of the ETF, the partnership between Gemini and Nasdaq stands, and the disapproval of the ETF allowed other companies that have filed Bitcoin ETFs with the SEC to revise their filings accordingly, further increasing chances of approval.

Since April of this year, Gemini has been working closely with Nasdaq to integrate market compliance and surveillance programs to appeal to regulators and to legitimize the cryptocurrency exchange market.

The first step toward the institutionalization of a market is to create trusted custody solutions and appropriately regulate the spot market of the asset class to ensure stability and transparency.

The efforts of Gemini and other financial institutions like ICE — the parent company of the New York Stock Exchange (NYSE) — and Nasdaq to evolve cryptocurrencies into a well-regulated, structured and transparent asset class are expected to have a large impact on the long-term growth of the industry. Tyler Winklevoss, the CEO of Gemini, said:

“Since launch, Gemini has aggressively pursued comprehensive compliance and surveillance programs, which we believe betters our exchange and the cryptocurrency industry as a whole. Our deployment of Nasdaq’s SMARTS Market Surveillance will help ensure that Gemini is a rules-based marketplace for all market participants.”

Controversy around Tether, investors happy to see alternative stablecoins

For nearly four years, since its launch in 2014, Tether has been the dominant force in the cryptocurrency exchange market as the most widely utilized stablecoin.

However, many analysts and investors in the cryptocurrency space have heavily criticized Tether since its inception due to the lack of transparency and clarity on its origin, audit reports and structure.

The controversy around Tether began in 2017, when a set of 13.4 million confidential electronic documents relating to offshore investments called the “Paradise Papers” were released by German reporters Frederik Obermaier and Bastian Obermayer.

The Paradise Papers disclosed a connection between Tether and Bitfinex officials Philip Potter and Giancarlo Devasini, who established Tether Holdings Limited in 2014.

Tether was brought into the cryptocurrency market by the integration of Bitfinex, one of the leading cryptocurrency exchanges in the global market. As the volume of Tether continued to increase and more investors started to rely on USDT to hedge the value of their holdings to U.S. dollars, major exchanges like OKEx, Huobi and Binance adopted USDT as the primary stablecoin.

For many years, investors have publicly expressed their dissatisfaction in the opaque structure of Tether, as it became one of the core components of the cryptocurrency exchange market. Throughout this year, Tether consistently demonstrated a daily trading volume of over $3 billion, which is twice larger than that of Ethereum, the second most valuable cryptocurrency in the world.

Top 10 cryptocurrencies by market cap

Hence, in a hypothetical situation in which Tether Holdings files for bankruptcy and the stablecoin does not represent several billion dollars — contrary to its balance sheet — then the entire global cryptocurrency market could suffer greatly.

In response to criticisms, Tether Holdings released audit results in June through law firm Freeh Sporkin & Sullivan LLP, demonstrating that it has more than enough funds to cover the billions of dollars its balance sheet portrays. At the time, Tether CEO J.L. van der Velde said:

“Despite speculation, we have consistently stated that Tether is backed by USD reserves at or exceeding the Tethers in circulation at a given moment, and we’re glad to have independent verification of this to answer some of the questions posed by the public.”

However, the fact that the audit result was not published by a widely recognized accounting firm and that Tether canceled the audit from Friedman LLP led the controversy around the stablecoin to intensify.

Speaking to Cointelegraph, American accountant and auditor Abhishek Shah said in March:

“The reason given by Tether was certainly not clear and precise, neither acceptable. An audit is to be allowed as much time as required, albeit the audit needs to be concluded before the due date. It is not a reasonable ground, and I’ve personally not heard of such a reason in my auditing career.”

For over four years, Tether has always been at the center of controversy and has struggled to definitively prove its legitimacy through trusted third-party audits. As such, investors such as Multicoin Capital partner Tushar Jain said that GUSD and PAX can be considered as improvements over Tether:

“This is such a huge improvement over Tether. It reduces systemic risk in the whole crypto ecosystem. Tether is a systemic risk in that, if it explodes, billions of dollars could effectively disappear and cause exchange insolvencies. An alternative to Tether hugely reduces that risk.”

Professor at the University of California is not convinced

In an op-ed published in The Guardian, Barry Eichengreen, professor of economics and political science at the University of California, Berkeley, firmly stated that he believes stablecoins do not solve the stability issue in the cryptocurrency sector.

As an example, Eichengreen offered the dilemma of cryptocurrency-accepting merchants. He stated that merchants are not able to price goods based on Bitcoin, given the extreme volatility rate of the currency. But, stablecoins can be accepted by merchants as a primary currency because their value is backed by fiat currencies.

“Stablecoins purport to solve these problems. Because their value is stable in terms of dollars or their equivalent, they are attractive as units of account and stores of value. They are not mere vehicles for financial speculation. But this doesn’t mean that they are viable.”

Still, regardless of the stability in the value of stablecoins, Eichengreen said that stablecoins are still not viable for various reasons, with the main factor being the vulnerability of the market to tax evaders and criminals.

“This exchange may be attractive to money launderers and tax evaders, but not to others. In other words, it is not obvious that the model will scale, or that governments will let it.”

The approval of GUSD and PAX by NYDFS directly refutes the two arguments of Eichengreen. A distinguished government body — in this case, the state of New York — regulated and licensed the launch of the two stablecoins.

Moreover, due to their compatibility with Ethereum as ERC-20 tokens, GUSD and PAX do not need to depend on an exchange. Even if they did, cryptocurrency exchanges are so heavily regulated in most major markets that it is highly impractical for criminals to attempt to utilize cryptocurrencies to launder money with stablecoins.

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SEC Shuts Down Crypto Hedge Fund for ‘Wilfully’ Violating Securities Laws

The US Securities and Exchange Commission (SEC) has formally issued a cease and desist order to a cryptocurrency hedge fund for violating securities laws. Under the Gun The SEC has filed a cease and desist order as well as a $200,000 fine to Crypto Asset Management LP (CAM) and to its founder Timothy Enneking, CNBC reports. According to the Commission, the fund which had proclaimed itself as the “first regulated crypto asset fund in the

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Federal Judge Affirms Securities Laws Can Be Applied to ICO Fraud


U.S. District Judge Raymond Dearie said today the government is permitted to proceed in a criminal case concerning two fraudulent ICOs, a situation the prosecution says falls under securities laws. In Brooklyn, New York, District Judge Raymond Dearie affirmed securities laws could be pertinent in a case concerning two fraudulent ICOs. The decision was seen as a big win for prosecutors, who have mentioned how the case is one of the first of its kind.

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FINRA Charges Broker With Fraud for Trading Unregistered Cryptocurrency

FINRA has charged Timothy Ayre with securities fraud and the illegal distribution of HempCoin, which he failed to register.

The U.S. Financial Industry Regulatory Authority (FINRA) has filed a complaint against Timothy Tilton Ayre, charging him with securities fraud and the illegal distribution of an unregistered cryptocurrency, according to a statement released on FINRA’s website Tuesday, September 11.

In the complaint, FINRA, overseen by the U.S. Securities and Exchange Commission (SEC), states that Massachusetts-based Ayre tried to lure investment to his public company, Rocky Mountain Ayre, Inc. (RMTN), by selling HempCoin, which he misrepresented as “the first minable coin backed by marketable securities.”  The regulator writes that Ayre’s claims are “fraudulent, positive statements about RMTN’s business and finances.”

Furthermore, Ayre stated that HempCoin is a security backed by RMTN common stock, telling investors that each coin was equivalent to 0.10 shares. As a result, more than than 81 million HempCoin securities were mined in late 2017 and sold on crypto exchanges. As Ayre never attempted to register the coin, FINRA has decided to charge the RMTN head with the unlawful distribution of an unregistered security.

In addition to the above, from January 2013 through October 2016, Ayre reportedly made false statements about the nature of RTMN’s business and the creation and “unlawful distribution” of HempCoin, as well as making misleading claims in RMTN’s financial statements.

FINRA, which has started a formal proceeding against RMTN by filing a complaint, reminds the public in the statement that anyone named in a complaint can file a response and request a hearing. If FINRA admits there were violations, the firm or individual might get a fine, censure, suspension, or be barred from the securities industry.

FINRA’s statement comes the same day as its ruling organization SEC has issued two separate cease-and-desist orders along with fines.

As Cointelegraph wrote September 11, the SEC filed a cease-and-desist against Timothy Enneking and his Crypto Asset Management fund, which “misrepresented” itself as the “first regulated crypto asset fund in the United States.” The SEC’s second notice addresses “ICO superstore” TokenLot, which the U.S. watchdog alleges has also breached the law by failing to register in the country.

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In an Apparent First, U.S. SEC Penalizes Crypto Hedge Fund

The SEC has issued a cease and desist order and a $200,000 fine to Crypto Asset Management for misrepresenting itself to investors.

The U.S. Securities and Exchange Commission (SEC) has issued a cease and desist order and a $200,000 fine to Crypto Asset Management (CAM) and its founder Timothy Enneking, according to a document published on the commission’s website Tuesday, September 11. According to CNBC, this is the first SEC disciplinary action against a digital asset management fund.

The SEC order says that CAM “misrepresented” itself as the “first regulated crypto asset fund in the United States,” and raised $3.6 million from 44 investors in late 2017, bringing its net asset value to $37 million.

According to the filing, the fund has “never been registered with the Commission in any capacity.” Тhe commission insists that CAM “wilfully” broke the law by claiming to have the necessary credentials associated with holding and trading securities.

After being contacted by the SEC, the company has agreed to stop its public offering and has offered a buyback to investors. CAM has also agreed to pay the fine, while it has not admitted guilt to the commission’s allegations.

Also today, the SEC issued an order against “ICO superstore” TokenLot. The Commission says that TokenLot breached the law by failing to register. Similar to CAM, the firm has agreed to pay a $471,000, but has not formally admitted to violating the law.

In a further move from regulators, the U.S. Financial Industry Regulatory Authority (FINRA) has filed charges against a Massachusetts man on September 11 for securities fraud and illegal distribution of an unregistered cryptocurrency HempCoin. If FINRA admits there were violations of securities law, Timothy Tilton Ayre or his public company, Rocky Mountain Ayre, Inc. (RMTN), might get a fine, censure, suspension, or be barred from the securities industry.

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New Study: 20% of ICOs Are Scams, But Investors Aren’t Fazed

Initial Coin Offerings (ICOs) have become the hottest way of raising capital, but at least one in five has turned out to be a scam, according to a new study. 1 in 5 ICO Projects are Scams The number of Initial Coin Offerings (ICOs) has gone through the roof throughout the last year as their underpinned technology, the blockchain, received mass media exposure and starts to see widespread adoption. Yet, being comparatively easy means of

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