Blockchain Legal Resource

The acting general counsel of the Federal Election Commission (“FEC”) recently published for public comment a draft advisory opinion under the Federal Election Campaign Act and related FEC regulations regarding mining cryptocurrencies for the benefit of political committees.  According to draft Advisory Opinion 2018-13, a service provider has proposed to provide services to political committees to enable individuals to use the processing power of internet-enabled devices to mine cryptocurrencies, with the political committees receiving the mined cryptocurrency. A “political committee” is broadly defined under FEC regulations to include a wide variety of groups that have paid money or provided anything else of value to influence a federal election.

At a recent securities regulation conference, Bill Hinman, Director of the SEC’s Division of Corporation Finance, indicated that the agency intends to release “plain English” guidance around the issue of whether an ICO is a security. The SEC has provided guidance on these issues in its DAO Report and Hinman’s own prior speech, and as we have frequently blogged, has been actively enforcing perceived violations of the federal securities laws. The idea behind the plain English guidance appears to be to consolidate the SEC staff’s views into a single “how to” document for use by the lay person.

As we have previously blogged, state and provincial securities regulators across the U.S. and Canada have been actively policing the marketplace for ICOs and security token offerings, supplementing efforts at the federal level in the United States undertaken by the SEC. Texas and Massachusetts have been particularly active on this front, and New York recently issued a blistering report on the status of crypto exchanges. Colorado and North Dakota are among the latest states to announce enforcement actions against crypto businesses.

On November 8, 2018, the SEC announced settled charges against an unlicensed digital token exchange (the “Platform”). It represents the SEC's first enforcement action based on findings that such a platform operated as an unregistered national securities exchange. This action follows first-of-their kind enforcement actions that the SEC brought in September against an unregistered broker-dealer and an unregistered investment company that each transacted in digital securities.

On November 1, 2018, the New York Department of Financial Services (“DFS”) announced its approval of the first virtual currency license for an operator of Bitcoin teller machines (“BTM”). According to DFS, to date it has now approved 12 charters or licenses for companies in the virtual currency space.

The SEC’s Division of Enforcement (Division) released its latest Annual Report (Report) on November 2, 2018. The fiscal year that ended September 30, 2018, was a busy one for the SEC in the crypto and distributed ledger technology space, and the Report includes a discussion of the SEC’s initiatives on this front.