The SEC announced its first civil penalties against two cryptocurrency companies that didn’t register their initial coin offerings as securities.
Crypto companies Airfox and Paragon Coin Inc. will each have to pay $250,000 in penalties to compensate investors, and will also have to register their digital tokens as securities, the agency said Nov. 16.
The Securities and Exchange Commission pointed to the consent decrees and investor reimbursement as a roadmap for other crypto firms to follow. The consent orders “provide a model for companies that have issued tokens in ICOs and seek to comply with the federal securities laws,” SEC Enforcement Division Co-Director Steven Peiken said.
The following are updates to the Digital Currency, Blockchain, FinTech Regulatory Relief, and ICO Trackers, available on Bloomberg Law, from the week of November 12-16, 2018. They include U.S. federal, U.S. state, and foreign government actions affecting the use of digital currency and blockchain, and regulatory enforcement actions and private class action litigation against ICOs.
- The New York Department of Financial Services (DFS) approved the application of NYDIG Execution LLC, a subsidiary of NYDIG LLC, for a virtual currency license and a money transmission license on November 14. The virtual currency license was the fourteenth (14th) granted by DFS.
- DFS authorized NYDIG to offer secure custody and trade execution services for consumers, with several options for the custody of the digital assets, and to offer defined services to operate as a custodian for virtual currencies, including Bitcoin, Bitcoin Cash, Ether, XRP and Litecoin.
Federal Enforcement Actions: First SEC Civil Penalties For Failures to Register ICOs as Securities
- The SEC announced settled charges against CarrierEQ Inc. (Airfox) and Paragon Coin Inc, two companies that sold digital tokens in ICOs without registering the tokens as securities after the Commission warned that ICOs can be securities offerings in its DAO Report of Investigation.
- SEC Press Release: Two ICO Issuers Settle SEC Registration Charges, Agree to Register Tokens as Securities
- The Monetary Authority of Singapore (MAS) issued a consultation paper on the creation of new pre-defined regulatory sandboxes to complement its existing regulatory sandbox on November 14. The “Sandbox Express” will enable firms which intend to conduct regulated activities to embark on experiments more quickly, without needing to go through the existing bespoke sandbox application and approval process.
- The Sandbox Express is intended for activities where the risks are generally low, or well understood and could be reasonably contained within the specific pre-defined sandbox. As a start, it will include sandboxes specifically pre-defined for insurance broking, recognized market operators and remittance businesses.
- MAS will assess applications based only on two criteria – (i) technological innovativeness of the financial service, and (ii) fitness and propriety of the applicant’s key stakeholders. The applications will be fast-tracked, with approval decisions granted within 21 days.
- The public consultation will run from 14 November to 13 December 2018.
- Consultation Paper on Sandbox Express
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