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In one of the first pro-crypto moves of Donald Trump’s second presidency, the Securities and Exchange Commission late on Thursday reversed guidance known as SAB 121, which had called for institutions to treat digital tokens held for customers as liabilities on balance sheets. The shift underscores expectations that Trump will take a far more welcoming approach towards the digital asset sector, undoing the more sceptical stance the SEC took during Joe Biden’s administration.

Douglas Arner Urszula McCormack Emily Parker Henry Yu Dominic Maffei Yam Ki Chan Rita L. Padraig Walsh Elizabeth Wong So the stablecoin bill doesn't look too bad, and the only thing that I will be focusing on is what to do they mean by "offering" stablecoin. There are two terms in which you can us the term "offering". Offering as in "initial public offering" or offering as in trading. If the intent of the legislation is just to prevent offering in the sense of making an IPO, but if the intent is to prevent trading of stablecoin then we have a problem. So rather than bring this up in court, we can just have some back and forth in the Legislative Council Bills Committee. One thing that I plan to do is to write a letter saying "okay, if your goal is to just prevent people from issuing new stablecoin, we are good, but if your goal is to prevent people from trading stablecoin, then you do realize that we have a swiss cheese situation." So if you look at C3169 and the definition of offer. Suppose I have an OTC shop and I am selling USDT. I can get around the offering definition of C3169 because an offering requires a communication of 1) the stablecoin to be offered 2) the terms of the offer and 3) the mode by which the person can get stablecoin. Now if you look at the defintion of offer, what I am doing is not an offense, if I just provide one piece of information. So if I put out a sign "come here for stablecoin" and then at the office I put out another sign for the rate, then this looks like it would not be an offense because I didn't create a communication that contained all three elements. Also I instead of saying "I am selling USDT" I can say "I am buying HK dollar". So one reason I want to publicize these work around is that I don't want legal uncertainty. What I want *before* the legislation is passed is to say "we all agree that this is legal/illegal because none of us want to go to court to settle this". If I write a letter to Legco and have discussion of during the bills committee, and we all agree that the "loopholes" I mentioned are intentional, that will save us all a lot of time.

Bitnomial v. SEC: Are Crypto Based Futures Under the SEC’s Jurisdiction? On October 10, 2024 Bitnomial Exchange sued the SEC for declaratory and injunctive relief. The gist of their complaint is that the SEC is ignoring precedent finding that secondary market sales of XRP did not constitute sales of a security such that the SEC is infringing on the CFTC’s jurisdiction by threatening an enforcement action if Bitnomial lists XRP futures. On July 13, 2023, the Southern District Court of New York found that while Ripple Lab’s programmatic sales of XRP on a digital exchange did not constitute the sale of a security, Ripple Lab's private sale of XRP did constitute the sale of a security. The theory was that when sold in the secondary market, buyers were seeking to profit from market movement, not the efforts of XRP’s creators (Ripple Labs) but buyers in the primary market were in direct contact with Ripple labs and expected Ripple’s efforts to lead to increased value. The SEC filed a notice of appeal on October 2, 2024. While the Ripple Labs appeal is pending, Bitnomial certified to the CFTC that it intended to list a futures contract for XRP under which XRP would be delivered at the agreed upon price if the futures contract was not offset prior to the settlement date. The CFTC reached out to the SEC and the SEC informed Bitnomial that listing the XRP futures contract would constitute an unlawful listing of a securities futures contract. Securities futures contracts are futures contracts on an underlying security or small group of securities, were approved by the SEC and CFTC as part of the Commodity Futures Modernization Act of 2000 and require, among other things, that the underlying security be registered with the SEC and that the futures contract be traded on a properly registered securities exchange. To the extent that XRP were a security, it is not registered and while Bitnomial is registered as a derivatives clearing organization with the CFTC, it is not registered as a securities exchange with the SEC. Bitnomial requested that the Northern Illinois District Court declare that XRP futures are not security futures contracts, and prevent the SEC from asserting jurisdiction over XRP futures contracts. Is the situational view of the SDNY correct and XRP is not a security when secondary market buyers do not have any contact with the issuer? Can the SEC disregard the SDNY while the appeal is pending? Will a win for Bitnomial create precedent that any digital asset in the secondary markets can be made into a futures contract? This case should be worth watching.

🚨 Big News in Finance 🚨 Martin Gruenberg, Chairman of the FDIC since 2005, announced he will step down following a critical investigation into workplace misconduct at the agency. This comes after a May 7 report and May 15 congressional testimony revealing severe issues, including sexual harassment and mismanagement. In an email to staff, Gruenberg stated: "In light of recent events, I am prepared to step down from my responsibilities once a successor is confirmed. Until that time, I will continue to fulfill my responsibilities as Chairman of the FDIC, including the transformation of the FDIC’s workplace culture." The FDIC, an independent U.S. government agency, insures deposits at commercial and savings banks. Gruenberg's leadership faced bipartisan criticism, and lawmakers, including Senate Banking Chair Sherrod Brown, have urged President Biden to nominate a new FDIC chair. This move has been met with cheers from the crypto community. Nic Carter of Castle Island Ventures called it "the best day ever," highlighting Gruenberg's role in "Operation Choke Point 2.0," aimed at limiting banks' interactions with crypto firms. Gruenberg previously compared crypto assets to the risky financial innovations behind the 2008 crisis, a stance that has fueled much debate. Stay tuned for updates on this significant shift in financial regulation leadership! 💼🔄 https://lnkd.in/gzQC_vFP #FDIC #FinanceNews #Crypto #LeadershipChange #Banking #MartinGruenberg

But Wilson has used the flexibility of his private ownership to take risky bets on assets that other large trading firms have avoided, including property and cryptocurrency. He even launched a real estate arm called Convexity in the wake of the financial crisis — its name a reference to the mathematical relationship between interest rates and bond prices, and one it shares with Wilson’s catamaran racing team. That diversification has had its downsides, with the property portfolio dragging down DRW’s credit outlook with rating agencies Moody’s and S&P. His bet on Bitcoin proved more prescient, as a fragmented and nascent ecosystem meant there were enormous price discrepancies between exchanges for years, something DRW could take advantage of. Wilson discussed a potential investment in the cryptocurrency with staff as early as 2012, calculating there was a 10 per cent to 20 per cent chance “the majority of the world population” would agree Bitcoin was “digital gold”. With Bitcoin’s price then around $12 or $13, they were good enough odds. then doubled down on the bet in the years that followed, winning 70,000 Bitcoin in US government auctions of holdings seized from the online illegal drug market Silk Road. Now that stash would be worth about $5bn. “These guys made crazy money because the spreads were huge . . . they were arbitraging all day long,” said one former broking executive at a large bank that worked with DRW. DRW said it did not comment on specific trades or assets it held. In his efforts to stay ahead of his competitors, Wilson has sailed close to the wind, attracting unwanted attention from regulators. In 2013, the US derivatives regulator, then helmed by Gary Gensler, who is now chair of the Securities and Exchange Commission, sued Wilson and his firm for allegedly manipulating the price of an interest rate futures contract. Unlike most firms, Wilson refused to settle and took on the regulator in court. DRW won a decisive victory in 2018, with a judge ruling Wilson’s trading strategy was based on a “superior knowledge” of the market rather than manipulation. “It is not illegal to be smarter than your counterparties in a swap transaction, nor is it improper to understand a financial product better than the people who invented that product,” the judge said at the time. Last month, Gensler came for round two, charging Cumberland DRW with operating as an unregistered securities dealer because it sold more than $2bn worth of cryptocurrencies that the SEC argues are under its jurisdiction. said it will fight the case, and said it tried in good faith to operate a registered business but was told by the SEC in 2019 that it could not use its broker-dealer to trade the cryptocurrencies referred to in the regulator’s complaint. With the return of Donald Trump to the US presidency, DRW and its ilk may be granted a reprieve. banks New titans of Wall Street: how Jane Street rode the ETF wave to ‘obscene’ riches ‘King of the geeks’:

An interesting decision this afternoon in the Federal Court dealing with Bit Trade's Kraken crypto exchange and whether it had failed to comply with design and distribution obligations (“DDO”) in s.994B(1) and (2) in Part 7.8A of the Corporations Act 2001 when offering a margin trading product to Australian customers: Australian Securities and Investments Commission v Bit Trade Pty Ltd [2024] FCA 953. https://lnkd.in/g-pexyrs Under the DDO, the issuer of a financial product to which the relevant obligations apply, must make a “target market determination” before the financial product is offered to consumers.  A target market determination must, amongst other things, describe the class of retail clients that comprises the target market for the product: s 994B(5). The target market determination must be such that it would be reasonable to conclude that, if the product were to be issued or sold to a retail client in the target market, “it would likely be consistent with the likely objectives, financial situation and the needs of the retail client”: s 994B(8).  It was common ground that Bit Trade was the issuer of the margin extension product and had never issued a target market determination in relation to the product.  Bit Trade said was not required to comply with the DDO on the basis it did not issue a financial product to which s 994B(1) and (2) applied.  Ultimately the court disagreed. Bit Trade's margin extension product provided for margin extensions to be made and repaid in either digital assets (e.g. Bitcoin) or national currencies (e.g. US dollars). ASIC alleged that the obligation to repay a digital asset or national currency was a deferred debt and accordingly, that meant that the product fell within the definition of a credit facility. In assessing the issues Justice Nicholas found that "An obligation to pay an amount of cryptocurrency of some type is not an obligation to pay a sum of money and therefore cannot be a debt". While a margin extension involved the provision of “financial accommodation” to a customer that did not mean that the provision of financial accommodation in eg, Australian or US dollars, gave rise to a debt. It was also necessary to consider how any payment obligation imposed on the customer may be satisfied. After closely reviewing the terms, his Honour accepted ASIC's submission that a margin extension in a national currency created a deferred debt which meant that the product was a credit facility. As a result, Bit Trade contravened s994B(2) of the Corporations Act each time it made the product available to a customer. Entities that provide crypto-related products should be aware that many such products are financial products.  ASIC has published Information Sheet 225: Crypto Assets (INFO 225) which provides guidance on the circumstances in which a crypto-related offering may be a financial product. It is worth a read.

In a notice posted on its website, the SEC said the 2022 guidance known as Staff Accounting Bulletin 121, which then-President Joe Biden blocked lawmakers from cancelling in May of last year, had been revoked. The crypto industry and crypto-friendly lawmakers had long objected to the measure, which required companies keeping custody of digital assets on behalf of others to account for them as liabilities, raising the cost of doing so. The banking industry welcomed the withdrawal of the guidance. For daily news and analysis subscribe to the https://lnkd.in/gNfm9wi3 newsletter. #Accounting #Finance #Business

Now FIT 21 makes it one step further, securities vs commodities, decentralized AND functional. 😊 https://lnkd.in/gTXW6teB

TDCI's Securities Division and the Tennessee Attorney General's Office recently won court approval to freeze the bank accounts and financial assets related to a group of Memphis-based individuals who allegedly engaged in fraudulent activity and acted as unregistered broker-dealers and investment advisers, in addition to allegedly committing other violations of state securities law and other Tennessee laws protecting consumers. Investor complaints spurred the investigation into three individual defendants, Ali Raza Galani, Misam Abidi, and Anisha Abidi as well as their various corporate entities, Star Credit Holdings, LLC, Satori Credit Solutions, LLC, NumisMe, LLC. Investors complained after they lost the majority of their investments through the STAR Investment Club and purchase of the NUME cryptocurrency token, which Galani and the Abidis fully owned and controlled. The complaint alleges Galani, the Abidis, and their companies violated state securities law by engaging in fraudulent activity, misleading investors, comingling and misusing investor funds, by not registering their securities offerings with TDCI’s Securities Division, and also by not registering as broker-dealers, broker-dealer agents, investment advisers, or investment adviser representatives. According to the complaint, investors in 17 states, including Tennessee, invested over $6.3 million in fraudulent investments. Wyoming investors lost the most with over $2.4 million followed by California investors who lost $1.14 million. Tennessee investors are believed to have lost over $250,000. As part of the ongoing court proceedings, TDCI’s Securities Division investigators are asking those who have invested with Galani, the Abidis, or their corporate entities to come forward and share information as it relates to their dealings with these individuals and corporations. To learn more and to file a complaint, visit: https://lnkd.in/e7yMeaVx #consumerprotection #tennessee #consumeralert #tnsecurities #investorprotection

2026 marks the beginning of stricter tax rules for cryptocurrencies. Forbes discusses what these changes mean for investors and how to adapt your strategies accordingly in the evolving crypto landscape. #CryptoTaxChanges #InvestmentStrategies #FinancialForecast