June 11 – 17, 2018 | SEC, Canadian Regulations & More Crypto News
3iQ Research Group consolidates the top five cryptoasset stories of interest
to investment advisors and our investors.
SEC: Bitcoin and Ether are not Securities
June 14, 2018 – William Hinman, the head of the Division of Corporation Finance at the US Securities and Exchange Commission (SEC), has announced that two of the leading cryptocurrencies, bitcoin and ether, are not classified as securities. He also provided guidelines for determining if other cryptocurrencies and ICOs are classified as securities. Notably, if there is an expectation of a return by a third party, particularly when a person or company is directly involved in the creation and sale of the asset, that crypto may be classified as a security. Hinman and the SEC do not recognize bitcoin or ether as securities, largely because they have been decentralized. For bitcoin and ether, there is no central party that benefits from the success of the cryptocurrencies, unlike many ICOs. The announcement gave a boost to the price of most major cryptocurrencies on June 14.
“Central to determining whether a security is being sold is how it is being sold and the reasonable expectations of purchasers,” said Hinman. “Over time, there may be other sufficiently decentralized networks and systems where regulating the tokens or coins that function on them as securities may not be required.”
Most Leading Blockchain Projects are Built on Ethereum
June 11, 2018 – Kevin Rooke, a popular cryptocurrency researcher and YouTube contributor, has noted that the Ethereum community now has over 250,000 developers, and 94 of the top 100 blockchain projects are utilizing the Ethereum network. Major cryptocurrencies such as bitcoin and litecoin do not use the Ethereum blockchain; however, many emerging cryptos utilize Ethereum’s ERC-20 token standard as their foundation of development. By owning the cryptocurrency ether, an investor can own a part of the major ecosystem that dominates the global crypto market. Despite new competition, Rooke notes that Ethereum’s preferred utilization amongst developers gives it a compelling case for the future.
“You simply cannot build excellent applications and products without a big developer base behind you. But today, Ethereum has roughly 250,000 developers building on its platform. The industry is still really small [and thus], 250,000 is a shocking number,” said Rooke.
Financial Industry Spends $1.7 Billion on Blockchain Annually
June 12, 2018 – Leading market intelligence provider Greenwich Associates has released a report on blockchain spending from the financial services industry. The financial services industry spends about $1.7 billion USD annually on developing blockchains, which are known to power popular cryptocurrencies such as bitcoin. The report also determines that many companies are increasing their spending on the development of distributed ledger technologies (DLT), which are commonly found on the Ethereum blockchain. Budgets spent on blockchain creation and development have increased 67% in just one year, and about one in ten banks were found spending over $10 million USD every year.
Despite blockchain and distributed ledger technologies being a top focus for some financial services firms, the study recognized that many are experiencing development difficulties. “More than half the executives we interviewed told us that implementing DLT was harder than they expected,” said Richard Johnson, the vice-president of Greenwich Associates Market Structure and Technology. Despite difficulties, Johnson says that over three-quarters of these developing projects should go live within two years.
Canadian Crypto Exchanges Must Report Transactions Over $10,000 CAD
June 11, 2018 – The Department of Finance Canada has released a Regulatory Impact Analysis Statement that proposes amendments to Canada’s current AML and ATF policies. The department is expecting to recognize Canadian crypto exchanges as money service businesses (MSBs), meaning they will have to report all trades over $10,000 CAD. The federal agency is looking to “close loopholes”, as well as recognize deficiencies in compliance which have already been set by the Financial Action Task Force (FATF).
The statement recognizes that “persons and entities that are ‘dealing in virtual currency’” would be deemed MSBs. Historically, MSBs were required to implement a full compliance program and register with FINTRAC, and many Canadian crypto exchanges will now be required to follow suit.
Billionaire Investor Tim Draper Explains How Bitcoin Will Hit $250,000
June 12, 2018 – Famed billionaire and investor Tim Draper has outlined a number of key factors that he thinks will take the price of bitcoin to $250,000 USD by 2022. Draper specifically addresses regulations, hacking, and security classifications, which have been a major talking point in the cryptocurrency market for some time. He sees regulations as a good thing, and that “cryptocurrencies are the next big technological tectonic shift and governments have to weigh their need to protect investors with their need to be included in this potential economic powerhouse”. Draper clarifies the issue of hacking, and specifically notes that underlying blockchain of cryptos such as Bitcoin have never been hacked into.
“Cryptocurrencies will increase the velocity of money, and the current $86 trillion global market for currency will grow to be about $140 trillion in the next 10 years, and that growth will be in crypto. In fact, I estimate that fiat currencies will actually decrease in use, and that crypto will become as much as $100 trillion of that market,” said Draper. “I expect Bitcoin to be about 10% of that market, or $10 trillion. There is a lot of room to grow there.”
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