Solidus Digital Asset Trade Surveillance and Regulation News Briefing | February
Everything you need to know from the past few weeks: FINRA joins SEC in making digital assets an inspection priority for 2019; U.S. Congress promoting legislation to tackle digital asset manipulation. Korean exchange owners face jail time for manipulated volume reports
February 4, 2019
Legislation and Regulation
Locally, state legislators in Washington, New Hampshire, Wyoming, and Pennsylvania promoted or passed rules to help define digital assets and simplify their taxonomy. In New York, Robinhood received the sought-after BitLicense, joining approximately 15 other companies who are licensed to provide virtual currency services in the Empire State.
In addition to evolving legislation, regulation is sure to further tighten this year, with FINRA joining the SEC and stating digital assets will be a focus of its inspections in 2019.
In Korea, for the first time, the founders of Komid, a digital asset exchange, were sentenced to jail for manipulative volume reports. Simultaneously 14 leading Korean exchanges agreed to establish inspections by a self-regulatory industry organization in an effort tackle market manipulation.
The Stock Exchange of Thailand, the country’s premier traditional stock exchange, said it's seeking digital asset licensing.
South Africa’s central bank proposed a licensing regime for digital asset exchanges and wallet providers.
In Europe, the British Financial Conduct Authority (FCA) released a consultation paper on digital assets that aims to help innovators establish if they need to adhere to regulation. The FCA paper follows a study by the European Banking Authority calling for a unified continental legislative approach, as well as a European Securities Market Authority (ESMA) advice paper suggesting digital assets often qualify as securities.
Our take: For the digital asset space globally, stakes of non-compliance are constantly increasing with a first jail penalty. The combination of increasing legislation and regulation is bound to maintain this trend and we can expect significantly more regulated and prudent blockchain-based finance by the end of 2019, ushering accelerated mainstream and institutional adoption.
Other Industry News
In a series of interviews, Gemini Trust founders Cameron and Tyler Winklevoss discussed their digital commodity exchange's regulated approach and repeatedly pointed out manipulation and trade surveillance as a central priority in the path forward. Recently, Gemini announced it successfully passed a complete SOC 2 compliance audit, a first in digital assets.
In another first, tZERO officially launched secondary trading on its platform, enabling the buying and selling of the firm’s own tokens, touting it as a “first step towards trading other digital assets.”
VanEck resubmitted it’s Bitcoin-ETF application to the SEC, after withdrawing it earlier this month due to the U.S. government shutdown and concerns it would be rejected.
Investment giant Fidelity posted an update on its continued effort to respond to institutional clients’ “clear need for a trusted platform provider in order to engage with digital assets in a meaningful way.”
Following the launch of a new crypto-to-fiat platform, Binance - the world’s largest exchange by volume, sees a massive increase in demand creating a long registration backlog.
The London Stock Exchange agreed to sell its traditional trading tech to the Hong Kong digital asset exchange AAX.
Our take: Finance veterans like Fidelity are becoming more vocal regarding the transformation blockchain-based assets are introducing to capital markets, while digital asset firms like tZERO and Gemini are utilizing regulation-friendly policies and traditional investment vehicles like ETFs to attract institutional investors. This amounts to a pincer movement that combined, brings digital assets closer than ever to both Wall Street and Main Street.
Solidus Labs uses 20 years of Wall Street FinTech experience to provide machine learning-powered trade surveillance tailored for digital assets. Our products help exchanges, broker-dealers, market makers and other financial service providers detect and combat manipulation in digital asset trading, and streamline reg-reporting.