As regulators from across the US government continue to grapple with the rapid expansion of financial technology (FinTech) and digital assets, the Office of the Comptroller of the Currency (OCC) has adopted a welcoming position toward such technology and taken three recent steps with the potential to significantly benefit industry. First, the OCC is planning to propose a new national bank charter for payments companies, including those dealing with digital assets, that may allow such companies to obtain a single national license rather than licenses in each state in which they operate. Second, on July 22, 2020, the OCC issued an interpretive letter clarifying that national banks and federal savings associations may provide cryptocurrency custody solutions on behalf of their customers. Third, on June 4, 2020, the OCC issued an advanced notice of proposed rulemaking (ANPR) seeking comments on the digital activities of national banks and federal savings associations. All three developments have the potential for significant, positive impact on industry.
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US Regulators Issue Joint Statement on AML Compliance Involving Digital Assets
By Brian Egan & Evan Abrams on
Posted in Anti-Money Laundering
On October 11, the leaders of the Commodities Futures Trading Commission (CFTC), Financial Crimes Enforcement Network (FinCEN), and the Securities and Exchange Commission (SEC) issued a joint statement regarding anti-money laundering (AML) compliance for persons engaged in certain activities involving digital assets. While the statement largely reaffirms known agency guidance and existing regulations, it is noteworthy for a number of reasons.
First, the joint statement, issued from multiple regulators, is the first of its kind in the digital asset space with respect to AML and may indicate an intent of regulators to show that their approach to AML compliance is aligned and to coordinate more closely on AML compliance going forward. While each of the three regulators has published guidance regarding digital assets and has engaged in related enforcement actions, there has not been any public indication to date that such efforts have been coordinated across agencies.…
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TurnKey Token Gets to Fly: SEC Issues First No-Action Letter for Token Sale
By Will Turner, Alan Cohn, Jason Weinstein, Gary Goldsholle, Jack Hayes, Evan Abrams & Josh Oppenheimer on
Posted in Regulatory
On April 3, the US Securities and Exchange Commission (SEC) provided important guidance for token issuers. The SEC Division of Corporation Finance issued a No-Action Letter dated April 3 regarding TurnKey Jet, Inc. (the “TurnKey No-Action Letter”) in which the SEC staff confirmed that it would take no action against Turnkey Jet, Inc. (TKJ) for selling tokens without registration. This guidance is most relevant to token issuers who are focused on commercial utility and record-keeping benefits in a centrally controlled network and are willing to minimize or eliminate the profit elements of the token. The TurnKey No-Action Letter, taken together with the Framework for “Investment Contract” Analysis of Digital Assets (“Framework”) issued by the SEC’s Strategic Hub for Innovation and Financial Technology on the same date, offers guidance for structuring the elements of a private, permissioned, centralized blockchain token and network.[1] …
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SEC Smooths Out Digital Assets Turbulence With Further Guidance
By Gary Goldsholle, Josh Oppenheimer, Alan Cohn, Jason Weinstein, Will Turner, Jack Hayes & Evan Abrams on
Posted in Regulatory
Long awaited guidance from the US Securities and Exchange Commission (SEC) on application of the Howey test to digital assets came on April 3 in the form of a Framework for “Investment Contract” Analysis of Digital Assets (“Framework”) and a No-Action Letter regarding TurnKey Jet, Inc. (the “TurnKey No-Action Letter”). These two documents are best understood as part of a trilogy with the June 2018 Hinman speech.
The Framework offers the clearest indication yet of the SEC staff’s thinking on the Howey test, with the TurnKey No-Action Letter and the Hinman speech providing examples of where a digital asset fails to meet a necessary element of the test. For purposes of clarity, it helps to think of the Howey test as having four elements: (1) an investment of money (2) in a common enterprise (3) with a reasonable expectation of profits (4) derived from the efforts of others.[1]
The first two prongs are essentially throwaways inasmuch as the Framework devotes only three sentences to them in total. SEC staff note that these prongs are “typically satisfied” in evaluating digital assets. On the other hand, the Framework pays significant attention to the third and fourth elements.
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