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Coinbase Retracts SEC Approval Claims

Coinbase has retracted reports of obtaining SEC approval for a trio of acquisitions in its quest to become a broker-dealer. The company also said it only discussed aspects of the deal with SEC officials and didn’t require the Commission’s go-ahead. This is the second time in as many days where a significant piece of news in the industry has been retracted or denied.

Coinbase Didn’t Receive SEC Endorsement

Reports emerged on Monday (July 16, 2018) that Coinbase had obtained approval from the United States Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) to acquire three companies. These companies were Keystone Capital, Venovate Marketplace Inc., and Digital Wealth LLC. The acquisitions enabled Coinbase to operate as a registered broker-dealer for the crypto securities market.

However, the company retracted those reports, yesterday, (July 17, 2018). In an email to Bloomberg, Coinbase spokesperson, Rachael Horowitz, said:

It is not correct to say that the SEC and FINRA approved Coinbase’s purchase of Keystone because [the] SEC was not involved in the approval process.

SEC Approval Was Not Required

Horowitz also went on to say that the Commission’s approval was not required for the deal. According to Horowitz:

The SEC’s approval is not required for the change of control application. Coinbase has discussed aspects of its proposed operations, including the acquisition of the Keystone Entity, on an informal basis with several members of SEC staff.

The retraction from the San Francisco-based cryptocurrency exchange platform is the second significant news to be retracted or denied in as many days. Reports also recently emerged that BlackRock was putting together a team to examine the merits of crypto-based investments. However, a few hours later, company CEO, Larry Fink dismissed those claims.

In the meantime, cryptocurrency investors will also be wondering what is to become of Coinbase’s bid to be a regulated broker-dealer. The main highlight of the plan is the listing of ICO tokens. The SEC has frequently classified ICO coins as security tokens. The following days and weeks will likely shed more light on the matter.

Are you concerned about the mixed reports that seem to be becoming a theme in the market? Keep the conversation going in the comment section below.

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Coinbase Obtains License to List Cryptocurrency Security Tokens

Coinbase announced yesterday (July 16, 2018) that it had obtained the go-ahead to become a government-licensed broker-dealer platform in the United States. Thus, the largest cryptocurrency exchange platform in the country can now list ICO tokens. Regulators in America have long maintained that tokens sold during ICO crowdsales were, in fact, securities.

Coinbase is Now a Federally Regulated Broker-Dealer

In June 2018, reports emerged that Coinbase was set to acquire Keystone Capital in a bid to become a regulated broker-dealer. At the time, the company was waiting for the approval of the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

According to a company spokesperson, the firm finally obtained regulatory approval for the purchase. Coinbase also purchased Venovate Marketplace Inc. and Digital Wealth LLC. The trio of acquisitions enables Coinbase to operate as a registered investment adviser, a broker-dealer, as well as an alternative trading system (ATS). As an ATS, the San Francisco-based firm can operate outside the mainstream public stock exchange market.

Listing Cryptocurrency Security Tokens

Based on the approval from the SEC and FINRA, Coinbase now has the license to list tokenized securities. The company’s regulatory status has also been given an upgrade from a collection of state licenses to being under federal oversight.

Now that Coinbase has obtained the necessary federal backing, the next step forward is to integrate the new platform with its existing technology. Trading securities in America require strict observance of laid down rules and regulations. Coinbase will have to ensure that its reporting protocols are up to standard. Employees will also need to have the necessary licenses to trade tokenized securities.

Regulated Trading of Tokenized Securities

ICOs are a multibillion-dollar market which continues to grow despite crackdowns in countries like China and the United States. In the first half of 2018, ICOs raised over $12 billion which represents a 300 percent increase from the whole of 2017.

There is the potential of facilitating billions of dollars in ICO token trade. Coinbase will be hoping to gain first mover advantage in the market. However, the platform faces competition from the likes of Circle which is also aiming to become an SEC-regulated broker-dealer. Circle even intends to go one further by applying for a federal banking license.

Coinbase recently announced that it was examining the possibility of adding five new tokens – Cardano, Basic Attention Token, Zcash, 0x, and Stellar. Presently, the platform only four cryptocurrencies for trading – Bitcoin, Ether, Bitcoin Cash, and Litecoin.

What do you think about Coinbase’s new broker-dealer license? Will this news cause another price spike in the market? Keep the conversation going in the comment section below.

Image courtesy of CoinSchedule.

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FINRA Wants to Know All About Member Firms' Crypto Activities

A U.S. self-regulatory body for broker-dealers is requesting member firms to submit a wide range of details relating to their cryptocurrency-focused activities.

In a regulatory notice issued on Friday, the Financial Industry Regulatory Authority (FINRA) said the requested information will supplement its existing efforts to “ascertain the extent of its member firms’ involvement” in the nascent space.

According to the notice, FINRA wants to know if a member firm has been or will be trading cryptocurrency, accepting it from customers, managing a pooled crypto fund, participating in a token sale, or offering advice on any crypto-related topic.

Also notably, cryptocurrency mining – earning rewards for participating as a node in a blockchain to record transactions – or “any other use of blockchain technology” are areas that FINRA has indicated interests in for its monitoring purpose.

The organization went on to say:

“Until July 31, 2019, each firm is encouraged to keep its Regulatory Coordinator updated if it, or its associated persons or affiliates, begins or intends to begin, engaging in a new type of activity relating to digital assets not previously disclosed.”

Authorized by the U.S. Congress in 2007, FINRA was incorporated as a self-regulatory organization with the remit to approve and supervise broker-dealers in the country.

Although the new regulatory notice is not mandatory, it follows FINRA’s existing efforts to scrutinize member firms amid rising concerns of “fraud and other securities law violations involving digital assets,” FINRA said in the notice.

Last year, the body issued a warning to retail investors to remain cautious after a number of public companies saw spiking stock prices following claimed blockchain and cryptocurrency pivots.

FINRA image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Crypto Startup Uphold Moves to Become Licensed U.S. Broker-Dealer

Digital money platform Uphold is looking to become a broker-dealer in the U.S. after acquiring a registered firm called JNK Securities, it was announced Wednesday.

The company has now filed with the Financial Industry Regulatory Authority (FINRA) for approval of the change of ownership to become a registered broker-dealer.

Ultimately, Uphold hopes to offer security tokens, fractional equities and other exchange services under the supervision of the U.S. Securities and Exchange Commission (SEC) and FINRA, as part of its new securities platform.

Uphold’s general counsel, Ben Sherwin, explained the move to CoinDesk, saying: “We’ve acquired a New York-based broker-dealer to expand our product base and offer more digital assets to our users.”

If approved, the acquisition would allow Uphold to begin offering regulated products to its customers.

Sherwin said:

“You file with FINRA to become a broker-dealer and that broker-dealer status allows us to engage in activities that we wouldn’t be able to without that license. It also aligns with our mission of transparency and trust because we’re submitting to the regulation that is appropriate and responsive to what the regulators are saying.”

Uphold later plans to file to become an alternative trading system (ATS) with the SEC, he added.

While JNK and Uphold will operate as two distinct companies until the merger is complete, Uphold intends to bring JNK’s employees in to help with Uphold’s expansion plans.

“JNK is an … organization with a 25-year history of being in the financial markets. They’re quality people and good operators … running a broker-dealer requires a certain amount of expertise and the quality of the people there gives us a leg up,” Sherwin said.

The flow of expertise will go the other way too, as Uphold intends to help JNK start offering cryptocurrency research products, on top of the reports it already offers looking at a variety of industries.

“From a process standpoint, they have license and we’re hoping to expand their license,” Sherwin said. “So we benefit from their institutional reach and they benefit from our consumer reach.”

“This reduces our regulatory overhand and shows how serious we are about regulatory oversight [because] Uphold is based upon transparency and trust,” he concluded.

Taxis image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Tezos Co-Founder Sanctioned By US Financial Watchdog

The co-founder of Tezos, the cryptocurrency project that made headlines with its $232 million initial coin offering last year, has received a sanction order from a U.S. financial regulator.

According to a report by Reuters, the Financial Industry Regulatory Authority (FINRA) prohibited Arthur Breitman from association with broker-dealers for two years and handed him a $20,000 fine over allegations that he made false statements about the project while employed at investment bank Morgan Stanley. Breitman did not admit or deny the allegations, the report added.

Approved by the U.S. Congress in 2007, FINRA is a self-regulatory body with oversight of dealers and brokers in the country. Breitman was registered with the agency during his employment in Morgan Stanley from 2014 to 2015, Reuters said.

The regulator alleged that Breitman failed to disclose his involvement in developing and pitching for Tezos during his time at the bank, according to the report. He thus violated a rule mandating that registered broker-dealers must to notify employers of side businesses that are expected to bring financial compensation.

Breitman also allegedly provided false information when answering questionnaires from his employer over any outside business activities.

While the report indicated that an attorney for Breitman played down the impact of the sanction on the Tezos blockchain network, it comes at a time when the project is still going through close scrutiny in various legal cases.

Following its record breaking ICO in July of last year, at least four class action suits have emerged since November 2017 against the firm, alleging it violated U.S. laws by issuing tokens that are in effect unregistered securities.

FINRA image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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FINRA: Beware Public Stocks That Tout Cryptocurrency Connection

The Financial Industry Regulatory Authority (FINRA), a self-regulatory authority (SRO) in the U.S., has issued a new warning about cryptocurrency-related stock fraud.

In a new post on its website, FINRA urged investors to do their homework when it comes to public companies that tout their activities involving blockchain or cryptocurrencies.

FINRA, an organization which provides testing and licensing for registered brokers and financial professionals, said that would-be investors should be “cautious” when assessing solicitations from such firms that seek to fund cryptocurrency initiatives “without the business fundamentals and transparent financial reporting to back up such claims.”

The organization wrote:

“Especially in today’s ‘hot’ cryptocurrency environment, it’s easy for companies or their promoters to make glorified claims about new products, services and other cryptocurrency-related connections. And, even when legitimate companies flock to a hot, new sector, fraudsters almost always follow suit, exploiting the news to launch their latest frauds du jour.”

The warning is perhaps a timely one, given several recent moves by the U.S. Securities and Exchange Commission to halt trading of several publicly traded stocks, as well as a swath of announcements by previously uninvolved companies that are now working on blockchain projects.

Among the latter group is Long Island Iced Tea Corp., which announced today that it was changing its name to Long Blockchain Corp after “shifting its primary corporate focus towards the exploration of [and] investment in opportunities that leverage the benefits of blockchain technology.” As reported by Bloomberg, the stock price for Long Island soared by more than 200 percent in the wake of its announcement.

In August, the SEC warned investors about the risk of public stock pump-and-dump schemes that use cryptocurrency as a marketing tool.

“These frauds include ‘pump-and-dump’ and market manipulation schemes involving publicly traded companies that claim to provide exposure to these new technologies,” the agency said at the time.

FINRA image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.