Continuing its efforts to engage with FinTech innovators and market participants in the adoption of new technologies, the Commodity Futures Trading Commission (“CFTC”) and its LabCFTC[1] released a Primer on Smart Contracts (the “Primer”) on November 27. The Commission focused its Primer on (1) detailing the technical aspects of smart contract technology; (2) examining potential benefits and risks connected to their widespread adoption; and (3) the CFTC’s role in regulating the adoption of the…

On November 12, 2018, the Monetary Authority of Singapore (“MAS”) released guidelines for financial services firms to consider when they make decisions related to artificial intelligence and data analytics (“AIDA”).  The guidelines, entitled “Principles to Promote Fairness, Ethics, Accountability and Transparency (FEAT) in the Use of Artificial Intelligence and Data Analytics in Singapore’s Financial Sector” (the “Principles”), are believed to be the first AIDA guidelines issued by a central bank or financial regulator, and emphasize…

On November 16, 2018, the U.S. Securities and Exchange Commission (“SEC”) Division of Corporation Finance (“Corp. Fin.”), Division of Investment Management, and Division of Trading and Markets issued a joint public statement on “Digital Asset Securities Issuance and Trading.”  The public statement is the latest in the Divisions’—and the Commission’s—steady efforts to publicly outline and develop its analysis on the application of the federal securities laws to initial coin offerings (“ICOs”) and certain digital tokens. …

On November 8, the Securities and Exchange Commission (“SEC”) imposed a cease-and-desist order against Zachary Coburn for causing his former company, EtherDelta, to operate as an unregistered securities exchange in violation of Section 5 of the Securities Exchange Act of 1934 (“Exchange Act”).  Notably, EtherDelta, a trading platform specializing in digital assets known as Ether and ERC20 tokens,[1] was not operated like a traditional exchange with centralized operations, as there was no ongoing, active…

On September 26, 2018, a federal court in the District of Massachusetts found that virtual currencies are a commodity under the Commodity Exchange Act, 7 U.S.C. § 1 et seq, (“CEA”). This marks the second time that a court has accepted the Commodity Futures Trading Commission’s (“CFTC”) position and upheld the agency’s authority to regulate unleveraged and unmargined spot transactions in virtual currency under the agency’s anti-fraud and manipulation enforcement authority.  Most notably, however, the…

Over the past year, the U.S Securities and Exchange Commission (“SEC”) has increasingly scrutinized initial coin offerings (“ICO”) and certain digital assets.  On September 20, 2018, the SEC’s Enforcement Division co-Director, Stephanie Avakian, gave a speech in which she addressed the Division’s approach to dealing with these new forms of tradeable assets.  This speech came only days after the SEC settled its first case charging an unregistered broker-dealer for facilitating the sale of digital tokens…

On September 11, the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) each separately initiated their first enforcement action for violations of broker-dealer regulatory requirements under U.S. securities laws in digital asset markets. These actions echo all prior agency actions and alerts indicating that where a “security” is involved, both agencies will expect digital asset market participants to fully comply with U.S. securities laws. Additionally, they serve as a serious reminder…