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SEC Smooths Out Digital Assets Turbulence With Further Guidance

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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.

Starting with the “efforts of others” element, the Framework introduces the concept of an “Active Participant” (AP) as a promoter, sponsor, or other third-party (or affiliated group of third-parties) that provides essential managerial efforts that affect the success of the enterprise. The Framework then gives examples of when the actions of the AP are likely to indicate that a purchaser of a digital asset is relying on the efforts of others. In prior cases, the SEC has focused on whether a network is fully functional or still in development, and whether it has achieved the requisite level of decentralization. On this latter point, the Framework confirms that decentralization is to be viewed from a governance and managerial standpoint. The staff is interested in whether the AP has a “central role” in the maintenance and ongoing development of the network.  It also may be worth noting that the Framework characterizes this element as “reliance on the efforts of others” in contrast to the DAO report and the Hinman speech, which use the phrase “derived from the managerial efforts of others.” There is no explanation given for this shift in phrasing.

The Framework’s analysis of the “reasonable expectation of profits” element further introduces many new characteristics that may not have historically been viewed as evidence that a purchaser has a reasonable expectation of profits. These include whether the digital asset is transferrable or likely to be so in the future; whether there is correlation between the purchase price of the digital asset and the value of goods or services for which it can be exchanged; or whether the AP is able to benefit as a result of holding the digital asset.

However, the clearest understanding of the staff’s thinking on this element comes from the TurnKey No-Action Letter in which the SEC Division of Corporation Finance staff found a purchaser of tokens sold by TurnKey Jet, Inc. (TKJ and TKJ Tokens) would not have a reasonable expectation of profits.[2] In this case, the token is essentially a dollar-denominated stablecoin that can be used solely to purchase air travel priced in USD, and where any redemptions by the issuer would be at a discount (i.e., less than one USD). The TKJ Token is a means for users and providers of air travel services to avoid various transaction costs and delays associated with credit cards and wire transfers. TKJ Tokens are not likely to appeal to many entrepreneurs who seek the benefits of open-source software development and community networking, such as speed to execution, diverse development activities, sharing of expenditures among multiple network participants, fostering alternative network uses and commercial providers, and diversity of viewpoints in network governance. (See additional insight from Steptoe on the TurnKey No-Action Letter here.)

Fortunately, an investment contract must meet all four elements of the Howey test, and thus most entrepreneurs will focus on whether the purchaser of a token is relying on “the efforts of others.”  It was this element upon which Director William Hinman in his June 2018 speech concluded that Ether was not a security. Many of the factors cited in his speech have been incorporated into the Framework, but they are now better understood because they are placed directly in the context of each element of the Howey test, and because there is a greater understanding of what is meant by when a “network on which [a token] is to function is sufficiently decentralized.”  These factors include:

  • Whether or not the efforts of an AP, including any successor AP, continue to be important to the value of an investment in the digital asset;
  • Whether the network on which the digital asset is to function operates in such a manner that purchasers would no longer reasonably expect an AP to carry out essential managerial or entrepreneurial efforts; and
  • Whether the efforts of an AP are no longer affecting the enterprise’s success.

While expectations were flying high that the Framework and TurnKey No-Action Letter would answer all outstanding questions concerning token issuances, we believe the Framework and TurnKey No-Action Letter – read together with the Hinman speech – are a positive step forward to providing a clearer flightpath to compliance.

[1] In the Framework, the SEC describes the Howey test as having three elements, treating the “reasonable expectation of profits derived from efforts of others” prongs as a single element, but then identifying separate characteristics for determining whether there is (i) reliance on the efforts of others; and (ii) a reasonable expectation of profits.

[2] The “efforts of others” element is clearly satisfied because TKJ is retaining total control over all aspects of the network.

Source: https://www.steptoeblockchainblog.com/2019/04/sec-smooths-out-digital-assets-turbulence-with-further-guidance/

Blockchain

Bitcoin Just Marked New 2020 High, But This Indicator Signals Correction Incoming (BTC Price Analysis)

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Starting by looking at the bigger picture, Bitcoin price had made a remarkable run since October began, gaining almost $3000 to its value.

Looking at the following long-term weekly chart, we can see this week’s greenish candle that will be closed later today. From a technical point of view, as long as the candle close price is above the $12,500 area (previous high) – we can safely say that BTC is on a healthy uptrend.

btc_oct25_w-min
BTC/USD weekly. Chart by TradingView

The Good and The Bad: New 2020 High but Bearish Divergence

Just a few hours ago, Bitcoin price recorded a new 2020 high close to $13,400 (on Binance Futures); however, the primary cryptocurrency could not hold there, and quickly slumped to $12,700 in a matter of one hour.

Looking at the shorter-term chart, the 4-hour, we can identify a bearish divergence on the RSI. This is a bearish pattern and might indicate that the buying power is fading away.

This happens when the price goes through a higher-high, but the RSI indicator is doing the opposite and going through a lower-high.

Another worrying sign is the trading volume. Since its peak volume on October 20-21, four days ago, the trading volume decreased even though the BTC price had actually gone up.

BTC Support and Resistance Levels To Watch

As mentioned above, if BTC were to correct, then the first major level of support lies at the current levels around $12.9 – $13K. If Bitcoin breaks here, then the first significant level lies at $12,700, followed by the previous 2020 high from August at $12,400 – $12,500.

From the bullish side, if Bitcoin holds the $13,000 – then the first levels of resistance lie at $13,200, followed by today’s high around $13,400. Bitcoin will be looking to break the 2019 high from June – at around $13,880.

Total Market Cap: $400 billion

Bitcoin Market Cap: $240 billion

BTC Dominance Index: 60%

*Data by CoinGecko

BTC/USD BitStamp 4-Hour Chart

btc_oct25_4h-min

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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.


Source: https://cryptopotato.com/bitcoin-just-marked-new-2020-high-but-this-indicator-signals-correction-incoming-btc-price-analysis/

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Bitcoin Breaks New 2020 High As Total Market Cap Topped $400 Billion (Market Watch)

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Bitcoin continues with the 2020 records and just a few hours ago marked a fresh high of above $13,350. Most alternative coins followed suit with impressive increases, but the market has calmed since then. The entire cryptocurrency market clocked at above $400 billion.

Bitcoin To Yet Another 2020 High

CryptoPotato reported a few days ago that the primary cryptocurrency exceeded the August 2020 high of about $12,500 and reached $13,200. What followed was a slight retracement to about $13,000 and stagnation yesterday.

Nevertheless, the volatility returned in the past 24 hours, and BTC headed towards new highs. This time, Bitcoin broke above $13,350. In fact, according to data from Bitstamp, BTC’s new 2020 high is at $13,362.

Another sharp rejection followed, and the asset tanked briefly below $13,000. Nevertheless, the bulls have since driven it above the coveted mark, and BTC trades at about $12,940.

A compelling chart recently revealed that Bitcoin is forming an inverse head and shoulders pattern. If it’s to play out, the cryptocurrency could soon skyrocket even further and top its all-time high of $20,000.

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If this scenario is indeed to materialize, Bitcoin would have to break above the resistance lines at $13,420, $13,500, $13,815, and $14,000 before reaching new records.

btcusd_chart
BTC/USD. Source: TradingView

Altcoins Follow Up And Calm Down

Most alternative coins experienced similarly increased volatility as Bitcoin. Ethereum surged to a new 7-week high of nearly $420. However, ETH quickly retraced and is now hovering around $409 again.

Ripple’s highest level came at about $0,26, but XRP has since decreased to below $0.253.

Thus, on a 24-hour scale, most larger-cap altcoins have remained essentially at the same positions as yesterday, despite the brief price jumps. Chainlink and Litecoin have registered the most gains of about 3.6%. LINK trades close to $12.35, and LTC is positioned at $56.3.

heatmap
Cryptocurrency Market Heatmap. Source: Quantify Crypto

The most impressive gainer since yesterday is Filecoin. After the recent controversy and continuous price slump, FIL has surged by 45% in the past 24 hours.

Ocean Protocol (18%), Quant (17.5%), THETA (10.2%), Reserve Rights (10.2%), and Ampleforth (10%) have also increased by double-digit percentages.

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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.


Source: https://cryptopotato.com/bitcoin-breaks-new-2020-high-as-total-market-cap-tops-400-billion-market-watch/

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Ripple Board Member Arrested on Cyberstalking Charges

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  • Ripple board member and a close family friend of US President Donald Trump, Ken Kurson, has been arrested following allegations of cyberstalking.
  • According to the New York Times, Kurson has stalked and harassed a total of five victims, including his ex-wife.
  • He was reportedly most vicious against a friend of his ex-wife, whom he blamed for his divorce. He used pseudonyms to contact the hospital she worked and sent fraudulent emails claiming that she had an affair with her boss. Kurson also initiated a flood of negative Yelp reviews, threatening emails, and anonymous calls and messages to other hospital employees. 
  • The woman claimed that Kurson had used the same tactics against another female victim, who was fired from her job. The criminal complaint also asserted that the second victim is Kurson’s ex-wife.
  • The public corruption unit of the United States attorney’s office in Brooklyn is handling the case. A judge released Kurson from custody pending trial. 
  • Kurson is a close friend of Donald Trump’s son-in-law Jared Kushner. Kushner had previously appointed Kurson as the editor in chief when he owned The New York Observer in 2013. 
  • In 2018, the Trump administration offered Kurson a seat on the board of the National Endowment for the Humanities. After a routine background check from the Federal Bureau of Investigation, Kurson withdrew from consideration.
  • Kurson joined the board of directors at Ripple in early 2017. The announcement highlighted that Kurson was one of the first investors in the company. 

Featured Image Courtesy of CNBC

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Source: https://cryptopotato.com/ripple-board-member-arrested-on-cyberstalking-charges/

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