TFU | June 11-17

Leading Off

An SEC official reaffirmed that Ethereum is not a security; a proposed Congressional bill called for the study of crypto use in illicit activities; Singapore announced the formation of an advisory council to oversee the ethical use of AI; the price of Bitcoin fell sharply following news of a South Korean crypto exchange hack; Wells Fargo became the latest bank to limit cryptocurrency purchases on credit cards; a University of Texas study found that price manipulation played a large part in last year’s dramatic price increases of several major cryptocurrencies; and Apple banned cryptocurrency mining on its iPhones.

In the News…

SEC official says Ethereum is not a security.  William Hinman, director of the Securities and Exchange Commission’s (SEC) corporate finance division, reaffirmed [full text] that digital assets representing “no [investment in a] central enterprise” or which can only be used to buy or sell services “available through the network on which it was created” are “out of the purview of U.S. securities laws.”

Congressional bill calls for study of crypto use in sex traffickingThe House of Representatives Financial Services Committee introduced a new bill that, if signed into law, would require a study of “how virtual currencies and online marketplaces are used to buy, sell, or facilitate the financing of goods or services associated with sex trafficking or drug trafficking, and for other purposes.”

Singapore to develop ethical code for AI. The Singaporean government announced the creation of an advisory council to develop a governance program for the use of AI and personal data. Singapore’s Communications and Information Minister said the initiative’s focus will be on ensuring that the use of AI is “explainable, transparent and fair.”

Bitcoin value falls after South Korean exchange hack.  Global bitcoin prices dropped by over 10% to under $6500 after Coinrail, a small exchange in South Korea, reported that hackers had stolen around a third of its digital assets, an amount estimated to be roughly $40 million. The Wall Street Journal estimates that, since 2014, “exchange hacks have cost investors at least $1.4 billion.”

Wells Fargo bans cryptocurrencies purchases on its credit cards.  The bank joins Citi, JPMorgan, and Bank of America, all of which had already banned or limited cryptocurrency purchases on their credit cards, citing market volatility and credit risks. A study conducted last year found that 18% of Bitcoin investors used a credit card to fund the purchases; 22% of those were unable to pay off their balance.

Academic study suggests rampant crypto price manipulation.  Researchers at the University of Texas found that “price manipulation may have accounted for at least half of the increase in the price of Bitcoin and other big cryptocurrencies last year.” The study suggests that the Bitfinex exchange may have used a secondary virtual currency, Tether, to artificially inflate the price other of cryptocurrencies.

Apple bans cryptocurrency mining on iPhones.  The move targets apps that surreptitiously mine cryptocurrency through background processes, often without users knowing. However, the change in policy does not entirely ban crypto-related apps: the App Store still permits wallets and exchanges from firms like Coinbase and Robinhood.

Code Conference panel discusses cryptocurrency regulation.  At Recode’s annual conference, IBM’s Bridget van Kralingen, Kathryn Haun of Stanford and current member of Coinbase’s board of directors, and Ripple’s Brad Garlinghouse discuss the future of crypto regulation and the use cases for blockchain in government and business.

CSA issues guidance on when securities law applies to cryptocurrency offerings.  The Canadian Securities Administrators (CSA) issued new guidance on the applicability of Canadian securities laws to initial coin offerings, initial token offerings, and other cryptocurrency offerings like “utility tokens,” which allow its user to access or purchase services or assets based on blockchain technology.

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