As federal regulation remains patchy, firms may want to consider a New York state charter as a potential avenue to expand digital asset offerings in a compliant manner.
By Arthur S. Long, Barrie VanBrackle, Stephen P. Wink, and Deric Behar
On March 22, 2024, WisdomTree, Inc., a global asset management firm, announced that the New York Department of Financial Services (NYDFS) granted a New York limited purpose trust company charter to its subsidiary WisdomTree Digital Trust Company
MAS has published new requirements for DPT service providers and a consultation paper on additional regulations and prohibitions against unfair trading practices.
By Simon Hawkins, Farhana Sharmeen, Adrian Fong, and Tan Gen Huong
On 3 July 2023, the Monetary Authority of Singapore (MAS), Singapore’s primary regulator for banks and payment services, announced new custody and segregation requirements for digital payment token (DPT) service providers, including new obligations to safekeep customer assets under a statutory trust.
Additionally, the MAS published a consultation paper (the Consultation Paper) seeking the public’s views on its proposed regulatory measures for DPT service providers and prohibitions against unfair trading practices. The Consultation Paper follows the MAS’ previous consultation paper on proposed regulatory measures for DPT services in December 2022.
The MAS’ proposals largely align with the Hong Kong Securities and Futures Commission’s (SFC) new framework for regulating virtual asset trading platforms (VATP) (see Latham’s blog post), and indicate that virtual asset service providers must comply with regulatory rules similar to the securities regime. This aligned concept aims to ensure investor protection in line with regulators’ “same risk, same regulation” approach.
The regulators attempt to clarify their position on the possible custody of digital assets by broker-dealers, but questions remain.
By Stephen P. Wink, Cameron R. Kates, Shaun Musuka, and Deric Behar
The SEC and FINRA recently released a joint staff statement (Joint Statement) addressing the custody of digital asset securities by broker-dealers. For some time, registered broker-dealers and applicants have sought to facilitate digital asset transactions and the accompanying custody of such assets. However, their efforts have been stymied, in part due to a lack of interpretive guidance from the SEC and FINRA regarding how to custody digital assets in compliance with the relevant regulations. The Joint Statement is an initial step by the SEC and FINRA toward clarifying their positions on these issues. It makes clear that broker-dealers that do not seek to custody such assets but seek to otherwise engage in brokerage activities with digital assets (e.g., private placements or if the broker-dealer matches buyers and sellers who conduct settlement between themselves) should be permitted to do so. The bottom line, however, is that the regulators “are just not ready”[i] to approve broker-dealers to custody digital assets.
Federal legislators introduce two bills in an attempt to provide the blockchain economy with regulatory certainty.
By Stephen P. Wink, Morgan E. Brubaker, Cameron R. Kates, and Shaun Musuka
US regulators and federal legislators may be heeding the calls of crypto-enthusiasts for legal clarity regarding the status of digital assets and cryptocurrencies (collectively, Tokens). Two weeks ago, the Securities and Exchange Commission (SEC) released an analytical framework for determining when a Token constitutes a security. Last week, US federal legislators followed up by introducing two bills that are designed to “provide regulatory certainty for businesses, entrepreneurs, and regulators in the US’ blockchain economy,” the Token Taxonomy Act of 2019 (H.R. 2144) (TTA) and the Digital Taxonomy Act of 2019 (H.R. 2154) (DTA, and together with the TTA, the Bills).