SEC in the age of Bitcoin and digital currencies – Bitcoin – Cryptocurrency 2020

Bitcoin, bound by SEC rulings for its ETFs

Created following the crash of 1929, the U.S. Securities and Exchange Commission (SEC) is the equivalent of our Financial Markets Authority (AMF). It is an American federal body that regulates and supervises financial markets. Its role is to propose the rules relating to financial securities and to enforce the federal laws to which they are subject. It regulates the marketplace industry in the United States and any American company or organization offering shares similar to stocks. This also applies to the exchange of electronic securities, Bitcoin or ETH and, in general for all companies offering security tokens. Its objective is to promote the stability of the US markets, and, above all, to protect investors …

The American “stock market policeman”

The laws and regulations that regulate the financial market in the United States assume that any investor, institutional or private, must have access to as much information as possible. And this, before investing as well as during the entire period of ownership of the securities.

Securities and Exchange Commission logo that regulates assets and is particularly interested in Bitcoin and cryptocurrencies
SEC logo

Companies must therefore publish quarterly and annual reports. These reports are financial but also informative : MD&A (Management Discussion and Analysis). For example, they discuss the company’s past and future strategy.

The goal is that everyone, whether individuals or large corporations, can have access to the same data on businesses. The transparency is increased, and the risk of fraud and of insider trading reduced. Unlike the government guaranteed banking sector, investing in the stock market is risky and subject to losses.

So the idea is that an investment is made in perfect knowledge and that everyone takes responsibility. Thus the investor, individual or company, is protected, as well as the company which sells its shares.

The DRY regularly publishes educational documents on stock market investment. Educating the public, popularizing the sector, are part of its missions.

A rating system of companies by investors also makes it possible to catalog the good or the bad actors. The DRY can thus lead investigation on those who do not respect the legislation. In the event of an offense, the DRY can sue a company or individuals in the United States. This is what happened in the case of several Initial Coin Offerings (ICO).

A sheriff in the far west of ICO

With the rise in value of Bitcoin a new type of fundraiser appeared: ICOs, or Initial Coin Offerings. They will proliferate between 2016 and 2019, and offer pre-purchase tokens whose sale allows to finance the company that issues them.

It’s the wild west: delusional ROI, nonexistent business plans, inconsistent projects, false teams, fuzzy strategies … the scam race is launched. And the United States is far ahead.

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In 2018, it is estimated that the US ICOs lifted 1.2 billion dollars, or 10.5% of the total amount of global fundraising. However, statistics tell us that half ICOs put the key under the door before four months, and according to a study by the Wall Street Journal, that 20% have all the characteristics of a scam.

The SEC therefore decides to intervene for regulate and protect the investors. It decides to classify a large part of crypto-assets as securities and intensifies her repression with respect to some ICOs. Can testify Telegram, Kik, or other PlexCoin.

Bitcoin ETF: SEC’s “endless day”

In the same way, in order to be able to offer a derivative product based on a digital asset, one must succeed in convincing the DRY.

Bitcoin and the SEC, a long story about whether an ETF will be approved or not
The sweet hope of a Bitcoin ETF

Concerned that the course of the Bitcoin can be, according to her, easily manipulated, the DRY has been reluctant for several years to authorize an ETF based on the value of Bitcoin.

If such an ETF was launched, it would be possible to invest in Bitcoin like any stock market value.

Many observers believe that there would be an influx of capital into bitcoin. An ETF to go to ze moon? The planet Bitcoin is awaiting an SEC ruling …

The SEC has opened up and adapted to the world of Bitcoin and digital currencies. This in itself is a real recognition for the sector. It remains to be seen whether cohabitation will take the form of a long standoff or rather a lasting handshake. To be continued !

And now that you are good at SEC, it’s time to go and update yourself on her twin sister, the CFTC, to find out if she is “pro-Bitcoin” … or not.

SEC in the age of Bitcoin and digital currencies – Bitcoin – Cryptocurrency 2020
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