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CFTC allows ErisX to clear commodities beyond crypto

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The Commodity Futures Trading Commission, or CFTC, recently approved a license modification for ErisX’s clearing house. The license amendment allows ErisX freedom to offer more trading products. 

“The significance of the Amended Order is that it expands our licensed activities allowing us to clear products on other commodities beyond just virtual currencies or crypto,” ErisX general counsel Laurian Cristea told Cointelegraph. 

“Now we may list futures or swaps across the commodities spectrum from new crypto related contracts such as hash rate futures or crypto indices, to event contracts, and contracts on other commodities including, for example, tokenized base metals, precious metals, and diamonds.”

The ErisX brand includes an exchange hosting spot and futures trading, as well as a clearing entity, which also facilitates spot and futures activities, Christea clarified. “On the Federal level, our exchange holds a Designated Contract Market (DCM) license, and our clearing house holds a Derivatives Clearing Organization (DCO) license,” he explained. 

Unlike the crypto space, which sees exchanges wearing a number of hats, regulation requires mainstream traditional finance to segregate different wings of an enterprise. Exchanges provide market availability, while clearing houses handle the assets and their settlements on the back end.

Regulation requires separate entities for derivatives product trading and clearing. The same is not true of spot trading, although ErisX uses this structure anyway, due to its benefits, which include greater asset protection, according to Christea. 

The CFTC amendment not only adds mainstream market commodity clearing ability, but also gives ErisX an advantage. “Our clearinghouse platform, composed of our TCS™ technology and DCO license, now possesses several important distinctions and capabilities not featured with all DCOs,” ErisX CEO Thomas Chippas said in a public press statement on Wednesday. 

“We can clear fully-collateralized futures and swaps related to cryptocurrencies as well as contracts on all other commodities. We look forward to further welcoming FCMs, Institutions, Market Makers, Professional Trading Firms and Individuals to benefit from the expanding services of our clearinghouse.”

The achievement also opens ErisX’s clearing entity up to work with other companies and entities. “ErisX’s integrated exchange and clearing technology platform, licenses and operations enable us to offer services to 3rd parties that have innovative commercial ideas that require regulated market infrastructure,” the statement said. 

Regulation has only become more central to the crypto industry in recent years, with compliance becoming imperative. 



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ICO issuer charged with fraud by SEC for selling unregistered security

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The United States Securities and Exchange Commission, or SEC, has charged a cryptocurrency issuer for “making materially false and misleading statements” in connection with an unregistered security offering conducted between August 2017 and January 2018, offering further evidence that regulators were still targeting initial coin offerings from the last major market mania. 

Loci Inc., the platform behind LOCIcoin, and CEO John Wise were formally charged on Tuesday. The SEC claims that Loci and Wise misled investors about the company’s revenues, employee numbers and user base during the $7.6 million crowdsale. The regulator also alleges that Wise misused $38,163 in investor proceeds for personal expenses.

“Loci and its CEO misled investors regarding critical aspects of Loci’s business,” said Kristina Littman, the head of the SEC Enforcement Division’s cyber unit, adding:

“Investors in digital asset securities are entitled to truthful information and fulsome disclosures so they can make informed investment decisions.”

The order also requires that Loci and Wise pay a $7.6 million civil penalty for their transgressions.

Handing out penalties to cryptocurrency businesses is nothing new for U.S. authorities. Regulators from the SEC, Commodity Futures Trading Commission and Financial Crimes Enforcement Network have imposed fines of more than $2.5 billion on cryptocurrency-related businesses since 2014, underscoring the murky regulatory climate surrounding digital assets.

Elliptic Enterprises, a blockchain analytics firm headquartered in the United Kingdom, reported Tuesday that the $2.5 billion in penalties covered a broad range of infractions, including fraud, the selling of unregistered securities and a failure to uphold Anti-Money Laundering regulations.

The SEC accounted for the lion’s share of the penalties at $1.69 billion. The CFTC imposed penalties of $624 million and FinCEN slapped crypto businesses with $183 million in fines. The Office of Foreign Asset Control handed out the smallest fines among the regulators at $606,000.

Cryptocurrencies have been described by many as the wild west of finance. Tens of thousands of crypto-centric projects have launched in the wake of Bitcoin’s genesis block in early 2009. Many of these companies got their start in 2017 during the height of the initial coin offering boom.

Related: With US regulators handing out $2.5B in fines since 2014, crypto is not the ‘wild west’ of finance

ICOs allowed crypto startups to raise millions of dollars without having to meet the stringent regulations of more traditional security offerings. ICO funding reached the tens of billions in 2017 and 2018 combined, attracting unwanted attention from securities regulators. The SEC successfully charged the founders of several crypto companies, which effectively put an end to the mania — in the United States, at least.