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The SEC Is Still Looking at Custodian Rules for Crypto

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The U.S. Securities and Exchange Commission (SEC) is once again asking about qualified custodians and how crypto custody fits into this regulatory framework.

Last month, the Wyoming Division of Banking granted a no-action letter to Two Ocean, a wealth management firm hoping to offer custodial services for digital assets (which include virtual currencies) and call itself a qualified custodian. 

In the letter, the division said it “would not pursue enforcement action against Two Ocean for holding itself out to the public as a ‘qualified custodian’ if Two Ocean operates in conformity with applicable laws and rules surrounding the safekeeping of customer assets, including both Wyoming and federal law.”

In response, the SEC published a statement asking for public input on “qualified custodians,” noting that Wyoming’s letter touched on both state and federal law, and hinting the responses it gets may inform amendments to existing guidance to provide future clarity.

The statement’s very existence is a sign the SEC is still looking at cryptocurrency issues like custody, but confirms there is much work to be done in clarifying how digital assets fit into existing regulatory frameworks, industry experts said. 

“I think essentially the SEC is coming out here and saying, ‘Yes, it’s great that the Wyoming Division of Banking has issued this interpretation to you but we may have a different view and we are in the process of considering these issues,’” said Philip Angeloff, an attorney with Clifford Chance, a multinational law firm. 

The regulator isn’t directly saying its view differs from the Wyoming Division of Banking. Rather, it sounds more like the agency has yet to finalize its position, Angeloff told CoinDesk. Ensuring that it’s clear which companies fall into the definition of a “qualified custodian” remains under the SEC’s purview.

Still, the very fact the SEC is bothering to respond is a promising sign for the crypto industry, said Andrea Tinianow, an attorney who runs her own consulting firm. 

“This public statement reinforces the notion that digital assets are not going away, they are gaining in popularity,” she said. “Serious investors are paying attention to this asset class and they need to be protected, and that’s why the SEC is taking this up.”

The SEC move may benefit institutional investors and other parts of the investment community, she said.

Qualified custodians

The term “qualified custodians” is a legal one, defined by the SEC as a bank, broker-dealer, futures commission merchant or other entity that maintains client funds and securities in specific ways. The federal regulator can designate an entity as a qualified custodian, while state-level regulators typically cannot. 

That hasn’t stopped a number of crypto companies from trying to become qualified custodians, but by and large most have given up their bids and instead focus on becoming state-chartered trust companies, which still lets them offer custody services under regulatory oversight. 

While the Wyoming Division of Banking determined that Two Ocean could call itself a qualified custodian, other trust companies or entities cannot do so without receiving similar letters of their own, the letter warned.

“This is a fact-intensive analysis based on the assertions made in your letter of [July 27, 2020]. The guidance provided in this letter may no longer apply if these facts were to materially change,” the letter said.

Read more: SEC, FINRA Issue Explanation of Crypto Custodian Approval Delay

This distinction is important. As the Wyoming letter notes, the law surrounding custody, especially for digital assets, “is not fully developed.” This means it may be difficult to ascertain which companies can provide custody for assets like virtual ones, or how these assets are treated under law. 

In response, the SEC published a statement telling the general public to send it comments on how the “Custody Rule,” a part of the Investment Advisers Act of 1940, should apply to issues like digital assets. 

Chris Land, general counsel at the Wyoming Division of Banking, told CoinDesk this question has hovered over the industry for a few years, noting that most crypto custodians in the U.S. currently operate as trust companies.

One of the main issues for a trust company is whether custody qualifies as a fiduciary activity, another important regulated activity that falls under the Advisers Act. 

Good sign

The SEC’s letter is encouraging, Land said. The SEC is highlighting that investment advisers must consider their fiduciary duties when acting as a qualified custodian, and in his view the federal agency is just laying out questions around this issue. 

“The SEC letter and our letter both agree we have shared power over this area, the custody area, but I don’t think that line has been drawn with the precision that the banking industry and the securities industry might like, and I think that’s one thing we’re both going to have to work together [on],” he said.

Tinianow agreed, saying trust companies and other entities are likely to provide “thoughtful input” in response. 

The move fits into a broader trend of recognizing that digital assets have value, something many states have already done by crafting laws around the space, she said. 

“The SEC staff would not invest its time, resources or expertise if this was going away,” she said.

Read more: Texture Capital Awarded FINRA License to Trade Security Tokens

What the letter does show is the SEC is maintaining its ground in terms of being able to declare whether or not an entity is a qualified custodian, Angeloff said. 

“In some cases, law firms and, as in this case, state regulatory agencies, could provide their interpretation of state and federal law, but the SEC has the final word on interpreting the Advisers Act,” he said. 

In other words, while the Wyoming Division of Banking can tell entities they look like qualified custodians, those entities should still be talking to the SEC, he said.

“From my perspective, this is a sign that the SEC staff is still grappling with the notion that digital securities can be held on a distributed ledger and is still in the process of forming a definitive view as to how intermediaries that provide digital securities custody services can provide such services in compliance with the securities law and SEC rules,” he said.

Not bitcoin

The question of how digital assets are relevant to qualified custodians only applies to securities, meaning assets like bitcoin are not affected, Land said. 

“I think providing further clarity around which virtual assets are securities is another issue,” he said. 

Land noted the question does not apply to Wyoming’s Special Purpose Depository Institution license. So far only two entities have received this license – Kraken and Avanti – and both are operating as banks under the state law. 

Read more: PayPal Removes Waitlist for New Crypto Service, Boosts Weekly Purchase Limit to $20K

“I think it’s reflective of the SEC’s willingness to continue to look hard at digital assets and I’m fairly encouraged by the SEC putting that statement out. It was quite good, in my opinion. It was thoughtful and highlighted the issues well, in my opinion,” Land said.

The SEC’s statement asks whether state-chartered companies resemble qualified custodians, how their services compare, what advisers might look at when assessing custodians and if there are any qualified custodians that do not match the policy goals. Members of the public interested in commenting to the SEC can email the agency, and the SEC will make all responses publicly available, it said.



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Apple to Debut Faster Watch with Temperature and Glucose Testing Capabilities, AAPL Stock Slightly Up

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Beyond the company’s move in seeking advancement in its smartwatch, it is also working assiduously to explore new areas, notably in the Apple car pursuits.

American multinational technology company Apple Inc (NASDAQ: AAPL) is set to debut a faster model of Apple Watch as the tech giant seeks to beat competitors in terms of product performance. Per a Bloomberg report citing people close to the company’s plans, the proposed new Apple Watches will also brandish the abilities to check temperatures and user’s blood glucose levels.

The Apple Watch was debuted in 2015 and has grown to become a vital part of the Cupertino-based company’s product suite. While the watches have seen bigger upgrades in times past, the currently scheduled boost will place it at the echelon of smartwatches with unique capabilities in the market. The temperature check feature became a necessity following the advent of the COVID-19 pandemic, and the increased demand for handy temperature checkers.

As against the usual format for checking blood glucose levels, the feature designed into the Apple Watches will not involve pricking fingers for traces of blood. Instead, the Apple technology will analyze the blood without being invasive, according to the Bloomberg report. The new model dubbed the Apple Watch Series 7 also has a faster processor, improved wireless connectivity, and an updated screen. 

The Apple Watch with the temperature capability may not be hitting the market until the next year 2022, while that designed to check blood glucose may take a couple more years before it is available commercially.

Apple stock is currently trading at $127.79 in the pre-market, representing a growth of 0.35% from the previous close.

Beyond Apple Watch, the Company Is Expanding Its Product Suite

One of the major tenets of the top technology companies including Apple is the ability to innovate and match with the competition. Beyond the company’s move in seeking advancement in its smartwatch, it is also working assiduously to explore new areas, notably in the Apple car pursuits.

While the details of the Apple self-driven car production remain sketchy, CEO Tim Cook once confirmed the firm is building its tech in autonomous systems. Per his word;

“We’re focusing on autonomous systems. It’s a core technology that we view as very important. We sort of seeing it as the mother of all AI projects. It’s probably one of the most difficult AI projects actually to work on.”

Many have attributed this comment to the proposed self-driven cars which have been spotted on many occasions being tested by the company on the streets of California. The latest update from the Apple cars involves the potential pursuit of a partnership with either Contemporary Amperex Technology Co. Ltd. (CATL) and BYD Ord Shs A (SHE: 002594) for Lithium Iron phosphate batteries supply, according to an earlier Coinspeaker report.

The deal has neither been confirmed by either Apple or the two companies, however, people close to the matter noted the conditions to set up a plant in the United States set by the former is of disinterest in CATL. The cost considerations and the unrest between Washington and Beijing are the major considerations to pull the deal through.

Apple’s ties with Chinese firms are well engrafted as the assembling of the proposed upgraded main Apple Watch will be done by Luxshare Precision Industry Co Ltd (SHE: 002475). The Apple Watch SE is billed to be assembled by Foxconn Technology Co Ltd (TPE: 2354) alongside Taiwan’s Compal Electronics Inc (TPE: 2324).

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Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.



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El Salvador Becomes First Country to Accept BTC as Legal Tender, Its Cogress Approves Bitcoin Law

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President Bukele said the country may explore Bitcoin mining as a way to put its geothermal energy option to full use.

Latin American nation, El Salvador has made history as the first country to accept premier digital currency, Bitcoin (BTC) as a legal tender. Per a Coindesk report, a supermajority in the country’s legislative arm voted in favor of the Bill proposed by President Nayib Bukele to officially recognize the cryptocurrency as an official currency to complement the United States Dollar it currently uses.

Bitcoin has come a long way from when it was first introduced by Satoshi Nakamoto with the publishing of the currency’s Whitepaper in 2008, and the eventual launch of the currency in 2009. Since then, the coin has been tossed around in many scenarios, some encouraged its growth, and others largely held it bound. Government regulations, energy consumption criticisms to mention a few accounts for the latter, however, events in the past year seeing multinational corporations begin to invest and acquire the digital currency stirred the changes we are seeing today.

While many governments are exploring means to clamp down on crypto and Bitcoin activities, in particular, the El Salvadoran legislature has teamed up with Bukele to back the coin for its uniqueness. The vote that passed the bill came with 62 members voting in favor, 19 voting against, and 3 abstentions. The nation’s move is against the norm and there are plans for government officials to go explain the plans of the new law to the International Monetary Fund (IMF).

Bitcoin Is a Legal Tender in El Salvador: Here’s What to Expect

With Bitcoin becoming an official legal tender – as will be finalized when President Bukele signs it into law – businesses are now mandated to accept the cryptocurrency for payments. Beyond payments, all forms of taxes can be paid using BTC, transactions or investments involving Bitcoin will not be subjected to a capital gains tax.

The acceptance of Bitcoin as a legal tender is not targeted at offsetting the role of the Dollar in the country’s payment ecosystem and will serve as the reference point for the new form of money. The issue of volatility is also going to be addressed through a Trust that will be opened at the Development Bank of El Salvador. This trust is going to help mitigate the risks associated with price fluctuations as it will help merchants in the conversion of their Bitcoin holdings to Dollar in real-time. An initial allocation of $150 million will be made into the new Trust.

“If there’s an ice cream parlor, he doesn’t really want to take the risk, he has to accept bitcoin because it’s a mandated currency but he doesn’t want to take the risk of convertibility, so he wants dollars deposited in his banking account, when he sells the ice cream, he can ask the government to exchange his bitcoin to dollars,” said President Bukele in a Twitter Space conversation hosted by Nic Carter of Castle Island Ventures. “Of course he can do that in the markets also but he can ask the government to do it immediately.”

In addition, President Bukele said the country may explore Bitcoin mining as a way to put its geothermal energy option to full use.

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Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.



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Robinhood IPO on Horizon with $30 Billion Valuation Expected

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Robinhood IPO will offer over 22 million Class A shares, whereby they will be priced at $16-$19 per stock.

Robinhood Markets Inc, an America-based fintech company, has inched its way towards a $30+ billion IPO deal following immense growth in the past year. Its rapid development is attributed to its trading platform’s user-friendliness and simplicity, making it popular among the younger generation. Currently, it boasts of about 13 million users and a net value of over $11 billion having experienced a revenue ascent to around $260 million in 2020 from around $110 million in 2019.

Nevertheless, Robinhood has faced heavy backlash and lawsuits in the past year. The iconic Berkshire Hathaway investor Warren Buffett discredited the company’s reputation for easy trading by saying that it promotes a casino-like behavior. His partner Charles Munger backed him up saying it makes the stock market a gamblers’ ground and it makes money in “dirty ways”.

Additionally, a complaint was filed by Massachusetts regulators against Robinhood. Accusations ranged from their gamification of trading and use of aggressive methods to failure in preventing disruptions and outages in their trading platform. Rich Repetto, a brokerage analyst from Piper Sandler, reported that the company’s “zero commission” statement was true, however, its order flow payments and high trading volumes did more than cater for the revenue gap.

Furthermore, multiple class-action lawsuits have hit the company following their trading outages last year. Many users reported being locked out of the trading platform during major moves. Recently also, users reported restrictions from purchasing volatile stocks and unresponsive customer service.

Robinhood reacted to critics, saying that their users preferred the new way of trading compared to traditional methods. The company also reiterated its transparency and distanced itself from any conflicts of interest in its business model. More recently, the company has improved their customer service one of their customers committed suicide.

Amidst the chaos, Robinhood’s iOS downloads increased exponentially and more than $3 billion was raised by venture capitalists.

Bigger Picture on Robinhood IPO

Robinhood completed all requirements for its $30+ billion IPO offering, with Nasdaq as its stock exchange preference. It also widened its executive team to include Silicon Valley and Wall Street veterans such as Amazon’s Jason Warnick.

Silicon Valley’s unicorn has continued to express its novelty by allowing non-professional investors access to its shares before its IPO debut. Robinhood IPO will offer over 22 million Class A shares, whereby they will be priced at $16-$19 per share. Consequently, Robinhood users can now purchase the company’s shares on the Robinhood app. This move is intended to decentralize investment by making it accessible to people of diverse financial status rather than professional traders and the wealthy few.

To encourage both novice and experienced investors, Robinhood has provided prospectus with detailed information on its IPO including its business model, administrative personnel, and risks of investment.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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