Chris Brummer draws from his recent white paper on disclosure and decentralized finance (DeFi), to introduce some new concepts to the DeFi lexicon for building out disclosure delivery systems native to the crypto ecosystem. He imagines disclosure systems that are programmable, capable of evolving with technology - and which could provide the infrastructure for further tools for empowering participants in the Metaverse and beyond. If properly developed, the ideas could draw on DeFi's strengths and provide more functionality and security than regulators' legacy technology stack. Moreover, they could afford a new generation of developers and engineers a unique opportunity to reorient disclosure towards its original purpose: to be read.
The Canadian Securities Administrators (CSA) today published guidance to improve the quality of disclosures provided by issuers that engage materially with crypto assets (crypto asset reporting issuers). The notice outlines the disclosure expectations of CSA staff in key areas such as safeguarding crypto assets, the use of crypto asset trading platforms, risk factors, material changes and promotional activities. The notice also provides guidance to crypto asset issuers on navigating certain complex accounting and disclosure issues.
A paper by Chris Brummer and Agnes N. Williams highlights, with respect to decentralized finance (DeFi) in a U.S. context, the ambiguities inhabiting legacy disclosure obligations and offers a conceptual roadmap for assisting developers and regulators. Furthermore, it introduces a series of crypto-native tools to modernize disclosure delivery in DeFi systems.
The Basel Committee on Banking Supervision published its final disclosure framework for banks' crypto-asset exposures and targeted amendments to its crypto-asset standard published in December 2022. The disclosure framework includes a set of standardized tables and templates covering banks' crypto-asset exposures to enhance information availability and support market discipline. The targeted amendments include clarified criteria for stablecoins to receive a preferential regulatory treatment.
Announced Tuesday alongside JSE's launch of a tokenized Initial Public Offering platform, Blockstation's new tool, called the Smart Listing Accelerator Process (SLAP), is designed to streamline the filing of required regulatory disclosures and prospectuses.
According to Paul Amery (New Money Review): Permissible investment rules for US money transmitters vary state by state but typically allow them hold corporate bonds, currency, foreign government debt, asset-backed and mortgage-backed securities. US dollar money market funds, which closely resemble stablecoins in their objectives, operate according to more detailed and stringent reserve and disclosure obligations set by the Securities and Exchange Commission (SEC). Permissible investments are limited to cash, direct obligations of the US government, certain securities issued by US government instrumentalities with a remaining maturity date of 60 days or less, and securities that mature or are subject to a demand feature exercisable and payable within five business days.
The Australian Securities and Investments Commission (ASIC) will be working with five regulatory technology (regtech) entities for the Business Research and Innovation Initiative (BRII) Regulatory Technology (Regtech) Round. ASIC's challenge in this latest round is to explore the potential of using technology to help identify and assess poor market disclosure by listed companies.
"In a marketplace that often points to nearly continuous trading options for investors, the reporting and disclosures made by some of the organizations in the space are not nearly as continuous or transparent. Blockchain-based transactions, by default, are traceable and transparent, and so organizations conducting business in this sector should make the most of these underlying fundamentals. For a sector that touts its ability to disrupt, disintermediate, and otherwise upend the traditional financial order, the reporting and disclosures currently made leave much to be desired."
The U.S. SEC published guidance about how companies should account for the custody of crypto-assets on behalf of clients. Affected companies will have to disclosure the nature and amount of crypto-assets that they hold for their users, with separate disclosure for each significant crypto-asset and any vulnerabilities the business has due to any concentration in its users' crypto holdings. Also, an estimate of potential liabilities from safeguarding failures may need to be included with the initial recognition of those crypto holdings, as well as later accounting of their fair value. Caitlin Long tweeted that this "brazenly violates 'same activity/same regulation' principle" because such treatment isn't required of securities custodians.
"Increasingly, attorneys in the United States are asking courts to force the disclosure of cryptographic private keys as part of discovery or other pre-trial motions, and increasingly courts are acceding to those demands."
In a meeting on October 4-5, the Basel Committee on Banking Supervision (BCBS) looked at the various causes that may have contributed to the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank. It concluded that so-called 'crypto assets' concentrated in a small number of banks was one of the three major things that played a role. https://www.bis.org/press/p231005.htm
The SEC's approval of live streaming platform YouNow's Props token offering falls under Reg A+, which allows startups to raise up to $50 million in a public offering with fewer disclosures than a full IPO requires. Blockstack, a decentralized web platform for DApps, was the first blockchain firm approved under Reg A+.
This paper analyzes the white papers of the fifty top-grossing ICOs of 2017, how the software code controlling the projects' ICOs reflected their disclosures. Most promised forms of investor protection that the code did not deliver and 12 allowed modifications to the way the smart contract worked, but only four of them disclosed that ability.
The U.K. Financial Conduct Authority (FCA) will be consulting on amendments to its Listing Rules and related guidance to strengthen protections for investors in Special Purpose Acquisition Companies (SPACs). The consultation will consider the structural features and enhanced disclosure, including a minimum market capitalisation and a redemption option for investors, required to provide appropriate investor protection. Our proposals will help to ensure that SPACs operate within a framework of high regulatory standards and oversight. Where such protections are in place, we consider that the existing presumption of suspension of the listing for such companies at the point of announcement of an acquisition target is no longer required and we therefore intend to consult on this basis, aligning this element of our rules more closely with other major jurisdictions. https://www.fca.org.uk/news/statements/future-consultation-strengthening-investor-protections-spacs
U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce unveiled an updated version of her proposed three-year regulatory safe harbor for token sales. The update adds "semi-annual updates to the plan of development disclosure and a block explorer"; an "exit report requirement" that "would include either an analysis by outside counsel explaining why the network is decentralized or functional, or an announcement that the tokens will be registered under the Securities Exchange Act of 1934"; and that exit report requirement "provides guidance on what outside counsel's analysis should address when explaining why the network is decentralized." https://www.sec.gov/news/public-statement/peirce-statement-token-safe-harbor-proposal-2.0
Centre is late in releasing its USDC reserves attestations, the last one posted on their website dating back to March when the stablecoin had a market cap of $11 billion. This fact and the sudden growth the crypto-asset experienced in the last few months (there are now almost $21 billion outstanding) is raising alarms about the delay of these documents (the March 31 report was published on May 24). There has not been a public disclosure of why the tardiness is happening, and the reports remain vague about how the reserves are invested: "held...at federally insured US depository institutions and in approved investments" with zero clarity as to what "approved investments" are.
Giesecke+Devrient's (G+D's) hybrid-deployment Filia model of a value-based CBDC solution involves existing members of the currency cycle playing a vital role in. The creation and issuance of data files that represent monetary value take place in a highly secure offline environment at the central bank, while distribution is carried out by commercial banks or other financial service providers. Payment service providers can integrate Filia into their own offerings - as part of a larger payment ecosystem - to enable new business models, and to foster growth and innovation in an open system. Filia can be utilized through smartphones, smartcards, smartwatches, and other forms of digital wallets, without the need for a bank account, the disclosure of private data, or consumer fees. It also allows for secure offline consecutive offline payments.
This paper addresses issues related to the recognition, evaluation and reflection of crypto-assets in accordance with International Financial Reporting Standards (IFRS). There is currently no specific IFRS disclosure standard for crypto-assets.
The U.S. Securities and Exchange Commision (SEC) set forth for comments the circumstances under which broker-dealers can custody digital assets in compliance with Rule 15c3-3 and mitigate the risks of loss or theft. Rule 15c3-3 requires a broker-dealer to obtain and maintain physical possession or control of all fully-paid and excess margin securities it carries for the account of customers. The draft measures basically boil down to keeping security tokens the primary focus of the operation and doing due diligence in terms of cybersecurity and disclosures to clients, including making sure every potential customer is aware that the broker-dealer in question is handling digital asset securities. https://www.sec.gov/news/press-release/2020-340
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