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Regulation

Harbor Approved by SEC as Transfer Agent

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Harbor Approved by SEC as Transfer Agent

Broker Dealer

Harbor, a tokenization platform, has recently announced that they have successfully been awarded a ‘transfer agent’ licence by the Securities and Exchange Commission.

This new role will allow Harbor to act as a regulated financial bookkeeper. More specifically, this role “…involves recording transactional data, including asset ownership, and more.  Transfer Agents are typically utilized by companies which have issued some form of security.”

Multiple Licenses

This development caps off a productive few months, which also saw Harbor become a registered broker/dealer.

With these two new designations bestowed upon them, the company gains a significant amount of flexibility in the services which they can offer clientele. In a nascent industry, in which most companies are battling to establish themselves, this flexibility should prove to be a major boon to Harbor.

Harbor CEO, Josh Stein, commented on the need of companies within the digital securities sector, and how Harbor is doing their part to help them.

“…companies need solutions to compliantly manage the investment lifecycle, which includes working with licensed broker-dealers and registered transfer agents…Harbor provides these services along with a common technology platform that integrates compliance and custody and enables the traditional private capital ecosystem of issuers, broker-dealers and placement agents.”

Reg A+

While there may be various reasons as to why Harbor applied to become a transfer agent, the ability to offer Reg A+ investment opportunities ranks at the top of their list.

Harbor CEO, Josh Stein, had the following to say on the importance of this type of structuring.

Reg. A is really a sweet spot for many companies looking to raise capital, including blockchain companies wanting to get their tokens into the hands of a broad user base and offer potential for liquidity from day one.”

Investment opportunities operating under Reg. A+ are unique in their flexibility, as they are open to, not only accredited, but retail investors alike. Furthermore, they allow for a company to raise as much as $50M in a capital generation event. The main caveat is that a transfer agent is required to oversee the process in order to remain compliant – a title that Harbor now holds.

Harbor

A United States based company, Harbor, specializes as a tokenization platform. The company, which was founded in 2017, currently sees its operations spearheaded by CEO, Josh Stein.

In the time since their launch, Harbor has contributed more than most, to the digital securities sector. A few of these contributions include, not only the development of a specialized token standard for digital securities (R-Token), but the facilitating the tokenization of large real estate funds.

In Other News

For those interested in learning about industry competitors holding similar licensing to Harbor, make sure to read the following article. Here, we briefly discuss, not only the roles associated with these titles, but companies which hold them.

Titles and Designations among Industry Participants

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Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology. In addition to this, he is a licenced Paramedic in Nova Scotia, Canada. As such, he can provide emergency care/medicine to any situation necessitating it.

Regulation

Japanese Government Introduces New STO Regulations

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Japanese Regulators Amend STO Regulations

Japanese regulators officially launched their STO market via amendments to the country’s current securities regulations this week. The new crypto exchange-specific amendments add clarity to the market and introduce a number of important customer protections. As such, analysts predict that the Japanese crypto sector is about to experience rapid expansion.

According to new reports, the amendments will go into effect on May 1. Importantly the changes directly alter the Payment Services Act and the Financial Instruments and Exchange Act. The amendments introduced a variety of new measures ranging from new banking regulations and cold wallet requirements, all the way to, new legal terminology.

Storage Upgrades – STO Regulations

Specifically, the new amendments put new requirements on exchanges. For one, all exchanges must now keep in cold storage an amount equal or greater than the number of users’ funds held online. This regulation ensures that exchanges rely on cold storage whenever possible. Along the same line of thought, exchanges are no longer allowed to keep users’ funds and their funds together. Importantly, this regulation extends across both crypto and fiat reserves.

Financial Services Act via Wikipedia - STO Regulations

Financial Services Act via Wikipedia – STO Regulations

ICO and STO Amendments

Another important amendment added to the regulations is the legal definitions of initial coin offerings (ICOs) and security token offerings (STOs). For years, blockchain firms struggled to get regulators to clarify the exact differences in terms of regulations. Now, regulators have a clear cut understanding of what type of fundraising campaign is underway, and how to classify it.

Fighting Fake News – STO Regulations

Interestingly, the new amendments go after all forms of market manipulation. There are now stricter fines and punishments in place for spreading rumors or making false statements. This is an important addition as market manipulation is a real concern internationally. Japanese officials hope they can curb these nefarious actors and weed out bad sources of information.

As part of the new enforcement policies, the new regulations place cryptocurrency asset derivatives transactions under the FSA’s jurisdiction.  Additionally, there are some terminology changes. Moving forward, cryptoassets and not “cryptocurrencies” is the terminology regulators agreed on.

Importantly, a group of Japan’s top securities firms has been patiently waiting for these regulations to become official. The group includes Monex Group, Rakuten, and one of the largest financial institutions in the country, SBI. In March, the group publicly revealed plans to create a regulated security token exchange.

COVID-19 Delays

The group’s wish could have come sooner if the world wasn’t in the middle of the COVID-19 pandemic.  Unfortunately, the virus has wreaked havoc on the markets and caused multiple delays for regulators. Notably, Japan was even forced to postpone the 2020 Olympics.

Japan STO Market is Here

Despite the dreary state of the international markets, Japan seeks to be the blockchain capital of the region. This determination, coupled with regulators forward-looking stance, is sure to give the country an advantage over the competition. For now, you can expect to see progress as the Japanese STO market is officially active.

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Regulation

XRP Ripple Lawsuit re-filed, but not as a Security?

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Ripple XRP Lawsuit

This week, news broke that an amended complaint against Ripple has been filed by XRP investors. This news is the latest development in a two-year class-action lawsuit brought against the firm. Interestingly, investors chose to amend this lawsuit in order to add protections in the case that XRP doesn’t fall under securities regulations.

Importantly, the amended suit includes former XRP investor Bradley Sostack as the lead plaintiff. In this go-around, the plaintiffs brought additional claims against Ripple and its CEO, Brad Garlinghouse for violation of California business law. The report alleges the company blurred the differences between its enterprise solutions and XRP to further drive demand in the market.

Hedge Your Bets

Originally, the lawsuit alleged that Ripple raised millions of dollars through the unregistered sales of XRP to US retail investors. Now, according to a court document filed on March 25, investors decided to attempt another approach. Perhaps, fearing that XRP could escape securities regulations, the new suit goes after the firm for violations of California business laws.

To this extent, the sixth claim for relief states that the firm participated in false advertising, while a seventh claim, further accuses the firm of unfair competition in violation of California regulations. Also, the claim states that Ripple reportedly limited the supply of XRP to drive price appreciation.

Garlinghouse Under Fire

Specifically, the allegations claim that Garlinghouse made numerous conflicting claims to investors. In multiple instances, he stated that he was holding XRP for long-term gains. However, researchers pointed out that these statements were false. Throughout 2017, Garlinghouse sold millions of XRP via cryptocurrency exchanges. In fact, a review of the XRP ledger indicates that Garlinghouse sold over 67 million XRP in 2017 alone. Additionally, on multiple occasions, he dumped his XRP within days of receiving it from Ripple.

XRP Ripple Lawsuit

XRP Ripple Lawsuit

SEC vs Ripple XRP

The lawsuit cites statements made from Ripple about XRP being a utility token essential for international payments. Additionally, the firm and CEO made statements in which they described the cryptocurrency sales are primarily to market makers. This last point could prove to be a major problem for Ripple as 60 percent of XRP is owned by Ripple, and until now, only saw use solely for fundraising efforts.

The Ripple XRP Saga

The XRP securities saga started when a group of disgruntled investors lodged a complaint with the SEC back in 2018. Since that time, the case has seen numerous amendments as both Ripple and the plaintiffs adjusted their strategies. Ripple hoped to get the case dismissed early on,  but U.S. District Judge Phyllis Hamilton in the Northern District of California ordered in February the suit could proceed to trial.

While the news did seem bleak for Ripple, at that time, Judge Hamilton also stated that the company did not violate California state law. Consequently, both the false advertising and personal liability against Ripple’s CEO Brad Garlinghouse were dropped in that instance.

Now, Ripple worries that the plaintiffs will utilize unlimited amendments to falter the XRP market. Given the new legal approach that the plaintiffs have taken to towards the company, there may be some validity to their concerns.

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Regulation

BSTX Experiences Proposal Delay, as SEC Seeks Further Commentary

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bstx

Postponed

The SEC has recently released an update on a proposal put forth in 2019 by the, yet-to-launch, Boston Security Token Exchange (BSTX).  Despite being considered since last May, the proposal has been postponed.  The purpose of this delay is to allow for public commentary.

Final Decision

This move, delaying the final decision, comes after months of deliberation on the proposal put forth by the BTSX.  From the time of the initial filing, we have covered developments surrounding the BSTX on multiple occasions.  The following articles shed light on this timeline, and what the BSTX is trying to achieve.

Boston Security Token Exchange (BTSX) Seeks SEC Rule Change

SEC Seeks Input on ‘Boston Securities Token Exchange (BSTX)’ Proposal

Changes Proposed

While not all-encompassing, the following are a few of the key points put forth by the BSTX in their proposal for change.

  • Asset ownership recorded using a private blockchain
  • Trading enabled through use of BSTX tokens
  • Whitelisted Clients

Commentary

In their most recent extension, the SEC noted that it was done in hopes that the public would come forth, and share their stances towards the proposal.  They stated,

“The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal.”

Expressing Trepidation

Presumably, what prompted this delay is multiple responses received during the first commentary period.  While there were only two received, each expressed trepidation towards what the BSTX is trying to achieve.

Of the two responses received, thus far, one was received by a representative of Nasdaq.  It is stated,

“Nasdaq respectfully submits that the BOX proposal may place an unreasonable burden on competition because the blockchain (ledger) technology used to track ownership of the security token—the only aspect of this instrument that is unique—would not have a common distributed ledger. Rather, the distributed ledger would be exclusively available on BOX, thereby placing other exchanges at a competitive disadvantage that cannot be remedied by replicating the blockchain offering. Furthermore, the proposal appears to provide insufficient detail regarding: (1) digital securities infrastructure and technology pairing with the existing equities market infrastructure, and (2) its impact on the anti-fraud and customer protection provisions of the Act, as well as possible investor confusion. Nasdaq recommends that BOX submit additional detail addressing these concerns before the proposal is approved.”

Simply put, they break down their issues into two main points:

  • ‘The Proposal places an unreasonable burden on competition’
  • ‘The Proposal provides insufficient information to assess compliance with the Act or the costs to market participants.’

The commentary, put forth by Nasdaq, closes with a request for more information, stating,

“For the reasons described above, Nasdaq believes that BOX has provided insufficient information concerning the proposal’s impact on competition, how it complies with other aspects of the Exchange Act and Anti-Money Laundering statutes, and how BOX intends to avoid investor confusion. Nasdaq recommends that BOX submit additional detail addressing these concerns before the proposal is approved.”

Boston Security Token Exchange (BSTX)

Founded in 2018, the BSTX is a joint venture between BOX Digital, and tZERO.  The goal of the BSTX is to establish a regulated and full-fledged exchange, which offers support for digital securities.

CEO, Lisa Fall, currently oversees company operations.

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