Grayscale victory, SEC delays decision on Bitcoin ETFs: Law Decoded
On Aug. 29, crypto asset manager Grayscale Investments scored a major victory against the United States Securities and Exchange Commission in its efforts to convert its over-the-counter Grayscale Bitcoin Trust (GBTC) into a listed Bitcoin exchange-traded fund (ETF). The U.S. Court of Appeals Circuit Judge Neomi Rao ordered Grayscale’s petition for review be granted and the SEC’s order to deny the GBTC listing application be vacated. Previously, Rao said that the SEC did not “offer any explanation” as to why Grayscale was in the wrong.
Initial enthusiasm in the crypto community about the victory was tempered by the understanding of the limits of the court’s decision. “So far, every time they lose in court they just shamelessly say the judge got it wrong and pursue more shenanigans,” Delphi Labs general counsel Gabriel Shapiro said. According to Zero Knowledge Consulting managing partner Austin Campbell: “For many companies, fighting back is incredibly expensive (you will win, but you’ll be bankrupt when you do) or you’re a financial conglomerate where the SEC can fuck up the rest of your business in the meantime. Gangster behavior.”
Meanwhile, the SEC has postponed its decisions on six applications for spot Bitcoin ETFs. It has designated a longer period in which it may review applications from WisdomTree, VanEck, Invesco Galaxy, Bitwise and Valkyrie, as well as the Wise Origin Bitcoin Trust proposed by Fidelity. The SEC will have another 45 days upon publication in the Federal Register to consider the proposed rule changes allowing the listing of the investment vehicles, giving the regulator until October to approve, deny or delay a decision.
Travel Rule comes into effect in the United Kingdom
Crypto asset businesses in the United Kingdom could now begin withholding certain crypto transfers to comply with the new Travel Rule for crypto that came into effect last week. From now on, if an inbound payment is received from a person or entity from an overseas jurisdiction that hasn’t implemented the Travel Rule, the virtual asset service provider must make a “risk-based assessment” as to “whether to make the crypto assets available to the beneficiary.” The same rule applies to Brits looking to send payments outside the United Kingdom.
First unregistered securities sales claim against NFT offering in the United States
The SEC has accused Impact Theory — a media and entertainment company headquartered in Los Angeles — of engaging in unregistered securities transactions by selling nonfungible tokens (NFTs) to investors from October to December 2021. Allegedly, it raised almost $30 million through the sales of NFTs it called Founder’s Keys, which were offered in three tiers. The company “encouraged potential investors to view the purchase of a Founder’s Key as an investment into the business,” according to the SEC.
Crypto declared a property by a Chinese court
A People’s Court in China published a report on the legality of virtual assets, analyzing the criminal law attributes of these digital assets. The court noted in its report that virtual assets under the current legal policy framework are still legal property and protected by law.
The “Identification of the Property Attributes of Virtual Currency and Disposal of Property Involved in the Case” report acknowledged that virtual assets have economic attributes and thus can be classified as property. Although China has deemed all foreign digital assets illegal by imposing a blanket ban, the report argues that virtual assets held by individuals should be considered legal and protected by law under the current policy framework.
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