Crypto Trading Trends Up; Regulators Still Lukewarm; EY Crypto Webinar

A report in the Wall Street Journal marks a recent bump in crypto trading in the financial services sector. According to the WSJ, institutional clients traded $1.14 trillion worth of cryptocurrencies on exchange Coinbase Global in 2021, up from just $120 billion the year before, and more than twice the $535 billion for retail. The crypto regulatory landscape, however, remains fraught with uncertainty. The SEC recently charged BlockFi Lending LLC with failing to register the offers and sales of its retail crypto lending product and violating the registration provisions of the 1940 Act. To settle the SEC’s charges, BlockFi agreed to pay a $50 million penalty, cease its unregistered offers and sales of the lending product and attempt to bring its business within the provisions of the Investment Company Act within 60 days. The SEC’s order found that BlockFi’s products were securities under applicable law. BlockFi agreed to the SEC’s sanctions without admitting or denying the findings.  A client alert from law firm Stradley Ronon reviews the SEC’s order and explores possible ways for DeFi lending platforms to move forward within the confines of the 1940 Act.  The Stradley alert notes that the SEC is currently showing reluctance to “show flexibility with crypto companies” and that crypto platforms should look to comply with current investment company exceptions. The alert also lists a number of regulatory strategies under the 1940 Act that platforms may pursue to comply with the SEC’s requirements. 

For more on crypto currencies in the industry watch an EY webinar titled: What you need to know now: crypto and digital assets in financial services on March 10, 2022, at 11 a.m. ET. Registration is available here.