When it comes to technology, I’m not exactly what you would call an “early-adopter.”
I used a flip phone until 2015.
My mom bought me a Kindle a few years ago, and I basically used it as a wishlist for the books I would eventually buy physical copies of until, inevitably, I lost it (sorry, mom).
This past year, I finally transitioned from using a pen-and-paper planner to keeping track of my days with Google Calendar. I still hate it, though I am much more frequently on-time.
As cryptocurrency — basically, a digital currency made up of data instead of dollars where the value is determined by the supply and demand within its network rather than a government entity — emerged on the financial scene about a decade ago, to say I was disinterested would be an understatement. I was terrified. I didn’t even get a credit card until I was 26, for goodness sake.
Now these invisible units of code with meme-related names are worth thousands of dollars and can be exchanged like cold, hard cash? My luddite heart could never.
I may not have a choice, though. Michael Seymour, exchange desk adviser at Luxolo Financial in Portland, said that cryptocurrency is all but inevitable in modern society.
“As more of commerce and society is driven by digital technology, simply participating will require owning and spending cryptocurrencies,” Seymour said. “Even though there are still some dramatic price fluctuations ahead in the short term, the long-term value for bitcoin continues to appreciate. Nations and corporations around the world are investing in bitcoin. It is redefining global commerce.”
Seymour may be biased given that he works in the field, but cryptocurrency has its clear advantages. It is separate from monetary policy, so it is hedged against inflation or political instability (but a bad investment or a nasty hack could lead you to lose everything, with no bank to back you up). Cryptocurrency is also not controlled by any government or financial institution, so it cannot be impounded, confiscated or restricted from its owners.
There are risks, though. Cryptocurrency fluctuates in value thousands of percent over a short period of time for seemingly no reason at all. Over time, though, Seymour said we will see that volatility even out — as we have with financial assets throughout history.
“Cryptocurrencies are quite a lot more volatile than other assets but that’s a perspective of time,” Seymour said. “When stocks were first being issued, there was that same kind of extreme volatility.”
Not all types of cryptocurrency are created equal, either. While meme-able cryptocurrencies like Dogecoin and Shiba Inu can be risky, longer-standing cryptocurrencies like Bitcoin have been some of the best performing investments over the last decade.
“There is so much more value invested in Bitcoin, it’s already starting to stabilize,” Seymour said. “In general, now that Bitcoin has in excess of a $1 [trillion] valuation and ever increasing adoption by individuals, institutions and governments alike, the global bitcoin marketplace is signaling long term strength, stability and longevity.”
Plus, with that risk comes the possibility of reward.
“There’s no other asset class where you can see 100,000 percent gain over the course of the year,” Seymour said. “That happens regularly with crypto.”
OK, fine, I’ll bite. How does a girl get her hands on some Bitcoin?
Seymour said the first step is to get a cryptocurrency “wallet,” a web-based or smartphone app secured by a username, password and two-factor authorization. Apps like Atomic Wallet and Exodus Wallet are easy to use for beginners.
Then, buy cryptocurrency. There are a number of different types to choose from. Bitcoin is the most popular, but Seymour said that he also deals with Ethereum, and there are many others to choose from if you’re feeling experimental — high risk could yield even higher reward, after all.
You can buy cryptocurrency by going to a Bitcoin ATM. Maine Bitcoin LLC has kiosks around the state where you only need to show up with cash and your digital wallet. You can also buy from companies online like Swan Bitcoin and Coinbase, though such platforms often come with their own fees and set-up instructions.
Don’t be intimidated by the big price tags, either. You can buy a fraction of a unit of cryptocurrencies, up to eight decimal places.
Seymour said that a “practical” starting investment in cryptocurrency would be “about $500” if you want to see some real returns, but first-time investors in cryptocurrency should only put in what they can afford to lose.
“For some people that’s going to be $10 and honestly that’s enough,” Seymour said. “$10 gets you an account set up with some kind of exchange or some app on your phone and you start to see how things work and you can pay closer attention to market activity that gives you enough confidence to try a little more”
Once you have cryptocurrency, you can use it to pay for goods or services, as an increasing number of small merchants and large businesses are accepting Bitcoin and other cryptocurrency payments. You can also hook up with a service like Luxolo to help you invest your ‘coin further.
Or, if you’re like me and you’re just getting your toes wet, you can just keep a little Bitcoin in a wallet on your phone and see how the investment grows over time.
If I can figure out Google Calendar, I can certainly figure out this.
The S&P has lost nearly 9% in just three days. That’s its worst such stretch since the earliest days of the coronavirus crash in March 2020. The Dow lost 876.05, or 2.8%, to 30,516.74 on Monday, and the Nasdaq composite dropped 530.80, or 4.7% to 10,809.23.
The coronavirus crash in early 2020 was Wall Street’s last bear market, and it was an unusually short one that lasted only about a month. The S&P 500 got close to a bear market last month, but it didn’t finish a day below the 20% threshold.
Michael Wilson, a strategist at Morgan Stanley who’s been among Wall Street’s more pessimistic voices, is sticking with his view that the S&P 500 could fall further to 3,400 even if the U.S. economy avoids a recession over the next year.
That would mark another roughly 9% drop from the current level, and Wilson said it reflects his view that Wall Street’s earnings forecasts are still too optimistic, among other things.
With soaring price tags souring sentiment for shoppers, even higher-income ones, Wilson said in a report that “the next shoe to drop is a discounting cycle” as companies try to clear out built-up inventories.
Such moves would cut into their profitability, and a stock’s price moves up and down largely on two things: how much cash a company generates and how much an investor will pay for it.
Prices were at dizzying heights in November, and then came the crash. In just a couple of weeks in May, cryptocurrencies lost more than half a trillion dollars in market value.
The most spectacular implosion was a cryptocurrency called TerraUSD. It was a stablecoin – meaning its value was supposed to be pegged to the U.S. dollar through a complicated algorithm.
Instead, it tanked and is now virtually worthless.
That crash reignited calls for new rules to govern a cryptocurrency market that is still something of a wild frontier. And now we have perhaps the biggest step yet toward new crypto regulation.
Two senators — a Republican and a Democrat — teamed up to unveil a broad new regulatory bill last week. But skeptics are already warning it’s a step backwards and is far too crypto-friendly.
Let’s unpack what’s going on and why a big question is who would regulate crypto.
What is the current setup?
Nearly everyone believes the crypto industry needs some sort of regulation.
New cryptocurrencies are born by the hour — and along with them, plenty of scams and fraud. The industry is currently overseen by a patchwork of federal and state regulations, which haven’t always evolved as quickly as the technology has.
After the May crash, Treasury Secretary Janet Yellen called on Congress to pass “comprehensive” regulations on stablecoins in particular.
Democratic Senator Kirsten Gilibrand, of New York, says this phase of the internet’s evolution – with cryptocurrency and other technologies known collectively as Web3 – poses similar risks to the early days of social media – sometimes called Web2.
“Congress failed to regulate Web2,” she said. “We failed to create a regulatory agency over various platforms that are now doing extreme harm to our youth and dividing this country. We are not going to make the same mistake with Web3.”
What is this new bill then?
It was introduced earlier this month by Senator Gillibrand and Senator Cynthia Lummis, a Republican from Wyoming.
It lays out a framework for regulating the crypto industry.
This includes tax requirements for various digital assets, and imposing stricter requirements for stablecoins, which, according to Gillibrand, would have disallowed the TerraUSD coin that imploded in May.
It also has provisions about cybersecurity, the possible creation of a self-regulatory organization, and some disclosure requirements. And it includes provisions directing the Federal Energy Regulatory Commission to study the energy impact of the cryptocurrency industry.
But perhaps most importantly — and the thing that has skeptics most concerned — is that the bill defines most cryptocurrency as commodities, which would be overseen by the Commodity Futures Trading Commission (CFTC), instead of securities, which would fall to the much bigger Securities and Exchange Commission (SEC).
The SEC is headed by Gary Gensler — one of the sharpest crypto critics, who has said the crypto industry is “rife with fraud, scams and abuse.” He beefed up the SEC’s crypto enforcement team early in May, and after the crypto crash asked Congress for more funding, saying the team was still “out personed.”
But Senator Gillibrand said it made sense for the CFTC to do the heavy lifting.
“It would be inappropriate for the SEC to regulate some of these markets because they don’t function like securities,” she said. “Chair Gensler has already said … the words that ‘Bitcoin is a commodity,’ because he understands that it’s a form of value in the same way that gold is a form of value, in the same way that oil is a form of value, and that it’s more appropriately placed under the CFTC.”
Both senators are optimistic about the future of crypto. Lummis bought her first Bitcoin back in 2013 and owned more than $100,000 worth as of her most recent financial disclosure. She said this bill tried to find the “sweet spot” when it comes to regulation.
“So people who are innovating in this space know the rules of the road and people who are consuming the ultimate products know that the consumer protection elements are there,” Lummis said.
The bill is still a long way from becoming law. In terms of timing for a floor vote, Lummis said: “We’re talking months.” She has previously acknowledged the sweeping bill may ultimately be broken up into parts to go through the relevant committees.
What the critics say
There are a number of technology and finance experts who say that cryptocurrency is a purely speculative asset, and one that serves no real purpose.
And this month, a group of them wrote a letter to leaders in Congress, asking that they: “Ensure that individuals in the U.S. and elsewhere are not left vulnerable to predatory finance, fraud, and systemic economic risks in the name of technological potential which does not exist.”
One of the signatories was Molly White, a software engineer who runs the blog Web3 Is Going Just Great, which documents instances of fraud and catastrophe in the crypto universe. And she is not a fan of the new bill.
“It is very much what I think the cryptocurrency industry was hoping to see from regulators, which is a very limited set of regulations applied to the industry,” she said.
Some in the industry have responded positively so far. The Crypto Council for Innovation called it a significant step forward, and the Blockchain Association called it a “milestone moment.”
One of the biggest problems White has with the legislation is precisely that it hands over most of the regulatory power to the CFTC instead of the SEC.
White says cryptocurrencies aren’t like traditional commodities like wheat or oil, so the CFTC shouldn’t be the main regulatory muscle.
“Cryptocurrencies are more like securities because people broadly put money into them hoping for a return on their investment,” White said. “And when someone is engaging with something as an investment, that’s a good sign that it should go to the SEC.”
What’s more, White said the CFTC simply wasn’t equipped to handle the workload — even if the bill allows the CFTC to impose a fee on digital asset exchanges to help fund its large role.
“There would need to be a major change in the amount of resources going to the CFTC for them to suddenly take on this enormous and much broader set of issues than they’ve dealt with in the past,” she said. “And the SEC is frankly just more experienced in this field already.”
It is well known that insider trading—the practice of buying and selling stocks, bonds, or other securities based on material, non-public information—is unlawful. For that reason, many companies have compliance programs and policies that restrict trading by officers, directors, employees or other “insiders” with access to such information.
What does this have to do with NFTs? NFTs are non-fungible tokens, the ownership of which are registered on a blockchain. Many NFTs represent rights to a digital image or other digital asset. Many NFTs likely do not fall within the definition of a security. Yet, some may. Some examples of where this may be the case (depending on the facts) include: (1) a set of NFTs that represent a factional interest in some asset or revenue stream (also known as fractionalization); (2) pooling of assets as a single NFT; (3) NFTs that represent a right to a revenue stream; and (4) presale of NFTs that have functionality which is not useable at the time of sale. To the extent a NFT is deemed a security, then it is likely subject to the prohibitions on insider trading that apply to securities. Most companies have policies that prohibit illegal insider trading of securities. However, even if an NFT is not a security, there are certain trading activities that may be illegal, or at least unethical. The rest of this paper will focus on NFT policies for issues other than illegal insider trading of securities.
Why is a policy recommended even if a NFT is not a security? A well-publicized incident at one of the leading NFT marketplaces exposed a high-level executive who was buying NFTs from certain NFT collections based on confidential information shortly before those collections were to be promoted on the marketplace. By purchasing the NFTs in advance, the employee would be able to sell them at a profit, as the demand and resultant value of collections so promoted typically increased. Subsequently, the executive resigned and the company received substantial negative press over the incident. Shortly thereafter, the company developed a NFT insider trading policy prohibiting such conduct. Despite the fact that it does not appear that the NFTs involved fall within the definition of a security, the executive was later indicted for charges involving wire fraud and money laundering in connection with a scheme to commit insider trading in NFTs. You can read more about the indictment here. As detailed below, there are other facts patterns where employee actions regarding NFTs could create potential issues for companies.
Who should have an NFT trading policy? In our view, any company dealing in NFTs should consider adopting an NFT trading policy. For companies that operate marketplaces, the incident described above provides a compelling reason. However, other players in the NFT space should consider one as well. For example, brands and IP owners that license their IP for or create their own NFTs should consider one. There have been situations where individuals have engaged in wash sales or other activities to artificially manipulate the price or volume of NFT sales. Other companies that deal in NFTs or the NFT ecosystem should also consider adopting and implementing an NFT insider trading policy.
What should the policy cover? After the incident mentioned above, many companies cloned the NFT insider trading policy that the impacted marketplace adopted. Is this sufficient? In our view, no. There are other issues that should be addressed in a more comprehensive policy. The scope and content of the policy may vary depending on the nature of your company’s business and the role it has with NFTs. For example, the policy for an NFT marketplace may be stricter and cover other topics than one for a brand that just licenses its IP for or just distributes a limited number of NFTs. While it is advisable to enlist the help of a competent attorney to craft a company-specific NFT Insider trading compliance policy, the following are some of the topics you should consider:
Covered Individuals: Who will the policy cover? For example, will the policy cover all employees and contractors or just those directly involved in the NFT project? Will prohibitions be extended to family members or those likely to be privy to the insider information?
General prohibition on use of material, non-public information (“MNPI”). Companies should consider prohibiting any covered individuals from buying, selling, trading, or otherwise engaging in NFT transactions based on MNPI.
Provide guidance on use of Company Intellectual Property. Companies should also be sure to provide Covered Individuals guidance on how such individuals are allowed to exploit any Company intellectual property, if at all, and the restrictions on doing so. For example, can an employee create his or her own NFT featuring the Company logo or other company related information?
No Early Access: To avoid the appearance of impropriety—and the bad press that may result—companies should carefully consider prohibiting any pre-sale or allocation of NFT to insiders. This might include, for example, requiring employees to burn or decommission any NFTs minted for “testing” purposes.
No Illegal or Improper Activity: While this is self-explanatory, the policy should make it clear that NFT transactions cannot be used for any illegal purposes (e.g., money laundering or sanctions avoidance) or for improper purposes (e.g., wash trading to manipulate the price or trading volume of an NFT). It is possible that some employees may not know that some of these activities are illegal.
Training: Employees should receive proper training under the compliance policy, including their confidentiality obligations with regard to the MNPI, and to help them understand when NFTs may be securities, why certain trading activity may be illegal or improper and to understand other regulatory considerations with NFTs.
Due to the evolving business models and legal issues with NFTs, it is advisable to work with an attorney familiar with theses issues to develop a custom policy for your company and to periodically update the policy. New issues continue to emerge, new regulations will undoubtedly be passed (eventually) and new lawsuits will raise issues that may not yet be in focus.
A crypto lending company called Celsius has paused withdrawals for its customers, sparking fears of contagion into the broader market.
Engineers adjust mining rigs at a cryptocurrency mining farm in Nadvoitsy, Russia, on March 18, 2021.Andrey Rudakov / Bloomberg via Getty Images file
By Arjun Kharpal, CNBC
Bitcoin tumbled below $23,000 on Monday, hitting its lowest level since December 2020, as investors dump crypto amid a broader sell-off in risk assets.
Meanwhile, a crypto lending company called Celsius has paused withdrawals for its customers, sparking fears of contagion into the broader market.
The world’s largest cryptocurrency bitcoin dropped below the $23,000 mark, according to CoinDesk data. At one point bitcoin fell about 17 percent to trade around $22,764. Some of those losses were later recovered, and around 4 p.m. on Wall Street bitcoin stood at $23,351 for a loss of 15 percent.
Over the weekend and into Monday morning, more than $200 billion had been wiped off the entire cryptocurrency market. The cryptocurrency market capitalization fell below $1 trillion on Monday for the first time since February 2021, according to data from CoinMarketCap.
Last week, U.S. indices sold off heavily, with the tech-heavy Nasdaq dropping sharply. Bitcoin and other cryptocurrencies have tended to correlate with stocks and other risk assets. When these indices fall, crypto drops as well.
“Since Nov 2021, sentiment has changed drastically given the Fed rate hikes and inflation management. We’re also potentially looking at a recession given the FED may need to finally tackle the demand side to manage inflation,” Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.
“All this points to the market not completely having bottomed and unless the Fed is able to take a breather, we’re probably not going to see bullishness return.”
Ayyar noted that in previous bear markets, bitcoin had dropped around 80 percent from its last record high. Currently, it is down around 63 percent from its last all-time high which it hit in November.
Now, the market is concerned about a crypto lending company called Celsius which said on Monday that it’s pausing all withdrawals, swap and transfers between accounts “due to extreme market conditions.”
Celsius, which claims to have 1.7 million customers, advertises to its users that they can get a yield of 18% through the platform. Users deposit their crypto with Celsius. That crypto is then loaned out to institutions and other investors. Users then get yield as a result of the revenue Celsius earns.
But the crypto market sell-off has hurt Celsius. The company had $11.8 billion worth of assets as at May 17, down from more than $26 billion in October last year, according to its website.
CEL, which is Celsius’ own coin, is down more than 50% in the last 24 hours, according to CoinGecko. Investors are concerned about broader contagion in the crypto market.
“The Celsius situation is definitely adding fuel to the fire,” Ayyar said.
“Broadly the markets were already under pressure from inflation concerns and the interest rate hikes, but with crypto such contagion events could cause outsized declines, given the market is tightly interlinked these days with a variety of inter-connected protocols and businesses.”
Mikkel Morch, executive director of crypto hedge fund ARK36, suggested there could be more pain ahead.
“In the medium term, everyone is really bracing for more downside,” he said. “Bear markets have a way of exposing previously hidden weaknesses and overleveraged projects so it is possible that we see events like last month’s unwinding of the Terra ecosystem repeat.”
Recently, the SEC published a proposed new regulation (the “Proposed Rule”) to amend the definition of an “exchange” for purposes of the Securities Exchange Act.1 Any person whose conduct meets the Proposed Rule’s new definition would be required to register as an exchange or apply for an exemption by registering as an Alternative Trading System (ATS).2
According to the Proposed Rule, the redefinition is intended to bring under SEC regulation certain traders in the Government Securities market. However, many observers have noted that the impact of the redefinition is over-broad in terms of its stated intent as it would extend the requirement to register as an Exchange or ATS to many business models previously outside its scope. The new definition is broad enough to cover both centralized and decentralized crypto exchanges3 . Simply put, the Proposed Rule extends the exchange registration requirement to any person or group that makes available a “Communications Protocol System” to conduct trades.
Given the tension between the SEC and the crypto industry, it is no surprise that crypto exchanges and other players view this move with extraordinary skepticism. Some commentators have described the relationship as a game of cat and mouse. In light of many public statements regarding crypto and crypto exchanges by SEC representatives and the wide array of legal challenges facing the industry, concern regarding this Proposed Rule is merited and invites the question, “what laws and regulations currently apply to crypto exchanges?”
Crypto-Exchanges & Securities Law
There is no special body of law or regulations that govern crypto exchanges. However, provisions of existing regulatory regimes may apply to their activity. Determining which rules apply requires a look into the specific activity carried out by a crypto exchange. This effort should involve, at a minimum, a deep dive into at least the following inquiries regarding the transactions completed and the tokens, coins, or other assets sold on the crypto exchange:
• Are they securities? • Are they subject to commodities regulation?4 • How are the transactions structured?
Narrowing our focus to securities regulation, crypto exchanges must grapple with compliance involving two broad registration requirements.
Any person “engaged in the business of effecting transactions in securities for the account of others” or in the “business of buying and selling securities for his own account” is required to register as a broker or dealer, respectively, and to join an SRO (i.e., FINRA).5 In determining whether a person is “acting as a broker,” the SEC would look to whether the person regularly participates in securities transactions “at key points in the chain of distribution.”6 Activities that indicate a person may be acting as a “broker” include: (1) solicitation of investors to purchase securities; (2) involvement in negotiations between the issuer and investors; and (3) receipt of transaction based compensation.7 Transaction based compensation is the “hallmark” of broker-dealer activity.8 The SEC interprets brokerage activity broadly. For example, it deems many people who act as investment “finders” for issuers to engage in brokerage activity.9
Exchange or ATS Registration
Online sites for trading in securities are generally required to register as broker-dealers and apply for authorization to operate an ATS. Persons that operate an ATS are exempt from the rule that only “exchanges” can provide facilities or a market place for trading in securities. Exchanges are defined by the Securities Exchange Act as “a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange as that term is generally understood.”10
Exchange Act Rule 3b-16, which governs the ATS exemption from exchange registration further defines an “exchange” as any person or group that (1) brings together orders for securities of multiple buyers and sellers; and (2) uses established, non-discretionary methods (whether by providing a trading facility or by setting rules) under which such orders interact with each other, and the buyers and sellers entering such orders agree to the terms of a trade. An “order” is defined as a “firm indication of a willingness to buy or sell a security … including any bid or offer quotation, market order, limit order, or other priced order.”11 Systems not meeting this two-part test are not “exchanges” under the current definition.12
Do the Current Broker-Dealer and Exchange or ATS Registration Requirements Apply to a Crypto Exchange?
Some companies operating crypto exchanges have maintained that they are not covered by the current definition of “exchange” and that they are not otherwise required to register as a broker-dealer. Several public comment letters to the Proposed Rule illustrate this.13 Their stated reasons include the following:
o The tokens or other digital assets sold by the exchange are not “securities.” o The crypto exchange does not facilitate or effectuate transactions for the account of others, but rather facilitates peer to peer trades between private parties or with liquidity pools. o They do not assist parties in negotiating transactions; transactions are disintermediated. o No actor “uses” non-discretionary methods to settle transactions. o They do not perform functions commonly performed by an exchange. o They do not publish price quotes. o They do not bring together “firm orders.”
The SEC and the Courts have not conclusively weighed in on many of the above arguments specifically in connection with crypto exchanges. The Proposed Rule recognizes that at least some “Communications Protocol Systems” do not fall within the definition of exchange.14 However, several publications and statements of SEC personnel appear hostile to these arguments in connection with crypto exchanges.
For instance, a 2017 investigate report addressing secondary market trading of unregistered “DAO” tokens noted that the DAO token was a security and that the platforms on which it traded should register as an exchange or a broker-dealer and ATS because they appeared to fit the definition of an exchange. In 2018, the SEC issued a statement on digital assets and trading, confirming its view that Exchange Act Rule 3b-16 contains a functional test and clarifying, “[n]otwithstanding how an entity may characterize itself or the particular activities or technology used to bring together buyers and sellers, a functional approach (taking into account the relevant facts and circumstances) will be applied when assessing whether a system constitutes an exchange.”
Significantly, by referring to the definition of “exchange” in the ATS rules as a “functional test,” the SEC signaled that it will not take a formalistic view of trading systems designed to avoid being literally captured within the definition.15 Although the SEC has “granted no-action letter to operators of passive communications systems that assist in transactions but do not play a role in effecting transactions in securities,” it is noteworthy that these letters appear to have addressed systems used between, or to communicate with, registered broker-dealers.16
Additionally, SEC Chair, Gary Gensler, observed in last year that Coinbase lacked a license to operate as an exchange “even though they have dozens of tokens that might be securities.”17 He also opined that “with 50 of 100 tokens” there is only a remote probability that any given platform has zero tokens that are securities.18 Some assets are obviously securities, such as those that are attached to equity ownership or profits interests. Others may provide access to only a good or service (i.e., a utility token) or represent only a tradeable good. Determinatively, Bitcoin and Ethereum have been deemed to not constitute securities.
Whether a cryptocurrency, token, or other digital assets is a security is determined by applying the analytic framework known as the Howey test.19 Many tokens traded on exchanges—even those labeled or thought of as “utility” tokens—qualify as “investment contract” securities. The SEC has offered a framework for analyzing whether digital assets are “investment contracts” based on the Howey test.20 Typically, if a token is intended to furnish access to a network that is not decentralized or fully functional and a purchaser of the token would expect the asset’s value to increase based on future efforts of a developer or operator, the token will be deemed a security.
Consequently, even before considering the impact of the Proposed Rule, crypto exchanges should seriously consider taking action to register as a broker-dealer and as an ATS. To recap, this is because many crypto exchanges likely sell coins or tokens that are securities and because of the broad and functional views taken by the SEC in connection with the definitions of “exchange” and “broker.” Virtually any action as an intermediary in a securities transaction can lead to liability exposure for having violated the broker-dealer registration requirement.
Although industry proponents may have plausible legal arguments that they are not a broker-dealer and that their trading system don’t meet the definition of an exchange, defending an enforcement action could be financially devastating for a crypto exchange. Further, participant or statutory underwriter liability could attach to the sale of unregistered securities by or on an exchange (this could depend on the proximity of the exchange and secondary trading to an issuer or an issuance) and could result in liability for violations of Section 5 of the Securities Act.21
The Proposed Rule’s Redefinition of Exchange & Impact
The Proposed Rule would redefine exchange (and extend the registration requirement) to include any organization or group of persons that, by way of any “Communication Protocol Systems,” “brings together buyers and seller using trading interest … under which buyers and sellers can interact and agree to terms of the trade.” In addition, “trading interest,” in addition to “an order” is redefined to mean “any non-firm indication of a willingness to buy or sell a security that identifies at least the security and either quantity, direction (buy or sell), or price.”22
Several comments on the Proposed Rule from market participants have observed that it would have a devastating impact—both for the industry and holders of digital assets. They further comment that the Proposed Rule suffers from procedural defects as applied to the digital assets industry and does not comply with the Administrative Procedures Act.23 Others have opined that the SEC is without statutory authority to redefine exchange as broadly as proposed in the new rule.
Among the challenges noted by industry participants is the difficulty of registering ATS platforms that trade in digital assets with the SEC and FINRA.24 Further, because of their decentralized nature, at least some decentralized crypto exchanges implemented by “Communications Protocol Systems” may not have any realistic possibility of registering as an ATS. As a result of these and other issues, crypto industry participants have voiced grave concerns and have signaled their willingness to defend future enforcement actions.
Whether the SEC will proceed with the Proposed Rule as written or make modifications to accommodate the digitals assets industry remains to be seen. The public comment period on the Proposed Rule closed April 18, 2022, but the SEC recently reopened it until June 13, 2022. One thing is certain: the story on crypto exchanges and registrations has not been finally written.
 Amendments Regarding the Definition of “Exchange” and “Alternative Trading Systems (ATSs) that Trade U.S. Treasury and Agency Securities, National Market System (NMS) Stocks, and Other Securities, 87 FR 15496, SEC Release No. 34-94062 (proposed March 18, 2022) (to be codified at 17 C.F.R. pts 232, 240, 242, and 249). Available at SEC: Proposed Rule.
Registering as an ATS is significantly less burdensome than registering as an exchange.
 This term is used broadly here to mean any platform or facility for secondary exchanging of digital assets.
 Commodities regulation is not addressed in this blog.
 See Sections 3(a)(4)(A) and 3(a)(5)(A) of the Securities Exchange Act.
 SeeSEC v StratoComm Corp., 2 F.Supp.3d 240, 253 (N.D.N.Y. 2014), aff’d 652 Fed.Appx. 35 (2d Cir. 2016) (citing Mass. Fin. Servs., Inc. v. Sec. Investor Prot. Corp., 411 F.Supp. 411, 415 (D.Mass.1976) aff’d, 545 F.2d 754 (1st Cir.1976)).
 SeeId. (citing SEC v. Gagnon, No. 10–cv–11891, 2012 WL 994892, at *11 (E.D.Mich. March 22, 2012); SEC v. Hansen, No. 83 Civ. 3692, 1984 WL 2413, at *10 (S.D.N.Y. Apr. 6, 1984)).
 See SEC No-Action Letter, Brumberg, Mackey & Wall, P.L.C. (May 17, 2010). Available at: Letter: 5.17.2010
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Finding the right software provider is one of the most important decisions you’ll make when deploying digital signage in your business.
Jan. 14, 2022
Finding the right software could be one of the most important decisions companies make as they prepare to roll out a digital signage platform. However, there are many factors to consider when choosing the ideal software.
Initially, companies must decide how they want to use digital signage. What is their end-goal for deployment? That will help users select the best product and vendor to fit their needs. The best digital signage software should be able to juggle a lot of different functions, such as touch screens, internet of things, beacons, speech, and Web triggers, among others.
If the software can handle all of these elements, chances are it will have no problem handling a demanding workload. The software must not only deliver clear, concise content, but have the ability to deliver it in real time. It’s also important to choose a software package with analytics features. That way, users can measure the effectiveness of their digital signage deployment.
Below are some of the top digital signage software providers in the market…
Intuiface is a no-code platform dedicated to the creation, deployment, and analysis of interactive digital experiences that connect people to place. Over 1,300 agencies, integrators, and enterprises across 70-plus countries are engaging audiences in-venue, on the web, and on personal mobile devices using interactive options such as touch, gestures, sensors, voice, computer vision, the Internet of Things, and more. It is an ISO 27001 Certified platform that can be used by most industries — including retail, hospitality, real estate, tourism, education — and for any intent — from digital signs to self-service kiosks and assisted selling. What makes Intuiface unique is:
Use of no-code techniques
Traditional, digital signage platforms
Insight and innovation for human-machine interaction
Vertical Markets Served Any vertical where target audiences are engaged in-venue. Includes retail, tradeshows, QSRs, workplaces, hospitality, museums, education, and more.
Top Clients Deloitte, FirstImpression, Musco, Yves Rocher, Stanley Martin Homes
Visix, Inc. offers a suite of digital signage software, content designs and meeting room signs for organizations wanting to engage, excite, and inform their audiences. Visix’s products work separately or together, are competitively priced and scalable, and have interactivity and data integration features for a unified, enterprise signage solution. Visix’s service and support teams consistently rank high in customer satisfaction for fast, professional responses and solutions.
Vistar Media is an end-to-end programmatic ecosystem for digital out-of-home. Vistar Media’s demand-side platform and supply-side platform help buyers and sellers transact on DOOH inventory, while applying data insights to improve media performance. Vistar’s SaaS solutions (the ad server and Cortex for device and content management) deliver enterprise-grade solutions for monetizing and operating digital signage networks at any scale. Founded in 2012, Vistar Media is headquartered in New York City and has offices across the United States, Canada, EMEA and APAC. Vistar’s mission is to transform the OOH industry through programmatic technology, and enhance every transaction in the physical world with data-informed targeting, automation and measurement.
Vertical Markets Served Vistar serves a variety of vertical markets including large formats such as billboards and street level transit; place-based including malls, gyms, office buildings, gas stations, restaurants, bars, taxis; and point of purchase found in convenience stores, grocery stores and pharmacies.
Top Clients Volta, Coinstar, GSTV, Lamar, Clear Channel
Amidst the age of information revolution, a new medium has emerged — Digital Signage. In 2004, a group of passionate dreamers and engineers combined their faith and creativity to open more possibilities for the digital signage industry, and thus CAYIN Technology was born. Marked with an ambitious drive, CAYIN Technology dived into the world of precision marketing and multimedia information announcement. Looking to domestic and international technological advancements and combining the newest technology with multimedia players to develop comprehensive digital signage solutions, including diversified media players, content management servers, and advanced management software for monitoring and generating reports.
CAYIN Technology has 17 years of experience in developing digital signage solutions, supports clients in more than 90 countries and has connected more than 1,000 brands and institutions with digital signage.
Vertical Markets Served CAYIN Technology in the digital signage market has been seen across schoolyards, retail stores, large-scale meeting rooms, museums, etc.
Top Clients McDonald’s, FamilyMart, DFS Galleria, SOGO, acer
Omnivex connects people and data. The Omnivex digital signage software enables users to collect, process, and deliver targeted information across your entire organization on any screen. It connects people with real-time visual information where and when they need it. Omnivex helps you achieve real business goals — increase and accelerate revenues, reduce delivery costs, improve customer loyalty, build brand equity and enhance employee engagement and productivity. Omnivex digital signage software enables you to:
Deliver real-time messaging to improve efficiency and ensure accuracy
Scale networks as business requirements change
Deliver targeted, intelligent content
Encourage interaction and improve customer experience
Adapt to accommodate new applications and departmental needs
Coates Group is an innovative technologies producer. Coates delivers end-to-end merchandising solutions through its extensive product range, covering everything from its powerful CMS software, Switchboard, to its digital hardware and signage. Switchboard content management system is a web-based, data-driven, scalable platform built for medium to large QSR brands and retail environments. It’s a key component in Coates’ digital merchandising solution designed to create, distribute, and display digital media to generate customer engagement. Switchboard uses real time data and analytics to orchestrate a customer journey by showing the right product, to the right customer, at the right time, while increasing revenue.
Vertical Markets Served Quick service restaurant, fast casual, retail, entertainment
SpinetiX inspires businesses to unlock the potential of their story. The SpinetiX team believes in the power of digital signage as a dynamic new storytelling platform to engage with people. For more than 15 years, they have been innovating to deliver cutting-edge technology that helps customers shine. SpinetiX delivers the most flexible and end-to-end signage solution on the market that answers to any deployment scenario: cloud-based, on-premise, or hybrid. SpinetiX ARYA is the cloud digital signage application designed as a one-stop content creation and distribution platform for end-customers or integrators. Elementi, on the other hand, is a simple, yet powerful signage software for rich data-driven content, easily integrated with 3rd party technology, that answers the needs of on-premise scenarios. In a hybrid scenario, both Elementi and SpinetiX ARYA can be used together for a best-of-both-worlds experience.
Vertical Markets Served The SpinetiX digital signage solution is used by the widest array of industries and easily integrates with third-party technologies: from big retail brands, corporate businesses, educational, public and healthcare institutions, hospitality, transportation to small businesses.
Top Clients Moss Adams, Mercury Systems, Columbia Distributing, Equifax, Lowe’s
Xibo is a reliable, cost effective digital signage solution that adapts to your business needs. Transform your digital signage designs simply and quickly to provide an engaging experience. Xibo powers digital signage networks worldwide through their open-source, web-based content management system, available with a choice of Android, Windows, webOS, Tizen and Linux players. With Xibo’s in the Cloud hosting solution, they manage everything needed to get your CMS running so that you can focus on content. You get the same great Xibo solution, with full support from the people who made the software.
Vertical Markets Served Hospitality, Retail, Education, Healthcare, Corporate, Transport, Out of Home
Userful’s software platform delivers IT teams unparalleled end-to-end control over corporate signage deployments. Unlike competitors, Userful provides infrastructure management without requiring proprietary hardware. Userful servers can be run in either a public cloud, or a private cloud configuration, while end-points (uClients) are software defined apps, available for LG WebOS displays, or any display with certified off-the-shelf uClient adapters. It offers unique workflow flexibility to display any content, from local network streams, HDMI inputs to 8k video files for large video walls, or use applications like Emerald Signage, a fully integrated Content Management System (CMS), and other 3rd party CMS integrations. Furthermore as a software-defined AV-over-IP platform, Userful can also be used in other application areas such as control rooms and meeting rooms, enabling Enterprise IT to standardize and do more with a single platform.
Vertical Markets Served Enterprise, Goverment, Education
Top Clients Texas Department of Transporation (working with AT&T), Comcast, Red Bull, Riachuelo, Visa
UCView combines a simple user interface with flexible features and an extensive library of easy to use widgets and templates. Their software allows you to deliver your digital signage message to any TV or display simply and professionally. Individually control each screen or control as groups from cloud or locally stored CMS. UCView also comes complete with its own integrated IPTV platform, allowing you to entertain as well as inform your audience. UCView offers the necessary tools and functionality to efficiently design, distribute, and monitor digital signage content. The solution offers built-in content integration with over 120 apps that support all popular media formats. Users can design full-featured layouts using drag-and-drop functionality, as well as rotate, resize and crop sections. The Live TV feature and HDMI capture card allows users to connect a cable or satellite for capturing HD video content.
Vertical Markets Served Venues, Education, Corporate, Military, Government and Retail.
Top Clients LA Coliseum USC Stadium, University of Idaho, The Legacy Sports Arena (Mesa, Ariz.), Camp Pendleton, Pensacola Stadium
What WordPress is for websites, eyefactive’s app platform is for interactive software on professional touchscreens: Create engaging interactive signage software solutions on any large-scale multitouch display, table, kiosk terminal or videowall. Combine and customize ready-to-use multitouch apps easily and integrate your own content, layouts and designs, with a minimum of time and cost, without any programming involved. Provide amazing interactive experiences for point of sale, information and entertainment – as well as collaborative teamwork and innovative communication in corporate environments. Compared to simple html point and click applications, all apps are based on eyefactive’s multiple awarded software technology to provide true multi-touch and multi-user experiences, with a smooth and ultra-fast performance on any touchscreen system.
Vertical Markets Served Interactive signage touchscreen solutions for smart retail at the Point of Sale, infotainment and corporate communication.