December 8, 2021

Volume XI, Number 342

Advertisement
Advertisement

December 07, 2021

Subscribe to Latest Legal News and Analysis

December 06, 2021

Subscribe to Latest Legal News and Analysis
Advertisement

State Securities Regulators Step Up Scrutiny of Cryptoassets and ICOs

On October 10, the North American Securities Administrators Association (“NASAA”)—an association of state, provincial, and territorial securities regulators in the United States, Mexico, and Canada—released its annual Enforcement Report (the “Report”). The Report demonstrates that, while stepped-up enforcement activity has been observed at the federal level with respect to cryptoasset markets, state regulators are increasingly getting in on the action.

Of particular note in the Report is the marked increase in the number of enforcement actions against unregistered individuals and firms—a 24% increase over the prior year. In the press release accompanying the Report, NASAA’s President, Michael S. Pieciak, attributed this increase in part to regulators’ focus on fraudulent initial coin offerings (“ICOs”) and other cryptoassets. The increase was also driven by various jurisdictions’ adoption of the NASAA’s model statute intended to protect vulnerable senior investors from exploitation.

The surge in enforcement activities related to cryptoassets in 2017 has prompted many of NASAA’s U.S. and Canadian members to launch a coordinated sweep of promoters and issuers of illegal and fraudulent offerings. The sweep, titled Operation Cryptosweep, began in early 2018 and has resulted in 50 enforcement actions as of the date of the Report. According to previous statements, the sweep has focused primarily on fraud, as well as state law violations including failure to register a product before an offering.

Given the success of the recent enforcement programs, cryptoasset market participants can expect a continued level of scrutiny from members of the NASAA, and should remain diligent regarding the evolving landscape of both state and federal regulation of cryptoassets.

© 2021 Covington & Burling LLPNational Law Review, Volume VIII, Number 285
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Burr Eckstut, Intellectual property attorney, Covington
Special Counsel

Burr Eckstut advises clients on strategic transactions involving the development and exploitation of technology and data, including joint ventures, IP licensing, and outsourcing. He also advises clients on intellectual property issues arising in mergers and acquisitions.

Mr. Eckstut has particular expertise in fintech, advising on legal matters arising with trading platforms and other financial market infrastructure, investment products, market and reference data, research, analytics, valuation, indexes and other benchmarks, and RegTech (regulatory technology)....

212 841 1112
Advertisement
Advertisement
Advertisement