Business

Derek Tonin

SEC clarifies rules for money services businesses, stops Telegram cold

The U.S. Securities and Exchange Commission (SEC) has been weighing in to the cryptocurrency more heavily in recent days, and Telegram is experiencing plenty of headaches as a result. The regulator has recently come forward with a big announcement on digital assets, halted Telegram’s token offering, causing Telegram to take a big step back to reassess.

On October 11, the Chairman Jay Clayton of the SEC joined leaders of the Commodity Futures Trading Commission (CFTC) and Financial Crimes Enforcement Network (FinCEN) to issue a joint statement on digital asset activities. In it, they declared, “AML/CFT (anti-money laundering and countering the financing of terrorism) obligations apply to entities that the BSA (Bank Secrecy Act) defines as “financial institutions,” such as futures commission merchants and introducing brokers obligated to register with the CFTC, money services businesses (MSBs) as defined by FinCEN, and broker-dealers and mutual funds obligated to register with the SEC.” 

The requirements for the MSBs are made pretty clear in the statement:

Among those AML/CFT obligations are the requirement to establish and implement an effective anti-money laundering program (AML Program) and recordkeeping and reporting requirements, including suspicious activity reporting (SAR) requirements.

If those requirements weren’t already too much for Telegram, the news that the SEC was filing a restraining order against their digital token offering of Gram must have been. In their announcement of that action, Steven Peikin, Co-Director of the SEC’s Division of Enforcement, noted: “Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.”

Specifically, the SEC notes they are charging Telegram and the Telegram Open Network (TON) with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act, and are seeking injunctions against them proceeding at all.

How is Tron reacting to all this news? At the moment, by putting a pause to everything to re-asses:

But they aren’t totally giving up. CoinDesk is reporting Telegram is seeking to negotiate with the SEC to resolve the restraining order and get the sale back on, possibly later than the originally planned October 31 deadline.

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