TRANSCRIBED FROM: http://adamtracy.io/video/cryptocurrency-copy-trading/
Copy trading is big. It’s always been big in Forex and it’s getting incrementally bigger in crypto, and what copy trading is, is where an experienced trader gains access to a platform and the client allocates certain amounts of his or her account and those trades are made automatically. They just basically copy what the experienced trader is doing and you see a lot of groups trying to emulate that in the crypto space through APIs and whatnot.
Adam S. Tracy:
Just focusing on Bitcoin, let’s talk about the legality of copy trading, what you could in theory have to do in this exceedingly gray area. When you’re talking about copy trading, and you’re talking about Bitcoin, let’s go from the premise that Bitcoin is a commodity, and let’s work from the Forex example where copy trading sort of originates from and then we’ll do, we’ll go to the equity side, to the security side.
Adam S. Tracy:
Generally speaking, if you are going to do copy trading, which contemplates automatic investing, investing where the trades that the client makes are generated by the software, by the signal provider, by the “experienced trader”, generally speaking you need to be registered as a commodities trading advisor and that is because you’re providing investment advice regarding the investment or trading of futures products.
Adam S. Tracy:
This is governed by the CFTC, not the SEC. In most cases, to become a CTA you have to one, register obviously with the CFTC but also register with the NFA, the National Futures Association and that would provide you with the ability, and this is sort of the hook if you will, the ability to have the automatic trading. In the absence of the automatic trading, you may have to be something called an introducing broker, but going from the basis that you’re trading off an API and how these work, well it looks like, from my perspective, in my opinion, that you would have to be a licensed a commodities trading advisor.
TRANSCRIBED FROM: http://adamtracy.io/video/cryptocurrency-copy-trading/
Adam S. Tracy:
So, and that process is in terribly difficult to go through, but it does require registration with the CFTC and again the NFA. There are some exceptions to that, and that’s when your trading algorithm or your trading, your signal provider, if you want to call it that, is numerically based. Where it’s based on a formulaic capacity or general numeric qualifiers. If the price of Bitcoin futures reaches $6,000, it’s an automatic sell. Something like that. Something that’s nuanced and driven less by the intuition and knowledge of the signal provider and more so from particular formulas or static market conditions.
Adam S. Tracy:
The question becomes, “I want to manage crypto wallets. What do I do? Can I do it?” Well, I think by the strictest interpretation, I think you need to become a commodity trading advisor if you want to manage these wallets, and that’s because Bitcoin technically is a commodity.
TRANSCRIBED FROM: http://adamtracy.io/video/cryptocurrency-copy-trading/
Adam S. Tracy:
Now, last week we had the SEC come out and say that they’re not going to regulate Ethereum. The question becomes, “Does Ethereum fall back into the definition of a commodity,” and generally speaking, the CFTC has considered Ethereum to be a commodity since its inception. I think that’s the direction we’re going. At the end of the day, Bitcoin has to be something. Ethereum has to be something. It’s a digital asset and if it’s a currency, then derivative products, which would be what you see on akin to like a Forex, those are commodities and those are going to be regulated.
Adam S. Tracy:
I think the short answer is if you want to do managed wallets, if you want to lock in with an API and do copy trading, which is effectively what a managed wallet is, then I think that spurs the need for CTA Registration and NFA registration. It’s probably not what a lot of people want to do, but I think at the end of the day, that’s where it’s going to go, and it’s the only way that you can look at it and truly say that you’re insulated from potential regulatory liability if you have that registration.
Adam S. Tracy:
Now, the opposite end of the spectrum is sort of if you’re going to trade ICO tokens that may be securities because then you’re looking at a registered investment advisor registration, which I’ll talk about in a future bit, but for the short and quick answer of, “What do I need if I want to manage wallets through either, through an API or some sort of copy trading format?” The answer is a CTA and NFA registration with the exception being that you have some sort of algorithmic or automatic trading system that’s predicated upon a computer system and arbitrarily defined by numbers.
TRANSCRIBED FROM: http://adamtracy.io/video/cryptocurrency-copy-trading/
Adam S. Tracy:
Check me out, tracyfirm.com if you have questions. This area’s rapidly evolving. You’ve got people coming out and saying that things are and aren’t securities or commodities every single day. So, what I’m telling you today could be completely worthless tomorrow. Hopefully it’s not, but yeah, hit me up adam@adamtracy.io
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A former professional rugby player, Adam S. Tracy brings over twenty years’ experience as an attorney, consultant and dealmaker with a particular focus on cryptocurrency, digital products, payments and immersive corporate structures. As an accomplished executive and advisor to high risk merchants and stakeholders, Adam has proven himself as a results oriented, decisive leader with proven success advising early market entrants, technology adapters, as well as established participants across a wide range of verticals. Adam Tracy’s attack-first personality allows him to excel in dynamic, demanding environments including complex corporate negotiations, distressed environments and regulatory investigations.
In addition, Adam S. Tracy also has a successful track record co-founding high risk industry ventures, building & leading cross-functional teams, and spearheading diverse corporate transactions. A serial entrepreneur, Adam has successfully started and created exits across a wide swath of markets, including various mobile SaaS ventures, nutraceuticals, peer-to-peer payment systems, and several telemarketing-based ventures. Moreover, as a recognized expert in the payments field, Adam Tracy has been a blockchain and digital currency evangelist and influencer since the early days of Bitcoin.
Utilizing his proprietary “Pre-Event Driven™” strategy for decision making, Adam S. Tracy further leverages his over twenty years’ experience to create cost-effective, value-add solutions for each client. A data-driven acolyte, Adam continually refines his strategies based on field studies and data collection. Moreover, Adam Tracy further augments his range of solutions by actively networking with regulators, liquidity providers, legal and compliance experts, deal-flow brokers, investors and management of leading high risk industry ventures.
Adam S. Tracy earned his Bachelor of Science in Computer Applications and Bachelor of Science in Finance from the University of Notre Dame. He subsequently earned his Masters in Business Administration from the DePaul Kellstadt Graduate School of Business, while concurrently earning his Juris Doctorate from the DePaul College of Law. Adam lives outside Chicago with his with his wife, four dogs, and two cats.
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