US Congressman introduces federal crypto regulations

The U.S. could be inching closer to creating a regulatory framework for cryptocurrencies and initial coin offerings (ICO). Representative Warren Davidson from Ohio has been working on a new bill that is designed to pave the way for crypto and ICO regulations, according to media outlet, and would clarify the definition of cryptocurrencies.

The bill will be presented to the House of Representatives for discussion. It looks to create a new and unique asset class that would cover crypto and ICOs, allowing the government to regulate the crypto space more thoroughly. The legislation is designed to prevent digital assets from being classified as securities and would allow the federal government to maintain complete regulatory oversight of token offerings.

There is a lot of confusion in the U.S. regarding how to define cryptocurrencies. The Securities and Exchange Commission (SEC) has said that, with the exception of Bitcoin Core (BTC) and Ether (ETH), the majority of cryptocurrencies are securities. On the other hand, the Commodities Futures Trading Commission (CFTC) asserts that they are commodities.

Two additional agencies, the U.S. Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN), both say that crypto is money. Without a central definition in place, standard regulations cannot be created.

Davidson is somewhat of a proponent of cryptocurrencies, or at least of the space in general. He has been pushing for regulation of crypto and assisted in the writing of a letter to the SEC this past September in which he asked that the commission speed up its introduction of legislation in order to prevent tech companies from leaving the U.S. The letter read, in part, “Current uncertainty surrounding the treatment of offers and sales of digital tokens is hindering innovation in the United States and will ultimately drive business elsewhere. We believe that the SEC could do more to clarify its position.”

Even if the bill were to pass through the House, it would still need to be considered by the Senate. Ultimately, this means that regulations shouldn’t be expected to come anytime soon. Perhaps they’ll be implemented sometime next year, but there’s still a long road ahead.

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‘Relaxed’ Swiss license allows fintech startups to accept public deposits

The Swiss financial regulator has issued fresh guidelines for fintech startups, giving leeway to licensees to accept up to CHF100 million ($100.1 million) in public deposits, in a radical move designed to boost innovation in the sector.

The move comes as part of the new Banking Act, which has been designed in part to create more favourable conditions for fintech businesses, including expanding the options for crowd-lending models within a regulatory sandbox environment.

The guidelines are part of a wider strategy of supporting the crypto sector by the Federal Council of the Swiss Financial Market Supervisory Authority, which aims to boost Switzerland’s profile as a global destination for crypto and fintech startups.

Crucially, the new guidelines give crypto businesses the ability to accept deposits from the public without the need for the same authorisations as a bank, enabling them to explore innovative models without the full range of compliance expectations.

According to a statement from FINMA, which will oversee firms in the regulatory sandbox and is responsible for issuing the new licenses, the measures will begin to come into effect at the turn of the year. It explained, “With the new measure, companies with special authorisation can accept public funds of up to CHF100 million from 1 January 2019, provided they neither invest nor pay interest on these funds.”

The statement goes on to reference amendments to the Bank Ordinance (BankO), which will come into force in April 2019, noting, “In the BankO, the sandbox will additionally be extended to include crowdlending business models, whereby public funds up to a total amount of CHF1 million can one day be brokered not only for commercial and industrial purposes but also for private consumption.”

The fintech license is aimed at startups looking to explore models of taking deposits, without investing or paying interest on those deposits.

The policy is designed to help cement the reputation of Switzerland and the city of Zug as a haven for cryptocurrency innovation, with an already established and booming crypto sector in the country.  

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To protect investors, Japan plans to regulate ICOs

Japan’s chief financial regulator, the Financial Services Agency (FSA), will reportedly roll out a new set of regulations targeting initial coin offerings (ICOs) in the country. According to Japanese news outlet Jiji Press, the financial authority wants to impose new regulations to protect investors in the crypto space.

Citing the increased fraudulent activities relating to ICOs, FSA believes it is high time they took appropriate actions to provide order and protection for the public. In the proposed regulations, all businesses offering crypto-related services in the country will be required to register with FSA before starting operations.

FSA plans to submit the proposed bill in January 2019, during the ordinary parliamentary session. The proposed bill will seek to revise the financial instruments and exchange law as well as the payment services law, according to the report.

The Japanese FSA is not the only financial authorities to want regulations for the ICO space. In the recent months, the U.S. Securities and Exchange Commission (SEC) has been busy in trying to regulate ICOs. Though it has taken a conservative and traditional approach on ICO, U.S. securities regulator has made a milestone in shaping the ICO industry. Last month, authorities in Thailand also tightened its grip on ICO regulation to create order in the industry.

Different jurisdictions worry that if proper regulations are not set for ICOs, fraudulent activities will cause significant effects on the economy. They have a good reason to worry. According to a recent report by Diar, a cryptocurrency and blockchain research company, ICO fraudulent cases have raised $12 billion, twice more than what was reported in 2017.

In the report, Diar stated that the amount raised by the ICO does not justify their operations.  The report also noted that most of the ICOs either get unlisted or they do not have the funds needed to stay in business. More than 60 percent tokens that completed their ICOs in 2017 and 2018, raising over $2.3 billion in the process, have yet to be listed on any exchange.

The report also noted that a good number of these ICOs have ended up being scams. ICO owners conduct an exit scam after collecting millions of dollars from unsuspecting investors. In the last two years, exit scams caused by ICOs amounted to $100 million.

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G20 nations agree to regulate crypto in line with FATF rules

Members of the G20 international forum have signed a joint declaration that establishes, among other things, the adoption of regulations for cryptocurrencies, in line with standards set forth by the Financial Action Task Force (FATF).

Various media outlets reported that the statement was signed at the conclusion of G20 talks during the weekend, in which concerns such as climate change, sustainable development, gender equality, and movement of refugees were also addressed.

Part of the document read, “An open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth… We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards and we will consider other responses as needed.”

Related to this, the G20 nations also committed to “continue to work together to seek a consensus based solution to address the impacts of the digitalization of the economy on the international tax system with an update in 2019 and a final report by 2020.”

The FATF consists of 37 member nations. Last October it had set the requiring of its standards to be applied in jurisdictions by June of next year. Under these regulations, cryptocurrency-related entities such as wallet providers, cryptocurrency exchanges, and those holding initial coin offerings (ICOs) will be required to conduct customer due diligence, which includes monitoring and reporting of transactions deemed suspicious.

Countries that fail to meet such standards, as determined by the task force’s periodic reviews, risk being placed in its blacklist.

The G20 includes the European Union (EU) and 19 countries, most of which are represented in the FATF as well, including Argentina, Australia, Japan, the UK, and the U.S.

Reacting to G20’s latest declaration, Bobby Lee, co-founder of the BTCC exchange, tweeted that “national governments are slowly but surely losing their monopoly and ability to issue fiat money.”

In connection with pronouncements and actions by the FATF and G20, individual countries such as Japan and Thailand, as well as individual U.S. states, are already pursuing their own financial reforms taking into account cryptocurrency markets and blockchain technology.

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3 crypto companies operating sans license shut down in Italy

Italy’s financial regulatory body, the Commissione Nazionale per le Società e la Borsa (CONSOB), has ordered three cryptocurrency startups to shut down after it found that they have been providing unauthorized cryptocurrency investment services in the country.

After receiving complaints from the public, the regulator started investigating the platforms. It discovered that the three—Richmond Investing, Crypton Ltd., Eagle Bit Trade—along with Alessandro Brizzi, who represents Cryptoforce Ltd., were not authorized to promote their products in the country.

The first company, Richmond Investing, reportedly failed to register as a financial intermediary which violates the Consolidated Law on Finance (TUF). According to the CONSOB release, CryptoForce, a company specializing in Proof-of-Stake (PoS) mining also promoted a cryptocurrency called “Crypton.” On the other hand, Brizzi was advertising CryptoForce on Facebook. The last company, Eagle Bit Trade also offered supposedly unauthorized “trading packages” to Italian investors. All these activities violated the regulations, according to CONSOB.

CONSOB has suspended the companies for 90 days. Recently, authorities in Italy have been tightening up crypto regulations, following the European Union’s footsteps in correcting the crypto space.

The Italian watchdog earlier published a warning against a list of financial companies that are listed as trading frauds by other European financial regulators. In September, Bruegel, a Brussels-based think tank, called on European Union authorities for more inspection on how cryptocurrencies were allocated to investors.

CONSOB advises investors in Italy to check its registers before making any investment with a broker. They should be keen especially if the broker or company uses aggressive marketing techniques.

So far, Italy does not have a formal framework for crypto business. However in March, the Italian Ministry of Economics announced the creation of a law that would classify the use of cryptocurrencies. The law also lists service providers related to digital currencies.

As reported by Finance Magnates, authorities in Italy have not banned financial institutions from dealing with cryptocurrencies. They are instead recommending that they wait until formal regulations are introduced.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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India could introduce crypto regulations in December

It’s one thing to change an idea based on new facts or evidence. It’s something completely different to flip-flop back and forth when the facts have remained the same the entire time. However, that’s exactly what seems to be occurring in India. After stating in November that there was a possibility that all private cryptocurrencies, including Bitcoin Core (BTC) and Bitcoin BCH, could be banned, the country is reportedly going to introduce a draft of crypto regulations as early as this December.

A report by Quartz released yesterday asserts that India’s finance ministry had given a task group the responsibility of creating regulatory norms and policies for crypto trading, as well as for blockchain technology. That group is expected to present its report next month.

The possibility of the draft first appeared in a statement issued by the country’s government related to a Supreme Court case that is pitting cryptocurrency exchanges against the Reserve Bank of India (RBI) and its banking ban. The statement reads, in part, “[S]erious efforts are going on for preparation of the draft report and the draft bill on virtual currencies, use of distributed ledger technology in (the) financial system and framework for digital currency in India.”

Once the draft is ready, it will be distributed to members of the finance ministry. From there, a ministry committee will discuss the draft to determine how to proceed. It’s not yet known what the draft may contain, but India’s Secretary of the Department of Economic Affairs and chair of the committee, Subash Chandra Garg, has said that the committee has “moved quite a lot” in drafting regulations. That progress comes despite the committee routinely missing deadlines on the draft.

Whether or not this will be a good thing for the crypto industry in India or not remains to be seen. The country has seemingly been more anti-crypto than pro recently, taking several actions that seemed not only to suppress the space, but could also be considered illegal – at the very least, draconian.

Last month, police seized the first crypto ATM, which had been installed by the founders of the Unocoin exchange. The founders were also arrested in conjunction with the seizure. The excuse given was that the ATM violates current fiat laws. However, the teller only allowed users to conduct crypto-to-crypto transactions, which, according to Indian law, is not illegal.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Singapore’s new payment services regulations include crypto coverage

Singapore is proactively working to implement changes that will foster a positive environment in which cryptocurrencies can flourish in the country. In October, the Monetary Authority of Singapore (MAS) announced an effort that was meant to bring banks and crypto operators together and, now, the country is introducing new payment services regulations that will cover crypto exchanges, as well.

According to a publication on the government’s website, a new bill looks to introduce regulatory framework that will give the MAS the ability to regulate seven types of payment services. Among them is cryptocurrency payment token services. That bill, the Payment Services Bill, has already made its first appearance in front of Parliament.

The bill looks to expand the control of regulated payment services given to the MAS. It specifically authorizes the agency to regulate payment services in relation to several risks, including money laundering and terrorism financing, limitations to interoperability, loss of consumer or merchant funds due to insolvency and risks associated to cyber-attacks.

The bill is divided into two parts—the designation framework for payment systems and the licensing framework for payment service providers. The first framework will give the MAS the ability to assign particular payment systems, as well as to regulate operators and settlement institutions. The second authorizes the MAS to regulate payment services provisions, including account issuance, cross-border and domestic money transfers, eCommerce issuance services and merchant acquisition services, among others.

The bill specifically defines a “digital payment token service” as the practice of “buying or selling digital payment tokens (commonly known as cryptocurrencies), or providing a platform to allow persons to exchange digital payment tokens in Singapore.”

According to the bill, “To ensure that the objects of the Bill are met, MAS will have general powers over all regulated entities, including powers to conduct inspections and investigations, and emergency powers. The Bill will require regulated entities to comply with general requirements relating to corporate governance, capital adequacy and business conduct.”

The move could help Singapore take a leading spot among the jurisdictions favorable to cryptocurrency’s future role as a viable alternative to fiat. It could also assist the country in becoming the first country to fully accept cryptocurrency, as it said it wanted to do this past September.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Crypto businesses in Isle of Man face stricter requirements

Regulators in the Isle of Man have tightened the rules around registering cryptocurrency businesses in the jurisdiction, imposing two new conditions on those seeking to register.

In a revision to the Designated Businesses Act 2015, which established the structure of regulation for registered cryptocurrency businesses in the British Crown Dependency, companies will now be required to have at least two directors resident on the island.

There is also a new requirement for businesses to be managed and controlled from the Isle of Man, in a move that has been seen as shoring up the island’s crypto industries.

According to the Isle of Man Financial Services Authority (Iomfsa), the changes are a necessary step to allow the regulator to undertake effective industry oversight. It noted, “In order for the Iomfsa to be able to successfully undertake its statutory duty of overseeing compliance of designated businesses with the AML/CFT legislation, designated businesses must have sufficient real presence to facilitate oversight.”

The revised rules also impact on initial coin offerings (ICOs), in particular holding that ICOs will only be permitted where they offer a ‘benefit’ beyond the token itself, although the precise legal definition of ‘benefit’ remains unclear.

The update in the law comes at a time of increasing competition between jurisdictions vying to create favourable regulatory regimes for the growing cryptocurrency sector. In particular, the introduction of official legal frameworks is designed to enable large institutional players to become more involved in crypto sectors, which relies on legal certainty and structure.

It follows in the footsteps of jurisdictions like Gibraltar, already a haven for iGaming and financial services, which became the first jurisdiction to introduce a regulatory regime for ICOs.

A number of cryptocurrency companies have set up or moved to Malta on a similar basis, thanks to its structured crypto laws, including Binance and Okex. Similarly, Switzerland and neighbouring Lichtenstein are working with banks and regulators to foster their nascent Crypto Valley in Zug, home to some of Europe’s most fancied crypto startups.

With more companies choosing to set up in the Isle of Man, it remains to be seen whether the tightening of licensing conditions will make the jurisdiction even more appealing to those crypto firms pitching at regulated businesses.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Switzerland clamps down on banks trading in crypto: report

The situation in Switzerland got a whole lot more difficult for cryptocurrency and banking in general, as the Swiss Financial Market Supervisory Authority (FINMA) is getting tough on those banks who want to trade in crypto assets.

On Monday,  reported that the financial regulator has described its stance on how financial institutions should weigh crypto assets.

In a letter to EXPERTsuisse, a copy of which was obtained by the Swiss news outlet, FINMA noted that banks and securities dealers should assign “a flat risk weight of 800% to cover market and credit risks” against crypto assets. This means that with the current BTC price of $6,000, institutions would have to value the coin at no less than $48,000 as a buffer level. EXPERTsuisse is a group representing Swiss trustees and accountants.

The guidance is on the high end of the range and on the level of hedge funds, according to the report, meaning FINMA considers crypto assets to be volatile. reported that FINMA has also set the crypto-trading cap at 4% of a bank’s total capital, noting that banks must report to the authority if they reach that upper limit.

While the letter offers insight into the regulator’s stance and outreach on this issue, it hasn’t yet released official rules for how Swiss banks should deal with cryptocurrencies under the Basel III international banking regulations, according to the report. The financial regulator has already issued an official guidance for initial coin offerings (ICOs) in February, after it received a number of enquiries on the matter.

At the time, FINMA said the applicability of regulation to cryptos would be determined on a case-by-case basis—a stance that is similar to the one taken by the U.S. Securities and Exchange Commission (SEC) in July.

According to FINMA, “asset tokens” fall under securities, meaning there are securities and civil law requirements for trading such tokens. It noted, “FINMA regards asset tokens as securities, which means that there are securities law requirements for trading in such tokens, as well as civil law requirements under the Swiss Code of Obligations.”

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SEC enforcement report highlights ICO misconduct in United States

Although there isn’t a clear framework regarding regulation for cryptocurrencies in the United States, the Securities and Exchange Commission (SEC) has placed a considerable emphasis on the space throughout 2018, particularly on initial coin offerings (ICOs). This was revealed in the SEC’s Division of Enforcement annual report—the second of its kind in which the regulator focused on its ability to crack down on fraud in the financial system as well as protect investors.

This year, ICOs were an important theme throughout the document with almost 30 mentions in the whole document. There was also a complete section dedicated to the agency’s activity in identifying misconduct that was tied to digital assets as well as token crowdsales.

According to the SEC, the agency has meticulously selected the projects they pursued this year, which saw an “explosion” of ICOs, in a bid to send the most effective message to issuers not just in the U.S., but also internationally where they market to U.S. investors. SEC noted that fundraising has been on the decline, with the tally for September failing to surpass $300 million versus $3 billion in January 2018.

“We believe our approach to enforcement in this space has been thoughtful and consistent. Importantly, it has provided a template for authorities in other countries, where fraud and misconduct targeting U.S. investors often have been based,” the report noted.

The SEC also highlighted its enforcement actions for conducts such as registration violations and unregistered broker-dealer activity, as well as “instances in which the purported use of blockchain-related technology is merely a veneer for outright fraud.”

According to the securities regulator, “In FY 2018, the Commission brought 20 stand alone cases, including those cases involving ICOs and digital assets,” noting that many of the cases involved fraud allegations, although the Division has also “pursued enforcement actions to ensure compliance with the registration requirements of the federal securities law.”

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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