South Korean Crypto Exchange CEO Jailed For 16 Years

Coinup crypto exchange CEO jailed for 16 years

Senior executives at a South Korean crypto exchange have been indicted in connection with a $386 million investment fraud. The news marks yet another drastic action taken by authorities in the country against cryptocurrency exchanges.


Eight Crypto Exchange Execs Indicted for Fraud

According to Yonhap News, a court in Seoul on Monday (November 11, 2019) sentenced Kang Seok-jung, CEO of crypto exchange Coinup to 16 years in prison. The court found the crypto exchange chief of being guilty of orchestrating a $386 million cryptocurrency scam.

Apart from Kang (also known as “Cash Kang”) seven other senior executives also bagged prison terms. The company’s vice president received a 7-year sentence while another high-ranking member of the exchange bagged an 11-year sentence. Other indicted senior executives saw prison terms between six and nine years.

According to reports from the investigation, Coinup promoted a fraudulent crypto investment scheme that promised 200% returns between 4 and 10 weeks. An excerpt from the court’s judgment reads:

They [the accused] created a plausible appearance, including a magazine with a current president’s composite picture, and portrayed the fraudsters in a deceptive, organized, and precise manner… The organization of the crimes, the number of victims, and the amount of damage show in the light of the truth that the sin is serious.

Reports indicate that law enforcement officials in South Korea have had the crypto exchange in their sights over the Ponzi scheme. Authorities in the country have in recent times been on the warpath with fraudulent actors in the crypto space.

Naïve Investors Not at All Innocent

While delivering judgment, the court also blamed investors for not doing enough due diligence, hence making themselves an easy prey to such fraudsters. According to the judge, greed and the allure of easy money is the reason why investors continue to fall victims to such elaborate scams.

The court’s verdict comes at a time when the South Korean scene appears to be experiencing a dip in fortunes. Several stakeholders also say the over-regulated nature of the industry is driving crypto commerce to friendlier shores.

Back in 2018, police conducted frequent raids on South Korean crypto exchange establishments. The country has since outlawed practices like anonymous trading and mandated banks to set stringent KYC/AML compliance for cryptocurrency exchanges in South Korea.

What do you think about these senior crypto executives bagging prison sentences for their crimes? Let us know in the comments below.


Images via Shutterstock

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Paxos to Debut Blockchain-Based Clearing & Settlement Pilot for U.S. Stock Market

Blockchain startup Paxos is set to launch a blockchain pilot for clearance and settlements in the U.S. stock market. The project provides an alternative to the process offered by the Depository Trust and Clearing Corp (DTCC).

If successful, the Paxos system will be one of the first blockchain implementations deployed in the U.S. stock market arena. The project could also provide backing for one of the proposed adoption use-cases for decentralized technology in the financial markets.

Paxos

Paxos Blockchain to Speed up Settlement Process

According to the Wall Street Journal (WSJ), Paxos has obtained approval from the U.S. Securities and Exchange Commission (SEC) to deploy its blockchain project for settlements of trades in the U.S. stock market. The initial approval covers a limited utilization of the decentralized technology (DLT) framework to process stock trades for AT&T and General Electric.

The process sees Paxos as a trusted intermediary between participating banks. The blockchain startup will use the DLT framework to digitize the cash deposits and securities involved in the prospective stock trade.

Paxos handles the actual settlement process with smart contracting protocols transferring the cash and securities to the appropriate accounts once the settlement date arrives. All the while, participants can monitor the trade via the blockchain platform.

Paxos will be hoping its new DLT system can shorten the clearing and settlement process for trading stocks. Such an outcome could lead to a broader adaptation of the system within and outside the U.S. stock market.

Already, similar plans exist in countries like Australia and Singapore. Stakeholders say blockchain adoption in the stock market could provide useful benefits to the entire financial ecosystem.

Increasing the speed of the settlement process could have significant cost reduction benefits as capital no longer needs to be tied up for days on end while waiting for approval for a stock trade. However, for now, Paxos’ mandate from the SEC only covers about 140 stocks with a cap of 1% of the average daily trading volume.

DTCC Welcomes Competition

A successful pilot testing of the Paxos blockchain-based stock trading settlement project could mean competition for the DTCC which has a monopoly on the clearing and settling of the U.S. equities market. Commenting on the project, Michael McClain of the DTCC says the organization welcomes the prospects of healthy competition adding that the DTCC is constantly striving to improve its operations.

For Paxos CEO Charles Cascarilla, the project could provide cutting edge solutions to the current pain points in stock trading remarking:

“There has been so much innovation in the way trading happens over the past 20 years, with people trading in microseconds, but there hasn’t really been innovation in clearing or settlement.”

The Paxos system aims to cut down the clearing and settlement period for stock trading from two days to a single business day.

Largescale Blockchain Utilization on the Rise

The Paxos news comes as blockchain adoption efforts continue to increase across the globe. China has recently caused a stir with a flurry of positive blockchain sentiments as even President Xi Jinping encouraged greater DLT utilization.

However, as reported by Blockonomi, there are concerns that China’s blockchain interest might not include the promotion of decentralization. Some critics argue that authorities in Beijing will only use the technology to further their control of citizens.

Lawmakers and entrepreneurs in the U.S. have urged a similar course of action for the country so as not get left behind by China in the emerging digital economy.

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Boxing Legend Manny Pacquiao: Pac Token Set for IEO on GCOX

Pac Token — the cryptocurrency token launched by Philippine boxing legend Manny Pacquiao, is set for its maiden initial exchange offering (IEO) on GCOX. The Singapore crypto exchange is known for offering support to altcoins linked to celebrity figures.

Initial investors and the core team for the altcoin will be hoping Pacquiao’s star power will help to trigger a successful IEO with plans for the token to be utilized in digital payment and merchant services. The development also provides further proof of the growing interest in celebrity-backed crypto tokens.

GCOX

Pac Token Sale Begins with IEO Listing on GCOX

Singapore-based GCOX is ready to list Pac Token for its IEO following a successful token launch announcement in September 2019. The public sale will see crypto investors able to purchase the newly created cryptocurrency.

Noted figures like former England professional football, Michael Owen and Abu Dhabi royalty, Sheikh Khaled bin Zayed al-Nahyan already participated in a private investment round.

According to the project team, Pac Token holders will be able to interact with the boxer-turned Filipino senator on social media platforms. Token owners will also be able to use the cryptocurrency to purchase Pacquiao-branded merchandise.

For Jeffrey Lin, the GCOX CEO, the Pac Token IEO goes beyond a fundraiser for the project. According to Lin, the token sale event isn’t only to raise money but to create a framework for the development of the altcoin’s ecosystem.

Commenting on the utility of the token, the Pacquiao released a statement back in September, stating:

“PAC Tokens may also be used to support philanthropic and charity causes that I champion. Together with my fans, we can help more people in need and improve the lives of others.”

Post-IEO Plans for Pacquiao’s Crypto Token

Apart from the GCOX IEO token sale event, the Pac Token team is reportedly looking to launch Pacpay — a payment gateway that will use the crypto token. Pac owners will be able to make discounted purchases and also earn rebates on the service.

As a payment platform, Pacpay will require regulatory approval. Some reports suggest may receive backing from Chinese billionaire Jack Ma who owns the Alibaba conglomerate.

Alibaba’s Alipay is one of the major Chinese payment platforms with a significant presence outside mainland China. Ma has also been critical of cryptocurrencies stating that blockchain technology held greater promise.

If launched, Pacpay will become the latest crypto-related entrant into the digital payments arena. Across the globe, cryptocurrency is beginning to play a more significant role in electronic payments with some commentators forecasting that virtual currencies will eventually replace fiat in digital payment transactions.

The Pac Token team will be looking to mortgage the significant popularity of the boxing legend to not only reach its IEO token sale goal but to engineer massive adoption for the token. Pacquiao himself has been front and center of the marketing efforts for the token which may help to remove doubts held by some investors.

Crypto fundraising has declined significantly with initial coin offerings (ICOs) and IEOs no longer delivering hundreds of millions of dollars in token sales. Financial regulators in several countries have also created robust regulations to govern the crypto ICO market.

Growing Celebrity Crypto Involvement

While the Pac Token team touts itself as being involved in the first-ever celebrity cryptocurrency, other notable figures from across the world are reportedly looking to launch their virtual currencies. LaLiga — the top tier of Spanish football has also signed a partnership deal with GCOX to sell its tokenized merchandise in the Asian and Middle Eastern markets.

The emergence of celebrity-launched tokens appears to be an extension of the involvement of public figures in altcoin projects. Some popular figures have landed in trouble for endorsing altcoin projects in the past including the likes of DJ Khaled and popular boxer Floyd Mayweather. Suspected fraudsters have also taken to creating fake crypto investment schemes with false endorsements from celebrities.

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Twitter CEO Sets Sight on African Bitcoin Market

jack dorsey twitter CEO

Twitter and Square chief, Jack Dorsey, is meeting with African tech entrepreneurs as the bitcoin bull sets sight on the continent’s growing crypto industry.


Twitter CEO Heads to Africa

Dorsey is currently in Ghana after spending a few days in Nigeria meeting with tech entrepreneurs. Part of his visit has included mini bitcoin meetups with developers and startup founders pushing Bitcoin utilization in both countries.

If Google searches are anything to go by, then Africa is where it’s at. Data from Google Trends, shows Nigeria as having the highest BTC searches worldwide, over the past 12 months.

Nigeria Tops Google Trends for Bitcoin

Twitter CEO bitcoin trends google

In fact, two other African countries — South Africa and Ghana also make up the top five. This high level of interest hasn’t, however, translated to concrete bitcoin adoption outside of the African cypherpunk scene just yet.

For Dorsey, this gap between interest and real-word utilization presents an opportunity for Square’s CashApp to penetrate the continent. Speaking during a town hall meeting at Techpoint in Lagos, the Square chief remarked,

I want to understand the challenges of starting a company here and figure out a way I can support. I want to live here for three to six months next year, full time, no travelling.

Some commentators say Dorsey’s approach highlights what constitutes the important aspects of mainstream adoption rather than the pursuit of ETFs and worthless blockchain applications.

African Mobile Money Market is Ripe for Bitcoin Adoption

According to World Bank figures, the majority of Sub-Saharan Africa remains unbanked. However, the continent has seen a massive penetration of mobile telecommunications technology.

Startups have also been able to leverage this telecoms boom to provide mobile money services even in rural areas without access to brick-and-mortar banking infrastructure. With such a buoyant mobile digital money market, bitcoin payment adoption seems like the next logical step.

Unlike officials in Asia and the West, governments in Sub-Saharan Africa haven’t created administrative roadblocks for crypto adoption. Save for the usual talk of risks, startups operating in the industry have a much clearer field.

Some crypto companies seem to be alive to this reality and are already seeking ways to leverage the potential in the African digital market. As previously reported by Bitcoinist, Binance added the Nigerian Naira as its first ever fiat trading pair.

Do you think Africa can take the lead in global bitcoin adoption? Let us know in the comments below.


Images via Google Trends and Twitter @jacobkostecki.

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Bakkt Bitcoin Custody Now Available to all Institutional Clients

bakkt bitcoin custody

Bakkt joins the field of institutional-grade bitcoin custody service providers after obtaining approval from regulators in New York. Meanwhile, the Bitcoin futures product launched by the Intercontinental Exchange (ICE) subsidiary continues to set new records.


Bakkt Warehouse Obtains NYDFS Green Light

Bakkt COO Adam White announced the news via a blog post published on Monday (November 11, 2019). According to the announcement, the New York Department of Financial Services (NYDFS) has given Bakkt the go-ahead to begin offering its enterprise-grade bitcoin custody services to institutional clients.

Before the approval, Bakkt’s bitcoin custody service was only available to clients who were trading the company’s Bitcoin Futures product, launched in September 2019. The company now joins the likes of Coinbase and Fidelity in the emerging institutional-grade crypto custody scene.

Gabor Gurbacs of VanEck praised Bakkt on the move, stating that it could help to encourage greater institutional adoption of bitcoin. As previously reported by Bitcoinist, a study crypto trading resource The Tie showed a significant decline in institutional BTC interest.

Apart from re-igniting interest, Bakkt’s expanded bitcoin custody service also signals the entry of a trusted name in the BTC custody arena. Back in September, the U.S. Securities and Exchanges Commission (SEC) still highlighted custody as one of the major pain points for the crypto industry.

Lack of trusted custody is also one of the reasons often provided by the SEC for refusing to approve a Bitcoin ETF filing.

Galaxy Digital Already Using Bakkt’s Bitcoin Custody Service

For Bakkt, the goal is to quickly onboard institutional players onto its custody platform. According to the announcement, Galaxy Digital, as well as VC firm Pantera Capital and crypto brokerage company Tagomi, are already using the Bakkt Warehouse.

White says Bakkt will leverage the status of its parent company ICE in attracting more “marquee clients” to its custody platform. The statement also revealed that the company has taken steps to ensure robust security for the custody platform including biometrically-controlled bank-grade vaults and round-the-clock video surveillance.

As previously reported by Bitcoinist, there is a $125 million insurance on the bitcoin stored in the Bakkt Warehouse.

Despite a slow start, the Bakkt Bitcoin Futures trading has begun to post new trading volumes records. This increase in trading volume has often coincided with periods of BTC price struggles with one happening amid a flash crash.

Will Bakkt’s expanded bitcoin custody service to institutional clients pave the wave for big money players getting involved with BTC? Let us know in the comments below.


Images via Bitcoinist Media Library, Twitter: @gaborgurbacs

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Chinese State-Run Newspaper Publishes Bitcoin Introductory Article

China’s cryptocurrency and blockchain appreciation continue as Xinhua, another state-run media organization publishes a full article about bitcoin. Some commentators opine that the flurry of positive digital currency sentiments in the country is part of Beijing’s efforts to normalize the industry before introducing the proposed digital RMB.

Despite these positive signs, trading and initial coin offerings (ICOs) remain banned. However, there appears to be a movement towards nationalizing the Chinese crypto space. Such a move might prompt a response from state actors in the West to adopt more crypto-friendly policies or risk losing out to China in the race for control of the emerging digital landscape.

China

Xinhua Says Bitcoin is First Successful Blockchain Application

Xinhua on Monday (November 11, 2019) printed an article providing a summary rundown of bitcoin. Titled “Bitcoin: The First Successful Application of Blockchain,” the piece detailed several aspects of the top-ranked cryptocurrency including mining, the maximum supply of 21 million, and halving to mention a few.

The article also mentioned price fluctuation and the energy consumption of the mining process. An excerpt from the piece reads:

“First of all, bitcoin is not a tangible currency. It is produced and operated on the internet. It is an open source P2P (Peer to Peer) digital ‘currency…’ Bitcoin is the first successful application of blockchain technology.”

Factual Errors and Inaccuracies

The article did contain a few errors and inaccuracies in its characterization of several aspects of bitcoin. One particular instance of such false information reads:

“The identity of the account holder will not be known to anyone… This feature also makes bitcoin widely used in illegal transactions such as money laundering. Currently, the most important use of bitcoin payments are black market transactions and ‘dark net’ transactions.”

The above portion is part of the article’s narrative that attempted to paint bitcoin as an anonymous currency. For one, BTC isn’t anonymous as there are several means of identifying the ownership of wallets and addresses.

Furthermore, exchanges have been forced to adopt robust know your customer (KYC) compliance by national and international financial regulators. Countries like South Korea have also banned anonymous trading.

This traceability of bitcoin transactions has also aided law enforcement agencies in apprehending criminals who use BTC and other cryptos. Police authorities and other security agencies in several countries have also issued reports showing that crypto isn’t as popular as cash for criminal organizations.

Whether it be money laundering, drug trafficking, or terrorist financing, cash remains the de facto financing vehicle. The top-ranked cryptocurrency is also something of a relief for people affected by deteriorating economic conditions in their country.

China’s Growing Crypto and Blockchain Appreciation

In a separate publication by Xinhua, the publication forecasted that China’s blockchain spending could surpass $2 billion by 2023 based on a study by IDC — a global market intelligence firm. According to IDC’s research, China’s blockchain expenditure will experience a compounded annual growth north of 65% within the next four years.

Back in October 2019, China’s President Xi Jinping declared that blockchain will become a core technology in the country. So far, IDC says the bulk of China’s blockchain efforts have focused on the banking, manufacturing, and retail sectors.

Such is the positive enthusiasm surrounding blockchain that authorities in Beijing have forbidden any negative publication about the technology. Since then, numerous media platforms including The People’s Daily — the official media service of the Chinese Communist Party, have published positive articles about the technology with The People’s Daily describing blockchain as the breaking point that will China overtake the rest of the developed world.

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Andreessen Horowitz Launches Crypto Startup School

a16z crypto startup school

Andreessen Horowitz is once again expanding its involvement in the crypto scene. The Silicon Valley VC firm is launching a free startup school for cryptocurrency and blockchain entrepreneurs.


Silicon Valley Firm Expands Crypto Involvement

The company announced the launch of the ‘a16z Crypto Startup School’ via a statement published on its website. According to the blog post, the program will be a seven-week course that will commence in February 2020.

The maiden edition of the course program will be a free, in-person series of lectures that will be held in Menlo Park California, catering to an estimated 40 crypto and blockchain entrepreneurs. Afterward, the company plans to make the course materials available for free download on the internet.

Crypto Startup School

Speaking to CNBC, Chris Dixon, general partner at the a16z crypto fund remarked that course participants will not have to give up any equity in their projects to take part in the program. According to Dixon:

Our general view is if we build goodwill, people will want to come to work with us — so it’s in that spirit. If they do go start a company, we hope we’ll be one of their first phone calls but there’s no requirement for that.

Andreessen Horowitz has been one of the more visible Silicon Valley VC investor in the crypto and blockchain arena. Back in 2018, the company rolled out a $300 million crypto fund to support startups in the industry and has backed no less than 19 companies in the process.

The company has even been at the forefront of trying to lobby decisionmakers in Washington to enact more favorable laws for the crypto space. Andreessen Horowitz is also one of the early backers of the Libra Association.

Libra Will Eventually Come Good

Concerning Libra, Dixon opined that the proposed digital payments project will eventually smoothen the current regulatory wrinkles. The a16z executive admitted the challenging nature of the regulatory hurdles but expressed optimism that all parties will soon come to a middle ground.

Unlike other early backers like PayPal and MasterCard, a16z has not pulled out of the Association, but instead put pen to paper on the Libra charter.

As previously reported by Bitcoinist, China’s former central bank head declared that Libra would be better received if it was under the custody of the International Monetary Fund (IMF).

Do you think the Libra Association and financial regulators will be able to come to some form of middle-ground arrangement? Let us know in the comments below.


Images via Shutterstock, Andreessen Horowitz

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Bitcoin Usage May Spike Following Cash Restrictions in Malaysia

malaysia bitcoin adoption

Malaysia is set to become the latest country to impose restrictions on cash transactions. The move could force more people to look towards bitcoin and crypto adoption in general as a way of getting around such limitations.


Cash Restrictions May Boost Bitcoin Adoption

The Malaysian government plans to impose restrictions on cash transactions reports local media platform The Star. According to the publication, the move is part of efforts to combat money laundering in the country.

Commenting on the plan, Datuk Abdul Rasheed Ghaffour, the deputy governor of Malaysia’s central — Bank Negara (BNM), remarked:

This is to address the abuse of physical cash used for illicit activities.

Malaysian economist, Barjoyai Bardai believes the proposed cash transaction limit in the country could boost digital currency adoption.

For Bardai, having such restrictions may be the catalyst that pushes more people to adopt digital payment systems. According to Bardai:

When consumers get used to using digital currency, they will be more willing and encouraged to undertake business dealings, and so, business dealings can get bigger and have a positive impact on the economy in the form of a doubling and also business volume.

As in most of Southeast Asia, bitcoin and crypto adoption continue to fair favorably. However, this trend has also been accompanied by fraudulent investment schemes and criminal behavior.

The Malaysian police on Thursday (November 7, 2019) announced the arrest of five individuals suspected of stealing 85 Bitcoin ATMs.

New Policy Will Not Affect the Average Malaysians

The proposed cash transaction limitation will affect industries like medical tourism, hotels, and wholesale merchants. However, transactions routed via financial institutions will not fall under the new restriction policy since banks already have robust anti-money laundering (AML) compliance requirements.

For Abdul Rasheed, the proposed plan will not adversely affect the average Malaysian household. According to the central bank executive, detailed studies showed a median household income of under $2,000 — far below the proposed limit.

Malaysia is the latest country planning to restrict the legal limit for cash transactions. As previously reported by Bitcoinist, Australia is also looking to cap cash payments at $10,000.

Both the Australian and Malaysian proposals contain no express mention of bitcoin and cryptos in their transaction restriction plans.

Do you think the proposed cash transaction limit will have a material impact on the level of bitcoin adoption in Malaysia? Let us know in the comments below.


Image via Bitcoinist Media Library

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Central Bank Survey Shows Universal Bitcoin Awareness in Canada

It appears Bitcoin is a demographic megatrend in Canada according to the details of a recently published study by the country’s central bank. The survey is reportedly part of the Bank of Canada’s plan to examine the risks posed by virtual currencies on the country’s current financial system.

Meanwhile, regulators in Canada are struggling to curtail incidents of cryptocurrency-related fraud with several high-profile cases involving Bitcoin ATMs and crypto exchange fraud emerging regularly.

Canada

Canadian Bitcoin Interest Cuts Across Different Age Demographics

Commissioned in 2016, the Bank of Canada “Bitcoin Omnibus Survey” shows a significant level of Bitcoin interest in the country. Figures from the study show a steady increase in the Bitcoin awareness level of participants across the three years of the survey.

Of the 1,987 respondents surveyed in the 2018 study, 89% indicated that they had some awareness of Bitcoin. This figure exceeds 62% and 83% seen in 2016 and 2017 respectively.

Canadian Bitcoin Ownership

The study also investigated the demographic composition of Bitcoin ownership in Canada which revealed mass appeal for the top-ranked crypto across gender and age categories. Usually, it is common for these types of studies to have BTC ownership skewered in favor of millennials who are arguably more interested in digital technology.

Details from the study show that respondents who were college-educated males between the ages of 18-34, earning more than $70,000 had the highest Bitcoin ownership figures.

Bitcoin Popular as a Store of Value in Canada

On the subject of why Canadians chose to own BTC, the study looked at the utilization of BTC as either a medium of exchange or a store of value. While there was some observable increase in the use of BTC to pay for goods and services, the survey showed that a majority of participants saw BTC a store of value.

Rising from 6% in 2016, 40% of the participants in 2018 identified store of value as their reason for owning Bitcoin. The jury is still out as to whether BTC does satisfy the requirements for being a stable store of value. However, some commentators say the lack of correlation between BTC and mainstream assets makes it a valuable hedge against uncertainties in the stock market.

Canadian Bitcoin Ownership

The Bank of Canada survey did show a massive sell-off between 2017 and 2018 likely due to the year-long bear market that characterized the 2018 crypto scene. BTC has since gained more than 150% since dipping as low as $3,000 in December 2018.

Canada Grappling with Crypto-related Fraud

The survey also acknowledged the rampant cases of cryptocurrency fraud in the country. As previously reported by Blockonomi, Einstein — a popular Bitcoin exchange has been seized by authorities in British Columbia.

Reports indicate that the exchange owes more than $12 million to its customers. The Einstein exchange news comes on the heel of the ongoing QuadrigaCX imbroglio and the return of the platform’s missing funds.

Back in 2018, another crypto exchange-related issue also rocked the Canadian cryptocurrency scene with reports suggesting that MapleChange had suffered a hack to the tune of $5 million. In the wake of these failing crypto exchange platforms, regulators in Canada have declared their intention to create more robust regulations for the industry.

Apart from exchanges, crypto-related fraud has also spread to the Bitcoin ATM scene. Back in June 2019, authorities in Vancouver led a crackdown on Bitcoin ATMs in efforts to combat money laundering. This news highlighted the severity of the issue given that Vancouver was the location of the world’s first-ever Bitcoin ATM.

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Ex-PBoC Boss: Facebook’s Libra Will Work Better if it’s in IMF Custody

libra better in IMF custody

A former head of China’s central bank has come out to say that Facebook’s Libra would be better served under the control of the International Monetary Fund (IMF). Facebook’s proposed digital payment platform continues to draw criticism from financial regulators around the world.


Libra Would Work Better Under IMF Custody

Zhou Xiaochuan, former head of the People’s Bank of China (PBoC) says Libra has little chance of succeeding outside the control of mainstream financial institutions. Commenting on the matter, Zhou remarked:

People will question the motive of Libra as it’s initiated by a private company, it works better if it’s in IMF’s custody.

Zhou, like many prominent actors within the Chinese government, has also come out against Facebook’s proposed digital payments project. Back in July, the former chairman of the PBoC declared that Libra posed significant risks to payment systems and national currencies.

For Zhou, Libra being under the control of private companies creates the possibility of these private interests dictating monetary policies on a global level. However, there is an argument to be made that replacing the Libra Association with the IMF would likely amount to the same centralized credit market control.

Furthermore, an IMF-controlled Libra project could see the same weaponizing of the system by sovereign powers as is common with the current financial infrastructure. It is this absence of centralized oversight that some commentators like Twitter’s Jack Dorsey say gives bitcoin (BTC) the upper hand in the grand scheme of things.

Facebook’s Crypto Still Grappling with Regulatory Concerns

Meanwhile, Libra continues to contend with regulatory pushbacks from authorities in different jurisdictions. Apart from declaring a desire to block the actualization of the project, some countries are looking to launch their digital currencies to counter Libra.

Numerous reports out of China, say the PBoC is creating a digital RMB which will dovetail with the country’s current electronic payment ecosystem. As previously reported by Bitcoinist, the European Central Bank (ECB) is also looking to issue a public digital currency in response to Libra.

Some stakeholders within the European Union (EU)n have recently called on the EU to not allow China to dominate the sovereign digital currency scene. Meanwhile, Turkey is set to conclude final testing on its digital lira by 2020.

What do you think will be the implications of Libra being under the custody of the IMF? Let us know in the comments below.


Images via Shutterstock, Twitter: @DoveyWan

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Crypto Exchange Regulations are Coming to Hong Kong

hong kong cryptocurrency exchange regulation

Financial regulators in Hong Kong will introduce clear cut rules to govern the operations of cryptocurrency exchanges. Meanwhile, reports show that fund managers continue to struggle with the stringent requirements for crypto investment in Hong Kong.


SFC To Regularize Hong Kong Cryptocurrency Exchange Scene

According to Reuters, Hong Kong’s Securities and Futures Commission (SFC) is ready to introduce a regulatory framework for cryptocurrency exchanges in the city. Speaking at a fintech conference on Wednesday (November 6, 2019) in Hong Kong, Ashley Alder, head of the SFC remarked:

The framework will enable virtual asset trading platforms to be regulated by the SFC, a major development which builds on a way forward I outlined at the same time last year.

Back in 2018, Bitcoinist reported that cryptocurrency exchanges in Hong Kong were coming under increased regulatory scrutiny. At the time, the SFC revealed that it was developing a new approach to overseeing the activities of local crypto exchange platforms.

New Rules Will Cover KYC and Custody

According to Alder, the new regulatory framework will focus on know your customer (KYC) and custody requirements for cryptocurrency exchanges. Such a move could pave the way for the emergence of formally legalized cryptocurrency exchange listings in the city.

Tweeting on Wednesday, Primitive Ventures co-founder and Chinese crypto insider, Dovey Wan remarked that the incoming regulations could see the likes of Huobi becoming the first “legalized Chinese cryptocurrency exchange.”

The emergence of regularized cryptocurrency exchange laws will also solidify Hong Kong’s stance on regulating rather than banning crypto trading. As previously reported by Bitcoinist, the former head of the SFC Carlson Tong Ka-shing once stated that a ban on crypto trading would not work.

Like ICOs, crypto trading is still banned in mainland China, with many platforms forced to move outside of the country. Regulated crypto trading in Hong Kong will present another departure from the policies operating in mainland China.

Fund Managers Struggle with Licensing Issues

While the city appears to be moving forward with crypto exchange laws, another virtual currency-related regulation isn’t yet having its desired effect. In 2018, the SFC introduced a licensing scheme for crypto fund managers.

However, reports suggest that one year on, fund managers are still struggling to satisfy the regulatory requirements for them to invest in cryptocurrencies. Some commentators say despite the initial excitement brought on by the SFC’s move, there hasn’t been much in the way of progress for fund managers to obtain the necessary clearance.

Do you agree with the HMRC’s position that cryptocurrencies like bitcoin do not constitute money or currency? Let us know in the comments below.


Images via Shutterstock, Twitter: @DoveyWan

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Ethereum Co-founder: China Won’t Promote Decentralization as Part of Blockchain Adoption

With several Chinese state actors waxing lyrical about blockchain technology, Joseph Lubin — co-founder of Ethereum, says Beijing will not adopt the more decentralized aspects of the emerging technology.

Lubin who is also the ConsenSys chief opines that the country’s proposed digital currency will ultimately become another system of control utilized by the government.

Meanwhile, China’s central bank says that it isn’t in any particular hurry to lunch the digital RMB with several studies still being performed.

China

Beijing Will Not Promote Decentralization

Speaking to CNBC, Lubin called into question the extent of China’s dalliance with blockchain technology and its attendant pivot towards decentralization. The Ethereum co-founder echoed similar concerns recently shared by stakeholders noting that China’s penchant for censorship will not allow the flourishing of decentralized systems.

Commenting on the matter, Lubin remarked:

“China is probably not interested in that aspect of blockchain technology. They, I believe, will bring a digital RMB to China that makes use of some of the elements, some of the primitives, say cryptographic primitives of blockchain technology. But there is no real reason for China to make use of [the] decentralizing aspects of blockchain technology.”

Digital RMB is Another System of Control

On the subject of China’s proposed digital currency, Lubin declared that it would ultimately be an extension of the government’s control over the financial activities of its citizenry. According to the Ethereum co-founder:

“I think that the central bank and the government have very significant control already. My guess is that it would be used to maintain the control that they have but also to potentially enable interoperations between more public systems or more global systems.”

This connection with global systems might point towards a desire by Beijing to participate in a parallel payment system that does not require the use of services like SWIFT. China has been among a group of nations that have accused the U.S. of weaponizing platforms like SWIFT to maintain U.S. dollar hegemony.

Back in October, the vice-chairman of the China Center for International Exchanges remarked that the country’s digital RMB will eliminate its dependence on SWIFT for cross-border fiat liquidation.

Qifan who was delivering a speech at the inaugural Bund Summit in Shanghai declared that systems like SWIFT will soon be replaced by other platforms not under the control of authorities in the U.S.

There continue to be several reports detailing the progress on the proposed digital RMB. However, no official release date has emerged from the People’s Bank of China (PBoC).

The PBoC has reportedly been studying the modalities for the creation of national digital currency. As reported by Blockonomi back in October 2018, the central bank has been recruiting digital currency specialists.

Speculation exists that the emergence of Facebook’s Libra has forced the central bank to accelerate its work. China, like many major economies, has come out vehemently against the Libra project highlighting the risk it poses to sovereign monetary control.

Blockchain Popularity Growing in China

Recently, there has been a significant increase in the decibel levels of blockchain-related chatter coming out of China. The country’s president has even joined the trend extolling the potentials of emerging technology.

As previously reported by Blockonomi, the Chinese President stated that blockchain will become a “core” tech in China. Despite its crypto trading and initial coin offering (ICO) ban, Beijing has never expressed a negative attitude towards blockchain technology. The country has also enacted a cryptographic law which will come into effect from the start of 2020.

The post Ethereum Co-founder: China Won’t Promote Decentralization as Part of Blockchain Adoption appeared first on Blockonomi.

UK Tax Office Updates Guidance on Bitcoin and Crypto

UK Tax Office Change Bitcoin and Crypto Tax laws

Nearly a year after publishing updated bitcoin and crypto tax requirements for individuals, the UK tax body has released similar guidelines for businesses. The tax authority also declared that it didn’t consider cryptos like BTC to be currency or securities.


HMRC Publishes Updated Bitcoin Tax Guidelines for Businesses

In its updated guidance published last week, Her Majesty’s Revenue and Customs (HMRC) — the UK’s tax body, outlined the new crypto tax requirements for businesses. The revised set of guidelines follows a similar publication for individuals released in December 2018.

The document contains information about how the various tax categories — corporate, capital gains, VAT, etc., apply to bitcoin and cryptocurrency transactions.

According to updated guidelines, all crypto exchange activities (even crypto-to-crypto trading pairs) and mining will likely incur some form of tax payment or the other. An excerpt from the document reads:

The amount of tax a business must pay will depend on its income, expenditure, profits and gains.

Bitcoin is Not Money in UK

One important takeaway from the updated guidelines was the classification of cryptos like bitcoin as not being money, stock, or marketable securities. Thus, cryptos in the UK will be exempt from stamp taxes and corporation tax legislation that deals solely with money or currency.

However, the document did provide a caveat for cryptos deemed to be securities. The HMRC also says it will evaluate each cryptocurrency on a case-by-case basis.

On the subject of receiving salaries in cryptos, the new guideline states that such salary payments will be taken as “money’s worth” and subject to income tax and insurance contributions.

UK Tax Body Mandates Thorough Record Keeping

Like the United States Inland Revenue Service (IRS), the UK’s tax agency also called for strict record keeping. The updated guidelines mandated businesses to keep accurate details of their crypto dealings in pounds sterling.

The HMRC also instructed companies to record the methods used to determine the fiat currency value of their cryptos. Unlike the IRS, the UK’s tax guidelines did a better job in differentiating between a hard fork and an airdrop.

For hard forks, the HMRC advised UK businesses to use a “just and reasonable” cost basis in dealing with tokens received via hard forks. The document declared that the HMRC held the power to investigate whether a company utilized an unfair apportionment method in evaluating the cost basis for hard forks.

Do you agree with the HMRC’s position that cryptocurrencies like bitcoin do not constitute money or currency? Let us know in the comments below.


Images via Shutterstock

The post UK Tax Office Updates Guidance on Bitcoin and Crypto appeared first on Bitcoinist.com.

Not a Fee, But ‘Long-Term Payment’ — How Crypto Exchanges List Tokens

Even though cryptocurrency exchanges claim to not call them listing fees, they still accept payments before adding tokens to their platforms.

Visit the website of any stock exchange platform, like the Nasdaq or the New York Stock Exchange, and the listing fees for new companies are there to see. There is hardly any controversy when it is clearly stated like this, but the same cannot be said for the cryptocurrency space. Here, numerous reports show that crypto exchanges are being decidedly opaque about the structure of their listing fees.

Take Blockstack, for example: A recent filing with the U.S. Securities and Exchange Commission revealed a $250,000 payment to Binance in its listing of STX token. The cryptocurrency trading giant, however, denied reports that the payment constituted a listing fee.

Likewise, some major exchanges say they have no listing fees, but reports abound of projects being charged significant sums to have their crypto tokens added to the trading catalog. Other platforms looking to cash in on this goldmine reportedly engage in wash trading, obtain false trading volumes, and charge exorbitant fees for the right to list tokens on their platforms.

There are even suggestions that some exchanges go on to pump these tokens after charging the expensive fees. Once the tokens reach a certain price ceiling, a massive dump follows, and the exchanges purportedly make an extra profit.

Listing fees or no listing fees?

As reported by Cointelegraph on Oct. 28, Blockstack’s SEC filing shows Binance receiving the sum of $250,000 tagged as a “long-term payment” to keep STX listed on the exchange for a year. Blockstack will also make three similar payments of 833,333 STX (currently worth $250,000) to cover for an additional three-year listing period plus an additional $100,000 marketing fee.

In total, Blockstack is committing to about $1.1 million in “fees” over a four-year period. This revelation calls into question a previous statement from Binance that it did not charge Blockstack any listing fee for adding STX to its platform.

Cointelegraph reached out to Binance to get a better understanding of the matter. According to a Binance spokesperson, the crypto exchange did not charge Blockstack any listing fee, and that “a long term payment fee is an incentive proposed by Blockstack for Binance to keep the token listed on the exchange. This is a new payment fee proposed by Blockstack.”

The Binance spokesperson’s claim that the $250,000 payment was Blockstack’s idea was corroborated by Blockstack CEO Muneeb Ali, who told Cointelegraph: “Their standard agreement has a listing fee which is called the ‘Technical Integration Fee’. The technical integration fee is $0 as publicly disclosed in the filing.” The Blockstack chief further revealed that the long-term payment was a unique agreement proposed by his company. According to the Blockstack CEO:

“This long-term payment is meant to watch out for the Blockstack ecosystem by incentivizing Binance to list Stacks over many years and aligns well with our long-term focus. The marketing fee is a joint marketing campaign that we plan to run later on, again that is not a ‘listing fee’ but a marketing campaign that we plan to launch in the near future."

So, to recap, Binance did not charge a listing fee for Blockstack’s STX token. However, Blockstack offered to pay $250,000 as long-term payment to keep its token on the Binance exchange. When asked about the platform’s standard listing practice regarding fees, the Binance representative revealed that the exchange does charge listing fees, though this long-term payment fee was not listing fee, adding that listing fees are usually charged to cover the cost of integrating a token into the platform.

What some cryptocurrency exchanges say

Binance updated its listing fee in October 2018, promising to ensure transparency in its altcoin listing process. At the time, the exchange giant announced that it will be donating all listing fees to charity via its nonprofit Binance Charity Foundation. Given Binance’s explanation that the $250,000 payment received from Blockstack isn’t a listing fee, it seems highly unlikely that the exchange will donate that sum to charity. Binance also has a marketing fee, which was explained by the spokesperson:

“The marketing payment is an amount of tokens sent to us which will be used as rewards for any promotion to be run on Binance.com in the future and will be 100% given to users as rewards, including but not limited to trading competition, community airdrop, etc. Binance has taken no fee or revenue from this amount.”

The Binance representative did, however, state that such payments do not factor into the decision to list a token. Binance CEO Changpeng Zhao once famously quipped:

“We don't list shitcoins even if they pay 400 or 4,000 BTC. Question is not ‘how much does Binance charge to list?’ but ‘is my coin good enough?’ It’s not the fee, it's your project! Focus on your own project!”

These comments came after Christopher Franko, creator of blockchain platform Expanse, claimed that a Binance representative demanded $2.6 million to list its project’s token. There are numerous similar stories where projects claim crypto exchanges have charged them fees as high as $15 million to be listed on their platforms.

Binance DEX charges a standard flat listing fee of 1,000 BNB. Earlier in 2019, the Binance CEO declared that the fee was necessary to raise the minimum entry barrier on the platform to prevent adding tokens with little or no economic and technical viability — or as they are colloquially known, shitcoins.

Even when there isn’t any listing fee, projects typically have to put up some form of advance payment before their tokens appear on these platforms. Exchanges say these payments help them to market the new token listing as well as take care of sundry administrative costs. OKEx, another major crypto exchange, does not charge listing fees. Commenting on the matter, Andy Cheung, head of operations at OKEx, wrote to Cointelegraph:

“We don’t have a standard listing fees. Some 3rd party cost could incur such as compliance, legal and due diligence of the project when it comes to listing, depending on the complexity of the token structure and design.”

The OKEx executive also maintained that the platform does not charge integration or other tech-related fees, declaring, “We believe as an exchange we should support as many as protocols as possible so to support a variety of token for our Users. The cost that we are paying is the time in testing and integration.”

Cointelegraph also reached out to Kraken for comments about its listing process. A spokesperson for the cryptocurrency exchange revealed that Kraken does not charge listing or integration fees, declaring:

“Kraken maintains a rigorous listing evaluation that incorporates a cross-functional team including Business Development, Kraken Intelligence, Legal, Compliance, Product and Engineering. As with everything we do, we have been deliberate in our listing approach to design a process with a strong rationale for new assets listed on our exchange.”

Should listing fees be a controversial issue?

Some critics rail against the existence and magnitude of listing fees charged by cryptocurrency exchanges. Ethereum co-founder Vitalik Buterin famously protested the activities of centralized platforms, remarking that he hoped they would “burn in hell.”

At the time, exorbitant listing fees formed part of Buterin’s grouse with centralized crypto exchanges, adding that they essentially had the power to make or break crypto projects. Some crypto exchange stakeholders like the Binance chief did take Buterin to task for his comments, highlighting the fact centralized platforms have played a huge role in the development of the digital currency market.

According to Cheung of OKEx, crypto exchange platforms have to a strike a balance between enabling greater participation in the ecosystem and maintaining the integrity of their token listing process: 

“We firmly believe that a long term approach to working with quality token teams is the key to successfully fostering a healthy ecosystem and providing our community with a variety of sustainable, interesting, and useful tokens to trade.”

Buterin isn’t the only crypto founder to lambast exchanges on account of listing fees. In 2018 tweet, the Bancor team accused platforms of charging more than mainstream stock exchanges like Nasdaq.

The tweet also brought up the fake trading volume — an issue that is not unrelated to discussions surrounding cryptocurrency exchange listing fees. According to several reports, most exchanges exaggerate their trading volume figures in the hopes of commanding higher listing fees.

The opaque nature of the listing process on crypto exchanges also arguably contributes to the air of controversy surrounding the issue. In the absence of publicly stated listing procedures — as is common with mainstream stock exchanges — rumors and speculation take center stage. According to the spokesperson from Kraken, cryptocurrency exchanges need to do more in lifting the veil of their listing processes, remarking:

“It’s important to educate the marketplace about the listing fee process. When an exchange lists a new asset, it takes on the financial, security and regulatory risks associated with listing an asset.”

There is an argument to be made that libertarian ideals form the core of the cryptocurrency philosophy. In this regard, exchanges charging fees at all — let alone demanding seven-figure payments — is a reality that shouldn’t sit well with cryptocurrency purists.

Thus, while it is standard for listing agreements on the likes of the NYSE and Nasdaq to have fees, the existence of such for cryptocurrency exchanges remains a topic of considerable discontent.

Bitcoin Ownership in UK is Surprisingly Low, New Survey Reveals

Bitcoin survey UK

A survey by cryptocurrency blog Crypto Radar is showing a high bitcoin apathy in the U.K. for people of retirement age.


67.5% of U.K. Citizens Have No Interest in Bitcoin

According to the details of the survey as published by Crypto Radar, only 5.3% of the 2,500 participants owned Bitcoin. Of this number, more than half  say they don’t plan on buying more BTC.

Bitcoin Adoption in the U.K.

The survey also showed an apparent high level of BTC apathy in the U.K. with 67.5% percent of respondents claiming they did not own or have any intention to own bitcoin. This demographic even increases further when only considering male participants aged 65 years and above.

High bitcoin apathy among people of retirement age isn’t a new phenomenon as seen by numerous similar surveys. The situation surrounding Brexit may also see retirees looking to hedge their fortunes in assets deemed to be less risky than cryptos.

Bitcoin volatility aside, global negative-yielding debt is north of $17 billion. Plus, there is an argument to be made that BTC provides a hedge against the growing.

On the other end of the spectrum, the reality appears flipped with a significant number of male respondents between 35 and 44 years of age keen on increasing their BTC ownership. Commenting on the results, Crypto Radar chief, Amine Rahal remarked,

Regardless of its enormous volatility, Bitcoin is a very attractive asset class for those investors, especially younger investors, who are willing to ride the volatility to tremendous gains.

Patchy Crypto Adoption in Europe

One particularly striking result from the survey was that about 20% of respondents claimed to not know about bitcoin. An ING survey published in September showed nearly a quarter of U.K residents believing that bitcoin will eventually replace cash.

Both the ING and Crypto Radar surveys did reveal an apparent dearth of crypto education in the U.K. This limited range of crypto awareness even extends to young upwardly mobile professionals who usually form the core of global BTC adoption.

While bitcoin is a demographic mega-trend in the U.S., the same cannot easily be said for their counterparts across the pond. In all, these surveys reinforce the patchy crypto adoption landscape that characterizes Europe.

Currently, it appears that bitcoin appeal only ranks high in places like Turkey where there are some economic struggles.

Do you think there exists a low level of bitcoin education in the U.K? Let us know in the comments below.


Images via Shutterstock

The post Bitcoin Ownership in UK is Surprisingly Low, New Survey Reveals appeared first on Bitcoinist.com.

Jack Dorsey Invests in Crypto ICO Platform CoinList

jack dorsey invests in coinlist

Twitter CEO Jack Dorsey is expanding his cryptocurrency involvement by backing crypto initial coin offering (ICO) exchange platform, CoinList. Dorsey, who also heads San-Francisco payment service Square, is a noted bitcoin bull who maintains that the top-ranked crypto will eventually become the de facto currency of the internet.


Twitter Chief Backs AngelList Spin-Off

According to the Wall Street Journal (WSJ), Dorsey took part in the latest CoinList funding round which reportedly raised $10 million. CoinList, established in 2017 as a spin-off of AngelList, is an ICO exchange platform that initially received backing from investment firms like Polychain Capital, raising over $9 million in its maiden funding round.

Commenting on his decision to back CoinList financially, Dorsey remarked:

Crypto needs a trustworthy platform for launching new projects. CoinList leads the industry in that role, and trading is a logical next step.

Since its inception, CoinList has supported token sales worth more than $800 million. The company claims to be an “SEC-compliant” ICO exchange.

CoinList vets crypto and blockchain startups looking to run a token sale and connect them with accredited investors. According to its website, the platform offers support for both private and public cryptocurrency token offerings.

Some of its more popular supported ICO listings include Filecoin and Blockstack. The recently concluded Blockstack token sale marked the first-ever SEC-qualified token offering carried out under Regulation A.

Since the 2017 ICO boom, the SEC has come down hard on token sales, labelling most offerings to be securities. The Commission has levied fines with some commentators calling for more nuanced securities regulations for cryptocurrencies in the U.S.

The existence of such stringent regulations has put a dampener on the trading of ICO tokens. Some exchange platforms have even been forced to relocate outside the U.S. or geofence certain tokens from U.S. traders.

Dorsey’s Increasing Crypto Involvement

Dorsey has continued to remain vocal about his support for bitcoin and involvement in the crypto space. Despite this enthusiasm for the industry, the Twitter chief says he has no intention of creating a cryptocurrency payment system like Facebook’s Libra.

Instead, Dorsey has consistently declared his belief in the future of bitcoin as a bastion for decentralized currencies. As previously reported by Bitcoinist, Dorsey has identified bitcoin as having the potential to align the world.

Do you think that more token sales via SEC-compliant platforms like CoinList will lead to a buoyant altcoin trading market in the U.S.? Let us know in the comments below.


Images via Shutterstock

The post Jack Dorsey Invests in Crypto ICO Platform CoinList appeared first on Bitcoinist.com.

China Digital Currency Will Replace SWIFT: Huang Qifan

China digital currency to replace SWIFT

China’s plans to create a sovereign digital currency might be aimed towards eradicating the need for U.S.-controlled payment systems like the Society for Worldwide Interbank Financial Telecommunications (SWIFT).


SWIFT and CHIPS Systems Have No Future

Speaking at the Bund Financial Summit in Shanghai, Huang Qifan the vice chairman of the China Center for International Economic Exchanges (CCIE) declared that China was looking to create a cross-border renminbi (RMB) liquidation system independent of SWIFT.

For Qifan, the tendency for the U.S. to weaponize the current international payment processors means that China needs to seek alternatives. Commenting on the matter, Qifan remarked:

SWIFT is an outdated, inefficient and costly payment system. Large remittances usually require paper documents, which presents additional difficulty for processing large-scale transactions effectively.

The CCIE vice-chairman also opined that SWIFT takes undue advantage of its monopoly to charge expensive fees. According to Qifan:

At the same time, SWIFT usually charges a fee of one ten-thousandth of the settlement amount, and has obtained huge profits by virtue of the monopoly platform.

China Will Be First to Launch DCEP

Keen on preserving its monetary distribution right, Qifan declared that China will move forward with plans to create its digital currency. According to the CCIE chief, the country will be the first to deliver on a working digital currency electronic payment (DCEP) framework.

For Qifan, it is important that a digital currency issued by a central bank be linked to national GDP, fiscal revenue, and sovereign credit among others. As previously reported by Bitcoinist, China is developing a digital RMB.

Libra and Other Digital Currencies Will Fail

On the subject of Libra, the CCIE chief remarked that private digital currencies that attempt to challenge sovereign currencies will fail. According to Qifan:

These decentralized currencies based on blockchain is out of sovereign money. The basis of the issuance cannot be guaranteed, the value of the currency cannot be stabilized and it is difficult to truly form social wealth. I do not believe that Libra will succeed.

For crypto enthusiasts, the separation of money and state remains a firm appeal that drives adoption. Sovereign digital currencies do not offer a change from the current status quo, rather an entrenchment of state-enacted financial censorship and control.

Will countries abandon SWIFT for a new payment system that utilizes sovereign digital currencies? Let us know in the comments below.


Images via Twitter @mg0314a.

The post China Digital Currency Will Replace SWIFT: Huang Qifan appeared first on Bitcoinist.com.

Libra Might Become Unrecognizable by Navigating Regulatory Concerns

Libra considering the use of fiat-pegged stablecoins for its basket while navigating through a wave of negative criticisms from regulators.

Amid the regulatory storm facing Libra, the project’s hierarchy is looking to change one important detail of the payment system: using fiat-pegged stablecoins rather than a token supported by a basket of national currencies. The Libra Association says such considerations are part of efforts to create a more agile payment platform.

Meanwhile, the furor over the controversial Libra has begun to take a more political undertone, both within and outside the United States. Arguments for and against the project now seem to include issues surrounding the trade war between the U.S. and China.

In Europe, China’s response to Facebook’s crypto project (the creation of yuan-pegged digital currency) and Libra itself, have sparked some commentators calling on the European Central Bank to adopt a digital currency for the EU. In some ways, it appears Libra has ignited a new currency war, one that might take place in the digital realm, with several counties floating their own central bank digital currencies (CBDCs).

For Libra, the regulatory hassle might constitute only part of its trouble, as the project could face stiff competition from payment giants, especially in China and other parts of Asia. Some of these payment companies are already identifying Libra as a potential competitor ahead of its launch.

Single Libra token or individual fiat-pegged stablecoins?

As previously reported by Cointelegraph, David Marcus, the co-creator of Libra and head of the Calibra wallet, said the project is open to using various fiat-pegged stablecoins rather than its original idea of creating a token. In its white paper, Libra proposed that its token would be supported by a basket of various national currencies. In a statement shared with Cointelegraph, Dante Disparte, the Libra Association’s head of policy and communications, remarked:

“The Libra Association is committed to pursuing responsible innovation in open collaboration with applicable regulators and stakeholders, to ensure the public interest is always protected and remains at the heart of this project. We have a long launch runway by design and are actively engaged with regulators and policymakers around the world.”

Such a move could change the nature of the project drastically, as Libra will be presenting itself as a payment gateway that utilizes digital versions of national fiat rather than a new currency supported by a basket of fiat deposits. For one, its original idea would likely have meant the existence of a private exchange rate mechanism that is firmly in the control of the Libra Association.

In a conversation with Cointelegraph, Randolf Zhao, vice president of operations at cryptocurrency derivatives trading platform BaseFEX, remarked that the move signals Libra’s intention to smoothen some of the regulatory wrinkles hampering the project:

“If you tie your stablecoin to USD, such as Tether, you are not undermining the dominance of USD because people still consider it as a virtual version of USD that is backed by USD reserves companies like Tether possess. But if your coin is backed by a basket of fiat currencies, you are introducing something whose percentage of USD dependency is much less than a USD-backed stablecoin, which is, in essence, challenging the dominance of USD.”

For Zhao, governments around the world will be hard-pressed to allow a project like Libra to operate, considering the vast userbase commanded by Facebook that counts more than 2 billion users across the globe.

Regulatory scrutiny and loss of banking relationships

Earlier in October, a couple of U.S. senators sent cautionary letters to Stripe, MastercardVisa, and other U.S.-based early backers of Libra. An excerpt from one of these letters reads:

“If you take this on [being a member of the Libra Association], you can expect a high level of scrutiny from regulators not only on Libra-related payment activities but on all payment activities.”

As previously reported by Cointelegraph, PayPal pulled out of the Libra Association at the start of October. Other early backers like Visa, eBay, Mastercard and Stripe have also announced their exit from the project. Meanwhile, none of the current Libra backers have yet made any financial commitment to the association.

Related: Libra Loses Key Members, Potentially Forked — Still Looks Confident

Facebook CEO Mark Zuckerberg spent more than six hours on Oct. 23 responding to several questions from members of the U.S. Congress. The grilling was the latest in a series of appearances by Facebook and Libra before U.S. lawmakers concerning regulatory issues surrounding the project.

As reported by Cointelegraph, Facebook’s role within the Libra Association was one of the major talking points of the hearing. Amid the barrage of questions, Zuckerberg declared that Facebook would have to quit the Libra Association if it fails to secure the green light for the project from U.S. regulators.

Reaffirming its commitment to complying with regulatory provisions, Libra’s Disparte told Cointelegraph, “From the beginning, we’ve said we’re committed to taking the time to get this right,” and went on to say that the publication of a white paper was intended to kickstart a dialogue with the regulators and policymakers, adding that:

“As a member of the Libra Association, we will continue to be a part of this dialogue to ensure that this global financial infrastructure is governed in a way that is reflective of the people it serves. Facebook will not offer Libra through its Calibra wallet until the Association has fully addressed regulators’ concerns and received appropriate approvals.”

For Disparte, the Libra Association is working to ensure that the project adheres to global best practices in the payments industry. As part of the statement to Cointelegraph, Disparte said:

“Our goal is a digital payment system that replicates or exceeds current standards for consumer protection, financial stability, and the prevention of money laundering and illicit finance — while preserving national sovereignty over monetary policy.”

To this end, Disparte said the Libra Association will continue to liaise with regulatory agencies from around the world, adding, “We look forward to collaboration with applicable policymakers on a path forward that addresses their questions and concerns.”

Related: Zuck of the Hill: After 6-Hour Libra Grilling, Congress Unconvinced

Meanwhile, regulatory concerns might not be the only problem for Libra and its partners. According to Ralph Hamers, the head of Dutch global financial behemoth ING, Facebook might lose valuable banking relationships due to its involvement with Libra.

As reported by Cointelegraph, Hamers indicated that banks could consider cutting services to Facebook if it launches the Libra project. The ING chief remarked that banks may choose not to be associated with Facebook once Libra comes online due to money laundering concerns.

Potential for global Libra adoption

Even if Libra obtains regulatory approval, the project still has to contend with achieving widespread adoption in the electronic payment market. For Vikram R. Singh, managing director at enterprise blockchain firm Antier Solutions, Libra could claim a significant market share in the international remittance scene. In an email to Cointelegraph, Singh observed that the world is currently lacking a banking unicorn, adding that:

“All in all, it [Libra] will be a major disruption and the challenge to the status quo of the state's authority over its money which will force them to redefine themselves by accepting the change. Consumers will win whichever way it goes; this is for sure.”

In major markets like China, Libra may find breaking into the payment market to be a daunting task due to Facebook’s involvement in the project. Zhao of BaseFEX, commenting on Libra’s prospects in China, remarked:

“Alipay and WeChat Pay both achieved wide adoption through their parent company’s massive promotion efforts and the pre-existent penetration of the corporate’s other services — for Alipay that’s Taobao and TMall, for WeChat Pay it is WeChat. So, unless Facebook can launch something in China and make it a killer app here prior to the launch of Libra, I really don't see similar success coming for Libra.”

Zhao believes that Libra’s problem in China also has a lot to do with its association with Facebook. Commenting on the matter, the BaseFEX executive said: “Facebook has been out of the picture in China for a long while. Only China’s tech and internet industry talk about Facebook and for the 99.9% population, it is irrelevant.”

Several stakeholders within the banking sector have also come out to dismiss the Libra project. JPMorgan Chase CEO Jamie Dimon recently described Libra as a “neat idea that will never happen.”

Prelude to the CBDC wars?

Amid the ongoing talk surrounding the Libra project, the idea of governments creating their own digital currencies continues to be a recurring conversation. At the Oct. 23 hearing before Congress, Zuckerberg declared that China had stolen the lead from the U.S. in digital currency innovation. An excerpt from an official statement issued by Zuckerberg to Congress reads:

“China is moving quickly to launch a similar idea in the coming months. We can’t sit here and assume that because America is today the leader that it will always get to be the leader if we don't innovate.”

Indeed, there have been reports that Beijing is looking to release its own CBDC — a yuan-pegged digital currency — with some commentators speculating that the move is part of the country’s efforts to block Libra. However, there have been conflicting statements regarding the level of work already completed on the project.

Related: Digital Yuan: Weapon in US Trade War or Attempt to Manipulate Bitcoin?

Oct. 24 did see a flurry of news from China, with the country’s president, Xi Jinping, calling for accelerated adoption of blockchain technology. China has also passed its first-ever “crypto law,” which will reportedly go into effect at the start of 2020. Some commentators, including Dovey Wan of Primitive Ventures, say these moves are part of the modalities for the emergence of China’s national digital currency. Zhao of BaseFEX told Cointelegraph that the proposed digital-yuan is still a work in progress:

“The main driving force at this moment is a working group inside the People’s Bank of China (PBoC). It is more like an internal think tank, within the Central Bank. What that group says represents only what they think, not what the entire People’s Bank of China thinks. But allowing this small working group to say things publicly on a regular basis does indicate PBoC’s favorable stance upon this China-crypto.”

However, Zhao maintained that it would take more than the recommendations of a PBoC working group to engineer something like a national digital currency in China. According to Zhao, the introduction of a national cryptocurrency would be a very big deal for the entire nation, and therefore the PBoC will by no means decide on such a move by itself. Zhao also added:

“People who don't know how Chinese government departments function and work with each other tend to over-react to such news, which is unfortunately very much the case for the English-speaking crypto community.”

CBDCs for all, including Libra

Nevertheless, these reports seem to have been sufficient to spook some stakeholders within the EU. Bruno Le Maire, France’s finance minister, recently called on the European Central Bank to begin working on creating its own digital currency in response to China’s efforts.

Despite identifying the apparent threat of China’s CBDC efforts, Le Maire and other EU policy stakeholders aren’t keen on Libra, tagging the project as having severe implications for the monetary sovereignty of countries in the EU. Both France and Germany have expressed a desire to prevent Libra from operating in Europe.

For some members of the U.S. Congress, however, the fears surrounding China’s reported digital currency project is much ado about nothing. After the Oct. 23 Libra hearing, Rep. Maxine Waters, who is the chair of the House Financial Services Committee, dismissed Zuckerberg’s implication that the U.S. is lagging behind in terms of digital innovation.

Chinese Bitcoin FOMO: Major Bank Invests in Popular BTC Wallet

chinese bitcoin fomo is real

Chinese bitcoin FOMO appears to be on the rise as a major bank has reportedly invested in a local wallet platform. This report marks another significant crypto and blockchain-related development from China as the country appears to be moving towards government-approved adoption.


China Merchants Bank Invests in BTC Wallet Service

Tweeting on Monday (October 28, 2019), Dovey Wan co-founder of Primitive Ventures revealed that China Merchants Bank has invested in BitPie — a non-custodial bitcoin wallet service.

According to Wan, BitPie is the longest-serving bitcoin wallet platform in China, with the most users. The investment in BitPie comes only a couple of months after the bank’s shares fell 13.7% amid ongoing investigations in the U.S. for involvement with North Korean state actors.

For Wan, however, the move is part of a growing trend of crypto and blockchain nationalization in China. The Primitive Ventures chief, remarked:

All I can say is this to me it’s a sign of [the] beginning of the nationalization of Bitcoin/Cryptocurrency related infra in mainland [China]. Eventually, all things can be state-owned, or at least partially (mining, ASIC, exchanges, wallets, etc).

Despite the 2017 ban on crypto trading and initial coin offerings (ICOs), p2p trading is allowed in China. There are even reports that major exchanges run bitcoin over-the-counter (OTC) desks via marketplaces on popular Chinese payment services like Alipay and WeChat Pay.

Chinese Bitcoin FOMO on the Rise

If Wan’s deductions prove accurate, then there could be a wave of institutional involvement in bitcoin and cryptos in general. Such a development could provide a further boost to the already growing retail crypto interest in China.

Come next year, the cryptography law will come into effect. Reports suggest that the new law aims to provide a robust regulatory framework for crypto and blockchain technology, as well as, making China more competitive in the emerging digital landscape.

As previously reported by Bitcoinist, bitcoin FOMO in China is on the rise. Since the country’s President XI Jinping made mention of blockchain technology, there has been a surge of positive interest sweeping across the country.

Search trends from Chinese search engines like Baidu show a significant uptick in bitcoin and crypto interest. Also, Chinese altcoins like NEO and ONT have been coasting on this positive wave of enthusiasm with massive price gains.

Do you think China is moving towards the nationalization of it’s crypto and blockchain industry? Let us know in the comments below.


Images via Shutterstock, Twitter: @DoveyWan

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Litecoin Hash Rate Down 60% Since August Halving

litecoin hash rate down

Three months after the August 2019 halving, the Litecoin hash rate continues to tumble with mining profitability reaching all-time lows. This massive fall in mining activity signals yet another negative report for the altcoin with reports earlier in the year suggesting developers weren’t interested in contributing to its cryptocurrency code.


Litecoin Miners Abandon Ship

Data from BitInfoCharts.com shows that the Litecoin hash rate has fallen by more than 60% since the August 2019 halving. These figures are a continuation of the downward trend seen in Litecoin mining activity since the summer of 2019.

Litecoin hash rate decline

This massive hash rate decline suggests a significant chilling of miner interest in the sixth-ranked cryptocurrency by market capitalization. Litecoin miners are exiting the network in droves meaning lower computing potential being expended on the network.

Most importantly, a hash rate decline of such proportions signals an alarming security risk to the network itself. Falling hash rate figures correspond to lower participation in the network which jeopardizes the fidelity of the Proof-of-Work (PoW) activities on the blockchain.

That the hash rate decline comes following a halving appears even more ominous for the altcoin touted as being the “silver to Bitcoin’s gold.” The halving of the block reward should in theory act as a scarcity mechanism which makes each LTC unit even more valuable.

Litecoin mining profitability

Analysts usually identify halvings as being triggers for boosting the market value of a PoW crypto. However, Litecoin miners seem not be sharing in this enthusiasm meaning they are likely diverting their resources to mining other more valuable cryptocurrencies. According to data from BitInfoCharts.com, Litecoin mining profitability is at an all-time low.

Litecoin Mining Death Spiral A Familiar Tale

The mining death spiral for Litecoin is only one out of a series of issues for the popular altcoin. Despite notable achievements like the Litecoin Lightning Network and atomic swaps, the overall appeal of LTC hasn’t seen any significant boost.

Litecoin price decline

Litecoin led the way among the top-ten altcoins for the earlier part of the year during altseason. Its spot price even surged to $140 but has since tumbled by about 60% to $57 as at press time.

The problems for Litecoin even extend beyond price performance into developmental efforts in its core code. As previously reported by Bitcoinist, LTC creator Charlie Lee has admitted that nobody is interested in contributing to Litecoin’s crypto code.

Do you think Litecoin will be able to weather the declining hash rate storm? Let us know in the comments below.


Images via Shutterstock, BitInfoCharts, and TradingView.

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Bitcoin Hash Rate Approaching 120,000,000 TH/s Amid Market Crash

Bitcoin mining nears all time high despite market crash

The Bitcoin Network is about to reach another hash rate milestone despite BTC falling more than $500 in a single day.


Network Fundamentals Improving Despite Price Drop

Data from Blockchain.com shows the Bitcoin Network hash rate currently at 114 quintillion hashes per second (114 million tera hashes per second — TH/s). This figure represents a new record for the computing power required to secure the network.

Bitcoin Hash Rate chart

Since the start of 2019, Bitcoin’s hash rate has maintained steady growth regularly setting new highs. A look at the 7-day average figures shows that the Bitcoin hash rate has increased by close to 140% since the beginning of 2019.

The computing power increase looks to be bringing Bitcoin’s hash rate closer to a new milestone of 120 quintillion hashes per second. There is, however, some disagreement over how to measure the network’s hash rate.

Thus, it is common to see platforms providing different hash rate figuresCoin Dance shows the network’s computing potential already reaching 134 quintillion hashes per second earlier in the year. However, irrespective of the platform, the figures showcase the same trend — Bitcoin hash rate steadily on the rise since the start of the year.

The current hash rate spike will mean another upward difficulty correction. Bitcoin mining activity has experienced a resurgence since the 45% hash rate crash in December that sparked fears of a mining capitulation.

As reported by Bitcoinist, Bitmain is set to open a mega-mining facility in Rochdale Texas. The Bitcoin mining giant is the latest player in the industry to pursue further expansion of its activities with competition in the market becoming fiercer.

Bitcoin Price Struggle Continues

Strong fundamentals aside, the bitcoin spot price is still reeling from yesterday’s (October 23) $500 drop. The top-ranked crypto is now at its lowest price level in five months.

Speaking to Bitcoinist, Joe DiPasquale, CEO of crypto investment firm BitBull Capital attributed the price drop to a swift $200 million bitcoin liquidation. According to DiPasquale:

Smart money sold out in advance of today’s [Libra] hearings. Investors appear to have taken a cautious approach ahead of the hearing by limiting their exposure to crypto. We believe the price of BTC will remain under pressure for at least the next 24 hours, if not through Monday.

An earlier Bitcoinist report did note an influx of BTC movements into exchanges potentially signaling a massive sell-off. Meanwhile, James Bennet of Byte Tree says there has been a significant drop in Bitcoin network velocity as trading has swung towards Tether (USDT).

What is your end of year price forecast for bitcoin? Let us know in the comments below.


Images via Shutterstock, Blockchain.com and Twitter @coinmetrics.

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Crypto Derivatives Ban: UK Govt Won’t Interfere with FCA Decision

The UK government says it has no power to interfere with any decision by the Financial Conduct Authority (FCA) regarding the fate of crypto derivatives. This report comes amid speculation that the financial watchdog is moving to ban crypto derivatives over investor protection concerns.

Meanwhile, several stakeholders have urged the FCA to reconsider its stance on the matter. Some commentators say a ban will only force digital innovation out of the UK and into friendlier regulatory environments.

FCA Crypto

UK Govt Maintains FCA Independence

According to FinanceFeeds, the UK government doesn’t plan to get involved with the activities of the FCA as it relates to cryptocurrency regulations. Responding to questions on Monday (October 21, 2019), John Glen, Economic Secretary to the Treasury maintained that the FCA is an independent body.

Commenting on the reports of an impending FCA ban on crypto derivatives, Glen remarked:

“The Financial Conduct Authority (FCA) made a commitment to consult on the potential prohibition of the sale to retail consumers of derivatives referencing certain types of cryptoassets in the final report of the Cryptoasset Taskforce, comprised of HM Treasury, the Bank of England and the Financial Conduct Authority, in October 2018. The final decision on this consultation is a matter for the Financial Conduct Authority (FCA), which is operationally independent from government.”

For Glen, the executive is in support of whatever approach the FCA decides to take in dealing with crypto derivatives trading.

Crypto Derivatives Nuanced Regulations

Since the report of an impending crypto derivatives ban by the FCA emerged, several cryptocurrency stakeholders in the UK have taken issue with the regulator’s stance. As previously reported Blockonomi, the World Federation of Exchanges (WFE) declared that a ban on crypto derivatives wasn’t a good idea.

According to the WFE, the FCA should adopt a more nuanced approach to dealing with crypto derivatives warning that an outright ban would affect its members who are already in compliance with a slew of regulatory standards.

Rather than pursuing an outright ban, the WFE declared that the FCA should look for ways to balance the need for investor protection while not seriously harming the UK’s crypto market.

However, the FCA continues to maintain its stance on the matter, stating that the move is in the interest of retail investors. According to the FCA, a ban on crypto derivatives could lead to a $96 million haircut in harm done to retail traders per year.

Regulators Pursuing Stricter Cryptocurrency Laws

The FCA isn’t the only regulator ramping up efforts to combat fraud in the cryptocurrency market. Elsewhere, the Financial Crimes Enforcement Network (FinCEN) in the United States is paying even greater attention to bitcoin and cryptos.

As reported by Blockonomi, FinCEN director, Kenneth Blanco said that cryptos provide a conduit for illegal activities. Thus, businesses operating in the industry must comply with regulatory provisions like know your customer (KYC) and anti-money laundering (AML).

The FinCEN chief also said the industry must adhere to the Bank Secrecy Act and that crypto firms cannot operate outside the law. These comments add to the increasing scrutiny around the virtual currency sector as governments and regulatory agencies continue to shine a brighter spotlight on the market.

These stringent regulatory policies have begun to have a marked effect on the market in countries like South Korea. Meanwhile, several crypto businesses have been forced to adopt these policies or risk going out of business.

In response, several stakeholders in the industry have recommended the creation of relevant self-regulating organizations (SROs). However, the jury is still out on whether government authorities would be willing to work with these SROs in the creation of a mutually beneficial regulatory framework for the crypto space.

The post Crypto Derivatives Ban: UK Govt Won’t Interfere with FCA Decision appeared first on Blockonomi.

Crypto Derivatives Ban: UK Govt Won’t Interfere with FCA Decision

The UK government says it has no power to interfere with any decision by the Financial Conduct Authority (FCA) regarding the fate of crypto derivatives. This report comes amid speculation that the financial watchdog is moving to ban crypto derivatives over investor protection concerns.

Meanwhile, several stakeholders have urged the FCA to reconsider its stance on the matter. Some commentators say a ban will only force digital innovation out of the UK and into friendlier regulatory environments.

FCA Crypto

UK Govt Maintains FCA Independence

According to FinanceFeeds, the UK government doesn’t plan to get involved with the activities of the FCA as it relates to cryptocurrency regulations. Responding to questions on Monday (October 21, 2019), John Glen, Economic Secretary to the Treasury maintained that the FCA is an independent body.

Commenting on the reports of an impending FCA ban on crypto derivatives, Glen remarked:

“The Financial Conduct Authority (FCA) made a commitment to consult on the potential prohibition of the sale to retail consumers of derivatives referencing certain types of cryptoassets in the final report of the Cryptoasset Taskforce, comprised of HM Treasury, the Bank of England and the Financial Conduct Authority, in October 2018. The final decision on this consultation is a matter for the Financial Conduct Authority (FCA), which is operationally independent from government.”

For Glen, the executive is in support of whatever approach the FCA decides to take in dealing with crypto derivatives trading.

Crypto Derivatives Nuanced Regulations

Since the report of an impending crypto derivatives ban by the FCA emerged, several cryptocurrency stakeholders in the UK have taken issue with the regulator’s stance. As previously reported Blockonomi, the World Federation of Exchanges (WFE) declared that a ban on crypto derivatives wasn’t a good idea.

According to the WFE, the FCA should adopt a more nuanced approach to dealing with crypto derivatives warning that an outright ban would affect its members who are already in compliance with a slew of regulatory standards.

Rather than pursuing an outright ban, the WFE declared that the FCA should look for ways to balance the need for investor protection while not seriously harming the UK’s crypto market.

However, the FCA continues to maintain its stance on the matter, stating that the move is in the interest of retail investors. According to the FCA, a ban on crypto derivatives could lead to a $96 million haircut in harm done to retail traders per year.

Regulators Pursuing Stricter Cryptocurrency Laws

The FCA isn’t the only regulator ramping up efforts to combat fraud in the cryptocurrency market. Elsewhere, the Financial Crimes Enforcement Network (FinCEN) in the United States is paying even greater attention to bitcoin and cryptos.

As reported by Blockonomi, FinCEN director, Kenneth Blanco said that cryptos provide a conduit for illegal activities. Thus, businesses operating in the industry must comply with regulatory provisions like know your customer (KYC) and anti-money laundering (AML).

The FinCEN chief also said the industry must adhere to the Bank Secrecy Act and that crypto firms cannot operate outside the law. These comments add to the increasing scrutiny around the virtual currency sector as governments and regulatory agencies continue to shine a brighter spotlight on the market.

These stringent regulatory policies have begun to have a marked effect on the market in countries like South Korea. Meanwhile, several crypto businesses have been forced to adopt these policies or risk going out of business.

In response, several stakeholders in the industry have recommended the creation of relevant self-regulating organizations (SROs). However, the jury is still out on whether government authorities would be willing to work with these SROs in the creation of a mutually beneficial regulatory framework for the crypto space.

The post Crypto Derivatives Ban: UK Govt Won’t Interfere with FCA Decision appeared first on Blockonomi.

India Not Alone in Libra Crypto Aversion, Says Finance Minister

India remains one of the more hostile countries when it comes to cryptocurrencies. Facebook’s proposed Libra crypto hasn’t been exempted from this crypto aversion.

However, authorities in New Delhi aren’t the only ones wary of Libra. In fact, since the project’s white paper was published, there has been a significant global backlash against Facebook’s foray into the crypto payment arena.

India Remains Wary About Facebook

According to a report by the New Indian Express, the issue of cryptocurrencies, Libra inclusive, was discussed at a recent meeting of the World Bank and the International Monetary Fund (IMF) held in the U.S. Present at the meeting was India’s Finance Minister, Nirmala Sitharaman, who stated that India echoed the concern of other governments concerning Libra and other cryptocurrencies.

Sitharaman speaking specifically on the issue of Libra, said:

“On our side, the Reserve Bank Governor spoke about it during our turn to intervene. I got the sense that many countries were cautioning on rushing into this. Countries will have to show extreme caution much before anything is said or moved on this.”

The current Managing Director of the IMF, Kristalina Georgieva, also said that financial bodies have been actively investigating cryptocurrencies. The IMF boss added that while virtual currencies have their benefits, they could be used for fraudulent activities – a popular refrain employed by crypto critics in government and regulatory agencies

India’s Long-Standing Anti-Crypto Policies

India’s stance on Facebook’s Libra comes as no surprise, considering the country’s turbulent relationship with bitcoin and other crypto tokens. Following the RBI ban prohibiting commercial banks from offering banking services in 2018, there has been an ongoing battle between the Indian central bank and the crypto community.

These stringent measures have led to crypto exchanges like Zebpay and  Coinome to shut down their services in India and move to other jurisdictions with crypto-friendly regulations. In the wake of the legal tussle, the country’s supreme court asked the Union of India to enact regulations for bitcoin and other cryptos

Back in July, an inter-ministerial committee set up to look into crypto regulations submitted a recommendation for a blanket ban on cryptocurrencies in India. A supposed draft bill revealed that any individual holding or trading crypto could face a five-year or ten-year prison term in addition to a fine.

However, India’s Minister of State for Finance, Anurag Thakur, came out to state that the country had no intention of banning bitcoin. Some stakeholders opine that a ban on bitcoin and other cryptos will be bad for the country.

Libra Continues to Brave Growing Regulatory Storm

India’s reticence aside, Libra has faced mounting regulatory scrutiny from various financial regulators around the world. Consequently, initial backers like PayPal, Visa, and Mastercard, reportedly pulled out of the Libra project.

Two U.S. Senators reportedly tried to persuade three online payment companies, namely Visa, Mastercard, and Stripe, to double-check their involvement in the Libra crypto project. According to the senators, regulators; Libra Association members and the U.S. Congress didn’t have sufficient information regarding Libra and the risks associated with the virtual currency.

The U.S. senators highlighted Facebook’s previous brushes with privacy scandals and the potentially negative impact such an association could have on the goodwill of their respective payment companies.

European and Chinese authorities have voiced concerns about Facebook’s Libra, with some officials worried that the Libra digital currency would threaten sovereign currencies.  France’s Finance Minister, Bruno Le Maire of France called for stringent regulations for Libra and also vowed to prevent the stablecoin from launching in Europe.

The post India Not Alone in Libra Crypto Aversion, Says Finance Minister appeared first on Blockonomi.

CFTC Chairman: Cryptoassets Other Than BTC and ETH Can Become Commodities

The Chairman Of The CFTC Might Just Have Brought The Bitcoin Crash To An End

Heath P. Tarbert, Chairman of the U.S. Commodity Futures Commission says cryptos classified as security tokens can become commodities. The CFTC chief also revealed that Ethereum futures may hit the market within the next 12 months.


Crypto Transmutation from Security to Commodity is Possible

Speaking at the DC Fintech Week on Monday (October 21, 2019), Chairman Tarbert remarked that crypto designations into securities and commodities aren’t set in stone. According to the CFTC chief, a cryptoasset that’s considered a security can become a commodity and vice versa.

Furthermore, Tarbert revealed that other cryptos apart from Bitcoin and Ethereum might be labeled as commodities. As previously reported by Bitcoinist, the CFTC labeled Ethereum a commodity.

Tarbert also stated that the CFTC was looking into evaluating stablecoins as commodities. According to Coinmetrics co-founder Nic Carter, the CFTC Chairman did state that he wasn’t aware of any legal precedent for such a transmutation from security to commodity status.

For Tarbert, the U.S. Securities and Exchange Commission (SEC) is responsible for determining which cryptos fall under the securities classification. To this end, the CFTC chief remarked that market-led self-regulatory organizations (SROs) will not determine how regulators classify virtual assets.

Earlier in October, several major U.S. crypto firms formed the Crypto Ratings Council (CRC) — an independent rating body for cryptocurrency classification.

Chairman Tarbert also restated his belief that Ethereum futures are imminent forecasting that hit the market in the next 6 to 12 months. Since the SEC separated bitcoin and ether as commodities back in 2018, there has been talk of launching ether futures in the U.S. market.

At the Yahoo Finance All Market Summit earlier in October, the CFTC chair praised the performance of the Bitcoin futures market.

CFTC Still Uncertain About Crypto Exchanges

Away from the security and commodity debate, Tarbert declared that crypto exchanges were still a “Wild West” arena. According to the CFTC chairman, there is still work needed to be done in sanitizing the crypto trading space.

In recent times, regulators have begun to insist on total compliance with measures like know your customer (KYC) and anti-money laundering (AML). These stringent measures have reportedly dampened retail trading in once buoyant markets like South Korea.

For many regulators, these robust regulatory provisions are necessary to prevent illegal financial activities.

What do you think are the potential implications of other cryptos being labeled commodities? Let us know in the comments below.


Images via Shutterstock, Twitter @nic__carter.

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John McAfee: Stablecoins Solve the ‘Fiat Problem’ for Decentralized Crypto Exchanges

John McAfee — cybersecurity expert and crypto bull, says stablecoins could hold the key to solving some of the core issues with decentralized exchanges (DEX). With centralized exchanges still holding sway in the crypto trading markets, some cryptocurrency purists say DEX adoption needs to become the focus if virtual currency dealings are to be truly independent.

Stablecoins

Government authorities continue to force centralized platforms to adopt robust compliance to know your customer (KYC) and anti-money laundering (AML) policies. Meanwhile, McAfee recently launched the McAfeeDEX which is open to all countries and has no KYC protocols.

No Need for Fiat On-Ramps on Crypto DEX

In a Twitter video posted on Sunday (October 20, 2019), McAfee identified fiat on-ramps and off-ramps as the major headache for crypto DEX. Unlike their centralized counterparts, DEX platforms cannot easily handle fiat transactions.

Commenting on the problem, McAfee opined:

“What is the main issue with decentralized exchanges? It is how to get your fiat currencies in and out. [It’s] very difficult since no information is collected on a decentralized exchange — no name, no address, no social security number, no email, nothing. It’s difficult to do.”

Fiat on-ramps aren’t only a problem for DEX, but they also pose significant issues for centralized platforms operating in areas with stringent government regulations. In China, for example, traders on peer-to-peer (P2P) platforms have to utilize backchannels in payment processor services to deposit yuan for Tether (USDT), which is then converted to bitcoin (BTC).

For McAfee, stablecoin utilization solves this particular issue for crypto DEX platforms. Rather than face the tenuous processes required for fiat transactions, the crypto bull says crypto DEX services should adopt stablecoins like DAI.

McAfee highlighted the benefits of using a stablecoin like DAI, pointing out that its value never differs from the U.S. dollar by more than one percentage point. Such stablecoins can in McAfee’s opinion be used in lieu of fiat currencies and are easily convertible to U.S. dollar when traders have need of such.

Fiat Trading the Missing Link for DEX Platforms

McAfee’s commentary possibly provides a viable route by which crypto DEX platforms can chart their way to becoming the popular type of exchanges for cryptocurrencies. Centralized platforms like Binance and Coinbase still account for the overwhelming majority of cryptocurrency trading activity.

Ease of use is one of the major problems associated with crypto DEX platforms. Critics say marketplaces like Binance have a more streamlined user-interface.

For Andrew Hamilton, CEO of decentralized exchange platform Rubix.io, new entrants into the crypto DEX arena are well aware of such issues and have engineered their services to alleviate the problem. According to Hamilton:

“Traditional decentralized exchanges haven’t quite been able to manage usability and robust order-matching functionality.”

If crypto DEX platforms can incorporate fiat trading in the form of stablecoins, perhaps they may begin to see greater utilization. Some commentators even say that crypto DEX platforms might hold the key to total cryptocurrency independence from mainstream financial and regulatory infrastructure.

McAfee DEX

Earlier in October 2019, McAfee launched a new crypto decentralized exchange platform called McAfee DEX. According to the details of the launch, McAfee DEX does not require KYC of any sort.

The launch announcement also revealed that tokens running on the Ethereum blockchain can be added free of any listing fee. The team at McAfee DEX says it has plans to expand its listing catalog.

For McAfee, the launch of the DEX is part of his long-standing position that decentralized exchanges hold the key to the advancement of the cryptocurrency movement. The crypto bull stated that platforms like McAfee DEX move crypto trading from the realms of pure speculation towards fulfilling the libertarian dream of separating money from the state.

Despite the 2018 bear market, McAfee still maintains optimism for the future of the crypto market, especially bitcoin. As previously reported by Blockonomi, McAfee still holds to his $1 million by 2020 bitcoin price prediction.

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4 Reasons Why Bitcoin is So Popular in South Africa

Bitcoin south africa

Bitcoin and cryptocurrencies, in general, continue to thrive in South Africa even as such interest comes with a multitude of scams and fraudulent investment schemes. The country even ranks second in the world for bitcoin searches according to Google Trends. Here are four reasons for the continued interest in bitcoin among South Africans.


(1) Internal and External Remittance

South Africa’s remittance market continues to grow, triggered by both rural to urban migration and the influx of migrant workers from neighboring nations.

According to Bloomberg, the country’s remittance market is expected to reach R34 billion ($2.3 billion) by 2023.

Bitcoin offers a cheaper alternative for sending money to relatives in rural South Africa or in neighboring countries.

Commenting on the role of bitcoin and crypto payments in the country’s remittance arena, Marius Reitz, general manager for Africa at crypto exchange platform Luno, opined:

There are large remittance flows from South Africa to other countries in the SADC region, of which a portion is informal due largely to the high costs and complexity involved. It is vital that we reduce the cost and complexity associated with moving money seamlessly across the continent.

Bitcoin Google Trends South Africa

(2) High Fintech Literacy

South Africa remains the sole fintech hub in Africa. Data from the United Nations Economic Commission for Africa (UNECA) shows that South Africa accounts for 31.2% of the fintech startups on the Continent.

This relatively high fintech literacy also extends to mobile money adoption. Bitcoin in many ways constitutes an extension of a payment system already familiar and in popular use by the South African public.

South Africa also presents a departure from the norm in Sub-Saharan Africa as far as the unbanked population is concerned. While more than half the population in Sub-Saharan Africa is unbanked, more than 80% of South Africa is banked.

This degree of banking and mobile money penetration has made it easy for South Africans to purchase bitcoin from platforms like Luno.

Bitcoin Trading in South Africa

(3) Volatile Rand

According to Bloomberg, the South African rand — the country’s fiat currency, was the most volatile among the “major currencies.” Like in other countries experiencing such volatility, bitcoin presents a viable alternative.

According to Reitz, daily bitcoin trading in South Africa averages R90 million ($6 million). Data from Coin Dance shows an average of R15 million ($1 million) traded via P2P platform Localbitcoins for the month of October 2019.

(4) Absence of Stringent Regulations

Finally, South Africa is yet to enact strict cryptocurrency laws that might dampen enthusiasm for bitcoin. Apart from tax regulations and AML/KYC compliance, the country’s crypto space isn’t highly regulated.

However, as reported by Bitcoinst, there are plans by authorities in the country to begin robust crypto tracking modalities.

Do you think South Africa can become the leading crypto and blockchain hub in Africa? Let us know in the comments below.


Images via Shutterstock, Google Trends and Coin Dance.

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Alipay Denounces Bitcoin OTC Trading: Regulatory ‘Gray Area’ in China

Alipay denies providing support for Bitcoin trading amid reports of Binance accepting fiat deposits via popular payment channels.

Earlier in October 2019, Binance announced a fiat on-ramp for crypto trading via Chinese payment services Alipay and WeChat. This move was part of the exchange giant’s peer-to-peer (P2P) trading rollout for Bitcoin (BTC), Ether (ETH) and Tether (USDT) against the Chinese yuan.

The public nature of this announcement did bring questions to the fore regarding the use of payment channels like Alipay and WeChat for crypto trading. Alipay did, in fact, release statements distancing itself from cryptocurrency trading activities, with Binance later clarifying that it wasn’t working directly with the aforementioned payment services.

Meanwhile the evolving narrative around the situation speaks to the legal status of Bitcoin and cryptocurrencies in China. Even with a trading ban in place, there are whispers of a booming P2P trading arena, with authorities in Beijing seeming to adopt a “see no evil, hear no evil, speak no evil” approach.

However, whenever these reports do make it into the public domain, Chinese authorities and businesses are swift to put a lid on them. Perhaps the arrival of the country’s proposed digital currency might necessitate the emergence of more clear-cut handling of crypto commerce in China.

Alipay wants nothing to do with Bitcoin

As previously reported by Cointelegraph, Alibaba-owned payment channel Alipay has moved to ban transactions involving Bitcoin and other cryptocurrencies. In an email to Cointelegraph, a spokesperson for the platform wrote:

“Alipay closely monitors over-the-counter (OTC) transactions to identify irregular behavior and ensure compliance with relevant regulations. If any transactions are identified as being related to bitcoin or other virtual currencies, we immediately stop the relevant payment services.”

This statement came in response to reports that Chinese crypto traders were using the platform as a P2P trading marketplace. Crypto exchange giant Binance even announced that it had enabled support for fiat deposits via Alipay and WeChat.

Cointelegraph spoke with Filipe Castro, co-founder and chief information officer of Utrust — a Swiss-based digital payments processor — about the Alipay announcement. “AliPay, as many other established companies are still focused on their traditional business models and see this ecosystem as a challenger,” Castro said.

For the Utrust chief, Alipay’s status as a major player in China’s electronic payment arena means it has to work toward balancing the need for increasing revenue streams and compliance with directives from authorities in Beijing. Castro also highlighted the less than favorable standing held by the crypto industry in China, noting:

“Mainland China has strict laws banning gambling, and many still see cryptocurrency as such. Alipay and other providers still look at other cryptocurrency providers as investment outlets and not payment vehicles. Thus, until this perception changes, it is likely that current measures will stay in force.”

In an interview with Cointelegraph, Celine Lu, founder and CEO of BitDeer — a hashpower sharing platform — provided further insight. According to Lu, the Chinese government pays particular attention to the activities of popular third-party payment processors like Alipay:

“In these regulations, the state clarifies the nature of Bitcoin as a virtual commodity. At the same time, for the purpose of prevention of risks to the financial system, the relevant regulations limit the participation of financial institutions and payment institutions in Bitcoin-related activities.”

Alipay isn’t alone in coming out to distance itself from Bitcoin OTC trading. Back in May 2019, WeChat changed its payment policy, forbidding the use of its platform for P2P transactions.

Is it all about the narrative?

However, despite Alipay coming out to deny the use of its platform for Bitcoin OTC trading, several commentators say the practice is common in China. The summary of the arguments posited by many is that such activities while illegal on paper, fall into a regulatory gray area.

To clarify, Bitcoin OTC trading is not in itself illegal in China. Back in May 2019, the government revealed that the 2017 trading and initial coin offering (ICO) ban did not affect Bitcoin’s legal status as a property that can be held or exchanged via P2P channels.

Indeed, following the 2017 trading and ICO ban, reports began to emerge of growing P2P Bitcoin trading in China. Platforms like WeChat became marketplaces for the convergence of prospective buyers and sellers.

There are even reports that major crypto exchanges use these backchannel avenues to conduct P2P Bitcoin trading in China. These exchanges reportedly mask such activities by using the guise of running a P2P trading desk for the BTC/USDT trading pair. OTC P2P trading reportedly accounts for the overwhelming majority of Chinese BTC/CNY trading. Users place manual buy and sell orders, with the exchanges acting as the go-between.

Given the informal nature of the arrangement, counterparty risk becomes a major problem. The buyer reportedly has to send fiat payments first before receiving the agreed-upon Bitcoin. Thus, these marketplaces tend to put in a lot of effort in ensuring that participants hold to their respective ends of the bargain.

The fiat payment part of the deal requires channels like WeChat, Alipay or wire transfers. However, financial institutions in mainland China are barred from facilitating crypto transactions. Thus, users of such channels usually run the risk of having their accounts terminated.

However, some commentators allege that such practices are possible not because of regulatory loopholes but due to an unwritten “implied consent” of some Chinese government officials. These people claim that crypto exchanges have forged useful relationships with key actors in Beijing that help to smoothen any legal wrinkles.

While the Alipay/Binance situation was unfolding, a Twitter account named Blocfilo posted some startling revelations about the Chinese crypto trading scene. Allegedly, despite the trading ban, many cryptocurrency exchanges still operate and have their headquarters in mainland China. The self-professed crypto exchange analyst also tweeted that government officials are prepared to look the other way as long as they receive bribes from the platforms. Excerpts from the thread read:

“You just gotta pay the government officials some money and you can operate just fine under the radar. A lot of crypto exchanges have already become banks to certain extent. Only the legitimate ones will survive in the long run though.”

Cointelegraph reached out to several Chinese crypto exchanges to ascertain the veracity of these claims. The platforms that responded declined to comment on the matter. If such statements are true, then it appears authorities in Beijing seem more concerned with optics rather than actual trading activities.

Crypto-yuan: To be or not to be?

Back in April 2018, Chinese social media-based news platform cnLedger revealed that there was a booming Bitcoin OTC trade for crypto bulls in the country. As reported by Cointelegraph at the time, traders in China were paying a premium for BTC via these OTC desks. Chinese traders exchange CNY for USDT, which is then used to purchase BTC overseas. Such activities bring capital control issues with yuan deposits leaving the country.

Indeed, one of the objections raised by China to Facebook’s proposed Libra cryptocurrency project is the potential impact on its capital control efforts. Some countries in Europe, such as Germany and France, say Libra could have troubling implications for the monetary sovereignty of nations.

Related: Chinese National Cryptocurrency Turns Out Not Being an Actual Crypto

There has been talk for some time of the People’s Bank of China (PBoC) creating a digital yuan currency. Some commentators suggest that such a move even presents greater prominence following the Libra announcement.

China already has a well-developed electronic payment ecosystem with the likes of Alipay and WeChat dominating the scene. The coming of a digital yuan is seen by some as an effort by the government to prevent the penetration of cryptocurrencies into the space.

Cointelegraph asked Utrust’s Castro about the potential impact of Alipay’s announcement distancing itself from Bitcoin trading on the future of crypto payments in China. According to Castro, Alipay’s stance is not surprising given what it has said in the past, adding:

“The advent of an e-Yuan digital currency, natively developed in China could help shape its strategic stance going forward. Competition from Libra and other private initiatives can undoubtedly act as a catalyst that accelerates this process.”

As reported by Cointelegraph, there is still no official consensus on the exact release date for the proposed digital yuan currency. Back in August, reports emerged that the PBoC was ready to roll out the central bank digital currency, or CBDC. However, conflicting revelations emerged a month later saying the central bank still required more time to study the pros and cons.

China’s proposed digital currency coupled with Facebook’s foray into the market has also reportedly spooked several key actors within the European Union. In an op-ed in the Financial Times, Bruno Le Maire, France’s finance minister, urged the EU to consider creating its own digital currency. According to Le Maire:

“We [the European Central Bank] should consider the creation of central banks’ own digital currencies, in the medium to long term. We cannot let China be the only player in this field. Our independence is at stake.”

Le Maire’s aversion to the involvement of private institutions in global monetary affairs echoes some of the sentiments the Utrust co-founder shared with Cointelegraph. During the interview, Castro highlighted the still-prevailing negative rhetoric surrounding the industry, stating, “There are many challenges still ahead, namely the establishment of a good, credible and trustworthy brand reputation for the cryptocurrency ecosystem.”

For now, the likes of Alipay need to maintain a public perception of crypto-aversion, even if private dealings reveal otherwise. Perhaps a time will come when governments will no longer be able to cast the industry in a bad light and cryptocurrencies will usher in the expected global electronic payment revolution.

New Singapore Payment Services Act Includes Forensic Crypto Tracking

Singapore Forensic Crypto Tracking

Financial regulators in Singapore are looking to implement robust crypto tracking as part of efforts to combat financial crimes. This move comes as authorities are set to introduce the country’s new Payment Services Act.


MAS Wants to Combat Illegal Crypto Transactions

According to a speech published by the Monetary Authority of Singapore (MAS), the financial regulator is keen to upscale its crypto surveillance capabilities.

Delivering the keynote address at the International Compliance Association Annual APAC, Loo Siew Yee of the MAS revealed:

MAS is experimenting with both in-house and external technologies to draw insights from new data points, such as transactional information on public blockchains and other sources. Such data will provide useful early warning indicators, alongside traditional sources of information such as statutory returns and suspicious transaction reports.

For Yee, the focus on cryptos is part of efforts by the MAS to strengthen the country’s anti-money laundering (AML) policies.

Earlier in September, Singapore’s Parliament passed the Payment Services Act which comes into effect on January 2020. The new law brings crypto-businesses under the purview of the MAS with a specific focus on AML/CFT compliance.

Singapore’s financial watchdog says it wants its crypto tracking modalities to be in line with international best practices. Intergovernmental bodies like the Financial Action Task Force (FATF) have in recent times advised nations to increase their crypto surveillance.

The Act is only the latest in a recent string of developments aimed at formalizing the country’s crypto space. As previously reported by Bitcoinist, Singapore’s tax body back in July proposed a law exempting bitcoin from Goods and Services Tax (GST).

Several retailers in the country have even begun accepting bitcoin payments as the Southeast Asian theater continues to experience greater crypto adoption.

Blockchain Tracking On The Rise

Singapore’s focus on cryptocurrency surveillance comes at a time when reports indicate that crypto tracking capabilities are on the increase. According to a previous Bitcoinist report, blockchain intelligence firm CipherTrace says crypto tracking is possible for more than 700 tokens.

The firm issued a report showing the existence of crypto tracking capabilities for 87% of the trading volume of the top 100 cryptocurrencies by market cap.

Furthermore, the company revealed that it aided the U.S. Department of Justice (DoJ) in its recent takedown of the largest child pornography website.

With increasing crypto tracking ability, is the argument that virtual currencies support illegal activity a non sequitur? Let us know in the comments below.


Images via Shutterstock

The post New Singapore Payment Services Act Includes Forensic Crypto Tracking appeared first on Bitcoinist.com.

Pushing for Crypto Self-Regulation Amid Tightening Government Scrutiny

With government regulations becoming more stringent, crypto businesses are coming together to form self-regulating bodies for the industry.

Self-regulation is once again a trending topic in the cryptocurrency landscape as major exchange platforms have announced the creation of self-regulated organizations (SROs) to achieve some standardization in digital currency governance. Government regulators across various jurisdictions continue to exert greater regulatory pressure on their local cryptocurrency industries.

Even inter-governmental agencies like the Financial Action Task Force have in recent times put crypto governance at the forefront of their regulatory ambit. For digital currency stakeholders, many of these regulatory measures can negatively impact innovation in the industry. Some even warn that harsher laws will see both capital flight and a brain drain from nations that adopt these stringent measures.

Related: Japan Security Token Offering Association: The Way of Self-Regulation

However, there is an argument to be made against the effectiveness of the approach adopted by some of the existing SROs. Some critics posit that their recommendations do not come with the appropriate authoritative weight to trigger lasting changes in the crypto regulatory landscape. Furthermore, without the participation of government regulators, it might appear that self-policing measures only amount to an elaborate exercise of “guessing legality.”

Crypto self-regulation in South Korea and Japan

Before the “crypto frenzy” of the late 2017, China was the only major market to have issued any definitive ruling in the form of a ban on digital currency trading and initial coin offerings (ICOs). In the aftermath of the meteoric rise in crypto prices and the subsequent increase in global consciousness, the start of 2018 begun to see more serious government consideration of the market. 

In early 2018, reports began to emerge of plans in South Korea and Japan to create self-regulating bodies for their crypto markets as a way of preempting stringent laws from the government. Thus, Japan and South Korea became some of the first jurisdictions to have some sort of crypto SRO such as the Japanese Virtual Currency Exchange Association (JVCEA), which  formed in April 2018.

The JVCEA emerged mostly as a reaction to the January 2018 Coincheck hack that saw the theft of more than $530 million in NEM (XEM) tokens. The association focuses on the Japanese crypto trading arena, working together with the country’s Financial Services Agency to enforce strict compliance among its members. Thus far, the JVCEA has worked to enforce regulations for hot wallet use and limits for crypto margin trading. The association became a recognized SRO in October 2018.

As early as February 2018, Cointelegraph reported that the Korean Blockchain Association (KBA) was already considering the creation of a self-regulatory framework for local exchange platforms. At the time, regulators in the country had already started taking stringent measures against crypto exchanges.

By April 2018, the KBA had finalized rules for the self-regulation of cryptocurrency exchanges. The rules focused on Anti-Money Laundering and Know Your Customer compliance.

The KBA framework also mandated that its members manage client funds separately from their own while maintaining minimum equity of $1.8 million. Exchanges under the KBA also have to publish regular audits and financial statements.

SROs in the U.K. and U.S.

Crypto stakeholders in the United Kingdom also joined Asian countries in pioneering self-regulation for the industry in early 2018. Formed in February 2018, CryptoUK is the first-ever self-regulating trade body for cryptocurrencies.

Coinbase, CEX.IO, eToro and other major crypto businesses came together to form the association. With the U.K. having no cryptocurrency regulations, CryptoUK has sought to lobby members of Parliament to create favorable laws for the local crypto industry.

In the United States, crypto exchange and custody giants like Coinbase, Bittrex and Kraken established the Crypto Rating Council (CRC) in the end of September 2019. The CRC is an independent body that provides insight on whether crypto tokens can be classified as securities or not.

In its maiden crypto ratings, the CRC examined 20 different cryptocurrencies. For example, the council classified the likes of Bitcoin (BTC), Litecoin (LTC) and Monero (XMR) as not securities.

Related: Crypto Rating Council Is Out to Help Change US Regulatory Landscape

Again, the CRC is another example of a country-based SRO focusing on a major pain point of its local crypto scene. In the U.S., exchanges have to carefully navigate unclear regulations about which crypto tokens constitute securities.

Given that the U.S. Securities and Exchange Commission (SEC) has consistently maintained that most ICO tokens are securities, some U.S. platforms have been forced to geofence certain tokens or create separate local exchanges that list only tokens deemed not to be securities.

Before the CRC, U.S. crypto exchange platform Gemini proposed the formation of an SRO for digital commodities. According to a Gemini published post from March 2018, the Virtual Commodity Association (VCA) would only focus on nonsecurity crypto tokens. As previously reported by Cointelegraph, three other platforms — Bittrex, Bitstamp, and bitFlyer USA — joined Gemini in establishing the VCA.

In the past, several commentators have called on the crypto industry to pursue self-regulation. Even members of regulatory agencies like “crypto mom” Hester Peirce of the SEC and Brian Quintenz of the U.S. Commodity Futures Trading Commission (CFTC) have stated in the past that crypto businesses should develop modalities for self-regulation.

Back in mid-2018, Cointelegraph published a survey by Foley & Lardner LLP — an international law firm showing 86% of crypto executives being in favor of formalized self-regulation for the industry. Commenting on the need for robust self-regulation for the crypto industry,  Iqbal V. Gandham, chair of CryptoUK and CEO of trading and brokerage firm eToro, wrote to Cointelegraph in an email, saying:

“Effective self-regulation combined with necessary industry-informed government regulation to promote confidence is the key to realizing the potential of the industry whilst providing the necessary protection for consumers and businesses. The cryptoasset industry is still relatively new, with advances in technology and industry collaboration already creating solutions for many of the initial concerns surrounding the asset-class, such as protection of consumer assets through cold storage.”

Over-regulation: A threat to digital innovation?

Self-regulation is not unique to the crypto space. In fact, there is an argument to be made that these SROs are trying to become the crypto analogs of organizations like the National Futures Association (NFA) — with the ability to promulgate important rules and guidelines ratified by government regulators.

In the U.S., for example, the CRC is trying to develop a nuanced approach to determining which tokens should be considered securities, as several stakeholders in the U.S. crypto space have bemoaned the current regulatory climate in the country.

In an email to Cointelegraph, Yusuf Hussain, head of risk at Gemini, explained that self-regulation could help to temper some of the more stringent crypto laws being enacted by several governments. According to Hussain, “thoughtful regulation in cryptocurrency is a win-win for the market and regulators alike. Done right, it can pave the way to healthy and sustainable markets and fuel long-term innovation that unlocks the promise of cryptocurrency and transforms society for the better.” Hussain went on to add:

“The crypto industry and regulators are trying to solve for regulatory uncertainty, and the U.S. Securities and Exchange Commission (SEC) is taking a conservative approach while trying to define what is and is not a security. The SEC is looking to the industry to help come up with a sensible approach in conjunction with them, and a self regulatory organization (SRO).”

Back in July 2019, Ripple signed an open letter to the U.S. Congress, asking for fair crypto regulations. In the statement, the blockchain startup urged agencies not to enact laws that put U.S. cryptocurrency businesses at a disadvantage to their overseas counterparts.

Goldman Sachs-backed Circle also echoed similar sentiments earlier in the year, claiming that U.S. regulations were constituting a hindrance to digital innovation. The company has since moved the bulk of its crypto exchange business — i.e., the Poloniex platform — abroad. 

In late September 2019, reports emerged that the U.K.’s Financial Conduct Authority (FCA) was looking to ban crypto derivatives. When asked for its response on the matter, CryptoUK told Cointelegraph:

“A ban would potentially expose retail customers to poorly regulated investment products in other jurisdictions, which could lead to fewer avenues for recourse and less protection for consumers. We believe retail customers interested in derivatives are best served by a well-regulated UK market overseen by the FCA and ESMA, who can utilise less restrictive measures, such as leverage limits, to achieve their aims.”

As reported by Cointelegraph, crypto exchange OKEx is looking to create a self-regulating body for cryptocurrency trading platforms. Commenting on the potential role of SROs in the face of increasing government scrutiny, Andy Cheung, head of operations at OKEx, wrote to Cointelegraph, stating:

“Working parallel internally and externally would strike a balance to shape a better industry.”

Government agencies in some countries appear to be exerting ever-greater regulatory pressure on their local crypto industries. Small- and medium-sized exchange platforms are coming under increasing pressure in trying to comply with tough banking laws. 

Such is the extent of the problem that about 97% of these platforms are close to going bankrupt. South Korean blockchain startups are electing to list their tokens on overseas exchanges, further causing the local token trading market to shrink.

Establishing a global crypto self-regulating body

Thus far, most of the efforts at crypto self-regulation appear contained in servicing local markets. However, OKEx is looking to form a global SRO that will work toward standardizing the industry at a macro level.

Related: South Korea Is Hoping for Regulatory Clarity as Crypto Laws Toughen

As a global SRO for crypto exchanges, such an organization may function like the World Federation of Exchanges in lobbying regulators across different countries to come up with more favorable laws. 

Commenting on the need for a global governance standard for the crypto industry, Cheung wrote to Cointelegraph, stating that an SRO is the only way for “exchanges to grow and deliver impact is by joining together to develop practices and policies that will set a global standard and adapt to regional regulatory frameworks.” For Cheung, rather than focus on any one local jurisdiction, the exchange’s planned SRO will have a more worldwide focus. Explaining further on the subject, Cheung said:

“This SRO will be an independent, membership-based organization that is neutral and open to exchanges of all sizes and jurisdictions. Member exchanges will work together to define and adopt standards that will promote digital asset adoption globally, educate governments and regulators, and develop metrics and criteria for trading, listings, and reporting.”

CryptoUK also expressed willingness to join a crypto SRO with a global focus but maintained that the U.K. market remains its primary objective. In an email to Cointelegraph, a spokesperson for the association declared:

“We are always open to partnering with a global forum that promotes international collaboration to introduce policies that strengthen the conduct of the global crypto industry. However, our priority remains UK regulation, reflecting the ongoing review of existing regulatory frameworks by the FCA, along with consultations on the development of new crypto-focused policy by HM Treasury.”

Gemini’s Hussain also touched on the possible emergence of a unified SRO for the global crypto market, stating, “Currently, there is no precedent for a global SRO. However, many VCA members are part of SRO initiatives in other jurisdictions, which can provide a unified, consistent approach to self regulation across multiple jurisdictions.”

However, there are critics who argue against the measures being adopted by these SROs, describing their methods as not amounting to effective self-policing. Some of the arguments against the current operations of SROs hinge on the absence of consonance between these organizations and government regulators, which have the final say on what constitutes a legal framework for cryptocurrencies.

For Hussain, self-regulation cannot exist in a vacuum, adding that in the U.S., self-regulatory organizations will always be accountable to federal regulators:

“There are specific requirements of an SRO in the United States set forth by existing regulations that require oversight by a regulatory authority.”

The Gemini executive further stated that SROs in the U.S. financial market, such as the Financial Industry Regulatory Authority and the NFA, are accountable to the SEC and CFTC respectively. Until SROs and government agencies can agree on a suitable middle ground, crypto business will have to endure the patchwork of usually stringent regulations in different countries.