Bitcoin News — Bitcoin regulation
Posted by Kirill Bryanov on
Blockchain industry might be the real winner in the US midterm elections.
Every four years in November, about halfway into each presidential term, voters in the US head to the polls to fill 36 state governor seats, all 435 seats in the U.S. House of Representatives, and about one-third of the 100 US Senate offices. Widely considered a referendum on a sitting president, midterm elections often produce power shifts in Congress, especially if the head of the executive and his party are not particularly impressive early in the term.
This time, Democrats were full of hopes to summon a ‘Blue Wave’ and break the unified Republican control of the government. While the Democratic party has succeeded in flipping the House and increasing the number of governorships they control, some commentators were still not impressed by the wave’s momentum. However, there has been another remarkable tide: a group of pro-blockchain politicians who have recorded spectacular wins that will project them to high offices.
Many crypto-savvy people, when asked to quickly name one blockchain-friendly US politician off the top of their head, will certainly recall Jared Polis’s name. Polis, who was among the trailblazers of crypto campaign finance and has later co-founded and co-chaired the Congressional Blockchain Caucus will assume the office of the Governor of Colorado in January 2019 after he defeated State Treasurer Walker Stapleton on the midterm election night. There is little doubt that Polis will actively pursue a pro-blockchain agenda, as one of his campaign’s big promises is to ‘establish Colorado as a national hub for blockchain innovation in business and government.’
His five-prong plan envisions implementation of distributed ledger technology (DLT) in improving election infrastructure and security; exempting cryptocurrencies from money transmission laws and establishing the legal status of utility tokens; exploring blockchain-based solutions for optimizing energy distribution and consumption; digitizing government records and moving them to public ledgers; creating a blockchain council to work in coordination with the state’s Office of Economic Development & International Trade. Polis is open about taking the crypto-friendly state of Wyoming as a mold for many of his policies.
On May 20, 2014, Gavin Newsom, then-lieutenant governor of California and former mayor of San Francisco, while campaigning for reelection, tweeted at then US Representative Jared Polis about following his lead and welcoming BTC contributions. This marked Newsom’s accession into the ranks of early ‘bitcoiners’ in the top tier of US politics.
That midterm season, both Newsom and Polis have won their respective races to keep the offices they occupied. Four years on, they are both victorious again, this time becoming governors of their states for the first time. Newsom overran his Republican opponent John Cox by a comfortable 57-43 margin.
While not as outspoken a blockchain advocate as Polis, the new Californian governor-elect is considered crypto-friendly not just for his embrace of Bitcoin campaign contributions, but also due to his overall pro-technology orientation. Particularly, Newsom has spoken in favor of the federal government’s digitization initiatives. According to the datasheet compiled by the advocacy group Digital Asset Trade Association, Gavin Newsom is generally in favor of policies that would attract blockchain startups to the state, supportive of recognizing the legal status of crypto transactions, and positively views the idea of creating a state-level blockchain committee or task force. Given California’s stature as an economic and technological powerhouse, even relatively modest evidence of the new governor’s potential pro-blockchain orientation is great news for the industry.
Wyoming has been banking big on blockchain lately, seeking to boost the influx of technology startups into the Cowboy State. Following a sweeping tide of pro-crypto legislation enacted by the state house this year, the Wyoming Blockchain Task Force has already unveiled proposals for the 2019 legislative session, which appear to be taking the trend even further. State Treasurer Mark Gordon, who last Tuesday night was elected to serve as the 33rd Governor of Wyoming, seems to be fully embracing Wyoming’s emerging leadership in the field. In DATA’s scorecard, all of the eleven boxes that represent various dimensions of crypto-friendliness are checked against his name.
Two more governors who are usually considered pro-blockchain secured their offices for the next term. Texas governor Greg Abbott, who first opened his coffers to crypto contributions in the 2014 campaign, has won his second term, topping the Democratic contender Lupe Valdez. In the Rhode Island election, according to the Digital Asset Trade Association’s scores, the blockchain community was set to win regardless of the outcome, since both major candidates ranked high in blockchain friendliness. Incumbent Gina Raimondo, a Democrat, sustained competition from Allan Fung to secure another two years in the office.
The Congressional Blockchain Caucus is a bipartisan group of Members of Congress who appreciate the vast potential of blockchain technology and work to promote hands-off legislation that would enable the industry’s dynamic growth. The Caucus also aspires to be a platform for both public and private sector to come together and discuss both implications of the technology and policies around it. The group was founded in 2016 by Jared Polis and Mick Mulvaney, who has since left the House to lead the White House Office of Management and Budget.
Granted, Jared Polis will be missed dearly by the Congressional Blockchain Caucus. Yet his departure from Congress will hardly disembowel the group. In the buildup to the midterms, the Caucus has seen two prominent members, Tom Emmer and Bill Foster, elevated to co-chair positions alongside Polis and his longtime confederate David Schweikert. Emmer has been particularly resourceful in the past months, announcing a series of bills designed to facilitate development and adoption of blockchain technology and digital currencies. The Blockchain Caucus leadership looks both willing and prepared to keep pushing the crypto agenda on the national level.
Electorally, the Caucus has done exceptionally well in the midterms: both of the co-chairs and 10 out of 12 regular members who stood for reelection retained their seats. Here is the roundup:
David Schweikert, the Congressional Blockchain Caucus co-chair, serves as the Republican representative from Arizona's 6th Congressional District since 2011. In this election he defeated his Democratic opponent Anita Malik by a 12.8 percent margin.
Tom Emmer, a Republican, has been representing Minnesota's 6th District since 2015. Last Tuesday, he beat the Democrat Ian Todd by 22.4 percent of the popular vote.
Bill Foster has been the Democratic representative from Illinois' 11th Congressional District since 2013. He defeated Republican Nick Stella by 27.2 percent of the vote.
Stephen Lynch has been the Democratic representative from Massachusetts' 8th District for 17 years, since 2001. A South Boston native, he emerged victorious in the Democratic primary in September and was unchallenged in the general election.
Michael McCaul is the Republican from Texas' 10th Congressional District. A former Texas Deputy Attorney General, he has represented the district for 13 years. In the present election, he managed to fend off the Democratic contender, Mike Siegel, by 4 percent of the vote.
Denny Heck, a Democrat from Washington’s 10th district has served in his position for the last 5 years. He defeated the Republican Joseph Brumbles by a confident 22.6 percent margin.
Tony Cardenas has been the Democratic representative from California's 29th Congressional District since 2013. In the November 6 general election, he defeated the Republican Benito Bernal by a staggering 58.4 percent of the vote.
Jerry McNerney, a Democrat from California's 9th District, has been in Congress since 2007. On the night of November 6, he narrowly defeated the Republican Maria Livengood.
Mark Meadows, a Republican member of the US House since 2013, represents North Carolina's 11th Congressional District. On the night of the midterm general election, he secured 20 percent more of the popular vote than his Democratic opponent Philip Price.
Darren Soto has served as the Democratic representative from Florida's 9th Congressional District since 2017. He won the November 6 general election against the Republican Wayne Liebnitzky by a 15.6 percent margin.
Jeff Duncan is the Republican representative from South Carolina's 3rd Congressional District, who has served in the US House since 2011. He defeated the Democrat Mary Green by 35.6 of the vote in the general election.
Tom MacArtur, the Republican representative from New Jersey’s 3rd District, ran against Democrat Andy Kim in a dramatically tight contest. Several days after the election, the results were still pending, with the race too-close-to-call. As of November 11, Kim appears to be leading by 1.1 percentage points, though no official announcement of the outcome were made.
John Larson A Democrat from Connecticut's 1st Congressional District has been in the office for 19 years. In the general midterm election, he defeated the Republican challenger Jennifer Nye by 28.4 percentage points.
Greg Gianforte, representing Montana’s At-large district since 2017, was triumphant against the Democrat Kathleen Williams by 5.1 percent of the vote.
Two of the current Congressional Blockchain Caucus members announced prior to the midterms that they would not seek reelection for the next term. Democrat John Delaney from Maryland’s 6th Congressional District revealed his plans to run for president in 2020, while Bob Goodlatte, the Republican veteran of the House who has been representing Virginia’s 6th District since 1993, cited his willingness to spend more time with his granddaughters.
The only Caucus member who had definitely lost in the present election was Keith Rothfus, the Republican representative from Pennsylvania’s 17th District. Having served in the House since 2013, he was defeated by the Democratic challenger, Conor Lamb, by 12.4 percent of the vote.
Given that all the 435 seats in the House were up for reelection, the Congressional Blockchain Caucus’ showing indeed looks impressive. While the Caucus retains its core membership in the incoming Congress, there seems to be room for expansion as well. The midterms saw many new faces joining the legislature for the first time, and chances are that at least some of them share the vision of the blockchain-powered future that inspires this diverse group of lawmakers to work together.
Election predictions go decentralized
Yet another remarkable outcome of the midterm elections is not directly related to the ballots cast and offices filled. Although the Commodity Futures Trading Commission (CFTC) rules explicitly prohibit wagering on election results, there are several platforms that allow U.S. bettors to do so without breaking the law. PredictIt, a centralized prediction market that relies on its academic affiliations to secure an exemption from the CFTC regulation, has been dominating the space in recent years. However, this election cycle PredictIt suddenly faced strong competition from the decentralized side in Augur, a blockchain-powered prediction marketplace. While the CFTC is still pondering on the possible regulatory approaches to decentralized prediction protocols, Augur’s users take full advantage of its infrastructure.
Reports suggest that the overall amount of money staked on this midterms’ outcomes exceeded $2 million, compared to PredictIt’s $550,000. To be fair, the rules of the centralized prediction platform strictly limit wagers at the $850 cap per user per market, while Augur’s bettors are only restricted by the amount of ETH they are ready to risk. Therefore, there can be no implications regarding the two platforms’ relative popularity as of now. Also, there is some evidence that just two people were responsible for a huge share of the overall trading volume. All these reservations notwithstanding, Augur proved its capacity to successfully handle trading volumes comparable to those of its centralized counterparts, while the overall number of bets showed increasing usage of the platform.
Posted by Ana Berman on
Zeniex, a joint crypto venture run by South Korea and China, is closing its crypto exchange due to the financial regulator’s investigation.
The crypto exchange, a joint project by South Korea and China which opened May 2018, states in the post that due to “recent issues,” they have “come to the conclusion that continuing to operate such a service will be difficult.”
While crypto trading has already stopped on Nov. 9, all other services will be stopped on Nov. 23.
Zeniex customers are asked to withdraw all their cryptocurrencies before the deadline, as the service will then no longer be available.
Furthermore, in a separate announcement, the company states that Zeinex cryptocurrency fund Zxg Crypto Fund No. 1, which in particular has been a subject to local regulator’s investigation, is also closing on Nov. 23. Initially, the company expected its ZXG token to be listed by international exchanges, but then the decision was then cancelled, according to the press release:
“We believe that ZXG Crypto fund No 1. will have difficulties to operate smoothly with such current pressure from the financial authorities.”
Zeinex and its Chinese partner, Genesis Capital, will return the funds invested in ZXG in Ethereum (ETH) on Monday, Nov. 12.
In late October, South Korea’s Financial Services Commission (FSC) warned investors about investing in unauthorized crypto exchanges and Initial Coin Offerings (ICO), as they fail to protect investors from risks according to Korean regulation.
As local finance newspaper Business Korea explained, the notification in particular mentioned Zxg Crypto Fund No. 1. The FSC stressed that the company had never been registered by the Financial Supervisory Service as required by South Korea’s Capital Market Act.
A Zeniex representative told South Korea’s main daily business newspaper, Maeil Business Newspaper, that the company was not obliged to register as it had raised less than 1 billion won ($884,500) in total. However, the FSC started the investigation against the company, citing a lack of ability to check whether the platform is operating as claimed.
Although in early 2018 South Korea was rumored to be about to impose a strong ban on crypto, the country then decided to regulate the area instead. Banning anonymous trading, forbidding minors and government officials from trading, and taxing exchanges substantially were among the measures announced by country’s government to control crypto-related activities. The government has since recently been lobbied by local lawyers to clear up its stance on crypto and elaborate a clear legal framework.
Posted by Gareth Jenkinson on
The regulation of cryptocurrencies continues to be a talking point as governments and institutions look for clarity in the space.
To understand the implications of these refurbished guidelines, one needs to understand the role of the FATF and its involvement in the regulation of cryptocurrencies.
FATF and crypto
Established in 1989, by the G7, the FATF is responsible for creating legal, regulatory, and operational measures to prevent money laundering in Europe and around the world. Since its inception, the FATF has created a number of recommendations that are regarded as the international standard for fighting money laundering and the financing of criminal activities.
A massive surge of investors looking to gain exposure by trading cryptocurrencies on exchanges across the world, has led to governments and financial regulatory bodies having to provide clear legal frameworks and guidelines for those operating in the space.
Naturally, this has taken on different shapes and forms in different regions of the globe. We’ve seen hardline, no-to-crypto stances from countries like China, while a nation like Malta has adopted a pro-crypto attitude that could well make it a leading destination for crypto and blockchain-related businesses to thrive.
Within that vein, the FATF organisation released a “risk-based-approach” guideline for cryptocurrencies in 2015, which aimed to help countries develop regulatory processes to manage the potential risk of cryptocurrencies being used for money-laundering and terror-financing.
As it stands, 35 countries are members of the FATF, many of which are situated as financial centers across the globe.
European countries make up a large percentage of the member states, including UK, Turkey, Switzerland, Sweden, Spain, Norway, Netherlands, Luxenbourg, Italy, Ireland, Iceland, Greece, Germany, France, Finland, Denmark, Belgium and Austria.
With this in mind, the FATF’s recommendations on the regulation of cryptocurrencies to address AML concerns are specifically important for the continent.
Calls for clarity in Europe
As of October 2018, FATF has implemented some changes to its original recommendations three years ago that apply to financial activities relating to cryptocurrencies. This has largely been in response to calls for clarity on which activities the FATF guidelines apply to.
In relation to cryptocurrencies, the FATF rules regarding a risk-based response to Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) have been amended to address concerns around the use of cryptocurrency financial activities.
Exchanges, wallet providers, and providers of financial services for ICOs, are expected to be subject to AML/CFT regulations. This should be done by licensing, registering, or monitoring these entities to ensure their compliance with existing regulations.
This follows similar guidelines that have been implemented in South Korea, where anonymous trading has been banned and stricter guidelines for exchanges are being implemented, including the use of AML/CFT, as well as Know-Your-Customer (KYC) requirements.
At the end of October, the Federal Financial Monitoring Service of the Russian Federation urged members of the FATF to implement these changes. The Russian service wants to put rules in place to control crypto transactions of 600,000 rubles or more (about $9,120).
This seemingly puts the FATF recommendations in perspective, as they seem to be the only real standard that different countries can fall back on to deal with cryptocurrencies in a broad perspective.
Just a day before the FATF released its newest recommendations, Switzerland-based Capital Markets and Technology Association (CMTA) published its own updated AML standards for digital assets and distributed ledger technologies (DLT).
The document outlines compliance standards for virtual asset issuers, guidelines for classifications of initial coin offerings (ICOs) as well as directions for banks, securities dealers and other financial institutions looking to get involved with cryptocurrencies or blockchain-based projects.
In September, a Belgian report was issued that called for the regulation of cryptocurrencies and ICOs at a European level. These were led in order to manage potential risks as well as developing the use of blockchain technology.
The European Union has already made it clear that it will work on cryptocurrency classification and management over the next 12 months, according to European Commission Vice President, Valdis Dombrovskis. A pressing concern once again is the threat of money-laundering and fraud.
There are risks – U.K. Cryptoasset Taskforce
While the FATF has provided general guidelines for the international community to follow, the U.K. has done its own homework on the sector – in addition to being a member of the FATF.
In March 2018, a Cryptoasset Taskforce was established by the HM Treasury, the Financial Conduct Authority and the Bank of England. This has culminated in a final report, which was published at the end of October.
The report maintains that there are multiple benefits to be gained from blockchain technology, described as distributed ledger technology in the report. However, it maintains an air of negativity and skepticism towards cryptocurrencies:
“There is limited evidence of the current generation of cryptoassets delivering benefits, but this is a rapidly developing market and benefits may arise in the future. There are substantial potential risks associated with cryptoassets, and the most immediate priorities for the authorities are to mitigate the risks to consumers and market integrity, and prevent the use of cryptoassets for illicit activity.”
The report recommends that cryptocurrencies that meet the standards of existing regulations must be treated as such.
Meanwhile, newer cryptocurrencies that pose challenges to older financial regulations will require international coordination to ensure they are treated accordingly.
These recommendations have been met with some skepticism as well, with a report labelling proposed regulations as a “blunt instrument approach.” The companies involved in compiling the report suggested that a heavy-handed approach could actually stifle the development of cryptocurrencies and various fintech companies.
A waiting game
As it stands, the current guidelines from the FATF are non-binding, they mainly serve as advisory parameters for regulators and governments to follow and apply to cryptocurrency operations in their respective locations.
In conjunction with the October update to its recommendations, FATF president, Marshall Billingslea, announced the plans to release governing rules for the crypto industry by June 2019, according to Reuters.
A number of European countries have enforced their own rules and regulations for cryptocurrencies, wallet providers, and other associated businesses.
Nevertheless, those member states that haven’t enforced any regulation of cryptocurrency trade can expect to be given a directive from the FATF next year.
Cointelegraph has reached out to the FATF for comment – and has not received a formal reply at the time of publication.
Posted by Helen Partz on
Germany’s federal financial regulator BaFin has ordered the cessation of cross-border proprietary trading from a British crypto-related firm.
The German Federal Financial Supervisory Authority (BaFin) has ordered partial cessation of activities by U.K.-based crypto-related firm Finatex Ltd., according to an official announcement published on BaFin’s website on Friday, Nov. 9.
According to the BaFin’s notice, reportedly dated Oct. 2, Finatex Ltd. is ordered to “immediately” stop offering cross-border proprietary trading on its trading platform, Crypto-Capitals. According to BaFin’s announcement friday, the firm must cease trading since its activity is not approved by German financial legislation, including the German Banking Act.
In a short description of the company’s activities, the financial regulator noted that Crypto-Capitals offers “options, contracts for difference (CFDs) on shares, indices, currencies and commodities.” In turn, the company positions itself as a “premium cryptocurrency trading platform operator.” The firm also evidently does not possess an account on any of the social networks listed on its website.
Previously, BaFin has addressed the cryptocurrency industry with public warnings, particularly focusing on Initial Coin Offering (ICO) projects. In late 2017, Germany’s major financial regulator warned investors about the risks of investing in ICO tokens, claiming that ICO investors take all associated risks upon themselves due to the “lack of legal requirements and transparency rules” in the industry.
In February of this year, BaFin clarified obligations for ICO issuers, following “increased queries” about ICO tokens, with operators specifically inquiring “whether the underlying tokens, coins or cryptocurrencies behind so-called ICOs are viewed as financial instruments within the area of securities supervision.”
Most recently, last month BaFin urged the global community to combine efforts in order to regulate the ICO industry, despite uncertainty as to whether ICOs will remain a “niche issue,” or become a “standard part of the financial economy.”
Prior to that, in June 2018, BaFin’s President stated that the main mission of the agency is not protecting individual retail investors, but rather the preservation of general financial stability.
Posted by Ana Alexandre on
The Colorado Securities Commissioner has ordered four initial coin offerings to immediately cease and desist in connection with offering unregistered securities.
Colorado State Securities Commissioner Gerald Rome has issued a cease and desist order to four Initial Coin Offerings (ICOs) for allegedly offering unregistered securities, according to an official notice published Nov. 8.
The orders come as part of a state operation by the “ICO Task Force” within the Department of Regulatory Agencies (DORA), which in May of this year commenced investigations into potentially unlawful activity targeting cryptocurrency investors. With yesterday’s orders, DORA has now issued 12 cease and desist actions against ICOs.
On Nov. 8, Rome signed four orders to Bitcoin Investments, Ltd. — which is also conducting business as DB Capital — PinkDate, Prisma, and Clear Shop Vision Ltd.
Per the notice, Bitcoin Investments claims to be a blockchain investment firm with over $700 million assets under management across multiple funds. The company allegedly promised its customers over one percent daily returns along with additional returns on internal trading of the “DB Token.”
The company reportedly claimed that “the average registered investment return over a two month period in 2017 was an amazing 95 percent,” while its ICO lists a number of celebrity promoters.
Bitcoin Investments’ website reportedly deploys the same format, visual content, and employee team as the U.S. Securities and Exchange Commission’s (SEC) educational site about related risks for potential crypto investors. Per the statement, DB Token ICO has not been registered as a security with the Division of Securities.
“Anonymously-operated, worldwide escorting service[s]” company Pinkdate allegedly seeks to fundrise more than $5 million via an ICO in tokens referred to as PinkDate Platform (PDP). The statement says that the firm promises investors “50 percent of Net Profits through dividends” in Bitcoin (BTC), Ethereum (ETH), Monero (XMR), or Bitcoin Cash (BCH). The PinkDate ICO allegedly has not been registered with the Division of Securities.
As for Prisma, its website allegedly requires users to buy its native crypto Prismacoin (PRIS) to use a proposed lending and arbitraging investment platform, through which investors could ostensibly profit up to 27 percent on their initial investment. The “arbitrage bot” is claimed to generate returns of up to 1.5 percent daily.
The last company on the list, Clear Shop Vision, Ltd, has promoted three ICOs since June 2018 and offered “ORC Token” with a “serious appreciation potential.” The company’s site allegedly directs investors to send ETH directly to Clear Shop’s ETH wallet, but not through a crypto exchange.
Per the notice, all mentioned companies have to immediately cease and desist all alleged violations of the Colorado Securities Act, including unregistered securities and fraud.