Pro 22

US Congressmen Introduce Bill To Exempt Crypto From Securities Law

A couple of Congressmen in the United States are trying to get an exemption for cryptocurrencies from securities law. If successful, it could signal a paradigm shift in the US regulatory climate as far as virtual currencies are concerned.


Crypto May Be Exempt From Securities Law

Rep. Warren Davidson (R-Ohio) and Rep. Darren Soto (D-Florida) introduced a bill on Thursday (December 20, 2018) called the “Token Taxonomy Act.” The bill seeks to exempt cryptocurrencies from being classified as securities. If passed, US securities law will no longer apply to virtual currency tokens once their projects become fully functioning networks.

The current securities law framework applied by the SEC to virtual assets comes from the Securities Act of 1933. A US Supreme Court ruling from 1946 introduced the “Howey Test” as a baseline set of rules to determine whether an asset is a security.

Based on the Howey Test, transactions that can be classified as investment contracts are securities. Based on this definition, many ICO tokens, according to the SEC are securities. This is because individuals invest in these ICOs (common enterprises) in the expectation of profit from the efforts of the project team or third party.

However, the sponsors of the new bill argue that the 70-year old Securities Act is inadequate to regulate a market as nuanced as cryptocurrencies. This position is one shared by many stakeholders in the industry. Expressing similar sentiments, Kristin Smith, the Blockchain Association chief said:

These decentralized networks don’t fit neatly within the existing regulatory structure. This is a step forward in finding the right way to regulate them.

Cryptocurrency-Specific Regulations

For the sponsors of the bill, their efforts are reminiscent of the steps taken during the early days of the internet. Commenting on this, Rep. Davidson, said:

In the early days of the internet, Congress passed legislation that provided certainty and resisted the temptation to over-regulate the market. Our intent is to achieve a similar win for America’s economy and for American leadership in this innovative space.

For people like internet security expert and cryptocurrency enthusiast, John McAfee, the SEC has no right to regulate cryptocurrencies in the first place. McAfee hasn’t hidden his disdain for the Commission’s “encroachment” into the market with many strongly-worded posts on Twitter.

The current efforts by the lawmakers if successful might initiate the emergence of cryptocurrency-specific regulations in the US. Agencies like the Commodity Futures Trading Commission (CFTC) or Federal Trade Commission might now have oversight over the industry.

Will the token taxonomy act help the US in catching up with the developments in the Asian cryptocurrency market? Please share your thoughts with us in the comments below.


Image courtesy of Twitter (@MatiGreenspan and @officialmcafee).

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Čvn 26

EU Adopts New AML Directive to Combat Cryptocurrency Crimes

The European Union recently adopted a new anti-money laundering (AML) directive specifically targeting cryptocurrencies. It is the fifth AML directive of the EU, and aims to detect, investigate, and prevent financial crimes in the region.


Details of the Directive

The directive tagged “Directive (EU) 2015/849” allows Financial Intelligence Units (FIUs) to access cryptocurrency wallet information. These security agencies will be able to identify the owner of a cryptocurrency address, based on this latest policy. A portion of the directive reads:

It is therefore essential to extend the scope of Directive (EU) 2015/849 so as to include virtual currency exchange platforms and custodian wallet providers. Competent authorities should be able to monitor the use of virtual currencies. This would provide a balanced and proportional approach, safeguarding technical advances and the high degree of transparency attained in the field of alternative finance and social entrepreneurship.

The major highlights of the new directive include:

  • A better understanding of the risks posed by virtual currencies as well as prepaid cards.
  • Improved cooperation between FIUs
  • More comprehensive checks on transactions originating from “high-risk third countries.”

One crucial aspect of the new policy is balancing its objectives of hindering criminal finance without disrupting the region’s payment ecosystem. Commenting on the new directive, Bulgarian finance minister and President of the European Council said:

These new rules respond to the need for increased security in Europe by further removing the means available to terrorists. They will enable us to disrupt criminal networks without compromising fundamental rights and economic freedoms.

Cryptocurrency and ML/TF

A large part of the government opposition to cryptocurrency lies in the anonymity of the system. Many governments around the world are quick to declare that virtual currencies provide a viable conduit for money laundering and terrorist financing (ML/TF).

Recently, Robert Novy, Deputy Assistant Director of the U.S. Secret Service’s Office of Investigations called for “additional legislative actions” to address the dangers posed by privacy coins. Rep. Robert Pittenger of North Carolina even described virtual currencies as “one of the greatest emerging threats to U.S. national security.”

However, experts like Matt Peyer disagree, saying cryptocurrencies are for the most part overrated for terrorist finance. According to Peyer, while virtual currency transactions are somewhat anonymous, lack of places that accept them in known terror havens make them unsuitable for supporting terrorist activities.

In fact, a report from the Center for a New American Security (CNAS) revealed that only 7.929 BTC were linked to terrorist financing between 2015 and 2017.

What is your opinion on the new EU AML directive? Do you think cryptocurrencies are a viable means for terrorist financing and financial crimes? Keep the conversation going in the comment section below.


Image courtesy of Risetopeace.org, Shutterstock

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Kvě 24

From Russia with Love: How Cryptocurrency and Blockchain are Finding Their Feet

· May 23, 2018 · 9:00 pm

In the West, crypto markets continue to battle with the regulatory uncertainty as the SEC and other regulatory bodies take their time to decide which camp they sit on. At the same time, things are not much rosier in the East either where China is yet to warm up to cryptocurrencies.


Blockchain has been around “long” enough to show the proof of concept in that by utilizing blockchain it is possible to streamline a number of processes, both on the governmental and also corporate levels. This then has prompted an exponential rise in fintech start-ups looking to challenge the status quo and disrupt the standard ways of storing, organizing, and extracting data sets. However, the actual implementation of blockchain technologies across much of Western Europe and even the US has been constrained by the regulatory uncertainty.

On the one hand, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are yet to put a fundamental framework forward to appease concerns surrounding utility vs security token model. While in Europe, an introduction of General Data Protection Regulation (GDPR), which is perfectly suitable for blockchain applications, is being rushed through by compliance and HR departments with such haste that blockchain is far away on their radar.

In Blockchain We Trust

In Blockchain We Trust

Russia is an interesting case when it comes to the world of ICOs. On the one hand, it is a great place to source technical experts for your blockchain related ventures. The price tag might be astronomical but at least you know what you are getting for the labor and that is quality, reliability and of course security. So, with one piece of the puzzle sorted comes the tricky bit, finding a suitable business partner and this is where things go wrong… really wrong.

One of the most depressing and worrying statistics that has come out of the Russian Association of Cryptocurrencies and Blockchain (RACIB) is that around half of the ICO funds in the country that were raised in the past year – amounting to $300 million – have gone to pyramid schemes.

Economic and political uncertainty, together with numerous corruption scandals has really dented investor appetite for projects in the country. It is very much high-risk, high-reward based game when it comes to investing in Russia and when combined with the volatile nature of the currency, this perception is unlikely to change anytime soon. The regulation and oversight by the government can help alleviate some of the concerns relating to fraudulent activities but at least for now, the crypto community is yet to “sanction” Russian projects altogether.

In the meantime, the likes of Blackmoon (BMC) will remind budding entrepreneurs and investors of the success stories and there is, of course, hope that the government, which is actively looking at ways to promote and integrate digital economy, will not be overly involved in regulation aspect.

On the subject of regulation, it was reported that the Russian State Duma’s Committee for Legislative Work will support the first reading of an initiative that will add the basic norms of digital economy to the Russian Federation Civil Code. The initiative itself does not mean that digital currencies will now become a legitimate means of payment and instead, a separate law developed by other regulatory bodies, will outline conditions for using digital currencies as a payment method. The initiative will also look to treat a digital confirmation by a user in a smart contract is equal to his written consent.

What Does Russia’s Future Hold?

Over the course of 19-20 May 2018, Moscow hosted one of the largest cryptocurrency summits of 2018, with over 200 speakers and over 3000 participants taking part in the event. While the event may not carry the same weight as Consensus, which took place earlier this month, or d10e, it was an important event for the country that stands at a crossroads with the technology. The decisions that will be made by the government need to be made in the spirit of blockchain and with the aim to further technological, as well as economical, advancement as opposed to being the means to destabilize the Dollar.

The commissioning of the crypto-rouble is not far-reaching enough. Anyone looking for inspiration should turn to Dubai and their smart-city plans. According to Smart Dubai, which is conducting government and private organization workshops to identify areas that will benefit from the overhaul, the strategy could save 25.1million man hours, equivalent to $1.5 billion in savings per year for the emirate. It has been noted that the fast majority of improved efficiency will come from moving to paperless government.

What do you think of the latest developments in Russia and can it reform and lead the way in providing a sound base for crypto projects? 


Images courtesy of Wikimedia Commons, Shutterstock

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Pro 28

South Korea Tightens Grip, But Won’t Ban Bitcoin Trading

· December 28, 2017 · 3:00 am

It was only a matter of time until authorities pulled the reins in on one of the biggest crypto trading nations in the world. South Korea, which is responsible for as much as 25% of total crypto trading volume, said on Thursday it will impose additional measures to regulate speculation in crypto within the country.


South Korea Will Ban Anonymous Crypto Trading

As previously reported that more regulations are expected, South Korean regulators have confirmed additional measures to curb illegal activities at cryptocurrency exchanges. According to Reuters, the government noted that trading prices of most digital currencies were much higher on South Korean exchanges than they were on exchanges in other countries.

A government spokesperson made the following statement:

The government had warned several times that virtual coins cannot play a role as actual currency and could result in high losses due to excessive volatility.

The first steps will include a ban on opening anonymous crypto trading accounts. Most exchanges require photographic proof of identity anyway, so this regulation is nothing to be concerned about.

Secondly, however, is a more alarming plan to introduce new legislation which will allow regulators to close virtual coin exchanges if required. This measure had been recommended by the justice ministry, according to the statement.

Previously, South Korea had announced a plan to tax capital gains from cryptocurrency trading to tackle what it perceives as the risk of excessive speculation.

Banks Backing Off

As expected, earlier this week, two major banks in South Korea announced that they are closing reward programs, which allow clients to purchase bitcoins with credit card bonus points.

Commercial banks in the country are increasingly preventing the opening of new virtual accounts, which are necessary to trade on South Korean crypto exchanges.

South Korea Bans Bitcoin Futures As Authorities Consider Crypto Income Tax

In addition to Shinhan Bank and KB Kookmin Bank closing rewards programs next month, Woori Bank and Korea Development Bank also announced that they would be closing all virtual accounts provided to exchanges.

It is no surprise that banks in South Korea and elsewhere are pulling back from crypto; the concept essentially goes against their business model. Unfortunately, in this embryonic industry, traders still need to rely on exchanges, many of which, such as Coinbase, have adopted banking-style models of fees and commissions. Only when crypto trading is truly decentralized and peer-to-peer will the masses start to benefit more than the banks and exchanges.

Will the Korean clampdown affect the markets? Add your thoughts to the comments below.


Images courtesy of Pixabay, PublicDomainPictures, and Bitcoinist archives.

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