Lis 05

Swiss Regulator: Crypto Assets Need 800% Risk Weighting In Absence Of Formal Rules

Swiss financial regulator has informally signaled cryptocurrency investments should have a risk weighting ratio of 800 percent of the original amount.


FINMA Highlights Bank, Dealer Queries

According to local news media outlet Swissinfo, the Swiss Financial Market Supervisory Authority (FINMA) revealed the figure in October in response to a query by trustee and accountant association EXPERTsuisse.

In the letter, dated October 15, FINMA suggested it had come under pressure to provide clarity on the issue from banks and associated players, but the requisite regulatory guidelines were yet to appear.

Swiss Based

“FINMA has recently received an increasing number of inquiries from banks and securities dealers holding positions in cryptoassets and are subject to capital adequacy requirements, risk distribution regulations and regulations for the calculation of short-term liquidity ratios,” Swissinfo quotes it as stating.

Switzerland has several years’ experience of formal integration of cryptoasset-based products in its banking sector, has taken a proactive role in creating a supportive legislative environment for the new instruments.

At the same time, Swissinfo notes, FINMA can only give ballpark figures until all-encompassing formal statutes are set in stone by the international adjudicator Basel Committee on Banking Supervision.

A decision may come as soon as the Committee’s next meeting at the end of November.

‘No Impact’

In the meantime, cryptoassets should be “assigned a flat risk weight of 800% to cover market and credit risks, regardless of whether the positions are held in the banking or trading book,” the letter continues.

According to sources commenting on the situation, the 800 percent figure is high, but not prohibitive.

SEBA, a startup which in September raised $103 million to build a cryptocurrency bank in the country, said the recommendation “had a limited impact on its business model.”

“It’s encouraging to see banks no longer turning down the increasing number of client requests for crypto services but asking for guidance and providing their input along the way,” lobby group the Bitcoin Association Switzerland added to Swissinfo.

What do you think about FINMA’s recommendation? Let us know in the comments below!


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Lis 02

Germany Gets First Bitcoin ATM In Years (But How Long Will it Stay?)

Germany has received its first ever legally-sanctioned Bitcoin ATM (BTM) following a landmark legal ruling — but its longevity is already in doubt.


Munich Machine Hangs On Court Ruling

As t3n.de first reported October 30, the owner of a casino in Munich opted to import a BTM from Austria after a German court ruled cryptocurrency dealing was not subject to mandatory licensing.

Previously, those wishing to conduct business involving BTMs, as an example, had to get permission from financial regulator BaFin; ignoring this constituted an offense.

The situation changed last month when the Berlin Kammergericht overturned the authority of BaFin to decide such matters, deciding Bitcoin and cryptocurrency was not “money.”

That judgment led the Monte24 Casino and Video Store to set up its BTM, bringing it across the border from Austria, where cryptocurrency regulations have been more supportive for several years.

Bitcoinist_Bitcoin Adoption Germany

BaFin: We ‘Respectfully Acknowledge’ Court Decision

Due to the uncertain nature of the Kammergericht’s decision regarding the long-term ability of entities to operate BTMs and other cryptocurrency exchange services, however, its future is already hard to estimate, says t3n.

“Whether the ATM will be found in Munich for a longer period remains unclear and depends on how long the judgment can remain in force,” the publication reports.

Germany’s slow progress in acknowledging consumer interest in cryptocurrency has often led to frustration, especially viewed in contrast to well-known progressive neighbors Austria and Switzerland.

Attempts to operate BTMs in the country have previously ground to a halt over red tape, with installations several years ago all disappearing.

In an interview last week, BaFin said that while it “respectfully acknowledged” the court ruling, the issue as to whether cryptocurrency constituted a unit of account as per the law was a different matter.

President Felix Hufeld further called for an international push to regulate phenomena such as ICOs.

What do you think about Germany’s Bitcoin ATM? Let us know in the comments section below! 


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Říj 30

Japan’s Financial Regulator Says Stablecoins Are Not Cryptocurrencies

The lack of uniformity in stablecoins has led Japan’s Financial Services Agency (FSA) to conclude that stablecoins are not cryptocurrency.


Not All Digital Assets Are Created Equal

Japan’s Financial Services Agency (FSA) recently announced that it does not believe stablecoins should be classified in the same category as cryptocurrencies.

According to Japan’s Payment Services Act and the Fund Settlement Law, cryptocurrencies are considered a method of payment that users do not need to pay taxes for. Meanwhile, stablecoins do not meet these criteria as the majority of the current dollar pegged digital assets have varying characteristics, and the lack of a uniform set of characteristics makes it impossible to categorize them.

FSA Japan

JVCEA Cannot Regulate Stablecoins

Under the Payment Service Act, stablecoins fail to meet the current criteria for classifying as a “virtual currency” and an FSA spokesperson said, Due to [varying] characteristics [of stablecoins], it is not necessarily appropriate to suggest what those companies need to obtain or register before issuing stablecoins.”

Interestingly, while the FSA recently ceded authority to Japan’s Virtual Currency Exchange Association (JVCEA) by granting the collective the authority to self-regulate Japan’s cryptocurrency exchanges, the JVCEA will not be able to regulate stablecoins as they have been determined to not be cryptocurrencies.

It appears that the task of regulating stablecoins to will fall to the FSA and regulators will need to analyze each stablecoin on an individual basis.

Do stablecoins function the same as non-fiat pegged digital assets? Share your thoughts in the comments below! 


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Říj 29

UK Fintech Industry Slams Govt’s ‘Blunt Instrument Approach’ To Cryptocurrency

The UK could compromise its fintech sector with “very blunt instrument” regulation currently under consideration, a new report from several industry entities warns.


‘Ashamedly Geared Around Bitcoin’

As local news outlet the Telegraph reports October 29, the report criticizes plans to award more power to regulator the Financial Conduct Authority (FCA) and says treating all cryptoassets in the same way as Bitcoin was counterproductive.

“Bad regulation is worse than no regulation at all,” the Telegraph quotes it as reading, adding that the extant proposals are “ashamedly geared around Bitcoin.”

Politicians had lobbied for wider FCA jurisdiction in September, six months after the regulator had launched a dedicated “task force” with the remit of formalizing the domestic space.

Far from increasing security and consumer protection, however, one of the report’s authors argues a laissez-faire attitude would be considerably more beneficial for a sector which is only just beginning to mature.

“It is a very blunt instrument approach and I haven’t seen this in other countries,” Patrick Curry, chief executive of the British Business Federation Authority (BBFA) commented about the plans.

The use of this technology is still a voyage of discovery and these technologies are being refined for different types of use. My concern is the law of unintended consequences.

Overreaching?

The government had pledged to make London a home for fintech in the coming years, sounding out concerns that Brexit would make the city an unattractive place for innovative newcomers.

Blockchain Expo - Crypto La La land

At the same time, the Bank of England has said it is open to the concept of a self-issued national digital currency while also claiming that cryptocurrency poses “reputational risks.”

“Crypto-assets also raise concerns related to misconduct and market integrity,” Deputy Governor Sam Woods wrote in June.

Many appear vulnerable to fraud and manipulation, as well as money-laundering and terrorist financing risks.

What do you think about the UK’s cryptocurrency regulation plans? Let us know in the comments below!


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Říj 23

VanEck Says Bitcoin ETF Concerns ‘Resolved’ at Meeting With SEC

Entities seeking to launch a Bitcoin ETF (exchange-traded fund) met with the US Securities and Exchange Commission (SEC) October 23 as one commissioner spelled out the expectations in fresh media comments.


5 Key ‘Issues Resolved’

VanEck, which received a rejection of its ETF application in late August, met with the SEC to discuss its status, producing a supporting document outlining five reasons for approval.

“Issues identified in disapproval order have been resolved,” it states.

 There now exists a significant regulated derivatives market for bitcoin

Relevant markets – Cboe, bitcoin futures, OTC desks – are regulated

Concerns around price manipulation have been mitigated, consistent with approval of prior commodity-based ETPs

Cboe’s rules are designed to surveil for potential manipulation of Trust shares

Promotes investor protection.”

Stein Highlights Points Of Consideration

Speaking to Bloomberg TV Monday meanwhile, SEC Commissioner Kara Stein underscored the uncertainty over whether or not ETFs will soon see regulatory approval.

One the face of it, it may seem like the SEC is poking around and trying to cause issues but in reality, it might be the opposite.

Multiple applications to launch have stalled at the SEC’s door, authorities either rejecting or postponing their decision regarding whether or not investors can legally interact with them.

“They’re going to have to show how they can get accurate valuations… despite sometimes volatile price swings, how they can make sure there’s physical custody when necessary,” Stein told the network.

How they’re going to make sure there’s adequate liquidity, especially in a 40 act fund context so investors can get their money… we’ll look at all those factors and make a decision on that particular fund and how it’s actually going to be able to handle those particular requirements.

2019 Or Sooner?

After the initial round of rejections and delays, attention from cryptocurrency analysts and investors turned to other financial products aimed at institutional investors and their capital.

As Bitcoinist reported, multiple Wall Street heavyweights are planning to release cryptocurrency products in the short term, Intercontinental Exchange this week confirming it would launch its Bakkt platform December 12 – again subject to regulatory approval.

ETFs and their potential to shore up cryptocurrency markets meanwhile remain a talking point more generally, with various predictions surfacing that 2019 will be the make-or-break year for the instrument.

Andreas Antonopoulos, while remaining skeptical on the benefits of an ETF for Bitcoin’s reputation, nonetheless forecast that their market entry was a certainty.

“…There’s enormous market appetite and very little technical knowledge, so institutional investors simply can’t at the moment hold Bitcoin directly.” he said in July.

Stein declined to speculate on possible timeframes for an ETF approval to come from the SEC.

Does the VanEck/SolidX Bitcoin ETF now habe a higher chance of approval? Let us know below! 


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Říj 22

Int’l Financial Watchdog FATF to Introduce Cryptocurrency Rules in 2019

The Financial Action Task Force (FATF) – an international agency which is intended to tackle criminal activity across the globe, is set to issue the first set of rules regarding cryptocurrency regulations in 2019.


Focus on Crypto Exchanges

The FATF is based in Paris and it is currently comprised of 37 countries. Its’ president Marshall Billingslea said that the agency will issue new rules regarding cryptocurrency regulations. Purportedly, they will require each country to thoroughly license or regulate cryptocurrency exchanges as well as companies which provide encrypted wallets. He said:

As part of a staged approach, the FATF will prepare updated guidance on a risk-based approach to regulating virtual asset service providers, including their supervision and monitoring; and guidance for operational and law enforcement authorities on identifying and investigating illicit activity involving virtual assets.

Additionally, the president said that the watchdog will be conducting regular reviews to guarantee that the countries are actually implementing the new set of rules. According to him, the rapid development of the functions which digital currencies serve also requires the FATF to review activities and operations which are contained within the existing standards.

globe

Billingslea:

In light of the rapid development of the range of financial functions served by virtual assets, the FATF will also review the scope of activities and operations covered in the amended Recommendations and Glossary in the next 12 months and consider whether further updates are necessary to ensure the FATF Standards stay relevant.

Billingslea also noted that he expects the additional instructions to be issued by June:

By June, we will issue additional instructions on the standards and how we expect them to be enforced.

A Steady Course

The FATF’s most recent move follows the agency’s current policy towards shedding regulatory clarity over the field of digital currencies.

Earlier in June, Bitcoinist reported that the agency will introduce binding regulations for cryptocurrency exchanges and that Japan is particularly active in that direction. In fact, the country launched a self-regulatory body in April, called the Japanese Cryptocurrency Exchange Association.

What do you think of FATF’s recent move to issue its first rules towards cryptocurrency regulations? Don’t hesitate to let us know in the comments below!


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Říj 12

‘Nurture Productive Aspects Of Cryptocurrency,’ US Presidential Hopeful Tells Senate

The US senator and potential presidential contender who suggested cryptocurrency “hurt” American families repeated concerns about the industry on October 11, saying it was “easy to steal.”


Warren Argues For Consumer Protection ‘Balance’

In a Senate Banking Committee hearing, Elizabeth Warren voiced fresh worry over the current regulatory climate in Washington, implying balanced rules should come into force.

At the same time, Warren poured scorn on ICOs, alleging “a lot of small investors” were being “scammed” by them, Forbes reports.

“The challenge is how to nurture productive aspects of crypto with protecting consumers,” the publication quotes her as saying.

Last year, Warren had claimed when US regulators turn their attention away from an emerging phenomenon in need of regulation, it was “American families” who “suffer” as a result.

“It was exactly that attitude at the Fed in the run up in the crash in 2008,” she said at the time. “The Fed had a lot of tools they could have intervened, but they sat there on their hands and said, ‘Let the market go forward.’”

Elizabeth Warren

Roubini Has No Time For Cryptocurrency

The Senate hearing meanwhile has already become infamous in cryptocurrency circles following comments from economist and famed naysayer Nouriel Roubini, who delivered what could be considered his most scathing appraisal of the industry yet.

“Crypto is the mother or father of all scams and bubbles,” he told the Committee as part of the prepared testimony.

“Especially folks with zero financial literacy – individuals who could not tell the difference between stocks and bonds – went into a literal manic frenzy of Bitcoin and Crypto buying.”

On ICOs, Roubini was also keen to espouse the view the industry was mostly legally dubious, using results of research published earlier this summer by Satis Group which concluded over 80 percent of such projects were scams.

“It would appear that ICOs serve little purpose other than to skirt securities laws that exist to protect investors from being cheated,” he concluded. 

What do you think about Elizabeth Warren and Nouriel Roubini’s appraisals? Let us know in the comments below! 


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Zář 29

‘Nothing At All’ Going on With Crypto Regulation, Says D.C. Insider

Despite the growing importance of the cryptocurrency industry, the US government’s position on crypto regulation remains frustratingly opaque. According to a D.C. insider, a movement towards real regulation or greater regulatory guidance is still quite far away.


Regulatory Uncertain

Questions about how the government intends to regulate the crypto industry abound. For example, it is still unclear to many investors whether crypto regulation will ultimately come from the SEC or the CFTC.

While there remains no widespread movement in Washington towards reforming the crypto regulatory environment, there are encouraging signs that pockets of Congress are beginning to take interest in the cause.

Beginnings of Congressional Action?

On September 24th, Rep. Warren Davidson (R-OH) hosted industry leaders from Wall Street, Silicon Valley, and the crypto industry for a roundtable discussion on the crypto regulatory environment. Davidson’s roundtable, titled “Legislating Certainty for Cryptocurrencies,” was held at the Library of Congress. Roughly eighty thought leaders from the private sector attended the roundtable, with multiple members of Congress and their aids in attendance as well.

Davidson stressed the importance of industry being involved in crafting the government rules that will eventually govern the crypto space.

Congress

Congressional Letter to the SEC

Following the roundtable, Davidson and fourteen other Representatives issued a public letter to SEC chairman Jay Clayton requesting that the SEC issue clarification on whether Initial Coin Offerings are considered security sales. The Representatives used the letter to express concern that all tokens were being treated as securities, regardless of whether the designation was applicable or relevant. The letter stated:

Therefore, we believe is important that all policy makers work toward developing clearer guidelines between those digital tokens that are securities, and those that are not, through better articulation of SEC policy, and, ultimately through formal guidance or legislation.

The letter went on to express concern that existing guidance on SEC policy is being conveyed solely through enforcement action, leading market participants forced to try to divine SEC policy through the scope of its enforcement actions. The letter continued:

Additionally, we are concerned about the use of enforcement actions alone to clarify policy and believe that formal guidance may be an appropriate approach to clearing up legal uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught.

Legislstion

New Legislation Begins to Emerge

While no major legislation has been introduced to cover the crypto industry, U.S. Representative Tom Emmer (R-MN) has introduced a slate of three bills designed to encourage support for the crypto industry. Emmer’s bills propose only minor changes to how cryptocurrency is regulated in the U.S.

Concerns about the regulatory status of various crypto projects have encouraged many entrepreneurs and firms to decamp to more stable regulatory climes. For example, Switzerland’s “light-touch” regulatory policy has fueled the dramatic growth of the industry in the country.

While it is encouraging to see the government finally begin to take interest in the crypto industry, the Congressional letter stressed that SEC guidance would take time to fully emerge and develop. Start-ups and entrepreneurs hoping for greater regulatory clarity will likely still have a long time to wait.

Will U.S. regulators eventually wake up? Let us know in the comments below!


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Zář 15

SEC and Institutional Investor Backing: A Question of Custody

One of the last major hurdles to the widespread institutional adoption of cryptocurrency is the issue of custody — where to securely store all those high-paying clients’ assets. Fortunately, several companies are currently working on a solution to this piece of the puzzle.


A Universal Question

Custody is a question that perhaps anyone who has owned crypto has considered — or failed to at their own peril. I.e., Where am I going to keep my Bitcoin (BTC) 00 — or other tokens —safe?

In the early days, some were happy enough to leave their crypto in the safe hands of the exchange where it was bought. Until a series of high profile hackings highlighted just how untrustworthy those hands may be.

The crypto community possesses online desktop and mobile wallets, hardware wallets, and even paper wallets, depending on how sensible/paranoid we are. Now imagine dealing with millions of dollars worth of someone else’s money.

Assured Security

Institutional investors are accustomed to having their assets safely stored or FDIC insured. For institutions holding assets of over $150 million dollars, use of a third party custodian is an SEC requirement. So for larger companies, self-custody (managing their own private keys) is not even an option.

Smaller retail and family offices may utilize offline cold-storage methods or even keep assets on an exchange. But there is a clear need for some entity to fill the role of secure, regulated custodian. Managing private keys in the way that Wall Street custodians manage traditional asset classes.

Regulatory Scrutiny

One of the companies aiming to fill that niche is BitGo. Yesterday BitGo became the first regulated service for storing digital assets when it received a state trust company charter from the South Dakota Division of Banking.

https://medium.com/@mikebelshe

CEO and Co-founder, Mike Belshe said:

This is the missing piece for infrastructure — it’s a treacherous environment today… Hedge funds need it, family offices need it, they can’t participate in digital currency until they have a place to store it that’s regulated.

The Alternatives

Aside from BitGo, there are several companies vying for a place at the custodial table. They include Coinbase, Gemini, Ledger and ItBit, who are all developing solutions. Nomura partnered with Ledger and Global Advisors to announce plans for a custody solution in May. Even Goldman Sachs recently announced plans for their entry into the market.

An influx of institutional investors could be the exact boost the current crypto-market needs. For the SEC to get on board and realize this vision, there really is no alternative to a regulated custodian service.

What are your thoughts on custodial services in the crypto landscape?


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Zář 11

Malta’s Push to Become a Global ‘Blockchain Island’ Seems to Be Working

Prime Minister Joseph Muscat classified Malta’s efforts to become a crypto and blockchain-friendly jurisdiction as a “calculated risk.” So far, work by authorities to turn Malta into a world leader for both industries looks to be paying off.


A variety of nations across the world have spent time investigating how they can control and manage the spread of blockchain and cryptocurrency.

Malta has been moving in an encouraging direction for a while now.

A number of prominent exchanges, namely OKEx and Binance, have moved to the tiny Mediterranean nation. The Maltese Parliament was hard at work over the summer approving legislation concerning crypto and blockchain.

Prime Minister Joseph Muscat has also been very bullish when it comes to virtual currency. He remarked in April how cryptocurrencies are the “inevitable future of money.”

Prime Minister Joseph Muscat has also been very bullish when it comes to virtual currency. He remarked in April how cryptocurrencies are the “inevitable future of money.”

When asked in a recent interview about the variety of steps the island has taken to become a blockchain and crypto powerhouse, Prime Minister Muscat noted efforts were “a calculated risk” to help further diversify the economy.

Aggressive Steps Forward

According to Prime Minister Muscat, part of this risk-taking includes slashing “layers of bureaucracy” and making it easy for entities in the blockchain and crypto world to come and set up shop in the country.

Malta has long been an attractive destination for digital companies due to the open stance of many government officials. Additionally, the island also features low tax rates, and the nation’s stock exchange is currently speaking to companies about listing virtual assets.

Officials are also collaborating with PricewaterhouseCoopers to roll out blockchain licenses for regulated entities. Parliamentary secretary Silvio Schembri said these would be issued in November.

All of these industry-friendly policies seem to be engendering a sense of optimism on the island, even if questions about future regulation are still up in the air.

In the interview, Prime Minister Muscat said how Malta is a trailblazer when it comes to regulations for the crypto world, and speculates the EU might one day be “doing what we are very much doing right here today.”

Michael Binanchi, chairman of the Founders Bank, toasted Malta as the “blockchain island” at a recent dinner.

The Road Ahead For Malta

 Some believe Malta’s open policies could continue to attract a variety of forward-thinking entities that could really shake up the financial world.

The Huulk digital exchange applied for a license in Malta in late August, and has a focus on attracting listings from fintech startups that are Sharia compliant. Ultimately Huulk is keen to list around 20 firms, many of which are located in nations like Turkey and Malaysia.

The ability to tap into religiously-sensitive investors across the world is thought to be a big opportunity for an exchange like Huulk, and for Malta

The ability to tap into religiously-sensitive investors across the world is thought to be a big opportunity for an exchange like Huulk. The same goes for Malta, especially since the nation’s Bianchi Holdings Limited would be an equity partner if the license is approved.

What do you think about Malta’s policies when it comes to crypto and blockchain? Can the island squarely position themselves as a global powerhouse for both industries?


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