Major US Banking Regulators Finish “Policy Print” and Release 2022 Crypto Roadmap

Major US Banking Regulators Finish “Policy Print” and Release 2022 Crypto Roadmap

Top US banking regulator said on Tuesday that banks must seek and obtain written permission from their bank supervisors before engaging in cryptocurrencies.

The Office of the Comptroller of the Currency said that before taking on activities like providing custody services for crypto assets, banks must demonstrate they have appropriate risk management tools.

“I said the next few years will be the most important in the history of crypto policy,” commented Jake Chervinsky, head of Policy Blockchain Association. “Here’s proof: the major US banking regulators just finished a crypto “policy sprint” & say 2022 will be a big year. Get ready.”

On Tuesday, the Federal Reserve, Federal Deposit Insurance Corporation, and OCC released a joint statement, saying that they see the potential opportunities presented by the emerging crypto asset sector, but at the same time, they recognize the risks for banking organizations, their customers, and the overall financial system.

To provide clarity, the agencies recently conducted a series of inter-agency “policy sprints” focused on crypto and are now providing a roadmap of future planned work.

The focus of the sprint work included developing a commonly understood vocabulary, identifying and assessing key risks, including considering legal permissibility related to potential crypto activities conducted by banking organizations, and analyzing the applicability of existing regulations and guidance.

The staff also reviewed and analyzed activities banks may be interested in, such as crypto asset custody, facilitation of customer purchases and sales of crypto, loans collateralized by crypto, activities involving payments and stablecoins, and those that may result in the holding of crypto on a banking organization’s balance sheet.

The agencies said they would also evaluate the application of capital and liquidity standards to crypto for US banks. In addition, they will continue to engage with the Basel Committee on Banking Supervision and other relevant authorities.

“Based on this preliminary and foundational staff-level work, the agencies have identified a number of areas where additional public clarity is warranted.”

As a result, the agencies have developed this roadmap for cryptocurrencies. Throughout 2022, they plan to provide greater clarity on whether certain crypto-related activities conducted by banks are permissible, compliance with existing laws and regulations, and expectations for safety and soundness.

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Author: AnTy

Southeast Asian Country, Laos, Authorizes Trading and Mining of Cryptocurrency

Southeast Asian Country, Laos, Authorizes Trading and Mining of Cryptocurrency

In a policy shift, Laos has approved the mining and trading of cryptocurrencies in the Southeast Asian country.

Analysts see this move as a logical step for an inland Communist-controlled country that has surplus hydropower.

The debt-laden country has its domestic tourism industry severely impacted by the pandemic, and while it has a strong power generation capacity, domestic demand is relatively small and weakened.

This shift to crypto comes after last month, the central bank of Laos issued a notice warning the public about the use of crypto assets.

This week, the Prime Minister’s Office said six companies, including banks and the construction groups, were authorized to start mining and trading crypto assets while relevant ministries draft regulations governing their use.

A host of ministries led by the Ministry of Technology and Communications in coordination with the Ministry of Finance, Ministry of Energy and Mines, Ministry of Planning and Investment, and the Ministry of Public Security will work with the Bank of Laos (BOL) and the national utility the Lao Electric Power Company to regulate the industry, reported the Laotian Times.

The research findings and consultation between ministries and relevant organizations will be discussed at a meeting later this month.

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Author: AnTy

Fed Governor: USD Pegged Stablecoins “Broaden The Reach Of US Monetary Policy Rather Than Diminish It”

Fed Governor: USD Pegged Stablecoins “Broaden The Reach Of US Monetary Policy Rather Than Diminish It”

While stablecoins could serve as an attractive payment instrument that could become a major challenger to banks for processing payments, Christopher J. Waller believes, “there are many legal, regulatory, and policy issues that need to be resolved before they can safely proliferate.”

Governor Christopher J. Waller remains skeptical of a Federal Reserve CBDC, which he says is a “solution in search of a problem.”

Speaking at the American Enterprise Institute, Washington, D.C., via webcast, Waller said CBDC won’t be solving any existing problems that are not already being addressed.

While many central banks are considering the adoption of a CBDC as their economies become “cashless,” Waller said eliminating currency is a policy choice and not an economic outcome. Not to mention, Fed Chair Powell has said U.S. currency is not going to be replaced by a CBDC.

The payment system already in place isn’t too limited or slow either to warrant the introduction of a CBDC, he said. While existing interbank payment services have nationwide reach, commercial banks have developed an instant payment service called the Real-Time Payment Service (RTP), and the central bank is creating its own instant payment service FedNow as well, he added.

Waller doesn’t agree with CBDC improving the financial inclusion argument either. He pointed to an FDIC survey showing about 5.4% of US households being unbanked in 2019 and 75% of them were not interested in having a bank account.

“It is implausible to me that developing a CBDC is the simplest, least costly way to reach this 1 percent of households.”

In fact, a CBDC would create additional competition in the market for payment services because that would allow the general public to bypass the commercial banking system, which would then put pressure on them to lower their fees or raise the interest rate to prevent additional deposit outflows, said Waller.

And if commercial banks are earning rents from their market power, then there is a profit opportunity for nonbanks to enter the payment business and offer cheaper services as seen with stablecoins, he said.

“A stablecoin could serve as an attractive payment instrument if it is pegged one-to-one to the dollar and is backed by a safe and liquid pool of assets. If one or more stablecoin arrangements can develop a significant user base, they could become a major challenger to banks for processing payments.”

Such competition from stablecoins could pressure banks to reduce their markup, he added.

But Waller also made it clear that he is not endorsing any stablecoin, and there are many legal, regulatory, and policy issues that need to be resolved first before they can safely proliferate.

Not only is the private sector already developing payment alternatives to compete with the banking system, but innovation in the private sector is also happening quite rapidly, “faster than regulators can process.”

Waller isn’t concerned about private money like stablecoin representing a threat to the Fed for conducting monetary policy either as the USD pegged stablecoins actually “broaden the reach of U.S. monetary policy rather than diminish it,” he said.

“It is well established in international economics that any country that pegs its exchange rate to the U.S. dollar surrenders its domestic monetary policy to the United States and imports U.S. monetary policy. This same logic applies to any entity that pegs its exchange rate to the U.S. dollar.”

Waller also dismissed the argument that CBDC is needed to maintain the primacy of the U.S. dollar because he sees “no reason to expect that the world will flock to a Chinese CBDC or any other.”

Non-Chinese firms, according to him, wouldn’t want to have all of their financial transactions monitored by the Chinese government. Also, the Fed does not need to create a CBDC for the same reason as China, which is to more closely monitor the economic activity of its citizens, he said.

As such, “a CBDC remains a solution in search of a problem,” concluded Waller.

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Author: AnTy

BTC Felt Like A “Somewhat Frothy Market,” says Fed Chair Noting Stablecoins “Growing Really Fast”

While worried about that, the Fed is promising “powerful support” through monetary policy. Jerome Powell also called for “appropriate regulation” of stablecoins and getting the digital dollar right, rather than fast, because the US is “not in danger of losing” the reserve currency status.

On the second day of the testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Federal Reserve Chair Jerome Powell further elaborated on the state of financial markets and commented on the cryptocurrency market.

“Financial conditions are highly accommodative,” said Powell while noting that this is how people are getting things financed like SPACs.

“We see Bitcoin going up in value and down in value… At times it felt like a somewhat frothy market. You do worry about that,” he said, adding, but at the same time, “we’re very focused on the real economy.”

Here, their focus is on maximum employment and price, and financial stability.

“We’ve got a long way to go. So we want to be careful about tending to our main mandate while we also think about financial stability issues.”

“Growing Incredibly Fast”

According to Powell, cryptocurrencies have surely tried but failed to become a viable payment method.

“With cryptocurrencies, it’s not that they didn’t aspire to be a payment mechanism, it’s that they’ve completely failed to become one, except for people who desire anonymity, of course, for whatever reason,” he told Sen. Cynthia Lummis of Wyoming.

The question, he said, is really about stablecoins, which he compared to bank deposits or money-market funds, saying they’re growing incredibly fast but without appropriate regulation.

“It’s growing really fast – we really ought to have appropriate regulation. And today we don’t.”

Following this, the US House of Representatives, the lower house of the U.S. Congress, has proposed a bill to change securities to define and include digital assets as “investment contract assets.”

Congressman Tom Emmer of Minnesota along with Reps. Darren Soto and Ro Khanna introduced the bipartisan bill, called the Securities Clarity Act.

Digital Dollar

Talking about a central bank digital currency (CBDC), Powell told the Senate Banking Committee on Thursday that he hasn’t made up his mind about a digital dollar yet.

“I am legitimately undecided on whether the benefits outweigh the costs or vice versa,” said Powell when asked to clarify his positions on a CBDC.

If the Fed were to issue its own digital fiat, “we would want very broad support in society and in Congress, and ideally, that would take the form of authorizing legislation as opposed to a very careful reading of ambiguous law,” he added.

Powell said the focus with a CBDC is to get it right because the US is the reserve currency with no “good competitor,” as such,

“We’re not in danger of losing it. Certainly not to China which doesn’t have an open capital account.”

Not concerned about competition, the real concern is about getting this right as a CBDC has its benefits and risks, he said.

“It’s quite specific to the institutional context of each country. And I want to get it right. We are the reserve currency. We have a first mover advantage by virtue of that. So I think it’s way more important to get it right than it is to do it fast.”

Stimulus to Continue

Besides crypto and stablecoins, and the digital dollar, Powell acknowledged that inflation had seen a “big uptick, bigger than many expected, bigger certainly than I expected,” but added that inflation may slow in “in six months or so,” as it is tied to the “shock going through the system associated with the reopening of the economy.”

Now, the Fed is trying to understand if this will pass fairly quickly or if they would need to act.

“One way or another, we’re not going to be going into a period of high inflation for a long period of time, because of course, we have tools to address that.”

As for tapering, Powell told the Committee that there is still an “elevated level” of employment and the economy still has “a long way to go.” Also, the purchases have been contributing to the housing market’s strength.

As such, the Fed “will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete,” he said.

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Author: AnTy

Fed Promises to Keep Monetary Policy Loose; Interest Rate Near Zero & Inflation Above 2%

Fed Promises to Keep Monetary Policy Loose; Interest Rate Near Zero & Inflation Above 2%

The dovish tone from the Fed is pushing the USD down, which has been falling throughout this month while the risk-on environment is good for both stocks and bitcoin.

“The economy is beginning to move ahead with real momentum,” Jerome Powell, Federal Reserve chair, told reporters Wednesday after the central bank held interest rates near zero and kept bond purchases at $120 billion a month.

Powell reiterated that it is not the time to discuss scaling back asset purchase. “When the time comes for us to talk about talking about it, we’ll do that. But that time is not now,” not until there is more than one great job report, he said.

As for the concerns around inflation due to the Fed’s aggressive support, Powell said though prices are likely to rise amidst surging demand, it is just,

“An episode of one-time price increases as the economy re-opens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation.”

The central bank is interested in keeping the inflation above the 2% target and only when it was to move “persistently and materially above 2%” that threatens to move longer-term inflation materially above 2% that the Fed will use its tools to bring it down to mandate consistent levels, he said.

“Markets are having a hard time digesting this.”

“The Fed is saying, ‘I hear you. Inflation is going to be above 2% for a while, but I am trying to tell you we are not going to do anything about it.”

Michael Gapen Chief U.S. Economist at Barclays Plc

President Joe Biden, meanwhile, is all set to unveil a $1.8 trillion plan after a $2.25 trillion infrastructure proposal and the $1.9 trillion pandemic relief package was signed into law last month. This time to expand educational opportunities and child care.

“I took away that not even any preliminary discussion of a change in policy is imminent.”

“He gave a spirited defense of the Fed’s view on inflation and employment. They are very happy with the course they are on and not likely to change it soon.”

Carl Tannenbaum Chief Economist at Northern Trust in Chicago

How’s the Market Feeling…

This opens the doors for the continuation of a risk-on environment, which means investors are willing to enter into higher-risk investments like Bitcoin and stocks, wrote Deutsche Bank in a report published this week.

S&P 500 jumped to a record high in part bolstered by Fed’s same dovish tone and in part the ongoing tech earnings report. However, the promise of keeping the monetary policy loose is not turning out good for the dollar.

The USD index has been going down throughout this month and is currently near 90.6, while gold is still around $1,780 per ounce.

As for Bitcoin, it is hovering around $54k, which is giving altcoins a perfect chance to run higher.

Amidst this, the White House released a slew of tax increases in its “The American Families Plan,” as per which top personal income tax rate is raised from 37% to 39.6% for all taxable income north of about $550,000 for individuals and about $650,000 for married couples.

The top individual tax gain rate on long-term capital gains and dividends would be increased from 23.4% to 43.4%.

It is also proposing to give the IRS the authority to regulate paid tax preparers. They would get an annual report on the money deposited and withdrawn from every bank account in America.

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Author: AnTy

Ledger Reveals 3 Month Policy for Keeping Buyer Info; 2k New Users Affected in Data Breach

Ledger Reveals 3 Month Policy for Keeping Buyer Info; 2,000 New Users Affected in Data Breach

This time the information was leaked by the hardware wallet’s e-commerce provider Shopify’s rogue employees. But “these attacks have only strengthened our resolve to build and release products that keep you and your crypto safe,” says Ledger.

Hardware wallet Ledger, which is meant to “provide security to critical digital assets for consumers & institutional investors,” keeps leaking information about its customers.

After the last data breach affected 272,000 customers, yet another one has leaked the customer records of additional 20,000 Ledger customers.

On Wednesday, Ledger informed the crypto community that in an incident in the first half of 2020 (April and June), its e-commerce provider Shopify’s team members illegally exported merchants’ customer databases.

Shopify alerted Ledger about this incident on December 23rd, in which 93% of the information obtained was similar to the previous data dump, 7% of the customer records breached were new.

Reportedly, this incident affected over 200 merchants of Shopify, but the e-commerce giant didn’t discover that Ledger was also targeted in this attack until Dec. 21st, 2020.

As for why Ledger would keep the information, the company says, “our goal is to completely delete your personal data (such as your name, address, and phone number) as soon as possible.”

However, the company stores e-commerce information for “accounting and legal obligations,” in a segregated environment — “separate, dedicated, and encrypted storage inaccessible from the internet or external devices, with limited access rights” — for “as short a period of time as necessary” which is 3 months after the order is shipped.

The company has already contacted the concerned users directly to inform them about this incident.

“We are dedicated to taking action against this incident,” wrote Ledger while advising users to never share a 24-word recovery phrase.

If a user purchased a Ledger product after the end of June 2020 or outside of the Ledger.com site, their data is not exposed.

“We are deeply sorry that these incidents occurred and for any pain or stress they’ve caused our customers,” reads the official announcement in which the company says it will

“soon release a technical solution that will remove the 24 words as the single pillar of the security of our hardware wallets and will open the door to funds insurance for individual customers.”

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Author: AnTy

Facebook Owned WhatsApp Changes Privacy Policy; Telegram and Signal Gets Promoted

Facebook Owned WhatsApp Changes Privacy Policy; Telegram and Signal Gets Promoted

Popular Messaging app WhatsApp has changed its terms on Thursday that will allow it to share more information about billions of its users with its parent company Facebook and to further roll out ads and e-commerce.

Users must accept the changes, or their access to the service will be cut off from Feb. 8.

The updated terms will allow additional sharing of information like contacts and profile data but not the contents of messages, between WhatsApp and Facebook and its other applications such as Messenger and Instagram.

“If the only way to refuse (the modification) is to stop using WhatsApp, then the consent is forced as the use of personal data is illegal,” said Arthur Messaud, a lawyer for La Quadrature du Net, an association that defends internet users.

The changes would not affect EU and UK-based users.

Facebook bought WhatsApp in 2014, and two years later, it gave users a one-time chance to opt-out of sharing app data with the social media giant.

Brian Acton and Jan Koum, the founders of WhatsApp, left the company in 2017 and 2018, both of whom vehemently opposed the decision to monetize the platform through ads. Koum even called for people to “delete Facebook.”

This move by WhatsApp prompted calls for users to delete their accounts and switch to encrypted messaging apps like Telegram and Signal.

Tesla CEO and un-official DOGE CEO, Elon Musk, who has become the richest person in the world, recommended users to switch services, tweeting “Use Signal,” hours after criticizing Facebook via a meme.

“We need Web 3.0 now more than ever. We’re losing control of our own information, identity & destiny every day. A decentralized & fair internet made of distributed ledger technologies allows us to dismantle centralized tech giants & rightfully own our data,” said Jay Hao, CEO of cryptocurrency exchange OKEx.

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Author: AnTy

FinCEN Opens Job Positions for Crypto Policy Advisers Ahead of Proposed Wallet Regulation

The Financial Crimes Enforcement Network (FinCEN), a top policy enforcement arm of the Treasury Department, has been rumored to be in the process of developing crypto regulations for a while.

These rumors have now been given new life as the regulator recently posted two job listings for crypto advisers.

Qualified Applicants Only

Published last week, the listings showed openings for Strategic Policy officers. These professionals will primarily assist the agency in developing policy responses to cryptocurrencies. They will also issue advisories to liaise with financial institutions and engage in crypto policy collaborations with private and public sectors.

The details of the job listings show that FinCEN wants to improve its crypto policy acumen. Both positions will receive top clearance, and they are full-time positions. Candidates are to have experience in strategizing, drafting, and researching crypto policy.

These requirements show that FinCEN is looking to get more than just washed-down regulatory policies that will do no good for the crypto space.

Talks of policy developments from the FinCEN have swirled throughout the year. In February, Treasury Secretary Steve Mnuchin alluded that the agency was working on drafting regulations for cryptocurrencies across the countries.

Many Talks, Little Action

Speaking to Congress on the President’s $4.8 trillion budget proposal, the Treasury Secretary explained that the budget was also set to address effective cryptocurrency monitoring and enforcement against criminals. He said in part:

“We’re about to roll out some significant new requirements at FinCEN [Financial Crimes Enforcement Network]. We want to make sure that technology moves forward but on the other hand, we want to make sure that cryptocurrencies aren’t used for the equivalent of old Swiss secret number bank accounts.”

The Treasury Secretary revealed that his department would collaborate with several other regulators, including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

So far, there hasn’t been much in terms of regulatory oversight from the agency. In September, it issued an announcement stating that it would seek public comments on forthcoming proposals that would strengthen rules on monitoring and reporting financial institutions’ requirements.

The announcement claimed that the proposals would address terrorist financing, money laundering, and others, suggesting that crypto-related firs would also be in the regulator’s crosshairs.

Last week, Coinbase CEO Brian Armstrong revealed on Twitter that the FinCEN was most likely looking to rush through crypto regulations with the current administration on its way out. Mnuchin is set to be replaced by Janet Yellen at Treasury, and according to Armstrong, the current administration will be looking to make one last mark.

The CEO accused the FinCEN of trying to track self-hosted wallets. This move could essentially break down a significant anonymity barrier on which the crypto industry stands.

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Author: Jimmy Aki

Bitstamp Rolls Out New Crime Insurance Policy to Protect Crypto Held on the Exchange

Bitstamp, one of the leading crypto exchanges based in Europe, has introduced a new insurance policy against online crypto thefts and other crimes for digital assets held online.

The insurance policy comes in the wake of several exchange hacks leading to the theft of millions worth of digital assets. Most of these exchanges fail to ensure the proper refurbishment for the loss incurred by the exchange users. Thus, this insurance policy initiative by the Bitstamp exchange could prove to be a great attraction for customers.

Paragon International Insurance Brokers would offer Bitstamp’s new insurance policy in association with Woodruff-Sawyer. The insurance policy would be applicable for several digital assets like bitcoin and other similar crypto-assets.

The policy would cover several crimes such as online theft, hack, employee theft, loss of assets while under the custody of the exchange, loss in transit, loss caused by computer fraud, and losses related to legal fees and expenses.

Bitstamp revealed that 98% of all the digital assets under its custody are held offline and are protected and covered by the crypto custodian BitGo. Thus, the current insurance policy would focus on assets held online, even though it meant covering both online and offline.

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Author: James W

FCA Proposes UK Crypto Exchanges And Wallets Share Money Laundering Data With Regulator

The UK’s top regulatory body, the Financial Conduct Authority (FCA), has proposed a new policy for crypto exchange and wallet custodians. This policy requires crypto companies to submit a detailed history or report on potential money laundering. The FCA noted that they are planning to extend certain obligations for crypto companies for the reporting of money laundering risks associated with their customer accounts.

The FCA first started demanding an annual crime report from financial institutions in 2016. As per the latest proposal made by the regulatory body, “crypto-asset exchange providers and custodian wallet providers” must provide the FCA with a report about their financial crime risk, “irrespective of their total annual revenue.”

It is to be noted that the policy is just a proposal at present, which has been put up for comments by the regulatory body until November 23rd and based on the feedback they receive, the FCA plans to release a policy statement along with new rules by the first quarter of 2021.

How Would New Policy Pan Out?

As per the new policy introduced by the FCA, some further information that crypto businesses might be required to submit the lists of customers put in the ‘high-risk’ category. List of customers who refused to provide their details or left because of the information demand from them along with the top 3 prevalent frauds.

The crypto companies would be required to submit “from their next accounting reference date after 10 January 2022.” The FCA also made a critical change towards crypto exchanges, which open their base in tax-havens but operates all around the globe. The new FCA policy defines “operates” as “where the firm carries on its business or has a physical presence through a legal entity.”

The FCA revealed that the main reason behind such policy changes is to harvest data from potential fraudulent companies so that the right amount of resources could be dedicated to these companies, which in turn would help in containing the money laundering risks. The FCA also stated,

“There may be additional reporting obligations that we might require of crypto-asset businesses in the future.”

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Author: James W