Netherlands Central Bank (DNB) Approves First Crypto Exchange Under New AMLD5 Regulations

The AMLD5 regulations approved by the EU are considered to be quite strict, which cast many doubts over the future of digital asset firms operating in the region. However, Nederlandsche Bank NV (DNB), the Netherlands’ central bank, has approved AMDAX BV as the first digital asset firm to operate under its jurisdiction.

The authorities’ approval is a first of its kind since the latest AMLD5 regulations came into force. Many existing crypto firms had to either close their operations or move their business outside of the Netherlands. Deribit, a popular derivative exchange, was among those who had to shut down its operations because of the newly enforced laws.

As per an official briefing dated October 7, AMDAX BV, an Amsterdam-based crypto service provider, would now offer its services to the Dutch residents. The company in its official statement said,

“AMDAX B.V. has been registered by De Nederlandsche Bank (DNB) as the first provider of crypto services in the Netherlands. This enables AMDAX to process crypto transactions and store cryptocurrencies.”

Ever since the enforcement of newly updated anti-money laundering rules called 5th Anti-Money Laundering Directive, or AMLD5, companies must register with the regulatory body. Only after their approval, they can offer their services to the customers. The registration for support started in January 2020, and AMDAX B.V has become the first firm to get the regulatory nod.

AMDAX B.V to Cater to the Needs of Retail and Institutional Investors

AMDAX B.V would be catering to the needs of both retail and institutional investors. The digital asset firm started working towards AMLD5 compliance back in May. Valentino Cremona, AMDAX BV co-founder, commented on their regulatory approval and said,

“The market needs clear legal frameworks, such as the set of requirements of DNB. This registration shows investors that crypto is a mature asset class, not for criminals, but smart investors.”

“All crypto companies need to get this registration. Without it, they cannot operate in the Netherlands. The other Dutch crypto companies have up to November 21st to receive registration.”

The approval of DNB for AMDAX BV shows that digital asset firms can still get the regulatory nod despite the stricter regulations.

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Author: Hank Klinger

European Union Economic Council Aims to Introduce ‘Tougher’ Laws On ‘Global’ Stablecoins

  • Chief economic minister in the European Union calls for tougher and more stringent regulations to govern the cryptocurrency industry
  • Targeting global stablecoin projects such as Facebook’s Libra

In a speech made during the Digital Finance Outreach Conference 2020, Executive Vice President of the European Commission, Valdis Dombrovskis, spoke on the regulation of the digital finance industry, urging EU states to take the step forward in guiding proper regulation of the digital assets.

As the world continues its battle to stop the spread of COVID-19, many states and organizations have turned to digital payments, and Valdis does not expect this trend to go away any time soon. He said,

“Once the crisis passes, I would not expect the process of embracing digitalization to slow down – given how quickly technology evolves and the strong demand.”

The future is pointing towards a digital finance economy, and Dombrovskis is urging the European Union to take the step forward to “embrace digital finance and make it mainstream.” However, the challenge of regulation always arises in light of new technologies given the rapid movement in the field.

To remove these regulatory barriers, the commission is looking to launch a digital finance strategy for Europe later in the year. The strategy will focus on creating laws and regulations to make the most out of digital finance, enabling the continent to compete with the U.S, parts of Asia, and Russia in the space.

Crypto assets at the test

Crypto assets and distributed ledger technologies are the first tests for the commission. The fragmented regulation of crypto across European countries is making it difficult for market integration and companies to carry out businesses freely across the trade bloc. Dombrovskis said,

“Lack of legal certainty is often cited as the main barrier to developing a sound crypto-asset market in the EU.”

While the speech gives little away on the planned crypto regulation regime, Valdis said the new regulation strategy would boost innovation and development in digital finance across Europe through a harmonized rulebook.

A closer look at stablecoins

Valdis also differentiated the need to have a separate regulation handbook for “global stablecoins” backed by fiat currency. He believes global stablecoins such as Libra “are likely to raise additional challenges in terms of financial stability and monetary policy,” hence the need to adopt stringer policies on them.

The speech did not state any specific stablecoin, but the rise of Facebook’s Libra currency has seen several financial authorities take a keen look at the stablecoin.

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Author: Lujan Odera

Russia to Prohibit Crypto Circulation, Mining, and Ads Under New Draft Law For Digital Assets

Cryptocurrency regulations are quite tricky and up until now, only a few countries can boast of finding the right mix of existing new laws to regulate digital assets fairly.

Russia is definitely not among the few of those countries as it always had a passive stance towards privately issued or decentralized cryptocurrencies.

After months of rumors and speculation over Russia’s regulatory policy towards crypto assets, the government has finally submitted a new draft law on its official website for public comment on Monday. This new set of regulations, along with additional documents uploaded on the website, suggested that the government does not approve of cryptocurrencies as a legal asset.

Breaking these newly formed regulations also come with legal penalties. The new set of rules, if implemented, would prohibit the circulation of any privately issued cryptocurrencies as well as mining them. The advertisement related to these crypto-assets would also invite hefty penalties for the advertisers.

However, these regulations do not mean that crypto is illegal to own in Russia, as the central bank has neither formulated any laws around it nor they have classified crypto as security under Russian laws.

One of the members of the State Duma, Anatoly Aksakov, confirmed that these drafted laws would not go into effect until next summer. Last week, Aksakov also cleared any doubts on crypto ownership in Russia, saying people can still buy and own crypto as long as they declare it while filing their taxes. This would allow them to get legal protection as the state would consider it as property.

The New Digital Asset Law Could Force Crypto Service Providers To Close Down or Relocate

Crypto owners won’t be as impacted by these laws as the crypto service providers in Russia. Anti Danilevski, CEO of the new KickEX cryptocurrency exchange commented on the recently introduced draft laws and said:

“We were initially regulated in the European Union, not in Russia because we anticipated this. It’s a pity that cool technology startups are forced to leave the country and cannot operate in their homeland. We will transfer our team to the EU now. It’s painful for me to see that in the field of cryptocurrencies and digitalization, my country is moving backwards while the whole world is moving forward.”

If these laws are implemented without any amendments, then it would many many crypto service providers in the country especially crypto exchanges would either have to shut their operations or relocate.

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Author: Rebecca Asseh

Swiss Govt. Rejects Crypto Valley’s $103M COVID-19 Relief Loan for Blockchain Startups

Switzerland’s own crypto valley located in the Canton of Zug known for its business-oriented regulations is struggling to keep businesses afloat.

Its request of 100 million francs, which is around $103 million USD, as a COVID-19 relief package has been rejected by the Swiss government. The request for the relief package was initiated back in April by the finance director Heinz Taennle, reported a local daily.

The crypto valley would now have to depend on the 15 million Swiss Francs loan announced by the canton of Zug. The application for 100 million francs relief package was the only one rejected by the federal government among 24 similar COVID-19 related relief packages.

Almost two-thirds of the crypto valley blockchain firms which applied for the Federal loans failed to receive any assistance from the government.

The capital crunch in the crypto valley mainly occurred due to the ongoing coronavirus pandemic. Forcing many private equity investors into offering capital support in the fintech valley.

The New Loan Scheme Would be a Joint Effort by Federal and State Government

The newly announced 15 million swiss francs loan scheme would require fintech firms in the valley to submit their loan application by May 27th, 2020, and the loan can be applied to any bank in Switzerland. The loan amount would be covered by both the Federal government and the canton of Zug, where the federal government would offer 65% of the amount and the Zug would offer 35% of the loaned amount.

The situation in the crypto valley is getting worse with each passing day, as 80% of the operating companies in the valley report that they won’t be able to make it through the end of the year.

The main reason behind such outcry is the reluctance of equity investors to invest their money amid financial uncertainty which has been looming even before the pandemic struck which made the situation even worse. Almost 57% of the firms in the crypto valley have laid off a significant portions of their workforce, turning the crypto valley into death valley.

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Author: James W

PBoC’s Fintech Innovation Regulations Pilot Program Extends to Six More Districts

The new Fintech Innovation Regulations implemented last year by the Bank of China (BoC) in a Beijing Pilot program will be extended to six more districts, with hopes of benefiting the real economy amidst global Covid-19 concerns. The decision is aligned with China’s 3-year Fintech Development Plan unveiled last year by the BoC.

After releasing the new Fintech Innovation regulations last year, the Bank of China (BoC) opted for a pilot program approach that was unveiled in Beijing. On April 27th this year they have stated their intention to extend the regulatory programs to six of China’s districts.

The extension will involve the districts of: Chongqing, Suzhou Hangzhou, Hebei Xiong’an New District, Shenzhen and Shanghai in an attempt to bolster financial systems. Ultimately, the extension aims to boost the economies of these districts struggling under the present circumstances.

They have reiterated their intentions to help SMEs mitigate financial downsides amidst the global Covid-19 pandemic.

“We are aiming to amid the pandemic situation and help enterprises to resume work and production.”

China’s Huge Appetite for Fintech Products.

The main objective of these Fintech innovation regulations is to uphold their citizens’ consumer rights. Notably, China has a colossal population with a voracious appetite for Fintech products and consumer goods.

The intentions of the BoC were made clear last year in October when they launched a certification program for Fintech products. The system was set to cover all possible angles on Chinese payment systems including point-of-sale mobile terminals, embedded application software, user front-end software, and security carriers and chips.

The fintech innovation regulations are a major cog in China’s mega plan to further foster growth in their Fintech realm.

During a conference held last year where the Fintech Development Plan (2019-2021) was discussed at length, whose scope of touched on the plans for the Fintech sector touching on guidance ideology, basic principles, development targets, key missions and guarantee mechanisms between the three-year period.

The bank has set a three-year timer to achieve one of their main objectives which are solidifying Fintech regulations which would entail coming up with a framework for implementing the regulations. According to the outline from the Bank, China ought to have come up with framework dubbed ‘the four beams and eight pillars’ of their Fintech Development.

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Author: Lujan Odera

FATF Rates US As ‘Largely Compliant’ In Crypto AML/CTF Report, But Still Has Work To Do

In its recent revaluation on whether the United States is compliant with the set worldwide regulations on counter-terrorist financing (CFT) as well as anti-money laundering (AML), the Financial Action Task Force (FATF), has rated the US as ‘largely compliant’.

According to a FATF report that was released on March 31, the US was evaluated on its laws and regulations dealing with virtual assets and cryptocurrencies and was rated as largely compliant. The evaluation exercise mostly focused on recommendation 15 which deals specifically with crypto.

The ranking means that the US’s compliance with the recommendations has not changed since the last assessment that was conducted in 2016. However, FATF has updated its guidelines severally since then with the recent one being in October last year on FATF travel rules. Therefore, the latest assessment involved deeper scrutiny than the previous one.

The report noted some notable awareness about the risks posed by digital currencies as depicted by different regulators. The report singles out the different task forces as well as reports that have been looking at money laundering and crime financing through cryptocurrencies.

The FATF also notes that the current US regulations are working well in dealing with various Virtual Asset Service Providers (VASP) as per the FATF guidelines as they cover crypto exchanges and custodians. Nevertheless, the FATF is concerned that the regulations do not adequately deal with a VASP which is incorporated within the US but does not operate in the country, Cointelegraph reports.

Firms dealing with cryptocurrencies are categorized as Money Services Businesses (MSB) and are subjected to a higher compliance standard. Majority of MSBs have to come up with their own AML as well as CTF standards and, according to the FATF they are generally sufficient.

The report concludes that the US regulators have been lax in pointing out crypto service providers when they are enforcing regulation. However, the issues identified by the body seems to be minor making the US to be awarded a ‘B’ as per the FATF grading system.

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Author: Joseph Kibe

Billionaire Michael Bloomberg Ends 2020 Presidential Race, Who Is Left To Advocate For Crypto?

Michael Bloomberg, the billionaire and Presidential candidate who advocated clearer regulations for crypto, has exited the November 2020 Presidential election race.

As reported by Wall Street Journal (WSJ), Bloomberg is going to endorse former US Vice President Joe Biden, even if he spent over $620 million in 3 months for his campaign. Bloomberg had plans to legitimize the crypto market in the US. His intention was to introduce clearer cryptocurrency laws and to replace the old State and Federal regulations for the industry.

Bloomberg Was Pro Crypto

Bloomberg had very clear policies for cryptocurrencies, so he was a pro-cryptocurrency Democratic candidate, together with Andrew Yang, who also dropped out of the Presidential race back in February. Yang was also pro adoption of crypto and creating standardized cryptocurrency laws. Here are Bloomberg’s exact words on his drop out:

“After yesterday’s results, the delegate math has become virtually impossible—and a viable path to the nomination no longer exists… I’ve always believed that defeating Donald Trump starts with uniting behind the candidate with the best shot to do it. After yesterday’s vote, it is clear that the candidate is my friend and a great American, Joe Biden.”

What Will Happen with Crypto Regulations After the Election?

Super Tuesday had Sanders and Biden as front runners for the Democratic Party, but neither of these 2 candidates has even mentioned cryptocurrencies in campaigns. However, they both have interests in the US’s tech industry, with Biden being favored by voters who know more or are involved with technology.

On the other hand, Sanders is famous for supporting the breakup of major tech companies like Amazon, Facebook and Google. If Biden is to be elected, the scrutiny on Facebook’s Libra is sure to increase.

When it comes to President Donald Trump’s stand on crypto, he thinks not so highly of it, especially since the crypto industry is highly developed in North Korea, China and Iran. Seeing there’s none of the remaining candidates to focus on crypto policies, regulations in the industry may lie with the US Congress, just like Cryptocurrency Act of 2020 and the Token Taxonomy Act do.

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Author: Oana Ularu

Hong Kong Financial Authorities To Apply FATF Regulations To Crypto Exchanges, Brokers

  • Hong Kong proposes new regulations to target Virtual Asset Service Providers (VASP) in accordance with FATF recommendations.
  • This is despite Hong Kong being miles ahead of its Asia-Pacific peers and receiving high ratings from the financial agency.

Reports have emerged that the Hong Kong government is looking to increase its efforts in the regulation of the crypto space. This is in a bid to increase adherence to the global Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) guidelines.

In a speech by Paul Chan, Hong Kong’s Financial Secretary the government is going to use the recommendations by Financial Action Task Force (FATF) assessment to better their AML/CTF agenda. Notably, they plan to include Virtual Asset Service Providers (VASP) and precious metal merchants into their AML/CTF framework with plans to include the public’s input on the same.

The new regulations are to unsettle crypto exchanges and Over the Counter Brokers (OTC) in Hong Kong which has so far been crypto-friendly. In a memo from Hong Kong Money Authority (HKMA) official Carmen Chu to heads of all Authorized Institutions (AI) where she indicated that AI should treat the VASP’s different depending on the risk assessment for individual VASPs.

“Assessing the AML/CFT controls of the VASP as appropriate The extent of customer due diligence measures should be commensurate with the assessed ML/TF risks of the VASP”

In June last year, the FATF updated its guidelines in regards to the AML/CTF standards. The proposal stipulated that countries would now hold virtual assets to the same regard as property or funds.

The FATF would also obligate VASP’s to share detailed transactional information such as the sender and destination of funds for transactions above USD/EUR 1000. This information should be readily available for the next five years in case the regulators come calling.

Hong Kong rated highly compliant by FATF

This is despite Hong Kong ranking highly in the global watchdog’s FATF assessment. They rank as the first jurisdiction in Asia-Pacific to have aced the FATF assessment. Countries are now racing towards achieving FATF compliance standards with reports of private partnerships among countries to collaborate efforts to monitor cryptocurrency transactions.

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Author: Lujan Odera

What Does EU’s Fifth Anti-Money Laundering Directive (AMLD5) Mean For Crypto Exchanges?

European cryptocurrency firms are expecting a stricter regime of regulations as the 28 EU states are preparing to adopt the 5th Anti-Money Laundering Directive (AMLD5).

The AMLD5 will burden small firms and force them to either merge or fold. The Netherlands-based crypto exchange Deribit has already found a solution and is moving to Panama, where the AMLD5 version of regulations is not putting such high barriers and has reduced costs for traders.

AMLD5 Will Make Authorization and Registration of Crypto Firms More Difficult

The current norms on traditional finance are not right for the crypto world, whereas the AML crypto authorization schemes are different from one European country to another. When everything will be regulated under AMLD5, authorization, and registration of crypto firms will turn out to be very complex processes. Malcolm Wright, the AML Working Group’s head at Global Digital Finance and a chief of compliance officer for Diginex had this to say about Europe’s crypto future:

“There almost needs to be a more coordinated approach to make sure it allows the industry to still flourish and offer services to residents in the EU who want to invest in virtual assets products.”

FATF Guidance Includes Crypto-to-Crypto Exchanges

The AMLD5 has been in discussions for about 2 years, not to mention it has received some recommendations made by the Financial Action Task Force (FATF) in October 2018 and June 2019. While AMLD5 is addressing cash to crypto and the other way around transactions, FATF’s guidance includes crypto-to-crypto transactions too. It also has some requirements on the sharing of traditional to crypto payments data under its famous “travel rule”.

AMLD5 Will Impose Extra-Restrictions on Firms Providing Non-Custodial Wallets

Many are concerned about AMLD5’s extra-restrictive policy for firms that provide non-custodial wallets on a decentralized basis, especially since Germany and the UK are determined to implement this policy. This means Ethereum (ETH)-based finance platform Monolith (former TokenCard) and Wirex, the crypto payment card provider, would find it very difficult to comply with the new regulations.

AMLD5 Postponed in the Netherlands

In Netherlands, there seems to be a lot of confusion over the definition of “license”, not to mention the central bank and the Dutch Ministry of Finance believe an onerous AMLD5 version has been given to crypto players in the country. It seems the January 10 deadline for AMLD5 will be missed in the Netherlands as a result of a “serious disagreement between legislators and industry”.

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Author: Oana Ularu

Massive Lawsuit Brought Against Consumer Financial Protection Bureau by PayPal

  • PayPal says that the regulations implemented by the CFPB force them to make “misleading and confusing” disclosures to customers.
  • The payment processing firm is asking to be compensated for the attorney fees and cost of taking this case to court.

PayPal is one of the biggest payment processors in the world, and they’ve served millions of customers on various merchant websites. However, they have recently gotten involved in a lawsuit against the Consumer Financial Protection Bureau. According to PayPal, the CFPB has required them to make disclosures about its fees with “misleading and confusing” statements.

The lawsuit, which was filed on December 11th by PayPal, states that the agency seems to be unclear on the substantial ways that digital wallets and prepaid products (like their prepaid debit cards) differ. A court filing revealed to CoinTelegraph shows that the CFPB requires both digital wallets and prepaid products to be regulated under the same rules. However, this type of regulation for the digital wallets that PayPal offers is “fundamentally ill-suited,” as PayPal states.

Within this lawsuit, there’s a specific CFPB rule in question – “Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) Rule.” The rule was originally implemented in April this year, and it states that PayPal must provide users with a disclosure on the fees that are not charged by the company. PayPal claims that the rule also doesn’t properly demonstrate what most customers actually pay for their fees.

Essentially, the rule states that the descriptions of these fees on PayPal that “undermine PayPal’s own clear disclosures” need to be simplified. Furthermore, the rule bans them from offering information to consumers that would otherwise allow them to make “an informed decision,” and instructed the firm to tell their customers the worst possible fee that they may come up against, “even if the fee would rarely be incurred.”

In the filling, PayPal added, “The Rule mandates that customers be given — and actually view — ‘short form’ fee disclosures. The requirements for this short form disclosure are extremely prescriptive and rigid. Certain fee categories must be placed in specified positions and presented in certain font sizes […] The Rule further prohibits PayPal from including explanatory phrases within the disclosure box to describe the nature of these fee categories.”

Along with the petition for the ruling by CFPB to be deemed unconstitutional, the push to relieve them of it also asks that PayPal be awarded the costs and attorney fees by the court, as they deem appropriate.

Andrew Rossow, an internet attorney from Ohio, said that the lawsuit from PayPal makes it clear that there are many regulators – CFPB included – don’t actually understand the new technologies being launched in the industry today, like blockchain, artificial intelligence, and others.

Rossow added, “I think the CFPB’s recent expansion of Regulation E (Prepaid Accounts Under the Electronic Fund Transfer Act) and Regulation Z (Truth in Lending Act) was premature because it still doesn’t understand, in my opinion, how these digital wallets (which includes cryptocurrency wallets—hot and cold) operate and the parties that involved in even the most ‘basic’ of digital money transactions.”

If the court sides with PayPal, the progress could be huge for the cryptocurrency industry. After all, PayPal isn’t just standing up for itself – it is “defending the business operation of each of its competitors, protecting themselves from unwarranted and almost endless liability at any given point in time,” says Rossow.

PayPal has recently revealed their substantial quarterly profits and has been recording new users and more transactions. However, the platform recently cut some of their partnerships, including their ties to Pornhub and their models.

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Author: Krystle M