Indian Securities Regulator to Restrict IPO Promoters from Holding Bitcoin: Report

India’s securities regulator is reported to be working on barring all IPO organizers from holding cryptocurrencies. This is another statement move from the government following its cryptocurrency ban.

The Indian government has shown no subtlety in its approach to banning cryptocurrencies from the country.

Now, it appears to be extending its anti-crypto stance to the traditional financial industry. Initial Public Offerings (IPO) promoters would be the first to feel its wrath.

No Crypto for Fundraisers

Recently, the Economic Times reported that the Securities and Exchange Board of India (SEBI), India’s securities regulator, is planning to force all IPO participants to divest all crypto holdings before proceeding with their listings.

Per the report, crypto selloffs will most likely become a prerequisite for anyone looking to raise funds through an IPO, forming what the latest in New Delhi’s plans to eradicate digital assets is.

The news source reported that the SEBI plans to send notices to merchant banks, underwriters, securities lawyers, and all other stakeholders in India’s IPO space, warning them to stay off digital assets.

A securities lawyer told the news source that this would most likely be a government directive, as they could believe that an IPO promoter holding an illegal asset could pose a risk to investors.

Some investment bankers have also explained that the SBI might move ahead with the restriction even if the Reserve Bank’s ban on digital assets doesn’t pass parliamentary approval – an improbable process on its own.

Mahesh Singhi, an executive at investment banking firm SInghi Advisors, explained that SEBI is looking to avoid a situation where IPO promoters divers their raised funds to crypto investments, which remain highly speculative.

SEBI has yet to release any written notifications to that effect, but many stakeholders seem to believe that this restriction will come into effect soon.

No Time to Waste

The IPO restriction is the latest approach from the Indian government, which has vowed to disrupt the crypto sector in the country. First announced last month, the ban is gaining traction ahead of a presentation at the country’s lower parliament.

Titled the “Cryptocurrency and Regulation of Official Digital Currency Bill,” the proposal is already in consideration at the Rajya Sabha, India’s upper house of parliament. However, the current budget session is expected to run till April 8, with a recess session already ongoing until March 7.

Earlier this month, local news source CNBC-TV18 reported that the government might as well skip the parliamentary process altogether. Per the report, it could look to take the “ordinance route” to ban the use of private digital assets while also allowing the Reserve Bank to create a digital framework for its planned Central Bank Digital Currency (CBDC).

CNBC-TV18 reported that all appropriate parties had already begun drafting the ordinance as they look to pass the crypto ban proposal within a month. Ordinances usually allow the Indian government, through President Ram Nath Kovind, to bypass parliament and take action.

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Author: Jimmy Aki

French Regulator Proposes New Regulations And Pilot Programs For Blockchains & Crypto

French Regulator Proposes New Regulations And Pilot Programs For Blockchains & Crypto

A leading French financial regulator calls for accelerated focus and development of new crypto regulations around emerging technologies (blockchain, crypto, AI, and data) across the EU.

In a speech by Robert Ophèle, Autorité des Marchés Financiers (AMF) Chairman, during the 5th Annual Fintech and Regulation Afore Consulting conference, French regulators need to take a step forward in pilot programs and creating new laws to govern distributed ledger technology (DLT) and blockchain across the EU.

Ophèle further acknowledged the “digital acceleration” in the financial world due to blockchains and DLTs coming up but stated government intervention is needed to guarantee a level playing field. He further designated the European Securities and Markets Authority (ESMA) as the best regulator to take over crypto regulation and supervision due to entry barriers into the new ecosystem.

According to Robert in his speech, ESMA leading the crypto supervision would ensure the regulator is fully competent on crypto while “building all the expertise in one place.”

Additionally, Ophèle also calls for creating rules on digital assets classified as financial instruments and non-financial instruments as well through the Markets in Crypto Assets (MiCA) regulation. However, to promote technological growth in the DLT industry, he suggests creating a pilot regime. The ‘Pilot regime’ allows crypto companies to be “able to try out and test within a proportionate and clear regulatory framework.”

“Work is needed in MICA to ensure that the technological neutrality principle is respected. As already highlighted for security tokens, we need to ensure that all types of DLT can be used, private and public.”

“Nor should we close the door on decentralized business models by prohibiting or overlooking them.”

The regulatory sandbox will offer companies the chance to operate as traditional money financial services (MFS) and broaden the range of issuers able to benefit from listing their securities on DLT-based infrastructures. He also proposed the sandbox to have an ‘open mind’ while accepting companies’ listing to the pilot regime and respecting the “principle of technological neutrality.”

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Author: Lujan Odera

Zurich-based Crypto Broker AG Receives Securities License from FINMA

Crypto Broker AG has obtained a securities house license from Swiss financial regulator, the Swiss Financial Market Supervisory Authority (FINMA) that will allow the company to offer services to institutional investors — “a significant milestone (that) caps a successful previous year,” the broker said in a statement Monday.

The firm is based in Switzerland, which has crypto favorable regulations, while major banks still stayed largely away from offering blockchain-based services.

Moreover, the securities license has been granted to a handful of companies that includes Sygnum and SEBA. Calling this a “pivotal moment,” Jan Brzezek, founder and CEO of the Crypto Finance Group, said, with this license,

“We will be able to offer our professional – and regulated – services to even more financial institutions, enabling them to enter this new asset class.”

Receiving the license means the broker can now hold funds on behalf of its clients as well, a feature which is “highly relevant for institutional clients, as many do not have their own capability.”

AG’s clients traded more than $1 billion in assets last year, with its digital operations growing “exponentially.” The company expects to further expand its business in 2021.

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Author: AnTy

South Africa’s Primary Financial Regulator Proposes New Crypto Regulations In The Country

South Africa’s Primary Financial Regulator Proposes New Crypto Regulations In The Country

  • South Africa’s financial regulator is looking to regulate cryptocurrencies and introduce laws to prosecute fraudsters in the industry following the uncovering of the “largest Ponzi scheme.”

Reports from Bloomberg confirms that South Africa’s primary financial regulator, Financial Sector Conduct Authority (FSCA), is planning to regulate cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. The regulator is making proposals to oversee the cryptocurrency industry, prosecute fraudsters and “put people in jail,” the Head of enforcement at FSCA, Brandon Topham, said.

“At the point, something becomes a Ponzi scheme, we have lost our jurisdiction,” he said. “We need the police and the prosecuting authority to work fast and put people in jail.”

This follows the recent uncovering of a Ponzi scheme by a top Bitcoin trading desk, Mirror Trading International Ltd., said to have collected over 23,000 BTC (~$700 million) from its customers. In December, MTI, with over 260,000 customers on its books, was placed under ‘provisional liquidation’ as the customers rushed to withdraw their funds.

South Africa’s Mega-Million Bitcoin Scams

The rising demand for the world’s largest digital asset, Bitcoin, drives up the number of scam projects in the space. The MTI saga started in early 2020 when questions arose on whether the company was running a Ponzi. Then, the FSCA stated the company was not a Ponzi but rather lacked a crypto trading license.

After several investigations on the firm, the FSCA “found that the company kept neither accounting records nor a comprehensive register of participants, apart from 170,000 unique email addresses” recovered during a raid on the company in October. This led to more speculations of MTI running a Ponzi as MTI’s Chief Executive Officer Johann Steynberg fled into hiding – believed to be in Brazil.

In 2009, an alleged Bitcoin Ponzi ring involving over 800 investors across eight countries was stated to have stolen close to 12.5 billion rands (~$800 million) in a scam operation. According to Topham, such mega million scams are getting out of hand, who called for action against the MTI investors. He said,

“We need to make an example of MTI so that people understand that investing in a Ponzi is never a good idea.”

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Author: Lujan Odera

UK’s Financial Conduct Authority (FCA), Extends Temporary Registration For Crypto Exchanges

  • UK’s top financial regulator extends “temporary registration regime to July 2021.
  • Customers are warned to withdraw assets from exchanges that are not in the registration process.

U.K. regulator, the Financial Conduct Authority (FCA) launched its ‘Temporary Registration Regime’ to allow cryptocurrency service providers who are in the process of registration to continue offering their services. The registration deadline to crypto firms in the U.K is being extended to July 10th next year for every firm that applied for registration before December 16th, 2020 – previously set on January 10th, 2021.

The temporary registration regime is set to allow the regulators additional time to check and approve licenses “due to the complexity and standard of the applications received” and the effects of the global pandemic on their operations.

Earlier in January, FCA took on the lead supervisory role of the cryptocurrency ecosystem in the U.K. The regulator enforces anti-money laundering and counter-terrorism financing (AML/CFT) compliance across the country to safeguard the consumers. The regulator introduced several stringent laws in crypto, including every crypto service provider acquiring a license to operate a business in the country.

The deadline for registration of crypto firms was set for January 10th, 2021.

However, the regulator announced an extension of the registration period – a “Temporary Registration Regime” – to 10th July 2021 as applications are still being assessed. The regime allows crypto service firms, those who had registered before December 16th, to continue offering their services as the regulator works on the licenses. The statement from FCA reads,

“This [The Temporary Registration Regime] is to enable those existing businesses to continue to trade after 9 January 2021 until 9 July 2021, pending the FCA’s determination of their application.”

The registration delay is blamed on the “complexity and standards of the applications received” by the regulator.  The Coronavirus pandemic also hindered the authorities as their visits to the crypto exchanges themselves was limited.

The statement warns both crypto trading services providers and customers on the consequences of leaving assets on a trading platform not registered before December 15th –as the waiver does not apply to them. Exchanges that weren’t registered by Wednesday, Dec 15, will need to ask their customers to withdraw their funds by January 10th, 2021, or risk “being subject to the FCA’s criminal and civil enforcement powers.”

According to FCA’s website, only three companies have received approval to start trading crypto, with a list of 90 crypto firms waiting in line. So far, Kraken exchange subsidiary, Crypto Facilities, received a crypto futures trading license earlier in the year, and Binance announced its plans to launch FCA regulated exchange in the U.K. However, only the U.K fintech firm Ziglu, Archax, and Gemini are regulated by the FCA.

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Author: Lujan Odera

US Regulator OCC Proposes ‘Fair Access’ to Banking Services For All Including Crypto Companies

The Office of the Comptroller of the Currency (OCC), the US’s national bank regulator, has proposed a rule that would forbid banks from providing their services to legal industries, including cryptocurrency companies.

As per the proposed rule, led by former Coinbase counsel Brian Brooks, fair access is promoted under which financial services could be denied by banks to customers only on the basis of “quantitative, risk-based standards established in advance.”

They can’t do so due to political pressures, to prevent the customer from entering or competing in a market or to benefit another person or business activity.

Published on Friday, the proposal does not explicitly mention cryptocurrency but is surely welcoming news for the industry, which has been time and again denied the services by the banks.

The proposal does mention Operation Choke Point, an initiative taken by the Justice Department under the Barack Obama presidency that reportedly aimed to shut down the fraudulent businesses and lenders.

It further reads that it has been revealed that the government agencies have pressured banks to sever their financial services access to “disfavored (but not unlawful) sectors of the economy.”

But neither OCC nor banks are well-equipped to balance these risks that are unrelated to the financial exposure, it said.

Marco Santori on US OCC
Source: @MSantoriESQ

“Fair access to financial services, credit, and capital are essential to our economy,” said Acting Comptroller of the Currency Brian P. Brooks.

“This proposed rule would ensure that banks meet their responsibility to provide their services fairly since they enjoy special privilege and powers because if the system fails to provide fairness to all, it cannot be a source of strength for any.”

The proposal is open for public comments until January 4, 2021.

This week, President Donald Trump nominated the acting Comptroller Brooks as the permanent head of the OCC, a five-year stint.

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Author: AnTy

Deregulating Bitcoin may Increase Speculative Trading Instead of Technical Innovation

Ryozo Himino, the new top financial regulator of Japan, wants the country to take caution over promoting digital assets, arguing that instead of promoting technical innovation, it may end up fueling the speculative fire.

“Deregulating bitcoins and other cryptocurrencies may not necessarily promote technical innovation, if doing so simply increases speculative trading,” Himino told Reuters.

“We’re not thinking of taking special steps to promote cryptocurrencies,” he said. Himino became the new commissioner of the Financial Services Agency (FSA) just last month by replacing Toshihide Endo.

Last year, Himino, under Japan’s chair, spearheaded the G20 debate on regulating cryptocurrencies. Himino was in favor of setting strict regulations on the likes of Facebooks’ Libra, warning the global risks cryptocurrencies pose needs to be addressed first.

Focus on CBDC

According to him, Tokyo needs to shift the focus towards issuing a central bank digital currency (CBDC) as the ongoing coronavirus pandemic could help speed up a cashless society.

Japan has already been studying the technical obstacles to issuing a digital yen and conducting research in joint efforts with other central banks as well.

Himino welcomed these efforts and said, “We shouldn’t be worried about various challenges without even trying to design a plan (for issuing CBDCs).”

“In the end, Japan must think hard about whether to issue CBDCs because there are merits and demerits to doing so. What it can do now is to be ready so that when Japan decides to issue CBDCs, it can do so straight away.”

No “One-Size Fits All” Solution for Banks

The coronavirus (COVID-19) has been making things worse for the country’s regional banks, which are already feeling the pain of years of ultra-low interest rates and a sluggish economy.

According to Himino, there is no “one-size fits all” solution for the banks and said regional banks could use the bail-out programs of the government, cut costs, or raise capital from the markets, though the situation hasn’t been that bad, he said.

“At present, there isn’t any regional bank that is facing concerns over its financial health.”

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Author: AnTy

US Regulator Authorizes National Banks and Federal Saving Institutions as Crypto Custodians

U.S. regulator, the Office of the Comptroller of Currency (OCC), allows federal banks and national savings institutions to officially custody cryptocurrencies for their customers. The statement released on July 22, confirms that any national bank or savings facility can now hold on to unique cryptographic keys of cryptocurrencies in their vaults pertaining to custody services.

According to the statement, the decision to allow banks to offer crypto custodial services follows a growing demand by investors to safely store their cryptographic keys, which, if lost, capitulates the value of the assets. This news opens up the field to large banks to provide these services, relieving current state-chartered crypto custodians such as Coinbase and Gemini.

Nonetheless, crypto custodial services differ from the traditional custody services banks offer, the statement explained. Given that the digital assets are not physical, digital wallets will be required to safely store the cryptographic keys.

The release, which comes a month after the OCC asked for public input on Crypto and DLT, further states that the increasing technological innovations in the financial world call for “banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers.”

A modern form of traditional banking activities

Discussing the new regulation, the author of the statement, Jonathan V. Gould, the Senior Deputy Comptroller & Chief Counsel, claimed that cryptocurrency custodial services Is a new form of already existing asset custodian businesses of national banks.

The OCC permits national banks and savings to hold their customers’ cryptocurrencies in both a fiduciary and non-fiduciary role. Banks holding crypto in a fiduciary capacity will need to manage them in the same way as they manage other assets while non-fiduciary capacity targets holding cryptographic keys that control the actual transfer of the cryptocurrency.

Manage your cryptocurrency risk

Brian Brooks, the current head of OCC and a former executive at Coinbase, however, warns on the risk management of custody services across national banks. Focusing on customer assets protection, Brooks said,

“This opinion clarifies that banks can continue satisfying their customers’ needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency.”

The statement concludes by warning custodians to focus on risk management techniques, due diligence, and KYC/AML compliance as they begin the operations on holding crypto assets. No specific recommendation of customers was provided in the statement with banks open to deal with crypto institutions, as recently seen with JPMorgan onboarding Coinbase and Gemini.

This, however, should be done with the thought that cryptocurrencies do hold their risks and challenges. It states,

“A national bank or FSA engaging in new activities should develop and implement those activities consistent with sound risk management practices and align them with the bank’s overall business plans and strategies as set forth in OCC guidance.”

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Author: Lujan Odera

Singapore’s Financial Regulator, MAS, Wants More Power to Push Stringent Rules For Crypto

Singapore’s financial regulator, which also serves as the country’s central bank, The Monetary Authority of Singapore (MAS), is seeking to introduce stricter rules for the crypto industry to adhere to the new Financial Action Task Force (FATF) standards.

The financial watchdog is seeking to have more powers that will help in prohibiting any unsuitable enterprise from doing any business within the country. The financial overseer is also seeking powers to oversee, license, and regulate all crypto businesses which offer services in other countries but are based in Singapore.

As per the proposal, the country’s financial authority is seeking to expand the provisions of the Payment Services Act (PSA), which came into effect in January this year. If the proposal is adopted, Virtual Asset Service Providers (VASPs) will be required to conduct their operations in other countries using the same standards and regulations in their country of origin, Singapore. Although the MAS, back in March, already exempted a few of the top crypto companies: Binance, Coinbase, Gemini, and Ripple.

The regulator has already published a consultation paper seeking public input and feedback in regards to the expanded powers of the Monetary Authority of Singapore.

The regulator argues that the new proposal will put a halt to regulatory arbitrage where multinational VASPs choose the regulations to adhere to if they suit their mode of business.

The VASPs that will be significantly affected by these proposals are the ones that work abroad but maintain a “meaningful presence” in the city-state; that is, their directors and offices are located within Singapore. Corporations registered in Singapore, partnerships, as well as limited liability partnerships created in the country, will also be affected by the new legislation.

The financial regulator also explains that the regulations will help Singapore to adhere to the set anti-money laundering (AML) standards that were set late last year by the global financial watchdog FATF.

The public has until August 20 to send their views and opinions.

Asia’s most preferred countries, is Singapore, for the crypto industry, because of its friendly crypto environment. There are more than 150 crypto and blockchain-based firms headquartered in the city-state.

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Author: Joseph Kibe

Swiss Financial Regulator, FINMA, Licenses Local Bank To Carry Out The Crypto Transactions

Switzerland’s top financial regulator, Financial Market Supervisory Authority (FINMA) grants local banks, InCore, the first license to transact digital currencies. This adds to the accelerated efforts from the Swiss government in the blockchain field so far in 2020 with the government looking to implement a central bank digital currency (CBDC).

InCore, first Swiss bank licensed to transact crypto

In an official announcement released on Friday, May 29, InCore bank confirms its FINMA license allowing it to process digital currency transactions. This makes it the first business to business Swiss bank mandated to operate within the crypto industry opening up a gateway for customers across the globe.

The license allows institutional-based clients banking with InCore bank to buy, sell, trade, hold and transfer digital assets on their accounts. Opening up crypto transactions aims at promoting the overall development of blockchain-based payment systems to increase efficiency, reduce cost, and enhance transparency in the financial system.

Speaking on the new license, CEO of InCore Bank, Mark Dambacher, says the demand from customers for digital assets pushed the addition of the services. The bank aims to provide world-class services for its customers “without having to invest in infrastructure and new processes themselves”. He added,

“And this while maintaining the usual security standards. This is how we build a bridge to traditional asset classes.”

The bank recently announced its “Digital Services” division that will work on the strategic development of these new crypto transaction systems. The bank aims to separate and secure the crypto wallets differently according to Daniel Blatter, InCore bank Head of Digital Services,

“We guarantee the complete segregation of crypto customer assets on individual wallets, which means that the bank’s own capital requirements are not required.”

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Author: Lujan Odera