US Bank Regulators to Roll Out Uniform Rules for Crypto & FinTech Firms; Streamlining Licensing

  • In efforts to ease the regulatory process for payment services and crypto firms, the United States is set to introduce a unified set of regulations that will be used in about 48 states.

As per a press statement shared with Bitcoin Exchange Guide, money services businesses based in the United States, composed of crypto firms, will in the near future enjoy easy regulatory processes. The press statement explains that the Conference of State Bank Supervisors (CSBS) is set to launch a group of state regulators which will oversee all the licensing work.

CSBS will bring together 48 state regulators who have agreed to come up with a unitary set of supervisory rules. Until today, crypto-based firms as well as payment service companies were forced to adhere to numerous individual state regulations.

About 78 firms will benefit from the fresh simplified format and according to an official at CSBS, these companies move more than $1 trillion per year combined. The enactment of the unified state regulations will help ease operations across many states.

John Ryan, CSBS’s CEO, stated that the new initiative will come with numerous opportunities which will help businesses operating in the country to expand their services. Ryan also quipped that the new model will work safely just like in the old regime.

He explained that the states will not be giving up their authority but will realize efficiencies through sharing of information. Ryan also explained that although states will be sharing information, every state has the right to conduct and independent examination when the regulators deem it necessary.

The new initiative comes after several complaints were filed by crypto and fintech firms as they try to get a solution on having a state-by-state supervisory regime that delayed the licensing process. CSBS embarked on testing various approaches to determine what could work well in efforts to come up with a lasting solution. The current unified approach led to promising results which culminated in the establishment of a pilot initiative last year.

Western Union’s Rosemary Gallagher whose firm participated in the pilot program praised the initiative saying it will lead to a faster licensing process.

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Author: Joseph Kibe

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

Germany’s Financial Authorities Introduce A Draft Bill On Blockchain Based Securities

  • Germany’s financial authorities aim at introducing electronic securities to modernize its regulatory and supervisory capabilities with blockchain technology playing a pivotal role, the draft bill states.

The German finance ministry, Federal Ministry of Finance (BMF), and the Federal Ministry of Justice and Consumer Protection (BMJV) have introduced a bill on August 11 on digitizing securities on blockchains. According to the official statement, the authorities aim to introduce a new law on electronic securities (eWpG).

Currently, financial instruments in Germany, classified as securities under civil law, must be securitized in a paper form document. The paper document allows buyers and sellers a point of contact to transfer the securities legally. The BMF and BMJV draft bill aims at replacing this paper form contract into an electronic system in a bid to improve the marketability of legal securities. The statement reads:

“To ensure the marketability of securities and legal compliance, however, it requires a suitable replacement of the paper document, for example, by an entry in a register-based on the blockchain technology.”

According to the draft bill, the introduction of blockchain technology will improve the overall liquidity of securities markets while providing regulatory clarity. The Federal Financial Supervisory Authority will be the leading monitoring and maintenance agency of these blockchain-based electronic stocks.

The draft bill further differentiates between central electronic securities register by a central securities depository and registers kept for issuing electronic bonds on distributed ledger technologies (DLTs) and other electronic bases.

With the introduction of blockchain-based e-stocks, Germany aims to strengthen its market for stocks while improving the overall securities industry. Introducing blockchains will also increase transparency, market integrity, and investor protection, the bill states.

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Author: Lujan Odera

Three Strikes, You’re Out for BitLicense Applicants Under NYDFS’ New Guidelines

New York’s regulatory and financial agency has issued a warning to Crypto companies vying for the states Bitlicense. According to the watchdog, companies could see their applications terminated if they fail to adhere to feedback.

This was made public on Wednesday, 24 June, when New York’s Department of Financial Services announced that it would be implementing a new ‘three-strike’ policy for each application. Implementing such a policy would allow the agency to respond more effectively to applications that do not adhere to requested feedback.

According to the Department of Financial Services:

“If all deficiencies, involving a particular application requirement, or set of requirements have not been fully and effectively addressed by the end of the response period for the third deficiency letter… the DFS may, without further notice, deny the application.”

The introduction of this ‘three-strike’ rule comes as New York celebrates the fifth anniversary since the Bitlicense was introduced. Since its conception, the state has been continually updating its regulatory framework for crypto companies to do business in New York easily. While Bitlicense’s structure has been regularly updated and re-evaluated, the state has approved only 25 companies. Even now, only 19 of them have received physical licenses.

One of the most recent applicants under New York’s Bitlicense was the derivatives clearinghouse company – ErisX in May.

So what was the true motivation behind making these changes, and implementing this rule? The agency mostly cited that it sought to help improve the existing procedure of applying for the BitLicense. Implementing a three strike policy would allow more responsive applicants to have their applications expedited. Meanwhile, companies that don’t adhere to regulatory concerns would have their applications rejected. The note continues,

“DFS believes this policy will benefit the majority of applicants who diligently advance their applications once they are under substantive review, allowing for more effective use of DFS resources.”

While the three strike rule is the most catchy change introduced, regulatory changes include the introduction of a checklist feature. The purpose is to ensure that companies have clear guidelines on what steps need to be addressed or have already been completed.

While these new regulations presume to make the process easier, publications have since argued that it may make the whole process far harder.

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Author: James Fox

ConsenSys Backed Nomisma Exchange Cleared by European Union to Trade Crypto Derivatives

Nomisma crypto exchange has become the first crypto derivatives platform to get a regulatory nod from the Liechtenstein Financial Market Authority to operate a blockchain-based Multilateral Trading Facility (MTF).

The exchange obtained a Markets in Financial Instruments Directive II license (MiFiD2), which would allow the exchange to offer crypto derivative products in the European market. The MiFiD2 license would allow the exchange to trade derivatives on digital assets, security tokens, payment tokens and utility tokens.

The MiFiD2 license offers a regulatory umbrella for trading infrastructure in the European Economic Area (EEA), EU member states and countries within the European Free Trade Association (EFTA). Any exchange offering its services to EU customers are required to obtain this license. The MiFiD2 license would also allow the exchange to operate in Kong and Singapore.

The first iteration for the MiFiD2 license was formalized back in 2007 which mainly revolved around stocks and traditional assets, however. The EU made amendments to the regulatory policy back in 2017 to include different asset classes as well. The newly formulated regulations aimed to cover the majority of the financial ecosystem with a focus on cost transparency and transaction record-keeping.

Dimitrios Kavvathas, Founder and executive chairman of Nomisma commented on obtaining an operation license saying:

“The license describes what financial instruments you are allowed to conduct trading in. In our case, they are derivatives on digital assets, including payment, utility and security tokens.”

Nomisma Exchange backed by SIG and ConsenSys

Nomisma Crypto derivative exchange obtained the operating license in late April and has obtained the backing of Susquehanna International Group (SIG) affiliate and ConsenSys, both of which have invested in the exchange in a different equity financing round. However, the exchange is not yet functional but plans to offer the trading features for tokenized assets which would also include digital asset derivatives.

ConsenSys’ former head of global business development, Andrew Keys, has been heavily involved in the project as he is not only one of the key investors in the exchange, but also works as a close advisor helping them navigate through the crypto ecosystem. Keys also cited three key reasons behind his avid interest in the project, namely:

  • Nomisma is the first MIFID2 compliant exchange in Europe for digital asset derivatives
  • Nomisma exchange has the ability to passport the license globally.
  • The architecture of the system, which allows the settlement of digital assets in a hybrid environment on and off-chain.

Although Nomisma has obtained regulatory clearance from the EU, the Financial Conduct Authority (FCA) has not cleared the exchange. The FCA is responsible for maintaining the details of regulated exchanges in the UK. However, the exchange’s founder assured users that their next target is to register with the UK’s regulator.

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Author: James W

Forked Version of Telegram’s Open-Source TON Blockchain Network OS is Now Live on Github

Telegram’s blockchain project, TON, has experienced several delays, due to the regulatory friction with the SEC and just recently postponed its launch indefinitely as all its efforts to convince the regulators did not go as planned.

However, the operating system for its blockchain network, TON, does not have to bear the brunt and it is all set to go open-source on Github prior to its official launch on Google Play and Apple AppStore.

The news about TON Labs, making the OS open source was revealed on May 6th by the Mitja Goroshevsky, CTO at TON Labs. The CTO explained that the TON OS would not be a universal one like android or iOS and meant to enhance the interaction of customers with blockchain-based systems and applications. He explained:

“Vitalik Buterin has been referring to Ethereum as the “World computer.” If it’s a world computer, it must have a processor and resources and provide services to the user.

But there is no operating system or operating environment to manage these resources on the blockchain today.“

TON to Launch TON Cash Along With Making the OS Open Source

As per a report from ForkLog, the industry publication revealed that the open-source launch of the TON OS will also include a command-line interface, the multi-signature wallet smart contract, TON validator launch toolkit, and the TON node.

Apart from these tools and services launched with the open-sourcing of the project. The report also revealed that TON Labs is planning to issue its decentralized browser – called Surf – along with a staking pool called DePool and even a new token called TON Cash within a month of the open-source launch.

TON-OS is designed to support blockchain applications and further, it would also allow users to create blockchain applications compatible with the TON ecosystem. Despite the regulatory woes over the native token – GRAM – being a security offering, the mainnet can still be launched by the independent validators.

With the release of the TON Open Source, TON Labs is joining hands with the Free Software Foundation (FSF). As the name suggests FFS is a major free software movement, and the decision by TON Labs to join this movement is to keep its TON blockchain project as decentralized as possible which can be available to everyone for free.

The Forked version of the TON OS went live during a three-hour live-streamed Zoom call in which the first block (genesis) went live. You can see the live stream here. You can see on the TON block explorer that they are (at the moment) sitting at around 5,000 blocks.

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Author: Rebecca Asseh

Renaissance’s $10 Billion Medallion Hedge Fund Permitted to Enter into Bitcoin Futures Market

As per regulatory form filled on March 30, 2020, Renaissance Technologies is permitted to enter the Bitcoin Futures market for cash-settled contracts.

The company’s Medallion hedge fund is currently in the news for having its best years ever. Up 24% year to date it recorded impressive 9.9% gains in March, one of the worst months in modern financial history.

They are well ahead of the broader stock market, which is down over 11% since the rapid spread of the coronavirus pandemic. March’s gains came even after charging hefty investor fees including a cut of 36% of all trading gains and 5% of all money invested.

Cash-settled Bitcoin Futures contracts

Now, Jim Simons founded company has been permitted to enter into bitcoin future transactions, “which Renaissance will limit to cash-settled futures contracts traded on the CME.”

The Form ADV mentions that the underlying commodity, bitcoin is a relatively new and “highly speculative” asset and is extremely volatile, as such “investment results may vary substantially over time.”

It further cautions that these instruments involve much larger risk and potential for loss compared to conventional financial instruments.

“Investments of this type should be considered substantially more speculative and significantly more likely to result in a total loss of capital than many other investments.”

Significant Risk

Renaissance further lays down a list of risks associated with bitcoin including its limited history, the absence of any recognition of bitcoin as legal tender by any government.

Bitcoin’s substantial price volatility, its susceptibility to forking, and possible correlation to the price volatility of other distributed ledger assets are other risks.

What the crypto community hails as the biggest strength of Bitcoin, no central authority to issue or control the world’s leading digital asset is also taken by the company as one of the risks.

Bitcoin’s susceptibility to manipulation by malicious actors or botnets, spot exchanges to fraud, manipulation, and other malfeasance, and the enhanced basis risk in futures compared to other types of investment vehicles are also mentioned.

Moreover, it mentions the undeveloped and evolving nature of regulation amidst the increased regulatory scrutiny of participants in the crypto space.

There is also the possibility of exchanges or FCMs’ imposing other requirements or limitations on bitcoin futures trading.

And any of these factors could “materially and adversely” affect the value of the Fund’s investments, reads the form.

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Author: AnTy

Hawaii Opens Up Regulatory Sandbox For Crypto Payment Companies Till 2021

Hawaii launches a regulatory sandbox, “Digital Currency Innovation Lab”, a pilot program to boost the understanding of digital currencies. The program will run for two years offering crypto startups and companies an opportunity to do business in the country “without obtaining a state money transmitter license.”

Hawaii launches the Digital Currency Innovation Lab

In a joint partnership among three financial authorities in Hawaii, Department of Commerce and Consumer Affairs, Division of Financial Institutions (DFI) and Hawaii Technology Development Corporation (HTDC), cryptocurrency payment services will now be able to carry out business in the state under the new sandbox program. The new program is set to assist the authorities shape up regulations for the industry while understanding it deeper.

Furthermore, this looks set to relax the arduous rules that crypto companies have had to deal with over the past few years in the state. One particular rule that is set to be eased is the “double-reserve” requirement that states companies can only hold as much fiat currency as their customers hold crypto.

Those companies that will be selected in the program will have total autonomy to carry out business activities that would previously been considered unlicensed money transfer activity. This means none of the financial authorities will take action for companies registered in the program. Iris Ikeda, Commissioner of Financial Institutions says,

“DFI is leveraging its statutory authority to provide an innovative way to introduce digital currency issuers into the State of Hawaii, while ensuring the safety of our consumers.”

“Financial authorities to benefit from program”

The digital currency pilot program is specifically set to help in regulating the crypto payments industry in the state better according to Len Higashi, acting executive director of HTDC. Len believes Hawaii will lead in the digital currency payments race by being an early adopter. He remarked,

“By spearheading the Digital Currency Innovation Lab, Hawaii can position itself on the forefront of financial technology and potentially, reap the economic benefits that accompany the leadership stance taken.”

Iris also believes that the project will help in understanding and appreciating the overall advantages that cryptocurrency offers. He said,

“By acknowledging digital currencies as a transmission vehicle of the future, we will be able to craft legislation that is conducive to its development in Hawaii.”

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Author: Lujan Odera

Gemini In Talks With NYDFS To Offer Filecoin Trading, Will Offer Custody For Q3 Launch

  • Gemini collaborates with Regulatory agencies to support the trading of Filecoin.
  • Testnet launch delayed 6 weeks due to extended testing and the Coronavirus.

In a blog post released by the New York-based exchange, it confirmed that it will offer custodial services for the Protocol Labs developed Filecoin (FIL) so that the asset can roll on. According to the blog, the exchange is collaborating with the New York State Department of Financial Services (NYSDFS) in order to be granted approval to provide Filecoin trading services to its clients.

Gemini expressed its gratitude in adding Filecoin to its platform, stating that it’s following its mission of empowering cryptocurrency users.

Gemini has a pretty conservative reputation when it comes to supporting new coins. At the moment, there are only five assets available to trade on the platform. These include Bitcoin, Litecoin, Ethereum, Bitcoin Cash, and Zcash. The addition of Filecoin will bring the total tradeable assets on the platform up to six.

Filecoin’s Launch Window Postponed

In related news, Filecoin has announced that it’s postponing its previous launch window by six weeks.

In 2017, Filecoin conducted a successful token sale exercise, raising over $200 million from institutional investors. The firm rolled out Testnet phase 1 on Dec. 11, 2019, which gave storage clients, developers, and storage miners a chance to participate in the exercise.

During the launch of phase 1, the firm also released an updated roadmap, where phase 1 was scheduled to end by late Jan. 2020, with phase 2 due to start immediately after. The firm also anticipated launching its full mainnet in March.

According to the press release by the firm, the postponement was necessary to allow further time for the development of the platform. The firm also stated that the outbreak of Coronavirus in China has also affected the community members who do not feel safe going back to their work stations.

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Author: Joseph Kibe

Swiss Crypto-Friendly SEBA Bank To Raise An Additional $96.5M 2 Months After Getting License

SEBA, is the famous crypto bank which obtained its regulatory license last year in November from the Financial Market Supervisory Authority (FINMA). The crypto asset bank is looking to raise a secondary capital of 100 million Swiss Francs which is equivalent to $95 million US Dollar, reported Financial News London.

SEBA and its competitor Sygnum were among the very first and one of its kind crypto banking service providers to receive a regulatory clearance from FINMA. The crypto bank in question had massive success with the first funding round as well where they raised $103 million and this is the reason they are quite confident of their secondary fundraiser.

The crypto bank which was officially launched just six months ago is already planning to expand in 9 countries including Singapore, Hong Kong, UK, Italy, Germany, France, Austria, Portugal, and the Netherlands. Although Seba hasn’t launched any branch in these countries, the institutional investors can still open their account with the crypto bank.

The crypto banking service providers currently support five major cryptocurrencies on their platform which includes Bitcoin, Ethereum, Stellar, Litecoin and Ethereum Classic. The crypto bank also offers a range of banking services to make crypto transactions and handling quite easy. They offer SEBA wallet app, e-banking services, and SEBA card along with the provision for crypto to crypto and crypto to fiat conversion as well.

Switzerland is a Crypto Heaven

Switzerland is considered among the most crypto-friendly countries on earth due to progressive and user-friendly regulations. This is the reason it has become the alternate choice for many crypto service providers who fails to obtain regulatory clearance in their native country. Switzerland was the choice for Facebook to register their nascent crypto project Libra as they were aware of regulatory scrutiny back home in the United States.

Given Seba’s rapid expansion plans, a significant portion of the funds raised from the second funding round could be utilized towards that aspect.

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Author: James W