Crypto Regulation Digest: Rise in demand for blockchain engineers, Japan exchanges are now self-regulated, Sweden launches e-krona pilot in 2019 Paradigm Follow Nov 8, 2018 · 14 min read

23rd October — 7th November

Interesting

Reports

Demand for Blockchain Engineers Has Grown 400% Since End of 2017, Report Says: The average earnings of a blockchain engineer have soared to between $150–175,000 per year, CNBC reported Oct. 21, citing Hired’s 2018 State of Salaries Report. Far higher than the $135,000 average software engineer salary, the figure puts blockchain engineers in the same pay bracket as artificial intelligence specialists, as the pace of blockchain recruitment demand gathers pace. The figure is also notably higher than other specialized tech engineering roles.

Report: Cryptocurrencies Should Be Governed by Current EU Financial Laws: The Securities and Markets Stakeholder Group (SMSG) has released a new report suggesting that the European Securities and Markets Authority (ESMA) recommend to the European Commission that it regulate the cryptocurrency space with existing legislation rather than instilling new rules and laws. The report specifies that most crypto assets are covered by the Unfair Commercial Practices Directive, which regulates unfair business practices in the European Union and requires corresponding laws to be passed that incorporate it into each member state’s legal system. However, cryptocurrencies are covered only in the sense that an entity issuing a crypto asset is labeled as a business, while the person purchasing it is a consumer.

Morgan Stanley Report Shows Strong Institutional Investment for Bitcoin: On October 31, multinational investment bank and financial services company, Morgan Stanley, released their latest report on Bitcoin. The report stated that Bitcoins and altcoins have constituted a “new institutional investment class” since 2017. In comparison to Morgan Stanley’s 2017 report on Bitcoin, their 2018 outlook is bullish. The report contains an overview of both how Bitcoin has evolved, and how its investment purpose has changed throughout its existence. Morgan Stanley analysts also touched upon the recent stablecoin trend and both central bank and regulator reactions to Bitcoin for the last six months. The report listed several shortcomings that persist for Bitcoin, such as energy consumption and a lack of a robust regulatory framework. Analysts have revealed about the “surprising” change in funding flowing into the sector, along with an increasing trend for crypto-tied futures.

SEC Report Notes ‘Dozens’ of Investigations Into ICOs at End of Fiscal Year: The U.S. Securities and Exchange Commission’s Enforcement Division has released its annual enforcement report for the 2018 fiscal year (FY), Friday, Nov. 2. The report notes actions by the Division against fraudulent ICOs. According to the report, since the formation of the Division’s Cyber Unit at the end of FY 2017, the commission’s focus on cyber-related misconduct, including ICOs, has been growing steadily. The SEC attributes this to an “explosion” in crypto-asset offerings, which it says are often considered high-risk investments.

Opinions

Circle CEO Calls on Global Economies to Coordinate on Crypto Regulation: Jeremy Allaire, the CEO of crypto investment app Circle, has called on global economies to develop coordinated regulation of cryptocurrencies in an interview with Reuters. The CEO of the Goldman Sachs-backed crypto firm claimed that the global community should develop universal international rules for regulating the crypto space. Claiming that for the crypto industry “ultimately there needs to be normalization at the G20 level,” Allaire has paid special attention to the regulation of Initial Coin Offerings, as well as stressed the need to adopt a coordinated approach towards crypto market manipulation and KYC policies.

Central Bank-Issued Digital Currencies: Why Governments May (or May Not) Need Them: On October 20, The Bank of Japan’s (BOJ) deputy governor, Masayoshi Amamiya, repeated his negative stance towards central bank-issued digital currencies (CBDC), claiming that such digital currencies are unlikely to improve the existing monetary systems. The concept of CBDC, or national cryptocurrencies, has attracted many governments across the world. Some of them have already rolled out their virtual currencies, some keep researching their economical impact, while others — like Japan — have decided to dismiss the idea altogether. What the concept entails, and why major governments choose to implement or deny it?

Central Bank-Issued Digital Currencies: Why Governments May (or May Not) Need Them: The Bank of Japan’s (BOJ) deputy governor, Masayoshi Amamiya, repeated his negative stance towards central bank-issued digital currencies (CBDC), claiming that such digital currencies are unlikely to improve the existing monetary systems. The concept of CBDC, or national cryptocurrencies, has attracted many governments across the world. Some of them have already rolled out their virtual currencies, some keep researching their economical impact, while others — like Japan — have decided to dismiss the idea altogether. Here’s what the concept entails, and why major governments choose to implement or deny it.

SEC Launches FinHub to Communicate With Industry, But What Does it Have to Say?: On October 18, the U.S. Securities and Exchange Commission (SEC) announced the launch of the agency’s Strategic Hub for Innovation and Financial Technology (FinHub). The new arm of the regulator will be focused on fintech-related fields, including, specifically, distributed ledger technology (DLT) and digital assets. What made the SEC create FinHub?

Cryptocurrencies Regulations: A Necessary Next Step by George Zarya, CEO At BeQuant.

Op Ed: 10 Takeaways From Recent French Guidance on Blockchain and the GDPR by Laura Jehl, co-leader of law firm BakerHostetler’s General Data Protection Regulation (GDPR) and its Blockchain Technologies and Digital Currencies initiatives.

Where Crypto Regulation is Heading: Beware or Behold? by Ricky Li, Co-Founder & Head Of North America, Altonomy.

Blockchain In The Retail Industry by Alan Cohn, Jason Weinstein, Chelsea Parker, And Meegan Brooks, Steptoe & Johnson LLP.

USA

SEC Promises Clarity On Its Definition Of Security Token Offerings: SEC director William Hinman made the remarks at the D.C. Fintech Week conference, where he said the SEC plans to release “plain English” guidance on token offerings. Developers have been clamoring for such instruction, with many saying the lack of it has held back industry growth. No timeframe for the guidelines was mentioned.

SEC Investigates Nevada Company Over False Regulatory Claims: The US Securities and Exchange Commission (SEC) has ordered a suspension of trading in the securities of Nevada-based American Retail Group Inc. Trading is suspended for ten days from 9:30 am EDT October 22, 2018, through 11:59 pm EDT on November 2, 2018.

Texas Regulator Issues Cease and Desist Order to Cloud Mining Company: The Texas State Securities Board has issued an emergency cease and desist order to an Australia-based cloud mining company AWS Mining PTY LTD for selling unregistered securities. AWS Mining along with its multiple agents and Chief Marketing Officer Josiah Kostek have violated the Texas Securities Act by luring the state’s residents in purchasing AWS’ unregistered cloud mining power contracts and promising a “200 percent passive return on every investment.”

Two Pro-Crypto Candidates Score Wins in US Midterm Gubernatorial Elections: Two pro-cryptocurrency candidates have won seats to become governors of the U.S. states of California and Colorado in the country’s midterm gubernatorial elections. In the California race, Democrat contender Gavin Newsom sealed 59 percent of the electorate’s support to defeat the Republican Party’s John Cox. According to local newspaper The Sacramento Bee, Newsom brought crypto onto the party political scene as early as 2014, when he became one of the first high-profile politicians to accept campaign donations in Bitcoin (BTC).

Bitcoin ATM Operator Coinsource Gets New York Regulator’s Green Light With ‘BitLicense’: Bitcoin ATM operator Coinsource has been granted a virtual currency license, or ‘BitLicense,’ from the New York State Department of Financial Services (NYDFS). The regulator has thus given its formal seal of approval for New Yorkers to use cash to buy or sell Bitcoin (BTC) using Coinsource’s “Bitcoin Teller Machines (BTMs).” The Texas-based operator already deploys 40 such machines across the state — in New York City, Westchester and Nassau County — and is the first BTM operator to receive a NY virtual currency license.

US Man Faces up to 5 Years in Prison for ‘Unlicensed’ Bitcoin Sales via LocalBitcoins: A U.S. citizen has pled guilty before a federal court to operating an “unlicensed money transmitting business” via LocalBitcoins.com. The man, Jacob Burrell Campos, has reportedly admitted to “selling hundreds of thousands of dollars” in Bitcoin (BTC) “to over 1,000 customers” in the U.S. between Jan. 2015-April 2016, thus deemed to effectively be operating what the DoJ characterizes as an unregistered “Bitcoin exchange.”

Europe

Crypto Disclosure Bill Approved By Spanish Govt: The government of Spain has approved a draft law that will force crypto holders to identify themselves and declare how much cryptocurrency they have in their possession. María Jesús Montero, the country’s finance minister, said last week that the draft law, which has been approved by the Spanish Council of Ministers, will require Spaniards to clearly identify themselves and their cryptocurrency holdings.

Swiss Financial Association Publishes Anti-Money Laundering Standards for Digital Assets: The Switzerland-based Capital Markets and Technology Association (CMTA) has published new anti-money-laundering standards for digital assets and distributed ledger technologies (DLT). CMTA is a non-profit, independent association established in Geneva earlier this year with the aim of promoting the adoption of DLT, such as blockchain, and digital assets in the financial markets. Its creation was a joint initiative from online bank Swissquote, market software provider Temenos, and the country’s largest law firm Lenz & Staehelin.

Sweden’s Central Bank Hastens Plans for National Digital Currency: Riksbank, Sweden’s Central Bank, is adapting to the shifting financial landscape in the country where the transition to a cashless society has accelerated quickly. Several banks in Sweden no longer handle cash, which is a problem some groups of people who struggle to adapt to new technologies, such as the elderly. The central bank believes that a state-backed digital option is necessary in order to maintain the stability of the country’s financial system.

Swiss Regulator Recommends 800% Risk Coverage For Bank Crypto Trading: The Swiss Financial Market Supervisory Authority (FINMA) has advised banks that cryptocurrencies should have a risk weighting ratio of 800 percent to cover market and credit risks. FINMA issued a confidential letter to EXPERTsuisse, an association representing Swiss trustees and accountants, which explains the regulator’s current stance on cryptocurrency trading.

UK’s Financial Regulator Mulls Ban on Sale of Crypto Derivatives: The U.K.’s Financial Conduct Authority (FCA) has said it will consider whether to ban the sale of cryptocurrency-based derivatives. Unlike crypto spot market activities, trading, transacting and advising on crypto derivatives such as contracts for difference (CFDs), options, and futures currently falls within the FCA’s regulatory perimeter and requires its official authorization. The watchdog is reported to have said it will now launch a consultation in the first quarter of 2019 into whether or not to place a ban on their sale in future.

UK: New Report Warns Over ‘Bad’ Government Cryptocurrency Regulation: U.K. businesses and analysts have hit back at government plans to regulate cryptocurrencies and related technology, describing them as a “blunt instrument approach”. Calls to step up the level of power the country’s finance regulator, the Financial Conduct Authority (FCA), has over cryptocurrency — which Cointelegraph reported on in September — allegedly focus on consumer protection and anti-money laundering (AML) policy.

German Finance Regulator: International Regulations ‘Desirable’ for ICOs: Germany’s financial regulator wants to see an international effort to regulate ICOs, despite remaining uncertain whether they would ever become more than a “niche issue”. In an interview Felix Hufeld, chairman of Federal Financial Supervisory Authority (BaFin), said German regulatory sources remained hawkish on ICOs as a financial instrument.

European Parliament Member: Decentralization via DLT ‘Provides More Security’: Maltese politician and a Member of the European Parliament (MEP) Roberta Metsola claimed that decentralization powered by blockchain “provides more security,” Cointelegraph learned during her speech at the Malta Blockchain Summit on Friday, Nov. 2.

Asia

China’s Central Bank Extends Its Regulatory Scrutiny to Crypto ‘Airdrops’: China’s central bank, the People’s Bank of China , has widened its scrutiny to include token airdrops, which it characterized as “disguised” Initial Coin Offerings in its 2018 financial stability report, published Nov. 2. Using by now familiar rhetoric, the report reiterates the bank’s stringently anti-ICO and crypto trading stance, defining the former as “illegal” fundraising, and pointing to the widespread risks of financial fraud and pyramid schemes.

Hong Kong Issues New Rules to Regulate Cryptocurrency Funds and Exchanges: Hong Kong’s securities regulator issued a statement setting out guidelines for funds dealing with cryptocurrency, saying it could move to formally regulate exchanges. In what it called “guidance on regulatory standards,” the autonomous Chinese territory’s Securities and Futures Commission (SFC) set in motion a series of steps that chief Ashley Alder hinted would culminate in a formal regulatory environment. Hong Kong differs significantly in its approach to cryptocurrency from mainland China, with cryptoasset exchange and related activities legal, though formal regulation is pending.

Chinese Arbitrator Reaffirms That Bitcoin Can Be Held, Privately Transferred as Property: An arbitration body in China has ruled that cryptocurrencies such as Bitcoin (BTC) are legally protected as property, in a case published Oct. 25 via the arbitrator’s WeChat account. The Shenzhen Court of International Arbitration ruled in favor of an unnamed plaintiff in an equity transfer dispute, in which the defendant failed to return holdings of Bitcoin, Bitcoin Cash (BCH) and Bitcoin Diamond (BCD) as had been agreed upon in a contractual agreement.

Skirting the Great Wall: The Chequered Saga of Crypto in China, 2018: In the aftermath of September 2017’s historic ban on ICOs, and the banishment of domestic crypto trading platforms, a resourceful crypto community was already showing signs of devising multiple means of circumventing the authorities’ increasingly draconian actions. Part two of Cointelegraph’s three-part series continues to investigate the factors that catapulted China’s regulators to redouble their efforts to curb the meteoric rise of crypto trades; their unprecedented actions to try to cut the country’s crypto mining titans down to size; the response of China’s tech triumvirate — Alibaba, Tencent, and Baidu — to new constraints; and as ever, the proliferating means investors continue to use to scale an “impregnable” anti-crypto wall.

Japanese Financial Watchdog Grants Self-Regulatory Status to Local Crypto Exchanges: Japan’s Financial Services Agency (FSA) has given the local crypto industry self-regulatory status, certifying the Japanese Virtual Currency Exchange Association (JVCEA) to oversee the space. The FSA expects the self-regulatory body to set rules to protect customers’ assets, elaborate on anti-money-laundering (AML) policy, and give working guidelines to crypto exchanges.

Korea’s Top Financial Regulator: Crypto Exchanges Should Face ‘No Problems’ With Banks: The chairman of South Korea’s Financial Services Commission (FSC) has affirmed that crypto exchanges should face no issues with banking provisions. The FSC’s Choi Jong-Ku clarified that banking support would be provided as long as exchanges have adequate anti-money-laundering safeguards in place and apply robust KYC checks.

South Korea’s Financial Watchdog Warns Investors Over Crypto Funds: South Korea’s Financial Services Commission has warned the public to exercise caution when investing in cryptocurrency funds. The FSC issued a note to investors Wednesday, saying cryptocurrency funds have a structure similar to mutual funds and, thus, investors may mistakenly believe such funds are legal investments under the country’s Capital Markets Act. As per the law, funds that raise capital from the public must be approved by and registered with the FSC. However, cryptocurrency funds are neither approved nor registered, the regulator says.

Taiwan Will Issue Draft ICO Rules by June 2019, Regulator Says: Taiwan plans to release draft ICO regulation by June 2019, local English-language daily news outlet Taipei Times reported Tuesday, Oct. 23. The publication quoted plans from Wellington Koo, chairman of Taiwanese finance regulator — the Financial Supervisory Commission (FSC) — who was speaking at a meeting of the Legislative Yuan Finance Committee.

Taiwan’s Legislature Amends AML, CFT Laws to Place New Requirements on Crypto Exchanges: Taiwan’s legislature has passed amendments to existing AML and counter terrorism financing (CFT) laws to place new requirements on crypto exchanges. The development was reported by FocusTaiwan, the English language news website of Taiwan’s national news agency, on Nov. 2. Under the new changes to Taiwan’s Money Laundering Control Act and Terrorism Financing Prevention Act, the Legislative Yuan — the Taiwan-based unicameral legislature of the Republic of China — has given Taiwan’s Financial Supervisory Commission (FSC) the authority to bar anonymous crypto transactions.

Rest of the World

Russia: Business Lobby Group Sends Prime Minister Medvedev Proposal on Crypto Regulation: A lobby group of the Russian Union of Industrialists and Entrepreneurs (RSPP) has recently sent its proposals for crypto regulation to country’s prime minister Dmitry Medvedev. Per a document obtained by RBC, the head of RSPP Alexander Shokhin criticizes the main draft that was accepted by the Russian State Duma in the first of three readings in May. He urges Medvedev to postpone the hearings until 2019 to develop new aspects of the draft law that would serve both entrepreneurs’ and regulators’ interests. According to Shokhin, the current legislation, if accepted, would force Russian startups to move to other jurisdictions abroad that are more friendly to cryptocurrencies.

Russian Regulator Tells Financial Action Task Force Members To Control Crypto Circulation: All member states of the Financial Action Task Force (FATF) should adopt its recommendation to control the exchange of cryptocurrency, their storage and more. The Paris-based FATF is an intergovernmental organization established in 1989 with the aim of developing standards to fight money laundering and other illicit forms of financing.

Russian Industrialist Union to Create Arbitration Board for Crypto-Related Disputes: The Arbitration Center at Russian Union of Industrialists and Entrepreneurs (RSPP) has announced the creation of a board for disputes on issues pertaining the “digital economy,” including crypto-related cases. The chamber will reportedly be created to hear cases related to blockchain technology, smart contracts and ICO. As per experts cited by the newspaper, the number of such cases will increase up to 40 times from 2020–2025.

Ukraine Plans To Legalize Cryptocurrencies By 2021: Ukraine’s Economic Development and Trade Ministry is developing a public policy for the classification and legalization cryptocurrencies. The ministry said that the purpose of the policy is to “create understandable conditions for conducting activities in the field of virtual assets and virtual currencies.” This will reportedly be done in two separate stages and will be completed in 2021.

Brazilian Tax Regulator Publishes Draft on Cryptocurrency Taxation: The Department of Federal Revenue of Brazil (RFB), which administers tax collection in the country, is seeking to receive monthly reports on crypto assets operations. In the paper, the RFB has announced that Brazil-based crypto exchanges are now obliged to send them detailed reports on all crypto-related operations on monthly basis. For instance, the companies have to reveal the amounts of transactions and the identity of the customers. Moreover, both legal entities and individuals residing in Brazil are now obliged to report all the transactions they have carried out at foreign crypto exchanges if they surpass R$10,000 Brazilian reals ($2,700) per month.

Two Brazilian Banks Reopen Accounts of Local Crypto Exchange to Avoid Fines: Two major Brazilian banks have reopened the banking accounts of one of the local crypto exchanges experiencing banking issues recently.

Indian Official Suggests Ban on ‘Private Crypto’ Prior to Supreme Court Decision: India’s secretary of Economic Affairs has recommended that the country’s Ministry of Finance to impose a ban on “private cryptocurrencies”. The Financial Stability and Development Council (FSDC), headed by India’s finance minister Arun Jaitley, held a meeting on the current economic and financial situation in India, attended by senior government and financial regulation officials.

Indian Police Seize ATM Run By Crypto Exchange Unocoin: Police in the Indian city of Bangalore have seized an ATM just weeks after it was set up by local cryptocurrency exchange Unocoin. The Times of India said in a news report that Harish BV, co-founder and chief technology officer of the Unocoin exchange, was arrested while attending to the crypto ATM. According to the report, the Central Crime Branch of the local police force seized the ATM, two laptops, a mobile, three credit cards, five debit cards, a passport and Indian rupees worth about $2,500.

Oxfam in Sri Lanka Will Use Ethereum to Deliver Microinsurance: Oxfam in Sri Lanka, part of the non-profit group focused on alleviating global poverty, has teamed up with blockchain startup Etherisc to help bring affordable insurance to paddy rice farmers.

Cryptocurrencies In Syria Are A Way To Avoid Sanctions: A region in northern Syria called Rojava, or Syrian Kurdistan, spent the last six years at war. And while it is now in a truce, its economy is affected by the economic sanctions that countries like Turkey, Iraq and Iran put on it. The leaders who are behind the Democratic Federation of Northern Syria, as the residents of Rojava call themselves, seek monetary independence. Currently, the main currency in this area is the Syrian lira, the official currency of the nation. For Erselan Serdem, a leader in the region’s technological development program, cryptocurrencies could be a superior alternative.