1. United States House Committee on Agriculture Hearing: Cryptocurrencies: Oversight of New Assets in the Digital Age

(1) Key Points

① Former chairman of the Commodity Futures Trading Commission (CFTC) Gary Gensler: I hope that cryptocurrency will overcome its challenges and succeed. Bitcoin is a modern form of digital gold. It’s a social construct.

② Chairman of the U.S. House Committee on Agriculture Mike Conaway: the future of token networks is more versatile and reliable than (payment systems). Providing a strong regulatory framework for cryptocurrencies is critical. If necessary, Congress or regulators may consider developing a new regulatory framework. He also commented that ‘as long as the stupid criminals keep using bitcoin it’ll be great.’

③ Andreessen Horowitz Managing Partner Scott Kupor: The issuance of these tokens, the so-called investment contract, should be subject to similar supervision. No doubt about it. Bitcoin is the worst money laundering tool, because every transaction can be traced.

④ CFTC Chief Innovation Officer Daniel Gorfine: CFTC is looking to increase resources to regulate the digital currency sector. It’s estimated that an additional $281 Million in investment would be needed.

⑤ Clovyr CEO Amber Baldet: Cryptographic currency can become a bridge for people in trouble.

⑥University of Washing Law School professor Joshua Fairfield: We capture criminals through traffic analysis, and blockchains are ideal for traffic analysis.

(2) Review of Federal Reserve Chairman Powell’s View on Cryptocurrency: House of Representatives Hearing

① Encrypted digital currency isn’t big enough to pose a threat.

② The United States doesn’t participate in cryptocurrency

③ The Fed doesn’t seek to provide oversight over cryptocurrencies. Cryptocurrencies should be regulated, but not by the Federal Government.

④ Cryptocurrency is not a real currency, and poses a significant risk to investors

⑤ Regulatory issues in the cryptocurrency field are huge and extensive.

2. Policy Trends

(1) International

① Japanese National Tax Agency: Cryptocurrency revenues exceeding $1,780 need to be reported for taxes.

July 16: the National Tax Agency (NTA) stated that it would simplify tax measures for cryptocurrency investors. Cryptocurrency-related income is still defined as ‘miscellaneous income.’ The NTA may change how tax returns for cryptocurrency-related income are submitted. The NTA consulted with the Japan Financial Service Agency and other agencies to help develop software that automatically calculates revenue and expenditure. Such systems are conducive to taxation and tax filing. Tax will have to be paid on income related to cryptocurrency earned between January to December 2018 that exceeds $1,780. The NTA stated that this to reduce the overall burden on digital currency investors and tech companies.

② Italy: The Basel Committee on Banking Supervision is currently assessing the importance of exposure on crypto assets on banking credit.

July 16: the Italian Financial Stability Board (FSB) released a progress report on the work of crypto assets. The report mentioned that the Basel Committee on Banking Supervision (BCBS) is assessing the importance of direct and indirect exposure of banks’ crypto assets. The report describes the discreet handling of such exposures and monitoring crypto assets associated with banks and regulators. In addition, the report mentioned that the International Organization of Securities Commission (IOSCO) has established an ICO advisory network; the Committee on Payments and Market Infrastructure (CPMI) has already done a great deal of work towards the application of distributed ledger technology and is currently expanding innovation in payment methods, monitoring, and analysis.

③ Philippines: A Philippine Special Economic Zone will issue its own currency by the end of the month.

July 16: the Cagayan Economic Zone (CEZA) in the Northern Philippines announced that it will release its own digital currency in late July. It is reported that the digital currency will be circulated throughout the special economic zone and can be used for any transaction. CEZA’s general manager Raul Lambino will issue a business license for cryptocurrency exchanges within the district.

④ Korea: The Korea Internet & Security Agency and the Korea Housing Finance Corporation have signed a memorandum of understanding to develop a blockchain-based storage system for file storage

July 17: the Korea Information & Security Agency (KISA) and the Korea Housing Finance Corporation (HF) will introduce a blockchain system for managing electronic mortgage documents. KISA will provide HF with the advice and technology necessary to build and operate the new systems. The system is also designed to provide blockchain-based self-identification services to extend customer data protection and simply the user experience. HF provides housing finance services for low and middle-income families, digitizing documents and storing them on online file storage systems.

⑤ Japan: The Japan Financial Services Agency has reorganized a new comprehensive policy bureau for dealing with issues related to cryptocurrency

July 17: the Japan Financial Services Agency conducted a large-scale organizational reform, establishing a new ‘Comprehensive Policy Bureau’ in addition to other departments. The bureau will be responsible for strategic development of issues related to financial management and technology, including cryptocurrency and money laundering. In the future, the bureau will work to strengthen cross-industry legislation and market management to meet the spread of financial technology.

⑥ Switzerland: The Swiss Financial Market Supervisory Authority clarifies regulations concerning ICOs and tokens.

July 18: the Swiss Financial Market Supervisory Authority (FINMA) has recently released regulations relating to ICOs and tokens. The regulations stipulate:

I. ICOs related to payment tokens must meet the requirements of the Anti-Money Laundering Act.

II.Utility tokens and asset tokens are subject to securities and stock exchange regulations.

(2) China

① Hong Kong: The Hong Kong Monetary Authority establishes a blockchain trade finance platform

July 18: the Hong Kong Monetary Authority (HKMA) is working with a group of banks to establish a blockchain-based trade finance platform (TFP). The TFP will be jointly operated by the Monetary Authority and seven of the initial cooperating banks (HSBC, Standard Chartered Bank, BOC Hong Kong Holdings, Hang Seng Bank, The Bank of East Asia, Bank of Australia and New Zealand) as well as DBS Group Holdings Limited. However, the system is expected to eventually connect over 21 different banks.

② Taiwan: Four major auditing companies are working with Taiwanese banks in an attempt to use blockchain technology for financial auditing

July 20: The world’s four largest auditing firms (Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers) have partnered with 20 Taiwanese banks to pilot blockchain technology for financial auditing purposes. The ‘Big four’ will join with Taiwan’s major banking groups to test blockchain solutions for interim financial reports for auditing companies, with an emphasis on streamlining the ‘validation process.’ Auditors are currently required to manually obtain and verify audit evidence of company transactions with third parties.

3. Industry Trends

(1)International

① Oracle has officially released their blockchain platform

July 16: Oracle Software Corp. has officially launched their blockchain platform. The blockchain platform enables users to monitor supply chain data, track global shipping systems, and accomplish cross-border deliveries.

② France: Accenture has entered into a collaboration with the French Thales Group to use blockchain to update the aircraft supply chain.

July 17: The consulting firm Accenture has partnered with French multinational aerospace company Thales Group to use blockchain technology to update the aircraft supply chain. The program is based on Hyperledger Fabric and will be debuted at the Farmborough Air Show in the UK from July 21st to 22nd. It will utilize blockchain to track and identify aircraft parts and materials in conjunction with Thales’ Physical Unclonable Function (PUF) tools.

③ United States: Law firm Blakemore Fallon and SEC will jointly establish a blockchain consultation company

July 17: The US Securities and Exchange Commission (SEC) and law firm Blakemore Fallon have formed a blockchain consultation firm called Ketsal Consulting. The firm will provide global blockchain participants with the strategic guidance needed to respond to rapidly changing legal and regulatory environment in the blockchain industry. Blakemore Fallon has brought expert knowledge into the domestic and international blockchain regulatory framework. The founders promote innovative financing methods, helping institutional investors enter the industry in addition to assisting with the drafting and explaining of key regulations that are important blockchain customers.

④ Singapore: A Singapore-based company releases shipping and logistics blockchain services to promote trade in Asia

July 18: The Singapore digital service provider CrimsonLogic announced the launch of a shipping and logistics blockchain service that claims to improve overall security, efficiency and transparency in international trade, particularly in Asia. The system, called Global eTrade Services (GeTS) or Open Trade Blockchain (OTB) is the first cross-border blockchain system in Asia to operate in conjunction with China’s ‘Belt and Road’ and ‘Southern Corridor’ initiatives. IBM and port operator PSA teamed up to test a blockchain-based cargo tracking platform from Chongqing, China to Singapore on the Beta Singapore Pacific International Airline prior to the launch of OTB.

(2) China

① Zhejiang Hengdian Film and Television Property Rights Exchange Center: We are planning on using blockchain and other technology to create an industry-wide television property rights trading platform

July 16: Liu Tao, general manager of Zhejiang Hengdian Film and Television Property Rights Exchange Center, stated that the trading center will rely on Zhejiang Hengdian Filam and Television Industry Experiment Zone’s public service platform to utilize advanced information technologies like the internet, big data and blockchain, as well as various types of financial tools for product development and business model innovation. The aim is to combine the online and offline fields with culture and capital integration of the entire industry to create a television property rights trading platform.

② LeTV: LeTV has launched a box product, entering the blockchain field

July 13: LeTV’s super TV ‘Le Rong Zhixin’ has entered the blockchain field, jointly releasing a box product with the chain. The OTT box is based on a free-to-view video content and money-making box, rewarding users for the bandwidth they share and time spent on advertisements. According to its introduction, the two parties will work together for big-screen operations. Lewei finance will also be included in the financial blockchain.

③ Suning: Suning has released a blockchain white book which will focus on product traceability and other applications

July 20: Suning has officially released a blockchain white book which focuses on application scenarios in the intersection between smart retail and blockchain, including user portraits, car networking, member ecology, smart logistics, and copyright protection, and smart furnishings. Qiao Xinliang, vice president of Suning Technology, said at the press conference that blockchain technology has already been applied into Suning’s products and is helping the healthy development of smart retail. He believes that AI can solve smart customer service, and blockchain can solve all kinds of credit problems. Blockchain technology will be applied on a larger scale in the future, particularly in the fields of product traceability as it relates to reputation and contracts. The company strives to make trustworthy people better off and fight against fraud. The Suning Financial Research Institute established a blockchain laboratory in 2017. The Suning Bank Blockchain domestic L/C information transmission system successfully went online on September 29, 2017. Suning Bank is the third bank in China to conduct business in the domestic blockchain L/C field.

4. Cryptocurrency

Ethereum: Ethereum has nearly 70,000 unconfirmed transactions due to serious network congestion

July 17: The number of unconfirmed transactions on the Ethereum network reached 69,775, and network congestion was severe.

5. Voices

(1) Deputy Director of the Ministry of Industry and Information Technology: Blockchain is the core technology of the new digital economy

July 17: The deputy director of the Ministry of Industry and Information Technology (MIIT), Xin Guobin, stated that blockchain is necessary as the ‘core’ technology of the new digital economy. In the National Expert Forum of Manufacturing Powerhouses 2018, Xin Guobin said that the ‘important role’ blockchain plays should be grasped from a ‘strategic perspective.’ (Blockchain) can make up for the traditional credit system’s shortcomings and prevent information tampering and forgery in addition to saving on (social costs). This will have an important impact in the finance e-commerce, smart healthcare, social security, Internet of Things, energy and other fields.

(2)Tencent Blockchain General Manager: Blockchain can be used in invoicing for billing transactions and reimbursement

July 17: Cai Weige, general manager of Tencent’s blockchain, proposed three applications for blockchain to be used in the electronic invoice, game, and supply chain finance industries at Singapore’s 2nd International Blockchain Game Forum at the World Blockchain Summit. The blockchain electronic invoice application could be optimized for user reimbursement, business tax management, and tax department management. Transactions can be invoiced and reimbursed.

The Tencent blockchain provides lower layer services and standard service interfaces, allowing each service provider to develop their own service capabilities, such as invoicing development. Blockchain-based service can develop the full-service capabilities of invoice businesses, including blockchain-based electronic invoicing, invoice verification, invoice inquiry, and invoice circulation. This must have built-in name verification capabilities and be able to provide standard service-based invoice sending services. It needs to also write the transferring user’s identification information into the chain and write invoices for reimbursement.

Usually this is done by financial software with financial accounting and other capabilities. The company’s reimbursement service capability is developed, and the invoice reimbursement status written on the chain, by the standard service interface.

(3)Former Chairman of the CFTC: Responding to a question concerning the large number of cryptocurrency Ponzi schemes: Bitcoin is modern digital gold.

July 18: When a member asked at the U.S. House of Representatives Agriculture committee what is supporting the many cryptocurrencies that look like Ponzi schemes, former U.S. financial derivatives regulator CFTC chairman Gary Gensler replied: ‘There is in fact no physical support to back gold, it’s only supported by cultural norms. We have liked gold for thousands of years. We use it to store value, and so Bitcoin has become a modern form of digital gold. It’s a social construct.’ According to the World News, the theme of the House Agriculture Committee hearing on July 18th was Cryptocurrencies: Oversight of New Assets in the Digital Age.

(4)Vitalik: Blockchain is one of the few tools that can achieve credible commitments

July 20: Ethereum founder Vitalik Buterin said in the podcast Conversations with Tyler that crypto economics is first and foremost economics, it’s just that it’s economics tailored to a special environment. Any structure in the field of crypto economics requires special regulations. This not only depends on the judge’s standards, but also on the standards of the programmer. He also said that blockchain can’t be done using traditional economics because blockchain is one of the few tools capable of achieving credible commitments.

6. Market Trends

Market: BTC rose 15% this week, with an amplitude of 21.1%

Source: BITFINEX

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