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Swiss Report Recommends Flexible Revisions to Blockchain Regulations

Swiss Report Recommends Flexible Revisions to Blockchain Regulations

A new Swiss report on blockchain technology by a federal blockchain/ICO working group has recommended flexible changes to existing regulations that oversee the space in that country.

Regarding cryptocurrency, the report is specifically calling for more clarity for exchanges while safeguarding the current Anti Money Laundering (AML) Act to safeguard the rights of investors. Heinz Tännler, President of the Swiss Blockchain Federation, commented, “Legal implementation now needs to follow on quickly. Switzerland needs this certainty as a base for further development.”

Switzerland is one of the leading lights in the industry and Crypto Valley in the small town of Zug has become a blockchain incubator and driver for numerous blockchain startups.

The report does not recommend a discrete law relating to blockchain but suggests existing civil and financial market laws can still be used to cover the new technology by making relevant adjustments. In this way, a more flexible structure can be created for blockchain-based financial market infrastructures to work with.

A blockchain task force of blockchain industry stakeholders was formed last year when it became clear that emerging technologies were gaining traction within the Swiss financial economy. The task force is also recommending that the highlighted changes in the working group are quickly put into action.

Such is the nature of Switzerland’s enthusiasm for blockchain and cryptocurrency technology, what could have been an investigation into the failings and successes of blockchain became a call for positive action in the hands of the working group comprised of government councilors, councilors of states, and national councilors. The report stated that the idea was to move blockchain further down its successful route:

“The work of our group is geared towards turning that initial spark into a bonfire – for the benefit of Switzerland and of the world.”

Switzerland’s State Secretary Joerg Gasser has opined that standards are now more important than regulation since according to him, fintech has moved beyond the “hype-cycle”. On the horizon, more utility use for blockchain enterprise seems to be developing as well.

 

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G20 Calls for Universal Crypto Taxation Rules

G20 Calls for Universal Crypto Taxation Rules

Cryptocurrency and taxation have found their way among the main headlines coming out of the latest 2018 G20 meeting in Buenos Aires, alongside further commitments to fight climate change.

The G20 has now announced the desire for universal cryptocurrency taxation legislation to cover all jurisdictions within its remit with the body planning to regard itself as a “huge IT company” going forward. New laws governing the taxation of cryptocurrencies would also include further regulation as promised earlier in the year.

The current problem, which will clearly need to be overcome by some lateral and innovative thinking, is the role of international law in matters of taxation, as current ones do not allow most countries to tax companies without physical bases in that specific country. In the new declaration to commit to a cross-border crypto tax system, the G20 stated:

“We will seek solutions for the international taxation issue accompanying the digitization of the economy and will continue to collaborate.”

Previous G20 meets had already raised the topic; in its July report, the body’s Financial Stability Board (FSB) noted that previous analysis of crypto-asset markets, which included initial coin offerings (ICOs), had brought forth awareness surrounding significant challenges such as rapid market development, lack of transparency (with regard to identity and location of token issuers), as well as governing laws for white papers and gaps in data.

There continues to be some consensus from within the group representing the 20 nations about the value of innovation, although this may be limited to the respect currently being shown for the current impact of DLT and AI in the fintech space and elsewhere. The G20 has asked for further investigations to be launched in cryptocurrencies when Japan takes over the helm as chair in 2020.

Regarding cryptocurrency, the G20 repeatedly cite taking actions which are “balanced between preserving the benefits of innovation and containing various risks, especially those for consumer and investor protection and market integrity” but again AML legislation will be a focus with Japan as the next chair.

As is frequently in the case regarding the G20, it is a matter of getting all members on the same page, particularly given the current political friction between some of the member states. Europe and the UK are interested in developing such a program that they feel could combat money laundering and fraud, particularly in the case of larger organizations, but Japanese news agency Jiji has indicated that the USA and China are far more reticent to endorse such a move.

 

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Estonia’s Own Private Bull Run Boasts 900 Crypto Firms in Less Than a Year

Bitcoin News has been following Estonia’s cryptocurrency march with some interest this year, and with over 900 licenses granted within the first year of the regulator’s initial registration ruling in that country, there seems to be no stopping its enthusiasm for the enterprise.

Estonia was one of the first jurisdictions in the EU to legislate cryptocurrencies and many companies are now doing business there. The Baltic region is fast becoming a northern crypto-paradise with Lithuania, Latvia, and Estonia all experiencing a recent economic boom. This has made Estonia a breeding ground for new startups.

Even its neighbor Latvia, though behind Estonia in cryptocurrency adoption, is beginning to make real inroads into developing a positive input to the industry. In March 2018, Latvia hosted an international discussion between industry experts on the future of fintech in the Baltics and the overall EU, which featured the vice-president of the European Commission Valdis Dombrovskis as keynote speaker.

But it’s Estonia breaking the records at present due to a progressive approach to cryptocurrency, despite the country abandoning its plans to introduce its own cryptocurrency after being warned by President of the European Central Bank Mario Draghi earlier this year.

500 licenses have been issued to date with over 400 wallet providers also being issued permission to operate. It appears that obtaining a license to operate a platform in Estonia is relatively simple according to Nikolay Demchuk from the law firm Njord which works in the sector. As Estonia operates under EU rules, the main emphasis on obtaining accreditation is complying with local and EU rules. Businesses applying also need to prove that they can operate with adequate KYC and AML protection.

Approval only takes about two weeks and are issued by the local regulator, the Estonian Financial Intelligence Unit (FIU), but companies must begin operating within six months of receiving their licenses under the pressure of losing them.

The biggest drawback in Estonia concerns banking as there is still a reluctance among the country’s banking community to provide services to cryptocurrency exchanges. However, the e-residency program, introduced in 2014, allows non-Estonians access to Estonian services such as company formation, banking, payment processing, and taxation. The program also allows anyone in the world to apply for a digital ID card and gain access to Estonian e-services when planning to start a company in the country.

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Taiwan Tightens AML Legislation to Remove Crypto Anonymity

Taiwan has amended its AML legislation to incorporate cryptocurrency transactions into state law.

Pro crypto congressman Jason Hsu proposed the amendment to the country’s Money Laundering Control Act last month in a bid to make cryptocurrencies face the same legal recourse as traditional financial instruments, in addition to several added rules specific to cryptocurrency. Hsu’s hope was that by providing a solid legal framework, investors will be encouraged into the market, while the new regulations could help inform citizens on the emerging technology.

Now that the new law has been passed, Taiwan’s Financial Supervisory Commission (FSC) can place the onus on exchanges to conduct their own vetting and verification processes, which will now require users to use their own names and not hide behind an alias. This means that banks could now put pressure on exchanges for not observing AML and KYC guidelines.

Cryptocurrency exchanges can now expect to receive fines for non-compliance to accompany the new rules. Non- financial institutions can expect fines from between USD 7,300 and USD 145,000, while financial institutions will receive much more significant penalties for non-compliance from between USD 73,000 and USD 1.45 million.

The FSC had amended the original AML legislation in 2016 but it is thought that the changes had made no significant impact on financial crime. The Ministry of Justice sees the new rules as far more in keeping with international standards.

In response, a spokesperson from cryptocurrency exchange BitoEX said the anonymity was only relevant in cases of cryptocurrency-to-cryptocurrency transactions. Any transactions involving fiat had always required the user’s full details and correct name.

Earlier this year, banks in Taiwan ordered the FSC to identify bank accounts offered to Bitcoin trading platforms as “high-risk clients”, requiring transactions through the accounts above a certain threshold to be flagged to the regulator.

The FSC has revealed that it also intends to implement new ICO regulations by June 2019.

 

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Crypto Faces Global AML Regulations by June 2019, Says Watchdog

The international watchdog focused on anti-money laundering (AML) regulations has said it plans to institute a global framework for cryptocurrency beginning in June next year.

As Reuters reports, the Paris-based Financial Action Task Force (FATF) has taken a significant step forward in the process of regulating the famously unregulated market of digital currencies with its announcement this week.

FATF detailed plans to begin publishing rules that would set a standard for all cryptocurrency transactions, noting that global jurisdictions would be required to enforce certain licensing schemes or compliance checks on exchanges, financial service providers for initial coin offerings (ICO), and potentially digital currency wallet providers.

Marshall Billingslea, FATF’s president, was responsible for setting the early summer date for action next year following discussions this week between officials from 204 global jurisdictions.

The upcoming regulations come with a warning: any non-compliant countries will be put on FATF’s blacklist, meaning they will suffer from restricted access to the global financial system.

A statement released by the watchdog on Friday reads: “there is an urgent need for all countries to take coordinated action to prevent the use of virtual assets for crime and terrorism.”

A lack of global cooperation on cryptocurrency regulations until now has led to entirely different approaches being adopted by national governments, bringing uncertainty to crypto firms looking to expand their operations.

Countries have failed to agree on how best to manage the price volatility of the cryptocurrency market, and have been skeptical of wallets’ and exchanges’ inability to protect peoples’ investments on their platforms from hacks and ensuing theft.

During the G20 Summit earlier this year, leaders expressed a desire to expand existing international AML onto the cryptocurrency industry.

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Crypto on the Rock: Gibraltar Gets Its First Regulated Exchange

The tiny British Overseas Territory of Gibraltar located at the southern tip of the Iberian Peninsula is to get its first fully licensed exchange, Coinfloor.

Coinfloor, the UK’s oldest crypto exchange is the first to be fully accredited as a “distributed ledger technology (DLT) provider” under the legislation which requires the government to satisfy itself that 9 operating principles of good practice are being adhered to.

Obi Nwosu, the CEO of Coinfloor, commented that these were all met by his company, including those which guarantee adequate AML and KYC safeguards and security against the risk of cyber attack. He said:

“What impressed us was that this [legislation] was in the works for a long time… It’s been well thought out, well considered. They are focusing in on quality over quantity.”

Gibraltar, known affectionately as “The Rock” among residents and visitors, and home to the only Barbary macaques living in Europe, has begun attracting new and existing fintech companies to its shores. It is attempting to follow in the footsteps of other European countries such as Malta and Switzerland, both of which have seen the arrival of major cryptocurrency players like Binance and Bitmain in 2018. It now holds regular events such as the Gibraltar International Fintech Forum, demonstrating the country’s serious intent when it comes to encouraging fintech companies to do business there.

Coinfloor’s CEO said that he was glad to be able to fulfil the requirements of the new legislation, thereby securing a position in Gibraltar’s blockchain and cryptocurrency ecosystem, particularly as the UK exchange had recently been forced to lay off employees due to weakening demand in the UK through Bitcoin’s fall from its 2017 highs. He argued:

“It’s never desirable to make these changes, but it’s a natural part of the market cycle… The market has contracted and you should make appropriate changes to your team . . . It’s happening across this space.”

Despite some companies looking to Gibraltar as a possible home, it is more likely that Malta, with its vibrant crypto community and favourable blockchain legislation, will be become a favourite with established exchanges and startups, particularly given the ongoing concerns regarding a no deal Brexit.

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Taiwan Congressman Proposes Extension of AML Laws to Include Crypto

A lawmaker in Taiwan hopes to change local regulations in order to cover cryptocurrencies under the existing anti-money laundering (AML) framework.

A press release shared with Coindesk news shows that Taiwan’s colloquially know ”crypto congressman” Jason Hsu has proposed an amendment to the country’s Money Laundering Control Act that would make cryptocurrencies face the same legal recourse as traditional financial instruments, in addition to several added rules specific to cryptocurrency.

His policy proposal would streamline Taiwan’s laws with the EU’s own Anti-Money Laundering Directive.

Should the law pass, the onus would be on local cryptocurrency exchanges to prevent money laundering from taking place on their platforms. On the part of cryptocurrency exchanges, they will be required to keep transaction records and report anything suspicious to officials in order to maintain this new degree of responsibility.

”All those involved should have the responsibilities to take care of this budding ecosystem,” Hsu is quoted in the press release, Coindesk reports.

Rather than pushing an anti-crypto narrative, however, Hsu hopes that by providing a solid legal framework, investors will be encouraged into the market, while the new regulations could help inform citizens on the emerging technology. He has said it is an effort to support the development of blockchain technology and cryptocurrencies, rather than stifle their innovations.

However, Hsu sees a limit to the degree of government control there should be over the industry, and supports self-regulation to a certain extent.

Blockchain banking

Earlier this year, Taipei bank Fubon Commercial became the first of its kind in Taiwan to introduce a blockchain based payment system.

The new system is being used for restaurants and merchants serving the National Chengchi University, with Fubon Commercial saying transaction times may be cut to less than a second.

Taipei has plans to become a ”smart city” and blockchain is looking to be a key fixture in this move.

 

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Deloitte: 5 Hurdles for Blockchain to Enter Mainstream

Blockchain adoption barriers can be lowered significantly if five “key issues” can be addressed, according to an article published by Deloitte.

Barriers

Published on 28 September, the article titled “Blockchain and the five vectors of progress” takes a deep dive into the many issues that are stifling mass adoption of the technology. In order for progress to be made, the article recommends three areas that will “enhance technical feasibility” and two others which call for greater regulatory support and an increase of organizations formed by blockchain enterprises.

Other reports and studies from the global auditing and consulting firm have appeared rather bullish on blockchain, suggesting that businesses that do not adopt and implement the technology will be at risk of falling behind.

Furthermore, a survey that was recently conducted by Deloitte highlighted positive sentiments held by industries across the globe; it found that a vast majority of participants believed that mainstream adoption will come to fruition in the not-so-distant future.

The article somewhat counters these findings by referencing a 2018 Gartner CIO survey which found that 1% of respondent CIOs had managed to “indicate any kind of blockchain adoption”, with another 8% working on either a pilot or were in short-term planning phases.

Speed

It goes on to argue that blockchain-based systems as a transaction medium are still too slow with the number one network, Bitcoin, only able to manage up to seven transactions per second and the second largest, Ethereum, around 15.

However, massive improvements have been made, with IBM managing to run 3,500 transactions per second on the Hyperledger Fabric blockchain platform. Furthermore, the article highlights the push to evolve consensus mechanisms as a sign of distinct progress.

Standards

Next up is standardization; for any business without blockchain coders and developers on staff, adopting the technology is expensive and time-consuming. This is due to the overflowing number of blockchain projects that are utilizing multiple coding languages, mechanisms and protocols.

Should there be a standard in place, the field will somewhat be leveled and an increase in industry-level participants will be further made possible. The report makes note of the Enterprise Ethereum Alliance (EEA), who are currently working to create a standard Ethereum network software for business.

As the number of participants in the blockchain race grows, it is thought that standardization will prove valuable to collaborations, sharing of blockchain solutions, smoother integration with existing blockchains and cross-blockchain transactions among many others.

Low-cost ease of access

Blockchain solutions are complex and costly, not only to create but also to implement.

Naturally, unintuitive new technologies can ward off even the most open-minded of skeptics, though this is also changing rapidly in the face of industrial giants such as Amazon and IBM launching affordable cloud-based technology as-a-service solutions.

These new services enable companies to dramatically reduce the barriers with blockchain templates, which allow for the simple setup of a “basic blockchain infrastructure”. Ease of development is also on the list of issues presently being conquered with new tools being created by companies such as Google.

Legally sound

Regulation has been one of the hottest topics surrounding the nascent technology in 2018. Countries such as Malta, South Korea, and Switzerland are tipped as the jurisdictions that are leading the regulatory race, with Malta miles ahead of the closest competitor.

Deloitte agrees that regulation is absolutely vital to the future success of blockchain, creating appropriate classifications for cryptocurrencies, defining smart contracts as well as Anti-Money Laundering (AML) and Know-Your-Customer (KYC) policies being high on the order list.

The formation of “blockchain consortia” is the final vector listed as part of the Deloitte’s five critical issue areas; groups of collaborating companies who band together to promote the advancement of the technology can be a powerful catalyst for its adoption.

Like the EEA, they can establish new standards for the tech, lobby governments, develop infrastructure, educate, advise and do much more to speed up progressions with the aforementioned vectors listed.

Conclusively, the article writes:

“It’’s understandable why, despite promising pilots and experiments, executives might wonder when — and even whether — blockchain will be ready for mass adoption. But progress along these vectors is bringing the technology closer to its breakout moment every day.”

 

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Winklevoss Twins and Gemini Glimpse Crypto Horizon in UK

Gemini and the Winklevoss twins are looking ahead to the UK as their next lucrative cryptocurrency landscape.

The entrepreneurial crypto brothers, having recently been knocked back by the SEC after their own ETF submission was turned down, have at least have received some recent success in getting a rubber stamp from the NY regulators for the company’s new stablecoin. Two firms, Gemini Trust Company, and the Paxos Trust Company are the first stablecoin providers to receive the go-ahead to list on exchanges in New York State.

Now it appears that the brothers are “crossing the pond” with their latest venture. Those close to the company have reported that Gemini has already taken the step to hire consultants to advise on an approach to move into the UK. London is currently the European financial epicenter, although many companies are now awaiting the final outcome of Brexit talks, and some have even already moved from London to Germany and France in anticipation of a negative result in which no deal between the UK and Brussels is reached.

This has clearly done little to dissuade Gemini as it plans to file an application with the UK’s equivalent of the SEC, the Financial Conduct Authority (FCA), according to the Financial Times.

If a move does materialize, Gemini’s made competitor will become San Francisco-based exchange giant Coinbase who are now well established in the UK as the main provider of crypto-related services to UK residents. Coinbase has recently expanded the offerings on its UK platform, enabling easier withdrawals from UK Coinbase sterling accounts to English banks and forming a partnership with major English bank, Barclays, to simplify its platform for users.

The UK market is still being monitored by the FCA but there have been recent calls for tighter regulatory measures called for by MPs. The FCA has recently asserted that it would not “rule out roles for crypto-assets themselves”, an approach far from calling for a ban or restriction on trading operations. However, the situation is ongoing without any real decisions taken as yet by the Crypto-Assets Task Force set up earlier this year in May.

The most recent noises out of Westminster concerning cryptocurrencies is that MPs want the FCA to look at digital currencies “as a matter of urgency”, suggesting that no new asset class is structured around the technology but that EU AML laws are enforced along with KYC checks.

The Gemini move may offer challenges in a vibrant and lucrative UK market, but the benefits may be worth the risks. The UK experiment has certainly worked for Coinbase who now plan to move into Ireland. Gemini is currently 61st in global rankings.

 

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Swiss Bankers Act to Correct Anti-Crypto Bias

The Swiss Bankers Association (SBA) have stepped in an attempt to curb banks in that country from rejecting financial services to cryptocurrency-related companies.

The SBA is an organization which claims that it aims to achieve the best possible operating conditions for banks in Switzerland and is the umbrella organization of the Swiss financial center. Its stated primary objective is to create optimal framework conditions for Swiss banks.

The SBA has released a new set of guidelines to banks to create a more cooperative environment in view of many banks’ reluctance to do business in the crypto sector. Earlier this year, the financial director of Zug called for the SBA to make it easier for blockchain companies to meet their banking needs.

Director Heinz Tannlerand, together with financial director of Zurich Ernst Stocker, suggested then that if some of the complexities weren’t removed for Swiss-based blockchain companies wanting to open bank accounts, there would be a strong likelihood that firms will look to do business elsewhere, in countries which have more crypto-friendly banking systems.

Adrian Schatzmann, strategic adviser of the SBA, stated: “We believe that with these guidelines, we’ll be able to establish a basis for discussion between banks and innovative startups, making the dialogue simpler and facilitating the opening of accounts.”

New suggestions by the SBA, aimed at ICOs, calls for separate AML procedures for both fiat and crypto fundraisers. Oliver Bussman of the Crypto Valley Association suggests that “this provides more clarity not only to banks but also to startups”.

This suggestion should help to alleviate the concerns of many banks who expressly targeted the AML as their principal concern in dealing with companies offering ICOs. Reuters recently cited sources in the banking community who maintained that “banks are worried because some of the companies that carried out ICOs did not do AML checks on their contributors, meaning the banks themselves could fall foul of AML rules”.

Bussmann estimates that 530 crypto and DLT companies have set up shop in Zurich and Zug. One reason for Switzerland’s success as a center for blockchain and fintech, according to Swiss law firm MME, is the country’s openness to new business concepts and innovation. Marin Eckert MME partner said, “Swiss regulators are among the few that really have a deep understanding of the technology and how it works.”

 

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