Category Archives: Blockchain regulation

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UK Financial Conduct Authority to Deliver Crypto Regulation Analysis in 2019

The United Kingdom’s cryptocurrency regulation is slowly taking shape as its Financial Conduct Authority (FCA) has announced that they will be analyzing the risks and benefits of blockchain technology and cryptocurrencies.

Regulation in the UK

The FCA, Bank of England and the UK Treasury are working together on a discussion paper for cryptocurrencies which will be revealed in 2019. The coming UK crypto regulations are geared toward attracting businesses based in Continental Europe.

The FCA Business Plan 2018/19 states:

“Cryptocurrencies has been an area of increasing interest for markets and regulators globally. In the UK, the Treasury Committee has announced that it will be launching an enquiry, to which we intend to respond.”

The plan continues:

“Cryptocurrencies themselves (i.e. those designed primarily as a means of payment/exchange) are not currently within our regulatory perimeter. However, some models of use or packaging cryptocurrencies bring them within our perimeter, making the landscape complex.”

Regulation around the world

The FCA has previously warned consumers regarding the risks of initial coin offerings (ICOs). The popular crowdfunding method for blockchain startups has been part of a miasma of controversies causing ICO bans in countries like China, which is still having issues with ICO and cryptocurrency projects getting past the Peoples Bank of China’s (PBoC) strict rulings.

There are very few countries around the world that have outright bans on ICOs, and many of the governments within their respective countries are taking a look at the possibility of future regulations.

Most countries have banned ICOs due to fraudulent actors, scams, security risks and money laundering; however, several are attempting to create definitions and legal frameworks that can accommodate the technology and utilize the long list of benefits that come with it.

Protecting consumers and the technology

In February, the UK Treasury Committee launched an inquiry into cryptocurrencies and distributed ledger technology, stating that one of its goals is to provide protection to consumers and businesses without stifling innovation. MP Nicky Morgan, committee chairman, said:

“People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors… We will also examine the potential benefits of cryptocurrencies and the technology underpinning them, how they can create innovative opportunities, and to what extent they could disrupt the economy and replace traditional means of payment.”

The FCA also released a statement in response to the UK’s growing number of cryptocurrency and blockchain firms describing that cryptocurrency derivatives could be classed as financial instruments, meaning that tokens issued through ICOs could require FCA authorization.

While the FCA doesn’t quite have a clear idea on how to manage or regulate cryptocurrencies and ICOs, it is evident that the regulator intends to embrace distributed ledger technology and, in doing so, enable blockchain-related businesses and innovations to thrive in the UK.

 

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Arizona Lawmakers Gearing Up to Pioneer State-Wide Regulated Blockchain Industry

The state of Arizona has officially signed into law a bill that allows for corporations to hold and share data on a blockchain. First introduced in February by state representative Jeff Weninger, the bill is intended “to open the door for emerging technologies in Arizona”.

Over the past two months, Arizona has been making headlines following numerous blockchain-related reports. Firstly in early March, the Arizona House of Representatives gave passage to a bill which was initially introduced in January. It has not yet been voted into law, however, if passed, it would make Arizona the first US state to accept payment for taxes in “Bitcoin or other cryptocurrency”.

A brief timeline of events

Jeff Weninger also sponsored House Bill 2602, which in February was passed. The bill would provide protection against any form or local regulation for users who are running blockchain nodes; the bill states: “a city or town may not prohibit or otherwise restrict an individual from running a node on blockchain technology in a residence.”

Weninger was also at the helm of two more blockchain bills. In February, the Arizona state representative began paving the regulatory framework for initial coin offerings (ICOs) in the state. The first bill defined “virtual coins” as “a digital representation of value that can be digitally traded and that functions as a medium of exchange, unit of account and store of value”.  The second bill made amendments to the Arizona Revised Statutes, which is to account for data that is written and stored on a blockchain.

By the end of March, controversy struck when an Arizona Bitcoin trader was convicted for five accounts of money laundering. On 28 March, Thomas Mario Costanzo was jailed for accumulating over USD 164,000 in cash made from narcotics, exchanging it into Bitcoin and further selling and distributing illegal substances using Bitcoin as a preferred method of payment via internet purchases.

The efforts made were not stifled by the Bitcoin controversy; typically a Bitcoin scam/scare can cause regulators and lawmakers to come down hard on the technology, but not in Arizona.

A year after, the state began accepting smart contracts as legal documentation and recognizing signatures recorded on a blockchain. Arizona is finalizing proceedings with the HB2603, HB2602, and HB2601 bill package that together can demonstrate to the rest of the United States that it is possible to integrate and regulate blockchain technology state-wide.

Arizona leading the way

Other states have not been so fortunate. Both New Hampshire and the state of Georgia failed to pass a bill that was to require the state to accept cryptocurrencies for payment of taxes and license fees. In Georgia, it was supposedly held back by a lack of understanding and education on the benefits that blockchain technology could bring.

Though that is not to say that new legislation and regulations are entirely off the cards for any of the states; Arizona has the opportunity to set the standard for the rest of the nation and demonstrate the beneficial potency of a regulated blockchain industry.

 

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