Category Archives: cryptocurrency regulations

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South Korean Government to Review and ‘Soften’ Cryptocurrency Policies to Meet G20 “Unified Regulation” Proposal

The South Korean government is said to be revising its cryptocurrency policies after the Buenos Ares G20 Summit agreed to create a set of “unified regulations” in light of acknowledging that cryptocurrencies are “financial assets”.

In late March, the G20’s Finance Ministers and Central Bank Governors released a communique noting that crypto-assets have “the potential to improve the efficiency and inclusiveness of the financial system and the economy more broadly”. It also points out that crypto-assets are not without risks, noting “consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing” as significant issues.

Significant Moves in South Korea
Since late 2017, South Korea has been churning out controversial and conflictingly positive headlines, from bans on initial coin offerings (ICOs) to proposing a cashless society and a cryptocurrency for its capital city.

As we enter the second half of 2018, the supposedly skeptical nation has proven itself to be a valuable ally to blockchain innovations and is now moving ahead to have its policies fall in line with those proposed by the G20.

According to The Korea Times, G20 financial policymakers have set July deadline for the proposed “unified regulations” and that it doesn’t recognize cryptocurrencies as a threat to financial markets as they are “too small to jeopardize it”. Which may be due to the total market value of cryptocurrencies being less than 1 percent of global GDP.

“Non-Financial Products”
The local news outlet also identifies that the present “non-financial product or asset” classification of cryptocurrencies in South Korea is at odds with the G20 assessment of digital currencies.

Whilst it may be a tricky issue for the countries regulators due to their current stance, it appears as though this won’t be enough to stifle efforts; The South Korean Financial Supervisory (FSS) said:

“It’s almost certain that cryptocurrencies will be classified as assets and the main issue will be centered on how to regulate them properly under the unified frame that will be agreed upon between G-20 nations. Given the current stance, this isn’t good, but we will step up efforts to improve things,”.

Building Blocks to a Crypto-Future
As mentioned before, South Korea has been piecing together some very significant parts of the blockchain/cryptocurrency regulation puzzle; in early May the new FSS Governor Yoon Suk-heun revealed his positive outlook on cryptocurrencies, stating that “There are a lot of issues that need to be addressed and reviewed. We can figure them out but gradually.”

The countries National Tax Agency has also been working with the finance ministry to collect and study taxation data collected from exchange operators; cryptocurrency trading is not legally recognized, and therefore only operators have to pay income taxes.

Furthermore, the countries central bank The Bank of Korea (BOK) has a task force studying the possibility of a central bank digital currency (CBDC). Additionally, the BOK had confirmed it was considering blockchain and cryptocurrencies as part of the “cashless society” project.

“The BOK’s recommendation regarding cryptocurrencies will be released by the end of June, at the earliest,” a BOK official said on May 14.

Bearing in mind that South Korea is the third largest fiat to crypto trading block in the world, it should come as no surprise that the country is steaming ahead with positive and evolving regulation attitudes.

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New KYC Regulations in EU Validate Crypto Trading

In an effort to prevent financial transgressions, the European Union now requires cryptocurrency exchanges to apply know-your-customer (KYC) policies, similar to that required by traditional banks in a move beneficial to the legitimacy of cryptocurrency trading.

Crypto crime prevention

The anonymity surrounding cryptocurrency trading is viewed by many as an enabler of fraudulent activities, money laundering, and terrorist financing. As reported by Reuters, increasing the transparency required by exchange platforms is valuable in countering any negative perceptions around the usage of cryptocurrencies.

With all investors in the industry now required to provide proof of identity when joining exchange platforms in the EU, this will make it significantly easier for law enforcement to trace any cryptocurrency users involved with illicit activities. It also increases the difficulty for potential hackers to access online wallets or exchanges.

The regulation from EU legislators should not be interpreted as a condemnation of cryptocurrencies; on the contrary, it is a move to legitimize and regulate the market for the benefit of investors, and the economy.

Not all those in the crypto sphere are a fan of KYC barriers though, as it goes against the concept of anonymity, the philosophical foundation behind blockchain technology. With incognito transactions being conducted, however, there always runs the risk of fraudulent activity, despite less than 1% of Bitcoin transactions to exchanges found to be guilty of this.

Pursuing blockchain

The EU signed a Declaration on the Establishment of a European Blockchain Partnership on April 10, with the aim of establishing the continent as an international leader in blockchain technology. As reported by Bitcoinist, the partnership claims to be a ”vehicle for cooperation amongst Member States to exchange experience and expertise in technical and regulatory fields”.

The regulatory move from the EU follows the continued pursuit of anti-money laundering and terrorist financing policies targetting many areas of finance and traditional banking, not merely restricted to cryptocurrencies.

 

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Crypto Exchanges Challenge India’s Banking Restrictions in Supreme Court

Four more exchange platforms have challenged Reserve Bank of India’s (RBI) prohibition of facilitating Bitcoin and other digital currencies transactions.

This is the third and most significant challenge yet to the ban that has seen banking services to cryptocurrency exchanges entirely blocked off. The platforms that filed the case include Coindelta Exchange, Koinex ExchangeThroughbit Exchange and CoinDCX.

As reported by Mohammed Danish, a practising lawyer at the High Court of Delhi in India, the case has been filled as a Writ Petition (Civil) no. 373 of 2018 under Article 32 of the Constitution, challenging the constitutional validity of RBI’s case.

The new policies adversely affect the business interests of exchanges and start-ups; the first two Writ Petitions came from two such entities that are seeking to protect the right to carry on trade, and rights to equality that are guaranteed in the Indian Constitution.

The initial two Writ Petitions filed in public interest with the Supreme Court are still pending, but will decide the legal status of cryptocurrencies in India. They are representative of the enormous public outcry against RBI’s dictum, as the population of India is well known for being both highly aware and active in the cryptocurrency market. It was reported by Finance Magnets in January this year that India was responsible for 10% of all Bitcoin transactions worldwide.

All three of the Writ Petitions are likely to be heard in Court on 11 May 2018.

The initial restrictions to crypto services

Last month on 6 April, RBI officially directed regulated banks and payment platforms to no longer provide services to cryptocurrency operations, effective immediately. The reasoning from RBI behind this move cited digital currencies as ”[coming] with associated risks‘, following the restrictions from HDFC and Citibank both restricting clients from purchasing Bitcoin via their debit and credit cards.

The initial statement from RBI reads: ”Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/ sale of VCs.”

 

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Crypto Payment Regulations on the Agenda in Portugal

Portugal’s parliament is scheduled to debate cryptocurrency payment regulations in the following weeks, with an objective of instituting a new legal framework that guarantees the safety of consumers.

As reported in the local news outlet Jornal de Negócios, the government plans to discuss applicable sanctions, as well as the distribution and supply of cryptocurrencies. Likely this will also cover the contentious issue of initial coin offerings (ICOs). The Portuguese government is looking for an outcome of new payment services to emerge that are both safe and cost-effective.

Those in government have argued that the regulation of specific aspects that are not yet  controlled will allow new types of payment services to expand, in time contributing to a legal framework that will ”accommodate the innovation to the benefit of consumers, and to even promote competition.”

Specifically, the parliament is looking to implement a set of standardized rules to access payment accounts, which could prevent unnecessary difficulties or interferences. As well as this, Portuguese political representatives hope to establish operational risk management and complaint mechanisms for service providers, ICO operators, and cryptocurrency users.

In assuring the financial security of cryptocurrency traders and businesses is paramount, the government is looking to implement ”complaint mechanisms for payment service providers and for electronic money issuers, as well as for the respective supervisory authority.”

Comparatively, Portugal has a positive attitude to cryptocurrencies; the agenda for the country now is to even expand cryptocurrency-related services in the country, promoting competition in a safe, transparent environment.

In December last year, Portugal’s Securities Market Commission disclosed that they were supervising banks and brokerages to keep an eye on what was called ”Bitcoin euphoria” across Portugal.

The European Parliament recently saw a majority agree that cryptocurrencies required closer regulatory enforcement, with members agreeing management was needed to prevent their usage in money laundering and terrorist financing.

 

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