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Bitcoin ETF Approval Would Give EU Legislators More Confidence Over Crypto

In a change of stance on cryptocurrency adoption by EU legislators, who until now have been mainly fence-sitting on the subject, are indicating that ETF acceptances may create more positive interest towards easing regulation.

European legislators have recently stated that a Bitcoin ETF green light by the SEC could ease the current pressure felt by cryptocurrencies across Europe.

A recent report by the EU’s financial advisory group suggested that there was a continued threat to investors trading in cryptocurrencies arguing that, “These issues are not unique to crypto assets trading platforms; they may be exacerbated in the case of crypto-assets because of their high price volatility and often low liquidity.”

In an attempt to regulate cryptocurrencies and provide more safeguards, EU legislators are increasingly looking to organizations such as Gemini who have taken to ETF, despite their own problems in getting them recognized by the SEC, due to the body’s continual reluctance to endorse cryptocurrencies. Gemini’s joint CEO Cameron Winklevoss commented about their own problems with regulation:

“We understand the commission’s concerns. We’ve heard them loud and clear and they are basically calling for more market surveillance and protections in the marketplace to avoid, prevent against manipulative behaviour and stuff like that. So, Gemini has built a market surveillance team.”

CSO of CoinShares, Meltem Demirors, has a more negative approach to the prospect of Bitcoin ETFs being accepted by the SEC due to the current political stalemate in Washington, arguing:

“….in this current sort of stalemate where you have the Democratic House, and the Republican Senate, you see some clashing, there are very different views on financial innovation and what should happen, but I think right now there is no upside to approving an ETF.”

The Winklevoss Brothers have called for the introduction of a Virtual Commodity Association, a self-regulatory organization for the cryptocurrency industry in the United States, similar to the Japanese Virtual Currency Exchange Association (JVCEA).

The JVCEA was founded on April 2018 when 16 crypto exchanges joined hands with the ultimate aim of providing self-regulatory standards for the industry-wide investors. Later in October, it was officially given self-regulatory status by Japan’s financial regulator to supervise the crypto sector.

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Coincheck Granted Exchange License a Year After Major Hack

Coincheck Granted Exchange License a Year After Major Hack

Japanese cryptocurrency exchange Coincheck has been granted an operating license a year from its notorious hack that resulted in a loss of USD 530 million.

Effective immediately as of 11 January 2019, Coincheck is now registered with the Kanto Financial Bureau. This will be its first time operating as a licensed cryptocurrency exchange.

In January 2018, Coincheck suffered a security breach which resulted in the theft of USD 530 million in New Economy Movement (NEM) tokens. The firm has said that it has since then adequately addressed any and all security concerns with the platform.

In order to receive the license, Coincheck was required to meet both Japan’s regulatory requirements and prove to the regulators that internal controls had been established to adequately protect investors on its platform. Coincheck claims it has established ”concrete internal controls” and a ”basic philosophy on risk management” to ensure another breach will not take place.

The management of the exchange has also been adjusted, with chief executive officer Koichiro Wada and chief operating officer Yusuke Otsuka both being replaced within the company. Privacy coins such as Dash and Monero were required to be delisted from the platform before it received its license, with the Japanese regulators citing that they failed to comply with anti-money laundering regulations.

Even with an official license granted, Coincheck will still have to win back its reputation to bring in new traders and re-establish itself as a secure platform.

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Japan Regulator Denies ETF Rumors

Japan

Japan regulator Financial Services Agency (FSA) has denied rumors that it is considering the option of Bitcoin exchange-traded funds (ETFs).

The denial comes after the report by Bloomberg from an anonymous source that claims FSA was mulling on the acceptance of Bitcoin ETFs. The agency has categorically denied that fact, saying, “At this moment, we are not exploring an approval of ETFs based on crypto assets.”

The FSA was also reported to be considering the creation of a new legal category for cryptocurrencies, called crypto assets. Through the single name change from currency to assets, the report said the government “hopes that traders will no longer purchase [cryptocurrencies] believing that they are legal tender recognized by the government”.

Japan is one the most progressive countries when it comes to cryptocurrency. Yet, the Asian nation is ensuring that there is no misleading information or perception on the nature of cryptocurrencies. The FSA is very active in this regard and has made a number of regulations and given rulings. In October last year, it had declared that stable coins were not a form of cryptocurrencies, but just a form of prepaid payment instruments. This definition put stable coins in a whole different category and standard payment instrument applied to them.

In December, the agency also set out a new set of rules for companies wishing to run and ICO, in order to protect the rights of investors. This would require proper registration and approval from the regulator first.

The country also has a crypto exchange regulating body, the Japanese Virtual Currency Exchange Association (JVCA). It is primarily a self-regulating group that sets standards for industry-wide investors.

 

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Japan May Regulate Unregistered Crypto Investments

Japan

The Financial Service Agency (FSA) of Japan is reportedly looking to crack down on unregistered crypto investment firms and bring them under the Financial Instruments and Exchange Act. Tentative dates for the aforementioned action have not been announced yet.

It stems from a legal loophole which allows unregistered investment firms to collect funds in cryptocurrencies rather than cash, an oversight the FSA is keen to rectify.

The issue became a highlight due to the increased number of crypto pyramid schemes being unearthed in Japan. Tokyo Police in November arrested eight men over the charges of collecting of JPY 7.8 billion (USD 69 million) in cryptocurrency using such schemes. A major chunk of the funds collected was in Bitcoin, whereas only JPY 500 million (USD 4.4 million) was collected in the form of cash. Officials claimed that the scam would not have come to their notice had the culprits only used cryptocurrency.

The FSA has kept a close eye on crypto-related businesses and firms since the collapse of the Mt Gox exchange back in 2014. The agency regulated crypto exchanges by introducing a licensing scheme and conducting inspections of the exchanges for their security and compliance with anti-money laundering laws.

Recently, reports surfaced that the FSA was looking to allow crypto exchange-traded funds (ETFs). However, over the concerns of enhanced speculations, it has now refused to allow the trading of crypto derivatives on financial exchanges.

 

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Coinfloor to Launch Derivative Crypto Futures Amid Tough Market

coinfloor derivative crypto futures markets bitcoinnews

Top UK cryptocurrency exchange Coinfloor has told Bloomberg, that it is venturing into the derivatives market despite the seemingly poor market outlook and fierce competition in the futures market, with physically-delivered Bitcoin futures the new emerging derivatives for the asset class.

The CoinfloorEX spinoff of the Coinfloor cryptocurrency exchange will be offering the new physical Bitcoin futures services to sophisticated Asian traders. Meanwhile, it has been renamed to Coin Futures and Lending Exchange (CoinFLEX) for this purpose.

According to the CEO of CoinFLEX Mark Lamb, who is also a co-founder of Coinfloor, “bear cycles in crypto can go on a long time, but ultimately it’s an asset class which is one of the most fascinating, volatile, which is great for traders”. Lamb also downplayed the current market condition, confident that crypto will someday become globally accepted, saying that “it has the potential to be one of the major currencies in the world”.

CoinFLEX will have its base in Hong Kong. The proposed derivatives will include physical futures for Bitcoin, Bitcoin Cash, and Ethereum with leveraging of up to 20 times. Comparatively, top cryptocurrency exchange BitMex, also having a sizeable market in Hong Kong, will be a competitor as it also offers leverage of up to 100 times on some of its contracts. However, CoinFLEX has the advantage of physical delivery as against cash settlements that are prone to manipulation.

Prominent crypto movers have been named as members of a consortium owning the project, including Roger Ver, Mike Komaransky and Trading Technologies International Inc. Meanwhile, Coinfloor is also reported to be retaining an equity stake in the new venture.

It would seem that the market for institutional investors is constantly being expanded with multiple derivative options. “Crypto derivatives could become an order of magnitude larger than spot markets and the main thing that’s holding back that growth is the lack of physical delivery,” said Lamb.

Last year, talks about the proposed Bakkt platform – an Intercontinental Exchange (ICE) project – constantly drove up the expectations of cryptocurrency holders and investors. Its recent announcement included a successful seed round funding of over USD 182 million, and a scheduled launch early this year, however, the date “will be amended pursuant to the CFTC’s process and timeline”.

Another derivative platform, ErisX, recently reeled in USD 27.5 million from Fidelity Investments, Nasdaq Ventures, and other investors during a seed funding round. It is also waiting for approval from financial regulators before launching this year.

Recently, the Japanese financial regulator hinted on the possibility of the launch of exchange-traded funds (ETF) that will be based on the new asset class.

 

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Japan Talks Bitcoin ETF, Ignores Futures Package

Japan Talks About Bitcoin ETF Ignoring Futures Package

As reported by the news outlet Bloomberg today, the financial regulator in Japan has abandoned its plans to allow Bitcoin futures but will consider the possibility of an exchange-traded fund (ETF) based off the new asset class.

The source cited someone who was familiar with the development as saying that the Financial Service Agency (FSA) was “gauging industry interest in ETFs”. This comes after recent developments show that the regulator has decided against the decision to revise the nation’s security law that would have provided an opportunity for cryptocurrency futures and options to be listed on major financial exchanges. The report suggested that this change came “after concluding that such products would achieve little besides stoke speculation”.

This may have cut short the expectations of a few of those expecting Bitcoin futures to be in effect at the passing of the revised law.

Last month, the financial regulator was reported to have received as many as 190 cryptocurrency license applications from exchanges after granting the local crypto sector a self-regulatory status under the supervision of Japan Virtual Currency Exchange Association (JVCEA).

According to the news outlet, the new development, however, places Japan in contrast to the US, as the latter may permit the trading of physical Bitcoin futures, whereas Japan is leaning more in favor of ETFs. Many ETFs have been proposed to the financial regulator in the US, without any positive outcome till date.

The introduction of the different derivative instruments is aimed at introducing new players from the institutional class investors. However, this has proven to be a rather slow convention. Reports from exchange data suggest that the institutional demand from the pioneers of the asset class derivative market Cboe Global Markets Inc and CME Group Inc have fallen short of expectations and waver around USD 81 million after a year-long run.

2018 has been reckoned as the year of the bear, after the introduction of Bitcoin derivatives in late 2017 may have propelled the cryptocurrency markets to new highs. The year 2019 has been filled with enthusiasm as expectations of more institutional involvement to restore the performance of the market peaking.

 

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5 New Crypto Exchanges Join Japanese Self Regulatory Body

5 New Crypto Exchanges Join Japanese Self Regulatory Body

The Japanese Virtual Currency Exchange Association (JVCEA) has recently welcomed five new members into the fold.

The JVCEA was founded on April 2018 when 16 crypto exchanges joined hands with the ultimate aim of providing self-regulatory standards for the industry-wide investors. Later in October, it was officially given self-regulatory status by Japan’s financial regulator to supervise the crypto sector.

As a result of a USD 534 million hack of a crypto exchange (Coincheck) back in January 2018, the body issued comprehensive regulatory guidelines to mitigate any future hacks. These regulations banned insider trading and prohibited the trading of privacy-based coins.

The new companies joining JVCEA are: Coinage Corporation, Everyone’s Bitcoin, LVC Corporation, Lastroots Inc. and Coincheck. These companies are classified as Type II by the body, which means that these companies are still in the process of obtaining the virtual currency trader registration.

Reportedly, JVCEA is only recruiting Type II members at the moment. However, it is planning to add a classification for the wallet creators in the near future as well. On the other hand, the exchange association claimed that it is looking to put a margin trading limit along with the maximum restrictions to be placed by the exchanges on their clients’ trading.

 

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Kraken’s Law Enforcement Requests Tripled Last Year

Kraken's Law Enforcement Requests Tripped Last Year

US-based cryptocurrency exchange Kraken reported that the number of law enforcement requests it received in 2018 was three times that of 2017.

The infographic data shared by the exchange cites a total of 475 such requests last year, with a significant majority (315) coming from the US government despite the exchange also operating in Canada, the European Union, and Japan.

The Homeland Security Investigations (HSI) was responsible for the largest number of US government requests with a total of 91, followed by 67 subpoenas issued by the FBI, and 40 information requests from the Drug Enforcement Administration (DEA).

Kraken wrote on Twitter, ”You can see why so many businesses choose to block US users,” noting that the costs of dealing with such law enforcement requests are ”quickly becoming a barrier to entry.”

Peek at our Compliance team’s 2018 Transparency Report. You can see why many businesses choose to block US users. Cost of handling subpoenas (regardless of licenses) is quickly becoming a barrier to entry. Inquiries up 3x YoY. pic.twitter.com/YbyLEqhOUf

— Kraken Exchange (@krakenfx) January 5, 2019

While the US Securities and Exchange commision (SEC) made its fair share of headlines last year after cracking down on initial coin offerings (ICOs) and on cryptocurrency generally, Kraken’s data shows that there are at least 11 different government agencies directly involved with governing the industry.

The UK was responsible for the second largest number of requests to Kraken, totaling 61, followed by Denmark with 34. Kraken did not share whether the number of requests from law enforcement was at all correlated with the levels of use of the cryptocurrency exchange in each of the countries.

 

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Japan’s Regulator Swamped With Exchange Applications as New Year Approaches

Japan's Regulator Swamped with Exchange Applications as New Year Approaches

Japan’s financial regulator, the Financial Services Agency (FSA) is reported to have received 190 cryptocurrency license applications from exchanges as 2019 approaches.

This happened after the FSA recently granted the newly formed Japan Virtual Currency Exchange Association (JVCEA) in Japan the power to oversee self-regulation within the cryptocurrency industry.

The JVCEA had already applied to the FSA to become cryptocurrency’s one and only self-regulatory body in the country. It also attempted to stem the tide of transactions earlier this year when it recommended its own “appropriate regulations” for growth by proposing new rules that would affect the way exchanges operate, placing privacy coin listings and insider trading under the regulatory microscope.

Another tool for limiting the transaction surge suggested by JVCEA was to enforce trading caps and restrictions according to age group, i.e. the very old and the very young. The FSA regulator has already released figures showing that in April, there were 142,000 crypto traders in Japan. That monthly figure represents a small percentage of the total of 3 million Japanese traders.

Last month, FSA’s Study Group on Virtual Currency Exchange Industry concluded its tenth meeting. The group classified tokens according to three categories: virtual currencies with no issuers (like Bitcoin), virtual currencies with issuers, and virtual currencies that not only have issuers but also distribute profits.

The country’s top financial regulator Toshihide Endo has suggested that the industry needs to grow under “appropriate regulation” and as such won’t need government intervention to further enforce curbs on how exchanges operate within the country.

The FSA commented last week that:

“We think it necessary to work with the JVCEA closely so that the association can successfully perform self-regulatory functions through the establishment and application of self-regulatory rules and monitoring of their members.”

Japan is currently the global leader in the market development of cryptocurrencies, although, in terms of public adoption, many Japanese have suggested that the prices of cryptocurrencies must become far more stable in 2019 for people to use them for regular purchases throughout all sectors across the country.

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Bear Market Hits Hard at Mining Arm of GMO Internet Inc.

In a document released yesterday by Japan-based internet corporation GMO Internet Inc., the internet giant reported a financial loss of JPY 35.5 billion in Q4 2018 alone leading to the unsustainability of its cryptocurrency mining business.

The company described the loss as an “extraordinary loss” during a meeting of its Board of Directors. It would seem the market conditions of 2018 had a huge impact on the economics of the company, as it said that the profitability of the in-house mining business of GMO Internet Group decreased in tandem with the price decline in cryptocurrencies.

According to the document, the in-house mining on the consolidated account had an impaired loss of JPY 11.5 billion while the development, manufacture, and sales of mining machines returned a loss of JPY 24 billion.

The company recognized an intense competition in the “mining machine market” due to cryptocurrency price dip, as well as miners turning to second-hand sale/purchase of mining rigs, ultimately leading to cheaper hardware.
As for the in-house mining which was set up in December 2017, operations have not been favorable with expectations cut short due to the rise of the global hash rate.

On the basis of the current financial situation of the company, it has therefore decided to cease the manufacture and sale of mining rigs, while it moves its in-house mining operations to another location with cleaner and less expensive power supply.

In a follow-up Q&A document compiled during a conference with institutional investors, when asked about the outlook for 2019, the company responded that “GMO Internet will review the revenue structure of its in-house mining business, and continue running mining operations with the GMO Internet as a headquarter,” the document reads.

The company has also announced that sale of shares from its subsidiaries “GMO Financial Holdings (September 25, 2018) and GMO Payment Gateway (December 17, 2018)” increased significantly and that it was not reported as a consolidated gain.

The downward trend in cryptocurrency market this year has taken a toll on many crypto-related industries and GMO happens to be another victim of the prolonged bear market.

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