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Nigerian Crypto Association Asks Government for Clear Guidelines

The Electronic Payment Practitioners Association of Nigeria (E-PPAN) is asking government regulators in the country for clearer guidelines to drive the industry forward.

This follows reports, including a statement by E-PPAN, that there is a growing possibility of fintech businesses offering blockchain services being driven overseas unless both the Nigerian government and the Central Bank of Nigeria can offer clarification on its view towards cryptocurrency.

A new Nigerian blockchain hub was announced by the government in August in conjunction with UK blockchain firm Coinfirm. The resulting launch of the Africa Blockchain Lab promises to offer financial inclusion to many Nigerians outside of the country’s financial system and also to attract new startups as part of the country’s drive to support the adoption of blockchain and cryptocurrency technologies in the continent.

However, the Bitcoin Exchange Guide claims that Central Bank governor Godwin Emifele has done little to encourage the growth of cryptocurrency; investors continue to be reluctant owing to the government’s lack of guidelines. Despite the launching of the Africa Blockchain Lab by state-backed KAD ICT Hub, cryptocurrency still struggles to receive recognition in Nigeria due to its continued links to criminal activities by authorities.

“Investments in blockchain-based financial services such as cryptocurrency are today going to Rwanda and Malta, which have provided regulatory frameworks that guide operators of the technology,” claims Ade Atobatele, founder of Gboza Gboza Technology Ltd, and member of E-PPAN.

This hasn’t stopped PundiX setting its sights on Nigeria, recently introducing Point of Sale (POS) machines which enable users to pay in Bitcoin and Ether along with the country’s local currency, the Naira. Nigeria certainly has the potential to accommodate such facilities with Africa’s largest contingent of Bitcoin holders and a population of 185 million, representing the continent’s largest population of potential users and investors. Localbitcoins is reported to have seen a trading volume of USD 260 million this year to date.

Nigeria should be looking to overseas for regulation, according to E-PPAN member Michael Kiberu, calling for regulators to look to countries such as Uganda, Switzerland, Kenya, and Japan, where cryptocurrency guidelines are clear and operate with legal status, while creating a healthy flow of capital into the financial sector.

 

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Islamic Certification for Swiss Firm Opens Middle East Market

A Swiss-based fintech firm has successfully been certified by Islamic scholars, enabling it to trade digital currency in the Middle East.

Sharia law prohibits Muslims from lending money to anybody with the expectation of receiving interest on this amount. It regards fractional reserve lending that the majority of fiat currencies operate with as usury. Cryptocurrencies differ in this respect as they are underpinned by logistics of scarcity, appreciated by those practicing Sharia as it acts similarly to commodity trading such as gold that they adhere to.

With the news earlier this year that cryptocurrencies wouldn’t, in most circumstances, conflict with Sharia Law, the number of fintech companies moving into Sharia-compliant finance has notably increased. The Middle East, with its large Muslim population, has also become a potential hotspot for blockchain development.

The Swiss company X8 AG claims that its Ethereum-based cryptocurrency will address concerns of some Islamic scholars who are often concerned about the religious validity of cryptocurrency’s price volatility and the types of assets behind them. X8 Director Francesca Greco maintains that the fact that their cryptocurrency is backed by a basket of eight fiat currencies and gold should be a convincing enough guarantee. Greco maintains, “The Gulf region is a really good place for financial technology companies because they all want to become hubs for fintech.”

The Zug-based company which has now gained its certification from the Shariyah Review Bureau (SRB), an Islamic advisory firm licensed by Bahrain’s central bank, hopes to launch a crypto-exchange that would include a Sharia-compliant component. It has recently had meetings with other exchanges in the region.

This follows an announcement last week that another Islamic financial center, Dubai, was about to get its first cryptocurrency exchange after local media Al Zarooni Group and the Crypto Bulls announced the launch of the Crypto Bulls Exchange. Chairman of the Al Zarooni Foundation, Suhail Al Zaroon, stated:

“This will be the milestone for getting global investments opportunity from all over the globe in UAE, as all financial techs and investors are looking forward in crypto and blockchain industry.”

 

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UK Exchange Jumps the Gun On German Crypto Regulator

The German Federal Financial Supervisory Authority (BaFin) has closed down the operations of UK cryptocurrency exchange Finatex Ltd.

It appears that the UK firm was ordered to “cease cross-border proprietary trading immediately,” for slipping under Germany’s regulatory wire, having not received the necessary authorization to operate cross-border exchange transactions from BaFin. The UK company which was launched in Leeds, Yorkshire in 2016 has announced it plans to dissolve the company this week as a result.

This is not the first time that BaFin has stepped in to flex its regulatory muscles in recent months over the question of cryptocurrency exchanges’ rights to operate. The last attempt to prosecute a company trading Bitcoin operating without a license was, however, unsuccessful after The Berlin Court of Appeal overturned the case.

Inconsistencies in the way cryptocurrency firms can operate cross-border transactions in Europe have caused some concern recently, and the German case once again brought these to the notice of European financial regulators. Although individual EU countries have clearly defined rules in their own jurisdictions for the trading of Bitcoin and other digital currencies, the EU as a whole has so far failed to come together with a Europe-wide regulatory framework. The EU passed a motion in 2016 enabling taxation of cryptocurrency holdings, investments, and profits.

Now that the Berlin Court of Appeals has classified Bitcoin as a “financial instrument” it now comes under the auspices of BaFin’s financial regulatory practices. Its CEO Felix Hufeld only last month told investors that they should avoid ICOs due to scamming concerns. He argued:

“We do not want to stifle innovation, but must avert dangers at the same time. For example, it is important for us to take action against money laundering and safeguard the privacy rights of investors. In addition, there should be certain minimum standards for the underlying terms of the contract.”

Earlier this year, the German Federal Government stated that cryptocurrencies do not pose a threat to financial stability. The government stated on 12 June that the volume of cryptocurrencies, when juxtaposed to the overall size of the German financial system, is comparatively low and, therefore, simply needs careful monitoring and regulatory measures put in place in order to control the space.

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Taiwan Firms Laud Success of World’s First Aviation Tourism Blockchain Project

The Two Taiwanese companies who partnered to launch the world’s first aviation tourism blockchain project have praised the outcomes of their attempts so far to tokenize the travel industry.

Huafu Enterprise Holdings Limited and Far Eastern Air Transport (FAT) have published a press release outlining their successes since launching the cooperative project earlier this year.

At the end of March, Huafu Group and FAT launched a three-month public offering of its own token, Airline and Life Networking (ALLN). The aim in offering its own digital currency was to readapt its own businesses of aviation, tourism, real estate, and property management towards a more digital-based economy.  Founded in 1990, Huafu Group’s business includes construction, travel agencies, and business hotels.

The most recent press release praises the project primarily for its progress in using blockchain in the travel economy and becoming the first aviation company backed by the biggest blockchain incubator, M.O.B.C. It also notes its token ALLN is the first to partner with Southeast Asia’s biggest digital asset exchange MBAex.

The company states that ALLN is the first of its kind to work with Maxonrow, the world’s first blockchain with an instant KYC function; self-described as the first network in the world that connects societies, governments and businesses with the real economy through blockchain technology. COO of Haufu, Tseng Chin-Chih, commented:

“61 years ago, Far Eastern Air Transport became Taiwan’s first aviation company…. Now that we have Huafu’s ALLN Networking Token set into action, we are once again pioneers in the world of aviation tourism by applying blockchain technology to the real economy.”

The company was keen to point out that its ALLN token is now available as a payment tool that customers could use for booking their itineraries through a travel agent, including purchasing flights. The advantage being that, travelers would have no need to provide proof of identity when purchasing tickets, which were fully transferable. The token also enables the client with a blockchain tool to leave feedback and recommendations for other travelers.

Also, Taiwan is reportedly planning to release the initial draft of its ICO regulations early next year with an aim to simplify regulations and increase token liquidity,

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Iran Ready to Deploy National Cryptocurrency as Sanctions Go Into Full Effect

Iran’s national cryptocurrency is ready to be deployed, as the US sanctions go into full effect, which is mostly the reason for the Iranian Rial (IRR) to experience 300% inflation so far in 2018. The goal of this national cryptocurrency is to conduct international business since Iran’s international payment systems have been crippled.

The new Iranian state-backed cryptocurrency will be pegged 1:1 with the IRR, and will initially be used by commercial banks in Iran once the Central Bank of Iran approves the cryptocurrency. Approval is likely, considering this cryptocurrency was developed by the Informatics Services Corporation at the request of the Central Bank of Iran.

This announcement is nearly simultaneous with the re-implementation of sanctions by the United States on Iran starting 5 November 2018. Total blockades on Iran’s shipping, aviation, nuclear industry, and banking have been imposed by Washington. These sanctions are designed to ensure Iran never develops a nuclear weapon.

The crucial international payments network SWIFT has severed ties with Iranian banks. Additionally, due to the sanctions, Bittrex and Binance have stopped serving Iranian customers. Essentially, it is illegal for any company that does business in the United States to also do business in Iran.

The IRR has spiraled into hyperinflation during 2018, with the exchange rate going from 36,000 IRR per USD on New Year’s to 144,000 IRR per USD as of 11 November 2018. This suggests that the threat of sanctions, and now the implementation of sanctions, is severely damaging the Iranian economy.

The national cryptocurrency of Iran is designed to circumvent international sanctions, giving Iranian banks the ability to send money worldwide. It seems likely that when the national Iranian cryptocurrency is launched it will be deemed illegal by a United States Presidential executive order, similar to what happened with Venezuela’s Petro.

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French Crypto Taxes See Yet Another Drop Proposal

After stating in April 2018 that cryptocurrency taxes in France would be lowered, it appears that the government has settled on a figure.

Gains from the sale of cryptocurrencies were previously labeled as industrial and commercial profits under French tax law and therefore could have up to as much as 45% tax levied on them for larger users. With French social security contributions (CSG) currently standing at 17.2%, some wealthier crypto traders could have been paying a massive 62% in tax.

In April the Conseil-D’état, under new tax laws specifically aimed at Bitcoin had suggested setting the new crypto tax rate at 19%, which is the same rate applied to what the French call “movable property”, such as cars, jewelry, and patents. Bitcoin would fall into that same category.

However, the Finance Commission in France’s lower house of parliament revealed on Wednesday that its latest amendment to French taxation as it applies to cryptocurrency assets proposes a flat rate of 30%, equal to the current rate of French capital tax, from January of 2019.

The Bank of France proposed a ban earlier this year on investment companies to keep financial institutions from conducting business in the cryptocurrency market until the government could enact proper regulation. The Bank of France Governor Francois Villeroy de Galhau commented earlier this year that new laws were required to cover cryptocurrency exchanges, assuring investors who had previously been shocked when he commented:

“Bitcoin is in no way a currency or even a cryptocurrency. It is a speculative asset. Its value and extreme volatility have no economic basis, and they are nobody’s responsibility.”

The latest details coming from France’s lower house are sure to encourage investors, although original suggestions of a new rate of 19% proposed by the Conseil-D’état earlier in the year would have been far more warmly received by the industry.

The French aim is still geared towards establishing a more global regulatory network as digital currency is used globally, not simply in France. The country’s Finance Minister, Bruno Le Maire, has suggested that the G20 need to reach agreement on how Bitcoin could be regulated amongst the member countries.

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Cryptopia Relaunching New Zealand Dollar Stablecoin

Cryptopia has announced that it is relaunching the New Zealand Dollar stablecoin (NZDT) in Q1 2019. The exchange has a daily trading volume in excess of USD 2 million and has been a hub of altcoin trading and mining activity since it launched in 2014.

The NZDT was originally launched in 2017, with daily trading volume rallying to NZD 1 million per day. This spooked ASB, the bank that Cryptopia was working with, since proper know your customer (KYC) and anti-money laundering (AML) laws were not in place. Fortunately, the orderly termination of the NZDT stablecoin gave customers a month to convert their NZDT back to NZD.

Apparently, Cryptopia has now secured a bank account with an undisclosed bank and is in talks with government regulators to make sure the NZDT is not abruptly terminated again. Regulators are reportedly favorable towards the stablecoin.

It is difficult for New Zealander cryptocurrency traders to enter the crypto space. Fees are high and it takes days to deposit NZD into an offshore exchange. Campbell Pentney from the Bell Gully law firm said, “Let’s assume blockchain takes off and has amazing projects all over the world. Without an NZ dollar entry point, New Zealanders will find it hard to invest in these projects directly. Because getting money from your bank here into one of these cross-border exchanges takes days and involves big fees.”

This is why the NZDT became so popular. The process is relatively quick and the fees are lower than when sending fiat to an offshore exchange. The NZDT allows New Zealanders to buy cryptocurrency worldwide on any exchange that integrates the wallet.

Pentney said, “Not having them [a New Zealand Dollar stablecoin] matters hugely. It was going great guns, growing massively fast, and then suddenly there was no banking access. People are saying: ‘how do I buy Bitcoin?’”

Currently, there are only a few cryptocurrency exchanges in New Zealand that accept NZD deposits directly but their volumes are low and the lack of liquidity is not optimal for trading.

 

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Etherdelta Founder Fined $388,000 by SEC

In a landmark ruling for decentralized cryptocurrency exchanges, the founder of Etherdelta, Zachary Coburn, has been ordered by the United States Securities and Exchange Commission (SEC) to pay a USD 388,000 fine.

Etherdelta was until now among the top so-called decentralized exchanges. Its trading volume has crashed to USD 250,000 per day due to this news and it seems users have gone over to IDEX which now has USD 3 million of daily trading volume.

Etherdelta offers trading of Ethereum ERC-20 tokens, most of which are from initial coin offerings (ICOs) and can be considered securities by some jurisdictions, certainly by the SEC. The exchange did not have a license to operate as a securities exchange and Colburn is found liable for this since he created the exchange and operated it from July 2016 until it was sold to foreign investors in November 2017.

Coburn is being ordered to pay a disgorgement of USD 300,000, USD 13,000 of pre-judgment interest, and USD 75,000 to the SEC. The fines could have been heavier but apparently, Coburn worked closely with regulators and prosecutors.

This case sets a precedent where someone who creates the code for a decentralized exchange could be heavily fined by the SEC. This ruling could mean decentralized exchanges are considered illegal in the United States and therefore illegal worldwide. Even if a decentralized exchange tried to ban United States users, little could prevent enforcement scrutiny, as was seen with 1Broker, which was investigated by an undercover agent from the Federal Bureau of Investigations, paving the way for a lawsuit.

It would seem the only way to successfully launch a decentralized exchange is to retain full anonymity, extending decentralization to the hosting and management of the exchange hosting and software itself.

Bisq is a better example of a decentralized exchange, but still not 100% decentralized or anonymous. Most decentralized exchanges available fall short of true decentralization and autonomy, although that would be arguably impossible to create with today’s technology.

 

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Abu Dhabi Securities Exchange Releases Thought Paper on Crypto Assets

Abu Dhabi Securities Exchange (ADX), in collaboration with Central Securities Depositories and with support from International Securities Service Association (ISSA), recently released a thought paper containing infrastructural guidelines for distributed ledger technologies, and issuance of cryptocurrencies, reports the Emirates News Agency on 6 November 2018.

In an attempt to provide clarity on the technical and operational standards required for the issuance of cryptocurrencies, ADX designed the thought paper as a sample protocol to form a framework guiding financial institutions who want to transit back and forth between traditional financial assets and cryptocurrencies.

The securities exchange, having 69 traditional Emirati companies listed already, continues to drive towards innovation to achieve the fintech pinnacle. This was clarified in a statement made by its CEO Rashed Al Blooshi:

“At ADX, we embrace new and innovative technology and are always looking to capitalize on advancements in FinTech… ADX continues its efforts to manage the transition from conventional assets to more encrypted assets, which are witnessing major and rapid development in the region.”

Al Blooshi sees ADX as an important player in the regular financial markets. By leveraging its membership with the ISSA Central Securities Depositories Working Group, it plans on gaining more exposure to distributed ledger technology in order to further develop the blockchain infrastructural space. He further acknowledges that the current financial market is outdated and in need of an infrastructural overhaul and that this should be prioritized alongside incorporating standards of governance in order to keep the market whole and maintain investors’ confidence.

Apart from the fintech application of blockchain, as a nation, the UAE has shown great interest in the development of other blockchain-related products and promoting the industry within its economy.

In April, the UAE government launched the Emirates Blockchain Strategy 2021. This scheme is expected to help the emirate nation capitalize on the perks of blockchain enterprise by transforming 50% of government transactions into the blockchain platform by 2021. Objectively, this would help it save AED 11 billion in transactions and document processed routinely, 398 million printed documents annually, and 77 million work hours annually – in summary, save time, efforts and resources.

A little further down the year, the UAE began showing interest in initial coin offerings (ICO), when its national securities regulator hinted on plans to open up its capital market to ICOs. Rigorous regulatory exercises accompanied this intention since ICOs, according to the Board of Emirate Securities, are now considered as securities.

 

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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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