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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 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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Binance Off To Flying Start In Uganda With 40,000 Users In First Week

Binance has stepped into Uganda with a flourish as 40,000 new users signed up to the exchange in the hope of bypassing the Ugandan Shilling (UGX).

Many citizens of African countries are unbanked, either by choice or due to complicated prohibitive rules which make it hard to open an account. Uganda is no different, with a recorded 3/4 of the population without any form of conventional banking.

This is Binance’s first fiat-crypto exchange with UGX, the primary fiat currency and comes less than a month after the company acquired an EUR bank account in Malta, with more exchanges to come, according to CEO Changpeng Zhao. Binance’s enigmatic boss clearly realises the potential of Africa as a new investment hub due to the unbanked nature of much of its population:

“Uganda is a really interesting situation, only 11% of the population has bank accounts. It’s both a challenge and an opportunity. So it may be easier to adopt cryptocurrency as a form of currency instead of trying to push for bank adoption”.

Africans have been clever in dealing with financial barriers, and using cryptocurrency is increasingly becoming a go-to way in order to sidestep banking restrictions or weak state currencies. Corruption is also another factor never far from the surface in some African economies often necessitating the need for a clever approach by locals in order to conduct their everyday business.

Recently, neigbouring Kenyan Distributed Ledgers and Artificial Intelligence task force chairman Bitange Ndemo said that that government should consider tokenizing the economy to deal with “increasing” rates of corruption and uncertainties-such is Africa’s increasing faith in crypto ahead of local fiat currencies.

Wei Zhou, Binance’s chief financial officer, suggested that one reason for the exchange’s surge of clientele in the first week is the fact that it is so easy for Uganda’s unbanked to access the system, commenting, “They [users] just have to have money within the mobile payment system. They don’t have to have bank accounts.”

The country’s president, Yoweri Museveni, said recently that he welcomed and embraced blockchain technology in Uganda since it provides full transparency, and added that he was aware how businesses were being negatively impacted by what he called “secrets and deceit.”

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Singapore Token Day Puts Crypto Center Stage on Bitcoin’s 10th Birthday

Singapore Token Day celebrated Bitcoin’s 10th anniversary with its own event to promote cryptocurrency and blockchain adoption on the South East Asian peninsula.

The organizers promised that Singapore Token Day would be a national event lasting over two weeks between 31 October to 18 November, with a view to informing the uninitiated about all things cryptocurrency. The hope is that the event will give Bitcoin and other cryptocurrencies a springboard to increase its profile among the public.

Earlier this year, Singapore’s Infocomm Media Development Authority (IMDA) launched a blockchain challenge rewarding winning projects with development funding as part of its long-term plan to back cryptocurrencies and new technology. The city center has become a venue for cryptocurrency promotional events. In May, eyebrows were raised on the day when Bitcoin banknotes appeared at a major shopping center, readily available in denominations of BTC 0.01 (USD 98) and BTC 0.05 (USD 485), each containing a Samsung Semiconductor S3D350A chip.

This event has attracted 30 large retailers to Chinatown and allowed customers to purchase goods and services using a range of cryptocurrencies using organizer Bizkey’s Point of Sale (POS) device. This week hopes to raise the numbers of Singaporeans using Bitcoin, while also encouraging companies to improve their services through DLT.

Bizkey estimate that 10,000-15,000 Singaporeans own one or more cryptocurrencies. Although it is not yet widely used in the retail sector, the government continues to keep cryptocurrency on its legislative radar due to its obvious advantages in reducing the cost of money transfers and the speeding up transaction processes.

The Monetary Authority of Singapore (MAS) has been largely responsible for cryptocurrency’s increase in popularity, due in part to a clarification at the end of last year which outlined the distinctions between different tokens and their uses. The result was an increase in ICOs in the first few months of 2018 with 56 being offered in the city raising more than USD 1 billion in total from institutional and retail cryptocurrency investors – a huge increase on the previous year.

The local market has been further buoyed over the past few weeks by the news that South Korean cryptocurrency exchange Bithumb sold majority control for USD 354 million to a Singapore-based medical group. Bk Global Consortium acquired the 51% share in the exchange necessary to give it overall control. The deal was signed by BK International Consortium, a blockchain investment company formed by BK International, a plastic surgical procedures clinical team in Singapore.

 

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“Institutional Investment Class” Morgan Stanley’s New Catchall for Crypto

A new report published by American multinational investment bank Morgan Stanley has redefined cryptocurrency as an “institutional investment class”.

The report was initiated after research revealed that current trading trends are flowing towards institutional investors who are increasingly wanting to invest in cryptocurrencies, so much so that Morgan Stanley have had its eyes firmly set on institutional investor potential for some months.

This led to rumors recently that the bank was intending following in the footsteps of some other Wall Street financial institutions offering crypto-related services by dealing in contracts that gave investors “synthetic exposure to the performance of Bitcoin”.

Still unconfirmed but if the rumors turn out to have substance, then investors will be given the option to go long or short using what is described as a “price return swap”, with Morgan Stanley adding its own charge to each transaction that it facilitates, according to a source close to the investment bank.

It is of little surprise then, that the New York financial giant has chosen this time to re-examine the way it looks at cryptocurrency. The new report, titled ‘Bitcoin Decrypted: A Brief Teach-In and Implications’, updated the classification of digital assets based on statistics from the last six months.

The report also examines problems reported by customers in relation to crypto as an investment class, such as regulatory uncertainty and a lack of regulations. These are areas that Morgan Stanley would like to address if it is seriously deciding on targeting institutional cryptocurrency investors, with a view to offering clients the chance to trade in Bitcoin derivative, as it has hinted in the past.

On a positive note for the bank, if this is to be their direction moving forward, is the reports mention of Fidelity’s new crypto services division, Coinbase’s fundraising round and positive regulatory developments. The report also notes that institutional investor confidence is rising at the expense of retail investment which has all but come to a standstill. The report states that institutional investors have gained “full confidence” in the market over the past six months.

 

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Hong Kong Regulator: Sandbox First, Crypto Licences Could Follow

Hong Kong’s Securities and Futures Commission (SFC) is proposing a sandbox approach to cryptocurrency regulation. The idea was tabled by SFC chief executive Ashley Alder during a speech to delegates at this week’s Hong Kong Fintech Week 2018.

Alder said Hong Kong has seen the arrival of some of the worlds biggest platforms but there exists “a sizeable population of investors who have an interest in trading virtual assets through unregulated trading platforms”. A sandbox approach would allow the regulator to discover if it would be appropriate for crypto exchange operators to be regulated, Alder argued.

“If, and only if, we decide at the Sandbox stage that we should regulate, we would consider granting a license… the platform would then be subject to intensive reporting and monitoring to ensure that strict internal controls operate as expected and investor interests are protected.”

In a recent survey conducted by the Hong Kong Blockchain Association (HKBA), it was revealed that 23% of Hong Kong residents would consider investing in cryptocurrencies, given a recession. The response was based on the fact that many respondents anticipated a downturn in the world economy within the next year. Reportedly, a large portion of those surveyed would consider investing in cryptocurrency, despite their current concerns about digital currencies outweighing their potential advantages. Relevant to SFC concerns expressed at the Hong Kong Fintech Week was the fact that 60% of the respondents indicated that they felt that clear regulations and proper licensing laws were needed for cryptocurrency exchanges.

Alder said that the SFC had plans to clarify new regulatory standards for fund managers and that those investors coming on board with a mixed portfolio of more than 10% of virtual assets would need to follow the new requirements, regardless of whether the assets were “securities” or “futures contracts”. In the meantime, only professional investors should be allowed to trade until further guidance from the regulator is made public. The sandbox idea appears to fill in the cracks until more lasting regulatory plans can be formulated. In February the SFC said that it would crack down on unlicensed cryptocurrency exchanges.

Meanwhile, the blockchain sector is beginning to feel the pinch with a lack of qualified professionals to fill positions. A “talent list” has been issued by the Government of the Hong Kong Special Administrative Region in which it states that it needs “quality people from around the world in a more effective and focused manner to support Hong Kong’s development as a high value-added and diversified economy”. Among the 11 professions on the new list are those with DLT skills.

 

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Business Authority Slams UK’s Proposed Crypto Regulations

The Financial Conduct Authority (FCA), the government body responsible for regulation of financial services companies in The United Kingdom, has come under fire from the UK business Authority in a new report.

The director of the British Business Federation Authority (BBFA), Patrick Curry, has suggested that MPs’ plans to force the FCA to crack down on illegal activity is unnecessarily punitive and could ultimately damage the UK’s standing as a fintech hub. Curry maintains that it is still far too early to take such an approach given that blockchain is making important inroads towards improving business and the way the way that companies operate:

“It is a very blunt instrument approach and I haven’t seen this in other countries. The use of this technology is still a voyage of discovery and these technologies are being refined for different types of use. My concern is the law of unintended consequences.”

The report’s co-authors, the BBFA, law firm Baker Botts, Novum Insights and crypto exchange TodayQ, argue that “bad regulation is worse than no regulation at all”.

Neil Foster, the corporate technology partner at Baker Botts, said that proposed legislation is too all-embracing and needs far more sophistication, suggesting that crypto assets need their own discrete set of legislative guidelines. He argued:

“With sophisticated classification, we should work out what could be a regulated activity. If you crowbar everything into the Regulated Activities Order you are making everything into an investment bank.”

A recent report published by the United Kingdom Treasury Committee has called for the “Wild West” crypto-asset market to be regulated. Summarily, the report acknowledged that cryptocurrencies and “most” initial coin offerings (ICOs) did not fall within the remit of the FCA who, in August, established an international regulatory network for financial innovations.

The UK’s daily broadsheet, the Telegraph, has reported that the Conservative government is still dragging its heels regarding the regulation of cryptocurrency, despite London becoming one of Europe’s main crypto hubs and the home to some of the industries biggest players.

 

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Stablecoins Still Lack Institutional Confidence Despite Crypto Growth

Since the Royal Mint in the UK canceled its stablecoin project (RMG) after a US-based exchange group withdrew their support before the digital token launch, questions are now being asked about the lack of institutional support for such projects.

The Royal Mint is the government-owned mint responsible for producing coins for the United Kingdom. The Mint quickly tried to find an alternative exchange for trading its digitalized gold after RMG withdrew its support, but due to the UK’s Finance Ministry intervention, it was forced to cancel the project at the last minute.

The result of institutions not supporting these projects is a cause for concern, maintains Alex Bosworth, a developer at the decentralized network Lightning. He commented about his disappointment when a project he was involved in folded up; warning that government’s hesitation to support stablecoins could hinder the progress of highly investable and potentially successful projects in the future.

Government institutions in the UK still tread carefully when it comes to cryptocurrencies, despite some warming to the development of projects based on blockchain fundamentals. Even some banks are showing interest, such as UK High Street Bank NatWest which recently announced that it plans to leverage DLT for the syndicated loans market. However, fears regarding crime and money laundering are still a relevant factor when government departments consider products based on digital currency.

Bosworth’s concern is that stablecoins generally require the participation of traditional institutions. He suggests that these institutions are still not fully convinced by the argument for digital currencies linked to traditional assets and may be far more prone to withdrawing from token projects without warning as a result. However, this doesn’t stop the announcements of new stablecoins. London Block Exchange (LBX) has announced its plans to launch the LBXPeg, a stablecoin backed by the UK pound.

LBX hasn’t named its banking partner yet but has suggested that one-for-one reserves will be held by a third-party bank. LBX CEO Benjamin Dives claims this crypto pound is to be the first of its kind to be launched in the UK and is optimistic about the speed of development of the new coin.

Professor of Economics at UC Berkeley, Barry Eichengreen, argues that stablecoins contain certain “weaknesses,” and are not only expensive but require a reserve that is equal to or more than the coins in circulation to ensure market stability, making government regulation complex.

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Australia Post Ventures Into Crypto With New Service

The postal service Down Under, Australia Post, is enabling customers to easily access crypto exchanges through a new platform called Digital iD.

The platform has been created by Australia Post as an answer to concerns about the lengthy processes of accessing crypto exchanges for the first time. The Digital iD platform enables users to dispense with private documents such as drivers’ licenses and passports for initial verification, which often results in anything up to a ten-day wait for new users.

The platform was christened by Brisbane-based crypto exchange, Digital Surge, with customers registering through Digital iD for the first time. Director, Josh Lehman, commented that the Australia Post platform was offering a much more efficient user experience and was speeding up the registration process.

Digital iD’s general manager Cameron Gough pointed out that Australia Post was simply improving on its service to its many customers, enabling a far more efficient way of sharing information with organizations and companies. He pointed out that as with using a driver’s license to enter a club or buy alcohol, simply the name and date of birth of the user should be all that’s required.

Lehman suggested that Digital Surge also has additional systems enabling instant verification of new customers. Users can now buy their cryptocurrencies instantly without recourse to providing extra personal information.

Australia has become a leader in integrating cryptocurrencies into everyday use where possible, with two companies Gobbill and exchange Cointree, recently combining to allow Australians to pay utility bills in crypto. Despite the results of a highly expensive report just released by Australia’s Digital Transformation Agency citing that blockchain was being over-hyped by vendors, it appears that the new prime minister is firmly behind new technology. Scott Morrison recently stated that the contributions of distributed ledger technology (DLT) in the financial sector have, and will, create “massive opportunities.”

Cryptocurrency investors may be heartened at the arrival of a new PM in Canberra, who as treasurer in 2016, had a hand in removing the hated double taxation on crypto assets.

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Next Step in English Premier League: Player Transfers For Bitcoin

The massive transfer fees associated with signings in the English Premier League, the top flight of world soccer, could be paid using Bitcoin in the not too distant future, say commentators on the game.

Clubs worldwide endorsing blockchain related technology is becoming a far more common sight, with at least three teams in the Premier League endorsing blockchain products this season. Also, individual players such as Messi, Ronaldhino and Michael Owen have put their names behind crypto related enterprises in recent months with endorsements now becoming a regular feature of the game as cryptocurrency grows in popularity.

The first actual player signing using cryptocurrency was in January of this year when Turkish amateur club Harunustaspor signed its first Bitcoin player, paying a modest 0.0524 BTC for the transfer. However, pundits think that crypto transfers are on their way to the multibillion-pound Premier League in the near future, some reports indicating that it could be in as little as a few months.

Major global investment platform eToro which uses blockchain and enables users to invest in crypto sees Bitcoin transfers in England’s top flight as inevitable. The company has already launched a number of Premier League partnerships this season including, Brighton, Cardiff, Crystal Palace, Leicester, Newcastle, Southampton, and Tottenham. Each club has been paid an unrevealed amount in Bitcoin for helping to promote the eToro platform.

Iqbal V. Gandham, UK managing director at eToro, says that he is really optimistic at the level of interest that top clubs have taken in blockchain technology commenting, “I do feel that within about six to twelve months we will see a player transfer in the Premier League completed using bitcoin.”

Gandham cites numerous advantages of blockchain based management and payment schemes particularly in the area of transfers, which are usually significant sums in the Premier League, suggesting that deadlines can be far more easily met with instantaneous payments, cutting out last minute delays, and transfers can be made far more transparent due to the nature of blockchain which can reveal every aspect of each transaction. International transfers would also be simplified by the use of one common currency, Gandham maintains.

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