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South Korea Legislates Institution of a Legal Basis For Cryptocurrencies

South Korea Legislates for Institution of Crypto Legal Basis

South Korea Legislates Institution of a Legal Basis For Cryptocurrencies

On 27 November 2019, South Korea passed an amendment to establish a legal framework for virtual currencies by categorizing them as digital assets. As reported by local news outlet Korea JoongAng Daily, the bill was passed by the National Assembly’s national policy committee, stating that, thanks to the bill, “cryptocurrency is one step closer to being legitimate in Korea”.

According to the bill, all the crypto exchanges and firms within South Korea will be required to report to and register with the South Korean monetary authority, Financial Services Commission’s Financial Intelligence Unit (FIU) to make the system more transparent and to legitimize investments. Additionally, the new bill strictly condemns the practice of money laundering by the companies.

The bill also mentions setting up a protocol for financial transactions that the companies will be expected to adhere to. These ground rules should be in compliance with the standards of the Financial Action Task Force (FATF). Apart from this, all companies will have to acquire an Information Security Management System (ISMS) certificate from the state-operated Korea Internet and Security Agency (KISA). The report also states, “…those operating false-identity bank accounts will not be approved”.

The bill is yet to be approved by the judiciary committee. Once approved, the law is expected to come into effect in 2020.

As reported back in May 2019, the South Korean government decided to do away with the guidelines for Anti Money Laundering (AML) within virtual currency, and introduced legislation to directly regulate cryptocurrency exchanges. The amendment required cryptocurrency exchanges to provide their full analysis of AML data to banks in order to maintain their accounts.

 

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G20 Backs Proposal for Exchanges to Give Over User Data

G20 Backs Proposal for Exchanges to Give Over User Data

The Group of Twenty (G20) has backed a new proposal that would see crypto exchanges give over their users’ data to individual regulators in their jurisdictions. Their declaration serves as them “reaffirming our commitment” to implement accepted global standards to virtual assets.

The group said:

“Technological innovations can deliver significant benefits to the financial system and the broader economy. While crypto-assets do not pose a threat to global financial stability at this point, we are closely monitoring developments and remain vigilant to existing and emerging risks.”

Leaders from several countries in Europe, the US, China, Japan and South Korea had made this announcement at the G20 Summit in Osaka, following a set of proposed guidelines published by the Financial Action Task Force (FATF) that aims to tackle money laundering concerns. These concerns derive from the possibility to wash crypto funds at exchanges, and the further ability of anonymization from other blockchain technologies and wallets. The FATF has just a week ago established an enforced time restriction on exchanges’ customer information,

The regulatory bodies that would receive customer data, under the new proposal, will be adopting a “risk-based approach” in solving these issues of crypto-based mixing and laundering, and will oversee those services handling crypto. These services that include exchanges will be known as virtual asset service providers (VASPs).

These bodies would have new powers, able to obtain, hold, and when necessary, transmit information concerning account holders, particularly if transactions are of a suspicious nature. Exactly what constitutes for suspicious behavior, of course, is sometimes open to interpretation although the guidelines do provide some metrics.

More importantly, the user data that is permissibly gathered includes the names of the transaction parties, wallet and physical addresses, beneficiary account numbers, national identity numbers and dates of birth.

With this formal backing, FATF guidelines are now expected to become common law across the world.

 

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V20 Inaugural Summit Commits to Uphold Virtual Asset Industry

Inaugural V20 Summit Concludes With Commitments to Uphold The Virtual Asset Industry

The V20, a group of national crypto associations standing for the local virtual asset service providers (VASPs), have signed a Memorandum of Understanding (MoU) for setting up a global crypto association to unite the virtual asset industry to provide for a global delegation.

The group summoned at the inaugural V20 summit for the leading VASPs held in Osaka, Japan on 28 and 29 June which was held simultaneously with the G20 summit in the same place and at the same time.

V20 convener, Ronald M Tucker, said:

“We’ve brought everyone on the journey to create a new body that will assist in establishing a means to engage with government agencies and the FATF to ensure our best interests are understood and valued at an international level.”

As per the report, the signatories included the Australian Digital Commerce Association (ADCA), Singapore Cryptocurrency and Blockchain Industry Association (ACCESS), Japan Blockchain Association (JBA), Korean Blockchain Association (KBCA), Hong Kong Blockchain Association (HKBA) and the Taiwan Parliamentary Coalition for Blockchain and Industry Self-Regulatory Organization and the signing ceremony took place in the presence of by Roger Wilkins AO, the former Financial Action Task Force (FATF) President.

The MoU threw light on the issues concerning the virtual asset industry with an agreement to construct a cooperative regime to maintain communication with the government and regulators to promote VASP. Additionally, the MoU addressed the need to support information exchange across the industry, foster the growth of policies and procedures, increase awareness and raise the benchmark to match the levels of global industrial standards.

Anson Zeall, the Chairman of Singapore ACCESS and Co-convener of V20 summit commented on the signing of the MoU:

“With these new rules from the FATF, and in signing this MoU, we are coming together in the spirit of collaboration and entering into a new phase for the whole industry […] Further, this new agenda aligns with and strengthens our original mission to utilize the power of blockchain technology to deliver financial inclusion across the world.”

As reported earlier, the 36 member countries of the FATF, including European Commission held its annual Private Sector Consultative Forum in Austria in order to find some common ground on cryptocurrency before the commencement of the G20 summit. At the beginning of the month, Finance ministers and their central bank counterparts made a joint request to the Financial Stability Board (FSB) and global standards organizations to offer a cooperative response to monitor risks surrounding crypto assets.

 

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Swiss Crypto Industry Demands Banking Services

Swiss crypto firms demand banking services

Switzerland’s crypto industry has evolved into prominence, thanks to crypto-friendly regulations. However, financial institutions in Switzerland remain unwilling to fund crypto-based businesses. The Swiss crypto industry is now insisting that financial institutions provide banking services to crypto-based firms.

As reported by Swissinfo, the blockchain industry in Switzerland, which consists of approximately 750 startups, fails to get enough funds from financial institutions or banks. Blockchain entrepreneur Herbert Sterchi stated that it is difficult for professionals in the crypto industry to get bank accounts, and they have to travel to Portugal and Estonia to do the same.

Daniel Haudenschild, President of the Crypto Valley Association (CVA), said:

“The hype and scam-era are over. We are now seeing products that have been building up for the last two to three years, reaching maturity. We are seeing the big tech players coming out of the shadows to drop anchor.”

The leaders of large scale cryptocurrency industry believe that the bearish run in 2018 managed to eliminate the fraudulent firms, which stifled the essence of innovation. One of the most eminent tech players, Facebook, jumped into the crypto space by registering its Libra Network in Geneva thereby establishing a more “mature” and viable crypto outfit in Switzerland. Haudenschild said that the fact that Facebook chose Geneva over any other place speaks volumes of the stability of the crypto industry in Switzerland.

Despite the evolution of the Swiss crypto firms and the efforts by the Swiss Bankers Association (SBA), basic banking services have been rendered unavailable to an industry which has time and again proven itself to be a major part of the global financial system.

As reported earlier, G7’s Financial Action Task Force (FATF) warned that crypto assets will not be allowed to become “the equivalent of secret numbered accounts” referring to the confidential accounts commonly offered in Switzerland. US Treasury Secretary, Steve Mnuchin, stated that this was FATF’s attempt to keep a check on crypto-related firms to implement anti money laundering laws and fight the financing of terrorism.

 

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FATF to Enforce Time Restriction on Exchanges’ Customer Information

FATF To Enforce Time Restriction on Exchanges' Customer Information

The Financial Action Task Force (FATF), who met last week for another round of talks to decide on new AML steps, is to bring in a time restriction for crypto exchanges on data sharing.

The FATF has set a time limit of 12 months during which time exchanges must share user and sender information with “beneficiary institutions”.

The new data sharing guidelines, which are not actually set in law as yet, have further angered those in the industry who already feel that the rights and anonymity of both crypto senders and recipients are being eradicated by over-regulation. crypto exchanges Countries that do not comply with the FATF’s latest rules could face being blacklisted. Exchanges under the ATM guidelines must now:

“… obtain and hold required and accurate originator [sender] information and required beneficiary [recipient] information and submit the information to beneficiary institutions … if any. Further, countries should ensure that beneficiary institutions … obtain and hold required (not necessarily accurate) originator information and required and accurate beneficiary information …”

As one London-based digital finance group explained in a letter to the FATF most codes sent along with transactions already contains much of the information that the new rules require despite the fact that cryptocurrency transactions were originally intended to carry a high degree of anonymity for all participants.

This was pointed out to FATF by another company Chainalysis earlier this year who commented that “Virtual Assets are designed to provide a way to move value without the need to identify the participants in a transaction”. The fear is now that this requirement may drive some exchanges and wallet provider to the wall if it is enforced, a point clearly of little concern to U.S. Secretary of the Treasury Steven Mnuchin who commented:

“By adopting the standards and guidelines agreed to this week, the FATF will make sure that virtual asset service providers do not operate in the dark shadows.”

 

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FATF Warns No Swiss Style Free Ride For Crypto Account Holders

FATF Warns No Swiss Style Free Ride For Crypto Account Holders

U.S. Treasury Secretary Steve Mnuchin has compared the use of cryptocurrency to Swiss numbered bank accounts in a scathing attack on the industry.

He was referring to the G7’s Financial Action Task Force (FATF) and its current second look at crypto in the face of the expectation that billions of people could hook up to cryptocurrency via Facebook when the media giant releases Libra.

Swiss banking secrecy was codified in 1934 with the passage of the landmark federal law, the Federal Act on Banks and Savings Banks and private numbered accounts have long offered depositors question free banking. Mnuchin commented in an address to a plenary session of the latest G7 AML initiative targeting cryptocurrency:

“By adopting the standards and guidelines agreed to this week, the FATF will make sure that virtual asset service providers do not operate in the dark shadows. This will enable the emerging FinTech sector to stay one-step ahead of rogue regimes and sympathizers of illicit causes searching for avenues to raise and transfer funds without detection.”

He used the Swiss reference in the same address suggesting that crypto assets could never be allowed to “become the equivalent of secret numbered accounts,” referring to the Swiss model which has since been replicated in other offshore jurisdictions, where a client’s identity is not revealed and accounts are simply identified by a code or number.

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Line’s Crypto Exchange Nears Japan Approval

Line's Crypto Exchange Nears Japan Approval

Japan’s most popular communication app, Line, is heading towards the country’s approval to roll out its crypto exchange in the home nation. As reported by Bloomberg on 20 June 2019, the license is expected to be issued by Japan’s Financial Services Agency (FSA) within this month. If so, the operations are lined up to kick off a few weeks post the regulatory authorization.

The platform, dubbed as BitMax, will extend trading facilities to about 80 million users in Japan. This will enable trading of major cryptocurrencies such as Bitcoin including Line’s own token, Link, the report claimed. Line’s shares spiked up by 4.6% post the report.

About a year ago, Line launched the crypto exchange, BitBox. The platform, however, was denied approval by Japan and the US which rendered its services unavailable to the countries. BitMax has been designed to use the same back-end technology as BitBox.

The report stated that Line has another banking license on halt in Japan which is unlikely to be issued anytime until next year. The issuance of the above said license will bring forth a tight amalgamation between cryptocurrencies and services such as online shopping.

In March 2019, the FSA granted a license to tech giant Rakuten’s crypto exchange, which replaced Everybody’s Bitcoin Inc, acquired by the company for USD 2.4 million. Yahoo Japan’s crypto exchange Taotao was launched on 30 May 2019 after receiving approval from the FSA.

However, the FSA has been tightening its anti-money laundering regime to inspect crypto exchanges in accordance with the FATF inspection in a bid to up its financial security framework. This has been Japan’s top priority to avoid criticism from the intergovernmental watchdog as the country chairs this year’s G-20 summit to be held on 28 and 29 June. This is clearly reflected in the fact that as of March 2019, only 19 crypto exchanges had received a license from the FSA as opposed to the 190 applications received by the agency in 2018.

 

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Virtual Asset Summit Gains Global Legislator Support

Virtual Asset Summit Gains Global Legislator Support

CoinTelegraph Japan reports that virtual asset service providers (VASP) will be providing a formal response towards a set of recommendations for virtual currencies set forward by the Financial Action Task Force (FATF).

This response will be in the shape of a so-called V20 summit, which they hope to convene alongside the G20 Leaders Summit in Osaka, Japan on 28 and 29 June 2019. It is said that global legislators have expressed their firm backing for this summit, which will bring together economic leaders of the G20 nations along with their national blockchain associations, VASPs, and legislators from various jurisdictions.

All this because of the growing discussions around the series of recommendations developed by the FATF — the body established between the governments of the G7 group of economies that seek to promote common standards in legal, regulatory and operational actions against money laundering.

Their guidelines are thought of as a global benchmark in anti-money laundering efforts and the fight against illegal financing. They are used by some 200 countries despite not being legally binding, and now countries hope to adopt the same guidelines as they come face-to-face with crypto.

As it stands, however, not everyone is on the same page as to the current recommendations on virtual currency, with former FATF President, Roger Wilkins AO and former secretary Australian Department of the Attorney General, stating that:

“What we are hearing from industry is that the new rules may have the opposite effect to which they were intended, effectively forcing crypto transactions off the controlled platforms, which are currently one of the best avenues we have in gaining visibility over financial crime.”

The warning that overly restrictive regulations would drive crypto underground is not without basis — Iran and Venezuela are two recent examples where citizens continue to use Bitcoin peer-to-peer when their respective governments sought to ban them.

The G20 finance leaders and their central bank counterparts have already asked the Financial Stability Board (FSB) and global standards organizations to consider a multilateral crypto response.

 

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Financial Action Task Force’s Next Step Towards Crypto Regulation Due 21st June

Financial Action Task Force Next Step Towards Crypto Regulation Due 21st June

Some further clarity for regulation in the cryptocurrency could be the result of the Financial Action Task Force’s (FATF) next publication scheduled for 21 June.

The regulations, targeting cryptocurrency exchanges, custodians, wallets and cryptocurrency-related businesses, are continually being monitored by the FATF, but this next publication has some virtual asset service providers wondering what to expect.

The objectives of the inter-governmental FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. Such is the nature of the debate surrounding whether cryptocurrency should or should not be allowed to become embedded in the global financial environment, many task forces are currently examining where to go next when it comes to regulation.

Recently the Swiss-based FSB’s “Crypto-assets work underway, regulatory approaches and potential gaps report,” urged the G20 to keep the question of more coordination between international financial standard setters under review. The issue which most other groups tasked with cryptocurrency regulation are coming across is that members hold quite different views about how to move forward with cryptocurrency regulation.

One industry leader, exchange giant Coinbase, is keen to see the outcome of the 21 June announcement. Coinbase chief compliance officer Jeff Horowitz is hoping for a measured approach as he feels that heavy-handedness by the FATF may be a counterproductive measure. He argues:

“Applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement,” adding “The FATF really needs to consider the many unintended consequences of applying this specific rule to VASPs.”

Coinbase will not be alone in awaiting to examine what the next step in the regulatory process offers the industry on June 21.

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Crypto Exchanges Hold Breath as FATF Closes In on Recommended Policy Standards

Crypto Exchanges Hold Breath as FATF Closes In on Recommended Policy Standards

As the battle for acceptance into mainstream economics rage on, the cryptocurrency ecosystem continues to face daunting regulatory challenges. And as far as financial regulatory policies go, one perceived to likely have a far-reaching effect on the development of the cryptocurrency industry may soon set in, as the 21 June deadline approaches for the implementation of the Financial Action Task Force’s (FATF) Interpretive Notes as part of its virtual currency standards.

A recent report from Bloomberg indicates that the move by FATF in its Interpretive Notes – designed to clarify how virtual assets are to be regulated, may yet be the greatest fear for the industry.

“Their recommendation could have a much larger impact than the SEC or any other regulator has had to date”, says Eric Turner, director of research at crypto researcher Messari Inc. Although Turner thinks much of the rules will be subject to the interpretation of the individual jurisdictional regulators, he was of the opinion that the recommendation remains “one of the biggest threats to crypto today”.

The report further reflects on the FATF guidelines which advocates for a thorough know your customer (KYC) and anti-money laundering (AML) approach to be adopted by countries; noting that it may, however, be expensive to implement given that a good number of cryptocurrency wallets are designed for anonymity. For the recommendations, it may require “a complete and fundamental restructuring of blockchain technology,” suggests John Roth, Bittrex’s chief compliance and ethics officer, emphasizing on the cost-impact on compliance.

The FATF, as a multi-government initiative whose sole objective to provide standards that promote the necessary policy measures against money laundering and terrorist financing, could pose a serious challenge to the freedom of use of cryptocurrency. Such that, its recommendations to member countries to “apply a risk-based approach”, will undoubtedly have a blanket effect in over 200 countries, should it be adopted. This, perhaps, will invariably apply undue pressure on cryptocurrency exchanges and custodians to release sensitive data of their users, which, in turn, may drive wary customers to other means of transacting their cryptocurrencies.

Recently, the Japanese regulator stepped up its anti-money laundering campaign against non-compliant cryptocurrency exchanges in a bid not to fall short of the expectations of the FATF, after having received a lowest possible ranking back in 2018. This goes on to show the importance and steep ramifications of the FATF’s recommendations.

 

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