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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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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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Research: Banks Holding Back on DLT Due to Collective Bitcoin Distrust Psyche

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Retail banking continues to tread with caution before adopting blockchain, and it is Bitcoin’s 2017 rise and fall scenario which drives the distrust according to a recent report.

The potential of blockchain is being missed according to an earlier report which claims that Bitcoin lost its credibility with banks after its rise and fall in 2017. The possibility of using blockchain technology for cross border payments, saving banks as much as USD 4 billion a year, is still being overlooked due to lingering concerns over Bitcoin’s stability.

That report also points to further savings of USD 9 billion annually due to blockchain implementation cutting down on fraud. However, the poor uptake of blockchain in the banking sector is not reflected elsewhere, with governments seemingly taking blockchain on board with great vigor and enthusiasm.

Another consideration for the banking community is regulation, according to a McKinsey report. Although G20 nations are currently attempting to forge agreements spanning international borders when it comes to blockchain and cryptocurrency, there is clearly still much to do, with the UK’s Financial Conduct Authority still yet to release its awaited conclusive report on cryptocurrency and the SEC continuing to stall on ETFs.

The report also highlights some of the practical challenges which banks will be forced to address using DLT, particularly those of security, also citing other considerations which banks will need to address in adopting blockchain such as competitiveness:

“Banks must create large networks to achieve benefits at scale, requiring data standardization and collaboration. Finally, there is the question of whether any bank would be willing to take the lead on creating a utility that offers no competitive advantage—the so-called coopetition paradox.”

A University lecturer in Switzerland Matthias Weissl has recently suggested traditional banks are being easy prey for fintech companies, by being slow and unhelpful in crucial financial services such as settlement times, access and adoption of change. Clearly, the scope for change is there if banks can remove memories of Bitcoin’s rise and fall from traditional banking’s collective psyche and look at Blockchain for what it can offer, not its associations and origins which banks clearly distrust.

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G20 Asks Global Regulators to Consider Multilateral Crypto Response

G20 Asks Global Regulators to Consider Multilateral Crypto Response

Finance leaders and their central bank counterparts at the G20 meeting in Fukuoka, Japan, have made a joint request to the Financial Stability Board (FSB) and global standards organizations to offer a cooperative response to monitor risks around crypto assets.

The document, co-signed by the leaders, urges relevant bodies to give greater focus to crypto and to consider relevant steps to be taken, including multilateral actions:

“We ask the FSB and standard setting bodies to monitor risks and consider work on additional multilateral responses as needed… [considering that] technological innovations, including those underlying crypto-assets, can deliver significant benefits to the financial system and the broader economy.”

That latter part of the sentence was a carbon copy of last year’s G20 summit in Buenos Aires, during which bullish sentiments were also expressed for blockchain. After repeating this optimism, the authors of the document did bring up remindful concerns over emerging technologies:

“While crypto assets do not pose a threat to global financial stability at this point, we remain vigilant to risks, including those related to consumer and investor protection, anti-money laundering (AML) and countering the financing of terrorism (CFT).”

This was indicative of the desire for member countries to adopt the Financial Action Task Force’s (FATF) virtual assets interpretive note and guidance for a risk-based approach to virtual currencies at its plenary later in June. The leaders also state that they reaffirm their commitment to applying the recently amended FATF standards for crypto.

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IMF Talks Up Fintech’s Disruptive Potential

lagarde, IMF, fintech

Reuters reports that the International Monetary Fund (IMF) Managing Director Christine Lagarde has issued warnings over the increasing impact and presence of global tech giants who are using big data, artificial intelligence (AI) and fintech, possibly disrupting the global financial system.

Lagarde, in her address to the G20 finance leaders meeting in Fukuoka, Japan, specifically pointed to the rapid development of financial technology (fintech) resulting in cheaper payment and settlement systems for emerging economies where traditional banking networks are bare.

She said that this development could force policymakers the world over to reconsider the way they see banking and financial settlements should be regulated and made to comply:

“A significant disruption to the financial landscape is likely to come from the big tech firms, who will use their enormous customer bases and deep pockets to offer financial products based on big data and artificial intelligence.”

She admitted that financial markets would benefit from innovation but they could centralize and make vulnerable a small system controlled by a few tech giants: “This presents a unique systemic challenge to financial stability and efficiency, and one I hope we can touch on during the G20, and address in a cooperative and consistent fashion.”

She also pointed to China as a glaring example of fintech’s various benefits and shortcomings, showing how tech growth there has been extremely successful

Lagarde said China presents an example of the trade-off between benefits and challenges posed by financial technology, where millions now benefit from access to financial products and high-quality jobs, but where only two firms now control over 90% of the mobile payments market.

The IMF has had its past run-ins with the global community with its views and stance on fintech and emerging technology such as blockchain and crypto. It has its own quasi-crypto called Learning Coin but has warned the Republic of Marshall Islands over plans to launch their own crypto and told Malta there were significant risks of terrorism with blockchain.

 

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G20 Need to Work Towards Common Crypto Standards in Osaka Conference

G20 Need to Work Towards Common Crypto Standards in Osaka Conference

The next G20 summit is sure to take another step towards finding common ground between member nations on the regulation of cryptocurrency with the Financial Action Task Force (FATF) directing the traffic.

As a precursor to the summit in Osaka, Japan on 28 June, the 36 member countries of the FATF, which includes the powerful European Commission, held its annual Private Sector Consultative Forum in Austria earlier this month in order to find some common ground on cryptocurrency.

Money laundering is often the topic of choice when the FATF meet. At the end of 2018, its president Marshall Billinglsea, who also serves as Assistant Secretary for Terrorist Financing in the United States Department of the Treasury, suggested that a global Anti-Money Laundering (AML) standard for cryptocurrencies would soon be finalized.

Although the breakdown in trade talks between US President Donald Trump and Chinese President Xi Jinping is sure to dominate the Osaka G20 the FATF is sure to want to break new ground and push cryptocurrency legislation further towards some kind of agreeable fait accompli between all G20 members and the membership of the FATF.

South Korea is happy with the concept of unified crypto regulatory standards and chairman of the country’s Financial Services Commission, Choi Jong-ku, has been quoted as saying: “Transnational cooperation is necessary to regulate virtual currencies… to minimize regulatory inconsistencies.”

Russia is another country giving the FATF proposals a green light, particularly given its own tardiness in formulating its own regulatory framework for cryptocurrency, despite calls from President Putin to get the process in his own country moving.  Spoiling the party, perhaps with a note of discontentment, is Chairman of the State Duma Committee on Financial Market, Anatoly Aksakov who maintains that “the adoption of the law on digital financial assets is ‘stuck’ because of the requirements of the FATF”.

Whatever the outcome may be on 28 June 28, a harmonization of views is clearly what is needed in order to reach the common goal, as a US House of Representatives bill noted last week, “We have fully grasped the regulatory trends of G20 countries, and cooperated with each country to achieve international harmony.”

It is left now for some of the other 20 nations to fall in line in order to achieve a common cryptocurrency regulatory policy for all nations.

 

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Japan’s Prime Minister Commissions Cryptocurrency Handbook

Japanese Prime Minister Shinzō Abe has commissioned a cryptocurrency governance manual which will be ready for the upcoming 28 – 29 June Japan G20 Summit.

The G20 summit has been selected as an ideal launchpad for the cryptocurrency handbook given the clear need to accelerate cryptocurrency regulation amongst the contributing nations in the absence of a set international plan for crypto to-date. Reports indicate that the manual includes guidance in a number of regulatory areas, including protections against cyber attacks, customer asset safeguards, and also standards for ensuring that customers receive all the information required.

On a domestic level, however, member nations have been far more proactive in the past than the international forum with countries such as Australia taking a progressive stance, such as its INFO 225 which addresses how existing Australian regulations will apply to the emerging technology. The Financial Action Task Force (FATF), an organization supported by the G20, has recommended that “all [G20] countries should provide international cooperation in relation to virtual assets and virtual asset service providers”.

It was almost a year ago the Japanese announced that the FATF would begin its cryptocurrency discussions and a rule-making session on 24 June 2018, but to date, no set plans at G20 level are in place in order to reduce money laundering and terrorism financing associated with cryptocurrency use.

Again, a year on, the Japanese are hoping that some progress can finally be made, even if it means Australia adapting some of their own successes and formulating an internationally accepted standard, once the G20 has decided what that might look like.

Another participating G20 nation, the UK, under the governance of its Cryptoassets Taskforce recently proposed amendments to its own cryptocurrency regulations, in addition to categorizing and defining different variations of crypto assets.

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FSB Releases Global Crypto Regulators List as Next G20 Meet Looms

FSB Releases Global Crypto Regulators List as Next G20 Meet Looms

The Financial Stability Board (FSB) has released its latest Directory of Crypto-Assets Regulators ahead of this week’s G20 in Washington.

The FSB is formed by an amalgamation of 68 finance departments and central banks of the G20 and was chaired last year by the Bank of England’s head Mark Varney, who has expressed his concerns about cryptocurrency on more than one occasion. The current chair is Randal Quarles who is also Vice Chairman for Supervision of the US Federal Reserve.

The Directory of Crypto-Assets Regulators provides information on the relevant regulators and other authorities in FSB jurisdictions and international bodies who are dealing with crypto-asset issues, and the aspects covered by them.

The last FSB report in October 2018 looked at Crypto-asset markets, stating then that “FSB members have to date taken a wide variety of domestic supervisory, regulatory, and enforcement actions related to crypto-assets”. The latest report stated as it has before that “crypto-assets do not pose a material risk to global financial stability at this time” but that “vigilant monitoring is needed in light of the speed of market developments”.

However, the report cited its usual concerns such as consumer and investor protection, anti-money laundering, tax evasion, circumvention of capital controls and illegal security offerings, areas which were also addressed last year in July in another FSB Crypto-assets report.

The FSB was launched after the 2008 financial crisis, designed to monitor the global financial system, and principally to encourage effective regulatory, supervisory and other financial sector policies in the interest of financial stability.

Its been reported that the G20 will also meet in Fukuoka Japan in June to discuss international cryptocurrency Anti Money Laundering regulation.

 

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Crypto Tax Returns Need Extra Care with Increasing State Scrutiny

Crypto Tax Returns Need Extra Care with Increasing State Scrutiny

Cryptocurrency investors are needing to treat their income tax returns with more care as increasing scrutiny is cast over private crypto assets as the industry continues to develop.

Many countries around the globe have revised their tax laws over the past 12 months in order to integrate cryptocurrency assets into the annual tax return procedure.

Last year, the G20 had already begun to raise the topic; in its July report, the body’s Financial Stability Board (FSB) noted that previous analysis of crypto-asset markets, which included initial coin offerings (ICOs), had brought forth awareness surrounding significant challenges such as rapid market development, lack of transparency (with regard to identity and location of token issuers), as well as governing laws for white papers and gaps in data. In Buenos Aires in 2018, a G20 statement suggested a universal approach due to cryptocurrency’s worldwide popularity, declaring:

“We will seek solutions for the international taxation issue accompanying the digitization of the economy and will continue to collaborate.”

In December last year, the UK took its own steps in order to prepare for the future, publishing a comprehensive guide detailing the circumstances or instances in which a crypto holder, trader or someone who receives payment in the form of crypto would need to pay taxes.

Those moves built on the work laid out by the UK’s Cryptoasset Taskforce (CATF), an entity comprised of the UK Treasury and the Financial Conduct Authority (FCA), who, in a bid to regulate the nascent sector, have optimistically endeavored to examine and study cryptocurrencies and blockchain technology.

In the US, the IRS has already declared that one of their core campaigns in 2019 will be to concentrate on the taxation of cryptocurrencies after an announcement to that effect on 2 July 2018.

For holders of cryptocurrencies, there are steps that can be taken to take the pain out of the process of filing tax returns regardless of location around the globe. These include keeping tabs on where cryptocurrencies were both bought and sold and keeping a good record of such transactions.

As income is clearly something that tax officials will always target, all payouts, whether for work or mining, or any cryptocurrency received as an income, should be recorded for reference and return purposes. In this regard calculating gains and losses will be important factors. There are numerous formulae online for calculating a workable capital gain calculation. Losses can also be reported in order to lower tax bills.

Crypto tax specialists are now far more common due to the global usage of digital currency and may save a hefty tax bill.

 

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