Crypto Regulation Update — July 2019
This update is brought to you by Bridge Protocol (BRDG) as part of a series on cryptocurrency regulations.
Bridge is a RegTech company specializing in identity services and compliance for Know-Your-Customer (KYC), Anti-Money-Laundering (AML) and identity verification on/off the blockchain.
Read last month’s update here.
United States
- Kik Vs Securities and Exchange Commission (SEC) is official. The SEC is suing Kik, in New York, for running an unregistered securities sale when it conducted its Initial Coin Offering (ICO) for its token KIN, in 2017. The lawsuit was filed on June 4 and can be found here. The SEC claims that Kik violated Section 5 of the Securities Act of 1933. The SEC paints a “hail mary” picture of a desperate company trying to find a buyer, failing and then deciding to launch a token raise.
Ted Livingston, CEO of Kik, has publicly stated that Kik is ready to go toe-to-toe with SEC and fight their case. Livingston has stated that he is aware of the greater implications for the entire crypto industry and is taking the fight on his own shoulders. Previously, Kik had already provided a ‘Wells Response’ to the SEC, contesting the agency’s allegations.
It is also important to note that at this moment in time the SEC is only taking civil action against Kik and no criminal filings have been pursued.
2. SEC seeks blockchain and data provider to monitor risk and improve compliance. Attached here is the posting. Some of the high-level needs are the Bitcoin and Ethereum Networks; Bitcoin Cash, Stellar, Zcash, EOS, NEO, and XRP Ledger are secondary needs. Requirements and need are transaction hash, timestamps, balances (sent/receiving) and block heights to name a few.
3. Facebook announces Libra crypto project. Facebook announced their stablecoin called “Libra.” It will partner with its bank in Geneva for “Calibra.” This will provide partners like Visa, Mastercard and others to use the token in exchange for fiat for payment of services and operation on the network.
Upon the release of this news, Maxine Waters (D-CA) demanded Facebook stop all development of the Libra Crypto Project until more information can be provided and approved by regulators. The letter was sent by the House Financial Services Committee and Mark Zuckerberg and C-Level team are listed as addressees.
3. Celsius faces scrutiny over their ICO and token-interest payments. Celsius, a crypto lending startup, has suspended distribution of its native token to its U.S. members, citing legal advice.
The firm, which sold CEL tokens for $50 million in an ICO in March 2018, sent an email to its American users explaining that interest payments in the token (CEL) had been paused with immediate effect, saying the move had been prompted following instruction “from legal counsel.” Legal advisors say that using the token to pay interest to customers make them look more like a security than utility.
4. U.S. customers to be blocked from trading on Binance.com. Well it is official; after removing U.S. customers from the DEX service, Binance is now closing off Binance.com from U.S. customers.
Binance, the largest crypto-to-crypto exchange by volume, has announced that it will stop serving U.S. individuals and corporate customers on its main platform, Binance.com. 15% of their traffic comes from U.S. customers.
5. “Crypto Dad,” J. Christopher Giancarlo leaves the Commodity Futures Trading Commission (CFTC). His attention to emerging markets like crypto, earned him the moniker on many news outlets. The U.S. Senate approved Heath Tarbert as the next chairman of the CFTC.
WorldWide
- The Financial Action Task Force (FATF) has released new guidance laying out standards to combat money laundering and terrorism. The international organization has introduced new rules for virtual asset service providers (VASPs) and rules that create they must both obtain and transfer beneficiary information. The finalized guidance requires exchanges to gather and transfer originator name, originator account number (the VA wallet), originator’s location information, beneficiary name and beneficiary account number (their VA wallet). This is now being dubbed as the “travel rule.”
It is important to note this regulation is not binding, but the participating G20 nations have affirmed their intention to uphold these guidelines. Those nations that fail, risk isolating themselves from the group.
2. The U.K. Financial Conduct Authority (FCA) has announced its proposal to ban the sale of cryptocurrency derivatives and exchange traded notes to retail investors.
The FCA said it thinks these products are “ill-suited” to retail consumers due to their “extreme volatility.” The products’ underlying assets having “no reliable basis for valuation,” cyber theft and lack of sufficient understanding among retail investors are some other reasons, the regulator said.
3. China’s Biggest Payment Firms have no plans to follow Facebook… just yet. Pony Ma, the CEO of Tencent, the parent company of social messaging and payments app WeChat, said Wednesday that he thinks regulation will be the deciding factor for the success of Facebook’s Libra initiative.
