Regtech Digest (16 September 2020)
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Our Top 5 Articles From the Week
FATF Reveals Key Indicators of Suspicious Crypto Transactions
The Financial Action Task Force (FATF) has revealed the main indicators of fraudulent transactions on the cryptocurrency market. In a recent report titled “Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing,” the inter-governmental watchdog claims that the so-called “red flag indicators” are based on more than one hundred case studies contributed by jurisdictions from 2017–2020. [Coindesk]
Nigeria to Regulate Crypto-Currencies to Protect Investors
Nigeria’s Securities and Exchange Commission said it will regulate trade in digital currencies to provide protection for investors and to ensure that transactions are transparent. “The general objective of regulation is not to hinder technology or stifle innovation, but to create standards that encourage ethical practices,” the Abuja-based regulator said Monday in an emailed statement. The agency said it’s obliged to regulate “when the character of the investments qualifies as securities transactions.” [Bloomberg]
Austria FMA Blacklists More Crypto Brokers as Regulation Takes Effect
The Financial Markets Authority (FMA) of Austria has warned the country’s residents to exercise caution while dealing with FX and cryptocurrency broker, Raxtrade/ROI STOCK LIMITED. The FMA said this provider, which claims to be licensed and regulated in Vincent and the Grenadines, is not entitled to provide investment advice about financial instruments under local laws. [Finance Magnets]
Russian Ministry Proposes to Amend Law Banning Crypto Transactions
Authorities in Russia continue the game of ping pong in regulating cryptocurrencies like Bitcoin (BTC) even after passing the country’s first crypto law. Russia’s Ministry of Finance has reportedly proposed a set of amendments to the law “On Digital Financial Assets,” or DFA, which bans many operations with crypto. The proposed amendments envision a “blanket ban on any operations with virtual money for individuals and individual entrepreneurs” except for three scenarios. The ministry reportedly wants to ban all crypto transactions except the obtaining of assets through inheritance, bankruptcy, and enforcement proceedings. [Coin Telegraph]
German Regulator Now Requires License for Digital Currency ATMs
The German Federal Financial Supervisory Authority, or BaFin, has announced new measures under the Banking Act that require licensing and permissions for the installation and operation of digital currency ATMs. According to a notice on the regulator’s website, digital currency ATMs constitute banking business, which means they fall within their regulatory remit. “Proprietary trading is a financial service and financial commission business is a banking business, for which prior approval from BaFin is required.” [Coin Geek]
Merkle Science News
Hack Track: ETERBASE Cryptocurrency Exchange
Similar to Upbit’s hack, the ETERBASE hack is another case where the stolen cryptocurrency stored in a hot wallet (where the private keys are available in a database connected to the internet) that did not require multiple signatures (multi-sig) by operators of the exchange to sign an outgoing transaction. Therefore the hackers are able to retrieve the wallet’s private keys and sign the subsequent outgoing transactions without significant challenges.
Coinbit Seizure: Examining Why New Cryptocurrency Exchanges Conduct Wash Trading
Wash trading enables newly formed exchanges to gain a large market share within a few months and this has become a lucrative shortcut to marketing success for many young exchanges. For example, in the case of Coinbit, the exchange is accused of using multiple “ghost accounts” to inflate trading volume. According to estimates, up to 99% of Coinbit’s trading volume is said to have been manipulated between August 2019 to May 2020, which resulted in “unfair profits” of about US$84 million equivalent.
About Merkle Science
Merkle Science provides blockchain transaction monitoring and intelligence solutions for cryptoasset service providers, financial institutions and government agencies to detect, investigate and prevent the use of cryptocurrency for money laundering, terrorist financing, and other criminal activities. Merkle Science is headquartered in Singapore with offices in Bangalore, Seoul, and Tokyo and backed by Digital Currency Group, Kenetic, SGInnovate, and LuneX.
