Crypto Regulation News: SEC Again Delays Decision on Bitwise Bitcoin ETF Approval, Liechtenstein’s Government Passes New Regulation, Germany Plans Major Regulation Effort This Year

Paradigm
Paradigm
May 20 · 17 min read

6th May — 20th May

Reports

Despite Industry Pushback, G20 May Impose Stricter KYC Policy on Exchanges: On May 6th and 7th, 2019, in Vienna, the FATF met and spoke with cryptocurrency businesses as part of its annual private sector consultative forum, hosted by the United Nations Office on Drugs and Crime (UNODC), and chaired by the president of the FATF, Marshall Billingslea from the United States. Over 300 private sector representatives, including cryptocurrency companies, participated in the forum. In a publication addressing the event, the FATF speaks of “fruitful dialogue with a multi-stakeholder group of virtual assets market players.” Yet, despite public industry pushback, there has so far been no indication that the intergovernmental task force is about to change its position on stricter KYC rules for cryptocurrency service providers. While the draft recommendation is not final yet, there is so far also no indication that the draft will be adjusted. This would mean that the stricter KYC rules will have to be adopted across G20 countries.

Facebook Registers Secretive ‘Libra’ Cryptocurrency Firm in Switzerland: Facebook registered a new company, Libra Networks, in Geneva. This coincides with the slow roll-out of their internal cryptocurrency that will define the company’s first foray into blockchain technology. Facebook Global Holdings is a stockholder in the new company and it will, according to Reuters, “provide financial and technology services and develop related hardware and software, plans submitted on the Swiss register reveal.” Facebook’s march towards crypto has been slow and steady. The company’s latest move, the hiring of two Coinbase compliance managers. The Libra project has ruffled some feathers in Congress, as well. US lawmakers sent an open letter to the company seeking clarification on the currency’s purpose and implications.

Opinions

Bitcoin Critic and US Congressman Brad Sherman Calls for Bill to Ban Crypto: Congressman Brad Sherman, an outspoken critic of Bitcoin, is calling for a bill to ban all cryptocurrencies. The House Democrat from California says he’s looking to introduce legislation that will make it illegal for Americans to buy and sell crypto assets, an effort he believes will protect the country’s standing as a political and economic powerhouse.

2020 Bitcoin President Andrew Yang Pledges ‘Fun with Crypto in the White House’: Cryptocurrency is firmly on the agenda in the 2020 presidential race (and no, I’m not talking about John McAfee). Pro-bitcoin candidate Andrew Yang is quietly rising through the stacked Democrat field as a serious contender for the White House. In a keynote speech at the Consensus conference yesterday, he doubled down on his crypto agenda. “If I’m in the White House, oh boy are we going to have some fun in terms of the cryptocurrency community.”

Bakkt CEO Kelly Loeffler Targets July for Thrilling Bitcoin Futures Launch: It’s finally happening. The Intercontinental Exchange (ICE), the parent company of Bakkt, has officially filed for bitcoin futures approval with the U.S. Commodity Futures Trading Commission (CFTC), according to a blog post this morning by Bakkt CEO Kelly Loeffler. Although the CFTC hasn’t approved the new platform yet, Loeffler seems confident it will, stating: “…bitcoin futures will be listed on a federally regulated futures exchange in the coming months.”

SEC’s Crypto Czar Says Exchanges That List IEOs May Face Legal Risks: Certain exchanges that facilitate initial exchange offerings (IEOs) may be breaking U.S. securities laws, a top Securities and Exchange Commission official has said. Speaking Monday at CoinDesk’s Consensus 2019 conference in New York, Valerie Szczepanik, the SEC’s senior advisor for digital assets and innovation, said cryptocurrency exchanges that facilitate token sales for a fee likely meet the legal definition of securities dealers if the issuer or any of the buyers are based in the U.S. As such, they need to follow the registration and licensing requirements for broker-dealers, alternative trading systems (ATS) or national securities exchanges. And if they’re not, they’re going to be in hot water, according to Szczepanik.

Crypto Mom Scolds SEC for ‘No Meaningful Action’ to Spark Crypto Industry: ‘Crypto Mom’ and SEC commissioner, Hester Peirce, has extended yet another olive branch to the cryptocurrency community. Speaking at the Securities Enforcement Forum in California on May 9th, Peirce said officials should be wary of stifling creativity with overzealous regulation. However, she also suggested a lack of regulation could have a similarly negative effect on the crypto space. According to Peirce, the responsibility now falls solely on the SEC to apply clear guidelines to the still nascent industry.

SEC Commissioner Fears ‘Heel-Dragging’ Will Stifle Crypto Innovation: Hester M. Peirce, a member of the Securities and Exchange Commission, is worried that the regulator is moving too slowly for the crypto ecosystem. Addressing fellow regulators at the Securities Enforcement Forum in Palo Alto, California (the heart of Silicon Valley) on Monday, Peirce said that one year ago she was concerned that the SEC “as one of [the token market’s] potential regulators, would stifle its growth.” She wryly added: “I will admit today that I was very wrong, not about whether the SEC would stifle the industry’s growth — it has — but in how it would do it.”

Senior SEC Official Amy Starr: Securities Laws Are ‘Written to Be Dynamic’: Securities laws are “written to be dynamic,” a senior official at the United States securities regulator claimed in a recent panel at Consensus 2019 on May 13. Amy Starr, chief of the office of capital markets trends at the U.S. Securities and Exchange Commission (SEC), expressed the regulator’s willingness to interact with local crypto and blockchain-related businesses in order to gain a better understanding of how securities laws can be applied in various cases. Speaking at a panel titled “Perspectives on SEC engagement concerning digital assets,” Starr noted a high level of integration with the crypto industry and the SEC, particularly citing the engagement via the SEC’s Strategic Hub for Innovation and Financial Technology, as well as a number of peer-to-peer meetings conducted by the SEC’s “Crypto Czar” Valerie Szczepanik.

Russian Prime Minister: As Cryptocurrencies Lose Popularity, Regulation Isn’t a Priority: Crypto regulation is not a priority for the Russian government since cryptocurrencies have lost their popularity, the Russian prime minister has recently argued. Prime minister Dmitry Medvedev’s comments were reported by Russian news agency Fontanka on May 16. According to Medvedev, cryptocurrencies are not that interesting for the population anymore, which decreases the need for the adoption of crypto regulations. He said: “The popularity of cryptocurrencies has decreased so far, which likely makes the regulation issue not that relevant already.”

Free Markets and the Future of Blockchain by J. Christopher Giancarlo, a Chairman at U.S. Commodity Futures Trading Commission, the agency of the US government that regulates futures and options markets.

Underestimating Just How Many Subpoenas I Would Get — Steve Beauregard: Steve Beauregard of the Bloq talks about his favorite work: answering subpoenas.

Getting Your Bank Account Frozen for Bitcoin — HODL Guy: Mike the HODL Guy describes his first experience buying Bitcoin and the resulting freeze on his bank account.

USA

Minnesota Representative to Reintroduce Hard Fork Tax Reform Bill: Minnesota Congressional Representative Tom Emmer has announced plans to reintroduce a bill meant to “provide temporary safe harbor for the tax treatment of hard forks of convertible virtual currency in the absence of administrative guidance.” Representative Emmer participated in a panel on the relationship between government and the crypto industry at Consensus 2019 on May 13, 2019, wherein he first announced an attempt to continue the fight for his hard fork bill. Joined by industry leaders and government personalities, Emmer publicly acknowledged the sort of limbo that crypto holders find themselves in when one of their cryptocurrency holdings undergoes a hard fork. When a coin forks in such a way, tax agencies currently have grounds to consider the new “forkcoin” assets as undeclared income.

SEC Delays Bitcoin ETF Decision, BitGo Moves on BTC Custody Ahead of Bakkt, eToro Adds Gold and Silver Stablecoins: The U.S. Securities and Exchange Commission (SEC) has delayed its decision on the Bitwise exchange-traded fund (ETF) proposal filed with NYSE Arca. Palo Alto-based BitGo, a security and custody solutions company holding roughly $2 billion in crypto for its clients, has announced a new service for institutional investors. It will now provide an off-chain settlement and clearing system to minimize the risks associated with trading and moving large volumes of crypto assets. The social trading platform eToro is adding two new stablecoins pegged to gold and silver to its crypto asset exchange eToroX.

SEC Slaps Blockchain Author Alex Tapscott, Firm With Fines Over Securities Violations: The U.S. Securities and Exchange Commission (SEC) has fined blockchain author Alex Tapscott and his investment firm NextBlock Global over securities violations. The SEC says that Canada-based NextBlock had been offering securities that were not registered with the SEC “in any capacity” and that false misrepresentations were made about the firm when soliciting investors. The agency has therefore ordered Tapscott, co-author of the book “Blockchain Revolution,” to pay a $25,000 penalty and also issued a cease-and-desist on further securities violations by him or his firm. The SEC said it had taken into account the remedial acts “promptly undertaken” by Tapscott and NextBlock when agreeing the terms of the settlement. It also said that, following the firm’s payment of a 700,000 Canadian dollar (roughly US$520,000) administrative penalty, it had not imposed a further civil penalty on the company.

SEC Negotiations Have Cost Kik $5 Million, Says CEO: Kik’s CEO says the company has spent $5 million engaging with the U.S. Securities and Exchange Commission (SEC) over what the regulator claims was an unregistered securities sale.Kik, a messaging platform founded by Canadian entrepreneur Ted Livingston in 2010, raised $98 million in an initial coin offering (ICO) at the end of 2017 to support its kin cryptocurrency and ecosystem. The SEC later indicated the sale may have violated U.S. securities laws, and that SEC staff would recommend bringing an enforcement action against the company. Livingston told CoinDesk at Token Summit in New York that this hasn’t happened yet, but that both his firm and the regulator have been in talks since late 2017.

Tether and Bitfinex Ask New York Attorney General for Fund Accessibility: Attorneys for Tether and Bitfinex are hoping to get the former access to its reserves amid a legal dispute with New York Office of the Attorney General (NYOAG). In a letter sent to the New York County Supreme Court, attorneys representing iFinex (the parent organization of Bitfinex) and Tether took issue with the restrictions that had been placed on Tether’s transactions with related parties as part of an ongoing case against them, stating that the NYOAG had no basis for disallowing tether (USDT) holders and other affiliated entities from redeeming their tokens.

Floyd Mayweather, DJ Khaled Escape Lawsuit Brought By ICO Investors: Boxer Floyd Mayweather, music producer DJ Khaled and two employees of an ICO project have been dismissed from an investor lawsuit by a federal judge. According to a new court document, an omnibus order on motions to dismiss by Mayweather, Khaled, Steven Sykes and Steven Stanley, all of whom promoted or participated in the Centra Tech initial coin offering, was filed by federal Judge Robert Scola, of the Southern District of Florida. Scola said the plaintiffs failed to prove that they had bought Centra’s CTR tokens as a result of the defendants’ actions. Mayweather and Khaled both notably promoted Centra Tech’s offering, encouraging their respective fanbases to participate in what was later deemed to be an unregistered securities sale. They, along with Sykes and Stanley, were sued by investors in the offering, who alleged that the defendants violated securities law.

Boston Fed Announces Plans To Design a Blockchain ‘Supervisory Node’: The Federal Reserve of Boston is starting a new blockchain experiment this summer. The Massachusetts state regulator has been one of the earliest and most involved government bodies to dip their toe into the new technology. It has been quietly developing blockchain systems since 2016 but has said very little about their plans. Now the first results of those trials are out and the Boston Fed published a white paper on its proof-of-concepts on ethereum and Hyperledger Fabric. Now it’s getting ready for the next stage, Boston Fed’s vice president of IT Paul Brassil told CoinDesk. The team is going to look into possible opportunities to set up a “supervisory node,” a regulatory surveillance tool that should be able to connect to various banking blockchains in the future. This node will watch the money flows and settlements between different banks, Boston Fed’s senior vice president Jim Cunha said.

Crypto-Friendly US Congress Members Join New Fintech Task Force: The U.S. House of Representatives is launching a new task force aimed specifically at financial technology — including blockchain. The new task force, referred to as the FinTech Task Force, was established by the House Financial Services Committee by a voice vote Thursday, and will examine blockchain and cryptocurrency tools, among others. The task force will be headed up by Massachusetts Rep. Stephen Lynch. Its initial list of issues includes regulating fintech from both domestic and international perspectives; lending and using “alternative data” for loan underwriting; examining the legal and regulatory frameworks for payments, as well as the infrastructure; and data privacy.

Crypto Investor Awarded Over $75 Million in SIM-Swapping Hack Case: U.S.-based cryptocurrency investor and entrepreneur Michael Terpin has won over $75 million in a lawsuit related to a SIM-swapping fraud. Terpin filed the case against 21-year-old Nicholas Truglia earlier this year, saying the Manhattan resident had defrauded him of cryptocurrencies after gaining control of his cellphone number. California Superior Court has now ordered Truglia to pay Terpin $75.8 million in compensatory and punitive damages, Reuters reported Saturday citing court documents. Terpin had complained of losing three million unspecified cryptos via the hack in early 2018, which were worth $23.8 million at the time, according to the report. In a SIM-swap scam, hackers pose as the owners of victims’ mobile phone numbers, convincing telecom providers to grant them access to their calls and messages by issuing a SIM with the same number. In this way, they can gain access to important accounts, such as those held at crypto exchanges.

Europe

Cryptocurrencies Pose No Threat to Financial Stability: EU Central Bank: The European Central Bank (ECB) has said that cryptocurrencies are currently not a threat to financial stability in the euro zone. In its latest paper on the subject, published Friday, the ECB said the combined value of crypto-assets is small relative to the financial system, and “linkages” to the financial sector are still limited. Further, there are banks in the EU do not appear to have “systemically relevant” holdings of crypto-assets. The ECB also said cryptocurrencies do not perform the functions of money. A “very low” number of merchants currently allow buying of goods and services with bitcoin, and there is no “tangible impact on the real economy” or on monetary policy.

Liechtenstein’s Government Passes New Regulation Concerning Blockchain and Tokens: The government of Liechtenstein announced that it has passed new tokenization, virtual asset service provider and blockchain regulation in a press release published on May 8. Per the release, the new Token and VT Service Providers Act, passed on May 7, aims to improve investor protection, combat money laundering and establish clarity. The announcement also cites tokenized securities and how digital token systems can be used to tokenize real-world assets. The new law reportedly regulates “transaction systems based on trust technologies,” instead of explicitly referring to blockchain, to make sure it will stay relevant in case a new technology emerges. The author of the release expects that tokenization will “create new opportunities in the areas of financial services, logistics, mobility, the energy industry, industry and the media” in new token economies.

Germany Plans Major Digital Token Regulation Effort in 2019: Germany plans to introduce draft regulations allowing blockchain bonds as soon as this summer, local daily business news outlet Handelsblatt reported May 9. Citing Thomas Heilmann, the ruling coalition government’s dedicated blockchain correspondent, the publication revealed the new legislation has already gained mainstream momentum, with a summary paper already in existence. According to Heilmann, it is both necessary and advantageous for Germany to embrace blockchain with supportive regulation. “We consider it to be of paramount importance that we bring blockchain technology forward for Germany, specifically in 2019,” Handelsblatt quoted him as saying.

French Regulatory Agency Sees 14,000% Surge in Crypto-Related Scam Enquiries Since 2016: The French stock markets regulator AMF has seen over a 14,000% surge in enquiries related to fraudulent crypto offers in 2018 as opposed to 2016, the agency wrote in a new annual report released May 7. In the report, the Autorite des Marches Financiers (AMF) specified that the number of enquiries associated with crypto-related scams online has surged to over 2,600 in 2018 from only 18 similar enquiries back in 2016. With that, the amount of fraudulent online offers in other industries such as foreign exchange (forex) and binary options have significantly decreased, the AMF noted. As such, fraudulent offers concerning investment in forex and binary options triggered a total of 3,768 enquiries in 2016, with the number having decreased to 968 enquiries in 2018.

Estonian Consulting Firm Claims It’s Harder to Get a Crypto License Following Regulation: Estonian consulting firm Eesti Consulting OÜ has claimed that it is getting harder to get a cryptocurrency license in Estonia in a press release published on May 16. The Estonian government’s Ministry of Finance introduced changes to the licensing process on May 3. The new regulations adds a numbered formal obligation, extends the processing time from 30 to 90 day and establishes the requirement for a company or branch to be incorporated in Estonia. Furthermore, the registered office address and the board of directors now needs to be located in Estonia, and the state fee for the emission of the license has been increased from €345 ($386) to €3,330 ($3,729).

A Landmark for the Blockchain Island by Silvio Schembri, a Junior Minister for Financial Services, Digital Economy and Innovation within the Office of the Prime Minister of Malta. Malta becoming the “Blockchain Island” is no longer a distant dream but a reality, which — within a very short time frame and through our tireless commitment to incorporate, use and embrace this new, emergent technology — has propelled our country to the forefront of the blockchain sphere; reaffirming our position as a main point of reference for other countries that will inevitably follow. The latest announcements by the Malta Financial Services Authority (MFSA) and the Malta Digital Innovation Authority (MDIA) were highly significant for investors and operators who are looking at establishing their operations and headquarters in Malta. It was an important achievement for the Blockchain Island when the MFSA approved the first Virtual Financial Assets (VFA) agents, later followed by the MDIA issuing the first accreditation of System Auditors of Innovative Technology Arrangements. Both VFA agents and the system auditors have a huge responsibility in their hands, as they will act as the gatekeepers of this emergent industry, which the Malta Government estimates will be as big as the gaming sector in a few years’ time.

Asia

Paying the Price: WeChat Merchants Banned From Crypto Payments: On May 7, Dovey Wan, founding partner of crypto investment firm Primitive Ventures tweeted that the Chinese social media behemoth and payment service provider WeChat is set to ban merchants from making cryptocurrency payments. This ban marks the latest effort to stymie cryptocurrency usage in China, with the government also mulling over ways of greatly decreasing the presence of crypto mining on its soil.

Huobi Launches OTC Desk for Institutional Investors: Major global crypto exchange Huobi has launched a regulated over-the-counter (OTC) trading desk for institutional investors, according to a blog post on May 15. The new OTC crypto trading platform, Huobi OTC Desk, is fully regulated by the Gibraltar Financial Services Commission (FSC), and enables major fiat-to-crypto and crypto-to-crypto trading pairs. Unlike the existing Huobi’s OTC retail products, the new OTC trading desk enables a principal OTC trading process under Huobi Technology, Huobi’s regulated OTC trading entity in Gibraltar, while the existing OTC offering on otc.hbg.com enables peer-to-peer (P2P) tradings under Huobi Global, the firm clarified.

Rest of the World

Proposed Securities Framework Wrong for Regulating Crypto Exchanges, Argues Kraken: Canadian exchange Kraken has published a paper arguing against proposed regulation of crypto assets by the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC). Kraken says that the proposed framework considers the contractual arrangement between an exchange and an exchange user as a security. Kraken denies that these contracts constitute securities.

Bahamas Securities Regulator Proposes Rules for Token Sales: The Bahamas’ securities regulator is pushing for a new framework for token projects, aiming to turn the island nation into the jurisdiction of choice for blockchain startups. The Securities Commission of the Bahamas has filed a draft of the new bill regulating token offerings not deemed securities. The bill lays out a procedure for registering such offerings and informing authorities and investors on the details of a token sale. According to Rolle, the regulator is receiving a lot of comments and the consultation period will likely be extended for another month. Once it’s over, the document will be passed to the government of the Bahamas, and then to parliament. If everything goes as planned, the legislation may be passed this autumn, Rolle said.

BitOasis Clears Hurdle in Bid to Launch Regulated Crypto Asset Exchange: Dubai-based crypto exchange BitOasis is one step closer to launching a regulated custodian and trading platform in United Arab Emirates after receiving an in-principle approval (IPA) from the nation’s financial regulator. The bitcoin startup announced that the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) had granted it the IPA, clearing a regulatory hurdle for the company. It now has to satisfy specific requirements for the IPA in order to receive a license before it can begin offering services. Still, BitOasis contends that the IPA is still significant, and may help it become the first regulated exchange and custodian for crypto assets in the Middle East.

Indian Crypto Exchange Coinome Halts Services Citing Regulatory Pressure: Indian cryptocurrency exchange Coinome has announced it will be halting operations as of May 15, ostensibly due to regulatory difficulties. The development was announced in an official tweet from the exchange on May 9. As Cointelegraph has reported, exchanges in the country have faced a moratorium on banking services since the central bank, the Reserve Bank of India (RBI), implemented a ban on dealings with crypto businesses last year. Recent weeks have seen a further shake-up of community sentiment, with local media alleging in late April that various government divisions are considering tabling an absolute ban on crypto in all its forms — although the veracity of the rumors remain contested given other prior reports.

India’s Complex Relationship With Crypto: India has a strong and passionate community of crypto enthusiasts, however, their steadfast belief in the value of cryptocurrency does not appeared to be mirrored in the diverse organs of the Indian state. Cointelegraph takes a deep dive into the latest developments in the Indian crypto sector and speaks to the experts determined to stick out this turbulent period for investors.


This is not financial advice.

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Paradigm fund

Paradigm is a family office fund investing in crypto space since 2013. We are a group of industry experts & crypto enthusiasts consisting of PhDs and graduates from the top universities with experience in creating startups, trading on traditional financial markets and blockchain

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In chaos lies the truth

Paradigm fund

Paradigm is a family office fund investing in crypto space since 2013. We are a group of industry experts & crypto enthusiasts consisting of PhDs and graduates from the top universities with experience in creating startups, trading on traditional financial markets and blockchain