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Crypto Regulation Digest: Tether market manipulation investigation by US officials, IMF Chief report on benefits of crypto, promising study on on GDPR and Blockchain

6th November — 20th November



Report: Companies Over The Blockchain Hype: While it might be true, the hype behind blockchain technology may actually be off-putting to enterprises considering investing in the technology, according to Fortune magazine, citing a November 7 report from Forrester Research.

Report: US Officials Are Probing Tether Role in Bitcoin Market Manipulation: The U.S. Department of Justice (DOJ) is increasingly focusing a months-long investigation into crypto market manipulation on the tether stablecoin, a report says. Citing individuals familiar with the probe, Bloomberg reported that the DOJ is looking into whether crypto exchange Bitfinex and Tether Ltd. have pushed bitcoin’s price up using the stablecoin. Specific details of the investigation were not shared, and no accusations of wrongdoing have yet been made. However, concerns about tether have long existed in the public sphere, with researchers at the University of Austin publishing a study this summer linking the stablecoin’s issuance with bitcoin’s 2017 price pumps.

JP Morgan Identifies Three Companies Whose Stock Could Benefit From Blockchain: Investment bank and financial services firm J.P. Morgan Chase has identified three public companies whose stock it believes will benefit from their applications of blockchain technology, CNBC reported Nov. 8. In a note to clients, J.P. Morgan reportedly forecast that IT companies will deploy blockchain in the same way that many firms claim to benefit from machine learning and artificial intelligence. As Cointelegraph reported, some companies have started to drop using the term “blockchain,” as they believe the word is overhyped and too often used as a marketing ploy.

US Justice Dept. Investigating Bitcoin/Tether/Bitfinex Connections — Report: The US Justice Department is investigating whether the bitcoin rally that caused prices to reach the $20,000 level was, in part, caused by market manipulation. Bloomberg News is reporting that federal prosecutors are looking into a potential criminal conspiracy involving bitcoin, Tether, and its exchange Bitfinex, which has a stake in the stable coin pegged to the US dollar.

Report: France Accounts for Minor Part of Global ICO Market, While US Leads the Industry: ICOs industry in France represents a minor part of the global ICO market, according to a report on ICOs released by French financial markets regulator AMF (l’Autorité des marchés financiers). According to the recent study, the global ICO market has accounted for 19.4 billion euros ($21.8 billion) since 2014. Having experienced rapid growth since 2016, most of the market share has mainly been concentrated in 2017 and during the first three quarters of 2018, with 13.4 billion euros ($15 billion) raised within this latter period.

China’s Central Bank Wants to Put the Damper on Airdrops: Report: The People’s Bank of China (PBoC), China’s central bank, has its eyes on cryptocurrency companies that run airdrop campaigns in the country. In its most recent financial stability report for 2018, the bank said there has been a surge in the number of “disguised” Initial Coin Offerings (ICO), including the free distribution of crypto tokens through airdrops, despite its effort to clamp down on their activities.

Erik Voorhees, Salt Lending Being Investigated by SEC, Report Says: Crypto loans startup Salt Lending and former board member Erik Voorhees are said to be under investigation by the U.S. securities regulator, according to The Wall Street Journal. The news source cited “people familiar with the probe” as saying that Salt was subpoenaed by the U.S. Securities and Exchange Commission (SEC) in February seeking information on its $50 million initial coin offering (ICO) held in late 2017. Apparently under investigation is whether Salt’s crypto fundraising effort was in fact a securities offering that should have been registered with the regulator, the WSJ says, as well as how tokens were distributed to “insiders” and how the sale proceeds were spent.


IMF Chief: Crypto Should Not Be Dismissed, Can Benefit the Public With ‘Fast and Cheaper’ Transactions: The Official Monetary and Financial Institutions Forum (OMFIF) has just released their latest bulletin. Included in the 30-page bulletin is an article covering fintech, written by Christine Lagarde, head of the International Monetary Fund (IMF), a global organization focused on bringing economic health and security to people around the world. touches on the pros, cons and challenges surrounding the adoption of cryptocurrencies.

ECB Official Calls Bitcoin ‘Evil Spawn of the Financial Crisis’: European Central Bank executive board member Benoît Cœuré said this week that blockchain is promising — but that bitcoin is “the evil spawn of the financial crisis.” Speaking at the Economics of Payments IX conference, Cœuré, who is also the chair of the Committee on Payments and Market Infrastructures at the Bank for International Settlements, addressed the rising awareness of cryptocurrencies and their use as part of a broader speech on the 10 year anniversary of “the Lehman debacle.”

IBM Says Blockchain Can Power ‘Open Scientific Research’ in New Patent Filing: A patent application claims the process of conducting scientific research can benefit from the blockchain. Led by a team at IBM’s Watson Research Center, the patent application presents a vision for dynamic collaboration — one where researchers can track their work across institutional borders. It’s another non-financial application of the distributed-ledger technology, which IBM has championed in recent months. This latest patent can be thought of as an elaborate software changelog, but for science. Or, as the filing puts it, a system that provides “a tamper resistant log of scientific research.”

DOJ’s Rosenstein: Regulators Can’t Let Criminals ‘Hide Behind’ Crypto: U.S. Deputy Attorney General Rod Rosenstein has called for international cooperation in investigating crimes conducted using cryptocurrencies at an annual meeting of Interpol. Speaking at Interpol’s 87th General Assembly on Sunday, Rosenstein addressed the topic directly, saying “we must not allow cybercriminals to hide behind cryptocurrencies.”

“We Did This With Gold”: Could VanEck Be Bitcoin’s Best Bet for an ETF?: Gabor Gurbacs is confident that the approval of a bitcoin exchange traded fund (ETF) is inevitable. And he’s optimistic that the VanEck SolidX Bitcoin Strategy will be the first to deliver one to the world.

Blockchain, AI and the Legal System — Will Tech Lead The Law?

Where Crypto Regulation is Heading: Beware or Behold? by Ricky Li, Co-Founder & Head Of North America, Altonomy.

Blockchain Health Records — Fast Access Plays A Vital Role In Treatment by Connor Atchison, Project Lead And Co-Founder Of Records.OT.


Washington’s Chelan County To Increase Electricity Rates For Crypto Miners: The Chelan County Public Utility District (PUD) in Washington state has proposed a new electricity rate structure for cryptocurrency miners. The new rate structure will be similar to the current structure, referred to as Schedule 35, that cryptocurrency miners are paying right now. But the proposed structure (Schedule 36) will market on the energy price as the Chelan PUD will need to buy power on the market in order to serve the variable load associated with crypto mining. This means the costs of increased demand data mining would bring would be passed onto the crypto mining operators.

SEC Issues Statement On Tokenization And Securities Compliance Requirements: The US Securities and Exchange Commission has issued a statement regarding its position on what tokens constitute securites and require registration. In recent years, we have seen significant advances in technologies — including blockchain and other distributed ledger technologies — that impact our securities markets. This statement highlights several recent Commission enforcement actions involving the intersection of long-standing applications of our federal securities laws and new technologies.

The SEC cracks down on two ICOs, creating a template for future enforcement: Cease-and-desist orders were entered under the Securities Act of 1933 against Paragon and CarrierEQ Inc. The SEC has developed or appears to be developing a template for ICO enforcemenT. The SEC made it clear that tokens that fit within the Howey Test rubric are actually securities. It appears that the volume of enforcement actions by the SEC is set to increase.

EtherDelta Founder Charged by SEC For Operating an Unregistered Exchange: In an apparent first, the U.S. Securities and Exchange Commission (SEC) has charged the founder of EtherDelta, Zachary Coburn, with running an “unregistered national securities exchange,” according to a press release from the regulator.

Texas Regulator Issues Cease and Desist Order to Cloud Mining Company: The Texas State Securities Board has issued an emergency cease and desist order to an Australia-based cloud mining company AWS Mining PTY LTD for selling unregistered securities. AWS Mining along with its multiple agents and Chief Marketing Officer Josiah Kostek have violated the Texas Securities Act by luring the state’s residents in purchasing AWS’ unregistered cloud mining power contracts and promising a “200 percent passive return on every investment.”

Two Pro-Crypto Candidates Score Wins in US Midterm Gubernatorial Elections: Two pro-cryptocurrency candidates have won seats to become governors of the U.S. states of California and Colorado in the country’s midterm gubernatorial elections. In the California race, Democrat contender Gavin Newsom sealed 59 percent of the electorate’s support to defeat the Republican Party’s John Cox. According to local newspaper The Sacramento Bee, Newsom brought crypto onto the party political scene as early as 2014, when he became one of the first high-profile politicians to accept campaign donations in Bitcoin (BTC).

New York: DFS Grants BitLicense to Crypto Custodian: The New York Department of Financial Services (NYDFS) has issued a BitLicense to NYDIG Execution LLC, a subsidiary of New York Digital Investment Group (NYDIG LLC). In a statement published this week, the regulator revealed that the crypto custodian had been granted a virtual currency license and a money transmission license. In addition, another NYDIG subsidiary, NYDIG Trust Company LLC, has also been given permission to operate as a limited purpose trust company.

New Blockchain City in Nevada, a Gift Back to Crypto Community: Cryptocurrency millionaire and a consumer protection lawyer, Jeffrey Berns, has recently announced a new plan that might have a strong impact on the blockchain development. Berns is also a CEO of a firm called Blockchains LLC. This is a company that bought over 67,000 acres in northern Nevada earlier this year. The deal has cost around $170 million, and the reason behind the purchase remained unknown until now.

Ohio Congressman Wants to Allow ICOs to ‘Sidestep’ Securities Laws: Ohio Congressman Warren Davidson plans to introduce a bill that would allow Initial Coin Offerings (ICOs) to “sidestep” U.S. securities laws. Citing a spokesman for Davidson — Republican congressman for the 8th district of the state of Ohio — the publication reports that the prospective bill would propose that ICOs be treated as products rather than as securities at the federal and state level.

Alabama: The Unlikely Frontline for America’s Crypto Fraud Crackdown: “Of the states, I think we’ve got about 20 percent of all the active cease-and-desists.” That’s Greg Bordenkircher, the chief litigator at the Alabama Securities Commission, describing the extent to which his state, just the 24th largest by population, has nonetheless come to play a leading role in the ongoing fight against U.S. crypto fraud.

Colorado Regulators Crack Down on Four More ICOs: Colorado regulators took action against four ICOs Thursday, bringing the state’s total number of cease-and-desist orders against crypto startups to 12. The state’s “ICO Task Force” rebuked Bitcoin Investments, Ltd, PinkDate, Prisma and Clear Shop Vision Ltd. Where the companies are based is unclear, a spokeswoman for Colorado’s Division of Securities told CoinDesk, though the unregistered securities they promoted were available to Colorado residents.

Blockchain’s Power Ledger Deploys Trading Platform In Pennsylvania: Power Ledger, a decentralized energy trading platform and winner of Richard Branson’s 2018 Extreme Tech Challenge, has deployed its peer-to-peer renewable energy trading platform at licensed retail electric provider American PowerNet’s headquarters in Wyomissing, Penn.

Russian ICO That Impersonated Bank Hit With Cease-and-Desist: North Dakota’s securities watchdog has issued a cease-and-desist order against a Russia-based initial coin offering (ICO) that appeared to impersonate Liechtenstein-based Union Bank AG to promote “unregistered and potentially fraudulent securities.”


Study Finds ‘Promising’ Crypto Workarounds to Europe’s GDPR Regulation: A joint study between Queen Mary University of London and the University of Cambridge concluded that, whilst challenging, it is theoretically possible for organizations to design blockchain applications that fully comply with recently implemented EU ‘General Data Protection Regulation’. The research was published in the ‘Richmond Journal of Law and Technology’ and cited challenges such as exorbitant fines and uncertainty as major deterrents which prevent companies in the region from attempting to work with blockchain.

UK Financial Conduct Authority Warns Consumers Against Unauthorized Crypto Exchange: The UK Financial Conduct Authority (FCA) has issued a warning against an unregulated crypto exchange targeting UK consumers. In a notice the FCA said that Crypto Exchange Pro, which offers trading accounts for buying and selling major cryptocurrencies, has been providing financial services in the UK without the regulator’s authorization.

Swiss Regulator Recommends 800% Risk Coverage For Bank Crypto Trading: The Swiss Financial Market Supervisory Authority (FINMA) has advised banks that cryptocurrencies should have a risk weighting ratio of 800 percent to cover market and credit risks. FINMA issued a confidential letter to EXPERTsuisse, an association representing Swiss trustees and accountants, which explains the regulator’s current stance on cryptocurrency trading.

Malta, The ‘Blockchain Island’, Pivots Toward AI Development: In addition to the first blockchain applications reviewed by the Maltese government, the Minister of Malta, Silvio Schembri, is now entrusted with the ambitious role of positioning Malta at the forefront of Artificial Intelligence (AI) and the Internet of Things (IoT).


Cryptocurrency Included In Monetary Authority Of Singapore’s New Payment Service Regulations: The Monetary Authority of Singapore (MAS), the country’s central bank, has finalized the new regulatory framework for payment service providers. The new Payment Services Bill (PSB), moved by MAS board member and education minister Ong Ye Kung for its first reading in Parliament, will expand the scope of regulated payment services in a move to better safeguard consumers’ money, counter terrorism financing and boost cybersecurity measures. It will streamline payment services under a single legislation by combining the Payment Systems (Oversight) Act (PS(O)A) and the Money-Changing and Remittance Businesses Act (MCRBA).

Blockchain In China: Productive Disruption: Technology investing is now China’s business, and business is good. Asset management in China is one of world’s largest, crossing the 100 trillion Yuan mark last year. This is roughly about as big as the US GDP. Chinese VC firms put over 1.2 trillion Yuan into tech startups in 2017. This is equal to Greece’s GDP.

Top Crypto Exchange Huobi Pays Its Dues to Beijing by Setting up Communist Party Committee: The company behind major cryptocurrency exchange Huobi has created a Communist Party branch as part of its obligations to the Chinese state, the company’s U.S.-based subsidiary Huobi Info confirmed Nov. 16. Singapore-based Huobi has appeared to opt for “closer ties” with the government. As local news outlet South China Morning Post notes, the company is creating the Party branch at an additional subsidiary, Beijing Lianhuo Information Service (BLIS).

Bank of Thailand Governor: Digital Currency Use Won’t Replace Cash for Three-Five Years: The governor of the Bank of Thailand (BoT) has said that it will take three to five years for countries to switch from using cash to using digital currencies.

Thailand’s Deputy Prime Minister Advocates for More Cryptocurrency Regulations: The Deputy Prime Minister of Thailand, Wissanu Krea-ngam, has called for the enhancement of cryptocurrency regulations in the country. Wissanu argued that there was a need for more domestic and international legal measures to be put in place to prevent the misuse of cryptocurrencies. Bangkok Post reported that Wissanu urged terrorism and anti-money laundering experts not to be complacent. Instead, the Thai English publication reported, they ‘should update their knowledge so they will not lag behind criminals’.

Japan’s Financial Services Agency To Introduce Crypto Wallet Regulation: Japan’s Financial Services Agency (FSA) is planning to introduce regulation for crypto wallet service providers. During the FSA’s ninth cryptocurrency study group meeting last week, officials discussed regulatory measures for cryptocurrency wallet services, including the maintenance of internal control systems, management of cryptocurrencies belonging to the service providers and customers, audits of financial statements, publication of policies in the event of stolen funds in a hack, and maintaining funds to repay customers.

Police Arrest 8 Over Alleged $68 Million Crypto Pyramid Scheme in Japan: Police in Tokyo have arrested eight men alleged to have run a cryptocurrency pyramid scheme that collected 7.8 billion yen (almost $69 million) from thousands of victims across the country. According to a report from The Asahi Shimbun on Wednesday, the men were suspected by the police of breaking the country’s financial laws by not registering their business with the regulators and using cryptocurrencies to mask their actions.

Blocko runs blockchain-based micro-payments for Bank of Korea: Korea’s central bank and issuer of the South Korean won, Bank of Korea, has begun exploring blockchain-based micropayment settlement infrastructure. The bank is looking to find out how effective microtransaction settlements on distributed networks could be with regards to making transaction outputs happen faster and saving costs. To this effect, Blocko has begun facilitating micropayments for the Bank of Korea for a total duration of two months.

State of Regulation in South Korea: Banks Required to Provide Fair Services to Crypto Exchanges: South Korea’s main financial authority officially cleared banks to work with crypto exchanges for the first time in history, establishing a major milestone for the local cryptocurrency sector. At the state affairs audit, held by both government parties of South Korea to evaluate and track the progress of every government branch and agency under the administration of President Moon Jae-in, Financial Services Commission (FSC) commissioner, Choi Jong-ku, stated that the FSC has cleared banks to work with cryptocurrency exchanges by providing virtual bank accounts.

Rest of the World

Canadian Parliament Committee Suggests Crypto Regulation To Prevent Money Laundering: The Finance Committee of Canada’s lower house is urging the government to dramatically change the way it regulates cryptocurrencies to prevent their use in money laundering. In its recent report titled Confronting Money Laundering and Terrorist Financing: Moving Canada Forward, the committee recommended three significant ways the government should monitor cryptocurrencies. The first recommendation is to regulate crypto exchanges at the point that fiat currency is converted so as to establish these exchanges as money service businesses (MSB). The committee’s second recommendation is for the government to establish a regulatory regime for crypto wallets so as to ensure that proper identification is required, and that true ownership of wallets is known to the exchanges and law enforcement bodies if needed. The committee’s last recommendation is for the government to establish a license for crypto exchanges in line with Canadian law and look to the US state of New York’s Bitlicense program as a model for best practices.

Australia’s Biggest Bank Trials Blockchain-Based ‘Smart Money’ for Disability Insurance: The Commonwealth Bank of Australia (CBA) and government-run digital innovation center Data61 have released the results of their trial for a blockchain-powered “smart money” system for Australia’s National Disability Insurance Scheme (NDIS).

Indian Government to Present Draft Bill on Crypto Regulation in December, Documents Show: The Indian government is actively preparing a draft bill on crypto regulation, which is expected to see light this December. The government has filed a counter-affidavit Nov. 19 in the Supreme Court of India, which is currently hearing a case filed by several crypto exchanges against the Reserve Bank of India (RBI). The document states that the Indian finance ministry panel, responsible for the draft and headed by secretary in the department of economic affairs Subhash Chandra Garg, will present its first version in December.

Iran Banks Cut Off From SWIFT System, Could Turn To Cryptocurrency: In a move that may provide a prime test for blockchain and cryptocurrency’s power to circumvent sanctions, the SWIFT system has cut off access to Iranian banks.

Central Bank of Azerbaijan Rules Out Issuing Cryptocurrency: The Central Bank of Azerbaijan (CBA) has indicated that it does not intend to issue a state-backed cryptocurrency, also known as a central bank digital currency (CBDC). CBA first Chairman Alim Guliyev stated that the Bank treats cryptocurrencies conservatively, based on a belief that the use of digital currencies and similar financial instruments “comes with great risks”. According to Guliyev, cryptocurrencies are often used for money laundering, which is a major reason why the CBA does not intend to launch a CBDC anytime soon. This comes some months after CBA Chairman Elman Rustamov issued a warning to the Azerbaijani population at large, urging them to exercise caution in dealing with “risky and dangerous” cryptocurrencies.

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Paradigm is an ecosystem that incorporates a venture fund, a research agency and an accelerator focused on crypto, DLT, neuroscience, space technologies, robotics, and biometrics — technologies that combined together will alter how we perceive reality.

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