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Crypto Regulation News: Connecticut to Legalize Blockchain Smart Contracts, Germany Aims to Govern Bitcoin and Crypto Tech, Major News on Russian Regulation

25th February — 11th March

Interesting

  • Connecticut Lawmakers Seek to Legalize Blockchain Smart Contracts
  • Germany Aims to Govern Bitcoin and Crypto Tech by Deploying New Government-Run System
  • Major News on Russian Regulation

Reports

Bitcoin Terrifies Banks: Hypocritical JP Morgan is Blacklisting Crypto Firms: Per a Bloomberg report, JP Morgan still refuses to bank cryptocurrency businesses. The Wall Street giant even shut down the account of Kraken — one of the world’s largest and most-secure cryptocurrency exchanges.

Big Four Auditor PwC Publishes Crypto Insolvency Guide, Cautions Directors: Big Four audit and consultancy firm PwC Hong Kong has published guidance for financially distressed or insolvent businesses in the crypto sector. The document tackles the complexities specific to the nascent industry, in particular in regard to asset valuation and multi-jurisdictional operations. PwC notes that the two parameters used to determine a company’s financial viability — cash flow and balance sheet assessment — may be more difficult to ascertain in the case of crypto assets, whose volatility complicates a clear-cut valuation.

FATF Issues Preliminary Guidelines on Digital Assets to Combat Money Laundering: The Financial Action Task Force (FATF), an intergovernmental organization that develops policies against money laundering, has published preliminary guidelines for cryptocurrencies on its website. According to the organization, the new text of the Interpretive Note to Recommendation 15 — which contains requirements for regulating and supervising digital asset services providers — has been finalized.

Opinions

US State Dept. on Blockchain: Sometimes Gov’t Should ‘Stay out of the Way’: A United States senior government official said that the country was closely monitoring global approaches to blockchain in a speech at the 4th Annual DC Blockchain Summit.

Ex-IBM Chair: No Solution Yet Found to Bring Public Blockchains Under EU Privacy Laws: Sam Palmisano — retired IBM chairman and current chairman of United States nonprofit The Center for Global Enterprise — says he doesn’t know of a solution that has been found to make public blockchain networks compatible with European data privacy laws. Palmisano made his remarks during a joint interview for Bloomberg Markets with David Kappos, partner at U.S. law firm Cravath, Swaine & Moore.

European Regulatory Chair Supports New Digital Asset Regulations: The chairman of the European Securities and Markets Authority (ESMA) — the European Union-level financial markets supervisor — has said that he supports further regulations on digital assets. Delivering his speech at the FinTech Conference 2019 last week in Brussels, Chairman Steven Maijoor reportedly outlined the need to apply regulations to digital assets in order to help investors. He also expressed his support for expanding Europe’s Anti-Money Laundering (AML) requirements to include those involved in the exchange of one crypto asset to another, and not just the exchange between crypto and fiat currency.

French President Says Blockchain Could Put Europe at ‘Vanguard’ of Innovation: French President Emmanuel Macron has called for increased use of data technologies such as blockchain in the EU to boost the agriculture industry and address concerns over food traceability. Inaugurating the 56th International Agricultural Fair in Paris, Macron spoke of the need to authenticate and track agricultural products amid growing consumer concerns over issues such such as the recent Polish beef scandal, saying: “Let’s do this in Europe, [be at the] the vanguard of agricultural data by developing tools that will track every product from raw material production to packaging and processing.”

SEC’s ‘Crypto Mom’ Sounds Note of Caution About National Action Plans: A blockchain-friendly member of the U.S. Securities Exchange Commission (SEC) sounded a note of caution in response to an industry lobbyist’s call for a national strategy for the technology. “If we want the United States to be a leader in advanced technology we have to take action,” Perianne Boring, who founded the Chamber, said in her opening remarks at the organization’s D.C. Blockchain Summit last week. “It is time the United States introduced a national strategy for blockchain.”

The Right Way to Do Blockchain Consortiums by Randy Wilson, a partner in Digital Risk at Deloitte.

Will Fiat-Backed Stablecoins Pass Legal Muster With the SEC and CFTC? by Benjamin Sauter and Jake Chervinsky of Kobre & Kim LLP, litigators and government enforcement defense attorneys who specialize in disputes and investigations related to digital assets.

USA

The SEC’s Guidelines and Statements Show That It’s Slowly Learning to Accept ICOs on Cointelegraph: Initial coin offerings (ICOs) may be less fashionable than security token offerings (STOs) right now, but that hasn’t stopped the United States Securities and Exchange Commission (SEC) from keeping its beady eye trained firmly on them. Ever since it published its investigation into the decentralized autonomous organization (DAO) in July 2017 and declared that ICO tokens can be (and often are) securities, it has been producing a variety of guidelines and warnings on ICOs for investors.

Federal Reserve May Add Bitcoin Crash to Stress Test Scenarios: The U.S. Federal Reserve could soon include a cryptocurrency market crash as one of the risks to take into account when conducting supervisory stress tests. The Fed’s board of governors announced amendments to a policy statement on the scenario design framework for stress testing, saying that “the collapse of the bitcoin market” may be considered as one of the “salient” market risks. The crypto amendment was recommended to the board by a commenter who proposed it should be seen as one of several “extraordinary shocks,” such as a war with North Korea and major losses caused by trader misconduct.

Connecticut Lawmakers Seek to Legalize Blockchain Smart Contracts: The U.S. state of Connecticut could soon legalize the use of blockchain smart contracts in business. The Commerce Committee of the Connecticut General Assembly filed house bill 7310, proposing that blockchain smart contracts should be authorized for commerce in the state. The bill would, in effect, give equal rights to firms that use smart contracts on a blockchain or distributed ledger with those that use more traditional methods to secure information in connection with a transaction.

Colorado Lawmakers Eye Blockchain Tech for Water Rights Management: Lawmakers in Colorado want the U.S. state to study the potential of blockchain technology in water rights management. Republican senator Jack Tate, along with representatives Jeni James Arndt (Democratic) and Marc Catlin (Republican), filed senate bill 184, proposing that the Colorado Water Institute should be granted authority to study how blockchain technology can help improve its operations. The institute, an affiliate of Colorado State University, should study various use cases of blockchain tech, including water rights database management, the establishment of water “banks” or markets, and general administration, according to the bill.

Utah Bill Would Exempt Blockchain Firms from Money Transmitter Act: A lawmaker from the U.S. state of Utah has introduced a bill that would stop blockchain firms from being classed as money transmitters. Republican senator Daniel Hemmert filed senate bill 213 last week, proposing that any person who “facilitates the creation, exchange, or sale” of certain blockchain-related products should be exempted from the state’s Money Transmitter Act. The bill also aims to create a legislative group called the “Blockchain Pilot Project Evaluation Task Force” to study the potential of the technology in government services.

California Introduces New Bill to Regulate Bitcoin and Crypto Businesses, Calls for $50,000 Penalty for Violations: Assembly Majority Leader Ian Calderon has introduced Assembly Bill 1489, which would govern virtual currency business activity that takes place with or on behalf of residents. The bill is similar to New York’s BitLicense, and would require companies to go through an approval process to conduct crypto-related activities in the state.

US State Moves to Exempt Some Blockchain Tokens from Securities Rules: Lawmakers in the U.S. state of Rhode Island are seeking to exempt blockchain tokens from securities laws for some use cases. Five Democratic and Republican senators jointly filed house bill 5595, proposing that the Rhode Island Uniform Securities Act should be amended to state that developers or sellers of “open blockchain tokens” are not deemed as issuers of securities and are exempt from the act.

Crypto Skeptic Massachusetts Secretary Creates Fintech Advisory Group: The office of the Secretary of the Commonwealth of Massachusetts, which oversees the state’s securities regulator, has reportedly formed a fintech advisory group. The office of Secretary William Gavin has reportedly formed a group comprising representatives from Eastern Bank in Boston, a blockchain firm called Arwen, academics and legal experts, and other firms. The group will focus on developments in the fintech industry, including digital currencies.

Mark Karpeles Fails to Halt US Court Case Over Mt Gox Losses: Mark Karpeles, the former CEO of bankrupt bitcoin exchange Mt. Gox, has been refused a motion to stay a U.S. court case brought by former investors. Earlier Karpeles had filed the motion to stay in “light of ongoing civil rehabilitation proceedings in Japan that are likely to provide full recovery” to the plaintiffs, Gregory Greene and Anthony Motto. The plaintiffs brought the case saying that they hold Karpeles “personally liable” for any losses they occurred from their investments in bitcoin made through Mt. Gox.

US Government Returns Bitcoins Retrieved Following 2016 Bitfinex Hack: Bitfinex has announced that some of the bitcoins stolen in a major 2016 hack have been returned after they were retrieved by the U.S. government. In a blog post published last week, the exchange said that 27.66270285 BTC — worth just over $104,000 at time of writing — have been received from the U.S. government, and come as the result of U.S. law enforcement efforts.

Blockchain Advocacy Coalition Sponsors Bill to Allow Crypto for Legal Cannabis Tax: Activist group Blockchain Advocacy Coalition (BAC) has sponsored a bill in California’s 19th State Assembly District, set to allow legal cannabis businesses in the district to pay their state taxes using cryptocurrency. If put into law, it would affect California’s many cannabis businesses.

2 Nevada Senate Bills Signal State Is Open For Blockchain Business: Blockchain-related bills SB162 and SB163 were recently heard in the Nevada Senate. Members of the Nevada Senate’s Committee on Judiciary heard two blockchain-focused bills introduced by Senator Ben Kieckhefer (R): SB162 and SB163. Although Nevada does not prohibit blockchain technology or otherwise restrict its usage, the two bills provide clarifying language to, as the bill proponents explain, signal that Nevada understands and embraces blockchain and is open to economic development opportunities related to the technology. In a way, the bills could be considered enabling legislation.

US Attorney Charges Siblings Responsible For OneCoin Pyramid Scheme: The US Attorney for the Southern District of New York (SDNY), announced charges against several people behind OneCoin for allegedly operating a multibillion-dollar pyramid scheme involving the sale of fraudulent cryptocurrency.

Ripple Scores Minor Victory in US Securities Class Action: A judge has ruled that an ongoing class action lawsuit against Ripple must remain in federal court, potentially giving the payments firm a slight advantage going forward.

Europe

German Finance Ministry Calls for Regulated Blockchain Securities Market: The German Ministry of Finance has recommended that the country recognize blockchain-based securities as a legitimate form of financial instrument and regulate them as such. In a paper, the agency said securities can be issued in electronic form and shouldn’t have to be documented on paper. “German law should generally be opened up for electronic securities, i.e. the currently mandatory documentary embodiment of securities (paper form) should no longer apply without restriction,” the paper said, according to a Google translation from German.

Europe’s Largest Economy Aims to Govern Bitcoin and Crypto Tech by Deploying New Government-Run System: Lawmakers in Berlin, Germany are proposing a government-run electronic register that will regulate the blockchain sector. The proposal could impact everything from cars to pharmaceuticals, as players in different industries move their market processes onto blockchain-based platforms.

Swiss Crypto Market Secures Banking Access: Massive Growth Ahead?: Guido Buehler, a former UBS executive and the CEO of Seba, the first bank in Switzerland offering both traditional banking and crypto services, has said the crypto community of Switzerland would gain access to stable banking services. Even for a company like Seba founded by a group of high-profile former bank executives, it was extremely difficult to obtain a banking partner.

73% of UK Consumers Say They Don’t Know What Cryptocurrency Is: Seventy-three percent of U.K. consumers don’t know what a cryptocurrency is or are unable to define it, according to a new survey from the country’s financial watchdog, the Financial Conduct Authority (FCA). The research indicates that those who are most aware of cryptocurrencies are likely to be men aged between 20 and 44. The survey, which polled 2,132 British consumers in association with London-based market research firm Kantar TNS, further found that only 3 percent of those surveyed had ever bought cryptocurrencies.

London Stock Exchange Leads $20 Million Fundraise for Blockchain Startup Nivaura: Capital markets blockchain startup Nivaura has raised a total of $20 million with the closing of its second seed extension round led by the London Stock Exchange Group (LSEG). Other investors in the latest round include Santander InnoVentures, the Spanish bank’s VC arm; law firms Linklaters and Orrick; Transamerica Ventures, part of pensions and asset management giant Aegon; MiddleGame Ventures; Digital Currency Group; and Spencer Lake, formerly head of global markets at HSBC.

UK Financial Watchdog Warns Against Firm Claiming to be Authorized With FCA: The British financial regulator, the Financial Conduct Authority (FCA), has issued a warning against illegal crypto-related firm Next Coin Market. According to the FCA, Bulgaria-based Next Coin falsely claims to be authorized with the U.K. financial authority to offer cryptocurrency-related services to British residents.

Asia

Thai SEC Bans Three Cryptocurrencies from ICO Investment, Trading Pairs: Thailand’s financial markets regulator has banned several cryptocurrencies as a means to invest in ICOs and as a base in trading pairs. The country’s Securities and Exchange Commission (SEC) issued rules last July, mandating that any entity seeking to conduct a token sale must first file for an application for its approval. At the time, the SEC said that only Thailand’s national currency, the baht, and seven cryptocurrencies can be used to invest in ICOs: bitcoin (BTC), bitcoin cash (BCH), ether (ETH), ether classic (ETC), litecoin (LTC), XRP and stellar (XLM).

Crypto Money Laundering Reports Spiked in Japan Last Year, Police Say: Reports of suspicious cryptocurrency transactions in Japan soared last year, the country’s police agency has said. The National Police Agency (NPA) has released data indicating that cryptocurrency exchanges reported 7,096 cases of suspicious transactions in 2018. That figure is a hefty 961 percent greater than the previously reported number of 669 cases for the shorter period of April to December 2017. It is also almost 20 percent higher than the reported figure of 5,944 cases in the first 10 months of 2018.

Report: Singapore’s Wealth Fund GIC Among Those to Raise $300 Mln for Coinbase in 2018: Singapore’s Government Investment Corporation (GIC) was reportedly one of the investors to have helped raise $300 million for major United States crypto wallet provider and exchange service Coinbase in 2018. Bloomberg reported the news on Feb. 28, citing anonymous sources familiar with the matter. According to its official website, GIC — which was founded to manage Singapore’s foreign reserves — has in excess of $100 billion assets in over 40 countries worldwide.

North Korea Hacking Crypto Exchanges to Circumvent Sanctions: UN Panel: North Korea has been carrying out major cryptocurrency hacks to bypass economic sanctions, according to a United Nations (U.N.) Security Council expert panel report. This is the first time the panel has detailed North Korea’s illicit cryptocurrency activities. The country has had severe economic sanctions imposed over its nuclear and missile programs, which have impacted its exports of coal and thus its foreign exchange earnings. The panel estimates that North Korea carriedp out successful attacks on Asian cryptocurrency exchanges at least five times between January 2017 and September 2018, with losses totaling $571 million.

Rest of the World

Canadian Federal Tax Agency Targets Bitcoin Investors: The Canada Revenue Agency (CRA) has apparently been specifically targeting bitcoin and crypto investors as part of its broader tax strategy to keep tabs on their cryptocurrency investments, including how they purchase these assets. Forbes reported on this story in early March, detailing some of the tactics of the CRA, which include audits and questionnaires. In addition to subjecting cryptocurrency investors to audits, many of these same users have also been sent “comprehensive questionnaires to fill out regarding their bitcoin-related activity over the past years.” Reportedly, some sixty audits are actively ongoing.

Australian Regulator Trials Blockchain to Automate Transaction Reporting: An Australian financial regulator is trialing blockchain technology to automate reporting of cross-border transactions by institutions. The Australian Transaction Reports and Analysis Centre (AUSTRAC) has partnered with the Swinburne University of Technology in Melbourne to build a prototype for the trial. The two partners will specifically examine how blockchain and smart contracts, as well as other technologies, can help entities such as banks to automate reporting of international funds transfer instructions (IFTIs) to the regulator.

Regulators in Israel Eye Crypto to Give Traditional Trading a Big Boost: Israel’s top securities regulator is recommending the creation of a cryptocurrency trading platform with enhanced regulation. A committee at the Israel Securities Authority (ISA) says the move would allow companies to engage in fundraising through the issuance of digital tokens. The committee’s recommendation follows two years of studying blockchain and cryptocurrencies — and after 10 years of watching traditional trading activity in Tel Aviv decline. As a result, ISA is looking for more ways to attract investors.

Brazilian Court Rules Santander to Return $350,000 to Crypto Exchange Mercado Bitcoin: The Court of Justice in the Brazilian state of São Paulo has dismissed the appeal made by Banco Santander against cryptocurrency exchange Mercado Bitcoin, and ruled that the bank should return funds to the company. Previously, the bank reportedly closed the exchange’s account, claiming that its activity was incompatible with its policy and froze the funds. The Brazilian exchange took action through the courts against the closing of its account, claiming that the freeze of its funds was unjustified.

Indian Supreme Court Gives Government Deadline to Reach Decision on Crypto Regulations: The Supreme Court of India made a decision to present the government with an ultimatum: Develop crypto regulations within the next four weeks or the court will make its own judgement. In addition to setting this deadline, the court has refused to hear further argument from parties in the ongoing legal battle, instead forwarding the issue to the Union of India, the legal term for the federal government of India.

Bahrain Could Squeeze India to Re-Open its Crypto Market and Legalize Bitcoin: Bahrain has invited cryptocurrency companies in India to relocate to Bahrain as a part of the country’s initiative to establish a fintech hub. The Bahrain Economic Development Board (EDB) is set to provide crypto businesses with a wide range of resources including proper banking solutions and practical regulatory frameworks to support growth and innovation.

Bahrain Central Bank Releases First Crypto Exchange to Graduate Its Regulatory Sandbox: Bahrain-based Shariah compliant cryptocurrency exchange Rain has first completed the Central Bank of Bahrain’s (CBB) Regulatory Sandbox. Rain, which was founded in 2016, has reportedly become the first digital currency exchange to complete the sandbox. The exchange reportedly passed a Shariah compliance certification, which was led by a leading Sharia consultancy and audit firm licensed by the central bank of Bahrain, the Shariyah Review Bureau (SRB).

A New York Bank is Opening Accounts for Bermuda’s Crypto Startups: Cryptocurrency startups in Bermuda can now open bank accounts in New York. The Government of Bermuda announced that it is partnering with New York-based Signature Bank. Per the release, the deal will allow the island nation’s FinTech companies to access US banking services.

Neema CEO: Marshall Islands Digital Currency Needs Work to Satisfy US Regulatory Concerns: The Marshall Islands’ government upcoming digital currency, which will be launched in partnership with Israeli startup Neema, still needs work in order to placate United States financial regulators. While the release of the coin, dubbed the Sovereign (SOV), is scheduled for later this year, The Times of Israel notes that the U.S. regulators are concerned about a possible negative impact on the existing banks in the country, as well as potential for money laundering.

Russia

Vladimir Putin Orders Russia to Adopt Crypto Regulations and Develop Digital Economy: Russian president Vladimir Putin has set a firm deadline for the country to begin enforcing regulations on cryptocurrencies, starting this year: July 1st. A new document from Putin’s official office requires the lower house of the country’s Federal Assembly to implement new regulations designed to develop the country’s digital economy and include a legal framework for how digital assets are regulated.

Moscow Introduces Bill To Use Blockchain For E-Voting: The new platform is intended to fight voter fraud and keep votes anonymous. Officials in Moscow, Russia, submitted a bill focused on using blockchain technology for elections to the Moscow City Duma, the regional parliament, according to an article published in Tass.

Russia’s Crypto Users May Need Special ID: The prospective amendments to Russia’s crypto regulations are meant to fight money laundering and promote legal crypto adoption. Officials from Russia’s Duma Committee on Financial Markets hope to implement a mandatory identification process for users of cryptocurrency, according to a March 7 report in local Russian news outlet Izvestia.

Russia to Introduce Special Crypto Regulations for ‘Russian Offshores’: The new set of measures in respect to the development of “Russian offshores” will affect digital assets. The Russian Ministry of Economic Development is reportedly working on the third set of measures for the development of so called “Russian offshores” — places where companies can legitimately be exempt from paying taxes or follow relaxed regulations, — which will include a special regulation of digital assets and shipping.

Former Minister of Russia Launching Cryptocurrency to Challenge US Dollar and Bypass Restrictions: Russia’s former Minister of Energy Igor Yusufov has reportedly announced an oil-backed cryptocurrency to bypass trade and financial restrictions. Yusufov’s investment corporation Energia is in the final stages of developing the road map for its digital asset. Yusufov believes the cryptocurrency could affect the US dollar’s influence in the international community and help countries deal with fiat price fluctuations.

This is not financial advice.

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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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