Jul 27, 2020

14 min read

Crypto Regulation News: US Treasury bureau declares national banks can custody crypto, Bitcoin is now considered “money” under D.C. law, UK Treasury unveils plan to clamp down on crypto promotions, Russia’s newly passed crypto bill provides legal status to cryptocurrency

Vol. 48, 13th July — 27th July

TL;DR

Blockchain security company traced more than $1.4 billion of laundered money to top ten crypto exchanges.
The U.S. Office of the Comptroller of the Currency (OCC) has opened the door for federal savings associations and national savings banks to hold cryptocurrencies on behalf of their customers.
A D.C. court ruled that Bitcoin is money during a recent legal case, although the classification in this context already exists under legal expectations in much of the country.
The U.S. Food and Drug Administration has announced it will study blockchain technology to aid in smarter food security.
Two related cryptocurrency firms have fallen foul of U.S. financial regulators for entering into illegal off-exchange swaps in digital assets and foreign currency.
Grayscale Investments says the US Financial Industry Regulatory Authority (FINRA) has given the green light for its Bitcoin Cash Trust (BCHG) and Litecoin Trust (LTCN) to be quoted in over-the-counter (OTC) markets.
PayPal is offering a glimpse at its stance on digital assets amid reports that the payments giant is preparing to allow its users to buy, sell and store cryptocurrency.
The UK government has unveiled a plan to clamp down on crypto promotions in an effort to protect retail investors.
The central bank of France is about to start several experimental trials centering the digital euro.
Malta is taking a more holistic approach to its digital economy, combining blockchain with other “niche sectors.”
Japan’s central bank — the Bank of Japan (BoJ) — confirmed last Monday it has created a new division to research and study the issuance of digital currency.
China’s Supreme Court has called to strengthen property laws pertaining to digital currency, network virtual property and data.
China’s central bank may test digital yuan on Meituan Dianping’s food delivery platform with 435 million users.
The Monetary Authority of Singapore (MAS) has proposed new stricter rules for crypto businesses, in line with the Financial Action Task Force (FATF) standards.
South Korea has finalized a new 20% tax rate for income generated from crypto trading.
Indian Prime Minister Narendra Modi has publicly endorsed blockchain as an investment opportunity.
Russia’s newly passed crypto bill finally provides a legal status to crypto, but does not allow it to be used as a payment method.
Jamaica’s central bank has invited technology solution providers to develop and test a potential CBDC.
Gibraltar Finance, the business development arm of Gibraltar’s government, will provide support to the forthcoming Post-COVID Hackathon.
Examining COMP’s ability to pass the Howey test for being qualified as investment contracts and to be considered a security.

And more!

Reports

More Than $1.4 Billion of Laundered Money Has Moved Onto Crypto Exchanges This Year: Blockchain security company traced more than $1.4 billion of laundered money to top ten crypto exchanges.

Research Suggests STOs Are Better at Financing Startups than ICOs: Faculty at the Rotterdam School of Management argue that STOs are better for financing startups than ICOs.

State lawmaking at the heart of blockchain regulatory evolution: A deep-dive into the state of rule-making and guidance around cryptocurrencies and blockchain applications among U.S. states.

Grayscale Says Bitcoin ETF Only a Matter of Time: Grayscale’s managing director talks inevitability of a Bitcoin exchange-traded fund, or ETF.

PayPal Reveals New Insight on Potential Plans to Add Crypto ‘Capabilities’: PayPal is offering a glimpse at its stance on digital assets amid reports that the payments giant is preparing to allow its users to buy, sell and store cryptocurrency.

In a letter submitted to the European Commission, the payments processor says it is tracking developments in the digital assets industry as it works to understand the crypto space and how the blockchain technology can provide financial solutions.

“Of particular interest for us is how these technologies and crypto-assets can be utilized to achieve greater financial inclusion and help reduce/eliminate some of the pain points that exist today in financial services. We also have great interest in how these technologies can be used to promote transparency and enhance compliance efforts.”

PayPal says it started taking a serious interest in crypto when it joined the Facebook-led Libra Association last year, with the intention of learning how blockchain can help provide financial services to the unbanked.

“Since the project’s inception, PayPal has taken unilateral and tangible steps to further develop its capabilities in this area, and therefore — without questioning the value of the project — took the decision not to participate in the Libra Association and to continue to focus on advancing our existing mission and business priorities to democratize access to financial services.”

YouTube: We’re Not Liable for Crypto Scams: Lawyers for the video-sharing platform argue that because Ripple impersonators were third-parties it has no liability.

AMFEIX Investors Raise Concerns About Massive Pending Withdrawal Requests: Investors tell us that something has gone wrong within a once-hot crypto company.

Major Victim of Cryptopia Hack Prepares to Sue Liquidator Grant Thornton: The tale of hacked exchange Cryptopia’s extended liquidation is poised to see new legal action from a major creditor and token issuer.

Opinions

Coinbase CEO Says Bitcoin and Cryptocurrency Must Evolve to Reach Mass Adoption: Coinbase CEO Brian Armstrong thinks Bitcoin and crypto must evolve and become easier to use before widespread adoption can take place.

In a new interview with Peter McCormack, the host of the What Bitcoin Did podcast, Armstrong, who co-founded the leading US crypto exchange, says BTC needs to follow the internet’s lead in terms of usability.

“We have not taken any unnecessary risks with [Bitcoin], and we have ensured that it is going to probably survive the test of time as the gold standard, and we may find other solutions with scalability with layer two. I guess the other way to look at it is, ‘What would have happened if we had found a way to safely scale it?’ Maybe we would not have had a need for some of these other chains that have come up and divided focus.
I do think it has harmed the usability of cryptocurrency a little bit that even when people come to Coinbase, and there are so many different coins, they have to think about, ‘Well, if I want to use DeFi I’ve got to find this other protocol and learn about it.’ It has increased the learning curve for new people to get into cryptocurrency. And one of my big beliefs is we need to actually make it dramatically easier to use before it will get to a billion people. And I really want it to get to a billion people.
It is kind of like the internet — if you needed to understand IP addresses and DNS to even use the internet, probably not that many people would have. They needed to get it so simple where it is just like click a link on a web browser.”

US Lags Behind Other Nations Regarding CBDCs, Says Former CFTC Commissioner: According to former CFTC Commissioner Sharon Bowen, the U.S. is behind other nations working on a CBDC.

Hester Peirce says she disagreed with the SEC’s Telegram enforcement approach ‘from the beginning’: SEC commissioner Hester Peirce said that she disagreed with the Telegram enforcement action and later settlement “from the beginning.”

A Bitcoiner Is Behind the Recent Banking Crypto Clarity: Recent regulatory approval for banking crypto custody comes after a Coinbase alum took a prominent seat as the Acting Comptroller of the Currency for the the Office of the Comptroller of the Currency, or OCC — a U.S. banking regulator.

“There’s one major change that occured over the last 60 days,” Morgan Creek Digital co-founder Anthony Pompliano said in a July 23 episode of his YouTube show, Lunch Money.

Apple Co-Founder Steve Wozniak Sues YouTube Over Crypto Scams: Apple co-founder Steve Wozniak has joined the legal fray in suing YouTube over fake crypto giveaways using his image.

Ripple’s Garlinghouse Says China Leads US in Crypto Regulatory Outlook: Ripple’s CEO said China is ahead of the United States in terms of crypto regulatory thought.

Cryptocurrencies Could Undermine Obsolete Laws, Says Cybersecurity Expert: According to Pavol Luptak, “cryptocurrencies or crypto markets may undermine government laws and regulations that are obsolete for the 21st digital century.”

Could Compound’s Governance Token COMP Be Deemed a Security? Examining COMP’s ability to pass the Howey test for being qualified as investment contracts and to be considered a security.

Crypto Tax Disclosures Can Help With Internal Revenue Service: Disclosure sounds like it exposes you to extra IRS audit risk, but if it’s done properly, disclosure can actually reduce your risk.

USA

Top US Regulator Says Banks Can Hold Bitcoin (BTC) and Cryptocurrency on Behalf of Customers: A top US banking regulator says national banks can provide custody and safekeeping services for cryptocurrencies like Bitcoin (BTC).

In a new letter, the Office of the Comptroller of the Currency (OCC) says banks “may offer different methods of providing cryptocurrency custody services, depending on their expertise, risk appetite, and business models”.

The OCC says banks must comply with relevant laws, such as those that involve money laundering, if they want to hold crypto assets on behalf of their customers. It also urges those interested in the business to discuss the matter with regulators before launching the services.

“Because national banks are authorized to perform safekeeping and custody services for physical assets, national banks are likewise permitted to provide those same services via electronic means (i.e., custody of cryptocurrency).”

Acting Comptroller of the Currency Brian Brooks says banks should be allowed to hold BTC and other cryptocurrencies to meet the financial services needs of their customers.

“This opinion clarifies that banks can continue satisfying their customers’ needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency.”

Industry startups cheer the OCC’s crypto custody move, but don’t bet on big banks jumping into bitcoin just yet: Crypto startups see opportunity in the OCC custody announcement. But it doesn’t mean Wall Street is ready to play ball just yet.

New Ruling Classifying Bitcoin as ‘Money’ Isn’t Anything Special: A D.C. court ruled that Bitcoin is money during a recent legal case, although the classification in this context already exists under legal expectations in much of the country.

The US Army Wants to Track Cryptocurrency Transactions — Here’s Why: The U.S. Army Criminal Investigation Command (USACIDC) is looking for a web-based application that will allow it to trace cryptocurrency transactions.

According to public records, the U.S. Army is looking to enhance its cryptocurrency investigative capabilities. The Army says it needs the application to limit criminal activities where cryptocurrencies are involved.

“The U.S. Army Contracting — New Jersey (CC-NJ) located at Fort Dix, NJ is surveying the market for potential contractors capable of providing one license for one user of a cloud, web-based application capable of assisting law enforcement to identify and stop actors who are using cryptocurrencies for illicit activity such as fraud, extortion, and money laundering.”

The Army says it needs to track Bitcoin and other top cryptocurrencies that could be used for illicit activities.

“Application must enables [sic] users to conduct in-depth investigation into the source of cryptocurrency transactions and provides [sic] multi-currency analysis from Bitcoin to other top cryptocurrencies…
This is a requirement for an already developed web-based application that meets the requirements of the attached Statement of Work (SOW).”

Many government agencies are looking to enhance their cryptocurrency tracing capabilities. Recently, Coinbase was awarded a multiyear contract by the Secret Service.

The period for the Army contract will be a minimum of 1 year with up to 4 additional years based on the needs of the agency.

US FDA Considers Blockchain for Food Security: The U.S. Food and Drug Administration has announced it will study blockchain technology to aid in smarter food security.

Coinbase and other crypto exchanges are designing a P2P system for sharing user info under FATF rules: An effort is underway that has brought together U.S. crypto exchanges to design a collective solution for complying with Financial Action Task Force (FATF) rules on sharing customer data.

US State of Texas Saddles Up to Become the Next Blockchain Capital: Texas ups its aspirations to become the go-to place for crypto in the U.S., forming a new blockchain council and highlighting the state’s mining capabilities.

Texas Man Allegedly Used $1.1M in COVID-19 Relief Funds to Buy Crypto: U.S. authorities have accused a man of securing COVID-19 relief funds to invest in cryptocurrency.

US Regulators Take Joint Action Against Crypto Firms’ Swaps Offering: Two related cryptocurrency firms have fallen foul of U.S. financial regulators for entering into illegal off-exchange swaps in digital assets and foreign currency.

Crypto app maker Abra settles with CFTC and SEC over off-exchange digital asset swaps, registration violations: The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly announced Monday that they had settled charges with Abra, a crypto investment app maker.

U.S. senator seeks answers from Jack Dorsey on Twitter account compromises: U.S. Senator Josh Hawley sent a letter to Twitter CEO Jack Dorsey last week in what appears to be the first political response to the Twitter account attack.

Europe

UK Treasury Unveils Plan to Clamp Down on Crypto Promotions: The UK government has unveiled a plan to clamp down on crypto promotions in an effort to protect retail investors.

HM Treasury, the UK government’s economic and finance ministry, says it is currently looking for feedback on its proposals to regulate cryptocurrency promotions. According to the agency, cryptocurrencies have the potential to expose investors to “unacceptable levels of risk.” HM Treasury identifies three areas of risk including consumer protection, market integrity, and financial crime.

The UK government says they are targeting crypto asset promotions because they are often inadequate or misleading.

“Adverts often overstate benefits and rarely warn of volatility risks, the fact consumers can both grow and lose their investment, and the lack of regulation. There are also examples of regulated firms marketing cryptoasset products without clarifying that this part of their business is not regulated”.

French Central Bank Picks Accenture, HSBC and Others for Digital Euro Pilot: The central bank of France is about to start several experimental trials centering the digital euro.

Scratch ‘Blockchain Island,’ Malta Now Wants to Become a Digital Enclave: Malta is taking a more holistic approach to its digital economy, combining blockchain with other “niche sectors.”

Gibraltar Gov’t Partners With Post-COVID DLT Hackathon: Gibraltar Finance, the business development arm of Gibraltar’s government, will provide support to the forthcoming Post-COVID Hackathon.

Romania Is on the Way to Blockchain and Crypto Regulation: The European Union’s 5AMLD has been adopted as the first regulation in Romania of virtual currencies, crypto-wallets and fiat-crypto exchange platforms.

Asia

Chinese Supreme Court Favors Strengthening Cryptocurrency Property Rights: China’s Supreme Court has called to strengthen property laws pertaining to digital currency, network virtual property and data.

China to Test Digital Yuan on Food Delivery Platform With 435 Million Users: China’s central bank may test digital yuan on Meituan Dianping’s food delivery platform with 435 million users.

Chinese Energy Supplier Deploys Blockchain Node in State-Run Network: Gansu province is now connected to the state-run Energy Zone Blockchain public service platform.

BSN to Continue as One Interconnected Network, Initiative Member Said: Red Date Tech CEO says BSN has not split up but rather working in different groups with different governing structures.

Global Banks Reportedly Limit Service in Hong Kong for Political Reasons: Global banks are scanning clients in Hong Kong on potential political ties amid protests over China-initiated national security law.

Singapore regulator proposes new stricter rules for the crypto sector: The Monetary Authority of Singapore (MAS) has proposed new stricter rules for crypto businesses, in line with the Financial Action Task Force (FATF) standards.

Japanese Financial Watchdog Appoints New Commissioner: Ryozo Himino, the International Financial Deputy Counselor at Japan’s financial watchdog, will take over as the agency’s new commissioner.

Japan: Bitcoin-friendly central bank creates digital currency division: Japan’s central bank — the Bank of Japan (BoJ) — confirmed last Monday it has created a new division to research and study the issuance of digital currency.

Japanese Liquid Exchange to Delist Zcash to Get Licensed in Singapore: Liquid exchange plans to delist major privacy coin Zcash in an effort to play nice with Singaporean regulators.

Japan’s Financial Watchdog Whitelists OMG Network Token: The addition of the OMG Network token on Japanese crypto exchange GMO Coin indicates that the digital asset has been approved by regulators.

South Korea Finalizes Cryptocurrency Income Tax of 20%: South Korea has finalized a new 20% tax rate for income generated from crypto trading.

South Korea Might Soon be Spending Billions on Blockchain Development: President Moon Jae-in wants to allocate billions of dollars to strengthen industry 4.0 technology.

South Korean Police Investigate Who Leaked the Crypto Tax Bill: Sejong police are investigating who leaked details of the government’s crypto tax bill before it was formally announced.

Korean Exchanges Struggle With Expansion Amid Uncertain Regulations: Cryptocurrency exchanges in Korea shrink within national boundaries due to lack of regulatory clarity.

Binance Isn’t Permitted to Operate in Malaysia, Local Regulator Says: Binance is said to be “operating a recognized market” without authorization from the Malaysian regulator.

Rest of the World

Department of Justice unveils fraud charges against three people involved in PlexCoin ICO: The U.S. Justice Department said Friday that three residents of Quebec have been charged by a grand jury in Cleveland, Ohio, on fraud charges related to an $8 million cryptocurrency initial coin offering (ICO).

Coinsquare’s Leadership Forced Out After Wash Trading $5.5B: The CEO, President, and the COO of Canadian exchange Coinsquare have stepped down following an agreement with the Ontario Securities Commission.

Two OneCoin Promoters Found Dead in Mexico: Two promoters of $4 billion crypto exit scam OneCoin have been found dead in Mexico.

Bank of Jamaica Invites Tech Companies to Test Digital Currency Solutions: Jamaica’s central bank has invited technology solution providers to develop and test a potential CBDC.

Indian PM Backs Blockchain as ‘Frontier Technology’: Indian Prime Minister Narendra Modi has publicly endorsed blockchain as an investment opportunity.

India’s Former Finance Secretary Spars With Industry Experts on Crypto Ban: For the first time, the former Finance Secretary of India who proposed a blanket ban on cryptocurrencies discussed digital assets with industry leaders.

Russian Lawmakers Finally Pass Country’s Major Crypto Bill: Russia’s newly passed crypto bill finally provides a legal status to crypto, but does not allow it to be used as a payment method.

Wirecard Exec Reportedly Used Bitcoin to Move Funds to Russia: Russian media reported that Marsalek is hiding in Russia with funds that he was able to transfer there with Bitcoin.

Missing Wirecard Exec Found in Belarus; Russia’s FSB Involvement Suspected: Russian intelligence might have a lot to do with helping former Wirecard COO Jan Marsalek disappear into thin air.

Russian Cybercrime Surged 25x in 5 Years, Says Local AG: Russian cybercrime is up 92% since last year.

Ukrainian Ministry Plans to Track Crypto Transactions With Bitfury: Ukraine’s Ministry for Digital Transformation will be tracking illicit crypto transactions with a crypto analytics startup backed by Bitfury.

Kazakhstan Needs National Crypto to Fight Corruption, Says Local Official: Kazakhstan’s digital tenge has the potential to provide “full transparency in movement of budgetary funds,” chairman at local anti-corruption service says.

Illegal Crypto Mining is Booming in the Republic of Abkhazia: The republic still allows the import of crypto mining rigs despite the ban.