Cryptocurrency Regulation News

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However, the claim for the return of the BTC was not successful as, with no legally recognized status, it was not deemed a crime against property. “I expect bitcoin to remain highly volatile to the downside in the new year, given the potential for more scrutiny and tighter regulation. “While many expect the bitcoin rally to continue in 2021, I’m more concerned with what the Biden administration could mean for cryptos. In October 2015 Ms Yellen chose to deny that bitcoin’s rise could be a response to money printing by the US Federal Reserve. BITCOIN “has achieved escape velocity from regulators” claimed Max Keiser, with some regulators in various countries already “defecting to Bitcoin”, amid concerns the surging digital currency will come under increased scrutiny from newly appointed US treasury secretary Janet Yellen. It is likely that far wider and complexed legislative updates will be required in order to keep up with the ever-expanding and developing world of cryptocurrencies. The California-based payments platform said the launch of its new service would allow customers to buy, hold and sell cryptocurrency directly from their PayPal account.

The benefit of anonymity was made abundantly clear in May 2017 when a third of NHS Trusts were hit with ransomware with the offenders demanding payment in Bitcoin. The UK Government is acutely aware of the potential legal issues can flow from the use of cryptocurrencies. It is likely that UK laws will need to be updated to reflect the use of cryptocurrencies in the UK as they grow and become increasingly popular. PayPal has partnered with Paxos, a New York chartered trust company, to provide cryptocurrency trading and custodial services. A smart contract is a set of promises, agreed between parties and encoded in software, which, when criteria are met, are performed automatically. Smart contracts were written about in the 1990s by Nick Szabo, and have received renewed interest recently as a result of the “blockchain revolution” stemming from the technology underlying Bitcoin. Smart contracts do not need a blockchain to work, but they do need an underlying trusted network or mechanism, which blockchains provide conveniently and efficiently.

This week, incoming US Treasury Secretary Janet Yellen also expressed scepticism over Bitcoin, and concern has emerged over a “double spend” phenomenon that would display a flaw in the cryptocurrency’s software. “The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns,” the regulator said. The digital currency, which has soared to all-time highs of around $42,000 in January, is now trading at $32,000 per coin as of Saturday afternoon. “Chain reactions”, two articles from our 2016 Annual review, explain what blockchain, the ‘Computationally Efficient Trust Engine’ is and explore its impact on lawyers.

Bitcoin Boom Prompts Deluge Of Bizarre Cryptocurrency Schemes

In the short term, crypto firms will likely be predominantly concerned with overall market and contextual conditions and whether or not they fall within the regulatory perimeter. As we have seen in other segments of the financial services sector, investor pressure is likely to be one of the most effective tools to effect change. If you searched for Bitcoin news recently, the main headlines likely centred on the rising price, the falling price, or just the price of the cryptocurrency generally and the ‘hype’ around the asset as a speculative investment.

However, this approach has come under scrutiny, as just two months prior to the 2 August, 2016 hack of Bitfinex the CFTC had issued an order, following the conclusion of an investigation into the Hong Kong based cryptocurrency exchange. The recent suspension of trading on Hong Kong based Bitcoin exchange Bitfinex following the apparent theft of approximately USD60m worth of bitcoins is the latest in a series of Bitcoin thefts. With Bitcoin still in its relative infancy, some jurisdictions have taken steps to integrate Bitcoin into their financial regulatory system, while regulators in Hong Kong have not yet done so. With Bitcoin increasingly having real-world impact on everyday citizens, the question of how Bitcoin regulation should be approached becomes increasingly pressing. In further developments covering the regulation of initial coin offerings , the European Securities and Markets Authority is the latest body to issue a warning to investors of the high risks relating to token sales. These follow the tone and content of announcements of other regulators including the FCA, which has previously flagged the untested nature of the technology, liquidity of tokens and level of disclosure provided by issuers.

You can change your browser settings to disable cookies at any time but if you do so, parts of the FSCS site may not function properly. FSCS is committed to ensuring the security of your personal information and to giving you control over how your data is used. In response to changes to European data regulation known as GDPR, the FSCS privacy notice has been updated. Again, if you’re thinking of investing, you should get independent financial advice first. The FCA has issued a warning saying that ICOs are very high risk and speculative, and only experienced investors who have thoroughly researched the project should consider them. Initial Coin Offerings are a digital way of raising funds from the public using a virtual currency . As a result, utility tokens are outside FCA regulation (but could be e-money), and so would be outside FSCS protection.

India To Ban Ownership Of Cryptocurrencies

The earliest DAOs are software controlled community organisation experiments which seek to re-implement certain aspects of traditional corporate governance, replacing voluntary compliance with a corporation’s charter with actual compliance with pre-agreed computer code. It gained significant media attention after it raised the equivalent of USD168 million from individual investors in its initial creation phase, making it the world’s biggest crowdfunding project to date. However, on 17 June 2016, a weakness in The DAO’s code was maliciously exploited and it became materially compromised. In this paper we look at how DAOs work, and consider some of the potential legal issues associated with DAOs, including where liability might lie in the event of a problem. In a new paper Nivaura CEO and Product Architect Dr Avtar Sehra, Allen & Overy debt capital markets partner Phil Smith and Phil Gomes, Senior Vice President of U.S. B2B Digital for communications marketing firm Edelman, explore the dynamics within the market for initial coin offerings . In the latest regulatory development in relation to Initial Coin Offerings , China has announced that ICOs are illegal and investigations have been launched into a large number of ICO platforms.

• Another aspect that should be considered as being highly desirable to the industry is that it allows them to lobby, interact with and educate regulators and legislators.
• The digital currency, which has soared to all-time highs of around $42,000 in January, is now trading at $32,000 per coin as of Saturday afternoon.
• Regulatory activity in this area is likely to continue to evolve in 2018 and should therefore be factored into any ICO structuring discussions as early as possible.
• The Hon Albert Isola, Minister for Digital and Financial Services, explains to Finextra that the working group will focus on defining the appropriate market standards for crypto exchanges to strengthen market integrity.
• Investment Week helps enlightened investment professionals to grow revenues and manage risk by reading the market more astutely via this industry leading title.

Where we see larger markets and regulators unwilling or unable to quickly set out clear frameworks regulating the space in a comprehensive manner, smaller players have and are enthusiastically leaping in. “This is to enable those existing businesses to continue to trade after 9 January 2021 until 9 July 2021, pending the FCA’s determination of their application. With an unmissable line-up of dynamic speakers ranged across three streams focusing on what matters most to advisers PA360 will inform, educate and inspire, allowing delegates to meet new service providers and professional partners, and provide invaluable networking opportunities. The Managing General Agents’ Association now has some 140 MGA members with over £6bn premium under management – and all within six years. With advancements in technology, some hope that Artificial Intelligence will be able to do just as good a job as a human doctor.

Katy Perry Joins The Bitcoin Bandwagon With A Crypto

The UK has followed suit with seven British cryptocurrency companies having set up CryptoUK, a crypto trade association intended to improve industry standards and engage policy makers. Meanwhile in South Korea 66 members have signed up to the Korean Blockchain Association including 25 of the biggest crypto exchanges with a view to self-regulate. This has alleviated some of the fears in the industry of any major regulation being implemented any time soon and opens up opportunity for the industry to work with governments and take action to ensure this delay of regulation becomes permanent. A consultation on the government’s approach to cryptoasset regulation, with a focus on stablecoins; and call for evidence on investment and wholesale uses. Mr Gensler has said he wants to see greater cryptocurrency adoption but that this would go along with stricter regulation. “You want some form of regulation, you want traffic lights and speed limits, because then the public is confident to drive on the roads,” he told Bloomberg in 2018. Mr Gensler is believed to support cryptocurrencies but believe they need stricter supervision.

On 1 August, the Monetary Authority of Singapore issued a press released stating that the offer or issue of digital tokens in Singapore will be regulated by MAS if the digital tokens constitute products regulated under the Securities and Futures Act (Cap. 289) . MAS’ clarification comes in the wake of a recent increase in the number of initial coin offerings in Singapore as a means of raising funds and after the SEC also offered regulatory guidance on the likely treatment of token sales. The statements continue the theme of regulators around the world closely monitoring ICOs and putting issuers on notice that existing securities laws and other rules apply to token offerings. Issuers will need to structure their offerings accordingly when issuing tokens which are securities. The FCA has announced that it is to “conduct a deeper examination of the fast-paced developments” in the Initial Coin Offering market, following its study on distributed ledger technology .

What Will The Uk Government Do To Combat The Legal Issues?

The lack of standard terminology for cryptoassets across regulators and jurisdictions hampers a coordinated global regulatory response. Businesses carrying out certain cryptoasset activities in the UK were required to submit their registration applications to the FCA by 30 June 2020.

“Our legislation quite plainly says a security is an equity, a debenture or a warrant for all intents and purposes. So, if I issue that in a digital form, which I can do, a digital token is still a security. If it has attributes that make it look like a utility token it is a utility token. If it has attributes that make it look like an e-money token or a stablecoin it is an e-money token. This ‘if it aint broke’ mantra rings true with the IOMFSA guidance around the taxonomy of tokens released in October of 2020, which outlined that the body would take a neutral approach when it comes to digital currency and tokens, as they look to the substance of the activity being undertaken rather than the form. Billinghurst also believes IOM sees the long-term appeal of digital currency, and while the Isle is yet to confirm any ‘subject-to’ applications since they were made available, the update will likely be warmly received by firms who are cornered both by process and circumstance.

This is a major selling point of self-regulation and as long as governments are involved and are kept informed, they may be happy to leave it in the hands of self-regulatory bodies. By removing the threat of heavy regulation and replacing it with self-regulation, a high level of uncertainty is removed, bringing back confidence in the market and allowing organisations to plan effectively with a renewed focus on innovation. In a proactive move, The Japan Blockchain Association and the Japan Cryptocurrency Business Association are expected to merge to create a new self-regulatory organization to strengthen self-regulation which, if approved, could act as an independent regulatory body of the government. The discussions around Cryptocurrency regulations have even reached as high as the recent G20 Summit in Argentina .

The Bill gives legal certainty to issuers to directly issue DLT securities by keeping their securities’ registers on a distributed ledger . The Institute of Risk Management offers a variety of in-house and public courses on all aspects of risk management. There needs to be a system in place for detection from audits and reviews to incentivise the detection and deterrence of manipulative and fraudulent acts and practices, including partnering with regulators and particularly the CFTC to share or refer information, as appropriate. Whilst the benefits of self-regulation are clear, the regulatory body in place needs to be strong, fit for purpose and effective. Some key areas for consideration by newly formed self-regulatory bodies are covered below.

Antivirus Pioneer John Mcafee Charged With $13m Cryptocurrency Fraud

Divergence of approach is becoming ever more obvious across the globe, as regulators are increasingly being pressed into answering calls for regulatory certainty. The question is far from answered in the US, where a crypto wallet KYC rule was proposed by the Treasury Department in December and is set to be finalised in the coming months. From this year’s early Bitcoin skyrocket, stablecoins approved for banking payments by the OCC, Christine Lagarde and Janet Yellen’s public wariness of the assets, to the FCA’s outright warnings, it seems the market can’t stop trying to make sense of digital currency’s place in today’s and tomorrow’s world.

Recent years have also seen a large emphasis placed on environmental, social and governance (“ESG”) criteria in assessing the future financial performance of companies. Sustainable finance and sustainable investing have taken centre stage, especially in light of the government’s net zero commitment by 2050, and the UK has focussed particularly on climate change and climate-related reporting in this regard. On the international stage, the Financial Stability Board created the Task Force on Climate-related Financial Disclosures (“TCFD”) to improve and increase reporting of climate-related financial information. The issue is not primarily with the cryptocurrencies themselves, but with the amount of energy that is required to ‘mine’ cryptocurrencies. The mining process is integral to many cryptocurrencies that use a Proof of Work (“PoW”) mechanism to validate transactions. Taking Bitcoin as an example, miners compete to solve a complex mathematical challenge, which once completed, verifies a transaction. As the process is designed to increase in difficulty over time, ordinary laptops no longer cut the mustard when it comes to mining, so companies have opted instead to kit out warehouse-sized mining farms requiring vast sums of electricity to operate.

This has allowed for criminal businesses to advertise their items online and sell these to the world with little chance of being tracked down. Cryptocurrencies can facilitate money laundering and tax evasion due to the traders of the commodity being able to remain totally anonymous. The Persian New Year, Nowruz, begins on the first day of spring and celebrates all things new. A year into the coronavirus pandemic that has devastated Iran, killing over 61,500 people — the highest death toll in the Middle East — the nation is far from out of the woods. “I was counting down the seconds to see the end of this year,” said Hashem Sanjar, a 33-year-old food delivery worker with a bachelor’s degree in accounting. US account holders will be able to deal in digital coins, including Bitcoin, Ethereum, Bitcoin Cash and Litcoin in the coming weeks and plans to expand to Venmo and some countries in the first half of 2021. However, there have been major moves toward the mass adoption of digital currencies in recent months.

For regulated financial institutions, the opportunities presented by cryptocurrencies and distributed ledger technology are tied to significant operational and regulatory challenges, not least the implementation of anti-money laundering and counter terrorist financing regimes. Over the last few years, digital assets did not appear to fall within scope of French law or regulation as they could not be characterised as e.g. currency, electronic money, financial instruments.

This is in addition to the existing technology-agnostic regulatory framework applying to ‘security tokens’ and to tokens that fall within the existing e-money regime, and the FCA’s ongoing work on bringing certain cryptoasset-related activity within the scope of the financial promotions regime. A further issue arises from fraudulent traders and thieves who simply claim to trade cryptocurrencies but in actual fact simply defraud the unwitting cryptocurrency purchaser by taking their money with no valid cryptocurrency being exchanged. The anonymity of cryptocurrency trading means that is very difficult for people using the commodity for criminal activity to be traced by anyone if suspicious activity is detected.

A Bank of Canada investigation into the benefits and costs of issuing a central bank digital currency for monetary policy. Crypto infrastructure provider Fireblocks has raised $133 million in a Series C funding round to fuel its efforts to bring traditional banks and fintechs into the digital asset arena.

Cryptocurrency being used for nefarious purposes is well understood, well reported, and certainly remains a point of unease for risk-averse policy makers. But perhaps bolstering cryptocurrency’s role through rigorous regulatory regimes is the solution rather than the catalyst for criminal activity. Having recently announced the formation of a working group to deliver the jurisdiction’s 10th Core Principle for DLT regulation, Gibraltar is seeking to bolster its regime for digital asset exchanges. The Hon Albert Isola, Minister for Digital and Financial Services, explains to Finextra that the working group will focus on defining the appropriate market standards for crypto exchanges to strengthen market integrity. Since 10 January 2020, all crypto peer-to-peer lenders and other cryptoasset firms have been required to register with the FCA under new anti-money laundering rules.

Yes – The Financial Conduct Authority has a pro-cryptocurrency stance and wants the regulatory framework to be supportive of the cryptocurrency. China have prohibited banks and financial institutions from dealing with cryptocurrencies. South Korea have recently banned all anonymous traders from dealing in cryptocurrencies. Customers will be able to use their cryptocurrency holdings to pay for goods and services at PayPal’s 26 million merchants worldwide from early next year. However, merchants will not receive virtual coin payments, with cryptocurrency payments being settled using fiat currencies, such as the US dollar, the company said. This has stoked fears that Bitcoin “whales” who hold vast sums of the cryptocurrency could crash the market, according to experts.

The study is based on an in-depth analysis of 23 jurisdictions, and serves as a practical and analytical tool for regulators, market participants, and other stakeholders in the cryptoasset ecosystem. If you require legal assistance, contentious and/or transactional, in the field of blockchain, cryptocurrencies and digital assets, please contact our Senior Associate, Allan Murray via email or our Trainee Solicitor, Mariya Lazarova at The World Economic Forum recommends a multi-stakeholder approach to the stewardship of blockchain and cryptocurrencies in a new report. WEF says that blockchain, or distributed ledger technology, could soon give rise to a new era of the Internet even more disruptive and transformative than the current one. It sees the key to enabling this transition being the formation of a multi-stakeholder consensus around how the technology functions, its current and potential applications and how to create the regulatory, cultural and organisational conditions for it to succeed.