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On Wednesday, The Daily features a couple of announcements from Coinbase: the US crypto exchange enables instant purchasing with increased daily trading limits and is now accepting ETC deposits on its Coinbase Pro platform. We’ve also covered the opening of ABCC’s European headquarters in Malta and Omniex’s decision to appoint two former regulators as advisors.
Coinbase Enables Instant Purchasing, Increases Trading Limits
Users of Coinbase will be able to buy digital coins right after they deposit funds from their bank account, the platform explained in a blog post published on Tuesday. “Starting today, we are rolling out the ability to trade cryptocurrency immediately after a purchase — no more waiting five days for funds to settle,” the announcement reads.
While the platform supports instant transfers via wire transfer and debit cards, purchases via direct debits from a bank account used to take days. The change means that from now on the USD balances will be credited immediately for the amount customers have sent from their accounts. They’ll be able to buy cryptos but won’t have the option to withdraw before the funds from their bank are settled.
The company also announced an increase of the daily trading limits for US users. The functionality will be available over the next few weeks. For verified customers, the maximum allowable purchase will jump from $ 25,000 weekly to $ 25,000 per day. The exchange also noted that once the funds are transferred to Coinbase, there are no longer any limits to how much users can buy or sell at a time.
Initially, the instant purchasing, new trading limits, and the ability to withdraw coins will be available only to US customers who have completed the identity verification process with Coinbase. However, the platform promises to bring the updates to other markets as well.
Coinbase Pro Introduces Ethereum Classic (ETC)
In another announcement, the influential US exchange informed its clients of the successful completion of its final testing for the addition of ethereum classic (ETC), noting that the launch will proceed in four stages: transfer-only, post-only, limit-only, and full-trading mode. “Coinbase Pro is now accepting transfers of Ethereum Classic!” the company tweeted, notifying customers they can transfer ETC immediately to their exchange account and start trading within days.
“We are beginning the launch of ETC on our exchange at Coinbase Pro. We plan to add support for ETC at Coinbase.com when sufficient liquidity is established. We expect this to occur approximately 1–2 weeks after trading begins on Coinbase Pro,” David Farmer, Coinbase Pro’s General Manager, explained in the company’s blog. The exchange also reminded users that its GDAX platform was split into Coinbase Pro, for individual traders, and Coinbase Prime, for institutions.
Several positive developments, including the addition to Coinbase Pro and the Robinhood app, have pushed the price of ETC up. The cryptocurrency is currently the 13th largest by market capitalization, which is almost $ 1.68 billion USD at the time of writing.
ABCC Exchange Opens European Headquarters in Malta
Singapore-based digital asset exchange ABCC (Alphabit Cryptocurrency) has announced the opening of its European headquarters in Malta. In an official release, the trading platform described the move as a strategic decision, part of the commitment to increase its presence in Europe and elsewhere. The company hopes to create new investment and employment opportunities in the island nation which has taken steps to become a leading crypto-friendly destination. ABCC has also decided to sponsor an official blockchain event organized by the Maltese government, Delta Summit 2018.
“This comes just a few weeks after the Maltese Parliament enacted into law the highly anticipated three bills which will pave the way for the creation of a new economic sector. I thank ABCC for putting their trust in Malta and for providing their input to implement our vision and make Malta The Blockchain Island,” said Silvio Schembri, Junior Minister for Financial Services, Digital Economy and Innovation within the Office of the Prime Minister of Malta. “Indeed, we look forward to working closely with the Government of Malta and to support its transition into a digital innovation center of excellence,” added ABCC CEO Calvin Cheng.
ABCC’s announcement follows similar decisions by some of the world’s leading cryptocurrency exchanges. Binance, currently the largest trading platform by volume, is exploring opportunities to launch a decentralized bank in Malta. Another Chinese-run crypto exchange, Okex, announced in April it is setting foot on the island, and the Polish Bitbay revealed its plans to move to Malta in May.
Omniex Appoints Former Regulators as Advisors
Omniex, a crypto trading and investment platform oriented towards institutional investors, has appointed to its Board of Advisors Arthur Levitt, former US Securities and Exchange Commission (SEC) Chairman, and Sheila Bair, former Chair of the Federal Deposit Insurance Corporation (FDIC). According to an official announcement, the company has also hired former Thomson Reuters and KCG executives as part of the plans to accelerate the adoption of its platform.
Omniex, which provides portfolio and risk management, trade execution, investment operations and compliance solutions for crypto-assets to buy-side, market-making and broker-dealer institutions, has raised $ 10 million USD since it was founded last fall. Among its investors are leading firms such as Wicklow Capital, Jump Capital, Digital Currency Group, Sierra Ventures, Clocktower Technology Ventures, Thirdstream Partners and Alan Howard of Brevan Howard.
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A lot of people in Switzerland have left the traditional financial sector to work in the crypto space, in which the banking nation is now developing a niche market. The Swiss banks don’t show enthusiasm officially, but they massively have interests in dealing with Bitcoin, insiders say.
From Crypto Valley to Crypto Nation
At this year’s G20 finance ministers’ meeting in Buenos Aires, the Swiss Federal Councillor and Finance Minister underlined Switzerland’s position on cryptocurrencies, saying that digital assets offer a great potential for financial services.
The latest Credit Suisse crypto mover is Andrew Peel, efinancialcareers reported, Peel has left Credit Suisse to become head of digital asset markets at Morgan Stanley. He’s not the only one. At least eleven other people at Credit Suisse’s Zurich office have also succumbed to joining the crypto world in the past year, the financial news outlet highlighted, Peel was reportedly the latest to go with that flow.
Switzerland has seen a wave of crypto startup companies rushing into Zurich, Switzerland’s financial capital, and Zug, a Swiss town now commonly known as Crypto Valley, in the past two years. Many Swiss crypto companies are trying to operate like banks but they avoid deploying too much marketing noise, they just deliver, “Swiss style.”
Crypto Finance Group, a company which has an office in Zug and most of its manpower working in a luxury villa in Zurich dubbed “Crypto Villa,” is far from looking like a Silicon Valley garage. The atmosphere in the villa, which news.Bitcoin.com visited, is very much of a Swiss private bank’s. The board of Directors of the Fintech company founded in June 2017, includes Raymond J. Baer, a relative of the Swiss private bank Julius Baer, and Jan Brzezek, formerly Business Manager for the President of UBS Asset Management.
“We [almost] all have a background in finance. Basically what we did is what is standard in the traditional market like equities or FX, with older management systems,” Jan Brzezek, the CEO and founder of Crypto Finance told news.Bitcoin.com in an interview in Zurich. “Our strength lies in the fact that we have tech guys as well as guys who come from the Swiss financial industry. That’s why we can speak with all the large banks and Finma, because we speak the same language,” he added.
Many Swiss banks are prudent nowadays, as they do not want to take reputational or financial risks. “Despite the big crisis that occurred with the issue of the taxation of American assets, Switzerland still represent 25% of the global offshore market. That means Swiss banks manage 25% of all transnational assets, which is enormous for a country that small. Switzerland is strong but humble. There is a lot of talent and know-how in Switzerland for the development of these new technologies and their application to finance,” Yassine Ben Amida, the former market head at Julius Baer, and former head of financial institutions at Credit Suisse, who’s now officially involved in cryptocurrency projects in Switzerland told news.Bitcoin.com in a phone interview in Switzerland. “Switzerland is a very diversified nation, each bank decides which is its activity. And where it wants to go,” he said.
Why Does Switzerland Attract Cryptocurrency Talent?
From a judicial point of view, many global companies which come to Switzerland look at its judicial stability, Marc Walpoth, a Swiss jurist who formerly worked at the Intensive Supervision of Banks division at Finma from 2014 to 2017, explained. Walpoth is also now fully involved in the crypto business and compliance. “Finma, the Swiss financial market supervisory authority, is very stable with regard to regulations and is rather flexible,” he said, “Finma was created six years ago, it rewrote, and created new laws, however, Swiss banks are completely independent of the government. They decide the activities they wish to undertake, in coherence with the financial regulator. Which is different in many countries,” Walpoth explained. “It would not be acceptable in Switzerland that a Federal Councillor gives an order to banks to accept crypto companies. No politician in Switzerland would do so, and also Finma would not accept it,” he said. “Switzerland is a country were regulators are very flexible and exchange a lot of dialogs with the companies. That’s why we have a lot of entrepreneurs, generally inclined to take risks, because the political and judicial framework is quite flexible. This is deeply rooted in the Swiss culture.”
“We Don’t Need Banks Anymore,” Ex-Swiss Banker Says
Before joining the crypto space, Jan Brzezek worked on innovation projects and proof of concepts, issuing bonds on the Blockchain within UBS. While in charge there, he said he worked on the USC (Utility Settlement Coin) in consortia with other global banks, such as Barclays and Credit Suisse. “Theoretically, you don’t need a bank anymore for many of the tasks they have been performing,” he explained. “The core competence of a bank is to offer clients safekeeping of their assets, so [banks] will now build up custody solutions. The question is not if are they going to do that, but when.” Some believe Switzerland will reach this target by the end of 2018.
Money, Interest, and Clients
“I felt like Alice in Wonderland falling into the rabbit hole when I started to understand Bitcoin,” Brzezek said, “now it’s up to you, if you wish to stay in the traditional world, you are free to believe things will all stay as it is. Magic doesn’t happen when you stay in your comfort zone,” he said. Many bankers chose to adapt to where the money is. “[Banks] put their feet in the water, and they get a bit of experience, then as soon as they understand how it works, they go in, because there’s a lot of money, interests, and clients there.”
In the last 12 months, Finma, Switzerland’s banking and financial regulator has clarified what can be done and what cannot, with crypto. In September 2017 and February this year, Finma published a report clarifying how the Swiss law classifies ICOs. “The interesting point,” says Yassine Ben Amida, the ex-banker, “is that the Swiss have not created a new law, but they made some clarifications on an already existing law,” he explained. Cryptocurrencies, tokens, and ICOs are considered securities, and in Switzerland, to manipulate securities as a broker, the regulator requires a broker’s license, which currently no one has in the crypto industry in Switzerland, he said, but which many in the Swiss crypto space are trying to negotiate with Finma, according to people familiar with the matter.
Swiss Banks Are Quietly Interested in Bitcoin
SIX, the Swiss main stock market, announced they would put in place a market for cryptocurrencies, particularly for all the tokens that are considered as securities. “SIX is owned by all the Swiss banks, so isn’t it interesting to see that despite the lack of enthusiasm towards crypto that the Swiss banks seem to be showing, SIX has acquired the authorization from all of them to build a platform for digital assets?” Yassine Ben Amida told news.Bitcoin.com. “A lot of banks officially say they don’t do crypto, but behind the scenes, in front of their clients they are actually very active,” a source close to the matter said.
The mainstream media often reported that Swiss banks did not support crypto, or that they didn’t give authorization to companies working with ICOs to create corporate accounts. “I don’t think this is really true,” Yassine Ben Amida said, “Switzerland is pretty strict in terms of regulations, particularly in terms of money laundering. But we are seeing a clear ‘professionalization’ in terms of crypto, and banks increasingly started to accept companies working with cryptocurrencies, or ICOs,” he added. There are banks in Geneva and in Zurich that reportedly allow companies with cryptocurrency funds. “This is developing now because there is a will to professionalize the industry,” Ben Amida added.
What do you think of Swiss crypto entrepreneurs trying to acquire Swiss banking licenses? Let us know in the comments section below.
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An EU study claims that the international nature of the cryptocurrency markets is a challenge for European regulators because many players, especially miners, are outside their reach. The researchers also expect that bank-issued coins could reshape the balance of power among cryptos, with commercial banks using underhanded tactics to stifle the competition.
A recent study titled “Competition issues in the Area of Financial Technology”, which was requested by the European Parliament Committee on Economic and Monetary Affairs, raised a couple of interesting issues from a regulatory point of view. First, the researchers say that the international nature of cryptocurrency markets is a challenge to the implementation of competition policy at the European level.
The paper explains that many of the players operate from locations outside the jurisdiction of EU competition authorities, which makes investigation or prosecution more difficult. The main weakness of European regulators is the concentration of the mining activity in non-European countries. The researchers write: “Mining is the most strategic, sophisticated and technology dependent activity in the cryptocurrency market, and there currently appears to be a significant concentration of mining activities occurring in certain Chinese provinces.”
Bank-Coins to Reshape Competition?
The EU study also claims that the arrival of “permissioned cryptocurrencies” issued by banks, both commercial and central, will reshape the current competition level in the cryptocurrency market. A potential inadequacy of traditional policy to address competition issues in the cryptocurrency markets can be found, “suggesting direct public participation through a central-bank digital currency as a remedy.”
The researchers warn that the market power of incumbent commercial banks might be used to limit competition in the cryptocurrency market through preemptive acquisitions or predatory pricing schemes. The banks may also engage in anti-competitive practices by denying access to their gateways for exchange or wallet services, such as payment and transfer systems or card processor schemes. This may be conducted by means of low service quality, delays in negotiation, proprietary technical standards or excessive pricing. They say that these practices may deter consumers from using normal cryptocurrencies in favor of those promoted by the banks.
Is the international cryptocurrency market being outside of a single regulator’s reach really a problem for competition? Share your thoughts in the comments section below.
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While everyone is looking for an indication that institutional money is about to flood into bitcoin and revive the market, we just got another conformation that crypto has indeed entered the big leagues. Companies in the industry are now putting former regulators on their payroll, as is common for Wall Street mega banks, government-supported telecom monopolies, competition-stifling tech giants and the like.
Another Regulator Gets a Big Paycheck
Along the announcement of its new $ 300 million a16z crypto fund, Andreessen Horowitz also revealed it had hired Katie Haun as its newest general partner. While most tech publications hailed the move in the name of diversity and inclusivity, due to her gender, few took note that she is yet another in a string of government lawyers and regulators who joined the ranks of cryptocurrency companies recently.
According to her bio at Stanford, Haun spent over a decade as a federal prosecutor with the U.S. Department of Justice (DOJ), where she focused on fraud, cybercrime, and corporate compliance failures alongside agencies such as the SEC, FBI, and Treasury. She was the DOJ’s first-ever coordinator for digital assets, and led investigations into the Mt. Gox hack and the corrupt agents on the Silk Road task force. As her impressive resume proves, Haun is no doubt a very capable and highly intelligent woman. However, she is a law expert not a venture capital or investment expert, which could raise some questions about her new role.
Free and Fair Market?
As mentioned before, Haun is only the latest regulator to make the move into the crypto industry. In May 2018, Kraken hired Mary Beth Buchanan, the former US Attorney for the Western District of Pennsylvania. In December 2017 Bittrex hired Kiran Raj, a former Deputy General Counsel at the Department of Homeland Security (DHS), as chief strategy officer, as well as John Roth, a DHS Inspector General who spent twenty-five years at the DOJ, as chief compliance and ethics officer. In November 2017, the former New York Superintendent of Financial Services who pushed for the Bitlicense, Ben Lawsky, joined Ripple’s board of directors. And the list goes on and on as far back as in 2015, when Itbit hired former NY DFS General Counsel Daniel Alter as its general counsel and chief compliance officer.
All of this is, of course, not illegal and serves both parties. The crypto companies get people on board that can help them navigate the complex legal system, and the former regulators get to leverage their government experience in the much more lucrative private sector. The main downside is that this practice can potentially hurt end users as it hampers competition by erecting steep barriers for entry. Just imagine you want to open a new US crypto exchange. You might fear that, unless you have the financial resources and right connections to hire a former top government lawyer, you will have a severe disadvantage compared with the established players, and ultimately cancel the plan as a result. Hopefully, at some point some honest lawmakers will notice what is happening and conclude that the regulatory maze is too cumbersome for the good of the market. Until that happens, bitcoin companies will keep hiring people that mix in the right circles and know who to give a call when needed.
Are these developments good for the long term health of the bitcoin ecosystem? Share your thoughts in the comments section below.
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Six fully-licensed Japanese cryptocurrency exchanges have responded to the business improvement orders issued by the country’s top financial regulator. Two executives have also resigned from their positions as vice presidents of the recently formed crypto exchange association.
Japan’s top financial regulator, the Financial Services Agency (FSA), issued business improvement orders to six regulated crypto exchanges on June 22. Japan currently has 16 regulated crypto exchanges in total. Bitflyer, Bitpoint Japan, Btcbox, Bitbank, Quoine, and Tech Bureau received instructions to improve their crypto exchange businesses. Out of the six, only Tech Bureau has received two such orders.
Crypto Exchange Association
The Japan Virtual Currency Exchange Association (JVCEA), founded in March, consists solely of the 16 government-approved crypto exchanges. It was formed in response to the hack of Coincheck in order to restore public trust in the industry.
The chairman of the association is Taizen Okuyama of Money Partners. There are four directors: Bitflyer’s Yuzo Kano, Bitbank’s Hiroyuki Noriyuki, SBI Virtual Currencies’ Yoshitaka Kitao, and GMO Coin’s Tomitaka Ishimura. While GMO Coin did not receive a business improvement order on the 22nd, it received one in March.
On Monday, June 25, the association announced that two of its vice chairmen have resigned, stating:
In response to the fact that vice chairmen of the association, Yuzo Kano and Hiroyuki Noriyuki, representative directors of Bitflyer Co. Ltd. and Bitbank Corporation, received business improvement orders concerning their virtual currency exchange businesses, we inform you that we have received resignation requests from both of the vice presidents on this date and have accepted them.
The association continued to detail, “we will continue to do our utmost to protect the interests of users and to promote the sound development of the virtual currency exchange industry, including the early establishment of voluntary regulation rules.” Prior to the two resignations, local media reported that the association was going to release self-regulatory rules this week; the association has not confirmed any specific details.
Crypto Exchanges’ Responses
Japan’s largest crypto exchange by volume, Bitflyer, announced on the same day as the FSA order its plans to improve a number of business areas. The exchange has also halted new user registrations and will strengthen its account verification process for existing users, as news.Bitcoin.com previously reported.
Bitbank explained that it is reviewing “the internal control system and management system” in order to “ensure proper and reliable operation of the business towards customers’ recovery of trust.” The exchange emphasized that there is no impact to customer assets. A sophisticated management system will be established as the company works closely with the authorities, the exchange elaborated:
There will be no impact on various services and customer assets provided by our company due to the business improvement order this time. You can use the service as usual for all transactions / functions including deposits and withdrawals of Japanese yen.
Bitpoint Japan wrote, “We sincerely apologize for any inconvenience caused to you and other concerned customers,” adding that it will “promptly enhance and strengthen the management control system.”
Btcbox similarly declared, “We take the situation sincerely, we deeply reflect on it,” noting that it will build a management system as directed by the FSA’s order.
Quoine’s CEO, Mike Kayamori, detailed how his exchange will comply with the FSA order. He explained that the order is about “governance, compliance, back-office, KYC and AML,” not security or theft, elaborating: “we will need to pull out some necessary resources, especially from the back end developers who will need to provide the necessary data to comply and work with the FSA.” He further clarified that it means pulling “key people” away who are currently working on his exchange’s Liquid platform to work with the FSA instead, elaborating:
We believe this will be about a month or two process and business will be as usual.
Zaif, operated by Tech Bureau, also responded, referencing the March business improvement order. In addition to complying with the previous order, two more areas will be improved. The first is the “Establishment of an effective risk management system” and the second is the “Establishment of a system to respond appropriately to customers.” The exchange wrote:
We sincerely accept that we received the improvement order again. To make it possible for customers to use it with confidence, we will endeavor to further improve and strengthen the organization and work together throughout the company so that we can establish an appropriate management system.
What do you think of the responses by the six Japanese crypto exchanges? Let us know in the comments section below.
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The US Commodity Futures Trading Commission (CFTC) is being challenged in court over its oversight of cryptocurrencies. The defendants argue that their tokens are not commodities, with no futures contracts, which the CFTC regulates. The outcome of this case could affect the Commission’s ability to police all future crypto frauds.
Challenging the CFTC’s Power
The power of the CFTC over cryptocurrencies has reportedly been challenged in court. The case involving My Big Coin could determine whether the derivatives regulator “has the authority to combat fraud associated with cryptocurrencies,” Reuters reported on Wednesday.
Katherine Cooper, lawyer for the defense, explained that the CFTC should not have jurisdiction in this case, stating that “our argument boils down to the fact that because My Big Coin does not have future contracts or other derivatives trading on it, it is not a commodity,” and does not fall under the Commodity Exchange Act according to which the CFTC is the regulator.
The news outlet elaborated:
Lawyers watching the case say a ruling against the CFTC could affect its ability to police virtual currency frauds as the only one on which futures contracts are traded in the United States is bitcoin.
Gregory Kaufman, a lawyer with Eversheds Sutherland, believes that the outcome of this case “would have a chilling effect on the CFTC’s application of its powers in this area.”
Other than My Big Coin, the Commission has announced eight cryptocurrency-related cases to date, the publication noted, adding that U.S. District Judge Rya Zobel in Boston is set to hear the My Big Coin case on Thursday.
About My Big Coin Case
The case began in January when the CFTC sued Randall Crater and the company he founded called My Big Coin Pay Inc. The news outlet described, “The CFTC says the defendants misappropriated $ 6 million from 28 customers they lured by naming their virtual currency [My Big Coin] to sound like bitcoin and further claiming it was backed by gold.”
The Commission was given the authority over crypto in March when U.S. District Judge Jack Weinstein in Brooklyn “ruled for the first time that virtual currencies can be regulated by the agency as a commodity,” the publication conveyed. However, Crater’s lawyers argued:
The CFTC has no authority over the virtual currency because it [My Big Coin] is not a commodity like wheat or cotton or a service that is traded using futures contracts, the typical focus of the agency’s enforcement regime.
Nonetheless, Neal Kumar, a lawyer at Willkie Farr & Gallagher, was quoted explaining that “Crater may still lose because the Commodity Exchange Act defines services as commodities not just when they currently have futures contracts associated with them but in the future could.”
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Cease and desist letters have been sent to five crypto companies operating in Alabama, as part of the ongoing “Operation Crypto-Sweep.” The campaign, led by the North American Securities Administrators Association, is targeting ICO projects and blockchain startups suspected of fraudulent activities and violations of existing securities laws. Actions have been taken already by NASAA members in a number of states and provinces in North America.
Three LA-Based Companies Among the Targeted
The Alabama Security Commission (ASC) has recently taken enforcement actions in five investigations as part of “Operation Crypto-Sweep.” The international crackdown on fraudulent Initial Coin Offerings (ICOs) and crypto-related investment products is coordinated by the North American Securities Administrators Association (NASAA), a voluntary organization whose membership consists of 67 state, provincial, and territorial securities administrators in the US, Canada and Mexico, of which the ASC is also a member. The Commission has issued a total of five cease and desist orders “to protect Alabamians”, according to an official announcement.
The respondents are ICO organizations that have been targeting residents in more than one state. That’s why Alabama regulators have teamed up with their colleagues from Texas and New Jersey to go after the firms implicated in illegally soliciting investors. “Fraudulent activity involving ICOs and cryptocurrency-related investment products is a significant threat to Main Street investors in Alabama,” said ASC director Joseph Borg. The Commission is “committed to swiftly and effectively protecting investors from schemes and scams involving these products,” he added, noting that the measures taken are just the tip of the iceberg.
Cease and desist letters have been sent to three Los Angeles based companies. Extrabit Ltd., a purported crypto mining operation, offered through an ad the project’s EXB token at half price, conducting, according to regulators, an illegal and unregistered securities offering. Potential investors were told they had to spend $ 20,000 in the presale and expect the tokens within 48 hours. A 185 percent quarterly return was promised to those keeping a constant positive EXB balance. Returns were said to come from mining bitcoin, monero and zcash. The second firm form California, Leverage, has advertised itself as a crypto lending platform offering to investors a variable, daily interest. This case is again about an unlicensed security, the ASC said. Pool Trade is the third sanctioned company from LA.
Platinum Coin, another of the targeted crypto businesses, from Miami, Florida, has been caught offering investors an annual return of at least 320 percent. It has been issued with cease and desist order based on the same accusations – conducting sales of unregistered securities and making unrealistic promises. The fifth recipient of a cease and desist letter is an entity that purports to conduct business as an Internet-based escrow company. According to the ASC announcement, Chain Group Escrow Service is based in Kirkland, Washington.
Regulators Across North America Join “Crypto-Sweep”
Regulatory authorities in other states have also taken similar actions against dubious crypto businesses. The blockchain firm Shipchain, an operator of an etherium-based logistics platform, has received a cease and desist order from the Office of the Attorney General of South Carolina. The startup has been trying to sell its Shipcoin tokens without proper registration in the state, advertising its project to local investors. The state’s legislation treats investment contracts as securities and the tokens should have been registered as such. A permanent cease and desist order has been delivered to a company in neighboring North Carolina – Power Mining Pool. Another firm, Adosia LLC, has received a consent order in the state.
According to NASAA’s website, cease and desist orders and letters have been sent so far to crypto and blockchain businesses in the following states: Missouri, Texas, Colorado, Maryland, New Jersey, and Ohio, as well as in the Canadian provinces of Quebec, British Columbia and New Brunswick.
“Operation Crypto-Sweep” is coordinated by NASAA which has united the efforts of more than 40 state and provincial securities regulators in the US and Canada for a series of investigations into ICOs and crypto-related investment products. There have been more than 70 inquiries and investigations so far, as well as 35 pending or completed enforcement actions since the beginning of May. The campaign was recently applauded by the chairman of the US Securities and Exchange Commission (SEC), Jay Clayton, as news.Bitcoin.com reported.
Do you think the actions undertaken by NASAA members will limit fraudulent activities in the crypto sector? Share your thoughts in the comments section below.
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Forty regulators in the US and Canada are reportedly collaborating in the largest coordinated crackdown on cryptocurrency scams to date by state and provincial officials. The operation has triggered over 70 investigations so far, with 35 cases completed or pending.
The North American Securities Administrators Association (NASAA) said Monday that US and Canadian securities regulators have launched nationwide investigations on suspicious cryptocurrency investment schemes, the Washington Post reported. This is “the largest coordinated crackdown to date by state and provincial officials on bitcoin scams,” the news outlet wrote. CNBC elaborated:
More than 40 state and provincial watchdogs are participating in ‘Operation Crypto-Sweep,’ which has triggered at least 70 investigations so far.
NASAA is a voluntary association whose members are securities administrators from states, provinces, and territories in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada, and Mexico. According to its website, the association is the oldest international organization devoted to investor protection.
The association, which helps coordinate Operation Crypto-Sweep, confirmed that “as many as 70 investigations have been opened in the sweep, with more expected in the coming weeks.” Furthermore, the Washington Post detailed, “As many as 35 cases are pending or already completed, with some resulting in cease-and-desist letters warning the alleged schemes that their unregistered activity violates state securities law.”
The efforts focus on “unregistered securities offerings that promise lucrative returns without adequately informing investors of the risks” as well as initial coin offerings (ICOs), the regulators explained.
By posing as members of the public, the NASAA task force found roughly 30,000 crypto-related domain name registrations, the news outlet described, adding that “Many of the alleged scams use fake addresses, slick marketing materials and promises of over 4 percent daily interest,” the news outlet described. “A few have even used unauthorized photos of high-profile individuals, such as Supreme Court Justice Ruth Bader Ginsburg, to portray themselves as aboveboard.”
The director of enforcement at the Texas State Securities Board, Joseph Rotunda, was quoted saying, “Although the international task force’s work is far from complete, my suspicions have already been confirmed: The market for cryptocurrency investments is saturated with fraud, and our work is only revealing the tip of the iceberg.”
Last week, the Wall Street Journal published a study showing that out of 1,470 ICOs, 271 were found to contain “red flags that include plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams.” Investors have poured more than $ 1 billion into these 271 ICOs, the publication added. In addition, a Chinese government-backed industry organization also published its fake crypto analysis last week, claiming that its monitoring system has detected 421 fake cryptocurrencies.
Massachusetts’ Secretary of the Commonwealth, William Francis Galvin, emphasized on Monday:
Not every ICO or cryptocurrency-related investment is fraudulent, but we urge investors to approach any initial coin offering or cryptocurrency-related investment product with extreme caution.
NASAA president and the director of the Alabama Securities Commission, Joseph Borg, explained that “consumers face higher risks of being misled at a time when the intense demand for bitcoin has prompted many retail investors to take extreme steps to gain exposure to the currency, such as taking out a bigger mortgage.”
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South Korea’s government is widening its probe on cryptocurrency exchanges, particularly the use of corporate accounts which the regulators say can lead to money laundering. This announcement follows the prosecutors launching an investigation on the country’s largest crypto exchange, Upbit.
Widening the Crypto Probe
South Korea’s top financial regulators are teaming up with prosecutors to widen their investigation of domestic cryptocurrency exchange operators. An official of the Financial Service Commission (FSC) was quoted by the Korea Times on Sunday:
Following a request by the Financial Supervisory Service (FSS) and the prosecution to address growing anti-money laundering compliance concerns and possible abuse of cryptocurrencies in money laundering and fraud, the FSC is looking into exchanges’ corporate accounts opened in local banks.
The use of corporate accounts for crypto transactions should have been discontinued when the government introduced the real-name system at the end of January. However, only 30% of all crypto accounts have been converted into real-name ones so far.
The six banks that have the ability to issue real-name accounts have chosen to only service the country’s largest crypto exchanges: Upbit, Bithumb, Coinone, and Korbit. Nonetheless, not all accounts at these exchanges have been converted into real-name ones. In addition, all small and medium-sized exchanges continue to use corporate accounts for crypto transactions.
The regulators say that the use of corporate accounts can lead to fraud such as recently seen with Coinnest whose CEO was charged with embezzlement. The largest Korean crypto exchange by volume, Upbit, is also currently under investigation even though banks have been converting its accounts to real-name ones.
Collaborating with Other Countries
South Korea has been discussing a collaboration with other countries on cryptocurrency regulations. At a recent International Organization of Securities Commissions (IOSCO) Board of Directors and Annual General Meeting held in Hungary, FSC Vice Chairman Kim Yong-beom discussed cryptocurrency issues with major national supervisory bodies. The need for IOSCO to cooperate on cryptocurrency and ICO regulations was stressed at the meeting.
An official of the FSC was quoted by the Korea Times saying:
The FSC is collaborating with authorities in other countries. Our latest findings show that the domestic exchange faked its balance sheets and deceived investors. The FSC is checking Upbit’s computer system with prosecutors and the FSS to audit the exchange’s virtual currency holdings.
Meanwhile, the new FSS governor Yoon Suk-heun recently indicated that he will look into easing regulations on domestic cryptocurrency trading, citing that “there are some positive aspects to cryptocurrencies.”
What do you think of the Korean regulators widening probe on crypto exchanges? Let us know in the comments section below.
Images courtesy of Shutterstock and the Korean government.
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