The United States House of Representatives Committee on Financial Services has scheduled a hearing with Securities and Exchange Commision (SEC) Chairman Jay Clayton and four other SEC commissioners to discuss, among other topics, crypto.
In a memorandum from Sept. 19, the Committee on Financial Services stated that it will hold a hearing on Sept. 24 entitled, “Oversight of the Securities and Exchange Commission: Wall Street’s Cop on the Beat.”
This one-panel hearing will include the Securities and Exchange Commission (SEC) chairman Jay Clayton, commissioner Hester Pierce (AKA Crypto Mom) and another three commissioners.
Libra coin could amount to a security
The Committee on Financial Services has included cryptocurrencies on its list of topics for discussion and points out that the federal securities laws apply to securities — including stocks, bonds, and investment contracts — regardless of whether they are digital.
The hearing will touch upon Exchange-Traded Funds (ETFs), whether or not digital assets are a security or exempt from securities law, and of course Facebook’s planned launch of its stablecoin Libra in 2020. The document adds:
“The Libra Investment Token could amount to a security since it is intended to be sold to investors to fund startup costs and would provide them with dividends. The Libra token itself may also be a security, but Facebook does not intend to pay dividends and it is unclear if investors would have a “reasonable expectation of profits.”
Zuckerberg continues tour of Washington DC
Cointelegraph reported on Sept. 19 that Facebook CEO Mark Zuckerberg is making the rounds with policymakers in Washington, D.C. to discuss “future internet regulations,” most recently with Senator Josh Hawley.
Earlier on Sept. 19, Cointelegraph reported that Zuckerberg had dinner with a handful of U.S. lawmakers, where he faced intense scrutiny over the Libra project.
Like many other ICO success stories and subsequent leaders in their respective market segments, Augur, the preeminent platform for decentralized predictions, faces constant public scrutiny. The latest episode that drew public attention is the allegation, voiced by cryptocurrency hedge fund Tetras Capital partner Alex Sunnarborg, that a developer group behind the platform significantly overstates the volume of trades that Augur processes.
While the real trade volume is an essential metric indispensable for understanding the scale and impact of a given project, it is still a quantitative, rather than qualitative measure. In this regard, a dispute around how much money is staked on Augur at a given moment of time is different from two major previous fracases, which sparked debates about fundamental aspects of decentralized prediction platforms’ usage and governance. Those two episodes concerned the so-called “gimmick markets,” and, earlier, Augur’s capacity to host death pools.
When betting money on the outcome of future events, like with any other contract, the rule of thumb is to make sure that you get all the details straight. What exactly is the outcome that liquidates your futures contract at a win or loss? When exactly does it occur? In most cases, these conditions are straightforward enough to go without saying. After all, when you wager on Real Madrid beating Liverpool in the Champions League final, 90 or 120 minutes after the kickoff time, everyone knows who won. And if something goes wrong, you can always appeal to the bookmaker.
This is not quite the case, it appears, when predictions go decentralized. Once everyone can set up a market, the terms of some contracts may become vague — either due to amateur bookmakers’ unintentional lack of phrasing precision or due to malice. And once the bets are in, users have no recourse if they suddenly realize that they were wagering on something different than the market is really about.
The latter likely describes the situation many people involved with the recent Augur political market have found themselves in. The question looked simple: “Which party will control the House after 2018 U.S. Midterm Election?” Anticipating that Democrats will have flipped the House as a result of the midterms, 95 percent of the bettors wagered on them. Indeed, the “blue wave” that pundits predicted yielded the Democratic-majority House post-election. However, the important caveat is that the newly elected members were not to come in until January 3, 2019; as of the market closing date, Dec. 11, the House remained exactly the same as it was before the midterms — that is, Republican-controlled.
The Augur community went abuzz: Those who thought they were betting on the election outcome demanded that the market be called for Democrats, while others — including the alleged creator and designated reporter for the market — insisted that the idea was to measure the state of the House on Dec. 10, which, to be fair, could hardly be different from what it was on the day the market opened. In a Reddit post, the self-avowed creator made this clear by referring to the deal as a “gimmick market” and declared his or her intention to call it for Republicans.
The fact that more than $1.3 million were at stake rendered this conundrum perhaps the toughest test for Augur’s on-chain governance system so far, and definitely made for the platform’s biggest publicity crisis since the summer hype around assassination markets. Despite the fact that these two controversies look quite distinct on the face, they are manifestations of the same deficiencies intrinsic to the nature of decentralized prediction markets.
Markets for death
In an episode of the British techno-dystopian series Black Mirror entitled “Hated in the Nation,” mysterious assassins begin to eliminate public figures, one by one, decided by whomever social media users post the most #deathto hashtags about. Once the bloodthirsty online mob realizes how the death pool works, they readily rush to bid on the next odious MP’s or obnoxious rapper’s demise in order to trigger the murder that mysterious assassins immediately carried out.
As Augur, a blockchain-powered — decentralized prediction market, went live in July 2018 — the media was quick to latch onto the minor yet captivating facet of its functionality: the capacity to enable the creation of so-called “assassination markets.” In the dark spirit of Black Mirror, albeit under a somewhat different mechanism, these arrangements could spell death for those in the public eye. Indeed, it did not take long after the platform’s launch for such markets to appear, with a number of prominent politicians, actors and entrepreneurs put on the spot.
Augur provides a decentralized infrastructure for users to set up bets on whether certain events will or will not take place. Taking advantage of blockchain’s anonymity and the absence of a centralized authority to censor the content on the platform, malicious users could potentially procure a tool for incentivizing other people to “help” certain outcomes occur. For instance, by creating a market on whether politician X dies before the end of their incumbency and staking a huge pot of money on a “no,” someone could effectively put a bounty on the person’s head. Wagering against the massive “no” market and then contributing — to put it gently — to a “yes” outcome, any villain could run off with the money.
Horrendous as it sounds, the scenario was not invented by the Augur community. The idea of a cryptographically anonymized death market has been present in the cypherpunk milieu for a while — at least since cryptographer Jim Bell had formally recorded it in his 1996 essay “Assassination Politics.” He envisioned a market that would predict the deaths of government officials as a means to punish those who indulge in corruption. The Augur subreddit has also been rife with various takes on the death market principle long before the protocol went live.
So, is this what blockchain is for: letting scoundrels ease the remiss bettors of their money or even anonymously order people dead and get away with it? The clamor over the dubious Augur developments jibes quite well with the broader, ongoing debate that concerns platforms’ responsibility for the content their users choose to publish on them. Think Facebook and fake news/streamed deaths, or Twitter and political botnets, or Youtube and videos of dead bodies on popular suicide sites. The centralized social media gatekeepers’ mantra of “we are not publishers, we are merely infrastructure providers” is sounding ever less convincing with each high-profile blunder, forcing corporations behind those platforms to haphazardly design new policies and interventions.
Critics often point out that, in the case of a decentralized, blockchain-powered marketplace for anything, there is no corporation or government to go to if the goods or ideas in question turn out to be immoral or otherwise unacceptable for the majority of users. Furthermore, immutability of distributed ledgers that carry information about transactions renders it impossible to take the content down. This takes us back to a more general problem of blockchains’ capacity to perpetuate the wrong — be it flawed land titles, unjust copyright claims or transferring a scam victim’s money to a con artist’s wallet. Does this mean that a responsible society should avoid using decentralized, permissionless systems to underpin any sensitive sphere of transactions? Not really.
The classic notion of the marketplace of ideas, as John Milton and J. S. Millconstrued it, rests on the assumption that, once all ideas are allowed to clash freely in an open marketplace, the best of them will eventually prevail. Even though such reasoning might not seem indisputable, one need not take this leap of faith in order to be comfortable with blockchain-powered markets. Regardless of whether the natural tendency of good ideas to defeat bad ones is really a thing, there are still other mechanisms to fall back on — namely, governance systems’ design and a broader set of social norms that govern human behavior.
Prediction markets, as well as other blockchain-based idea marketplaces, may — and probably should — incorporate some on-chain mechanisms of community self-regulation. In the case of Augur, the community of REP token holders — who are also called “reporters” — are incentivized by the system’s design to document the correct outcomes of the events in question. The same people have the power to declare a certain bet “invalid,” in which case nobody gets paid after the outcome is decided.
This instrument of community self-policing looks like a relevant tool for stopping morally reprehensible bets from enriching those who might want to use the platform for malicious ends. The “gimmick market” case is a great way to test the system’s capacity to handle situations that are less unambiguously unacceptable than facilitating murder. Assassination pools constitute a marginal fraction of Augur’s overall trade volume, with just a handful of transactions. In contrast, gimmick markets on high-profile, highly bettable events may well become a feature of the Augur landscape, should the community set a precedent that lets the first one be.
In addition to on-chain community governance, there are things happening off-chain, too, that may serve as checks to potential abuse of prediction markets’ infrastructure. Even if we adopt the radical stance and accept that “code is law,” there is a larger ecosystem of constraints that influences human behavior. In the words ofLawrence Lessig, one of the preeminent legal thinkers of the Internet age, there are at least four discrete forces that shape people’s actions online: law, choice architecture, market and societal norms.
Even if the distributed ledgers’ architecture allows people to anonymously sponsor — and subscribe for — lawless action or con markets, and given the demand for them, social norms are still there. These norms suggest that murder is highly unethical, and fooling people into betting on the event that cannot possibly occur is not the best way to make them like you — even if you say sorryafterward. Also, there is a consideration of a perhaps more forceful effect: Both murder and fraud are criminal offences punishable within the legacy legal system, which still exerts a lot of influence over us all. On Augur, bets come in Ethereum, not REP, meaning that payments are very much traceable by law enforcement. And rest assured, the authorities are watching closely.
Most certainly, Augur already has regulators’ close attention, and recent developments are not going to make things better. Since markets that the platform hosts are essentially futures contracts, Augur and other decentralized prediction markets fall under the purview of the United States Commodity Futures Trading Commission (CFTC).
Reports emerged last summer that the agency was scrutinizing Augur for allegedly facilitating illicit gambling activities, since prediction markets as a form of gambling are illegal in the U.S. Those that manage to operate do so with multiple buffers and protections. For example, PredictIt, the largest non-blockchain platform that allows American citizens to wager on political events, is operated by a New Zealand-based, university-affiliated nonprofit and has strict limitations on the amount of money that users can stake.
In his October speech at a technology conference in Dubai, CFTC Commissioner Brian Quintenz raised a question of accountability on blockchain and sketched potential regulatory boundaries in the context of smart contract-powered futures products. In his remarks, Quintenz first demarcated the subset of smart contracts that potentially fall under the commission’s jurisdiction — the ones that manifest essential features of a swap, future or option — and then turned to the parties involved in their creation and operation: core blockchain developers, miners, developers of smart contract code and end users.
Quintenz suggested that it would be impractical to hold the first two categories accountable if some of smart contracts that operate on top of their ledger would be found to be in violation of the CFTC rules. Going after individual users of illegal decentralized futures, while normatively defensible, would likely be what Quintenz calls an “ineffective course of action,” given the pseudonymous and global nature of public blockchains. The only category left to directly target is, therefore, those who create and define the potentially illegal smart contracts.
Albeit Quintenz made sure to present his remarks as personal opinions, he is clearly not the only person on the commission who is pondering the ways to tackle these emergent challenges. Enter million-dollar gimmick markets springing on top of the largest political predictions platform available to U.S. citizens. Clearly, the whole deal looks primed for the regulator to step in and protect the investors — and if Brian Quintenz’s approach is the dominant one within the CFTC, it might be the right time for the Augur core development team to start getting concerned .
Governing with prediction markets
While regulators have yet to figure out how to deal with decentralized idea markets whose operations are apparently in conflict with the standing laws, it is unlikely that prediction platforms are going anywhere anytime soon. Since they essentially represent the pools of aggregate collective wisdom, such markets are often a feature of many projects aimed at creating systems of decentralized governance. Arguably, the most publicized of those is the futuristic form of government — called “futarchy” — that economist Robin Hanson proposed as a framework for enabling citizens to vote for optimal policies. The concept apparently gained traction with Ethereum’s Vitalik Buterin, who, in 2014, had dedicated a grant to support research on the topic.
There are projects that seek to build a versatile governance protocol around a pool of “collective intelligence”, where users determine visibility and prominence of policy suggestions by staking tokens on predicting whether they become a success or not. This way, a prediction market becomes a device for managing collective attention, stimulating members of the community to sift through policy proposals and evaluate their relative worth.
Meanwhile, blockchain-powered prediction markets are doing just fine in their primary capacity as platforms for betting on outcomes of future events. In November 2018, Augur’s trade volume in midterms-related contracts surpassedthat of Predictit, the largest centralized competitor in the domain of political forecasting.
Humankind has had the habit of betting on the future for thousands of years, and the idea of doing it without a middleman for the first time is incredibly appealing. The CFTC seems to be up against an enormous task of wrapping the red tape around an ever-expanding infrastructure that facilitates an activity that many people enjoy.
This post credited to Cointelegraph. Image source: Cointelegraph
Stock market investment veteran and co-founder of $70 billion fund Mayo Van Otterloo, Jeremy Grantham, has pledged to spend 98 percent of his net worth – approximately $1 billion – on what he sees as a race against the ticking time bomb of humanity’s fragile deal with the environment.
Bloombergreports that through his foundation, Grantham and his wife Hanne are currently spending more than $30 million a year to fund at least 38 non-profit organisations focused on dealing with the reality of climate change.
Is Humanity The Next Bubble?
Renowned for his prediction nous which saw him accurately predict the dotcom bubble and the 2008 global financial crisis Grantham’s latest prediction is that the next big crisis will be civilizational as against merely economic. In his view, the major unspoken problem being created by climate change is the fact that agriculture is being fundamentally threatened through creeping topsoil loss. According to him, humanity has a little under a century of good harvests left, which coupled with growing populations spells impending disaster.
Quoted by Bloomberg on his thoughts regarding the immediate and long term future of humanity he says:
Even without climate change, it would be somewhere between hard and impossible to feed 11.2 billion [without] recurrent waves of famine. If that’s the curve in the stock market, you know what to do: panic and go short.
To forestall such an occurrence, Grantham has become a busy political activist, getting involved in everything from the 2011 Keystone XL pipeline protest at the White House to left-wing political campaigning to sensitize people to the imminent danger of large-scale man-made climate change.
“Capitalism Needs Regulation”
Describing his initial political position as an “old, late-lamented Republican”, Grantham says that his moment of political awakening came with the U.S. presidential election in 2000 when he realised that “politics and climate became mixed up”.
Grantham describes his current political standing as a capitalist with a heavy dose of regulation. This he says, is because while capitalism “does a million things better than any other system,” without strong regulation, it is impossible to expect good behaviour from capitalists if such behaviour is not immediately profitable.
In his words:
You must not expect unnecessary good behavior from capitalists. […] I’m sorry, libertarians, it is the only way.
In true capitalist fashion, Grantham also intends to make money from his climate change awareness campaign. GMO launched the Climate Change Fund in April 2017 for the purpose of investing in organisations and commodities that will benefit from the growth of clean energy, green technology and energy efficiency.
Whether he will be successful or not remains to be seen. What seems clear though is that if there is anyone qualified to raise an alarm about the possibility of an impending ‘short’ on human existence, it would be Jeremy Grantham.
The central bank of Bahrain has kicked off a consultative process on cryptocurrency platforms in the kingdom by publishing the relevant draft regulations.
According to the Bahrain News Agency, the draft rules — which target the operations of crypto-asset platforms — aim to provide a regulatory framework for the supervision and licensing of these services. Additionally, the draft rules contain measures aimed at safeguarding the interests of customers, cybersecurity risk management, and technology standards.
“This regulatory framework will address the demand from the market for these services and the need to also recognise this innovation in financial services. The CBB’s experience with the participants within the Regulatory Sandbox was insightful in shaping these rules,” the executive director of banking supervision at the Central Bank of Bahrain, Khalid Hamad, said in a statement.
The Central Bank of Bahrain (CBB) expects to have received feedback on the draft cryptocurrency regulations by the last day of this year.
Bahrain Wants to Be an International Fintech Hub
This comes at a time when Bahrain has identified the fintech sector as crucial in helping the kingdom become a regional business and banking hub. Towards this end, the kingdom has launched a regulatory sandbox to allow financial institutions licensed by the CBB and other firms to “test their technology-based innovative solutions relevant to Fintech or the financial sector in general.”
In September last year, the CEO of the Kingdom’s Economic Development Board, Khalid Al Rumaihi, disclosed that Bahrain was keen on adopting cryptocurrencies and that a bitcoin exchange had already shown interest in setting up shop in the constitutional monarchy.
Besides cryptocurrency, Bahrain has also been keen to adopt blockchain technology. Last year in February, Al Rumaihi stated that the constitutional monarchy was in talks with the central bank of Singapore and others with a view of adopting distributed ledger technology and becoming a regional leader in the space, as CCN reported at the time:
“Blockchain will unlock so many different possibilities for business in the way email and internet did years ago. What would prevent Bahrain from becoming a leader in this space in the same way Singapore is?”
“Technologies such as blockchain take us a huge step forward in finding a secure way to facilitate transactions,” Mirza said. “Blockchain’s ability to protect user’s data is a true mark of progress, because it can be applied in different companies from different industries including cybersecurity.”
A law professor has reached an unflattering conclusion regarding the regulatory climate of the crypto space in the United States — it’s confusing!
According to Carol Goforth, who teaches at the University of Arkansas School of Law, “overlapping regulations produced by a multitude of distinct agencies with different missions and priorities” has resulted in a “confusing mix of classifications and requirements” for cryptoassets.
To illustrate her point, Goforth noted that there are four federal agencies in the United States which regulatecryptoassets to a certain degree and form: the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN) and the Internal Revenue Service (IRS).
Lack of Harmony
Consequently, the various federal agencies have varying definitions of cryptoassets, and this sows complexity and confusion. In its regulatory role the SEC, for instance, treats the issuance of new digital assets as securities. The CFTC, on the other hand, views all cryptoassets as commodities while the IRS sees crypto as property. In contrast, FinCEN regulates cryptocurrency exchanges as “money” exchangers, effectively leading to the conclusion that the U.S. Department of the Treasury bureau views cryptoassets as currency.
Inevitably, the varying definitions by the different agencies results in overregulation since each entity has its own requirements which must be met. Trying to comply with the numerous regulatory obligations thus becomes expensive and time-consuming for the players in the sector.
The situation gets worse at the state level since every state in the union has its own set of securities laws and tax regimes. Currently, only a handful of states have determined that cryptoassets should be exempted from state securities laws.
Per Goforth, the way forward is to adopt a regulatory approach that is more nuanced in order to avoid overregulation.
Here’s the Proof…
Already, the existing regulatory regime in the world’s biggest economy seems has severely limited the number of coins that U.S.-based cryptocurrency exchanges such as Coinbase can offer their clients. In contrast, a cryptocurrency exchange such as Binance which is headquartered in a friendlier jurisdiction boasts of dozens and dozens of supported coins.
The U.S. regulatory regime has also had an impact on ICO issuance. As reported by CCN earlier this year, a significant number of projects have skipped the U.S. and instead chosen to issue their initial coin offerings in jurisdictions such as Singapore, the Virgin Islands, and the Cayman Islands.
This was according to a report prepared by Satis Group Crypto Research which noted that in 2017 the U.S. had cornered 32% of the global ICO fundraising market. As of the first half of this year, this market share had declined to 10%.
The U.K.’s finance regulator, the Financial Conduct Authority (FCA), may ban cryptocurrency derivatives such as futures as part of its “most comprehensive response” to the industry, financial trading news outlet Finance Magnatesreported Nov. 20.
In a speech at a London conference Tuesday, FCA executive director of strategy and competition Christopher Woolard said the organization would consult on forbidding so-called cryptocurrency contracts-for-difference (CFDs).
This, says Finance Magnates, would “likely” also incorporate “options, futures and transferable securities.” The publication quoted Woolard as saying:
“We’re concerned that retail consumers are being sold complex, volatile and often leveraged derivatives products based on exchange tokens with underlying market integrity issues.”
The U.K. has found itself in a regulatory quandary over its slow response to the grow in popularity of cryptocurrency and associated instruments, with various factions criticizing the FCA’s priorities and intentions as they have surfaced so far.
In Tuesday’s speech, Woolard was outlining the findings of a dedicated “Taskforce” which began formulating recommendations in March. The idea of a ban on crypto derivatives first surfaced in October, Cointelegraph reported.
The group had delineated cryptocurrencies into three types, Woolard noted, constituting “exchange tokens” such as Bitcoin (BTC), “security tokens,” and “utility tokens.”
Regarding unauthorized use of tokens, Woolard additionally announced plans to take on what he called “one of the most comprehensive responses globally to the use of cryptoassets for illicit activities.”
A recent survey meanwhile showed that knowledge, ownership, and awareness of Bitcoin among British consumers has markedly increased.
The issue of Islamic classification of cryptocurrency has been ongoing since the rise of bitcoin’s popularity, with debate over whether or not bitcoin and other cryptocurrencies are considered halal (permitted) or haram (forbidden).
This is due to the stringent guidelines regarding monetary classification laid out in the Muslim faith, with conditions forbidding usury (the act of lending for profit on interest) as well as currency backed by nothing considered to be of value. The fractional reserve banking practices which led to the 2008 global financial crisis and the collapse of the US housing market, for example, are completely forbidden by Islamic law, and Muslim bankers and financial professionals cannot engage in them in accordance with their faith.
CCN has covered previous cryptocurrency developments in Islam such as the first ever mosque in Britain to accept cryptocurrency for alms-giving and the declaration that bitcoin is halal, or Sharia-compliant, according to certain scholars. Today, further progress has been made with Swiss financial technology firm X8 AG becoming certified by Islamic scholars for its digital currency, a certification that will be necessary to accommodate the company’s planned expansion into the Middle East.
Many other fintech firms are applying for and pursuing Sharia-compliant recognition that will grant them access to the Muslim banking world, and Middle Eastern regulators and exchanges are equally open to attracting international business pending scholarly approval. The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) conference of Sharia scholars met in Bahrain earlier this year with the classification of cryptocurrencies one of the major items on the agenda.
X8’s Ethereum-based cryptocurrency is backed by a basket of eight fiat currencies and gold, which helps the requirements for currency in terms of being backed by commodities or resources deemed to be inherently valuable. This distinction can be a shaky one — fiat currencies like the dollar are typically unbacked by gold these days and are simply deemed valuable by virtue of mainstream social acceptance and adoption, and indeed gold is valued higher than its utility as a conductor due to socially-held beliefs that it is a precious metal.
The Islamic requirement that cryptocurrencies are only valuable if society agrees may seem like a catch-22, but this is essentially a more formal version of the same process for Western valuation of cryptocurrency as well. In this case, X8’s cryptocurrency and related tokens have been certified by the Shariyah Review Bureau(SRB), an Islamic advisory firm licensed by Bahrain’s central bank.
X8 director and co-founder Francesca Greco said:
“The Gulf region is a really good place for financial technology companies, because they all want to become hubs for fintech,” adding the company would open a regional office in the Middle East later this month.”
When Bitcoin was debuted in October of 2008, the world’s first cryptocurrency was slow to garner traction. At the time, only the most eccentric internet users were willing to allocate capital, time, and brain power to bolster the development efforts of the Bitcoin Network, the first true blockchain/decentralized database. However, as time elapsed, the cryptocurrency found an ally in the Chinese people, many of which were open to utilizing BTC in day-to-day commerce.
While the local cryptocurrency economy saw a multi-year boom, which facilitated the rise of Bitmain, as BTC began its monumental run at the start of 2017, rumors began to circulate that China’s financial regulators were poised to crack down on blockchain-based assets.
Sadly, these rumors eventually became a reality, with the Chinese government reportedly establishing a blanket ban on crypto trading and ICOs in late-2017. As reported by NewsBTC, this heavy-handed action saw RMB/CNY-to-crypto volumes all but dissipate, leading many to claim that China’s crypto scene had sadly bitten the dust.
Due to the apparent extent of the ban, some were quick to believe that all crypto-related actions, including owning digital assets, weren’t permitted in the Asian nation. However, reports indicate that a Shenzhen-based court has ruled in favor of Bitcoin, likely bringing clarity to China’s precarious regulatory climate surrounding cryptocurrencies.
Shenzhen Court Rules In Favor Of Crypto, Bitcoin
CnLedger, a prominent crypto and blockchain source within China, recently claimed that members of the Shenzhen Court of International Arbitration moderated a case pertaining to this new technology.
1/ Chinese court confirms Bitcoin protected by law. Shenzhen Court of International Arbitration ruled a case involving cryptos. Inside the verdict: CN law does not forbid owning & transferring bitcoin, which should be protected by law bc its property nature and economic value.
Citing a document posted on WeChat, China’s one-stop shop for internet users, CnLedger claimed that the court’s verdict indicates that Chinese law permits consumers to transact and own Bitcoin. The local source added that the Shenzhen body has ruled the crypto asset legal due to its inherent nature as “property” and its “economic value.”
While this regulatory green light came as a shock to many, what didn’t come as a surprise is that the same court deemed that Bitcoin isn’t a legal currency by any means. However, in spite of the fact that this ruling may sound disconcerting, the lawyers overseeing this case acknowledged that the use of BTC “can bring economic benefits to parties,” and as such, the asset shouldn’t be invalidated in bona fide transactions and legitimate use cases.
However, it is important to note that this case underwent proceedings in Shenzhen, one of China’s special economic zones, which may have skewed the results of the case in favor of crypto assets.
Could This Ruling Turn The Regulatory Tide For Bitcoin?
Regardless, there are many that are still hopeful for crypto’s future within China, even if restrictions on Bitcoin aren’t consistent throughout the nation of 1.4 billion individuals. Per previous reports from NewsBTC, after Beijing’s recent move to double-down on its anti-cryptocurrency trading efforts, which included issuing public warnings regarding ICOs, blocking 124 exchanges, and banning crypto media outlets, traders took to shady over-the-counter (OTC) exchanges to purchase and sell cryptocurrency for fiat currencies.
While the WeChat document didn’t mention these questionable exchanges, the aforementioned court’s ruling to validate the use of Bitcoin in transactions could be a precursor to the reappearance of Chinese cryptocurrency exchanges, which are near-impossible to access in the eastern country.
So although this move isn’t likely to jumpstart China’s second drive for widespread cryptocurrency adoption, this unexpected ruling from Shenzhen’s International Arbitration Court indicates that hope isn’t lost for local Bitcoin fanatics.
This post credited to News BTC Image source: News BTC
Indian regulators’ clampdown on cryptocurrency businesses is forcing the exchange startup Unocoin to experiment with stablecoins and ATMs to continue receiving fiat deposits from customers.
Unocoin co-founder Sunny Ray told CoinDesk his company hasn’t been able to transact through regular banking channels with its 1.3 million customers for several months, after the Reserve Bank of India (RBI) banned banks from working with crypto or crypto companies in April.
Most recently, Unocoin set up an ATM in a Bangalore mall where customers can deposit rupees to their exchange accounts without a bank or credit card. In the coming weeks, Unocoin will open a few more ATMs in Mumbai and Delhi.
“We’re essentially employing bank-grade ATM machines,” Ray said.
Also, some users are quickly transferring their rupees to the ethereum-based TrueUSD token, which Unocoin began supporting in August, then using it to purchase bitcoin or other assets down the line when the price feels right. As a so-called stablecoin, TrueUSD is designed to maintain parity with the U.S. dollar.
For customers outside Bangalore, support for stablecoins may provide an indirect way to add or hold value in their Unocoin accounts without quite as much volatility, albeit it falls short of a fiat on-ramp. However, that transaction volume is still less than a few thousand TUSD per day.
“We never even considered that [stablecoins] before,” Ray said. “That’s more just like a stop-gap solution. It’s not like an actual, final solution to everything.”
As Unocoin investigates how to scale compliant ATMs, Ray said the team is also looking to expand to Malta and Canada, in case operating in India becomes impossible altogether, all while exploring the options for listing several new stablecoins.
Stepping back, an ongoing legal battle to overturn or alter this ban hasn’t yielded any results to date. Meanwhile, the ban is having a disastrous impact on India’s crypto community, with the popular exchange startup Zebpay abruptly shutting down late last month.
As Kashif Raza, a co-founder of Crypto Kanoon, an Indian regulatory news startup, told CoinDesk:
“The crypto community is suffering from this ban as there have been instances where the bank accounts of individuals have been closed who were found to be dealing in cryptocurrencies.”
The crackdown has been so severe that Raza said it has created a misconception in India that bitcoin itself is outlawed, even though the ban only applies to entities governed by RBI.
“From a regulatory perspective there hasn’t been any real clarity,” Ray said. “We as a company are working on a couple of solutions.”
None of this should imply that Indian crypto startups are now operating in a black market. To the contrary, Raza said exchange accounts can sometimes require more know-your-customer (KYC) paperwork than opening a new Indian bank account. Many see the ban as an inconvenient pause, not a death knell.
“Given the fact that the Indian government seems to be in favor of the technology behind virtual currencies, the crypto community is quite hopeful that [banking crypto companies] will be regulated in future,” Raza said.
Plus, Unocoin’s ATMs allow for regulation-conscious investors like Karthik Reddy of Blume Ventures, who praised the new ATMs in a press statement, to keep detailed records of their crypto portfolios while still depositing fiat currency as needed.
On the other hand, the ban has certainly invigorated peer-to-peer trading. Indeed, the P2P exchange WazirX reached a new daily trading volume peak of 50 BTC in September 2018. At the same time, the global P2P exchange LocalBitcoins reached nearly $1.5 million in weekly Indian trading volume at least three times since August.
And there’s even silver lining for Unocoin, which has seen up to 500 new account registrations every day ever since Zebpay closed its doors.
“It’s almost kind of freeing in a way because there are a lot of people in India that don’t have online banking,” Ray said. “Almost everybody in India uses cash, so it might in an odd way open us up to an even bigger market.”
Still, speaking to how restricting crypto companies that seek to serve a country of 1.3 billion could affect global adoption, Ray concluded:
“Innovation is being squashed in a country where one in seven people live.”
This post credited to Coindesk Image source: Unocoin.
North Dakota Securities Commissioner Karen Tyler has issued cease and desist orders against three firms for allegedly offering unregistered and fraudulent securities in the form of Initial Coin Offerings (ICOs), according to an announcement published Oct. 11.
The companies at the center of the orders are Crystal Token, Advertiza Holdings (Pty) Ltd., and Life Cross Coin a/k/a LifecrosscoinGmbH. Per the statement, Crystal Token (CYL) is an “evolutionary multi-utility” ERC-20 token, that promises earnings up to two percent per day. The token’s website allegedly contains fraudulent claims of “excessive unsubstantiated” rates of return on investment. CYL is not authorized to sell securities in North Dakota.
Advertiza Holdings offers cryptocurrency called “Tizacoin,” or “TIZA,” and claims that holders “can expect to make a profit from the appreciation of the value of TIZA tokens.” That, according to the regulator, indicates that the token’s description as a utility token is incorrect, and is instead a security.
According to the North Dakota Securities Department, Advertiza falsely claims to be registered with the U.S. Securities and Exchange Commission (SEC) and is also not registered to sell securities in North Dakota.
The third firm, Life Cross Coin, operates a website from a Berlin IP address associated with ransomware, malware, and identity fraud, and offers a cryptocurrency called “Life Cross Coin,” or “LICO.” The firm claims that the token will be spent on charity, while investors can allegedly get a “huge return on investment.” LICO is not registered in North Dakota, and its site reportedly contains unsubstantiated claims and blatant misrepresentations. Tyler commented on the orders:
“The continued exploitation of the cryptocurrency ecosystem by financial criminals is a significant threat to Main Street investors. In formulaic fashion, financial criminals are cashing in on the hype and excitement around blockchain, crypto assets, and ICOs – investors should be exceedingly cautious when considering a related investment.”
The order is part of Operation Cryptosweep, a coordinated multi-jurisdiction investigation into potentially fraudulent crypto investment programs, that involves 40 U.S. and Canadian state and provincial securities regulators. Since the initiative’s launch in May, investigators discovered about 30,000 crypto-related domain names and conducted over 200 investigations of ICOs.
In May, the Colorado Securities Commissioner launched probes into two companies — California-based Linda Healthcare Corp. and Washington-based Broad Investments LLC — for promoting unlawful ICOs.