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.

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Bahrain’s Government is Keen on Adopting Bitcoin, Reveals Official https://www.cryptocoinsnews.com/bahrains-government-keen-adopting-bitcoin/ 

Bahrain’s Government is Keen on Adopting Bitcoin, Reveals Official

Bahrain is interested in adopting digital currencies like bitcoin amid a wider impetus toward a ‘country level’ adoption of blockchain technologies.

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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?”

‘True Mark of Progress’

And three months ago, Bahrain’s electricity and water affairs minister, Dr. Abdulhussain Mirza, called for the adoption of blockchain technology by the private sector in the country:

“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.”

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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.

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81% of ICOs Are Scams, U.S. Losing Token Sale Market Share: Report https://www.ccn.com/81-of-icos-are-scams-u-s-losing-token-sale-market-share-report/ 

81% of ICOs Are Scams, U.S. Losing Token Sale Market Share: Report

More than 80 percent of all initial coin offerings (ICOs) could be classified as scams, an explosive new report has found.

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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%.

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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.”

recent survey meanwhile showed that knowledge, ownership, and awareness of Bitcoin among British consumers has markedly increased.

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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 cryptocurrency crypto

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.”

Regional Gulf regulators have encouraged fintech innovation over the past few years but are still wary of cryptocurrencies, which Greco states is an opportunity for stablecoins to step in and fulfill their use case of reducing volatility. Equally, Switzerland has embraced blockchain with open arms, establishing the small city of Zug as one of the world’s leading blockchain hubs, collaborating with other nations on blockchain regulation, and rolling out blockchain voting prototype systems.

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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.

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.

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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.”

Silver lining

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.

 

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Kenyan Distributed Ledgers and Artificial Intelligence task force chairman Bitange Ndemo has said that the government should tokenize the economy, local news outlet The Star reported September 25.

The taskforce was established in March by the government of the Republic of Kenya in order to evaluate proposals on how to deploy blockchain technology in the public sector. The working group consists of local blockchain startups, experts, researchers, regulatory bodies, lawyers and other associated parties.

Speaking at an Information and Communication Technology Ministry (ICT) stakeholders meeting with the private sector, Ndemo reportedly asserted that the government should consider tokenization of the economy in order to deal with “increasing” rates of corruption and uncertainties. This move, according to Ndemo, would have the government print less hard currency. The chairman said:

“We must begin to tokenize the economy by giving incentives to young people to do things which they are paid through tokens that can be converted to fiat currency.”

In addition, Ndemo stated that the adoption of tokens could reduce unemployment levels, outlining the necessity of issuing a digital currency equivalent to a fiat currency. The ICT Principal Secretary Jerome Ochieng said that the government will develop relevant policies to process the recommendations proposed by the taskforce.

Notably, the Central Bank of Kenya (CBK) issued a circular to all banks in the country in April, warning them against dealing with cryptocurrencies or engaging in transactions with crypto-related entities. CBK Governor Patrick Njoroge cited crypto’s prevalence in illegal activities, its anonymous nature, and its lack of centralized control as the impetus for the ban.

In June, decentralized liquidity network Bancor launched a network of blockchain-based community currencies to fight poverty in Kenya. The project seeks to stimulate local and regional commerce and peer-to-peer activity by enabling Kenyan communities to create and manage their own digital tokens.

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The Financial Action Task Force (FATF) said it is getting closer to the establishment of a global set of anti-money laundering (AML) standards for cryptocurrencies, Financial Times reported September 19.

The FATF is an international organization established in 1989 at the initiative of the G7 in order to develop policies and standards to fight money laundering. The agency’s scope of activities further expanded to combat terrorism financing. The FATF currently comprises 35 member jurisdictions and 2 regional organizations.

The agency’s president Marshall Billingslea reportedly said that he expects the coordination of a series of standards that will close “gaps” in global AML standards at an FATF plenary in October.

At that time, the FATF will purportedly discuss which existing standards should be adapted to digital currencies, as well as revise the assessment methods of how countries implement those standards. Billingslea also outlined the importance of developing standards that can be applied in a uniform manner.

According to Billingslea, current AML standards and regimes for cryptocurrencies are “very much a patchwork quilt or spotty process,” which is “creating significant vulnerabilities for both national and international financial systems”. Billingslea, noted that despite the risks related to this kind of assets, digital currency as an asset class presents “a great opportunity.”

In June, Cointelegraph reported that the FATF was planning to start developing binding rules for crypto exchanges later that month. The new rules would be an upgrade to the non-binding resolutions which were approved by the FATF in June 2015, considering whether existing guidelines on AML measures and reporting suspicious trading activity are still appropriate, and if they can be applied to new exchanges.

Earlier this month, Belgian think-tank Bruegel also called for unified legislation on cryptocurrencies and more scrutiny on how they distributed to investors. Bruegel noted that the virtual nature of cryptocurrencies limits the development of regulations, stating that a piecemeal approach to crypto regulation leaves an opportunity for regulatory arbitrage.

 

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German’s Finance Minister Olaf Scholz doubts that cryptocurrencies can currently replace traditional fiat currencies, Cointelegraph auf Deutsch reportstoday, September, 18.

“I would doubt today, whether it has a perspective as a currency model, ” saidScholz at a “citizens dialogue” at the German-Dutch Army Corps in Münster. Scholz compared cryptocurrencies to the tulip fever bubble in the Netherlands in the 17th century saying, “and the danger is great that there will be such a tulip inflation.”

Scholz said that the necessary computer processes for the mass implementation of cryptocurrencies are so expensive and energy-intensive that it could not work, but that he did not want to speak for the future “20 to 30 years.”

According to Scholz, cryptocurrencies should also be closely observed by regulators, as they could be used for terrorist financingmoney laundering or other criminal activities. He added that “…we do not believe that they already have an economically significant importance today.”

European legislators have met in several capacities in the past several weeks in order to discuss their concerns over cryptocurrencies and the potential remedies to problems associated with digital assets.

On September 4, members of the European Parliament met to discuss regulations for Initial Coin Offerings (ICOs), which while being a “very interesting and promising vehicle instruments” for raising capital, require more regulatory oversight in the view of many European legislators.

At a recent meeting of the Economic and Financial Affairs Council in Vienna, European Commission Vice President Valdis Dombrovskis claimed that crypto needs further regulation. While noting that crypto is “here to stay,” Dombrovsksis stressed that the European Union (E.U.) will focus on the development of crypto asset classification and regulatory mapping.

Prior to the aforementioned meeting, a report by Belgian think tank Bruegel urged European regulators to adopt uniform regulations on cryptocurrencies at the E.U.-level. The report notes that while regulations are left to national entities, there is an opportunity for “regulatory arbitrage” for crypto businesses.

 

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