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There are no Plans to Curb the Japanese Cryptocurrency Market, Says FSA Commissioner

The commissioner of Japan’s Financial Services Agency (FSA), Toshihide Endo has declared that the regulatory body prefers to pursue a more measured approach to regulating the country’s cryptocurrency space. The FSA has taken strict measures against defaulting virtual currency bourses in Japan after the January Coincheck hack saga.

A Measured Approach to Cryptocurrency Regulations

Speaking in an interview with Reuters, the FSA commissioner promised more moderate regulations. He said that his agency would strive to find ways of adequately regulating the digital currency market in the country. According to Endo, the Agency wishes to develop a regulatory framework that balances the need to protect consumers while not at the same time, stifling the growth of the industry.

Commenting on the matter, Endo said:

We have no intention to curb (the crypto industry) excessively,” he said. “We would like to see it grow under appropriate regulation.

Endo’s comments came as part of a wide-ranging interview session where the FSA chief spoke about numerous aspects of the Japanese financial space.

Post-Coincheck Cryptocurrency Space in Japan

The Japanese cryptocurrency industry has come under increased levels of scrutiny in the aftermath of the Coincheck hack. In January 2018, Coincheck – a prominent exchange platform at the time suffered a devastating cyber-attack. Hackers stole more than half a billion U.S. dollars in NEM tokens.

After the Coincheck hack, the FSA increased its oversight activities over the exchange platforms in the country. A thorough investigation by the agency unearthed alleged sloppy practices on the part of these platforms. According to the FSA, many of these cryptocurrency exchanges lack robust internal anti-money laundering (AML) protocols, as well as inadequate security infrastructure.

Since then, many platforms have suffered run-ins with the Agency including Binance which contributed to the exchange behemoth orchestrating a move to Malta. The FSA had already pioneered the idea of a national cryptocurrency exchange regulatory framework in 2017, making Japan the first country to have such a structured government oversight of the nascent industry.

In April 2017, the FSA passed a revised services payment code which the agency mandates all platforms to obey. The code which in effect recognized Bitcoin as legal tender also established defined operational provisions for cryptocurrency exchange platforms.

What do you make of FSA Commissioner – Toshihide Endo’s assurance of a more measured approach to cryptocurrency regulations in Japan? Keep the conversation going in the comment section below.

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FinCEN Director: Cryptocurrency Complaints Exceed 1500 Per Month

Cryptocurrency–Despite the call for Exchange Traded-Funds and other SEC regulated options for investors, cryptocurrency continues to remain a largely lawless place. A new report from the U.S. Financial Crimes Enforcement Network has shed a damning light on the industry in terms of suspicious activity and other forms of foul play.

In a speech delivered to the 2018 Chicago-Kent Block Legal Tech Conference last Thursday, Director of the FinCEN Kenneth A. Blanco dropped a relative bombshell when he told the public his investigative arm receives over 1500 cryptocurrency related complaints each month. Classified as Suspicious Activity Reports (SARs), complaints have continued to grow throughout the year, indicating a need for greater oversight. While members of the cryptocurrency industry rightly shun the centralized presence of further government regulation, the sheer volume of reported cryptocurrency scams and the growing number of complaints being levied at FinCEN and the SEC has painted a landscape wrought in some turmoil. While cryptocurrency still represents a gray space in terms of enforcing and regulating financial behavior, the department is working with the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC).

Blanco told conference attendees,

“innovation in financial services can be a great thing… we also must be cognizant that financial crime evolves right along with it, or indeed sometimes because of it, creating opportunities for criminals and bad actors, including terrorists and rogue states.”

Rather than condemning the industry of cryptocurrency for its role in producing epidemic numbers of scams and complaints, Blanco still finds the technology innovative and recognizes the need to foster that growth despite the current lack of regulation. He stated the field of fintech and cryptocurrency was filled with “incredible innovations,” but needed to find a way to work with regulators to implement certain guidelines for protecting investors and avoiding fraud,

“harm can be done with devastatingly increasing speed, breadth, and obscurity in the digital world.”

In addition to giving specific examples of cryptocurrency exchanges who had failed to comply with FinCEN regulations, despite falling under the umbrella of companies that accept transfers of value in fiat or fiat substitutes, Blanco commented that most crypto businesses take the necessary steps to meet regulation when given a nudge that an examination is forthcoming. However, Blanco made it clear that meeting regulatory requirements when under examination is not a substitute for following the law on a regular basis. For these exchanges, Blanco had harsh words,

“Let this message go out clearly today:  This does not constitute compliance.”

Blanco also spent time to comment upon the nature of the ICO industry, a market that has taken off substantially over the last two years. Despite a finding earlier in the year concluding that 80 percent of all ICOs could be classified as a ‘scam,’ the market has continued to see exponential growth. Through the first two quarters of 2018, total ICO volume already doubled that of the previous year, with 2018 looking to continue a strong trend of growth for initial coin offerings. Blanco contended that the current model for ICOs is convoluted enough to fall under several regulatory umbrellas, but that firms behind the offering are still required to meet anti-money laundering and anti-terrorist funding obligations.

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Ripple Exec: ‘Thrilled’ With Regulators Taking Interest in Cryptocurrency

Ripple (XRP)–Executives at Ripple are giving the impression that they welcome the introduction of regulators and increased scrutiny in the space of cryptocurrency.

While some community members and investors are skeptical of increased regulation, seeing it as an attempt to stifle the growth of cryptocurrency and introduce the centralization that the industry has been designed to move away from, others view the presence of regulators as a natural step in the maturation process of the industry.

Ripple, the parent company behind the cryptocurrency XRP, has been dealing with the possibility of regulation for some time as a startup targeting banking and financial services. While the currency XRP is embroiled in a battle over whether the coin constitutes a security, Ripple is moving forward in preparation of working with regulators and using the increased scrutiny to further their brand and business. Speaking in an interview with Fox Business, Ripple’s chief marketing strategist Cory Johnson has expanded upon the company’s view towards regulation, stating that he believes it can work to the benefit of Ripple and that they are “thrilled” with regulators finally getting more involved in cryptocurrency. In addition, he outlined how regulators would help protect both crypto businesses and customers, filling in some of the legal gray space and lack of accountability that most of the industry operates under,

“One person’s regulation is another person’s protection. I believe it’s really important for investors to be protected…We’ve seen what happens when there aren’t investor protections. We’ve seen investors lose so much money, and we’ve seen it in the world of crypto. We’ve seen some real bad actors involved, so we’re thrilled that regulators are getting involved.”

Ripple has been at the forefront of operating with the limited regulation currently in cryptocurrency, most of which has been concentrated in the state of New york. Ripple is one of just eight companies to have received a contentious BitLicense, one of the first regulatory attempts imposed on the industry and a legal structure that most crypto advocates have found repelling to growth. While the BitLicense allows Ripple to sell the subsidiary XRP II to firms and institutional investors–which reported increased sales in Q2 2018 despite the sharp drop off in total XRP sales–there is some controversy surrounding Ripple and the BitLicense ruling. Ben Lawsky, former superintendent of New York’s Department of Financial Services who oversaw the creation of the BitLicense, now sits on the board of Ripple. Some industry figures in crypto have accused Lawsky of creating a purposefully convoluted regulatory hurdle to operate in the state, thereby increasing his value to firms as a guiding hand through the process (Lawsky subsequently stepped down from his position in 2015, following the creation of the BitLicense, to found his own firm named the Lawsky Group).

However, as Ripple’s chief marketing strategist points out, the presence of regulators provides a “safer” space of institutions that are repelled by the current, Wild West-nature of cryptocurrency. It’s possible that greater government oversight will strangle the innovation of cryptocurrency, but its as much up to the industry and community members to steer clear of entities that attempt to impose centralization.

Johnson also went on to lament the level of understanding and appreciation for cryptocurrency in the U.S., stating that the country was in danger of falling behind on the next big thing in technological and financial innovation,

“A lot of other countries are moving faster than the U.S. to try to provide really clear lanes of where businesses can act — what’s right and what’s wrong.”

Johnson’s statement echoed the sentiment of CFTC Chairman J. Christopher Giancarlo, who said at a Congressional subcommittee hearing this week that he believes the U.S. to be four years behind on handling the application of cryptocurrency.

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We are Behind the Curve When it Comes to Blockchain Technology, Says CFTC Chairman

Chairman of the United States Commodity Futures and Trading Commission (CFTC), J. Christopher Giancarlo, has said that his agency is behind the curve of matters concerning blockchain technology. The CFTC chairman also clarified the agency’s role in the nation’s financial market.

The CFTC is Four Years Behind the Blockchain Industry

Speaking during a session of the House Committee on Agriculture, Giancarlo fielded questions about the CFTC’s performance so far as well as its plans for the future. The CFTC chair spoke about the agency’s expertise with cryptocurrency and blockchain technology. According to Giancarlo, the CFTC is out of pace with the developments in the industry:

We’re falling behind. The Bank of England has announced a new blockchain compliant payment settlement system. We’re four years behind. We need to test and understand it and know how to work it as a regulator before coming to Congress. …Using subpoenas to get information from blockchain finance industry I think is the wrong way to go about it. I think cooperation is the way forward.

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Giancarlo highlighted the statutory provisions that have effectively hamstrung the Commission’s ability to keep up with the industry. He also said the CFTC couldn’t create its own blockchain protocol due to budgetary constraints. It would be recalled that financial regulators in the United States had their budgets cut earlier in the year.

CFTC Doesn’t Regulate the Retail Cryptocurrency Market

During a point in the session, Rep. Adams asked the CFTC chair whether the Commission required a Congressional mandate to oversee the cryptocurrency market. In response, Giancarlo said:

It is not the historical role of the CFTC to play this type of role in cash markets. It is not my place to advocate for expanded jurisdiction. There may come a time for the govt to step, but the question is when is the time. The total value of the crypto market is probably less than one big publicly traded company, so it’s not a big market. [I think] we should follow the regulation template of the early internet which was ‘first, do no harm.’

Do you think the CFTC can catch up with the rapid pace of development in the blockchain technology and cryptocurrency market? Should the CFTC be given oversight authority over the retail cryptocurrency trading market? Keep the conversation going in the comment section below.

Image courtesy of Reuters.

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Ross Ulbricht’s Petition Gains Traction From Industry Leaders After Cries For His Release

Ross Ulbricht, who founded the anonymous Silk Road trading site, is currently serving two life sentences in prison for his affiliation with the site, locked away from the eyes of the world.

However, many in the cryptocurrency community still think of him as the one who started it all, the one who brought Bitcoin to thousands of more users, and someone who does not deserve two life sentences in a jail cell.

In the eyes of many, Ross didn’t do anything too serious, leading some to ask why he should be receiving such a long sentence in prison, with no chance of parole. As many point out, all the charges he was sentenced on were non-violent and had no criminal history prior to the Silk Road event.

Silk Road Founder Launches Twitter Account, Instantly Receives Worldwide Support 

In an unexpected turn of events, Ulbricht recently burst onto the Twitter scene, announcing that he now has the ability to post on Twitter, but will have limited access moving forward.

His account, which goes by the social media handle @RealRossU, currently showcases a picture of him, likely up against a prison wall, and a few tweets regarding his time in prison and the support he has been receiving.

The Twitter account quickly garnered thousands of followers from across the world, and from those who care about his cause. As of the time of press, @RealRossU is host to 11,700 followers, with many all issuing positive statements about Ulbricht and what he is trying to do.

Twitter user “Crypto Libero” put community sentiment regarding Ross best when he or she wrote:

Despite your circumstances you have chosen not to be silent. Our voice is what connects us and is our greatest strength. I’m glad I get to hear yours. Speak loud, be strong and carry on my friend.

Ross Garners Tens Of Thousands of Signatures On His Petition 

Along with messages about his prison life, Ross Ulbricht also asked users to sign a petition regarding his case started by his mother, who has been advocating for his clemency from the court of law for the years since his arrest.

Attempting to spread the word about Ross’ cause, Charlie Lee, the well-known founder of Litecoin, issued a tweet asking others to join Lee in signing the petition. The Litecoin founder gave a powerful statement regarding his thoughts on the case, writing in a Tweet:

I found out about Bitcoin from an article on Silk Road. Whatever you think of Silk Road, Ross Ulbricht, creator of Silk Road, does not deserve a life sentence w/o the possibility of parole.

Yet another industry leader, Erik Voorhees, the CEO of the Shapeshift exchange, also asked his followers to sign the petition in a Tweet.

At the time of writing, the petition titled “Clemency for Ross Ulbricht, Serving Double Life for a Website” has over 28,500 signatures from a variety of individuals all believing that Ross didn’t deserve what was handed to him.

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Philippines Central Bank Approves 2 Crypto Exchanges as Australia plans Crypto Taxation

Crypto regulation is a hurdle many crypto traders believe that once complete, will usher in a new era of continually Bullish crypto markets as was seen last year in December and early January this year. The countries so far that have shown willingness to regulate cryptocurrencies, exchanges and blockchain technology are the countries of Malta, Philippines, Thailand, South Korea, Japan, Australia and to some extent, the United States and the European Union.

Of particular interest, are the countries of the Philippines and Australia. The former country had recently given guidelines on how it will be issuing licenses to crypto currency exchanges in the country. Initially, the country’s regulatory arm known as the Cagayan Economic Zone Authority (CEZA), had stated it would only issue 10 licenses to crypto exchanges. This was however increased to 25 after the government listened to the popular opinion of its citizens.

It is with this background that The Bangko Sentral ng Pilipinas (BSP)  has approved two new virtual currency exchanges in the country. These two exchanges are the Virtual Currency Philippines Inc. and ETranss. The total number of exchanges in the country now stands at 5. This approval signals a new trend around the globe, of governments becoming friendlier to crypto currency trading.

With respect to Australia, the country’s tax agency, The Australian Tax Office (ATO) has stated that it will start investigating its citizens who are hiding their cryptocurrency gains offshore in other jurisdictions. The ATO will use advanced data-matching techniques through existing data sharing agreements with other nations to facilitate the further identification of these hidden funds and means of taxing them.

ATO’s Acting Deputy Commissioner, Martin Jacobs, is quoted as saying:

Where people attempt to deliberately avoid these obligations we will attempt to take action. We have a range of existing powers that are designed to address unexplained wealth and conspicuous consumption that may arise through profits derived through cryptocurrency investment.

The ATO is now free to exercise its mandate in the crypto industry after the passing of new crypto regulation in the country. Part of the new legislation makes it mandatory for crypto exchanges in the country to register on the Digital Currency Exchange Register. This register is in turn maintained by the Australian Transactions and Reporting Analysis Center (AUSTRAC).

In summary, more governments across the globe are beginning to see the proverbial light by issuing crypto regulation and eventually taxing gains from trading. At first the taxation part of it all will put off individual traders but with government direction, comes the institutional investors everyone is waiting for in the crypto-verse.

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Crypto Should Try Self-Regulation, CFTC Commissioner Says

Regulators are here to stay.

That was a common thread in the conversations Wednesday at Yahoo Finance’s cryptocurrency event in New York.

Whether that’s a good or bad thing is a matter of opinion. But even for those wary of government oversight, it’s perhaps a less unpleasant thought in light of the previous day’s hearing before the U.S. Senate Banking Committee, where the chairmen of the SEC and the CFTC expressed a generally open attitude toward crypto.

Against that backdrop, Brian Quintenz, a member of the Commodity Futures Trading Commission, pointed out that the Tuesday hearing was free of the scaremongering pronunciations that some in the ecosystem perhaps expected.

“One of the other takeaways from yesterday was you didn’t hear either chairman say ‘no, absolutely not, this is not safe, we must stop this at all costs.’ No one said that,” Quintenz said at the Yahoo event during an onstage interview with CoinDesk managing editor Marc Hochstein.

Noting that any congressional action to fill in jurisdictional gaps identified by the SEC and CFTC will likely take a long time, the commissioner called on the industry to consider forming a self-regulatory organization.

Successful examples of this model include the Financial Regulatory Industry Authority and the National Futures Association, he said.

Quintenz went on to add:

“We don’t want to be saying no to innovators, or to advancing technology.”

Speakers drawn from the startup ecosystem likewise struck diplomatic notes toward regulation.

Adam White, general manager of the Coinbase-operated digital asset exchange GDAX, said that government oversight was something the company welcomed.

“I think we embrace regulation at Coinbase,” he said. “We recognize that regulations are a complementary part of the financial system in many ways.”

Ripple’s ‘revolution’

Similarly, Brad Garlinghouse, the CEO of Ripple, stressed his company’s longtime friendly posture toward regulators (which made it stand out from the libertarian early adopters of bitcoin), saying:

“I don’t think the US dollar’s going away in my lifetime. I don’t think the US government’s going away in my lifetime. The revolution isn’t happening outside the system. The revolution’s going to happen inside the system.”

For others, including BitPesa CEO Elizabeth Rossiello, regulation is an everyday reality, especially for businesses that serve as bridges between cryptocurrencies and government-issued money.

“In an ideal world, we wouldn’t have regulation. But in the real world, my customers ask me: ‘Do we work with companies which [comply with investor rules]?” she said.

On the investor side, speaker Alex Sunnarborg, founding partner of hedge fund Tetras Capital, described how lack of regulatory oversight could have a significant impact, for example in Simple Agreements for Future Tokens. What if those future tokens are never delivered?

“The big fear there is you enter into a SAFT which gives you a discount or allocation into a sale in the future … but the sale [doesn’t happen],” he said. 

Image of Brian Quintenz (right) by Nikhilesh De for CoinDesk

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has ownership stakes in BitPesa, Coinbase and Ripple.

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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Hawaiian Bills Would Capture Crypto Under Money Transmission Law

Two bills introduced in the Hawaiian Senate last week are aiming to define and include virtual currencies within domain of the state’s Money Transmitters Act.

If passed, HI SB2853 and HI SB3082 would require those seeking to transmit virtual currencies in the state to have a license to do so. They would also mandate that these persons or businesses issue a warning to consumers prior to enabling such transactions.

However, the legislation notably exempts exchanges from section 489D-8 of the Act, which mandates money transmitters maintain cash reserves equal to the virtual currency funds held for clients. Hawaii’s Division of Financial Institutions previously indicated it planned to leave the requirement intact, prompting U.S. exchange Coinbase to terminate its services in the state.

Still, while including a carve-out, HI SB3082 further features a warning that cautions against the volatility of cryptocurrencies, and emphasizes that they are not backed or insured by any government or commodities.

It reads:

“You should be aware that there is a potential for you as a consumer to lose all of your virtual currency. Though cash can also be lost, with virtual currency this loss can occur because of a computer failure; malicious software attack; an attack, closure or disappearance of a virtual currency exchange company; lack of security; loss of your private key; or a sudden or dramatic change in value.”

Both bills come on the heels of the state’s adoption of the Uniform Regulation of Virtual Currency Businesses Act, a proposed model legislation published in 2017 as a guide for states seeking to enact policies and provisions relating to the technology.

Specifically, the template was drafted by the Uniform Law Commission (ULC), which authors non-partisan legislation to bring clarity to areas where it is wanting in state statutory law.

Map image via Shutterstock.

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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Litecoin Creator Charlie Lee Comments on Crypto-Ban Regulation

Prominent figure and very respected on the cryptocurrency community – Charlie Lee, Litecoin’s Creator added on the China ban regulation that has taken place stating that there is no reason for panic when it comes to the mining or blockchain network.

On social media (twitter) Charlie Lee twitter out on the relation to the Bitcoin mining ban rumors that are being spread stating:

“have a trusted source that says that there’s no truth to China banning mining or network” and that “the FUD is propagated by large manipulators trying to make money shorting. They know that China ban FUD works and cannot be proven wrong.”

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That information was not used by him for any basis when it comes to trading as he stated:

I have not traded this and have no plans to buy or sell in the near future.” He summed up by reaffirming that the exchange ban is still “absolutely true.”

The regulation that took place now has been an extension of that since Nov 2016 that China did, and now words are being flying around that the mining pools and that part of the industry will experience the same termination as exchanges did in China.

Lee joins John McAfee of MGT Capital in his skepticism over the claims made amongst the community that the regulation supposedly coming out of China in the near future will extend to mining.

As John McAfee posted in the same way in twitter that mining will not be shut down. He was consulting with Jihan Wu of Bitmain which had McAfee informed that the Chinese executive had no intention of outlawing cryptocurrency mining.

On the Question if they will be shut down, he answered on twitter: “They are not”.

When it comes to the nation-wide development, it would be of contrary such a regulation to take place. Keeping in mind that just terminating exchanges in the end of Sep and Oct will minor the Chinese market to its fullest compared to South Korea, US and Japan.

As of this moment, all we can do is to wait and see the Chinese officials actions and rely on the optimistic feelings and words of John McAfee and Lee.

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