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Former Thai Finance Minister Calls for Crypto Regulation

A former finance minister of Thailand has voiced his support for new regulations around cryptocurrency trading and initial coin offerings (ICOs).

Korn Chatikavanij previously served as the country’s finance minister between the end of 2008 and mid-2011. Now chairman of The Thai Fintech Association, a startup accelerator, he said in an interview last week that his organization supports the Thailand Securities and Exchange Commission’s plan to introduce dedicated rules for activities around the tech.

“I agree with the Finance Ministry’s [view] of letting the SEC be the only organization governing digital assets, because it already oversees securities and has a profound understanding of digital assets,” said Korn, according to a Friday report by the Bangkok Post.

His comments came after a months-long public consultation period that was extended twice past its original completion date of January 22nd. One possible outcome of the review process is a plan to apply existing “investment participation” rules to token sales, which would impose capital requirements on those conducting ICOs within Thailand.

Following the completion of the public consultation period and a joint meeting with government officials last Wednesday, state agencies in Thailand indicated they have agreed to enact a regulatory framework on cryptocurrencies and ICOs within the next month, per the Post.

Officials have suggested such a timeline in past comments to the media, including deputy prime minister Somkid Jatusripitak, who said in mid-February that new rules should be expected in the coming weeks.

Thai baht and bitcoin image via Shutterstock

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Japan's Finance Watchdog Eyeing ICO Regulation, Says Report

Japan’s financial regulator is mulling the creation of a regulatory framework for companies raising funds through initial coin offerings, a report indicates.

According to Sankei Shimbun, the Financial Service Agency is considering the revision of relevant laws and regulations in an effort to regulate ICOs in Japan, amid the growing popularity of token sale activities within the territory.

The report indicates that Japan currently has no clear regulations covering ICOs specifically, while the existing bitcoin payment law that went into effect last April is not sufficient to define the legal status of some ICO activities.

“There is an increasing demand for amendment of the law, and the FSA is planning to consider suspension of inappropriate ICOs,” the report reads.

The FSA has already started monitoring ICOs that target Japanese investors and are deemed suspicious by the agency.

As reported, the FSA has issued multiple warnings to a Macau-based cryptocurrency firm that solicits interests from residents in Japan and published a formal statement on its website to order a halt to the firm’s operation in the country.

The move towards a potential regulation is also a follow-up to the FSA’s statement in October last year, in which the agency stressed several risk factors of token sales activities with a fund-raising purpose.

Other nations have recently moved to more clearly define ICO tokens, both to protect investors and to bring clarity to the industry.

Just four days ago, Austria announced plans to draw up ICO and cryptocurrency regulations, using existing rules for the trading of gold and derivatives as a model.

And on Feb. 22, Germany’s financial markets regulator issued new guidance on how it will classify ICO tokens, including those it will consider securities.

Japanese yen image via Shutterstock

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Indian Finance Ministry: Cryptocurrencies Are 'Like Ponzi Schemes'

The Indian government is doubling down on its already public skepticism of cryptocurrencies.

In a new statement issued Dec. 29, India’s Ministry of Finance warned residents against the risks associated with trading cryptocurrencies, going so far as to compare blockchain-based assets like bitcoin to “Ponzi schemes.” The statement is the third warning this year from a government body in India, indicating a growing level of concern among top regulators in the country.

As reported by CoinDesk, the Reserve Bank of India has issued two similar warnings in 2017, one in February and another earlier this December, to people who hold and trade cryptocurrencies.

Yet, the new statement from the Finance Minister again shows how the government is responding to the worldwide spike in the price of various cryptocurrencies.

It reads:

“The price of bitcoin and other [virtual currencies] therefore is entirely a matter of mere speculation resulting in spurt and volatility in their prices. There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes… Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes.”

Elsewhere in the notice, the Ministry emphasized that India doesn’t recognize any cryptocurrency as a legal tender and that no license is issued in the country to authorize any cryptocurrency exchange. Therefore, users will bear the potential financial, operational, legal and security related risks when investing in cryptocurrencies, it said.

Such a note may be directly addressed to existing traders of cryptocurrencies in India, as data from CoinMarketCap shows that a more prominent cryptocurrency exchange in India, Koinex, currently sees a $115 million trading volume within 24 hours.

Warning asides, though, what’s also notable is the ongoing discussion in India whether and how cryptocurrencies should be regulated in the country.

India’s Supreme Court has previously urged various government agencies to respond to an online petition that demands a proper regulation over bitcoin.

In fact, in August, it was noted that a cryptocurrency regulation proposal had been submitted to the Finance Ministry, but that the content and timeline of such regulation still remained unclear. As such, the new statement from the government body may still signal a more restrictive rule.

India map via Shutterstock

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Lawsky: ICO Fever Could Bring Cryptocurrency Backlash

The rise in popularity of the initial coin offering (ICO) funding mechanism, and potential for associated fraud, could lead regulators to come down hard on cryptocurrencies broadly.

That’s according to a former regulator, one who, as the first-ever superintendent of the New York State Department of Financial Services, the state agency that regulates financial services and products, was among the first globally to attempt to regulate bitcoin.

“A big open question is, if ICOs get very out of control,” it could result in “a backlash against the entire bitcoin and crypto ecosystem,” Benjamin Lawsky said Monday at Money2020 in Las Vegas.

Lawsky, who now runs a consulting firm and is a visiting scholar at Stanford University’s Cyber Initiative, told the audience:

“Regulators have never seen a new financial product explode with the speed and velocity at which ICOs have exploded.”

The head of the NYDFS from 2011 and 2015, it’s on Lawsky’s watch that the agency created and enacted what has come to be called the “BitLicense” regulations, a series of alterations to state money transmission laws specifically tailored to digital currencies.

Since he left office, however, the field has expanded well beyond bitcoin, to include not only a wider variety of cryptocurrencies and private blockchains for enterprises but also ICOs – a term that denotes the process by which a company or software development team seek to use a custom cryptocurrency to raise funds from the public.

According to CoinDesk’s ICO tracker, token sales have raised a cumulative $2.67 billion, most of it in the last 18 months.

Yet, while many see ICOs as an engine of innovation, there is also widespread worry that a number of these projects are illegal, unregistered or outright scams.

Harsh ‘reality’

Against this backdrop, the concern expressed onstage by Lawsky was not unique to his panel.

At the conference, several attendees throughout the day remarked that the ICO market’s excesses could bring a regulatory hammer down on the entire industry. Still, most appeared to think this would be a natural reaction to market development.

For his part, Lawsky added that he was not casting judgment on the funding method, but “merely pointing out the reality” of how regulators operate when faced with practices that could put consumers at risk.

Elsewhere in remarks, Lawsky also sought to exonerate the BitLicense from criticism it has been too restrictive on businesses. (To date, less than five startups have successfully applied and received a license under the rules.)

To drive home the point home, Lawsky emphasized that when word got out that his agency was investigating bitcoin, a banking lawyer phoned Lawsky to applaud the effort – and encouraged him to “shut it down.”

But Lawsky said he didn’t want to do that, and that he just sought to ensure there were appropriate “guardrails” to prevent money laundering and protect consumers.

Still, the anecdote perhaps seeks to underscore the pressure other regulators may now be under in regards to ICOs, and why he believes the U.S. market could end up producing rules that, while contentious, are less restrictive than those seen internationally.

He told the audience:

“The Bitlicense [is] looking more reasonable in the context of China.”

Image via CoinDesk

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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CFTC Chair: Embracing Blockchain Is in the 'National Interest'

Blockchain is in America’s “national interest.”

That’s according to J. Christopher Giancarlo, chairman of the Commodity Futures Trading Commission (CFTC), who issued the bold proclamation in remarks at a gathering of government technology executives in Washington, D.C. Wednesday morning.

But while the blockchain industry has been encouraging regulators and government agencies to embrace the technology for years, this acknowledgment might have more oomph behind it. For one, unique to this statement was the size and caliber of the audience receiving it – in attendance was a group of roughly 270 leaders from over 40 U.S. government agencies.

“Distributed ledger and blockchain technologies … are going to challenge orthodoxies that are foundational to our financial infrastructure,” Giancarlo said.

Giancarlo continued:

“Everything we do has been digitized. The one thing that has not yet been digitized is regulation. We’re still very much an analog regulator of digital markets.”

And most importantly, Giancarlo stressed that it is imperative that U.S. regulatory structures catch up with the fast-moving digital economy.

Overcoming hurdles

Elsewhere in the talk, Giancarlo argued that government bodies must go beyond just understanding blockchain by finding ways to utilize the technology in an agency or regulatory setting.

“Whether it’s the promise of blockchain-enabled digital identities, improved regulatory reporting and surveillance, greater efficiency in clearing and settlement processes, more transparent flow of information – these innovations hold promise in benefiting the American public,” he said.

One “perfect example,” Giancarlo went on, would be using a distributed ledger system to implement the rule set put forth by the Dodd-Frank financial reform law. Passed in 2010, the legislation requires financial institutions to report swap trade info to a central repository.

The intent of the rule is to provide more transparency into a financial institution’s exposure to other banks and better assess systemic risk. But because of technological limitations, that initiative has hit stumbling blocks – issues that Giancarlo believes blockchain could overcome.

But while Giancarlo has mentioned blockchain’s ability to cut through the financial system’s complexity in the past, his statements at the event give a more detailed view of just how the technology could help.

Striking a balance

With all the optimism, Giancarlo did note that the digitization of modern financial markets should be a “delicate balance” of innovation and investor protections.

“Current enthusiasm for certain cryptocurrencies shouldn’t blind investors and regulators to the many risks that are evolving in this space,” he said.

This is particularly notable in that the CFTC recently found certain crypto tokens to be commodities, and earlier this year, granted cryptocurrency derivatives clearinghouse LedgerX a license to trade commodities.

Giancarlo was quick to say, though, that the agency has no intention of overstepping its jurisdiction by defining how all tokens should be classified.

Under Giancarlo’s leadership, the CFTC has brought blockchain into the fold through its blockchain research and development initiative LabCFTC. While this approach means boundary-pushing is inevitable, he says such dynamics are healthy and necessary to modernizing the legacy regulatory framework.

Giancarlo concluded:

“That makes sense because our rules weren’t designed for this technology. In fact, our rules were designed for markets that don’t exist anymore, and we need to update them.”

J. Christopher Giancarlo image via Aaron Stanley for CoinDesk

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