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Japanese Parliament Moves New Crypto Regulations to the Upper House

Japan’s House of Representatives passed crypto-related amendments to two financial laws to the upper house.

The Japanese House of Representatives has passed new crypto regulation in the upper house of the National Diet, local news agency Nikkei reports on May 21.

The lower house has reportedly moved crypto-related amendments to the existing financial law to the House of Councillors at a recent plenary session.                 

According to Nikkei, the amendments to two of Japan’s financial laws — the Financial Instruments and Exchange Act and Payment Services Act — intend to strengthen local regulations on cryptocurrency trading process. The amendments reportedly extend the regulation by adding legislation for cryptocurrency margin trading.

The new law also includes a change of crypto-related terminology, altering the term virtual currencies to “crypto assets.”

Japanese lawmakers first introduced the regulations for cryptocurrency margin trading in March 2019. The Japanese government’s executive branch, Cabinet of Japan, approved draft amendments to Japan’s financial instruments and payment services laws, limiting leverage in cryptocurrency margin trading at two to four times the initial deposit.

Margin trading represents the use of borrowed funds from a broker in order to trade a financial asset, which forms a collateral for the loan.

In April, Japan’s Minister of Finance and deputy prime minister Taro Aso urged reporters to stop using the term virtual currencies and to shift to the newly-introduced legal name crypto assets.

Earlier today, Cointelegraph reported that Russia was delaying the adoption of crypto regulation due to a requirement from the Financial Action Task Force on Money Laundering to legislate the terms cryptocurrencies and bitcoin (BTC) instead of using the sole term “digital assets.”

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Australian Securities and Investments Commission Warns Public Against New Crypto Scam

The Australian financial regulator has warned the public against an alleged crypto-related scam operating with no license.

The Australian Securities and Investments Commission (ASIC) has issued another warning on May 21 against an alleged crypto-related scam project.

According to the report, the Australian financial regulator has today published a warning against an alleged scam entity dealing under two names, Dartalon Ltd and GFC Investments.

The ASIC has red flagged the entity, reportedly claiming that the business “has made unsolicited calls or sent emails about investing, financial advice, credit or loans,” while it does not possess either an Australian Financial Services license or an Australian Credit license from the ASIC.

According to Finance Magnates, the flagged website of GFC Investments offers the public a chance to trade various cryptocurrencies, as well as foreign exchange (forex) and contracts-for-differences. On the website, the entity claims that it established its business in 2012.

Previously, the ASIC had released a warning against five misleading initial coin offering (ICO) projects and crypto-asset funds targeted at retail investors. The regulator has also revealed plans to increase regulatory overseeing of crypto exchanges and ICOs.

International Inquiries Related to Fraudulent Crypto Offers in May

Earlier in May, the French stock markets regulator AMF reported a 14,000% surge in enquiries related to fraudulent crypto offers in 2018 as opposed to 2016.

Last week, Cointelegraph reported on two blockchain sister startups RepuX and JoyToken, which reportedly defrauded investors out of a total of $8 million.

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Russia Delays Adoption of Crypto Regulation Due to FATF Order to Legislate Bitcoin

The Financial Action Task Force on Money Laundering is requiring Russia to include the word “bitcoin” in its crypto legislation.

Russia has postponed the adoption of crypto legislation due to a requirement from the Financial Action Task Force on Money Laundering (FATF), local news agency TASS reports on May 21.

According to the report, the FATF has recently ordered Russian lawmakers to expand the terminology of the federal bill on the regulation of crypto assets, requiring that the country legislate major industry terms such as cryptocurrencies and bitcoin (BTC).

Russia’s major crypto bill, “On Digital Financial Assets” (DFA) was passed by the Russian parliament in May 2018, but was sent back to the first reading stage after reports of it lacking major key concepts such as crypto mining, cryptocurrencies, and tokens.

Anatoly Aksakov, the Chairman of the State Duma Committee on Financial Market, revealed that Russian authorities had to delay the second reading of the document due to the FAFT’s recent order. He added that the lawmakers have attempted to avoid some terminology in the bill in accordance with a “certain position” of the Russia’s Central Bank.

Aksakov stated that Russia will include the necessary terminology in the DFA or will write it in a separate draft law.

In February, Russian president Vladimir Putin had issued another deadline for the state to adopt digital assets regulation by the summer after having made a similar order back in 2018.

Conversely, Russian prime minister and former president Dmitry Medvedev recently argued that crypto regulation is not a priority for the Russian government since cryptocurrencies “have lost their popularity.”

Previously, the Cambridge Centre for Alternative Finance issued a report stating that the lack of standard global terminology for crypto assets is a major impediment for the adoption of clear regulatory policies in the industry.

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Australian Government Employee Faces Court for Misusing Government IT Systems to Mine Crypto

An Australian government employee will reportedly face court today over his alleged misuse of government IT systems.

An Australian government employee will reportedly face court today over his alleged misuse of government IT systems to mine cryptocurrency for personal gain. The news was announced by the Australian Federal Police (AFP) on May 21.

The AFP alleges that the 33-year old man, whose name was not disclosed, used his access as an IT contractor to “manipulate programs to use the processing power of the agency’s computer network for crypto currency mining.” The alleged profits from his illicit mining activities reportedly amounted to AU$9,000 (~$6,200).

The man’s appearance before the Sydney Local Court follows an AFP search operation of his residency in Sydney on March 5, during which officers reportedly seized his personal laptop, personal phone, employee ID cards and data files. He faces two charges, specifically:

“Unauthorised modification of data to cause impairment, contrary to section 477.2 of the Criminal Code Act 1995 (Cth) [and] Unauthorised modification of restricted data, contrary to section 478.1 of the Criminal Code Act 1995 (Cth).”

In a statement, Acting Commander Chris Goldsmid, Manager of Cybercrime Operations, underscored the gravity of the alleged offence by an individual in public office. He noted:

“Australian taxpayers put their trust in public officials to perform vital roles for our community with the utmost integrity. Any alleged criminal conduct which betrays this trust for personal gain will be investigated and prosecuted.”

The charges carry a maximum sentence of ten and two years imprisonment respectively, the AFP announcement states.

As Cointelegraph reported, police have in the past taken action against suspects accused of stealing electricity from public providers to mine cryptocurrencies for their personal profit —  in Germany, Taiwan and China within the past year alone.

In May 2018, Cointelegraph reported that employees of the local headquarters of the National Police in Rivne, Ukraine, were allegedly illicitly mining crypto at work for four months.

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UK Watchdog Reports $34 Million Lost in Crypto and Forex Scams Last Year

The Financial Conduct Authority says crypto investors lost approximately $34 million from scams last year.

The primary financial regulator of the United Kingdom, the Financial Conduct Authority (FCA), reports that crypto investors in the country lost over $34 million due to cryptocurrency and forex scams from 2018–2019 the Financial Times reports on May 20.

According to the data, which the FCA gathered from the U.K. national fraud and cybercrime reporting center, Action Fraud, individual loss due to scams decreased from $76,000 to $18,500 while total losses fell by $14 million.

However, the number of reports more than tripled to reach 1,834, with 81 percent of such reports being crypto scam claims.

Per the report, the FCA is considering a ban on “high-risk derivative products linked to cryptoassets.” For now, FCA executive director Mark Steward cautions:

“Scammers can be very convincing so always do your own research into any firm you are considering investing with, to make sure that they are the real deal.”

The FCA reportedly stated that scammers use social media to find potential investors. The regulator also noted that scams will often use pictures of celebrities with fake endorsements alongside imagery of luxury goods like cars and watches.

Last year, initial coin offering (ICOs) advisory firm Statis Group released a study, which found that over 80 percent of ICOs in 2017 were scams. The associated losses for that year totaled $1.34 billion.

As recently reported by Cointelegraph, new evidence has surfaced suggesting that purported bitcoin (BTC) exchange Goxtrade is a scam. Goxtrade reportedly used the real names and pictures of unaffiliated parties such as blockchain figure Amber Baldet to fill their website staff page and is absent from the U.K.’s registry of companies and businesses.

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Senior Official in Russian Parliament Says That Cryptos Can Ruin Governments

Nikolai Arefiev, a senior official in the Russian State Duma, argued that cryptos were created to hide money from the government.

A senior official in Russia’s parliament, the State Duma, has argued that cryptocurrencies have the potential to ruin governments, Russian financial media agency Rambler reported on May 20.

Nikolai Arefiev, a member of the Communist Party of the Russian Federation and vice-chairman of the Duma’s committee on economic policy, innovative development and entrepreneurship, claimed that cryptocurrencies were created in order to hide large offshore assets from the government.

If cryptos such as bitcoin (BTC) had emerged by 1994, Russia would have been “fully destroyed” so far because it would have lost all its capital offshore, Arefiev stated, speaking at a recent press conference of local media agency, National News Service.

The 70-year-old official has further suggested that it is useless for a government to attempt to be involved in cryptocurrencies’ operations, emphasizing that those jurisdictions that decided to ban cryptocurrencies have chosen the easiest way to protect their capital.

Also today, Arefiev warned the public against speculative capital, claiming that it accounts for more than 90% of the global economy. According to the official, bitcoin is a part of those speculative schemes, which create “money from money” and do not actually produce any products.

The cryptocurrency industry is still not regulated in Russia.

Recently, Russia’s largest bank, Sberbank, requested that a client provide information on their income from operations with cryptocurrency. Last week, Russian prime minister and former president Dmitry Medvedev claimed that crypto regulation is not a priority for the Russian government since cryptocurrencies “have lost their popularity.”

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Venezuela and Russia Discuss Mutual Trades in Petro and Russian Ruble: Report

Venezuela’s representative to the UN reportedly revealed that the country is working with Russia to use oil-backed coin Petro.

Venezuela is considering to close mutual trade settlements with Russia using the ruble, Russian government-backed TV channel RT reports on May 17. Jorge Valero.

Venezuela’s representative to the United Nations in Geneva said they are also discussing uses for the state-owned Petro (PTR) cryptocurrency.

Valero reportedly revealed that Venezuelan authorities are now working with Russia to find opportunities for eliminating the use of the United States dollar in trade deals between the two countries.

As such, the two countries’ authorities are purportedly mulling the use of the Russian ruble, as well as Venezuela’s oil-backed Petro digital currency, a controversial project that was first launched in February 2018.

Amid the economic collapse in Venezuela that is worsened amid new U.S. sanctions, as well as the ongoing presidential crisis, Valero also expressed his hopes of getting Russian support in restructuring Venezuela’s foreign debt.

The Venezuelan Petro, which was designed to combat poverty and hyperinflation, was criticized by global experts for lacking global exposure. Some also questioned whether the coin was actually back with Venezuelan oil, as reported by Cointelegraph. Following the launch of the coin, U.S. President Donald Trump banned American citizens from purchasing Petro in March 2018.

Recently, the U.S. Treasury Department added Moscow-based bank Evrofinance Mosnarbank to its sanctions list due to an allegation that the bank represented a “primary international financial institution willing to finance” Petro. In the statement, the Treasury described the Petro as a failed project attempted to help Venezuela avoid U.S. financial sanctions.

In April, an adviser to the President of Russia proposed to adopt a digital currency in Crimea to attract investors and avoid sanctions.

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Paying the Price: WeChat Merchants Banned From Crypto Payments

Chinese payment giant WeChat bans crypto payments for merchants.

On May 7, Dovey Wan, founding partner of crypto investment firm Primitive Ventures tweeted that the Chinese social media behemoth and payment service provider WeChat is set to ban merchants from making cryptocurrency payments. This ban marks the latest effort to stymie cryptocurrency usage in China, with the government also mulling over ways of greatly decreasing the presence of crypto mining on its soil.

WeChat bans crypto payments

A rough translation of the Payment Service Protocol found on weixin.qq.com indicates that the ban is a result of changes regarding payment management and measures to ensure “the prevention of illegal telecommunications networks and criminal matters,” brought about by the People’s Bank of China.

Although the screenshot tweeted by Wan does not explicitly label cryptocurrency transactions as illegal, the text states that users who engage in crypto trading will have their accounts terminated. As per the screenshot, “merchants may not engage in illegal transactions such as virtual currency,” along with other restrictions not related to fintech.

As most over-the-counter (OTC) trades conducted in China take place via WeChat, Wan predicted that the ban “may impact local liquidity to quite some extent.”

Changpeng Zhao (aka CZ), CEO and founder of the cryptocurrency exchange Binance, said that, although he believes the restrictions were imposed on the company externally, there is still room for optimism. CZ wrote that this will not, in his view, have a negative effect in the long term.

CZ also said that the WeChat user experience was positive overall and would be hard to beat if the company took on a more transparent approach.

Some members of the crypto community expressed their frustration at the news of the WeChat ban, however, and CZ retweeted one of his previous comments regarding situations that can initially seem depressing in the crypto world.

In Q4 2018, WeChat Pay reported a total daily transaction volume of over 1 billion in unspecified currency. The total number of service users allegedly amounted to 1.098 billion. The technology news outlet TechNode reports that the usage is widely spread across different age groups, with 98.5% of Chinese people between the age of 50 and 80 using the app.

The new cryptocurrency policy comes into effect on May 31.

Expert predicts Chinese renminbi will become cryptocurrency

Although China has a well-established reputation for its hostility toward cryptocurrency, some experts now believe that the Chinese renminbi (RMB) will, itself, become a cryptocurrency.

In an interview with Bloomberg, the Blockchain Research Institute executive chairman, Donald Tapscott, explained that, according to the vice-chairman of the Communist Party, President Xi Jinping envisions blockchain technology playing a central role in the future of the country. Commenting on the country’s legal stance on cryptocurrency and mining, Tapscott added:

“It’s not really necessary to do that [to ban exchanges and mining] because in 20 years we are not going to be using bitcoin in China. Chinese people will use the RMB, only the RMB will become a cryptocurrency. The central bank of China will turn it into a digital currency.”

Although Tapscott believes that the renminbi is set to become a cryptocurrency, he remains hesitant about the prospects of decentralized exchanges within the country. Tapscott emphasized that, although these exchanges could, in theory, operate within the country, the government still has a firm stance toward digital currencies. Tapscott also suggested that decentralized exchanges will become the most prominent:

“Decentralized exchanges will dominate over the centralized ones, because you can identify this kind of bad behaviour and do something about it.”

China ponders mining ban

A Reuters report published on April 9 revealed that the Chinese government is considering placing a ban on crypto mining. With the majority of the world’s most significant mining pools founded in China, the fallout from this decision could well be significant.

This is not the first instance of the Chinese government trying to curtail mining activity. In February 2018, CNN Money reported government attempts to force miners into making an “orderly exit” from the industry through taxation and by linking crypto mining to environmental dangers. These alleged environment concerns have also been echoed by the National Development and Reform Commission (NDRC), which has included crypto mining as one of the industrial activities it intends to discontinue, as it “lacked safe production conditions, seriously wasted resources, polluted the environment.” This latest targeting of crypto mining comes under the auspices of the NDRC’s Catalogue for Guiding Industry Restructuring, which has been responsible for monitoring industry in the country since 2005.

Although the NDRC appears to have mining set firmly within its sights, there is no immediate deadline for the proposed elimination of the industry. The report instead suggests that mining activity should immediately be reduced.

The government’s renewed focus on mining activity is the latest blow to the industry. Although mining once represented one of the most profitable cryptocurrency sectors, companies are now having to diversify their sources of income to stay afloat. The most notable example of this is that of Bitmain, an ASIC chip manufacturer and mining company that once dominated roughly three-quarters of the global market and operated 11 mining farms at the time of its 2018 initial public offering (IPO) filing. Less than a year on, the company added artificial intelligence to its list of products after taking a beating from the crypto bear market and a decline in profits from mining and mining hardware sales. According to the company’s former co-chief executive, Jihan Wu, this is par for the course in the current climate, stating that “as a China company, we have to be prepared.”

Should this prospective ban on mining be implemented, it’s likely to have a ripple effect on the entire global crypto industry. Mark D’Aria of Bitpro Consulting LLC, said he sees the short-term effects being “extremely disruptive”:

“There will certainly be many winners and losers in the mining industry, as non-Chinese miners would benefit in the short term from significantly reduced difficulty, and from inexpensive surplus hardware as it filters out of China.”

D’Aria added that the actual impact of the ban would depend on the timing and nature of its implementation:

“If it was decreed that all miners were to shut down immediately, all of that hashrate lost in an instant could significantly disrupt the technical operation of the Bitcoin blockchain, slowing it down significantly until the next difficulty reduction. If this ban was implemented shortly after the last difficulty adjustment, this transitional period could last months.”

Although prospects for the crypto market may well appear grim in the event that the ban would take effect, D’Aria explained that the bitcoin blockchain will recover in the long run:

“It’s yet another example of how resilient Bitcoin actually is — it can be disrupted in the short term, but long term it adjusts to compensate.”

WeChat toughens stance on OTC trading

WeChat is not the only payment provider with a history of hardening its stance toward cryptocurrency in China. In August 2018, the mobile payment app Alipay cracked down on users using Alipay accounts for over-the-counter bitcoin trading.

According to the Beijing News, Alipay tightened its restrictions and, in some instances, permanently blocked accounts using its services to conduct bitcoin OTC trades. As per the article, the company reportedly created an inspection system for “key websites and accounts.”

The company’s decision to toughen its stance on OTC trading comes against the backdrop of other trading platforms, including peer-to-peer and OTC resources being banned as part of a blanket prohibition on wider crypto trading activity since September 2017.

News about Alipay’s decision to block a number of accounts soon spread to the crypto community, with Red Li, co-founder of the Chinese crypto community 8BTC tweeting a screenshot of the announcement from Alipay, stating that “#alipay is blocking accounts involved in bitcoin otc trading.”

The same month, WeChat blocked several accounts suspected of publishing initial coin offerings (ICO), along with the official sales channel of the bitcoin mining behemoth Bitmain, due to an alleged licence violation.