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South Korean National Assembly Holds Regulation Debate With Local Crypto Exchanges

Major Korean crypto exchanges have arranged a crypto regulation debate in the National Assembly, discussing Anti-Money Laundering policies and customer protection.

South Korea’s representative body, the National Assembly, has held a crypto regulation debate arranged by major local cryptocurrency exchanges, IT media oulet ZdNet Korea reports Monday, Dec. 10.

According to local business outlet Financial Leaders, the topics of the debate were proposed by seven crypto exchanges — Bithumb, CobitCoin, Coinone, Upbit, Gopax, Coinplug and Hanbitco.

The debate was attended both by crypto entrepreneurs and politicians, such as Democratic Party member Kim Byung-wook and representatives for the Liberty Korea and Bareunmirae parties, both with a significant number of seats in the National Assembly. The country’s financial watchdog, the Financial Services Commission (FSC), also sent a representative to the discussion.

ZDNet reports that Lee Seok-wu, CEO of Dunamu — a subsidiary of Kakao that operates Upbit — led a discussion that was attended by FSC members and the president of Gopax, among others. The discussion reportedly focused on Anti-Money Laundering (AML), customer protection and Know Your Customer (KYC) practices..

The debate in the National Assembly was preceded by the FSC’s decision to allow banks to service crypto exchanges, as soon as they have adequate AML safeguards and apply KYC checks.

At the same time, South Korea has a strict policy against Initial Coin Offerings (ICOs), issuing strong warnings against them back in 2017. However, local blockchain startup, Presto, is reportedly going to file a constitutional appeal over this policy.

According to a recent report prepared by CryptoCompare, the crypto industry in South Korea is consistently growing. In November Korean crypto exchanges overtook Maltese competitors by average daily trade volume. As per report, major Korean players produced over $1.4 billion daily.

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Major South Korean City to Build Blockchain-Enabled Virtual Power Plant

South Korea’s government will spend $3.5 million to set up a blockchain-enabled virtual power plant in the city of Busan.

South Korea’s government will spend 4 billion Korean won (KRW) (about $3.5 million) to set up a blockchain-enabled virtual power plant (VPP) in the city of Busan. The development was reported by South Korean newspaper Yonhap News Agency on Monday, Dec. 10.

Busan, South Korea’s second most populous city after Seoul, has announced that the city administration has selected a project to support an innovative energy industry in the region by building a VPP based on a citizens-shared blockchain.

The project will be reportedly represented at the national competition in 2019 hosted by the largest electric utility in South Korea, Korea Electric Power Corporation (KEPCO).

By its definition, a virtual power plant is a cloud-based distributed power plant that integrates the idle capacities of multiple energy resources in order to optimize power generation.

The recently announced blockchain-powered VPP project is set to aggregate such power sources as Busan area factories and public facilities of energy storage system (ESS), as well as solar power plants.

The project was reportedly proposed by the city of Busan, as well as major local companies and institutions including Pusan National University (PNU), energy management firm Nuri Telecom, Busan City Gas and real estate firm Korea Industrial Complex Corporation.

The city of Busan has already been actively developing and promoting blockchain technology, according to Korean crypto-focused news agency TokenPost.

Earlier this year, Yoo Jae-soo, the Minister of Economic Affairs in Busan and former director general for financial policy at the Financial Services Commission (FSC), reportedly held a meeting to discuss the establishment of a special zone in the city in order to build a friendly environment for the development of the blockchain and crypto industry.

In June of this year, South Korean governmental agency, Industry-SW ICT Convergence Association (WICA), also revealed plans to establish a blockchain center in Busan modeled on Switzerland’s Crypto Valley. According to the plan, the South Korean version of Zug’s Crypto Valley is set to be located at Haeundae, an affluent and touristic beachfront space in eastern Busan.

Earlier today, the country’s second-biggest commercial bank, Shinhan Bank, launched a blockchain-based initiative within the internal processes of the institution in order to reduce the number of human errors in record keeping.

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Indian Government Panel Suggests Crypto Dealings Should Illegal, Local Sources Say

An Indian government panel has reportedly proposed regulation making cryptocurrencies illegal via the Reserve Bank of India.

An Indian government panel has reportedly suggested a new legal framework within the Reserve Bank of India (RBI) that completely bans cryptocurrencies in the country. English-language Indian media outlet CNBCTV18 reported on the framework on Dec. 6.

The article cites an unnamed source as noting that “the panel has categorically said that all such currencies should be treated as illegal” and that “any kind of dealing in such currencies should be treated as” such.

CNBCTV18 notes that the Indian government had created a panel to create “norms” for digital currencies — headed by secretary of the Department of Economic Affairs (DEA) Subhash Chandra Garg — which submitted its report to Indian finance minister Arun Jaitley.

The debate over crypto’s legality began in April of this year, when the RBI stated it would no longer provide services to persons or legal entities involved with crypto. In response to the ban, eleven crypto-related businesses filed a suit against the bank in the country’s Supreme Court, with the legal outcome still unclear.

As Cointelegraph reported in November, the Indian government is also working on cryptocurrency regulation. The stipulated bill is expected to become public this month.

The current climate isn’t friendly overall to crypto enthusiasts in India. Also in November, the developers of India’s first Bitcoin “ATM” were arrested on criminal charges.

While the charges haven’t been disclosed, local mainstream media reported that they include criminal conspiracy, cheating and forgery. The developers were also the co-founders of the country’s first crypto exchange, Unocoin.

At the same time, one of the leading global auditing companies, Ernst & Young (EY), announced the are looking to hire 2,000 employees in India. The objective is to expand its digital services, including artificial intelligence (AI) and blockchain applications.

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Huobi Opens First Russian Office in Partnership with State Bank’s Digital Tech Center

Huobi has launched its first branch in Russia in partnership with local state-owned VEB bank’s blockchain and crypto center.

Singapore-based cryptocurrency exchange Huobi has officially launched its first branch in Russia on Thursday, Dec. 6, according to a press release shared with Cointelegraph today.

The Moscow-based exchange, dubbed Huobi Russia, is established in partnership with the state-owned Russian Development Bank’s (VEB) Digital Transformation Center and supported by Huobi’s regional exchange partnership program, Huobi Cloud.

The Center of Digital Transformation was created by VEB to promote blockchain and other crypto-related technologies, as its website states.

Back in September of this year, Huobi first joined Russia’s VEB Innovation Fund and became a resident of the Digital Transformation Center to share experience on crypto regulation, with the fund’s CEO claiming that Huobi’s expertise will assist in building a “legal basis that could compete with current promising jurisdictions.”

Speaking at a private event on Thursday, Huobi senior business director David Chen claimed that the launch of Huobi Russia will help to promote the company’s “leading technology and trading expertise to Russian users,” including such skills as “unmatched safety, stability, and user experience.”

Huobi Russia CEO Andrei Grachev also noted the increasing volumes of crypto trading in Russia, claiming that the volumes have “recently exceeded US $20 million in a single day,” regardless of the current bear market.

Russia’s VEB Innovation Fund, created in 2011, is reportedly the “first” Russian specialized center for support and development of disruptive technologies in the fields of management and the functioning of enterprises and government corporations, according to the center’s website.

The innovation center is exploring and implementing various blockchain projects, and houses more than 20 branches of major blockchain and tech companies such as the Ethereum Foundation, Bitcoin (BTC) tech company Bitfury, PricewaterhouseCoopers (PwC), and others.

Vladimir Demin, chairman of VEB’s Innovation Fund, claimed that Russia is “actively promoting the blockchain market,” with VEB willing to play an “important role as a leader in blockchain research and legislation,” as reported in the press release.

Founded in 1922, VEB bank, or “the state corporation Bank for Development and Foreign Economic Affairs,” is the first international bank of the Soviet Union, originally named Roskombank. The bank is responsible for developing the Russian economy, as well as managing Russia’s state debts and pension funds.

Other Russian banks have also shown an interest in blockchain technology.

Recently, major Russian state-backed bank Sberbank conducted an over-the-counter (OTC) monetary repurchase agreement based on blockchain technology. And earlier in November, the Russian branch of Raiffeisen Bank International teamed up with local state oil giant Gazprom Neft to issue a blockchain-enabled bank guarantee.

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Chilean Government Making Progress on Crypto Regulation, Says Finance Minister

The Chilean finance minister told local media that the government is making progress on clear crypto legislation.

Chile’s Minister of Finance Felipe Larrain claims that a group of state institutions “is making progress” in developing crypto regulation, local daily newspaper La Tercera reports Friday, Dec. 7.

According to Larrain, the Ministry of Finance is working with Chile’s central bank and Financial Stability Board to provide a balanced legal framework for the crypto industry. He noted that crypto regulations are but one aspect of a wider project to provide legal definitions for the fintech sector. Larrain noted that crypto regulation might take time:

“We are aware that it is important to move in this direction. But all countries in the world are facing similar problems [with crypto regulation], and there is no magic wand to solve them. We are exploring the best solutions to see how to regulate this brand new phenomenon.”

In March, following the closure of crypto-business accounts in major Chilean banks, Larrain promised to develop a legal framework to normalize the situation. Nine months on however, no such legislation has come forward, although the Chilean parliament has made some forays into regulating blockchain technology.

Larrain’s recent statement comes shortly after a Chilean Supreme Court decision, annulled a previous ruling by an anti-monopoly court to protect local crypto exchange Orionx and to reopen its banking accounts. In the decision, a judge claimed that cryptocurrencies “have no physical manifestation and no intrinsic value.”

Despite the alarming publications in local media, Chile’s crypto entrepreneurs told Cointelegraph that the new decision has nothing to do with prohibiting crypto exchanges. Both Orionx and Buda.com, which have been involved in a legal battle since March, assure that their banking accounts will not be affected, as the anti-monopoly court’s decision is still in force.

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EU Report Considers Blockchain-Based Digital Identities, Tokenized National Currencies

The EU Blockchain Observatory and Forum has made a case for a blockchain-powered “self-sovereign” digital identity system to secure and share personal information.

In its latest report released on Dec. 7, the European Union Blockchain Observatory and Forum (EUBOF) made a case for a blockchain-based digital identity system and digital versions of national currencies.

The report was prepared by blockchain software technology firm ConsenSys AG on behalf of the EUBOF, and focuses on the analysis of what blockchain properties could be beneficial and advantageous for governments.

The EUBOF suggests that governments should develop “user-controlled, ‘self-sovereign’ identity capabilities” to create secure, private, unique and verifiable identities, that can provide sufficient proof of identity without revealing more data than it is necessary for a transaction. The report recognizes that this has proven difficult to achieve with centralized technologies.

While the idea behind blockchain-based self-sovereign identity is that individuals could keep verified personal information themselves, instead of third parties, the EUBOF notes potential challenges for governments.

The report states that identity standards and frameworks must first be developed, in addition to defining the extent to which people want identity systems to be decentralized. It adds:

“They [governments] will have to take into account how identity attributes change over time during a person’s natural lifecycle, and will need to offer different levels of transparency depending on the context (e.g., verifying that someone is over 18 without providing a birth date). Identity platforms also need to be inclusive of all citizens, including those who, for whatever reason, have no access to or are not able to use technology.”

Another important issue raised in the report is digital versions of national currencies on a blockchain, or the ability of governments to “put fiat currency on the chain.” The report further reads:

“Putting digital versions of national currencies on the blockchain means they could then become integral parts of smart contracts. That would unlock much of the potential innovation of blockchain by allowing parties to create automated agreements, including direct transactions in these currencies, instead of having to use a cryptocurrency as a proxy.”

The report cites plans and initiatives of central banks in tokenizing national currencies, or inter-bank payments with distributed ledgers to make transaction processes more transparent, resilient, and cost efficient. Moreover, governments could purportedly use blockchain-based tokens in non-monetary ways, like an e-voucher that can be exchanged for government services.

This week, Malta, France, Italy, Cyprus, Portugal, Spain and Greece released a declaration calling for help in the promotion of Distributed Ledger Technology’s (DLT) use in the region, claiming that could be a “game changer” for southern EU economies. Among other things, the group also cited blockchain tech’s use for protecting citizens’ privacy and making bureaucratic procedures more efficient.

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Inside Chilean Power Battle: Crypto Exchanges vs. State Banks

The prerequisites and aftermath of the Supreme Court decision regarding crypto exchanges accounts.

On Monday, Dec. 4, the Chilean Supreme Court welcomed the decision of state-owned Banco del Estado to close the accounts of local cryptocurrency exchange Orionx. The new phase in the legal battle between the banks and several crypto exchanges — including Buda.com and CryptoMarket (CryptoMKT), which had appealed against the denial of services — may look somewhat sinister from the outside. But the main players of the Chilean crypto market assured Cointelegraph that the recent decision could not prevent them from operating in the country.

Exchanges vs. banks — a brief outline of the confrontation

In March, two crypto exchanges — Buda and CryptoMKT — came out with a joint statement, claiming that some banks in Chile had closed their accounts. “We are killing the whole industry long before exploring it and understanding its approach,” the release read. CryptoMKT also claimed that another bank received instructions not to deal with anyone who is related to cryptocurrencies. Both crypto businesses then urged the Chilean Association of Banks (ABIF), which coordinates all the private and foreign financial institutions in the country, to intervene — or at least clear up its stance on cryptocurrencies.

A response was given within a few days of the statement: The president of ABIF, Segismundo Schulin-Zeuthen, told Chilean business outlet Diario Financiero that the banks were free to moderate relations with their clients. Schulin-Zeuthen also criticized Buda and CryptoMKT for “[generating] false judgments about the institutional role of the ABIF,” while the association’s role consisted of discussing and analyzing existing regulation in the finance sector.

The bank that closed the crypto exchanges’ accounts was soon revealed to be Itau Corpbanca, the fifth-largest bank in Chile, along with a branch of Latin American banking giant Itau Unibanco and Scotiabank Chile, a branch of a Canadian banking group by the same name. They were soon joined by Banco del Estado — the only public bank in the country managing up to $52 billion in assets, as of 2017.

Later in April, Itau Corpbanca opposed the crypto industry’s stance that the move was illegal and insisted that the closure of accounts result in an internal investigation. According to Itau, Buda had failed to comply with their Anti-Money Laundering (AML) policy. Moreover, the bank accused the exchange of failing to verify the users’ data, as Buda’s website only requested basic information during the registration and did not verify the identities of its clients.

The whole story, including the media coverage and official responses, fueled a huge backlash on social media. As Cointelegraph reported in April 2018, crypto enthusiasts blamed financial institutions for “a huge negative blow to Chile’s reputation as a rational, innovation-friendly, free market economy,” stating that those actions “stifle innovation.” Twitter users created a hashtag #ChileQuiereCrypto (Chile wants crypto), urging the government to resolve the problem with crypto exchanges.

Chilean Banks Against Crypto Exchanges

In mid-April, the Chilean crypto exchanges decided to fight for their rights and started a legal battle, applying to Tribunal de Defensa de la Libre Competencia (TDLC) — an independent, anti-monopoly institution established to ensure that free competition rules are not violated. Buda and CryptoMkt, joined by Orionx (whose accounts had also been closed), had filed a petition against several banks, including Itau Corpbanca, Scotiabank and Banco del Estado.

Guillermo Torrealba, Buda’s co-founder and CEO, summed up the whole turmoil in an comment for Cointelegraph:

“There hasn’t been one regulator, legislator or government official saying that cryptocurrencies aren’t legal, it was just the decision of a very powerful sector of the economy: the banking industry.”

Blockchain regulation instead of crypto promises

Only a few weeks after the first complaint, TDLC ruled against Banco del Estado and Itau Corpbanca, forcing them to re-open Buda’s accounts.

Later in June, the same decision was made in favor of Orionx. As the company wrote on its official Facebook page, the anti-monopoly court ordered Banco del Estado and Banco de Chile — another major bank in the country that was mentioned in the initial lawsuit — to reopen Orionx’s accounts within three days.

It would be logical to assume that the long-term battle would force Chilean authorities to introduce relevant legislation on cryptocurrencies to prevent such situations in the future.

In late March, following the first news of the closure of the crypto accounts, Diario Financiero spoke to Chile’s Minister of Finance Felipe Larrain. He was reassured that both the Ministry and the Central Bank of Chile had started exploring the possibility of crypto regulation to normalize the situation:

“Technical progress and the digital economy bring people new services; we have to consider this fact. But when the regulation issues arise […], we have to avoid situations that could affect the normal development of markets and healthy competition.”

Chile’s central bank reaffirmed that intention in May. Mario Marcel, the president of the institution, proposed incorporating the crypto regulation in order “to allow having a registry of participants in these activities and thus have information to monitor the associated risks.” Marcel also stated that the industry needed more transparency and consumer protection — as cryptocurrencies could possibly be involved in illicit activities, such as money laundering and the financing of terrorists.

Six months after the recent claim, there is still no sign of a legal framework for cryptocurrencies in Chile. In October, local deputies instead introduced a resolution on blockchain adoption to the lower house of the country’s parliament. Miguel Angel Calisto and Giorgio Jackson — along with eight other MPs — urged Chile’s President Sebastian Pinera to implement blockchain in all the country’s public areas, along with carrying out studies on the advantages of decentralized security and energy solutions.

The Supreme Court comes into play

A new, unexpected chapter began on Dec. 4, when the Chilean Supreme Court published its resolution in favor of Banco del Estado. As cited by major Chilean newspaper El Mercurio, the document reads:

“The resolution taken July 11, 2018, is revoked. It is declared in its place that the protection appeal filed by Orionx SPA against the Banco del Estado is rejected.”

The Supreme Court further explained that the actions conducted by Banco del Estado were not “unjustified” or “illegal,” as the bank acted correctly and did not violate any rules of the Chilean constitution. Moreover, the top court stated that the cryptocurrencies “have no physical manifestation and no intrinsic value.” The document also proclaimed that they are controlled neither by a government nor by a corporation, citing the characteristics of crypto as reasons for letting banks refuse services to the exchange.

No pasaran: How Chilean crypto exchanges treat the highest court’s decision

Despite the apparent harshness of the Supreme Court’s decision, Chilean crypto exchanges believe it will have no bearing on the case. Reacting to the aforementioned resolution, Orionx published a statement on their official Facebook page:

“Orionx wants to clarify that this ruling does not imply the closure of the company’s current bank accounts. [D]ue to the fact there is a current precautionary measure issued by TDLC, which prevents banks from closing the mentioned accounts.”

Moreover, Orionx emphasizes that it disagrees with the arguments provided by the Supreme Court and regrets the latest ruling.

Buda shares the same stance, also citing the ruling of the anti-monopoly court in its official statement:

“The valid ruling in our favor pronounced by TDLC assures that our bank accounts will be maintained during the trial that is held in the mentioned court.”

Moreover, the firm insists that the Supreme Court’s resolution on Orionx has nothing to do with their company. Speaking to Cointelegraph, Buda’s co-founder Agustin Feuerhake said:

“The situation with Buda.com has been slightly different. Since [the] very beginning[,] we had a relevant KYC [Know Your Customer] policy. We also tackle money laundering and terrorism financing, so the bank’s argument to close an account does not apply to our case. There are no anonymous users on Buda.com.”

Feuerhake further added that the Chilean courts are not evaluating the ban on crypto exchanges, but rather seek ways to “condemn banks for abusive behavior” toward them.

As the decision of the Supreme Court did not mention Buda and CryptoMKT, it might be a turning point in the plot. The legal framework for crypto, if introduced, could side with crypto exchanges or stand with the banks.

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Japanese Police Note Uptick in Reports of Illicit Crypto Transactions This Year

There has been a significant increase in the reports of suspected illegal use of cryptocurrencies in Japan.

There has been a significant wave of reports of suspicious cryptocurrency transactions to the police in Japan, English-language local media outlet Jiji.com reports Dec. 6.

According to the report, the National Police Agency (NPA) have revealed that there have been 5,944 reports to the Japanese police about suspected illegal uses of cryptocurrencies, such as money laundering, between January and October.

By comparison, the number of such reports last year was 669, but their number increased “after the implementation in April of a law obliging the [cryptocurrency exchange] operators to make reports to the police if they detect dubious digital currency transactions.”

An NPA official declared that such an “increase indicates that the operators have become widely aware of the reporting obligation.”

As Cointelegraph reported recently, the Japanese government is searching for ways to prevent tax evasion on significant profits from cryptocurrency transactions. According to sources familiar to the situation, the government is working on a system that would let the National Tax Agency obtain data from cryptocurrency transaction intermediaries about crypto users.

Earlier this week, Cointelegraph reported that the Japanese Financial Services Agency (FSA) is planning the introduction of stricter Initial Coin Offering (ICO) regulations in an attempt to protect investors from fraud.

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US Dept. Homeland Security Calls on Blockchain Startups for Anti-Forgery Solutions

The U.S. Department of Homeland Security is seeking innovative blockchain-based solutions from startups to prevent the forgery and counterfeiting of digital documents.

The United States Department of Homeland Security (DHS) is seeking blockchain-based solutions from startups to prevent the forgery and counterfeiting of digital documents, according to a press release published Dec. 4.

According to the release, the request has been published under the aegis of DHS’ Science and Technology Directorate (S&T)’s Silicon Valley Innovation Program (SVIP). The call is open to startups or small enterprises that have not had a government contract in the past 12 months (totalling $1 million or more) and that have a workforce of under 200 employees. The release links to a detailed solicitation, entitled “Preventing Forgery and Counterfeiting of Certificates and Licenses.”

The solicitation outlines that DHS is interested in possible interoperable implementations of blockchain and Distributed Ledger Technologies (DLT) that could serve the “mission needs” of one or more of its programs or components; these include the U.S. Customs and Border Protection (CBP), U.S. Citizenship and Immigration Services (USCIS), and Transportation Security Administration (TSA).

The new SVIP call has been released in partnership with all three – the CBP, USCIS, TSA – and is purportedly the first SVIP solicitation to support USCIS use-cases. S&T SVIP Technical Director Anil John issued an official statement in the release, outlining that:

“The broad Homeland Security mission includes the need to issue entitlements, licenses and certifications for a variety of purposes including travel, citizenship, employment eligibility, immigration status and supply chain security. Understanding the feasibility and utility of using Blockchain and [DLT] for the digital issuance of what are currently paper-based credentials is critical to preventing their loss, destruction, forgery and counterfeiting.”

Homeland security use cases are broken down for applicant startups as necessarily pertaining to one of the following six categories: “Identity Documents for Travel, Identity of Organizations and Organizational Delegates, Tribal Identity Documents for Travel, Citizenship, Immigration and Employment Authorization, Cross-Border Oil Import Tracking, [and] Origin of Raw Material Imports.”

Successful participant startups will reportedly receive up to to $800,000 in non-dilutive funding over four phases; the press release notes that participation, however, “does not ensure procurement contracts with DHS or its components.”

As reported this week, DHS issued a pre-solicitation notice for parties to comment and design applications for blockchain forensic analytics in respect to emerging cryptocurrencies. DHS’ proposal called for analytics solutions for privacy-oriented altcoins such as Zcash and Monero in particular.

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International Crypto Standards: Will They Come From the Community or Governments?

International standards for crypto are coming, but at what cost to innovation?

There are over 2,000 different coins in existence right now, each with their own unique characteristics, uses and communities, while there are masses of different blockchains, platforms and exchanges — all of which answer to competing needs and values. On the one hand, this profusion is one of the key driving forces behind innovation in the crypto sphere. But on the other, it arguably acts as a block against widespread adoption, as the lack of unified standards means that some morally questionable endeavors give the rest a bad name.

The past year has seen an intensifying push toward producing international standards for the cryptocurrency industry. Groups such as Global Digital Finance have risen with the aim of fostering universal standards on how crypto platforms are run, just as groups like the Blockchain Association and CryptoUK are now focused mostly on standards at a national level. Such organizations count the likes of Coinbase, Bitstamp, Circle and others as members, despite often being less than a year old.

However, while holding the promise that crypto will avoid stringent government regulation by learning how to regulate itself, there’s also a concern that global standards might hamper innovation, and that crypto — almost by nature — is not meant to be standardized.

Global Digital Finance

As Teana Baker-Taylor, the executive director of Global Digital Finance (GDF), told Cointelegraph, the London-based association aims “to demonstrate that self-governance and driving best practice is critical for the industry’s consumers and their confidence in crypto assets, as the sector continues to mature, and in concert with developments in regulation.”

In other words, GDF is seeking to develop voluntary guidelines and codes of conduct for exchanges, token sales, wallet providers, cryptocurrencies and ratings websites, and while it was launched only in March, it already has a strong roster of members.

At the end of October, payments company Circle (and owner of Poloniex) joined it as a founder member, adding itself to a list that includes Coinbase, R3, ConsenSys and Diginex. Meanwhile, Baker-Taylor affirms that the association has also begun having dialog with lawmakers and public institutions.

“With over 250 individuals and firms, global regulators and policy makers have paid attention to the GDF Code and the commitment of the community, and this is an important start. Understandably, the signal from many regulators has been mixed, but most we are engaging with are supportive of maintaining an open dialogue to ensure they do not stifle this important innovation.”

Yet, GDF isn’t only working on codes of conduct for token sales and crypto-exchanges. They’re also busy devising a taxonomy of cryptocurrencies, which seeks to divide coins into three broad types: payment tokens, financial asset tokens and consumer tokens.

Given that there is plenty of confusion and conflict among the world’s governments on how to define crypto, this attempt to produce a clear taxonomy of cryptocurrencies is much needed. However, seeing as how such organizations remain largely averse to classifying cryptocurrencies as money and/or assets, there will remain the worry that GDF’s taxonomy (and codes) may simply be disregarded by governments and regulators.

Governments

Despite possible opposition or resistance from governments, the groups like the GDF could have emerged precisely because of increasing government interest in crypto regulation. Anyway, their emergence at such a time presents the crypto world with a golden opportunity to get involved in the shaping of government policy.

In October, the Financial Action Task Force (FATF) — an intergovernmental group established by the G7 to combat money laundering — adopted a variety of changes to its standards concerning the regulation of virtual assets. And encouragingly for the crypto industry, these new recommendations were focused specifically on preventing money laundering and the financing of terrorism, leaving plenty of freedom for exchanges, token issuers and crypto-services to operate in accordance with the needs of their users and own logic. It said in its recommendations from October:

“The FATF Recommendations require monitoring or supervision only for the purposes of AML/CFT [Anti-Money Laundering/Countering Financing of Terrorism], and do not imply that virtual asset service providers are (or should be) subject to stability or consumer/investor protection safeguards, nor do they imply any consumer or investor protection safeguards.”

Put simply, the FATF sees no reason to do anything about the volatility or decentralization of cryptocurrency, which implies that it wants to leave the much of decentralized nature of crypto intact. That said, other governmental groups want to do more than simply prevent crypto from being used for crime or terrorism.

For example, Felix Hufeld — the chairman of the German Federal Financial Supervisory Authority (BaFin) — affirmed his view in October that the global community needs to produce international standards governing the handling of ICOs:

“The number (of ICOs) and the volume (of money) per ICO are both getting higher. Investors have mostly minimal rights.”

Still, while this could foreshadow a push for intergovernmental standards that dictate what ICOs can and can’t do, such moves remain at a very preliminary stage. And because governments have been slow to act here, this provides an empty space which groups like GDF – or the newly formed Blockchain for Europe association (which includes Ripple and the NEM Foundation as members) – could advantageously fill to the benefit of the wider crypto industry.

National beginnings, international endings

And while the world’s governments and governmental bodies slowly wake up to the idea of regulating cryptocurrencies at a global level, the crypto industry is increasingly producing new trade institutions that are beating them to punch when it comes to developing standards.

In March, CryptoUK was established, with the aim of producing self-regulatory standards for the United Kingdom’s cryptocurrency industry. But its chairman, Iqbal V. Gandham, tells Cointelegraph, there’s also an appetite at CryptoUK for international coordination.

“CryptoUK’s focus since our launch earlier this year has been on the U.K. — securing proportionate regulation here is our priority, but we support collaboration on regulatory approaches internationally, in particular learning the lessons — both good and bad — from other jurisdictions.”

Given that most other self-regulatory trade bodies — such as the Blockchain Association, the Japan Virtual Currency Exchange Association and the Blockchain Foundation of India — are working primarily at the national level, global collaboration on regulatory approaches will be vital if the crypto industry is to enjoy uniform international standards.

And to an increasing extent, there does appear to be a growing willingness among crypto-related companies to work with each other on developing (international) standards. In August, the Gemini, Bitstamp, Bittrex and bitFlyer exchanges announced the formation of the Virtual Commodity Association Working Group. And like Global Digital Finance, its aim is to devise global industry standards on how crypto-exchanges are run and cryptocurrencies are traded.

Standards equals less innovation?

There is, then, every reason to believe that the crypto industry will, sooner or later, develop international standards and adopt them at large scale. But the question remains: Will such standards simply give the public greater confidence in crypto, or will they also have the unfortunate side effect of constraining innovation?

“In many industries, regulation and standards are seen as stifling innovation. However, in the crypto-assets market, regulatory and legal ambiguity poses challenges for growth.  Clarity around the ‘rules of the road’ will better enable innovators to access new ways of accessing global capital and support emerging nascent business models with greater confidence.”

– Teana Baker-Taylor, executive director of Global Digital Finance

Similarly, there’s a risk that standards could put compliant companies at a disadvantage compared to those corporations or cryptocurrencies that simply (and perhaps illegally) flout them. Given that the decentralized nature of cryptocurrency provides people and groups with greater scope to disregard centralized authority, this is a real danger.

However, once international standards are in place and recognized, it becomes much likelier that the companies that do observe them will have a much better chance of working with and influencing regulators — something which will ultimately put them at a competitive advantage. And as Teana Baker-Taylor concludes, there’s a very strong appetite among crypto-related firms to foster and follow strong universal standards.

“GDF’s community is made up of hundreds of individuals and businesses from around the world who share a vision of growing a mature, stable, transparent and fair crypto-asset industry. The desire and commitment of the community to instil and drive sound business practices is enormously compelling and in our experience, is far more prevalent than those who do not ascribe to this mindset.”