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Blockchain Payment Services Potential: Taiwanese Central Bank

The governor of Taiwan’s central bank – Yang Chin-long, highlighted out that the bank has come to a conclusions that it is very open to studying out blockchain technologies when it comes to financial services, during a speech on Feb 26.

At the end of January, Taiwanese capital Taipei had announced that they intended to turn into a ”smart city,” utilizing Blockchain for providing technological advances like pollution sensors and health history tracking to citizens by partnering with IOTA.

Wei-bin Lee – Department of Information Technology commissioner, declared that on the project Digital Citizen Cards the city has created a team made of IOTA and Biilabs [local startup].

« We’ll be starting with related applications for Digital Citizen Card that can be used as a platform. We also seek to boost the authentication and integrity checks for municipality-to-municipality/institution-to-institution data exchange (such as medical records). »

Yang Chin-long, the new governor, during his speech at the ceremony added that is open to adopt ‘a.i. technologies and big data analysis to better predict global economic conditions’:

“In addition, the bank will also try to explore the feasibility of enhancing the security and efficiency of payment systems using decentralized ledger technology [Blockchain].”

The bullish approach towards the crypto-ecosystem has been showcased even before as the Taiwan’s Financial Supervisory Commission declared that it will be supporting ICOs, digital currencies and the technology of blockchain, which announcement did come in contrary at a time when South Korea and China did pull-out the stricter-game card on regulations.

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Government Official: South Korea Has Yet to Decide on Best Cryptocurrency Regulatory Approach

South Korea has not decided on how best to regulate the cryptocurrency market, a senior government official said today.

In a report from Reuters, Hong Nam-ki, minister of office for government policy coordination, said to parliament that:

  • “The government hasn’t made any conclusion yet. Sufficient consultations should come first.”

According to Nam-ki, the government is keen to adopt a transparent environment with cryptocurrency trading, with any illegal activity being monitored by regulators. This news comes at a time when the country is continuing to wrestle with how best to monitor the market. Since the beginning of the year Seoul has given conflicting ideas on how best to regulate the digital currency industry.

At the start of the year it was thought that South Korea would follow in China’s footsteps with an outright ban on domestic cryptocurrency exchanges. Speculation that South Korea was taking a firmer stance was highlighted by the fact that crypto investors were ordered to change their anonymous trading accounts to real-name ones or face penalties by the end of January. As a result of the rumours circulating market prices dropped, with the start of the year proving to be a tough time for investors.

However, it appears that the government is scaling back on its previous stance. Earlier this month, Ethereum World News reported that the South Korean government was ‘positively’ considering a system to regulate cryptocurrency exchanges in the country similar to New York’s BitLicense. An official from the government ministry involved in a digital currency task force said at the time that:

“We are most likely [going to] benchmark the model of the State of New York that gives a selective permission.”

Additionally, last week, the country’s government also signalled support for ‘normalised’ digital currency trading, further highlighting South Korea’s move to embrace the industry. It’s believed that the government’s position has changed due to the fact that speculation in the market has subsided.

Notably, while South Korea’s Ministry of Justice (MoJ) and the Financial Services Commission (FSC) are in favour of a ban on cryptocurrency trading, they appear to be open to approval systems similar to New York’s.

Even though South Korea has yet to decide on how best to regulate the digital currency market, the fact that the government doesn’t seem intent on banning it has helped rally market prices.

At the time of publishing, bitcoin is trading at $10,732, representing a 7.53 percent increase in 24 hours, according to CoinMarketCap. Aid regulatory pressure from global authorities, bitcoin plunged to above $6,000 earlier this month.

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European Union hints at regulation sooner rather than later

European Commission Vice-President Valdis Dombrovskis hinted in comments Monday that the European Union should consider moving forward with regulating cryptocurrencies and not wait for global agreement on how to proceed.

“This is a global phenomenon and it’s important there is an international follow-up at the global level,” he said.

“We do not exclude the possibility to move ahead (by regulating crypto-currencies) at the EU level if we see, for example, risks emerging but no clear international response emerging.”

The Commission is the executive arm of the European Union.

Dombrovskis was speaking after a European Commission roundtable meeting on cryptocurrencies attended by representatives from the European Central Bank, the Financial Stability Board, the European Parliament’s monetary affairs committee and other regulatory and industry bodies.

An influential German politician, Markus Ferber, vice-chair of the monetary affairs committee, was even more forthright, saying that unregulated crypto meant retail investors were exposed to “manipulation and fraud”.

He also joined the calls for the EU to adopt regulations quickly, without waiting for global partners.

In a published statement Ferber said: “When it comes to virtual currencies, we need a quick EU-wide regulatory response. If we wait until international standards trickle through to the EU, years will pass without anything happening.”

He continued: “Right now, retail investors are losing money as they are not aware of the dangers of virtual currencies. In order to make sure that retail investors do not fall prey to market manipulation and fraud, virtual currencies should be regulated as other financial instruments.”

Earlier in February, European financial regulators in the form of the European Banking Authority, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority, highlighted the dangers to financial stability posed by cryptocurrencies because of their volatility and the current lack of legal protection for market participants.

In November last year the economic secretary to the UK Treasury, Stephen Barclay, said in a written reply to a parliamentary question that the EU was expected to finish working on its regulatory response to cryptocurrencies, but no proposals have yet been brought forward.

The crypto market has not reacted negatively to the latest statements from EU officials. Prices, for now, are continuing to head north, with bitcoin trading at $10,781, according to coinmarketcap.com, helping to pull most other top-tier coins higher in its wake.

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Cryptocurrency Accepted as Tax Payments – Georgia Next

Following up Arizona, Georgia is the next state in the row to possibly accept digital currencies as a form of state tax-payments, based on a bill that was introduced on Feb 21.

Joshua McKoon and Michael Williams – Republican state senators, introduced the Senate Bill 464 which proposes that:

“the commissioner shall accept as valid payment for taxes and license fees any cryptocurrency, including but not limited to Bitcoin, that uses an electronic peer-to-peer  system.”

The introduced bill specifies that the moment when the payments will come in, the commissioner would be converting the digital currencies to US Dollars within no more than a day – 24 hours.

The move is very similar to that of the Senate of Arizona which did just run a bill which would validate cryptocurrencies to be used as a tax-paying method with 13 votes against, 16 in and on abstaining:

“A taxpayer may pay their income tax liability using a payment gateway such as bitcoin, litecoin or any other cryptocurrency recognized by the department, using electronic peer to peer systems,” the bill says before further adding:

“The department shall convert cryptocurrency payments to United States dollars at the prevailing rate after receipt and shall credit the taxpayer’s account with the converted dollar amount actually received less any fees or costs incurred by the department for conversion.”

If all goes well [meaning that the final round – The House accepts the bill to become law] Arizona will be the first to declare such legislation in the western side of the globe.

Despite the fact that the announcement might sound at first as a positive development, according to Robert Wood – tax law expert, paying taxes the cryptocurrencies might lead the way to paying more of mentioned above, as the increases in cryptos used for tax payments could themselves be subject to capital gains tax and investment income tax.

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UK parliament’s Treasury committee launches cryptocurrency inquiry

An inquiry into cryptocurrencies has been launched by an influential UK parliamentary committee. The Treasury Select Committee of the House of Commons announced today that it will begin hearings on “digital currencies and distributed ledger technology”.

Contrary to reports on CoinDesk and elsewhere, the Treasury Select Committee is not an arm of the government or HM Treasury, and as such it can only make recommendations as opposed to laying down rules and regulations.

Nevertheless, the committee has the power to take oral and written evidence from both regulators and industry bodies as well as cross-examine individuals at its hearings. The reports of parliamentary committees can sometimes act as the foundation upon which legislation is brought forward by government.

Nicky Morgan MP, the chair of the parliamentary committee and a former secretary of state for education, says the inquiry will assess the “regulatory response” of the UK’s main financial regulator, the Financial Conduct Authority (FCA), as well as the attitude of government and the position of the Bank of England, the country’s independent central bank.

Morgan, a member of parliament for the ruling Conservative party, worries that consumers are oblivious to the lack of regulation in the cryptocurrency arena. “People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors,” said the lawmaker.

Balance regulation and innovation

The committee will look at how to balance regulation to protect consumers, businesses and the financial infrastructure “without stifling innovation”. In that vein, Morgan commented: “We will also examine the potential benefits of cryptocurrencies and the technology underpinning them, how they can create innovative opportunities, and to what extent they could disrupt the economy and replace traditional means of payment.”

She continued: “The distributed ledger technology that supports digital currencies is said to have significant transformative potential, not least within the financial services sector.

“Striking the right balance between regulating digital currencies to provide adequate protection for consumers and businesses, whilst not stifling innovation, is crucial. As part of the inquiry, we will explore how this can be achieved.”

Although money laundering rules apply to cryptocurrency exchanges in the UK, investors and users of cryptocurrency do not come under the deposit insurance arrangements that apply to other financial products.

The FCA has issued consumer warnings about the dangers of contributing to initial coin offerings but there are no regulations that apply to this new way of raising funds from investors.

Also, the FCA has sandboxes for blockchain development ongoing in which companies can securely test their products without having to worry about the regulatory implications.

Earlier this week the governor of the Bank of England, Mark Carney, dismissed bitcoin as a monetary failure. “It has pretty much failed thus far on … the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange,” said Carney in comments he made to a university audience in London.

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South Korea Wants to See ‘Normalised’ Cryptocurrency Trading

South Korean authorities have signalled support for what they have described as ‘normal’ digital currency trading, boosting bitcoin’s price.

Previous reports have indicated that the South Korean government had hinted at an outright ban on digital currency exchanges. At the end of January, the nation’s authorities banned the use of anonymous crypto trading accounts, ordering traders to use real-name accounts instead as the government scrambled to rein in the market amid speculative prices. At the time it was believed that authorities were preparing a bill to ban cryptocurrency exchanges in the country.

Yet, in an apparent shift Choe Heungsik, governor of South Korea’s Financial Supervisory Service (FSS), has said that he wants to see normalised trading of cryptocurrencies, reports Bloomberg.

Arthur Hayes, Chief Executive Officer of BitMEX, a Seychelles-based peer-to-peer crypto-coin trading platform, said:

“South Korea did not ban bitcoin. We’ve now gone up almost double in the last few weeks, and I think a lot of this is people coming around to the fact that bitcoin trading isn’t going anywhere.”

Bitcoin’s value has increased on the back of the efforts the FSS is working at. According to Heungsik, these efforts include establishing money laundering guidelines and a real-name account system to normalise digital currency trading.

Hayes added:

“People are seeing governments are not out to ban crypto trading.”

At the time of publishing bitcoin is trading at $11,656, representing a 35.36 percent rise over the past seven days, according to CoinMarketCap. Considering the digital currency was trading at just above $6,000 at the beginning of February, it has made a steady comeback.

A rise in market values can also be attributed to the fact that the South Korean government is considering a licensing system to regulate cryptocurrency exchanges in the country similar to New York’s BitLicense. According to an official from the government ministry involved in a cryptocurrency task force, the government is ‘most likely’ going to follow the model that New York already has in place.

Unlike China’s move to ban digital currency trading it appears that South Korea is beginning to take a more embracive approach to the market. Notably, though, while it appears to be following Japan’s lead it’s also keen to ensure that its citizens don’t fall foul of crypto scams or the volatility of the market.

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Measured Approach Towards Regulation of Cryptos – the White House

Rob Joyce, the cybersecurity coordinator and special assistant to the president for the White House, added that the US is still on a path which will be long before meeting the first regulation for the world’s first crypto.

The almost three-decade veteran of the National Security Agency  that give-in his part in coordinating policy strategy for cybersecurity between gov, companies and NGO’s – Joyce, at the Munich Security Conference in Germany highlighted out the importance of taking thought-out steps and a measured approach to cryptocurrency and Bitcoin which is in-contrary to rushing towards the regulation that might bring up various consequences:

I THINK WE’RE STILL ABSOLUTELY STUDYING AND UNDERSTANDING WHAT THE GOOD IDEAS AND BAD IDEAS IN THAT SPACE ARE. SO, I DON’T THINK [GOVERNMENT REGULATION IS] CLOSE.

Still, Joyce recognizes the already-proven criminal potential within the cryptocurrency space. As reported by CNBC — which incorrectly claims Bitcoin transactions are “completely anonymous” — Joyce doesn’t gloss over the inherent difficulties involved with monitoring criminal transactions across the blockchain, explaining:

WE ARE WORRIED. THERE ARE BENEFITS TO THE BITCOIN CONCEPT — DIGITAL CASH, DIGITAL CURRENCIES. BUT AT THE SAME TIME, IF YOU LOOK AT THE WAY BITCOIN WORKS AFTER THERE IS A CRIMINAL ACT THAT TAKES PLACE, YOU CAN’T REWIND THE CLOCK AND TAKE BACK THAT CURRENCY.

While credit card companies and banks can reverse fraudulent-status set transaction, cryptocurrencies do not have virtually no means to protect those that have been targeted by theft.

“With the current instantiation of bitcoin and other cryptocurrencies, we haven’t figured that out yet,” said Joyce. “So it’s a problem.”

But, this kind of approach by the White House and the US government signals directly that the regulation of cryptocurrencies can be taken as positive in contrary to what often seems like a very long on-going regulatory FUD.

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Japan’s Government to Inspect 15 Crypto Exchanges Awaiting Certification

Japan’s financial services minister has said today that it plans to conduct on-site inspections of 15 cryptocurrency exchanges following the hack at Coincheck.

Speaking at a news conference, Taro Aso, Japan’s financial services minister, said that the inspections would be looking at those that had filed for certification with regulatory authorities, reports the Japan Times.

The move comes after the hack at Tokyo-based digital currency exchange Coincheck, which saw the theft of $530 million worth of NEM last month. The exchange has since frozen its digital currency withdrawals services; however, it resumed its yen withdrawals on Tuesday.

According to Aso, the inspections will focus on the exchanges computer system safety measures and how they manage customer assets. Of the 15, five have already been informed of the upcoming inspections, the report indicates.

In light of the Coincheck hack, the country’s financial watchdog, the Financial Services Agency (FSA) ordered all licensed and unlicensed exchanges to report on their safety measures and their steps to preventing hacks.  Following the reports, the FSA has now deemed it necessary for detailed inspections to take place all all of the 15 unlicensed cryptocurrency exchanges.

Unlike China’s approach to the digital currency market, Japan has been more embracive of the industry. As a result, the government introduced a registration system for digital currency exchanges when it recognised cryptocurrencies such as bitcoin as a legal form of payment last April.

Notably, cryptocurrency exchanges that were in operation before the revised law went into effect, but have yet to be registered, are provisionally allowed to conduct their business during the registration process. Prior to Coincheck’s hack, the exchange was also permitted to operate. However, following the hack, and the submission of its report to the FSA earlier this week, the agency has to determine whether to give the exchange a license to continue operating.

Coincheck also faces the brunt of disgruntled investors after a lawsuit was filed against the company on Thursday. A group of seven traders, who filed the suit at the Tokyo District Court, are seeking the reimbursement of frozen assets amounting to 19.5 million yen ($182,910). A second lawsuit is expected to be filed against the exchange on the 27th February to account for any lost value in investors’ coins frozen by Coincheck.

After the hack, Coincheck vowed that it would reimburse 260,000 of its customers holding NEM coins, amounting to a total of 46 billion yen ($431 million).

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No Crypto-Ban to Take Place: Singapore Announces

Tharman Shanmugaratnam – Singapore’s deputy prime minister, added on released report that the gov officials will not ban digital currencies as they are included in the regulatory plans.

On Mon, Feb. 5 – The deputy prime minister who is in the same time minister in charge of regulatory body the Monetary Authority of Singapore, published fourteen statements replying to questions that were put out by members of the parliament regarding policies towards cryptos:

“…(MAS) has been closely studying these developments and the potential risks they pose. As of now, there is no strong case to ban cryptocurrency trading here,” the deputy PM said.

“But we will be subjecting those involved as intermediaries to our anti-money laundering regulations. And we will keep highlighting to Singaporeans that they could lose their shirts when they invest money in cryptocurrencies.”

Singapore [very similar to Japan] has created an environment with remarkable spacious freedom for blockchain and cryptocurrency to continue development.

In stark contrast to China and Indonesia, the city-state has favored Blockchain in particular as part of its bid to become a global hub for the technology.

Shanmugaratnam continued with highlighting out there is no systemic risk regarding actions taken with cryptos as there is no major exposure by the banking system to local entities in which digital currency related activity takes place:

“For now, the nature and scale of cryptocurrency trading in Singapore does not pose risks to the safety and integrity of our financial system,” he continued.

“…Further, connections between cryptocurrency trading and Singapore’s financial system are also not significant at present. Singapore’s banking system does not have any signficant (sic) exposure to global and local entities dealing in cryptocurrencies. We hence do not have broader, systemic risk concerns with regard to cryptocurrencies.”

Ravi Menon – MAS [ the Monetary Authority of Singapore] managing director, in Jan did reflect a similar positive standpoint for crypto’s future as he added on mainstream media that the director has high hopes for the digital currencies to continue developing even after a major crash.

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South Korea Considers BitLicense-Type System to Regulate Cryptocurrency Exchanges

South Korea’s government is considering a licensing system to regulate cryptocurrency exchanges in the country similar to New York’s ‘BitLicense’.

In a report from BusinessKorea, an official from the government ministry involved in a digital currency task force, said:

“We are positively considering the adoption of an exchange approval system as the additional regulation on cryptocurrencies. We are most likely [going to] benchmark the model of the State of New York that gives a selective permission.”

This news marks a significant change in the initial direction many believed South Korea was heading. Similar to China, investors and traders within the crypto market have been speculating whether the South Korean government would follow suit with an outright ban on cryptocurrency trading. In January, it was reported that digital currency investors in South Korea were ordered to change their anonymous cryptocurrency accounts to ones linked to their identities or face penalties from the end of January.

It’s reported by BusinessKorea that the government’s hardline approach has changed due to speculation on the market subsiding. As a result, the government doesn’t believe that it needs to regulate the cryptocurrency market for the time being. Not only that, but a ban on the market could have an impact on the development of the blockchain technology.

Kim Do-yeon, Deputy Prime Minister and Minister of Strategy and Finance, is reported as saying:

“We don’t need to get rid of or suppress digital currencies.”

The news source added that the Ministry of Strategy and Finance is ‘aggressively’ working at adopting the exchange licensing system, but a final decision is not expected until after local elections in June.

Dubbed the ‘BitLicense,’ the New York State Department of Financial Services’ (NYDFS) regulatory framework was launched in June 2015. Only after an exchange has received the license in New York can it legally trade digital currencies within the state. Not only that, but the exchanges are required to adhere to strict money transmitter regulations.

However, while it adds some legitimacy to the sector, the high cost of acquiring the BitLicense has meant that many exchanges have left the state of New York to set up elsewhere. There are, however, a limited number of cryptocurrency exchanges that operate in New York such as digital currency Coinbase.

Notably, though, the South Korean government feel that the introduction of its own BitLicense will enable them to bring digital currencies into the institutional system in addition to supervising the market.