Regulatory Clarity Will Drive Crypto, Blockchain Adoption

Commenting on the importance of regulation in the technology sector, Brad Garlinghouse, CEO of Ripple, said that introducing regulations will lead to blockchain and cryptocurrency adoption.

Garlinghouse made these remarks while talking to the Deputy General Counsel, Ross Leckow, of the International Monetary Fund (IMF) at the Singapore Fintech Festival. The topic of their discussion revolved around the regulatory frameworks emerging in the Association of Southeast Asian Nations (ASEAN). Some of the ASEAN members include Singapore, Indonesia, Thailand, Malaysia, Philippines, among others.

The Importance of Internet of Value

“Regulatory clarity has a huge ability to drive digital asset and blockchain adoption. It is surprising how many markets still have uncertainty,” said Garlinghouse.

The ASEAN market has set clear regulations for blockchain and cryptocurrency, but they face challenges in correspondent banking. Hence, Ripple has focused its attention on this sector, “Nearly 50% of all of our global customers are based in the region, and our Singapore headquarters continues to be a growth engine for Ripple — expanding by 200% in the past year.” Garlinghouse added that Thailand has not only supported this new technology, but its regulations has even legalized XRP.

Ultimately, Ripple plans to introduce the Internet of Value — a term coined by the company — to allow instant and economical cross-border payments.

Meanwhile, Leckow assured Garlinghouse that the IMF plans to support these countries in creating proper regulations without suppressing development in blockchain and cryptocurrency projects. In fact, IMF’s Fintech advisory board includes Chris Larsen, co-founder and former CEO of Ripple.

XRP is ‘Clearly Decentralized’

Last month, in an interview with financial news network Cheddar, Garlinghouse said that XRP is “very clearly decentralized”. He justified his statement by stating that even the CEO of the company is unable to change transactions or alter the ledger.

Garlinghouse also spoke against critics who spread false information regarding Ripple’s decentralized nature. He claimed that some of these people have an economic interest in bringing down XRP. The rest of these people belong to the group that believes government and regulations shouldn’t exist in the crypto sphere, he explained at the CB Insights Future of Fintech 2018.

Garlinghouse added that XRP is in the midst of a “crypto holy war”, but it knows that the only way to enable the Internet of Value is by collaborating with financial institutions and following proper regulations.

Featured image from Flickr.

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‘Future of Real Estate’ Gets Regulatory Approval

A blockchain-based startup which bills itself as “the future of real estate” has announced that its project has been legalized by Japanese regulatory bodies, including the Securities and Exchange Surveillance Commission.

Ruden Holdings says inaccurate information, poor record management and inefficient processes are currently blighting the property sector – costing businesses time, money and even credibility. Data cannot be shared easily between organizations – and some cases have seen property owners struggle to prove their ownership of a building.

The company has a goal of creating digital identities for real estate properties, helping to enhance the quality and consistency of information given to buyers and sellers. It also plans to reduce the costs associated with completing transactions through smart contracts and cryptocurrency payments – and believes this could offer big advantages to overseas investors who are making a purchase on the other side of the world.

According to Ruden’s white paper, one of the main advantages to digitizing certificates for properties – offering a thorough history of every building – is that it helps stop fraud. Blockchain’s encrypted and tamperproof nature lends itself to transparency, thwarting those who want to hide illicit funds through properties. Illustrating its potential, its team wrote: “Governments are now trying to use blockchain technology to register real estates and improve the transparency of lands and real estate ownership.”

In time, the company also hopes its technology could speed up the time it takes to get a mortgage – a prospect that would be welcome news for buyers. Research on the US market by Fannie Mae suggests that the closing time for a new purchase is 46 days – with the process creating endless amounts of stress and anxiety for parties involved.

Growing interest

Fresh from being recognized by Japanese regulators, Ruden Holdings has raised $10 million from private equity firms across Asia.

The startup is now planning to strike new relationships in jurisdictions beyond Japan and Singapore. Executives from Ruden recently attended the controversial Future Investment Initiative in Riyadh, Saudi Arabia, where their project attracted the attention of the Lebanese ambassador. The company is also gearing up for “high-level” talks with the finance minister of Lithuania in the not-too-distant future.

In addition, Ruden believes that there are some exciting prospects for growth to be found in the United Arab Emirates, which plans to ramp up its adoption of blockchain. As reported by Cointelegraph, the state wants to become a world leader in using the technology by 2021 – and one of its objectives involves a commitment to making 50 percent of transactions via blockchain over the next three years.

Jacky Hai, the company’s chief technology officer, told Cointelegraph: “Blockchain is a powerful tool for us which will enable us to define the future of real estate.

“It will speed up the process of buying property and open up the Japanese real estate market to foreign investment. The Ruden token allows us to incentivise the uploading of current real estate data which will unlock the value of large-scale data analysis.”

Building a home for real estate documents

In the fourth quarter of 2018, the startup has been embarking on fundraising with the goal of driving interest in its native Ruden coin. From here, it is expected to be listed on overseas cryptocurrency exchanges by Dec 1 2018.

Next year, the emphasis will shift onto building a platform where real estate can be securely purchased using cryptocurrency – and designing an “information registration and query system” to benefit its user base.

The CEO of Ruden Holdings is Susumu Nishioka, who has been in position since 2009. He worked at a law firm before starting his own business – and according to the company, he is now known as a “pioneer of one-room condominiums for investment purposes.”


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China’s Central Bank Extends Its Regulatory Scrutiny to Crypto ‘Airdrops’

China’s central bank, the People’s Bank of China (PBoC), has widened its scrutiny to include token airdrops, which it characterized as “disguised” Initial Coin Offerings (ICOs) in its 2018 financial stability report, published Nov. 2.

Using by now familiar rhetoric, the report reiterates the bank’s stringently anti-ICO and crypto trading stance, defining the former as “illegal” fundraising, and pointing to the widespread risks of financial fraud and pyramid schemes.

Signalling a new area of focus, the report warns that so-called “airdrops” are evading regulation around the public token sale model by issuing free assets to investors. According to the report, airdrops earmark a token reserve and then capitalizing on speculation in the market to inflate the assets’ value and drive their own profits.

The bank warns that such initiatives continue to rise in number, despite vigorous attempts to crack down on crypto token issuance in the country, and calls for “early detection” and redoubled vigilance on the part of regulators, alluding to the need for international cooperation to better protect investors.

The rest of the document reiterates concerns about crypto companies relocating overseas and using foreign “agents” to invest on behalf of domestic clients in mainland China, as well as warning against fraudulent whitepapers and crypto investment projects masquerading as “blockchain innovation.”

The report further refers to suspected market manipulation and violation of anti-money laundering (AML) systems in the crypto sector – warning of the negative societal impact that cryptocurrencies pose due to their use to evade capital controls, international sanctions, and to finance terrorism.

According to the bank, as of July 18, 2017 – before China’s ICO ban kicked in – 65 ICOs were completed in China, of which only 5 were launched prior to 2017. During this time frame, the total number of participants in ICOs exceeded 105,000, with cumulative funding hitting around 2.6 billion yuan (about $375.4 million). This, the PBoC states, accounted for 20 percent of ICO financing globally.

In addition to its toughened rhetoric and new focus on token airdrops, the bank’s report gives a historical overview of the PBoC’s interventions to date. This spans the bank’s 2013  ‘Notice on Precautions Against the Risks of Bitcoin’ – which defined Bitcoin (BTC) as a virtual commodity that is not recognized as legal tender/currency in China – to the PBoC’s notorious September 2017 ban on ICOs, which criminalized the model outright.

Even as the country’s regulators continued to broadcast stringent anti-ICO and trading rhetoric, holding cryptocurrencies is not itself illegal in China. In a recent case, an arbitration body in the city of Shenzhen protected Bitcoin as property, emphasizing that:

“There is no law or regulation that explicitly prohibits parties from holding bitcoin or private transactions in bitcoin, [only warnings to] the public about the investment risks. The contract in this case stipulates the obligation to return the bitcoin between two natural persons, and does not belong to the [Sept. 2017 ban].”

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$50 Million ICO Shuts Down ‘in Accordance with’ Regulatory Requirements

An Initial coin Offering (ICO) conducted by an Australian crypto startup Global Tech Exchange (GTE) has ceased operations, citing the Australian Securities and Investments Commission (ASIC) requirements, the company’s website reveals Monday, Oct. 22.

According to Business Insider Australia, the ICO was launched summer 2018 by GTE to create an an education-based trading and exchange platform and had a fundraising goal of $50 million.

The firm quickly gained popularity after being endorsed by Michael Clarke – a former Australian cricket captain and national celebrity. As of August, GTE cited him on its website as endorsing the project:

“I am really excited to be involved with Global Tech. Their ambition and drive is something that I resonated with straight away and I can’t wait to learn more about blockchain technologies.”

Clarke later posted the quotation to his Twitter account and was immediately warned by his followers about the general controversy surrounding ICOs.

The reasons behind the ICO’s closure remain unclear – ASIC has not yet commented on the matter following Business Insider’s request. On paper, the move appears instigated by GTE itself, which evidently voluntarily applied to the ASIC to deregister its ICO.

As per GTE’s website, the company has already returned all funds to investors. The statement also explicitly noted that Michael Clarke is “no longer associated with Global Tech Exchange and the Global Tech Exchange Blockchain education and awareness program.”

GTE’s ICO marks the sixth crypto crowdfunding project to be closed in Australia since April 2018. As Cointelegraph reported in September, ASIC revealed that the five other ICOs shut down before April were stopped due to a lack of required investor protection measures on part of the fundraisers in question.

However, only one of them was shut down permanently, while others needed to be restructured, the regulator noted.

This fall, ASIC has also revealed its plans to increase scrutiny of cryptocurrency exchanges and ICOs to ensure any “threats of harm” from the nascent industry are mitigated under its regulatory scope.

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Bermuda Government Approves First ICO Under New Regulatory Regime

The government of Bermuda has awarded the first certification for an Initial Coin Offering (ICO) under the island nation’s new regulatory regime for crypto and blockchain business, the country’s only daily newspaper, the Royal Gazette reports Oct. 18.

According to the Royal Gazette, the Minister of National Security Wayne Gaines — whose office oversees ICT policy and innovation — announced that fintech company Uulala was awarded certification by the Bermudan government today at the Bermuda Executive Forum in Miami.

In July, the Premier and Minister of Finance of Bermuda David Burt introduced new regulations on ICOs to the lower house of the country’s Parliament, the House of Assembly. The new guidelines require ICO issuers to provide detailed information about “all persons involved with the ICO.”

Issuers must also disclose a review of the project, detailing key aspects of the product or service such as the market audience, financing system, the amount of money that is planned to be raised, and technical aspects associated with software and blockchain specifications.

The Royal Gazette reports that Uulala aims to improve financial inclusion of unbanked and underbanked people by providing financial services. The firm has reportedly developed a decentralized peer-to-peer network “to load cash into the digital economy.” Once funds are deposited, users purportedly have access to a virtual MasterCard, with which they can participate in e-commerce, as well as pay bills or send cross-border payments.

The company’s CEO Oscar Garcia told the Royal Gazette that Uulala aims to raise $50 million dollars in its token sale, and has already raised $10 million privately. Garcia noted the country’s thorough regulatory standards; it reportedly took four months for the firm to get approval for its license. Despite the wait, Garcia said:

“Bermuda is known as a financial hub and it is very forward thinking on blockchain and fintech… They have a reputation of being excellent regulatory stewards and we thought that would be a better fit for us than a jurisdiction where we could say we’re good, they’d believe us and give us approval in three weeks.”

Bermuda has been cultivating a friendly regulatory environment for fintech, crypto, and blockchain-related business over the course of the past year. In addition to the aforementioned regulations, the country also began to amend the Banking Act in order to establish a new class of bank to render services to local fintech and blockchain organizations.The government has also signed memoranda of understanding (MoUs) with several blockchain and crypto-related companies to both promote the industry in Bermuda and create jobs for the local population.

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Winklevoss Twins’ Gemini Crypto Exchange Gets Regulatory Green Light for Litecoin Trading

U.S.-based cryptocurrency exchange Gemini, owned by the Winklevoss twins, has sealed regulatory approval to add Litecoin (LTC) custody and trading. The news comes from an official Medium blog post published Friday, Oct. 12.

Gemini’s vice president of engineering, Eric Winer, informs Gemini traders that they can begin depositing Litecoin into their exchange accounts as of 9:30 am EDT Saturday, Oct. 13. Litecoin trading will reportedly go live Tuesday, October 16th at 9:30 am EDT.

The coin is set to be the fourth crypto supported on the platform, alongside Bitcoin (BTC), Ethereum (ETH), and Zcash (ZEC). Consequently, LTC trading pairs will be available against all three cryptos, as well as against the U.S. dollar.

Winer’s post underscores Gemini’s thoroughgoing “banking compliance and fiduciary obligations” under oversight from the New York State Department of Financial Services (NYDFS). It notes that Litecoin trading support comes as the result of close cooperation with the watchdog, and that the exchange continues to expand with a “security-first” approach.

Lastly, the post reveals that support for Bitcoin Cash (BCH) had also been slated for today. However, due to high levels of “uncertainty” within the Bitcoin Cash community about “one or more possible hard forks” planned for mid-November, Gemini has decided to delay its support of the asset:

“Some of [the] forks [currently under discussion] lack the replay protection feature that would be required for Gemini to safely support Bitcoin Cash. Because of this situation, we are delaying our launch of Bitcoin Cash deposits, withdrawals, and trading until late November, after the forks have passed and we can evaluate the health of the Bitcoin Cash ecosystem.”

Earlier this month, Gemini announced it had secured insurance coverage for custodied digital assets from lending services firm Aon, which will complement its already available Federal Deposit Insurance Corporation (FDIC) coverage for U.S. dollar deposits.

The Winklevoss twins have also recently sealed the approval of the NYDFS to launch their own U.S. dollar-backed stablecoin, the Gemini dollar, the same day as U.S. Trust company Paxos announced its own NYDFS-approved stablecoin.

Shortly after the news, the brothers reportedly started to hire advisors to oversee Gemini’s potential expansion to the U.K. market.

As of press time, Gemini is ranked the world’s 38th largest crypto exchange by CoinMarketCap, seeing over $34 million in daily traded volumes.

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SEC Expands Crackdown on ICOs, Regulatory Ambiguity Remains

The U.S. Securities and Exchange Commission (SEC) has expanded its crackdown on Initial Coin Offerings (ICOs), putting “hundreds” of projects at risk, according to a recent joint investigation by Yahoo Finance and Decrypt Media published, Oct. 10.

The authors of the report stressed that hundreds of crypto and blockchain startups that conducted token sales have eventually found that they had violated securities laws despite their endeavors to comply with regulations. In response to SEC pressure, dozens of firms have reportedly “quietly agreed” to refund investors’ money and pay fines, rather than attempt to reach a legal compliance.

According to Yahoo and Decrypt’s conversations with more than 15 industry sources, many startups that were subpoenaed by the SEC did not know how to satisfy the commission’s demands, and were unable to consult with other firms on how to handle the matter.

The sources — who are represented by employees of subpoenaed companies or their attorneys — preferred to stay anonymous due to an SEC restriction from disclosing the issue.

An anonymous securities attorney at a high-profile Silicon Valley firm told Yahoo and Decrypt that while “everybody’s holding their breath,” waiting for new rules, the SEC is not going to provide them. According to the anonymous attorney, while dealing with the recently emerged industry, the SEC still applies the “same laws, the same statutes, the same rules, to stocks and bonds and everything else.”

As previously reported by Cointelegraph, there has been a “cascade of uncertainty,” associated with the existing ICO token classification, which only further complicates the development of desperately needed regulations for ICOs.

While major altcoin Ethereum (ETH) was launched back in July 2015, the SEC stated that the cryptocurrency would be regulated as a security only in June this year. Despite calls for regulatory clarity and comments from lawakers that the ICO industry needs “light touch” regulation, the SEC continues its crackdown on ICOs.

According to a recent study by financial research firm Autonomous Research, ICOs raised $20 billion since the start of 2017, which is $18 billion more than the previous year. With that, more than 80 percent of ICOs that were conducted in 2017 have been identified as scams by the ICO advisory firm Statis Group in July. Still, the U.S. is ranked the “most favorable” country for the ICO market, based on amount of funds raised by top companies in the field.

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US Congressmen Call on SEC for Regulatory Clarity Regarding Cryptocurrencies

A group of lawmakers from the U.S. Congress has sent a letter to Securities and Exchange Commission (SEC) Chairman Jay Clayton, calling for regulatory clarity regarding cryptocurrencies, CNBC reported September 28.

According to CNBC, more than a dozen congressmen asked Clayton to tell investors how the SEC plans to regulate digital currency. The lawmakers requested clarity on the criteria for identifying digital tokens as “investment contracts” and therefore securities, in addition to a  description of the tools the SEC will use to provide more concrete guidance to innovators in the field. The letter reads:

“It is important that all policy makers work toward developing clearer guidelines between those digital tokens that are securities, and those that are not, through better articulation of SEC policy, and, ultimately, through formal guidance or legislation.”

The congressmen reportedly expressed their concerns regarding uncertainty surrounding the treatment of offers and sales of digital tokens because, in their view, it impedes innovation in the U.S. and could eventually drive business to other jurisdictions.

The congressmen also said in the letter “We… believe that formal guidance may be an appropriate approach to clearing up legal uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught.”

On Sep. 26, congressman Warren Davidson hosted a “crypto roundtable” with over 45 representatives from major Wall Street firms and crypto companies. Experts expressed their concerns regarding possible regulations of the crypto space and told lawmakers that there is a pronounced lack of regulatory clarity for Initial Coin Offerings (ICOs) and digital currencies.

Some of the participants argued that current regulations were not only vague, but outdated. Joshua Stein, CEO at crypto-security firm Harbor, stated that securities regulations “do not work” in regard to utility tokens in decentralized apps (DApps). He added that current securities laws are only appropriate for traditional securities, and “they are not good fit” for the ICO industry.

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Cryptocurrency Prices Highly Correlated to Regulatory Action: BIS Report

New research has found that, despite the popular idea that cryptocurrencies operate generally outside the reach of national regulators, regulatory actions still have a huge impact on crypto markets. The research is presented in a report by the Bank for International Settlements (BIS), an organisation owned by 60 of the world’s central banks from countries cumulatively making up 95 percent of global GDP.

In the report, the data presented shows that while markets do not generally respond to news about central banks creating their own digital currencies or issuing general non-specific warnings about cryptocurrencies, they show a significant response to regulatory announcements regarding the legal status of cryptocurrencies and initial coin offering (ICO) tokens, as well as possible expansion and enforcement of AML, KYC, and CFT regulations.

According to the report, four major findings were established about the response of crypto markets to regulatory actions and announcements.

First of all, crypto markets were found to respond most significantly to news reports and events concerning bans, restrictions, or legal battles on cryptocurrencies and ICOs. Where the news in question directly concerns regulatory decisions or actions regarding the legal status of crypto assets, markets respond very strongly.

This also includes issues surrounding securities regulation, such as the ongoing ambiguity regarding the United States SEC’s pending decision on whether to permit a bitcoin exchange-traded fund (ETF). This does not only work negatively, as according to the report, markets also react positively to news about possible new legal frameworks designed to accommodate cryptocurrencies and ICOs.

bitcoin price
BTC/USD | Bitfinex

Second, regulatory news about AML/CFT measures and restrictions on crypto’s ability to integrate with traditional financial systems due to regulatory action or non-action was also found to have a noticeable effect on crypto markets. For example, news that a crypto exchange is denied access to banking services within a regulated financial system has a noticeably negative effect on the local market. Conversely, news about regulatory green lights for crypto startups to engage with regulated financial organisations, such as a successful New York BitLicense application, has a markedly positive effect on markets.

Third, non-specific general warnings about the dangers of cryptocurrency investment and trading have a negligible effect on the market. The same also holds true of announcements by financial regulators and central banks announcing their own plans to issue central bank digital currency (CBDC). Markets generally ignore such pronouncements for good or for bad, which was seen earlier this year when the EU slapped down Estonia’s bid to issue a national cryptocurrency. The news had no noticeable negative effect on crypto markets, as did news of Venezuela’s plan to launch a state sanctioned cryptocurrency backed by its crude oil reserves.

The report’s final finding is that, despite crypto’s trans-border accessibility and functionality, significant price differences are still noticeable across jurisdictions, indicating that there is a significant level of market segmentation.

Explaining this phenomenon, an excerpt form the report reads:

“These results suggest that cryptocurrency markets rely on regulated financial institutions to operate and that these markets are segmented across jurisdictions, bringing cryptocurrencies within reach of national regulation. […] Because they rely on regulated financial institutions to operate and markets are (still) segmented across jurisdictions, cryptocurrencies are within the reach of national regulation.”

The full BIS report can be downloaded here.

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Switzerland to Exchange Blockchain Regulatory Experience With Israel

Switzerland and Israel have agreed to share their experience on regulating the blockchain industry, Reuters reports Monday, September 17, citing both countries’ high-ranking officials.

Switzerland’s Minister of Finance Ueli Maurer and State Secretary for International Financial Matters Joerg Gasser have recently visited Israel to officially request access to the local markets for Swiss banks.

As Gasser told Reuters, by the end of 2018 he plans to prepare a report on blockchain regulation for the Israeli officials that would outline general recommendations. He expects that these notes might be approved by the Israeli parliament in 2019 and go into effect by early 2020.

Reuters has not been able to obtain a detailed comment from the Israeli officials. However, the Ministry of Finance has said in a statement that both countries had agreed to share notes on fintech regulation, including guidelines on cryptocurrencies and combating money laundering.

As Cointelegraph reported earlier, Israel has a number of projects that use the blockchain technology in one capacity or another. Selva Ozelli, an international tax attorney and certified public accountant (CPA), reviewed local blockchain initiatives such as an open government platform for elections, a blockchain-based drone registry and a national cryptocurrency.

Switzerland is actively adjusting its current legislation to integrate blockchain projects in daily life. As part of these efforts, the country has established a so-called Crypto Valley located in the canton of Zug where different blockchain solutions are being developed.

In July, Zug has held its first blockchain-based voting with the help of local tech companies, to evaluate whether the technology could be used at a higher level of governance. Citizens have voted on municipal projects, and the test was declared a success despite low turnout.

Furthermore, Switzerland actively promotes blockchain and cryptocurrency startups. In June, Hypothekarbank Lenzburg became the first bank in the country to offer business accounts for such companies. As Cointelegraph reported in July, several other Swiss banks have also opened their business to crypto-related companies since then.

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