As digital currencies transform the world, concepts like Bitcoin continue to percolate into academic courses and higher education worldwide. The French Ministry of National Education’s recently published economics and social sciences resource guide for teachers discusses cryptographic money like Bitcoin.
A Bitcoin Resource Guide for Economics and Social Sciences Teachers in France
Economics and social sciences teachers from France may opt to teach students about cryptocurrencies in the near future. The French Ministry of National Education has issued a resource guide that touches on a wide variety of economic subjects. The eight-page guide discusses Bitcoin with a pedagogical activity card that teaches the different functions of money. The “educational activity two” lessons are comprised of classifying particular examples of money functions specifically with a cryptocurrency. The purpose is for educators to give the example of Bitcoin in order to show students the relationship between traditional money systems and trust as well as other properties. The Ministry of Education also provides resources and proposed activities which include four videos hosted by Dessine-Moi l’éco.
The videos are called “Do you have to trust your currency?”, “Can Bitcoin replace the euro?”, “Is Bitcoin a currency like any other?” and “Is Bitcoin the currency of the future?” The teachers’ resource guide of proposed activities explains that instructors can have students list the functions of currency and show how they apply to Bitcoin. Further, students can separate the euro and cryptocurrencies from a trust point of view. Prior to the Bitcoin section, the resource guide also discusses how central banks mobilize the instruments of monetary policy. According to the Ministry of Education, central banks “create sufficient money to support global demand, but also ensure the preservation of the purchasing power of the currency.” The activity card for French educators says that central banks such as the ECB and Federal Reserve must “react” if there is a risk of accelerated inflation.
Cryptocurrency and Blockchain Education in High Schools and Universities Continues to Grow
The four videos about cryptocurrencies and bitcoin on the Dessine-Moi l’éco website are a few years old as they were published in 2017. Despite the age, they are very informative and the transcript from the video “Is Bitcoin a currency like any other?” explains that Bitcoin is “a virtual currency that circulates on the internet.” The video also notes that cryptocurrencies allow people to measure the value of goods and services in a digital sense and the network transactions serve as a medium of exchange. The film further says that the cryptocurrency can be stored for future use, but also emphasizes that users should “be aware that the euro and bitcoins have different characteristics.” “The euro is a legal tender, this means that it is recognized by the public authorities and that everyone in the Eurozone is obliged to accept to be paid in euros,” the video’s transcript reads. “Even if more and more e-commerce sites and even some physical shops accept the Bitcoin as a means of payment, nothing obliges a merchant to accept them and no one guarantees that they will be accepted in the future,” the video hosted on Dessine-Moi l’éco adds.
Academic institutionsaround the world have embraced spreading blockchain and digital currency knowledge for years now. For instance, the University of Luxembourg provides crypto security courses, Columbia University and IBM offer a slew of educational resources, and the University of Tokyo offers a blockchain innovation course as well. Coinbase recently published findings that disclosed more than 40% of the top universities around the world offer a course in cryptocurrency or blockchain. The study also found that 25% of the students surveyed were interested in taking a course on cryptographic technology. A high school in Brisbane, Australia had a lot of interest in Bitcoin so it prompted Brisbane students to create a cryptocurrency information night. Students at Union Catholic High School in Scotch Plains, New Jersey were also curious about digital currencies and the school’s Business and Personal Finance class added a cryptocurrencies course during the second semester in 2018. Last year, news.Bitcoin.com reported on a Dutch high school exam that featured Bitcoin-themed questions. The French Ministry of Education teaching educators how to address current cryptocurrency trends indicates that academic institutions take the technology very seriously.
What do you think about the French Ministry of Education’s teacher resource guide that discusses Bitcoin and cryptocurrencies compared to the euro? Let us know what you think about this subject in the comments section below.
Image credits: Shutterstock, French Ministry of Education, Dessine-Moi l’éco, and Pixabay.
Every year the world seems to be getting crazier and more people are starting to realize that it stems from oppressive government transgressions against a peaceful society. The world has noticed millions of people from France, Hong Kong, Venezuela, Indonesia and more are rising up because citizens are sick and tired of the manipulation. Because of all the money printing, hyperinflation, capital controls, austerity measures, and privacy-invasive tactics, groups and individuals have discovered that cryptocurrencies are profound tools for achieving economic freedom and the interest in permissionless money has only just begun.
Individuals Worldwide Are Protesting Against Oppressive Governments and the Growing Wealth Disparity
Three years after the 2008 economic crisis, the Occupy Wall Street (OWS) protests started in New York City’s Zuccotti Park and quickly spread across the world. OWS protest camps were staged internationally and there were many other types of similar demonstrations like the Arab Spring protests, the British student protests, the bank bail-out protests, and the Iranian election demonstrations. All of these activists had been fighting against economic inequality and the huge wealth disparity within the world. Now, little more than eight years later, people are rising up again for the same reasons. Revolution-style protests are taking place in Argentina, Venezuela, Indonesia, Netherlands, France, India, Russia, Hong Kong, Chile, Lebanon, Peru, Haiti, Egypt and Syria, and the whole world is watching closely.
The Argentines have literally watched their government destroy the economy slowly. The socialist leaders recently initiated currency controls as the country’s central planners have failed to fend off hyperinflation. In September, the Argentine government told the public the peso was extremely weak and restricted foreign currency purchases. Hundreds of thousands of Argentines took to the streets in Buenos Aires demanding that the government fix the situation.
There’s also been a massive food crisis and nourishment has been hard to come by in the Latin American country. Ivan Martinez, a protester in Buenos Aires, told news outlet Al Jazeera: “The situation is dire for all of us.” “I’m a construction worker but there is no work. It’s difficult to feed my children. That’s why I come here because the president’s policies are slowly killing us,” he added.
Similar to Argentina, Chile is also facing serious economic problems and the country’s citizens have risen up in protest. For a while, Chile was known as Latin America’s economic powerhouse with seemingly never-ending prosperity. But this year is very different as Chile is suffering from rapid inflation and pension shortages. The government has been raising prices, despite the economic outlook, thinking that austerity measures and tax hikes will solve the problem. The capital’s subway operator Metro de Santiago raised the price of tickets to $1.15 during rush hour and Chilean politicians also increased electricity costs by 10%. Much like the OWS protests, the Chilean government doesn’t know who is behind the uprisings that can be seen throughout major cities across Chile. The media details the movement was largely organized on the internet using social media platforms.
The streets of Paris this year saw thousands of yellow vests demonstrating against rising taxes, the manipulated banking system, and the region’s unethical bureaucrats. The group known as Gilets Jaunes formed marches in Paris that saw hundreds of thousands of people in the streets. Banks were vandalized and one group of Gilets Jaunes started burning banknotes at the bill printing factory.
“Starting today we start to burn foreign bills stock — The first paper ream we have here is for Israeli banknotes,” the bill factory employees stressed. “We start with this, then we burn everything — If the French government doesn’t change, all foreign countries that are waiting for their bills, will not be delivered.” It’s unknown how far the group of employees went with the burn, but the economic uncertainty in France remains dire.
Hong Kong has seen weeks and weeks of protests that don’t seem to be ending anytime soon. The demonstrations stem from Hong Kong citizens wanting to partition themselves from Beijing as China has been in full control over the territory since the British handover. However, activists have been striking at the root of Chinese banks located in the country following massive sit-ins at the national airport and demonstrations across several locations citywide.
In mid-August pro-independence activist, Chen Haotian, told protesters to initiate a bank run on China’s banks. That week, Haotian called upon the people to withdraw bank deposits. Chinese financial institutions were also attacked again on October 1, as China honored the 70th anniversary of communist rule. Dissenters besieged a Bank of China branch in Hong Kong, while also smashing the storefront glass of another Chinese bank called China Life the same day.
Citizens of Indonesia have been protesting as well, as students demonstrated against a proposed ban on extramarital sex. But just like Hong Kong, the protest reports go well beyond the controversial ban and dissenters on the streets have said government rules have been constantly overbearing. The Indonesian protests stem from a deteriorating economy and poor central planning, and the rise ups have been growing fervently thanks to social media. Civil rights, basic freedoms, and privacy are the main issues, many Indonesian protests participants will tell you. “It’s not a one-issue protest,” explained Andreas Harsono of Human Rights Watch in Indonesia. “And it’s also not a unified or organised movement.”
An economic crisis is devastating India according to various reports from news.Bitcoin.com’s Kevin Helms. It all started at the end of September when the Reserve Bank of India told 137 smaller financial institutions to limit withdrawals to 1,000 rupees ($14) and the public erupted in protest. “Depositors will be allowed to withdraw a sum not exceeding ₹ 1,000 (rupees one thousand only) of the total balance in every savings bank account or current account or any other deposit account by whatever name called, subject to conditions stipulated in the RBI directions,” the bank told the public. To this day, customers are still having problems withdrawing their hard earned money from a number of cooperative banks.
Egyptians are protesting their oppressive government right now because even though the economy is doing well, the country’s bureaucrats are the only ones reaping the benefits. Just like the Egyptian rise ups in 2011, the people are looking to see certain politicians arrested and jailed for their transgressions.
The three weeks of demonstrations in Egypt are no different than what’s happening throughout various countries across the world. Egyptians are upset about the draconian repression, increased political corruption, and government-imposed austerity measures. Thousands of Egyptians have been arrested and the latest demonstrations have people questioning “whether the Egyptian political system is about to collapse.”
The people living in Lebanon want a new government and word on the streets is the overreaching politicians continue to hurt the average working-class citizen. Lebanese are tired of the bureaucrats taxing the people on every single thing they do and the recent protests started after a tax proposal on Whatsapp calls. Hundreds of thousands of people took to the streets in anti-government protests against a 20-cents-per-day charge for using voice over internet protocol (VOIP) platforms. The most popular is Whatsapp in Lebanon, but Lebanese also use Facebook messenger. Lebanese activists have called for a new government and the latest demonstrations are the largest since 2005.
The youth in Russia have been protesting Vladimir Putin’s authority since 2012 and Putin doesn’t seem to care. Dissidents in Russia keep protesting and the police just continue to arrest the activists immediately. A protest last July saw 1,300 student arrests at opposition demonstrations. People in Russia are tired of the laws against Russian protesters and in September roughly 20,000 took to the streets to put an end to prosecutions tied to mass protests. Russian prosecutors had started an oppressive criminal case against demonstrators when people rallied against alleged rigged elections.
Social Media, Encrypted Chats, Precious Metals, and Cryptocurrencies
Throughout all of these events and the financial turbulence worldwide, safe-haven assets like precious metals and cryptocurrencies are being used as tools for economic freedom. Other tools such as the use of guerilla-styled social media tactics and encrypted chats are being deployed globally.
Millions of people from other nation states like Venezuela, Netherlands, Peru, Syria, South Sudan, Zimbabwe, Haiti, and Spain are rising up against their corrupt governments as well. It’s pretty easy to see why they are growing tired of the manipulation and it’s safe to say the central planners’ band-aids and money printing tactics are not helping.
What do you think about all the protests happening worldwide? Do you think cryptocurrencies can help people? Let us know what you think about this subject in the comments section below.
Image credits: Shutterstock, Reuters, Wiki Commons, Fair Use, Pixabay, and Twitter.
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Alipay denies providing support for Bitcoin trading amid reports of Binance accepting fiat deposits via popular payment channels.
Earlier in October 2019, Binance announced a fiat on-ramp for crypto trading via Chinese payment services Alipay and WeChat. This move was part of the exchange giant’s peer-to-peer (P2P) trading rollout for Bitcoin (BTC), Ether (ETH) and Tether (USDT) against the Chinese yuan.
The public nature of this announcement did bring questions to the fore regarding the use of payment channels like Alipay and WeChat for crypto trading. Alipay did, in fact, release statements distancing itself from cryptocurrency trading activities, with Binance later clarifying that it wasn’t working directly with the aforementioned payment services.
Meanwhile the evolving narrative around the situation speaks to the legal status of Bitcoin and cryptocurrencies in China. Even with a trading ban in place, there are whispers of a booming P2P trading arena, with authorities in Beijing seeming to adopt a “see no evil, hear no evil, speak no evil” approach.
However, whenever these reports do make it into the public domain, Chinese authorities and businesses are swift to put a lid on them. Perhaps the arrival of the country’s proposed digital currency might necessitate the emergence of more clear-cut handling of crypto commerce in China.
Alipay wants nothing to do with Bitcoin
As previously reported by Cointelegraph, Alibaba-owned payment channel Alipay has moved to ban transactions involving Bitcoin and other cryptocurrencies. In an email to Cointelegraph, a spokesperson for the platform wrote:
“Alipay closely monitors over-the-counter (OTC) transactions to identify irregular behavior and ensure compliance with relevant regulations. If any transactions are identified as being related to bitcoin or other virtual currencies, we immediately stop the relevant payment services.”
This statement came in response to reports that Chinese crypto traders were using the platform as a P2P trading marketplace. Crypto exchange giant Binance even announced that it had enabled support for fiat deposits via Alipay and WeChat.
Cointelegraph spoke with Filipe Castro, co-founder and chief information officer of Utrust — a Swiss-based digital payments processor — about the Alipay announcement. “AliPay, as many other established companies are still focused on their traditional business models and see this ecosystem as a challenger,” Castro said.
For the Utrust chief, Alipay’s status as a major player in China’s electronic payment arena means it has to work toward balancing the need for increasing revenue streams and compliance with directives from authorities in Beijing. Castro also highlighted the less than favorable standing held by the crypto industry in China, noting:
“Mainland China has strict laws banning gambling, and many still see cryptocurrency as such. Alipay and other providers still look at other cryptocurrency providers as investment outlets and not payment vehicles. Thus, until this perception changes, it is likely that current measures will stay in force.”
In an interview with Cointelegraph, Celine Lu, founder and CEO of BitDeer — a hashpower sharing platform — provided further insight. According to Lu, the Chinese government pays particular attention to the activities of popular third-party payment processors like Alipay:
“In these regulations, the state clarifies the nature of Bitcoin as a virtual commodity. At the same time, for the purpose of prevention of risks to the financial system, the relevant regulations limit the participation of financial institutions and payment institutions in Bitcoin-related activities.”
Alipay isn’t alone in coming out to distance itself from Bitcoin OTC trading. Back in May 2019, WeChat changed its payment policy, forbidding the use of its platform for P2P transactions.
Is it all about the narrative?
However, despite Alipay coming out to deny the use of its platform for Bitcoin OTC trading, several commentators say the practice is common in China. The summary of the arguments posited by many is that such activities while illegal on paper, fall into a regulatory gray area.
To clarify, Bitcoin OTC trading is not in itself illegal in China. Back in May 2019, the government revealed that the 2017 trading and initial coin offering (ICO) ban did not affect Bitcoin’s legal status as a property that can be held or exchanged via P2P channels.
Indeed, following the 2017 trading and ICO ban, reports began to emerge of growing P2P Bitcoin trading in China. Platforms like WeChat became marketplaces for the convergence of prospective buyers and sellers.
There are even reports that major crypto exchanges use these backchannel avenues to conduct P2P Bitcoin trading in China. These exchanges reportedly mask such activities by using the guise of running a P2P trading desk for the BTC/USDT trading pair. OTC P2P trading reportedly accounts for the overwhelming majority of Chinese BTC/CNY trading. Users place manual buy and sell orders, with the exchanges acting as the go-between.
Given the informal nature of the arrangement, counterparty risk becomes a major problem. The buyer reportedly has to send fiat payments first before receiving the agreed-upon Bitcoin. Thus, these marketplaces tend to put in a lot of effort in ensuring that participants hold to their respective ends of the bargain.
The fiat payment part of the deal requires channels like WeChat, Alipay or wire transfers. However, financial institutions in mainland China are barred from facilitating crypto transactions. Thus, users of such channels usually run the risk of having their accounts terminated.
However, some commentators allege that such practices are possible not because of regulatory loopholes but due to an unwritten “implied consent” of some Chinese government officials. These people claim that crypto exchanges have forged useful relationships with key actors in Beijing that help to smoothen any legal wrinkles.
While the Alipay/Binance situation was unfolding, a Twitter account named Blocfilo posted some startling revelations about the Chinese crypto trading scene. Allegedly, despite the trading ban, many cryptocurrency exchanges still operate and have their headquarters in mainland China. The self-professed crypto exchange analyst also tweeted that government officials are prepared to look the other way as long as they receive bribes from the platforms. Excerpts from the thread read:
“You just gotta pay the government officials some money and you can operate just fine under the radar. A lot of crypto exchanges have already become banks to certain extent. Only the legitimate ones will survive in the long run though.”
Cointelegraph reached out to several Chinese crypto exchanges to ascertain the veracity of these claims. The platforms that responded declined to comment on the matter. If such statements are true, then it appears authorities in Beijing seem more concerned with optics rather than actual trading activities.
Crypto-yuan: To be or not to be?
Back in April 2018, Chinese social media-based news platform cnLedger revealed that there was a booming Bitcoin OTC trade for crypto bulls in the country. As reported by Cointelegraph at the time, traders in China were paying a premium for BTC via these OTC desks. Chinese traders exchange CNY for USDT, which is then used to purchase BTC overseas. Such activities bring capital control issues with yuan deposits leaving the country.
Indeed, one of the objections raised by China to Facebook’s proposed Libra cryptocurrency project is the potential impact on its capital control efforts. Some countries in Europe, such as Germany and France, say Libra could have troubling implications for the monetary sovereignty of nations.
There has been talk for some time of the People’s Bank of China (PBoC) creating a digital yuan currency. Some commentators suggest that such a move even presents greater prominence following the Libra announcement.
China already has a well-developed electronic payment ecosystem with the likes of Alipay and WeChat dominating the scene. The coming of a digital yuan is seen by some as an effort by the government to prevent the penetration of cryptocurrencies into the space.
Cointelegraph asked Utrust’s Castro about the potential impact of Alipay’s announcement distancing itself from Bitcoin trading on the future of crypto payments in China. According to Castro, Alipay’s stance is not surprising given what it has said in the past, adding:
“The advent of an e-Yuan digital currency, natively developed in China could help shape its strategic stance going forward. Competition from Libra and other private initiatives can undoubtedly act as a catalyst that accelerates this process.”
As reported by Cointelegraph, there is still no official consensus on the exact release date for the proposed digital yuan currency. Back in August, reports emerged that the PBoC was ready to roll out the central bank digital currency, or CBDC. However, conflicting revelations emerged a month later saying the central bank still required more time to study the pros and cons.
China’s proposed digital currency coupled with Facebook’s foray into the market has also reportedly spooked several key actors within the European Union. In an op-ed in the Financial Times, Bruno Le Maire, France’s finance minister, urged the EU to consider creating its own digital currency. According to Le Maire:
“We [the European Central Bank] should consider the creation of central banks’ own digital currencies, in the medium to long term. We cannot let China be the only player in this field. Our independence is at stake.”
Le Maire’s aversion to the involvement of private institutions in global monetary affairs echoes some of the sentiments the Utrust co-founder shared with Cointelegraph. During the interview, Castro highlighted the still-prevailing negative rhetoric surrounding the industry, stating, “There are many challenges still ahead, namely the establishment of a good, credible and trustworthy brand reputation for the cryptocurrency ecosystem.”
For now, the likes of Alipay need to maintain a public perception of crypto-aversion, even if private dealings reveal otherwise. Perhaps a time will come when governments will no longer be able to cast the industry in a bad light and cryptocurrencies will usher in the expected global electronic payment revolution.
“I cannot countenance one of a sovereign state’s most powerful tools, monetary policy, falling under the remit of entities not subject to democratic control.”
France has taken a hardline stance on Libra, which continues to face pressure from governments around the world.
Previously, Le Maire announced France as a jurisdiction could not permit its development, due to perceived risks regarding the European Union’s financial structures among other problems.
His latest piece furthers those arguments. Facebook, the logic goes, cannot gain the same trust as the traditional financial system of governments and central banks.
Le Maire concluded:
“France’s position is clear: we want financial innovation to respect the sovereignty of states. Neither political nor monetary sovereignty can be shared with private interests.”
Predictable irony for Bitcoiners
As Cointelegraph recently noted, Bitcoin (BTC) proponents have largely laughed off objections to Libra by politicians.
For Saifedean Ammous in his popular book, “The Bitcoin Standard,” it is in fact governments and central banks that are responsible for the manipulation and destabilization of currencies they now consider under threat.
Divorce from the gold standard beginning in 1914, following Keynesian economics and allowing central banks to intervene in currency performance have all but guaranteed the instability of fiat currency, Ammous argues.
Bitcoin, by contrast, removes such control from centralized authorities altogether.
The deputy governor of Banque De France said that central banks really only have three available options to address cryptocurrencies: ignore, ban or adopt.
Denis Beau, the deputy governor of France’s central bank, Banque De France, recently delivered comments regarding central banks’ approaches to cryptocurrencies.
Establish appropriate cryptocurrency regulations
On Oct. 16, Beau spoke at the Official Monetary and Financial Institutions Forum conference in London, where he discussed the role of cryptocurrency assets in today’s global financial payment system.
Beau stated that the traditional bank-based ecosystem could face significant changes due to the many technological developments, such as blockchain and distributed ledger technologies, further explaining:
“With the emergence of so called crypto-assets […] and so called stablecoins, we may also see new settlement assets develop which may compete against and possibly, according to their promoters, replace commercial and central bank money as settlement assets at the center of our payment systems.”
Beau continues by saying that stablecoins of potentially large size and reach might present unforeseen challenges of “system-wide importance, to competition policy, financial and monetary stability.”
Beau adds that central banks really only have three available options to address cryptocurrencies. The first would be to completely ignore crypto-assets, which would not mitigate any of the potential risks. The second option would be to ban all cryptocurrencies and the third available option, which is the most preferred one in Europe and France according to Beau, is to establish and standardize crypto regulations across the board.
The challenge of standardization
Indeed, the lack of standardization of regulations and procedures in the cryptocurrency and blockchain spaces has been identified as a problem both by regulators and industry players. Big Four professional services firm Deloitte noted the lack of standardization as a major obstacle to blockchain adoption in a report last year. ‘
Monero (XMR) core developer Riccardo Spagni has previously suggested that uneven international regulatory standards will result in a cryptocurrency-related brain drain, as the talent involved in the industry moves to the most beneficial jurisdictions.
Lawmakers in some countries have attempted to get ahead of such an exodus of talent and investment by making friendly regulatory environments within their home jurisdictions. Earlier this year, United States Representative Warren Davidson reintroduced the Token Taxonomy Act — a bill that would exclude cryptocurrencies from classification under U.S. securities laws.
Ledger will provide its asset management system to Estonian cybersecurity-focused crypto exchange Rokkex.
French hardware wallet producer Ledger will provide its asset management system to Estonia-based crypto exchange Rokkex.
Built by Lithuanian cybersecurity and fintech professionals, Rokkex will integrate its trading platform with Ledger’s enterprise wallet management solution Ledger Vault to secure its crypto assets, according to a press release shared with Cointelegraph on Aug. 20.
Lukas Krikstaponis, Rokkex’s co-founder and CEO, said that the platform has successfully tested Ledger’s technology on its platform to date
Demetrios Skalkotos, global head of Ledger Vault, explained:
“Rokkex’s customers expect full transparency and protection from crypto hacks. […] By leveraging Ledger Vault, Rokkex will give investors total control of and instant access to their funds while providing them the peace of mind that their assets are secure, without sacrificing convenience.”
Founded in 2018, Rokkex is a regulated crypto trading platform, reportedly authorized by the Estonian Financial Intelligence Unit to provide crypto wallet and crypto exchange services. Ledger Vault integration comes amid the upcoming Rokkex security token offering, with the presale scheduled for Aug. 26.
According to the press release, Ledger Vault is a multi-authorization governance infrastructure for the management of crypto assets specifically designed for the needs of enterprise and institutional clients such as Rokkex.
As reported, Ledger Vault was first rolled out in May 2018 as a digital asset security tool targeting institutional investors. Ledger subsequently expanded its operations to New York in November 2018, appointing a former Intercontinental Exchange executive as head of global operations.
Recently, Ledger announced that it would be providing its technology to Canadian cryptocurrency broker Voyager Digital.
A cybersecurity firm has discovered a new strain of Monero mining malware, which contains code that hides the miner from Task Manager.
Cybersecurity company Varonis has discovered a new cryptojacking virus, dubbed “Norman,” that aims to mine the cryptocurrency Monero (XMR) and evade detection.
Varonis published a report about Norman on Aug.14. According to the report, Varonis found Norman as one of many cryptojacking viruses deployed in an attack that infected machines at a mid-size company.
Hackers and cybercriminals deploy cryptojacking hardware to use the computing power of unsuspecting users’ machines to mine cryptocurrencies like the privacy oriented coin Monero.
Norman in particular is a crypto miner based on XMRig, which is described in the report as a high-performance miner for Monero cryptocurrency. One of the key features of Norman is that it will close the crypto mining process in response to a user opening up Task Manager. Then, after Task Manager closes, Norman uses a process to relaunch the miner.
The researchers at Varonis concluded that Norman is based on the PHP programming language and is obfuscated by Zend Guard. The researchers also conjectured that Norman comes from a French-speaking country, due to the presence of French variables and functions within the virus’ code.
Additionally, there are French comments within the self-extracting archive (SFX) file. This indicates, according to the report, that Norman’s creator used a French version of WinRAR to create the SFX file.
Another cybersecurity company uncovered an unsettling update to a strain of XMR mining malware last week. Carbon Black discovered that a type of malware called Smominru is now stealing user data alongside its mining operations. The firm believes that the stolen data may be sold by hackers on the dark web. In its report, Carbon Black wrote:
“This discovery indicates a bigger trend of commodity malware evolving to mask a darker purpose and will force a change in the way cybersecurity professionals classify, investigate and protect themselves from threats.”
Europe is gradually tightening the rules for the crypto space. A wave of new regulations are introducing stricter requirements for companies operating in the industry and cryptocurrency users are going to feel the difference in the coming months. The measures stem from the obligation of member states to transpose EU’s Fifth Anti-Money Laundering Directive (AMLD5) into national law by January. Unfortunately, they often go beyond what Brussels wants them to do.
German Regulations Chase Out Crypto Companies Like Bitpay
Germany, the flagship of the European Union, is one of the first to make the changes. New anti-money laundering (AML) regulations entering into force next year will oblige digital asset exchanges as well as providers of crypto payment and custodian services to apply for licenses from the Federal Financial Supervisory Authority (Bafin). They have to do so by the end of 2019, as the new pan-European legislation is supposed to be implemented in January 2020.
Starting from next year, German financial authorities will consider digital coins a financial instrument. And while some welcome the regulatory clarity regarding the status of cryptocurrencies, others think many more aspects need clarification and even look at the new rules as an obstacle to normal business. Members of the local crypto community believe the government is actually hurting the German blockchain industry and sending crypto companies abroad.
A major industry player that evidently needs some time to think about the matter is Bitpay. The payment processor, which facilitates both crypto and fiat transactions, is not providing services to German customers anymore. About a week ago, the platform announced on its website that it doesn’t currently work with merchants or users based in the Federal Republic among countries such as Algeria, Bangladesh, Bolivia, Cambodia, Ecuador, Egypt, Indonesia, Iraq, Kyrgyzstan, Morocco, Nepal, and Vietnam.
The list of supported markets is regularly updated according to Bitpay’s evaluation and understanding of local laws. And the company says it engages with local authorities to fully understand the rules in order to retain compliance and offer businesses the opportunity to accept blockchain payments. But the fact that it has pulled out of Germany at this point, even if it’s only a temporary step, means that new German regulations are already making it harder for crypto companies to operate freely.
Some serious businesses, like the largest food delivery portal in Germany, Lieferando, have been offering bitcoin as a payment option to their customers through cooperation with Bitpay. Members of the country’s crypto community have been warning that the new rules are going to chase other companies out of Germany in search for a more favorable climate in different jurisdictions in Europe or elsewhere.
Prague Tightens Noose on Nascent Crypto Industry
The Bundesrepublik is not the only EU member state taking the road to much stricter standards for the crypto industry. According to reports by local media, the Czech Republic is now working on its own set of rules, further tightening the noose around cryptocurrency users. For example, failure to register with the national Trade Licensing Office will lead to massive fines for service providers in the space.
Again, these measures have been inspired by the latest European AML directive, but the country’s leading business daily wrote last week that they are going to be tougher than the requirements set forth by the EU. In an article on the subject, Hospodářské noviny recently pointed out that the new cryptocurrency regulations will increase oversight on a wider range of companies than mandated by Brussels, jeopardizing the competitiveness of the Czech crypto sector.
Estonia is another EU member that has been tuning its crypto regulations in recent months. The tiny Baltic nation was one of the first on the continent to create favorable conditions for businesses dealing with digital assets and attracted many of them to its jurisdiction. Towards the end of last year, however, regulators in Tallinn took steps to tighten the existing licensing regime. As a result, it’s going to take longer and it will be harder in the future to acquire an Estonian license.
This spring, the finance ministry presented amendments to the country’s anti-money laundering and counterterrorist financing legislation. One of the changes requires Estonian companies to keep their headquarters in the country and entities incorporated abroad now have to maintain a permanent office in the republic. Estonia adopted its Money Laundering and Terrorist Financing Prevention Act in 2017 to transpose the provisions of the Fourth Anti-Money Laundering Directive.
France Introduces Optional Licensing
Other European nations have also taken crypto regulation seriously. Earlier this year, France announced intentions to publish updated rules for the crypto industry. In April, the government in Paris adopted a bill creating the legal framework for service providers in the space and projects conducting initial coin offerings. The law introduces mandatory registration with the French Financial Markets Authority (AMF) for providers of crypto custodian services as well as optional licensing for all service providers including cryptocurrency brokers, dealers and exchange operators.
About the same time, Finland enacted its law regulating crypto service providers like trading platforms, wallet providers and issuers of digital coins. The Act on Virtual Currency Providers entered into force on May 1 after it was approved by the country’s president. The Financial Supervisory Authority (FSA) was tasked with registering and supervising entities that fall into these categories. The new legislation and the introduction of other regulations by the FSA led to changes in the customer verification procedures applied by the peer-to-peer crypto exchange Localbitcoins.
Holland Abolishes Licensing Requirement
Obliging crypto companies to apply for licenses issued by regulators is a step too far and the case with the Dutch AMLD5 legislation demonstrates that. In early July, the Netherlands’ finance minister filed a bill in parliament implementing the directive and amending his country’s Money Laundering and Terrorist Financing Prevention Act. The draft envisaged the introduction of a licensing regime for crypto exchanges and wallet providers.
However, the unnecessary provision regarding licensing was met with a negative reaction from the Dutch Council of State, a body that advises Holland’s parliament on draft legislation prepared by the executive power and provides assessment of bills in terms of compliance with EU law. According to the council, AMLD5 does not offer a choice between licensing and registration, hence the minister’s proposal is not in line with the directive.
In its considerations, the legal portal Lexology reported, the Council of State also notes that the advice of the Dutch Central Bank (DNB) and the Financial Markets Authority (AFM) to introduce a licensing system in order to improve the effectiveness of oversight does not mean such a measure is proportionate, given the burden it imposes on service providers. As a result, the licensing requirement was abolished in the latest version of the law submitted to the Dutch parliament. There’s only a registration requirement, which is in line with EU’s directive and the Council of State’s suggestion.
AMLD5 Must Be Transposed Into National Law by January
The Fifth Anti-Money Laundering Directive was adopted by the Council of the European Union in May 2018 and published in the official journal of the EU on June 19 last year. AMLD5 modifies AMLD4, which was released in 2015. The revision was proposed in the summer of 2016 as part of the European Commission’s Action Plan against terrorism prepared after the terrorist attacks in Paris and Brussels and the Panama Papers scandal.
AMLD5 entered into force on July 9, 2018 and EU member states are obliged to transpose it into their legislation by Jan. 20, 2020. One of its key goals is to extend the scope of anti-money laundering laws to cover crypto exchange platforms and wallet providers. It also contains provisions regarding know your customer (KYC) rules and procedures. The implementation of the new directive is mandatory for EU countries.
In many cases, national laws transposing AMLD5 introduce regulations that are tougher than the directive requires, limiting services that have so far been readily available to the crypto community in Europe. Platforms such as Local.Bitcoin.com offer cryptocurrency users a marketplace where they are free to trade bitcoin cash (BCH) on a peer-to-peer basis and in a secure manner, without the need for KYC.
Why do you think regulators and authorities in EU member states adopt stricter measures than required by the Fifth Anti-Money Laundering Directive? Share your thoughts on the subject in the comments section below.
Images courtesy of Shutterstock.
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Vinnik appears to be a “strategic intellectual resource” following extradition requests from multiple countries and alleged ties to an elite Russian cyber-espionage unit.
On July 25, 2019, United States prosecutors filed a complaint against the defunct cryptocurrency exchange BTC-e and its alleged former operator, Alexander Vinnik. The indictment was filed nearly 24 months after Vinnik was arrested in Greece while on holiday with his family and has followed numerous extradition requests from the U.S., France and Russia that have seen Vinnik’s case appear to morph from an investigation into alleged money laundering to a tug-of-war over a strategic intelligence asset between the U.S. and Russia.
Vinnik’s arrest in July 2017
On July 26, 2017, the U.S. Department of Justice (DOJ) announced that Vinnik had been arrested two days prior in Greece for allegedly taking part in the operations of the shadowy cryptocurrency exchange BTC-e. The Russian citizen, who is now 39 years old, was described as the mastermind behind an international money-laundering scheme that had processed over $4 billion worth of capital flows, including approximately 300,000 Bitcoins (BTC) that had been stolen from now-defunct crypto exchange Mt.Gox.
According to BTC-e’s website, the exchange was located in Bulgaria, though it was subject to the laws of Cyprus, and was based in both Cyprus and the Seychelles. At the time of Vinnik’s arrest, BTC-e was described as “one of the world’s largest and most widely used digital currency exchanges.”
U.S. requests Vinnik’s extradition
The DOJ produced a 21-count indictment for the operation of an “unlicensed money service business, money laundering, and related crimes,” with Chief Don Fort of the U.S. Internal Revenue Service’s Criminal Investigation Division alleging that Vinnik also “stole identities, facilitated drug trafficking, and helped to launder criminal proceeds from syndicates around the world.”
According to the indictment, since the exchange’s inception in 2011, “Vinnik and others developed a customer base for BTC-e that was heavily reliant on criminals, including by not requiring users to validate their identity, obscuring and anonymizing transactions and source of funds, and by lacking any anti-money laundering processes.”
The Financial Crimes Enforcement Network (FinCEN) assessed a $110 million civil money penalty against BTC-e for the alleged willful violation of U.S. Anti-Money Laundering (AML) laws. FinCEN also assessed a $12 million fine against Vinnik for his role in the company’s operations. However, any prison sentence would be imposed only “after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence.”
In an interview with RT during September 2017, Vinnik stated that he did not consider himself to be guilty, rejecting accusations of being BTC-e’s operator. Instead, he claimed to have worked for the exchange for a short period of time. The interview contradicted previous assertions made by BTC-e that Vinnik “was never the head or the employee” of its service.
Russia requests Vinnik’s extradition
On Sept. 19, 2017, roughly two weeks from the date set for his court hearing in Thessaloniki, Greece to determine whether Vinnik would be extradited to the U.S., RT reported that Russia had sent a competing extradition request for the accused BTC-e operator. During the same day, Vinnik agreed to the Russian extradition request, with one of his lawyers, Timofey Musatov, stating:
“Alexander Vinnik was taken out of prison to the prosecutor of Thessaloniki, who introduced him to the demand for his extradition to the Russian Federation for the crimes committed there. Alexander Vinnik agreed with this request, replied that he voluntarily wants to be extradited to Russia.”
The Russian request would see Vinnik face charges for a separate fraud case worth roughly 667,000 Russian rubles (approximately $11,000). By contrast, if extradited to California and convicted, Vinnik would face up to 55 years in prison in the U.S.
On Oct. 2, 2017, Vinnik attended a hearing in Thessaloniki to consider the U.S. extradition request. On Oct. 4, the Greek court ruled in favor of Vinnik’s extradition to the U.S. On the same day, Vinnik’s lawyers moved to appeal the decision. Two days later, Russia’s Foreign Ministry issued a statement criticizing the ruling. It described the verdict as “unjust and a violation of international law,” asserting that legal precedent should indicate that the Russian extradition request should “take priority as Mr. Vinnik is a citizen of Russia.”
On Oct. 10, 2017, Russian Civic Chamber Deputy Secretary Sergey Ordzhonikidze asserted that the court’s decision violated the Russia-Greece legal assistance agreement. He stated, “If a Greek court rules that a Russian national is guilty, the issue must be solved between Russia and Greece.” The following day, the court in Thessaloniki also ruled in favor of the Russian extradition request.
On Dec. 13, 2017, the Greek Supreme Court rejected Vinnik’s appeal to be extradited to Russia, delegating the responsibility to Greece’s Ministry of Justice, Transparency and Human Rights. During January 2018, Vinnik’s lawyer, Musatov, indicated that Vinnik would appeal the ruling with the European Court of Human Rights.
Greek police reveal plot to assassinate Vinnik
During May 2018, Russian media reported that Greek police had uncovered a plan to kill Vinnik, with the plot purportedly tied to Russian criminals who did not want Vinnik to return home to Russia. According to an anonymous source:
“Greek law enforcement received intelligence on plans to prepare an assassination via poisoning with the help of criminals. […] It all began after Vinnik’s extradition to the United States was blocked. There [are] people who are extremely interested in him not coming to Russia. The assassination was ordered by some unknown person from Russia.”
In response to the plot, Vinnik was restricted from receiving any food, water or things from people unknown to him, and in addition to being provided enhanced security, he was prevented from coming into contact with other inmates. Greek police were reportedly made aware of the planned assassination at the start of 2018. However, the plot was not made public for several months to aid investigators.
During the same month, Russia opened a criminal inquiry into confessions penned by Vinnik, with sources allegedly telling Russian media outlet Sputnik that Vinnik wrote four letters to the Russian Interior Ministry between March and May 2018, in which he confessed to “crimes related to financial technologies” and that he was ready to give testimony and aid to Russia in related investigations. According to an anonymous source cited by the Russian media agency:
“Vinnik wrote several confession letters to Russian law enforcement agencies, pleading guilty to crimes related to financial technologies. The Russian Interior Ministry’s investigative department has opened a criminal probe into several unknowns.”
On May 15, 2018, Russian media reported that U.S. intelligence services had attempted to persuade Vinnik to accept a plea bargain that would see him receive a reduced prison sentence in exchange for admitting guilt and agreeing to extradition to the U.S. Vinnik reportedly rejected the offer.
Russia files new extradition request
One week later, the Russian Interior Ministry placed Vinnik on the international wanted list for embezzling 750 million Russian rubles (approximately $11.5 million). The new criminal case was launched on May 21, 2018, with the Russian Prosecutor General’s Office filing a new extradition request with Greece’s Ministry of Justice shortly thereafter.
On May 26, 2018, Vinnik’s lawyer, Musatov, tied the assassination plot to Vinnik’s knowledge of Russian criminal activity and Vinnik’s willingness to assist Russia in its investigations. He stated:
“Alexander has told ‘I know too much and a lot of people in Russia would be embarrassed if I am back home.’ It is likely that this attempted murder has been prepared taking into account the opportunity of his return to the country.”
France files extradition request for Vinnik
During June 2018, Vinnik’s case was further complicated by an extradition request filed by France. According to the Associated Press, the request sought to trial Vinnik for alleged crimes like money laundering, extortion, cybercrime and money laundering and allegedly defrauding French citizens between 2016 and 2018.
Another one of Vinnik’s lawyers, Ilias Spyrliadis, emphasized that the “legal issue that will require our attention is which [extradition request] will have priority, as they are based on two international arrest warrants and one European arrest warrant.” While the Greece’s Ministry of Justice would have the final say regarding the U.S. and Russian extradition requests, Greece’s Supreme Court would have final jurisdiction over the French request due to it being a European warrant.
During the first week of July 2018, Musatov claimed that the Thessaloniki court had attempted to determine whether Vinnik would be extradited behind closed doors. Musatov told Russian media that the court was attempting to extradite Vinnik through an expedited procedure. On July 13, 2018, the Thessaloniki court ruled in favor of the French request to take custody of the accused BTC-e operator. Vinnik immediately appealed the ruling, which would be heard by Greece’s Supreme Court later in the year.
Mueller investigation ties BTC-e to Russian hackers
During July 2018, the stakes surrounding Vinnik’s case appeared to escalate, with the DOJ special counsel investigating alleged Russian meddling during the 2016 U.S. presidential election, Robert Mueller, alleging that Russian targeting of the Democratic National Committee had funded its operation using capital that had flowed through BTC-e.
On July 24, blockchain analytics firm Elliptic published a report asserting that funds had flowed through BTC-e via “Fancy Bear,” a cyber-espionage group reportedly associated with top Russian intelligence agency, the Main Directorate of the General Staff of the Armed Forces of the Russian Federation (GRU). Elliptic’s chief data officer, Tom Robinson, stated:
“There was a strong link between much of the funds allegedly used by the Fancy Bear group and BTC-e. What I can’t say for certain is whether Fancy Bear obtained them directly from BTC-e, or whether there was an intermediary.”
The link between Fancy Bear and BTC-e was made public during 2017, with Elliptic identifying that Fancy Wallet controlled a wallet containing around $100,000 that had transferred funds to a BTC-e wallet.
Greek courts rule in favor of new Russian extradition request, launches criminal probe
On July 30, 2018, Russian media reported that the Thessaloniki court had ruled in favor of Vinnik being extradited to Russia, following the consideration of a new request filed in May of that year. Greece’s Supreme Court also supported the Russian extradition request in a preliminary hearing on Sep. 4. However, the court was scheduled to review its ruling in favor of the French extradition request within two weeks of the ruling.
At the start of October 2018, the prosecutor’s office of the city of Thessaloniki launched a criminal investigation into Vinnik. Following a preliminary investigation, the court was set to formally determine whether a criminal case would be pursued. Vinnik’s lawyer, Musatov, stated: “In accordance with the Greek legislation, a preliminary investigation will take place, followed by a decision whether a criminal case should be initiated.”
Vinnik goes on hunger strike
On Nov. 19, 2018, another lawyer of Vinnik, Zoe Konstantopoulou, accused the Greek Supreme Court of “grossly violating” Vinnik’s rights, asserting that Vinnik was not provided with an official translation of the documentation pertaining to the French extradition request prior to the court’s review of the Thessaloniki court’s decision to extradite Vinnik to France that had been scheduled for the same day. Konstantopoulou added the documents received by Vinnik did not have official seals or signatures.
Less than one week later, Vinnik’s lawyer, Musatov, announced that Vinnik had gone on a hunger strike to protest the Greek Supreme Court’s proceedings, following the court’s decision to postpone its review of the Thessaloniki court’s ruling until Nov. 29, 2018. Musatov stated:
“Alexander Vinnik decided to go on a hunger strike because he realized he was stripped of the right for defense in France and, consequently, in Greece. […] If there is no fair trial, he will inevitably be deported to the United States through France, where he will get something close to a life sentence, which equals death.”
Greek Supreme Court upholds French extradition request
On Dec. 19, 2018, the Supreme Court of Greece upheld the Thessaloniki court’s ruling in favor of Vinnik’s extradition to France. The conflicting rulings again relegated the responsibility to determine Vinnik’s fate to Greece’s Ministry of Justice. During the hearing, Vinnik announced that he will only stop his hunger strike if extradited to Russia.
On Feb. 21, 2019, Russian human rights ombudswoman Tatiana Moskalkova announced that Vinnik had stopped his 80-day hunger strike. Four days later, Moskalkova petitioned the Greek Ministry of Justice to request Vinnik’s extradition to Russia. The ombudswoman estimated Vinnik had lost 30% of his body weight, describing him as being “on the verge of death.” She wrote:
“I appeal to you, Mr. Minister, with a request to extradite Alexander Vinnik, a citizen of the Russian Federation, against whom criminal proceedings have been instituted on the territory of the Russian Federation, in difficult marital status and state of health, to the Russian Federation for further investigation into his case.”
Moskalkova also wrote to the president of the International Committee of the Red Cross, Peter Maurer, Greek Minister of Health Andreas Xanthos, and Greek ombudsman Andreas Pottakis, requesting that Vinnik be provided with medical assistance after ceasing his hunger strike. The Ombudswoman asserted that Vinnik’s wife was seriously ill after being diagnosed with brain cancer, with Vinnik’s imprisonment threatening to render two minor children orphans.
On Feb. 28, 2019, Vinnik was admitted to a specialist clinic for treatment following his hunger strike. At a press conference, Vinnik’s lawyer, Konstantopoulou, stated that Vinnik was “a detainee without charges, without a sentence and without rights.” Konstantopoulou screened a video showing a gaunt-looking Vinnik, whom she described as being in an “exceptionally critical state of health.”
“Alexander Vinnik has been in this procedure of torturous waiting for the past 19 months […] without the justice minister answering him on whether he will hear him and what his decision will be.”
Russian commissioner for human rights petitions U.N. for Vinnik’s release
On March 5, 2019, ombudswoman Moskalkova met with United Nations High Commissioner for Human Rights Michelle Bachelet to request her assistance in seeking Vinnik’s extradition back to Russia. Emphasizing the deteriorating health of both Vinnik and his wife, Moskalkova stated: “Given the exceptional humanitarian situation, I would ask for help to extradite him to Russia so that he is closer to his family.”
Two weeks later, Vinnik lodged an appeal with a court in the Greek city of Piraeus requesting his release or extradition to Russia based on humanitarian reasons. Due to the condition of his health, Vinnik was transported to the court via ambulance. Vinnik’s lawyers also criticized the Greek judicial system for detaining him for more than the maximum 18 months permitted for pretrial detention. On April 11, 2019, the Piraeus court rejected the request. On July 11, 2019, the Thessaloniki court extended the period of Vinnik’s detention by six months.
$100 million civil complaint filed in the U.S. against BTC-e and Vinnik
On July 25, 2019, the U.S. prosecutors filed a complaint in the Northern District of California, seeking to recover civil money penalties for violations of the Bank Secrecy Act. The court asserted that it exercises jurisdiction due to BTC-e and Vinnik transacting within the Northern District of California.
The court is seeking to recover civil money penalties of $12 million from Vinnik and $88.6 million from BTC-e. Vinnik faces 17 counts of money laundering and two counts of engaging in unlawful monetary transactions, while both he and BTC-e each face one count of conspiracy to commit money laundering and one count of operating an unlawful money services business.
The indictment asserts that BTC-e “made no effort to register with FinCEN” or “maintain any elements of an AML program” despite more than 21,000 BTC transactions worth at least $296 million being conducted by U.S.-based users on the exchange.
The U.S. Securities and Exchange Commission (SEC) could learn from other countries when finalizing its own crypto regulation, Commissioner Hester Peirce explains. While highlighting peculiar and notable features of the U.S. system, the commissioner emphasizes cross-border considerations, detailing applicable crypto frameworks of several countries.
SEC Commissioner Hester Peirce explained last week her agency’s approach to regulating crypto assets and how the U.S. could draw from other countries’ regulatory frameworks in setting its own policies. Her speech was given in Singapore at the “SUSS Convergence Forum: Inclusive Blockchain, Finance, and Emerging Technologies,” hosted by Singapore University of Social Sciences (SUSS).
Among the topics she discussed was cross-border crypto regulation. Peirce, known in the crypto community as Crypto Mom, suggested that “The U.S. SEC can look to our counterparts overseas for ideas in untangling some of our most difficult legal and policy questions in this area.”
“Because so much of the activity is taking place outside the United States, we have to think about our regulation with a sensitivity for cross-border considerations, cooperation, and what I call co-learning.” Peirce elaborated:
Crypto regulation affords international regulators the opportunity to learn from one another … The resulting regulatory competition will allow us to see what works well and what does not work at all.
Crypto Mom anticipates several obstacles. Since “countries all over the world are still in the early stages of determining how and whether to regulate crypto,” she foresees uncertainties regarding the various rules in those countries. The commissioner further claims that it is difficult to pin down the domicile of an enterprise in the niche due to the global nature of cryptocurrency, adding that determining the “the precise nature — currency, commodity, security, derivative — of many of the assets at issue” may also be challenging.
Bermuda’s Custody Framework
The first country Peirce mentioned the U.S. could learn from was Bermuda, noting that it is one of the only jurisdictions to address crypto custody in depth. Not only does the island have a regulatory regime for crypto businesses, but it has also released draft guidance for crypto custodial services. “It addresses such difficulties as how to store private keys for hot and cold storage while preserving necessary liquidity, what safeguards should be in place to prevent unauthorized access, and how to frame internal audit of transactions to ensure their integrity,” the commissioner described.
“I look forward, for example, to learning more about Bermuda’s custody framework to see if we can draw from it as we think about how our custody rules apply in the crypto context,” she opined, stating:
These ‘laboratories of regulation’ operated by our international counterparts have me thinking about possible paths for the U.S. to become more welcoming of crypto innovation.
Singapore’s Security Token Approach
Singapore has been at the forefront of much crypto-related activity, which may be attributable to the clarity it has offered to issuers in this market, Commissioner Peirce remarked, noting:
Motivated in part by the approach taken by Singapore, which does not treat every token offering as a securities offering, I would support the creation of a non-exclusive safe harbor for the offer and sale of certain tokens.
Peirce has previously suggested that the U.S. SEC should take a safe harbor approach to crypto assets. “A token offering made in reliance on the safe harbor would have to comply with certain requirements — for example, providing clear disclosure of the assets’ functionality, including the mechanisms for changing holders’ rights and explaining how funds are to be used — before the issuer could use the safe harbor,” she clarified. “The relief could be time-limited to guard against reliance on the safe harbor by projects without a workable plan to build operational networks.” Crypto Mom detailed:
The requirements would be tailored to the needs of purchasers [of] digital assets in a way that our current regulations are not. Trading to get tokens in and out of the hands of developers and users would be permitted.
Hong Kong’s Licensing and Sandbox Regime
Commissioner Peirce also talked about Hong Kong’s crypto regulatory framework. Its Securities and Futures Commission (SFC) has released guidance stating that security tokens are “likely to be ‘securities,’” which Peirce said is similar to the approach the SEC has taken in the U.S.
Hong Kong, however, also requires funds with crypto assets exceeding 10% of aggregate assets to be licensed by the SFC, and has issued a circular which places crypto trading platforms within a regulatory sandbox, Peirce noted.
According to the Financial Stability Board’s directory of crypto asset regulators, the SFC and Hong Kong Monetary Authority supervise crypto activities in the country. The former regulates crypto assets that fall within the definition of securities, while the latter covers crypto assets in investment products and wealth management services.
Thailand, Japan, Malta, Switzerland, and France
In addition to the aforementioned countries, Peirce mentioned five others in her speech — Japan, Thailand, Malta, Switzerland, and France.
Japan is significantly ahead of other countries when it comes to crypto regulation, having legalized cryptocurrency as a means of payment in April 2017. Crypto exchanges are required to register with the country’s Financial Services Agency. So far, 19 have been approved but over 110 operators have expressed interest in entering the space. The country recently “passed legislation to bring securities offerings of digital assets within its existing legal framework for securities offerings,” Peirce added.
Another Southeast Asian country Peirce mentioned was Thailand, which has adopted a unique framework for regulating crypto assets, classifying them as either cryptocurrency or digital tokens. Crypto exchanges, brokers, dealers, and initial coin offering (ICO) portals must be licensed and comply with regulatory requirements. So far, five crypto exchanges and three ICO portals have been licensed.
A number of European countries have also acted early to regulate crypto assets. The commissioner mentioned Malta, Switzerland, and France. Malta passed legislation last year that separates digital assets into unregulated virtual tokens and regulated virtual financial assets. Switzerland provided preliminary guidance for ICOs in 2017 and issued more detailed guidance last year. France recently announced a new licensing regime for ICOs and crypto service providers.
Regardless of the kind of regulation the SEC decides on, Peirce believes that “Continued communication among the world’s financial regulators will be important,” reiterating:
We also can continue to learn from one another to fill the gaps in our own regulation and borrow, when appropriate, from frameworks developed and tested in other places.
Notable Features of US Regulatory Approach
The commissioner proceeded to point out some notable features of the approach the U.S. is taking to regulate crypto assets. Emphasizing that the SEC regulates only securities, with other regulators responsible for other areas such as commodities and currencies, the commissioner commented:
One of the peculiarities of the U.S. system is the sheer number of regulators. Not only do we have the state-federal allocation of responsibility that I just mentioned, but we have multiple federal financial regulators.
She added, “Another notable feature of U.S. law is that the definition of what constitutes a security is a bit nebulous,” admitting that “Unlike many other countries, we do not have an exclusive list of what counts as a ‘security.’”
To determine whether something is a security in the U.S., the Howey test is used. “Under Howey, something — including something that is a digital asset — is a security if it involves an investment in a common enterprise with an expectation of profits derived solely through the efforts of others,” the commissioner conveyed.
SEC’s Efforts Now and Going Forward
To understand and regulate crypto assets, the SEC has established a strategic hub called Finhub for fintech and innovation to coordinate the commission’s approach to digital assets. Its staff hosted a fintech forum in May and has “met with hundreds of market participants to hear what they are working on and where they need regulatory clarity,” Peirce said.
Last month, the agency qualified two token offerings under Regulation A+ and issued two no-action letters. The Financial Industry Regulatory Authority (FINRA) also recently approved applications for two non-custodial digital asset broker-dealers.
Moreover, the commission has issued a couple of guidance notes. One was in April which outlines a framework for determining whether a digital asset may be a security. The other, jointly issued with FINRA last month, addresses issues such as how digital asset securities can be custodied and how broker-dealers holding them can comply with other regulatory requirements.
Peirce emphasized that she “would like to see more focused momentum” at the SEC towards finalizing crypto regulation so that the U.S. will not fall behind other countries in attracting crypto businesses, concluding:
While I believe a single global regulatory framework would be unwise, regulators can create a healthy environment for this new market to grow by sharing information that will smooth cross-border transactions.
Do you think the US should adopt some of the crypto frameworks from other countries? Let us know in the comments section below.
Images courtesy of Shutterstock and the SEC.
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