Tag: crypto market

Crypto Regulations in 2019: What to Expect?

Bearing in mind the sensitiveness and volatility of the crypto market that we are witnessing right now, it can surely be said that next year regulators will stop being undetermined about crypto. Many countries, which have been implementing ambiguous and non-transparent policies so far, next year will likely take a holistic view of crypto.  So, what should we expect of 2019? Generally, governments will place due emphasis on two areas: taxation and investor protection. For the record, several countries like Poland and Japan already formulated crypto tax policies in 2018. In general, crypto regulations will become more widespread and harmonised. As you’ve already guessed, today we’ll talk about crypto and ICO regulations and how lawmakers are going to surprise the community in 2019.  Europe In October 2018, European regulators have explained that specific rules for crypto and ICO are on the way. Steven Maijoor, chair of the European Securities and Markets Authority (ESMA), said he was examining how ICOs fit into existing regulation and how they affect competition in the wider capital raising sector.  In addition, ESMA released a 2019 Annual Work Programme, which included a primary objective for the upcoming year:  “Achieve a coordinated approach to the regulation and supervisory treatment of new or innovative financial activities and provide advice to present to the EU institutions, market participants or consumers" Interestingly, the plans were revealed according to which ESMA is going to invest more than €1 million in order to develop a framework for overseeing cryptocurrencies and other fintech activities in 2019. However, in August 2018, the European Parliament’s Committee on Economic and Monetary Affairs published a proposal to impose new laws for ICOs in order to protect "consumers who are at risk from fraudulent activity taking place in this market". Speaking of taxation, French government recently claimed that it planned to boost its tax revenues by providing a regulatory cover for ICOs. It appointed a new tax force to draft regulations for ICO projects launching in the country. China  Turbulent approaches towards crypto have made China a hot topic for crypto community so far. However, in 2019 we should expect Chinese regulators to follow Japanese-like policies. An official from the Ministry of Industry and Information Technology in China recently confirmed that the authorities were working towards setting up national crypto-standards which would make decentralization and blockchain technology flourish. Li Ming, who is the director of the Blockchain Research Office at the standards institute under the Chinese IT Ministry, also revealed that a number of relevant government departments would be working toward establishing a nationwide ‘Blockchain and Distributed Accounting Technology Standardization Committee’. Malaysia  Malaysia is considered to be attractive for foreign investments as it has a highly diversified and robust economy. The country allows Bitcoin mining and trading with no restrictions.  However, the Central Bank of Malaysia recently issued a statement that Bitcoin is not considered to be legal tender and its users are poorly protected from fraudulent schemes and operational risks. The year 2019 is going to boost crypto development in Malaysian ‘hub’. According to local media, the government will enact regulations for cryptocurrency and ICOs in Q1 2019. This move is explained as a “part of the Securities Commission’s efforts to facilitate alternative fundraising avenues and new investment asset classes”. Looks like crypto investment flows are inevitable for Malaysia in the upcoming year.  World  Should we expect the international taxation in 2019? That is the question we all ask to ourselves. And it’s especially relevant in the context of recent meeting of G20 group leaders. In early December, they gathered in Buenos Aires to discuss global issues. One of the topics covered was cryptocurrency and how to regulate it in the best manner. According to the report, it is stated that G20 leaders are seeking to “build a taxation system for cross-border electronic services“. However, that’s controversial. While many are preparing their business for new taxes, others don’t even see any innuendo related to crypto. Gary McFarlane, a crypto analyst, thinks that it's not certain that the G20 focuses on crypto specifically:   "The G20 final communiqué doesn’t really add anything new. The statement in paragraph 26 of the communiqué talks about “the impacts of the digitalization of the economy on the international tax system”, but I think that has been misinterpreted by some as a call to tax cross-border transactions when in fact it is more a reference to finding solutions to global Big Tech corporations declaring their profits in low-tax jurisdictions". Most likely, in 2019 cryptocurrency will be losing one of its natural features – users’ anonymity. The pervasive AML and KYC procedures will be carried out in order to prevent money laundering, terrorist funding, exit scams, etc. However, if we want to operate in a stable and mature environment, we all have to make sacrifices. 

Articles/December 20, 2018

Iran: Crypto Comes to the Fore as ‘Economic Siege’ is Gaining Momentum

What do we know about the Iranian economy? Having survived through turbulent recent decades, Iran is currently facing an unprecedentedly isolated economic situation. Following the US withdrawal from the Joint Comprehensive Plan of Action agreement and the subsequent announcement of new sanctions on November 4, the Iranian rial (national currency) hit a historic low of 138,000 against the US dollar. According to recent calculations, the rial is expected to lose 57 percent of its value by the end of this year due to hyperinflation. Today we are going to examine how the current economic situation affects the cryptocurrency market and crypto-related businesses within the country. Let’s get started.  Firstly, let’s back up a few months. Facing a new set of US-led sanctions, the nation’s financial authorities came up with an ingenious idea – to create their own state-backed cryptocurrency in order to circumvent heavy sanctions. The Central Bank of Iran revealed details of the "indigenous cryptocurrency", stating that the national cryptocurrency could be a solution for the country that’s cut off from international payments networks. Azari Jahromi, the Iranian IT Minister who has frequently made clear his crypto-supportive intentions, told local media:  “A new attitude that has been created in the government is that the digital money does not necessarily pose a security threat and can create opportunities for the country” Additionally, at the beginning of September, the Secretary of Iran's Supreme Cyberspace Council revealed that various ministries of the country’s government have accepted crypto mining as a legitimate industry. IBENA, an Iranian news agency affiliated with the country's central bank, reported as follows: “Secretary of Iran’s Supreme Council of Cyberspace stressed that cryptocurrencies mining like Bitcoin has been accepted as an industry in the government and all related organizations to the mining such as Ministry of Communications and Information Technology, Central Bank, Ministry of Industry, Mining and Trade, Ministry of Energy, as well as Ministry of Economic Affairs and Finance have agreed with it, but the final policy for legislating it hasn’t been declared yet” The Cyberspace Council’s secretary Abolhassan Firoozabadi however, stated that there was not currently an appropriate legal framework for crypto mining. The Iranian National Cyberspace Center has since begun the development of a platform for crypto mining regulation. Let’s stop and make an intermediate conclusion here. It can safely be said that until November, Iran’s crypto market was not flourishing, but stable. This in itself is quite impressive. In the context of the threat of economic sanctions and the lack of financial recognition, the crypto market was one of few sectors in the country that was evolving.  It was, until the US sanctions entered into the force. These sanctions are wide-ranging in their impact and will prevent many from using any of Iran’s major resources, including oil, shipping, and gas market. The financial sector was also affected, which in turn led many crypto-related companies to quit the country. One of the first was Binance, the world’s biggest cryptoasset exchange. The company stated that it will continue complying with US regulations. Recently it emailed the following message to all Binance users from Iran: “If you have an account with Binance and fall into that [sanctions] category, please withdraw your assets from Binance as soon as possible” However, Nima Dehqan - an Iranian researcher - believes that such a move won’t have a dramatic impact on Iran’s crypto community because Iranian users are mostly ‘HODLers’ and miners, not traders.  At the beginning of November the Belgium-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) announced it was cutting off Iran from its financial messaging system.  The disconnection of Iranian banks from SWIFT has put the country in a tough spot, as it is not able to conduct banking services outside its borders. So, what moves should we expect from the Iranian government? Now it seems that there are no traditional economic activities Iran can undertake to evade its current issues. The only way out therefore is not to consider launching a national crypto, but to actually do it. The sooner Iran’s government realises that crypto has become a necessity, the faster the economic life in the country will be right back on track. Photo by Arman Taherian on Unsplash

Articles/November 22, 2018

The Holy Trinity: What Do the ‘Big Boys’ Think of Crypto?

For almost 10 years now, cryptocurrency has been one of the most discussed and controversial buzzwords in the financial sector. While some governments see great potential, even perhaps foreseeing an era of ‘blockchainization’, others are afraid of losing the ‘levers of influence’ on the traditional financial paradigms in their region and around the globe.  Having analysed and reviewed how the big players - including South Korea, the US and China - regulate crypto, we can conclude that all of these jurisdictions are adopting a broadly moderate or moderate-aggressive approach. Today we’ll take a closer look at each of these approaches, as well as the latest regulatory and legal developments in each country mentioned above. So, sit back and stock up on popcorn. The show has just begun! United States According to Cryptocompare, the US handles the second largest volume of Bitcoin transactions (roughly 26%). Another indicator of the US' power and relevance in the space is the number of crypto exchanges based in the country. However cryptocurrency is still not legal tender, as the Financial Crimes Enforcement Network’s guidance states. Right now, the US is losing the ‘crypto war’ due to the ambiguous nature of its legislation. While the United States House of Representatives has gone so far as to say that cryptocurrencies are the ‘future of money’, the same commitment has only been witnessed in some states and by a handful of regulators. For instance, the Securities and Exchange Commission (SEC) considers digital currency to be a security, while the Commodity Futures Trading Commission says crypto is a commodity. Such ambiguities serve to demonstrate, once again, that the US financial sector is overregulated and cumbersome. That’s why the majority of Americans aren't likely to benefit from the full integration of cryptocurrency into the financial system, with its superior simplicity and transparency, in short-term.  Nevertheless, the seeds of crypto development have been sown by the SEC and some local regulators. Last year, following the SEC’s move to regulate ICOs, the value of cryptocurrencies went up, as institutional investors gained more confidence in coin trading. The involvement of the SEC brought legitimacy to crypto trading, giving confidence to both existing and potential traders. Plus, several states have already passed supportive laws related to crypto. These are Arizona (recognition of smart contracts), Vermont (recognition of blockchain) and Delaware (pending initiative authorizing registration of shares of Delaware companies in blockchain-enabled form). South Korea  Lauded as one of the most technologically advanced countries in the world, South Korea has been pioneering within the ‘crypto revolution’. However, the country is currently perhaps most famous for its flirtation with the idea of banning cryptocurrencies and ICOs. To prove how influential the South Korean market is, we can cite the case of the ‘January collapse’.  On January 11 2018, South Korea - which had the world’s third-biggest crypto market at that time - announced plans to ban crypto trading altogether. Just a few minutes after the announcement, around $106 billion was wiped off the crypto market as Koreans withdrew from trading. The move by Korean authorities led to a massive worldwide sell-off throughout the month, sending the value of the top cryptocurrencies to a 2-month low. Despite despising crypto, the South Korean government is actually an ‘avid supporter’ of decentralized technologies. According to recent news, this summer the country pushed through accommodative legislations that would imply both tax reductions for new growth engine investment and the easing of requirements for new technology support, including blockchain technology investment support. China Here's an interesting observation: China is always associated with the color red. Its massive territory, painted in red on geographical maps, is the first thing to jump out at you. The same thing is true of ‘crypto maps’ too. China is famous for saying a hard ‘NO’ to crypto and ICOs.  However, China was actually titled the ‘King of Crypto’ in 2015-2016. The country used to be responsible for a vast majority of the global Bitcoin trade volume (95%) and for controlling about two-thirds of mining operations worldwide.  But then everything went downhill. It all started in the beginning of 2017 when the People’s Bank of China announced the investigation of the four major coin exchanges in the country. Following the announcement, mining faced serious crackdowns in the country, while the price of cryptocurrencies fell dramatically in value. Later in September, the Chinese government announced regulations that implied a ban of ICOs and crypto exchanges. New regulations affected every sphere of crypto, including P2P sales, over-the-counter markets, crypto-to-fiat exchanges, foreign crypto exchanges and ICO websites. Now the Chinese crypto community is expecting new legislation to hit the country. These expectations are possibly being driven by the newly elected governor of the People’s Bank of China, Yi Gang, who expressed a positive attitude towards blockchain and cryptocurrencies. Meanwhile, PBOC’s Institute of International Finance has released a report identifying cryptocurrencies as a top priority for 2018. This release served as a wake-up call for the community, and has breathed new life into the hope that China will come back into the crypto-friendly camp of nations.   Considering current levels of geopolitical uncertainty around the the world and the alarm expressed by some of the largest nations in relation to crypto, only one thing is clear just now: crypto is a priceless, unique, groundbreaking technology. It was once scarcely imaginable that the ‘empty-shell’ technology – as it has been called by naysayers - could create so much hype in the corridors of the world's most important institutions. Yet here we are.

Articles/October 25, 2018