Tag: regulation

Will 2019 be the year of STOs?*

It is past the middle of January. Time of the World Economic Forum in Davos, time of skiing, time of January blues and Siberian frosts, time of sitting by the fireplace with a good book and a glass of hot mulled wine… or, on the contrary, time of meditating under the shade of palm trees somewhere in Vietnam…  Hope you have had great winter holidays, because after the November market meltdown when bitcoin lost 36% of its value, we all needed some relaxation. But now it is time to look at the crypto market with a sober glance. June 2018 was the last month when the ICO market demonstrated stellar performance, and investors fueled more than $5.8 billion. For the rest of the year the ICO projects raised from $450 million to $1 billion per month. "The crypto gold rush has left behind too many casualties; many non-accredited investors and speculators were victims to really bad ICO punts. So many ICO projects performed so bad, exasperated the recent bearish market conditions, with some even reporting over 99% losses from their all-time high prices”Andrei PopescuCo-Founder of COSS.IO   “And we have warned you!” say regulators to thousands of investors who are nursing their wounds. To be fair, they did warn. ICOs are "vulnerable to money laundering and terrorist financing risks due to the anonymous nature of the transactions, and the ease with which large sums of monies may be raise in a short period of time," said the Monetary Authority of Singapore (MAS) as early as in August 2017. Still, so far regulators have done little to protect companies that deal with crypto assets and institutional investors that are ready to invest in them. An investigation carried out by the WSJ shows that $88.6 million has been laundered through 46 crypto exchanges since 2016. Few of the market participants noticed an event that may have far-reaching consequences for all of them. In November 2018, during the market meltdown, the first security token exchange, OpenFinance Network, was launched. It listed two of the earliest security tokens: Blockchain Capital (BCAP) and SpiceVC.  This launch marked the beginning of the new era of the security token industry. STOs are often defined by the formula: “ICO + Legal Compliance = STO” The basic difference between ICO tokens and security tokens is that the latter represent investment contracts. Paradoxically, but the very idea of such tool might be proposed by the SEC chairman Jay Clayton who said once: “I believe every ICO I’ve seen is a security”. Security tokens are digital assets that are subject to federal and global security regulations.  "I’m confident that STOs will be hugely popular by 2019 as they offer a familiar path for traditional investors to enter the space and an array of benefits compared to both the traditional finance sector and ICOs"Andrei PopescuCo-Founder of COSS.IO   Strangely enough, but STOs might be a by-product of the insufficient regulation. STO sales give some legal rights to investors. If an STO fails, its investors will be able to get some money back, because the issuer has some legal obligations. Besides, security tokens are traded on compliant trading platforms only. “With more than $256 trillion in real-world assets that have yet to be tokenized, STOs present a real alternative for companies and investors. Hosting an IPO is undoubtedly expensive. With an STO, companies can allow for investment through tokenization, which significantly cuts admin and legal costs while keeping the company and the process transparent. With improved regulations, STOs will become the more desirable choice for investors as increasing amounts of VCs and Family Offices eye-up the space, hoping to capitalize on the distribution power of ICOs with a legal, secure method of investing.”Andrei PopescuCo-Founder of COSS.IO   To put it differently, market participants decided to take the matter in their own hands, while regulators are trying to find a way to tackle money laundering in the crypto sector.  While the industry is experiencing barbarian growth, self-regulation takes the major role in terms of customer protection, and that’s risky, says Johnny Lyu, KuCoin VP. “After all it will be the market that’s the most powerful. And where there is a market, there are rules, and regulators. There is nothing wrong about regulations, it is to clean up the market.” In October, 2018 the Paris-based Financial Action Task Force (the global watchdog for money laundering) promised to set up its first rules on oversight of cryptocurrencies by June, 2019. “There is an urgent need for all countries to take coordinated action to prevent the use of virtual assets for crime and terrorism”, FATF says. Meanwhile, at least one country that has already legalized STOs. It is Uzbekistan. In 2018 Uzbekistan President Shavkat Mirziyoyev created Digital Trust fund to invest in blockchain-related startups and research and development. Now the Digital Trust is looking at STO and starting to build the framework for it, said Bobir Akilkhanov, its investment director. The Cryptonomos Blog wrote about the three Middle Asian countries (Kazakhstan, Uzbekistan and Kyrgystan) as they attempt to position themselves at the forefront of blockchain technology adoption.     * This article is based on the exclusive interviews with top-managers of several crypto exchanges. Cryptonomos is most grateful to Andrei Popescu, Co-Founder of COSS.IO; Johnny Lyu, KuCoin VP; Srdjan Mahmutovich, Kriptomat CEO; Jason Wang, CHAOEX CEO; Max Grain, Product Management Executive of Bitlish, and Alex Strześniewski, Business Development Director at CoinDeal.

Articles/January 22, 2019

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

Crypto Taxation around the World: from Germany to Japan

Do you pay taxes for using crypto? Or let’s better rephrase the question: do you know that you must or must not pay taxes for using crypto in your country?  If you do – and we are confident you do, still, this article is something you should not skip. Taxation is becoming one of the principal issues, when it comes to cryptocurrencies, as every country differs in its policies and approaches. Today we’ll examine which countries could be lauded as ‘tax havens’ for crypto owners and in which ones you will be taxed for a full ride. Buckle up, ladies and gentlemen, our trip across taxations is in high gear. Germany  Federal ministry of finance Germany Source:  Federal Ministry of Finance, photo: Ilja C. Hendel Germany is positioning itself as one of those European countries that have business-friendly tax policies. It has become a true shelter for both mid-term and long-term crypto investors. Here trading crypto is considered as a private sale under the rule 23 EStG which implies tax-free benefits. According to this document, trading cryptocurrencies is totally tax exempted, provided that your capital gains are not more than 600 EUR. The punch line is that in Germany digital currencies are not considered as a commodity, a stock, or any kind of currency. Instead, since 2013 they are recognised by the German Finance Ministry as private money in a way that’s similar to foreign currency. Interestingly, profits made through any kind of operation with crypto (e.g. mining, trading, exchanging) are subject to a capital gains tax (which is 25-28 percent, by the way) including a solidarity surcharge. According to the German Income Tax Act, if the assets are held for more than one year, they become tax exempt. Poland  President of Poland Andrzej Duda Source: Profil Prezydenta RP Andrzeja Dudy   A legal framework in Poland has been dramatically changing so far. In April 2018, the government decided to tax crypto investors on each and every crypto transaction they were involved in. The country’s government bound citizens to declare all their crypto and exchange gains. This far-fetched tax was too heavy for crypto owners. That’s why the government decided to backtrack it and commenced the establishment of a new well-thought-out one. Polish community had to wait for almost 3 months. In August, regulators in Poland have come forward with a long-promised Crypto Bill. This regulation, as government believes, will enable it to keep a strong focus on the illegal activities which are carried out in the guise of cryptocurrency transactions. The crypto taxation was officially released on 24th August 2018. Additionally, in mid-November, the Income Tax Department of the country has suggested President Andrzej Duda’s government to levy a steep tax of 19% on income from using crypto. If enacted, the taxation is expected to come into force from January 2019. USA  Internal Revenue Service Building on Constitution Avenue in Washington, D.C. Source: Wikimedia  The whole story with crypto-taxes in the US began in 2014 when the Internal Revenue Service (IRS), the country’s government agency that collects taxes and enforces tax laws, issued the general guidance on how cryptos are taxed. According to the guidance, in the US “virtual currency is treated as property”. It also says that crypto-taxes are calculated individually for every taxpayer who uses crypto and they depend on the coin’s value as of the date it was traded: A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in dollars, as of the date that the virtual currency was received” As of today, by the look of things, Internal Revenue Service is not going to be soft with crypto owners. In February 2018, Coinbase, a San Francisco-based digital currency exchange, sent an official notice to about 13,000 customers, informing them that their data is being handed over to the IRS per their request. The IRS is also famous for using software designed to track crypto tax cheats.  Agency periodically sends emails to crypto holders, reminding them to pay their taxes and even published a memo, highlighting the “inherently pseudo-anonymous aspect” of crypto transactions. Japan  The Ministry of Finance Japan Source: Japan Times  Japanese crypto holders seem to be operating in a crypto-paradise, but it’s not that simple. Although country recognises the crypto as a legal means of payment, the main reason behind this move to legalization is to ensure tighter oversight from the Financial Services Agency of Japan over the virtual economy.   In Japan, cryptocurrency investors must pay between 15 and 55 percent taxes on their profits declared on their annual tax filings by the end of the year. Judging from the statistics which shows that the trading pair BTC/YEN is one of the most popular, we can safely say that the country will receive large revenues from taxing crypto. Speaking of the latest news, in early December, Japan’s government announced that it prepared a new system that would allow the National Tax Agency (NTA) to obtain data from transaction intermediaries – crypto exchanges. A new regulation is expected to come into force in late 2019.  According to several sources, this will be the case for those crypto owners who earned over 10 mln yen ( ̴$88,700) from crypto transactions.

Articles/December 18, 2018

Fantastic Four: Top 4 ‘Crypto-Cities’ in the World

Crypto adoption had made significant leaps since it emerged roughly a decade ago. That’s why it’s unsurprising that many countries are doing their best to establish regulations regarding crypto.  Alas, there are stills some ‘crypto-naysayers’ (some of them you can remember from our recent articles) that decided to refrain from adopting digital currencies. Interestingly, even in such ‘red zones’ there are several cities which we call ‘crypto-partisans’.   Today we’ll review best cities for crypto enthusiasts that have become more eager and have made it to the list of the top 4 crypto-friendly cities in the world under the version of Cryptonomos. Get ready and pack your bags (full of crypto, of course). We are shoving off right now! Hong Kong comes in at number 4 Hong Kong’s authorities are not determined, when it comes to crypto regulations, and even claimed recently that Bitcoin was not a legal tender. Nevertheless, they follow considerably more positive position towards crypto in comparison to mainland China. Many retailers in the ‘city of skyscrapers’ (for the overall development, Hong Kong has the largest number of skyscrapers in the world) are accepting cryptocurrencies.  Noteworthy, Hong Kong has become an ideal crypto haven for Chinese enthusiasts. Hong Kong is basically an autonomous territory of China and has a separate political system from the rest of the country, which has its effect on the local economy as well. Therefore, the city does not inherit the Chinese severe approach towards crypto. A general attitude to cryptocurrencies could be revealed in the statement of the head of fintech at the state economic agency InvestHK Charles d’Haussy: “Blockchain is a very high priority for us. There is hype, and there is the fast grab of money with ICOs in some cases. But what we are looking at building here in Hong Kong is an infrastructure for new businesses and existing businesses, to make sure the technology and innovations remain a key enabler for financial sector growth” 3rd place goes to New York, USA Lauded as a financial capital of the world, New York is now so confident about supportive crypto and blockchain regulations, that perhaps there’d soon be a national monument in its name – ‘A Statue of Crypto-Liberty’.  The city has hosted a number of large conferences so far, including the 4th Annual Blockchain Conference, the North American Digital Commodities Summit, the Consensus 2018 and the Blockchain Summit New York.  There are over 100 merchants that accept Bitcoin and more than 120 crypto ATMs across the cosmopolitan city. Many crypto startups were initially established in New York. For instance, Coinsetter, one of the oldest Bitcoin exchanges, was launched in New York in 2012. By the way, the city even has its own cryptocurrency - the 'New York Coin' (NYC). Buenos Aires, Argentina, takes argentum and the 2nd place There are plenty of reasons to visit Buenos Aires: architecture, specific food, and electric atmosphere at the stadiums during football matches. However, few know that Buenos Aires is home to the second biggest number of crypto-related businesses (around 140) in the world. When the hoopla around Venezuela’s cryptocurrency finished, the hype about crypto was removed to Argentina. Many in Latin America name Buenos Aires as a ‘Bitcoin capital’ because many local individual professionals like photographers, professors, designers, technicians, psychologists and even taxi service providers are reportedly accepting Bitcoin for their services here. Bitcoin’s success in Argentina could be attributed to the inflation of the national currency. Such economic situation forced many citizens to get involved into cryptocurrencies. It should also be noted that there’s a Buenos Aires Institute of Technology located in the city. This private university offers a diploma course in blockchain and cryptocurrencies. Buenos Aires becomes a great point of destination not only for investors, but for those who want to learn more about the crypto world.  And the 1st place goes to… *drum roll*… Zug, Switzerland! For the common tourists of Switzerland, it would be hard to imagine this picturesque lakeside town as anything more than just that.  Zug is considered to be one of the most technologically advanced in the world. Thanks to low corruption, clear legislation and harmonized policies, Switzerland became the number one country in the world in terms of personal and economic freedom. Gladly supporting the title of “Crypto Valley”, the town is a real hotbed of crypto- and blockchain-related companies and foundations. Here you’ll find an entire ecosystem developing around blockchain businesses. For instance, the Ethereum foundation has been located here since 2014 and new companies are moving in with each passing day. Zug is an ideal place for avid travelers who are keen on using digital coins instead of cash. Here you can operate with numerous Bitcoin ATM machines and pay the restaurant bills in crypto. The only disadvantage, or to be accurate, the consequence of high standard of living, is that Zug is an expensive place. Living costs here are exorbitantly high. But still, as the practices of different businesses have shown, it’s worth it.     Cover: Photo by Marvin Ronsdorf on Unsplash Hong Kong Photo by bady qb on Unsplash New York Photo by Colton Duke on Unsplash Buenos Aires Photo by Andrea Leopardi on Unsplash

Articles/December 6, 2018

China: The World’s Biggest Blockchain and Mining Hub

China, the Asian fintech giant, has been through a real ‘crypto whirlwind’ since 2013. Judging by the fact that Chinese regulators banned ICOs and cryptocurrency exchanges last year, many now think of the country as rather unfriendly to blockchain tech. However, that’s easy to contradict. Today we’ll shed some light on China’s attitude to crypto, particularly to cryptocurrency mining, and its future plans in relation to it.  ‘Ambiguity’ is China’s middle name. In 2013 the People’s Bank of China issued a warning notice on the risks of Bitcoin and prohibited financial institutions from engaging in crypto-related activities. Three years later however the Chinese government apparently forgot about this and added blockchain to its five-year technology plan instead.  Then, a real ‘hardcore’ crackdown began in 2017. In September, the Chinese government imposed regulation banning all ICOs and crypto-to-fiat exchanges. Three months later, in January 2018, China imposed regulations banning P2P sales and over-the-counter markets. Later, China finished crypto enthusiasts off by blocking access to foreign crypto exchanges and ICO websites. Despite the fact that the country’s government did not manage to eliminate crypto-related operations for good, its crackdowns made the community skeptical about China’s environment. Before the aforementioned bans were enacted, crypto mining in China had been flourishing and had attracted dozens of giant players from all over the world who wished to locate their facilities in the ‘red superpower’. China was and, perhaps surprisingly, still is home to the world’s largest mining manufacturers, including Bitmain, Canaan, Ebang, to name a few.  To prove how vital the country’s role in the mining market has been, at its peak China accounted for three quarters of the world’s Bitcoin mining operations and over 95% of the Bitcoin trading volume.  Two years ago China was the obvious, if not the only, choice for mining enthusiasts. Low electricity costs were the true temptation for miners, along with an accessible, low-cost and high-efficiency mining hardware. Provincial governments are happy to welcome crypto-based entrepreneurs as they use excessive electricity, meaning more revenue for the local grid. However, recent statistics show that mining in China indeed requires too much electricity (to compare, it requires the equivalent of the power of three nuclear reactors). When the government’s attitude toward crypto became hostile, several large mining entities unsurprisingly began to look elsewhere for places to base their operations. One of those is Bitmain, a somewhat notorious mining company, which decided to expand its activity to Europe, North America and the Middle East in order not to be affected by a possible request to make an ‘orderly exit’ from the country.  Nevertheless, many still remain bullish on blockchain and crypto in China, based on recent statements made by the country’s President, Xi Jinping. In late May, he mentioned blockchain as a “new generation” technology: “The new generation of information technology represented by artificial intelligence, quantum information, mobile communication, internet of things, and blockchain is accelerating breakthroughs in its range of applications.” Following this statement, on June 4, the country's leading state-run broadcaster - China Central Television (CCTV) - issued an hour-long special about the ledger. During the show, it was said that blockchain is "10 times more than that of the internet" in terms of economic value.   Now it’s time to stop here and ask ourselves: How on earth do these severe crypto-bans coincide with a truly supportive attitude to blockchain? That can be easily explained. China's policies suggest a “Blockchain > Crypto” attitude. In other words, the government is much more interested in the underlying technology rather than in cryptocurrencies themselves.  China sees the enormous potential of blockchain, as it always does when it comes to the adoption of innovative new technology. Dominating the blockchain development industry can bring a lot of economic wealth to the region.  And this process has already begun. For instance, Hangzhou, the home city of Alibaba, has committed $1.6 billion to blockchain company investments. Plus, the People’s Bank of China (PBoC) is currently developing a blockchain-based digital currency. 'Decentralized' power in the hands of centralized giants is a hell of an idea - a terrifying idea. If such a blockchain-based digital currency were to be adopted, the PBoC could easily access all kinds of information about the economic activity of its citizens, thus becoming not a decentralized financial institution, but a veritable dictator.  Blockchain is still a unique and unprecedentedly traceable instrument which can allow the financial authorities of all countries to monitor small-scale transactions and reduce fraud, counterfeiting, and money laundering. By all accounts, we should expect China to be one of the leaders of a new blockchain-based economy in the nearest future. Photo by Henry & Co. on Unsplash

Articles/November 29, 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 US: Mining Superpower or Land of Ambiguity?

With over thousand of different ever-expanding interpretations of uses for blockchain and cryptocurrency, it’s not surprising that many governments are showing a keen focus to the digital currencies and associated operations. Today we are going to take a broad look at cryptomining in the US – one of the most discussed tech pioneer in the world. So, it’s time to ‘Make Americans Mine Again’!   In March 2018, the United States Joint Economic Committee issued a report which officially endorses cryptocurrency and blockchain. However, for a layman miner, the US is one of the most complicated countries for getting involved in crypto mining. As we’ve already mentioned in our recent post, the US is mired in the ambiguity of legal system. It means that each of the state has its own ‘crypto legislation’. Literally, give an inch here – your mining process flourishes, give an inch there – it’s feasible and forbidden. Thus, it cannot be said whether the process is completely dead in the country or not. It depends on the state one is going to deal with crypto in.  To show the difference in the attitudes, let’s review several states. For instance, according to the variety of sources and rates, the most appropriate state for mining cryptocurrency in the US is Louisiana. Sandwiched between Mississippi and Texas, Louisiana has never been considered to be a safe haven for crypto miners, or indeed for anyone from the fintech sector.  Nevertheless, Louisiana has the cheapest energy rates in the entire country, when compared to other attractive regions including Idaho, Washington, Tennessee, and Arkansas. Unfortunately, a fertile environment for mining makes many people lose their heads. Recently, Louisiana Attorney General Jeff Landry opened a criminal investigation into his own office's information technology department, including its recently ousted director, amid allegations that former staffers tapped state resources to mine Bitcoin. Among the terminated employees were a systems administrator, a help desk manager, a litigation support coordinator and a human resources employee. Despite the above, crypto still has a legal status in the state. However, not every ‘Louisiana-like region’ in the US takes advantage of cheap energy rates. For example, Plattsburgh, New York, has become the first city in the US to ban cryptocurrency mining. A city council unanimously voted to impose the 18-month moratorium on Bitcoin mining to prevent miners from using the city’s cheap electricity. With accordance to Plattsburgh mayor’s words, Plattsburgh has the “cheapest electricity in the world” where residents pay only 4.5 cents per kilowatt-hour. For the sake of comparison, the US average is a little over 10 cents per kilowatt-hour. Industrial enterprises, including mining companies, pay even less - just 2 cents per kilowatt-hour. Nevertheless, the US attracts many large players on the mining market. The best evidence of this is the fact that 2 out of 5 largest mining facilities in the world are located in the US. Among them are $65-million Bcause LLC and Washington State-based Giga Watt mining facilities. The latter has more than 20k GPUs hosted. Noteworthy, team at Giga Watt designed so-called Giga Pods, a groundbreaking solution which takes advantage of mining hardware’s extremely high power density, avoids active cooling consumption, and saves power for high-efficiency computing. The US legal framework is far from ‘united’ when it comes to crypto regulation. It’s true: while some ban, others endorse, and there’s no common logic about it. One thing is clear: the harmonization and unification of regulations across the country would create a stable and conducive environment for private users and crypto-related businesses. That’s what the US government needs to focus on.  Next time we’ll take a closer look at the country’s most powerful rival in the mining market – China. Stay tuned for that!

Articles/November 13, 2018

Crypto’s Red Zones: The Most Crypto-Unfriendly Countries

Countries around the world differ considerably in their approaches and attitudes to cryptocurrency and decentralized technologies. While superpowers such as the US and Japan have generally displayed a positive attitude towards crypto, there are still many governments with ambiguous positions -Schrödinger's regulators - who at best are taking crypto with a pinch of salt. As you may remember, in our recent posts we have highlighted the most crypto-friendly regions and countries. Today however we’d like to talk about those countries in the other camp - the ‘crypto-naysayers’, which continue to enforce harsh bans and rigorous policies. Here’s our pick of the top crypto-skeptic countries. Bangladesh  Bangladesh, the most densely populated country on earth, is a real nightmare for crypto holders. Bangladesh’s authorities are really on the hunt for crypto traders.  In accordance with the country’s anti-money-laundering laws, any holder of digital currency in any form would be sent to jail. Officials of Bangladesh’s Central Bank also stated that the use of crypto would be considered a ‘punishable offence’, to put it mildly. Specifically, anyone in Bangladesh found guilty of using Bitcoin could be sentenced to up to 12 years in jail.  Bolivia  Interestingly, Bolivia was the first country in the world to completely prohibit the use of "any kind of currency that is not issued and controlled by a government or an authorized entity". Since 2014, El Banco Central de Bolivia - Bolivia’s Central Bank - has considered all cryptocurrencies to be Ponzi schemes.  Moreover, in May 2017, the Bolivian Financial System Supervision Authority arrested 60 "crypto promoters". These users were carrying out a kind of ‘training activity’ relating to crypto trading and investing. Following the arrest and growing hype around crypto, Bolivian authorities stated they will arrest anyone involved even in small-scale discussion groups on WhatsApp, Facebook and other social media. Egypt  Speaking of the legitimacy of cryptocurrencies, Egypt’s legislation is one of the hardest to follow in the world. Not only has crypto been questioned by the government, but by religious leaders too.  Shawki Allam, the Egyptian Grand Mufti, issued an official fatwa in 2017 which banned all crypto-related operations. According to his statements, cryptocurrency carries risks of "fraudulence, lack of knowledge, and cheating”. He also compared crypto exchanges with gambling, which is forbidden in the country due to “direct responsibility in financial ruin for individuals”.  An adviser to the Grand Mufti, Magdy Ashour, endorsed Mufti’s statements, having previously stated that crypto is “used directly to fund terrorism”.   There were glimmers of hope for the local crypto community, inspired by the Egypt’s Central Bank. To be precise, there were rumors that the bank was going to begin to permit ownership of crypto assets. However, this was nipped in the bud by deputy governor Gamal Negm. Last summer he stated the following: “For stability of the Egyptian banking system, the banks deal with the official currencies only, and never deal with any virtual currencies” Drawing the line  The geography of crypto regulations is becoming clearer with each passing day. Some governments are afraid of losing their financial power within their nation due to the decentralization and anonymity that crypto can facilitate, which are deemed to be incompatible with governments’ interests. A number of countries are stuck in a 'ban-by-default' mode of thinking, and risk remaining mired in obsolete traditions. For instance, Bangladesh’s Foreign Exchange Regulation Act was enacted in 1947. Governments following similar policies should understand one thing. True development is based on two pillars, adoption and recognition - especially when it comes to the fintech sector - those which hinder either one will suffer. 

Articles/October 30, 2018

Kazakhstan, Uzbekistan and Kyrgyzstan: Middle Asia has entered the Game

Have you noticed how many countries, which have never really been ‘hyped’ in terms of crypto adoption and financial development, are now considered to be blockchain technology hubs? Estonia, Slovenia, Belarus...the list is permanently expanding.  Now, it would seem that it's time for the countries of Middle Asia to enter the game. While many of the so-called 'big boys' adopt a fairly cautious approach to the regulation of cryptocurrencies, several Asian countries - including Kazakhstan, Uzbekistan and Kyrgystan - seem happier to implement more supportive, optimistic laws and regulations. However it’s not just local regulators, but local banks too, which have become aware of the need for blockchain adoption. After reading this article you’ll definitely have learnt something new about this Central Asian trio, as they attempt to position themselves at the forefront of blockchain technology adoption. So, let’s get this ‘crypto journey’ started.  Kazakhstan  Kazakhstan is trying to become the region’s main crypto hotspot. In May, Kazakhstan’s President Nursultan Nazarbayev called for global cooperation on crypto regulation. At the plenary session of the Global Challenges Summit 2018 he stated the following:  “We see completely separate actions of states in this issue[cryptocurrencies]. And these disparate actions will lead to inefficiency. It is necessary to start developing common rules.” The blockchain hype hasn't passed by Kazakhstan’s Ministry of Finance either, who has started researching blockchain. In April, he announced the launch of a blockchain-powered database that will be designed to eliminate ‘grey schemes’.   Furthermore, in June 2018 Kazakhstan hosted one of the largest conferences dedicated to distributed ledger technology - the Blockchain Conference Astana - which was supported by public authorities and the Kazakh Association for Blockchain and Cryptocurrencies (KABC). 25 speakers from the UK, USA, Canada, Russia, Belarus and Kazakhstan, as well as over 200 participants from various sectors of the economy discussed the hottest industry topics, including the prospects for decentralized technologies in Kazakhstan. Uzbekistan  Recently, Uzbekistan’s government introduced a number of supportive regulations. The country now legally recognizes crypto trading and mining, while providing local crypto traders with exemptions from taxation.  One of the latest crypto laws enacted in Uzbekistan was a decree dedicated to building a digital economy, two key facets of which are the adoption of blockchain technology and the development of a friendly regulatory environment for crypto. Signed by the country’s president Shavkat Mirziyoyev in July, the law came into force on September, 2.  Local media Gazeta.uz recently published the key goals mentioned in the decree. They are as follows: To adopt and develop cryptocurrency-related activity, including mining, issuance, exchange, storage, distribution, management, and consulting related to virtual currencies. To implement blockchain technology, smart contracts and to support ICOs in order to diversify the various methods of investment and entrepreneurial activities. To train blockchain developers; to cooperate with entities from foreign crypto and blockchain markets; to attract international experts in order to build and implement joint projects with local firms.  To create a legal framework for blockchain considering the best practices of crypto-friendly countries.  Massively significant, isn’t it? And that’s not all - in September, President Mirziyoyev also ordered the establishment of a state blockchain development fund named "Digital Trust". The fund's principal aim is to integrate blockchain into local industries including healthcare, education, and cultural areas. Kyrgyzstan Interestingly, Kyrgystan is one of those countries which were initially against cryptocurrency. It banned cryptocurrencies back in July 2014, following the National Bank’s statement warning that the use of virtual currencies is illegal.  But fast forward to today and Kyrgyzstan is one of the most financially developed and crypto-friendly countries in the region. A report, published by the law firm John Tiner & Partners on behalf of the country’s International Financial Center Development Agency (IFCDA), demonstrates that the nation is now proposing more accommodative approaches. According to the report, there are almost no restrictions in Kyrgyzstan when it comes to crypto trading and mining. ICOs are also allowed to be deployed freely in the country. The only restriction is that those involved in the crypto trading must pay established taxes. Valery Tutykhin, head of the IFCDA, stated:  “Our local investment market infrastructure can be used to legally invest into any crypto-assets. Does someone want to buy cryptocurrencies? Let him do it through the local commodities exchange, considering that he will pay local taxes. Does someone want to raise capital for a startup through an initial coin offering? Let him do it through the local stock exchange. Its listing rules are not so complex”. These countries are a textbook example of how a nondescript region can become an epicenter of blockchain development, without hype and often while going unnoticed. It is hoped that the absence of regulatory uncertainty in the aforementioned countries will give crypto and underlying decentralized technologies a powerful impetus in this region.  As promised, our next article will be dedicated to the ‘big boys’, including China, the US and the UK. Stay tuned! 

Articles/October 18, 2018

Your Route to Becoming an Accredited Investor

Accredited investors are people who can deal with securities not registered with financial authorities. Being an accredited investor gives one the right to invest in higher-risk and more complex investments such as venture capital, hedge funds and angel investments. Historically, to become an accredited investor one had to satisfy requirements including net worth, income, professional experience or all of the above. Accredited investor rules ostensibly serve to protect the average person from high risk investments, and the potential of losing all of their savings. They also serve to concentrate the greatest financial and investment opportunities in the hands of the wealthiest few. As Anthony Pompliano (@pomp), founder and partner of Morgan Creek Digital Assets puts it: "US accreditation laws are legally upheld rules that prevent those without prior financial wealth from investing in the highest-earning investment opportunities. This is the definition of the rich getting richer." What follows in this post is an exploration of how potential changes to investor accreditation laws could change the investment landscape for individual investors like you, and what you can do to take advantage of the opportunities that will come your way Accreditation and Crypto Accredited Investor laws have always been relevant to crypto, because it's arguably the passing of the JOBS (Jumpstart our Business Startups) act in 2012 - the law that permitted small businesses to secure crowdfunding from non-accredited investors - that paved the way for the ICO phenomenon. The ICO boom of 2017 and early 2016 is evidence of the appetite among retail investors for high-risk investments. In 2017, blockchain-based startups raised $6.3billion through ICOs. In 2018 it only took until April  before that figure was eclipsed despite the significant bear market. Regulatory uncertainty has somewhat stalled the ICO market's growth, but what's clear is that the phenomenon is not going away. This appetite for high-risk, high-reward investment among ordinary investors has not gone unnoiticed by the SEC. Chairman Jay Clayton recently signalled his intent to make it easier for individuals to invest in private companies and that these changes could happen 'pretty quickly'. Speaking on August 29th 2018, he said: "We should consider whether current rules that limit who can invest in certain offerings should be expanded to focus on the sophistication of the investor...rather than just the wealth of the investor". This signal of intent will be music to the ears of many crypto thought-leaders, many of whom have been caling for such changes for years. The JOBS act was the beginning of a trend of which the ICO phenomenon is a symptom - not an isolated change. So, changes to accreditation rules are coming, and it's likely that YOU will have access to more opportunities because of it. The question is, what does this mean for YOU? 1. Better Quality Investment Opportunities Vitalik Butern, founder of Ethereum, recently pointed out that wealth-based accreditation rules render retail investors more susceptible to scams because they're some of the only opportunities available to them. ICO investors will empathize here. A revamp of accreditation rules would likely further fuel the ICO phenomenon, and top the balance towards high quality. In the event of updated rules, investors should perhaps consider devoting more of the high-risk portion of their portfolio towards ICOs than say, individual public stocks, as more retail investment money pours in. 2. VC-like Investment Opportunities It's likely that more investment vehicles will open up for non-blockchain startups too. These will likely be equity-driven - investing $x amount in exchange for y% ownership in a company. To help startups cope with the numbers of investors who many want to invest, this will necessitate the creation of new online platforms through which people can securely invest their money. Individual investors should stay up to date on such developments, keep an eye out for new platforms, or existing platform adding new functionality (e.g. Robinhood, Coinbase). 3. Keep up to date with how to become accredited How are the SEC, and similar bodies in other countries, likely to judge the 'sophistication' of a retail investor? Very possibly, through some kind of test through which one can demonstrate their knowledge and understanding of sound investment principles. Investors who're excited by the prospect of more private investment opportunities should continue to brush up on their knowledge, as well as keeping their ear to the ground with regards to likely topics and issues that could feature on a test so they can better focus their learning. Conclusion So, investor accreditation laws are likely to change, and you're likely to benefit. Individual investors must keep on top of relevant developments and continue to develop their understanding of sound investment principles as well as what new online platforms and services could be useful. Those who do will be those best placed to capitalize in the long term

Articles/October 2, 2018