Crypto Regulation News: South Korea’s central bank begins pilot program for testing digital currency, US lawmakers considering digital dollar to stimulate economy, Bank of France says Ethereum and Ripple could power central bank digital currencies, Several crypto firms get license exemption in Singapore for a limited period
23rd March — 6th April
- IMF Issues 7-Step Guidance to Preserve ‘Credibility and Integrity of the Global Financial System’ and Lessen Pandemic Blow
- Banking Regulators Announce Year-long Delay For Basel III Capital Rules Due To Coronavirus
- New Research Shows Why Fear Could Spark Adoption of Digital Currencies
- IMF Chief Says Economic Turnaround From Coronavirus Impact Should Arrive in 2021
- US Is Not Fully Compliant With Crypto Recommendations, Says FATF
- US Senate Minority Leader Releases Summary of Massive $2 Trillion Coronavirus Stimulus Package
- US Department of Homeland Security Names Blockchain Managers Part of ‘Critical Infrastructure Industry’ Amid Coronavirus Pandemic
- House Democrats Dump Digital Dollar in New Version of Emergency Relief Bill
- SEC Delays Decision on tZERO’s Proposed Security Token Exchange
- “Crypto dad” Christopher Giancarlo’s digital dollar initiative has named 22 new advisory members and is set to release a white paper in the next two months
- Maxine Waters, Chairwoman of the House Financial Services Committee, released draft bill, which provides financial protection and assistance for Americans affected by the pathogen-induced financial crisis
- Ripple Executive Says Crypto and Blockchain Will Transform World of Finance, Changing the Way Banks Do Business
- The central bank of France is launching an experimental program to investigate the feasibility of rolling out its own central bank digital currency (CBDC) for interbank settlements
- The Bank of Korea has launched a pilot program for testing digital currency. The program would run until December 2021 to check technical and legal requirements
- Several crypto firms have been granted an exemption from holding a license in Singapore for a limited period. These include Singapore entities of Ripple, Coinbase, Binance, Gemini and others
- Japanese Regulations on Crypto ‘Likely to Help the Market to Mature’
- China’s Central Bank Is Paving the Way for Its Digital Currency With Global Tech Giants on Board
- Russian Ministry Wants to Test Crypto and Blockchain in Regulatory Sandboxes
- Brazil’s Largest Brokerage Shutters Bitcoin Exchange
IMF Issues 7-Step Guidance to Preserve ‘Credibility and Integrity of the Global Financial System’ and Lessen Pandemic Blow: The International Monetary Fund has issued new guidance on how banking industry leaders can help maintain an ailing system amid the coronavirus crisis.
The IMF is urging banks to follow key practices to combat the current economic upheaval that represents “a different kind of shock” than the 2008 global financial crisis.
“Never before have modern economies shut down at the drop of a hat…
Pressure on the banking system is growing and higher defaults on debt are imminent. And many now expect a shock to the financial sector similar in magnitude to the 2008 crisis.”
The international body, which works with 189 countries to secure financial stability, is prompting bank supervisors to combine a number of strategies deployed during natural disasters, operational risk events and bank stress episodes to mitigate the downturn.
7 Guidelines for the Banking System
1. Don’t change the rules.
New initiatives could cause more confusion, so supervisors are being asked to focus on maintaining ongoing operations.
2. Use the buffers.
Proper management should allow banks to manage strains on liquidity and revenue loss from missed loan repayments.
3. Encourage loan modification.
Banks should be proactive in rescheduling their loan portfolio for borrowers hit hard by the temporary shock, utilizing flexible credit risk management.
4. Don’t hide the losses.
Transparency will prevent the crisis from getting even worse.
5. Clarify regulatory treatment of support measures.
Clarifying how banks should work with borrowers, credit guarantees and direct transfers, among other activities, can help with overall transparency.
6. Strengthen communication.
Working remotely during the unprecedented move and keeping everyone at home requires an open dialog and some adjustments, particularly regarding reporting requirements.
7. Coordinate across borders.
The integrity of the global financial system is at risk, requiring broad coordination.
The final measure is pivotal to the health of the banking network at large, according to the IMF, as the strain on the entire global financial system will pressure banking professionals to keep the very fabric of the global network intact.
“Broad coordination among national regulators at the international level is imperative. This crisis will pass eventually, and the effects may take time to dissipate, but preserving the integrity of the international framework will be crucial for the credibility and integrity of the global financial system. International bodies like the Financial Stability Board and the Basel Committee on Banking Supervision are working night and day to do just this.”
Mike Corbat, chief executive officer of Citigroup, the third-largest bank in the US by assets, says banks are walking a “fine line” in terms of strapping saddled customers with looming debt as more people file for unemployment and small business owners struggle to keep their enterprises afloat.
In an interview on March 26th with the Financial Times, Corbat remarked,
“The last thing that we all want to see is … our consumers, our small businesses and our big businesses come out of this … (with a) precariously bigger or larger position of indebtedness.
So it’s really … walking that fine line of being as supportive as we can be. But at the same time, not in any way, calling into question the safety and soundness of our institution or of the system.”
Brian Moynihan, CEO of Bank of America, the second-largest bank in the US, pledges to retain staff and support customers. He tells FT that the bank’s goal is to “relieve cash flow difficulties” for its borrowers while acting as a “bridge” that can ease the transition between today’s uncertainty and a post-coronavirus economic reality.
Banking Regulators Announce Year-long Delay For Basel III Capital Rules Due To Coronavirus: Global banking regulators issued a statement last Friday saying that elements of the Basel III banking rules reform that have yet to be implemented will be pushed back a year due to the coronavirus pandemic.
According to the new timeline, the rules — related to how much capital banks are required to hold in certain circumstances and how they model such needs — are being pushed back to from January 2022 until January 2023. The move was announced by the Group of Central Bank Governors and Heads of Supervision, Basel III’s oversight body.
The Basel III reforms trace their origin to the financial crisis of the late 2000s and were initially agreed upon in 2010. The delays announced Friday have to do with the set of rules that have yet to be implemented.
“It is important that banks and supervisors are able to commit their full resources to respond to the impact of Covid-19. This includes providing critical services to the real economy and ensuring that the banking system remains financially and operationally resilient. The measures endorsed by GHOS today aim to prioritise these objectives and we remain ready to act further if necessary,” François Villeroy de Galhau, governor of the Bank of France and the chairman of the Group of Central Bank Governors and Heads of Supervision, said in a statement.
Cash and Central Banks: New Research Shows Why Fear Could Spark Adoption of Digital Currencies: The Bank for International Settlements (BIS) has released a new report on cash and the future of payments. Research from the Swiss-based bank for central banks shows that growing concern about cash and how the coronavirus is transmitted is among several factors that could accelerate the use of digital payments and the adoption of digital currencies.
According to the report,
“The Covid-19 pandemic has led to unprecedented public concerns about viral transmission via cash. Central banks report a large increase in queries from the media on the safety of using cash. The number of internet searches pertaining to both ‘cash’ and ‘virus’ is at record highs.”
While a new study from National Institutes of Health, CDC, UCLA and Princeton University scientists in The New England Journal of Medicine shows that coronavirus can survive on surfaces, the probability of contracting the virus through banknotes and coins appears to be very unlikely, unless “someone is using a banknote to sneeze in,” says Dr. Christine Tait-Burkard, an expert in infection and immunity at the Roslin Institute at the University of Edinburgh.
The BIS report concludes,
“To date, there are no known cases of Covid-19 transmission via banknotes or coins. Moreover, it is unclear if such transmission is material compared with person-to-person transmission or transmission through other objects or physical proximity.”
Despite widely-available data that viral transmission via cash is low, BIS researchers believe the public’s behavior towards payments may change. As people try to minimize contact with cash, the BIS expects a surge in the use of digital payments including mobile, card and online channels.
The researchers also speculate that the increase in digital adoption opens the door for the development and use of central bank digital currencies (CBDC).
“The pandemic may amplify calls to defend the role of cash — but also calls for central bank digital currencies.”
The shift from physical to digital payments, however, could have an undesirable impact on millions of consumers, including the unbanked and older people. The researchers state,
“If cash is not generally accepted as a means of payment, this could open a ‘payments divide’ between those with access to digital payments and those without.”
To bridge the “payments divide”, the authors conclude that digital currencies such as central bank digital currencies (CBDCs) could provide contact-free transactions offering broad access and acceptability while alleviating concerns about viral transmission.
“The pandemic may hence put calls for CBDCs into sharper focus, highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats.”
You can check out the full report here.
Boost for Bitcoin? US Lawmakers Considering Digital Dollar to Stimulate Economy: In a bid to curb the financial impact of the coronavirus pandemic and the ongoing economic impact on Americans, Democrats in the House of Representative are proposing the creation of a digital dollar and digital wallets.
Maxine Waters, Chairwoman of the House Financial Services Committee, released draft bill H.R. 6321, which provides financial protection and assistance for Americans affected by the pathogen-induced financial crisis.
The draft bill describes the digital dollar as a redeemable electronic unit of value that recipients of the stimulus package would be able to access through a digital wallet via electronic devices or services.
“The term ‘digital dollar’ shall mean —
(A) a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal reserve bank; or
(B) an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governers of the Federal Reserve System).”
Unlike Bitcoin and similar cryptocurrencies, the proposed digital dollar would not be a decentralized asset. Instead it would be maintained by the central banking system.
Although it remains to be seen how long it would take to develop the digital dollar and whether the proposal can gain widespread support, the proposal has Bitcoin and crypto proponents contemplating a future where digital wallets are the norm.
The U.S. is about to create the “digital dollar” in order to save their own economy. Funds will be stored in “digital dollar wallets” controlled by the Federal Reserve. Bitcoin will pump so fucking hard.
The Direct Stimulus Payments for Families section of the proposed legislation directs a monthly payment of $2,000 for adult US citizens who earn less than $75,000 a year, and $1,000 for individuals under 18, as part of an economic relief package.
IMF Chief Says Economic Turnaround From Coronavirus Impact Should Arrive in 2021: Following a recent meeting of the G20 finance ministers and central bank governors on the coronavirus pandemic, International Monetary Fund (IMF) managing director Kristalina Georgieva says negative global growth in 2020 will be driven by a recession that is as bad as — or possibly worse than — the 2007–2008 financial crisis.
Despite a bleak outlook for 2020, Georgieva predicts a recovery in 2021, provided nations prioritize containment and strengthening their health systems to prevent further spread of the virus.
“All countries need to work together to protect people and limit the economic damage. This is a moment for solidarity…
“The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.”
Georgieva says the IMF is now working closely with other international financial institutions as nearly 80 countries have called for help.
The IMF is also asking for fund contributions from its members to replenish the Catastrophe Containment and Relief Trust, to lessen the economic impact of the health crisis on the most vulnerable countries.
Georgieva says the IMF is also ready to deploy its $1 trillion lending capacity, and is considering allocating its special monetary reserve currency to supplement aid for low- and middle-income countries.
“These are extraordinary circumstances. Many countries are already taking unprecedented measures. We at the IMF, working with all our member countries, will do the same.”
Ex-CFTC Chief’s Digital Dollar Initiative Adds 22 New Advisors, Will Release White Paper In The Next Two Months: “Crypto dad” Christopher Giancarlo’s digital dollar initiative has named 22 new advisory members and is set to release a white paper in the next two months.
Giancarlo, the former chairman of the Commodity Futures Exchange Commission (CFTC), first created the Digital Dollar Foundation in Jan. 2020. The goal, according to a previous announcement, is to advocate for the creation of a “portable” digital dollar that can be sent “as easily as a text.”
IT giant Accenture is acting as the project’s lead architect and technology innovation partner, and business advisory firm FTI Consulting is providing the foundation with strategic communication support.
According to the latest announcement by the Digital Dollar Foundation, the non-profit now has a total of 25 advisory members, ranging from businesspeople and technology experts to educators and former regulators. The list includes Lawrence Rufrano, former regulator at the Federal Reserve Board; Ramon Martin Chavez, former Goldman Sachs executive; and Accenture managing director Valerie Abend.
The Foundation just held its first official stakeholder meeting following the appointment of the new advisors. Its next step is to release a white paper in the next two months to elaborate on “core elements and the value proposition of a digital dollar.”
Notably, the U.S. Congress recently contemplated using a digital dollar to offer Americans stimulus payments. Although the provision was later stripped from the coronavirus economic stimulus bill, Giancarlo believes it was still an encouraging development. A separate bill advanced by the House Financial Services Committee retains the digital dollar language, and Ohio Sen. Sherrod Brown has put forward a digital dollar measure as a stand-alone bill in the U.S. Senate.
“Recent Congressional exploration of a #DigitalDollar highlights importance of upgrading architecture of USD$ for a digital 21st Century,” he said in a tweet:
DigitalDollarProject recently held its first (virtual) meeting with this extraordinary Advisory Board. Recent Congressional exploration of a #DigitalDollar highlights importance of upgrading architecture of USD$ for a digital 21st Century. https://t.co/MTDnwoY3st https://t.co/L295Fp7bAB
Ripple Executive Says Crypto and Blockchain Will Transform World of Finance, Changing the Way Banks Do Business: Asheesh Birla thinks blockchain technology is poised to dramatically overhaul the global financial sector.
Ripple’s senior vice president of product recently talked with SiriusXM business news host Randi Zuckerberg about his predictions for the space.
“I think that this is going to really start taking off in the next two years, and within anything that is done in the financial space today via Citibank or the HSBCs and the JP Morgans of the world, it’s going to be reinvented using this technology.
And there’s going to be a reshuffling of the world order, meaning maybe some of the largest banks today won’t have that kind of role in the future as this world gets reinvented using technology in the blockchain.”
Birla says Ripple is pushing to be the “blockchain version of Amazon.” The San Francisco startup currently has just over 300 banks and money transfers on its platform, RippleNet, according to the SVP.
However, Birla says there is work to be done by the US government which needs to establish clear regulations if it wants to take the lead when blockchain-based platforms and services proliferate across the global financial infrastructure.
“Really, for the massive players to start coming in in droves, you need clear regulations, and I think the UK has done great in terms of a digital asset framework. I think that Singapore is really close. Asia in general is leading the pack, which is really different than the internet, when the US led the pack.
I think the US will find its way, but it’s taking a long time in terms of the US paving the way with clear regulations for institutions to use digital assets.
And until you have that you’re not going to see some of the bigger players come in and transform the space.”
Is a Lack of Regulation Stifling Bitcoin Growth? Cathy Mulligan, co-director of Imperial College London’s Centre for Cryptocurrency Research and Engineering, believes a dearth of regulation is undermining new financial technologies.
US Is Not Fully Compliant With Crypto Recommendations, Says FATF: Global money-laundering watchdog, the Financial Action Task Force (FATF), has said that the U.S. is not fully compliant with its crypto recommendations.
“Minor deficiencies” remain, said the FATF in a report published last Tuesday. For instance, U.S.-registered money services businesses (MSBs) keep detailed records for transactions of $3,000 or more, as opposed to $1,000 required in the FATF recommendations.
“This higher threshold is not clearly supported by low ML/TF [money laundering/ terrorist financing] risks,” said the FATF.
Further, the U.S. does not specifically identify “higher risk” virtual asset service providers (VASPs), as they are largely covered under the broader MSB regime, according to the FATF.
“Therefore, it is not entirely clear whether the current approach is sufficiently risk focused, especially since only 30% of all registered CVC [convertible virtual currencies] providers have been inspected since 2014,” said the FATF.
“On this basis, the U.S. remains rated as Largely Compliant” with crypto “recommendation 15,” said the watchdog.
The FATF rates countries on four levels: compliant, largely compliant, partially compliant, and non-compliant.
The recommendation 15, which came into effect last June, provides guidelines for crypto businesses “to prevent the misuse of virtual assets for money laundering and terrorist financing and the financing of proliferation.”
Crypto businesses, therefore, are required to “obtain and hold required and accurate originator information and required beneficiary information on virtual asset transfers, submit the above information to the beneficiary VASP or financial institution (if any) immediately and securely, and make it available on request to appropriate authorities.”
This is the so-called “travel rule,” which has been a longstanding requirement for global banks when sending each other money on customers’ behalf. But crypto businesses such as Circle, Coinbase and Chainalysis, have previously said that adhering to the FATF guidelines globally could be costly to implement.
Notably, the FATF published revised compliance ratings for all countries, which can be seen here.
Senate Minority Leader Releases Summary of Massive $2 Trillion Coronavirus Stimulus Package: The White House and Senate have reached a historic deal to inject $2 trillion into the economy via cash handouts for workers, enhanced unemployment benefits, loans for small businesses and loans for distressed companies. The bill is intended to throw a lifeline to Americans enduring the economic impact of the coronavirus outbreak. If it passes Congress, it would become the country’s largest rescue package to date.
While the full text of the bill has not yet been released, CBS News reports that Senate Minority Leader Chuck Schumer provided a summary of the sweeping legislation to colleagues on Wednesday morning, calling it an “outstanding agreement”.
The rescue package will provide direct payments of $1,200 to most Americans who earn up to $75,000. Couples who earn up to $150,000 would receive $2,400. Individuals earning over $75,000 may qualify for a decreased amount, and payments would cap out for individuals making more than $99,000.
Unemployment benefits would expand, boosting the maximum benefit by $600 per week and providing laid-off workers with full pay for four months. The measure would also expand eligibility to aid more workers.
Small businesses are allocated $367 billion in loans, while state and local governments are allocated $150 billion.
Hospitals and other health-care providers for equipment and supplies will receive $130 billion in aid, while $500 billion in loans will be allocated for larger industries, including $50 billion earmarked for airlines.
The legislation will also establish an oversight board and an inspector general to oversee loans to large companies as well as prohibit companies owned by President Trump and his family from receiving federal relief.
A stock buyback ban will be in place to prevent corporate abuses. Companies accepting loans would also have to limit executive bonuses.
House leaders are attempting to fast-track the massive emergency package and are hoping to get it resolved by the end of the week. The legislation must first pass in the House before proceeding to Trump’s desk for signature.
US Department of Homeland Security Names Blockchain Managers Part of ‘Critical Infrastructure Industry’ Amid Coronavirus Pandemic: The US Department of Homeland Security (DHS) says blockchain managers are part of a critical infrastructure industry that the country needs as it battles with the coronavirus pandemic.
In a memorandum dated March 19, the DHS Cybersecurity and Infrastructure Security Agency (CISA) enumerates the industries that the government sees as crucial in providing essential services and products during the health crisis. The CISA also names blockchain managers in the food and agriculture industry as among those with critical roles in protecting public welfare and safety during the pandemic.
“Employees and firms supporting food, feed, and beverage distribution, including warehouse workers, vendor managed inventory controllers and blockchain managers.”
Blockchain managers, along with other essential critical infrastructure workers, are directed to maintain their normal schedule amid lockdowns.
In keeping with the directive of the memo, eight US states, namely California, Delaware, Louisiana, Indiana, Michigan, Massachusetts, Ohio and Washington state, now have stay-at-home exemptions for blockchain managers.
Companies such as IBM Food Trust, which allows participants to trace the location and status of food products by using blockchain, require a blockchain manager for their operations.
According to CISA, the exempt workers conduct a range of operations and services maintaining critical infrastructure.
“Functioning critical infrastructure is imperative during the response to the COVID-19 emergency for both public health and safety as well as community well-being. Certain critical infrastructure industries have a special responsibility in these times to continue operations.”
House Democrats Dump Digital Dollar in New Version of Emergency Relief Bill: The idea of a digital dollar fueling emergency payments to Americans is moot. House Democrats have removed all mention of a “digital dollar” and a “digital wallet” in the latest version of its counterproposal to the senate relief package, reversing an earlier draft that included a new digital payment strategy.
The 1,404-page revamped proposal, Take Responsibility for Workers and Families Act, has removed former references to a digital dollar.
A previous version outlined a plan to use a digital dollar that would have been maintained by the central banking system, sending relief funds to eligible US residents via a digital wallet in an effort to mitigate the economic fallout from the coronavirus
According to the current draft, US residents would receive $1,500 per person, plus $1,500 per child.
“Economic Assistance Amount
For purposes of this section, the term ‘economic assistance amount’ means, with respect to any taxpayer for any taxable year, the sum of
(1) $1,500 ($3,000 in the case of a joint return), plus
(2) $1,500 multiplied by the number of qualifying children (within the meaning of section 24(c)) of the taxpayer for such taxable year (not in excess of 3 such children).”
Recipients reaching $150,000, $112,500 and $75,000 thresholds for a joint return, head of household and all other cases, respectively, would be expected to repay the funds.
Meanwhile, Democrats and Republicans are still working on a comprehensive emergency package worth upwards of $1.5 trillion. The developing bill comprises a number of proposals including individual cash payments and emergency funds for hard hit industries such as hospitals, airports and public transportation.
SEC Delays Decision on tZERO’s Proposed Security Token Exchange: The U.S. Securities and Exchange Commission (SEC) has delayed the decision of approving or disapproving tZERO’s proposed security token exchange.
In a letter published last Wednesday, the SEC said it is looking for more comments on the proposed Boston Security Token Exchange (BSTX) — a joint venture between BOX Digital and tZERO — which plans to provide a regulated trading platform for security tokens.
The SEC was scheduled to announce a decision on BSTX today, but due to some legal and policy issues, it is extending the deadline. Specifically, the SEC wants to know whether BSTX’s operations are compliant with parts of the Securities Exchange Act of 1934 and whether the information it has provided so far is sufficient.
Commenters have three weeks to submit their initial thoughts, and an additional two weeks to respond to others’ comments.
The BSTX proposal was initially filed in May 2019, which the SEC published for public consultation in October. Last month, an amended BSTX proposal was filed with the SEC, revising the number of market makers required for an initial listing from two to three, and making listing standards closer to those set by Wall Street exchanges.
But, several firms showed concerns at the time. For instance, Nasdaq SVP Joan C. Conley said the BTSX proposal might place an “unreasonable burden on competition” as the underlying distributed ledger would be exclusively available on BOX.
Further, Conley said, the proposal appears to provide “insufficient” detail regarding infrastructure, impact on the anti-fraud and customer protection provisions of the Act, as well as possible investor confusion.
Bank of France Says Ethereum (ETH) and Ripple (XRP) Could Power Central Bank Digital Currencies: The central bank of France is launching an experimental program to investigate the feasibility of rolling out its own central bank digital currency (CBDC) for interbank settlements.
In a document released last Monday, the Bank of France has invited interested parties to participate in the program, with applications due by May 15th.
The plan is to identify a number of economic benefits and potential use cases for a digitized national currency.
“The challenge of these experiments is not to replace these two existing forms of central money, but to identify how innovative technologies could improve the efficiency and fluidity of payment systems and financial infrastructures, allowing a better financial sector to ensure the smooth financing of the economy.”
The central bank is also analyzing how cryptocurrencies can be used to power CBDCs. In a recent internal report, the bank highlights Ethereum (ETH) and Ripple (XRP) as two crypto assets that could be used to issue tokenized central bank digital currencies.
“This solution could be employed to carry out end-to-end transactions, including final settlement, using assets that are tokenised on a blockchain…
Since the attributes of a unit of the wholesale CBDC (file representing the currency unit, keys enabling use) may be integrated in a cryptoasset circulating on another blockchain, which is possible on Ethereum and Ripple, for example, it would then become possible to use the unit on this blockchain.
The wholesale CBDC unit could be exchanged via the secondary blockchain between entities not belonging to the digital currency’s formal circulation network.”
François Villeroy de Galhau, governor of the Bank of France, announced the experimental project in December of 2019 amid plans to make France the first country to issue a CBDC.
The regulator says a CBDC could be the solution for a liquid and safe payment instrument that can keep up with fast-moving technological changes. Other nations, including China and Sweden, are also taking steps to launch their respective digital currencies.
The Bank of Korea has launched a pilot program for testing digital currency. The program would run until December 2021 to check technical and legal requirements: The Bank of Korea, the country’s central bank, has launched a pilot program for testing digital won.
Announcing the news on Monday, the central bank said the program was launched last month and would run until December 2021. The 22-month program is aimed at identifying technical and legal provisions required to create and issue a digital currency.
On the technical side, it would define central bank digital currency (CBDC) design, an operation method of CBDC, and whether blockchain technology would be feasible to implement.
On the legal side, the program would analyze expected legal issues when introducing CBDC, and accordingly prepare a specific amendment plan for the Bank of Korea Act.
The pilot program schedule is set as follows:
- CBDC design and requirements definition: 5 months (March 2020 — July 2020)
- Technology review: 5 months (April 2020 — August 2020)
- Business process analysis and consulting: 4 months (September 2020 — December 2020)
- CBDC pilot system construction and testing: 12 months (January 2021 — December 2021)
It is worth noting that the Bank of Korea said, “it is not necessary to issue CBDC in the near future” because the demand for cash still exists, among other factors. However, it still needs to be prepared to respond “promptly” to future changes in the payments sector.
The Bank of Korea initially hinted at conducting CBDC research in December 2019. The central bank was hiring experts at the time to study CBDCs and analyze other countries’ digital currency initiatives.
Japanese Regulations on Crypto ‘Likely to Help the Market to Mature’: A new report has found strict regulations in Japan are likely to benefit new players in the long term.
Double jump.tokyo, the game developer behind My Crypto Heroes, introduced So & Sato, a Japan-based law firm specializing in crypto and blockchain, to Cointelegraph Japan.
Joerg Schmidt and So Saito from So & Sato told Cointelegraph Japan in an interview that local regulations for cryptocurrency exchanges are “far stricter” than in most other countries. However, they said this would be beneficial in the long run because it encourages the traditional finance world to get involved:
“The market is highly regulated in Japan. What seems to be a regulatory overkill, at first sight, is likely to help the market to mature in the mid to long term. This will allow more institutional players to enter the market and to increase their stake in the digital asset space.”
Regulations pertaining to crypto in Japan generally fall under the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA). Amendments passed for both acts tightening existing regulations enter into force in May.
Under the new PSA regulations, crypto exchanges must employ third-party operators to keep hold of their users’ money, separating it from their own cash flow.
Under local law, cryptocurrency exchanges in Japan must obtain a license through the country’s Financial Services Agency (FSA), while foreign-based exchanges must hold a license both in their home jurisdiction and in Japan. The report details the requirements:
“To register as a crypto asset exchange [in Japan], companies must meet certain criteria. Local companies must be incorporated as a stock company and have a minimum capital of JPY 10 million. An exchange must further ensure that its net assets do not fall below the amount of users’ funds that are stored in a hot wallet.”
As of today, there are 23 exchanges registered with the FSA, although none of them are yet foreign operated. OKCoin, which operates a subsidiary in Japan, was recently granted a license. So explains why the regulations seem to discourage overseas exchanges:
“Some Chinese exchanges have purchased an already-licensed Japanese exchange, so it’s open for foreign exchanges to take over licensed entities in Japan. But under the regulations, if foreign crypto exchanges themselves want to obtain Japanese licenses, they need to have similar licenses in their countries under the current regulations. There are not so many similar exchanges in foreign countries.”
The law firm concluded that the most likely exchanges that could be granted licenses would come from countries such as the United States, where regulations are thorough.
Coinbase, Ripple and Binance Exempted From Holding Payments License in Singapore Until Summer: Singapore’s central bank and financial regulatory authority is granting Coinbase, Ripple and Binance a temporary exemption from new licensing requirements.
In a statement, the Monetary Authority of Singapore (MAS) says the crypto firms have to comply with the licensing requirements under the Payment Services Act 2019 (PS Act) to continue operating in the country once their respective exemption periods expire.
The three crypto firms are allowed to provide digital payment token services without payments license until July 28th.
The PS Act, which took effect in January, requires crypto firms and exchanges operating in Singapore to secure a license following concerns that cryptocurrencies can be used for money laundering and funding terrorism due to the anonymous and borderless nature of the transactions.
“These entities are not licensed under the PS Act to provide the specific payment services, but are allowed to continue to provide the specific payment services.
The exemption will cease after the specified period; or if the entity submits a licence application under the PS Act, on the date that the application is approved or rejected by MAS, or withdrawn by the applicant.”
A number of additional crypto firms are affected by the exemptions. The full list is available through the Monetary Authority of Singapore.
China’s Central Bank Is Paving the Way for Its Digital Currency With Global Tech Giants on Board: China is reportedly working with private industry to accelerate the roll-out of its central bank-backed digital currency. According to a report by the Global Times, several Chinese tech giants, including Alibaba, Tencent and Huawei, as well as China Merchants Bank, have been working with the People’s Bank of China (PBoC) to issue an official digital yuan.
Industry insiders tell the Global Times that Alipay, the financial arm of Chinese e-commerce and cloud computing giant Alibaba, has filed five patents from January through March that are linked to the development of China’s digital yuan.
According to the insider,
“Judging from the patents, the first step of technological development has been basically completed.”
Speaking to the Global Times, Cao Yan, managing director of Digital Renaissance Foundation, says,
“If there is a chance China is considering lowering its interest rate into negative territory as an final option and directing such policy to commercial loans and lending, a circulated digital currency rather than M0 [cash] will be able to achieve that.”
Economic pressures stemming from the coronavirus pandemic, believed to have originated in Wuhan, China, have trumped up efforts to solidify the new currency’s basic features and functions.
Insiders say that the central bank is now drafting legislation for the roll-out following several patents covering a spate of technological challenges, including issuance, anonymous trading support, anti-money laundering, transaction history and digital wallets that will be used to store the currency.
The PBoC has not yet issued an exact launch date for its digital yuan.
Rest of the World
Russian Ministry Wants to Test Crypto and Blockchain in Regulatory Sandboxes: Amid regulatory uncertainty for cryptocurrencies in Russia, a federal ministry introduced legislation that would legalize crypto and blockchain within a special regulatory environment.
The Ministry of Economic Development of the Russian Federation has reportedly prepared a draft law that would allow the testing of cryptocurrency and blockchain developments within a special regulatory sandbox.
According to a report by local news agency Izvestia, the draft law was introduced to the State Duma — the lower house of the Federal Assembly of Russia.
Izvestia reports that the experimental law would pertain to digital technologies incorporated in eight industries including healthcare, financial markets, trade, transport, distance learning, construction, manufacturing and government services.
The draft law would unlock experimental testing of projects like unmanned vehicles, remote diagnostics as well as personal data usage without written consent.
As reported, crypto and blockchain participants of the regulatory sandbox would be granted regulatory relief regarding the minimum size of capital, reserve funds and reporting. Sandbox users would be exempt from the country’s foreign exchange law, the report notes.
According to the Ministry, the Bank of Russia — the country’s central bank — will act as a financial market regulator within the regulatory sandbox. The bank has declined to comment to Izvestia whether it supports the Ministry’s initiative.
The news comes shortly after a legal executive at the Bank of Russia declared that the country’s digital assets legislation will ban the issuance and circulation of crypto. According to the official, Russia’s bill “On Digital Financial Assets” would prohibit nearly everything about crypto except holding. As reported by Cointelegraph, the bill was delayed multiple ties after first being introduced in January 2018. President Vladimir Putin has ordered the immediate adoption of the bill two times since its inception to no avail.
Crypto Crackdown: Brazil’s Largest Brokerage Shutters Bitcoin Exchange: Brazil’s largest brokerage by equity trading, XP Inc., has closed its Bitcoin and cryptocurrency exchange, XDEX, amidst a crypto crackdown across the country. The company announced its decision last Tuesday, citing regulatory and market concerns.
The exchange allowed users to trade and hold BTC and other leading cryptocurrencies. Customers are now instructed to close their accounts within 30 days of the announcement, withdrawing their balances in Brazilian Real (BRL).
According to the announcement,
“Market projection, competition and few regulatory advances reduced the opportunities found at the beginning of the project and were the basis for this difficult decision.”
Cryptocurrency trading volumes are under increasing pressure in Brazil. Last May, the Department of Federal Revenue of Brazil issued guidance on cryptocurrencies requiring transactions above $30,000 Brazilian real ($7,600) to be reported to the tax authorities.
The measure was reportedly adopted to prevent “money laundering, tax evasion, weapons trafficking and the funding of terrorism.”
In February, Brazilian exchanges Latoex and Acesso Bitcoin also shut down after tax officials slapped both companies with fines. Bitcoin.com reports that the latter was facing a suspension order imposed by Brazil’s Securities and Exchange Commission, which threatened a 100,000 Brazilian real ($23,000) fine for lack of compliance.
Pedro Nunes of Acesso Bitcoin stated in February that the exchange was facing declining trading volumes that were triggered by harsh new standards imposed by the Federal Revenue.
According to a report by Portal do Bitcoin, Nunes remarked,
“After the rules of the Federal Revenue, we noticed a significant decrease in the volume traded within our market. We also feel that the market has cooled for smaller exchanges.”
Murilo Portugal, president of the Brazilian Banking Federation, is a vocal critic of cryptocurrencies. In a recent debate held at the Fernando Henrique Cardoso Foundation on the future of digital currencies, entitled ‘Impact of the Digital Revolution on the Financial System’, Portugal condemned cryptocurrencies on all fronts.
“They are actually called coins but they are not coins, which is why it is cryptocurrency. They do not fulfill any of the classic functions of the currency, which is to serve as an account unit, where people can express prices. They do not serve as a means of payment or as a store of value because the volatility is very high.”
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