Legislation

Japan and Philippines Discuss Pro-Crypto Laws, Cooperation Among Asian Countries

13/01/2020 by Idelto Editor

Japanese Minister Naokazu Takemoto and Philippine Cabinet member Raul Lambino of Crypto Valley of Asia recently met to discuss Asian countries’ crypto regulations. They urge the Philippine Congress to introduce legislation on cryptocurrencies and security tokens, calling for cooperation among Asian countries.

Also read: Regs Roundup: SEC Actions, Crypto Tax-Free in Korea, New Chinese Laws

Officials From Japan and Philippines Discuss Crypto Regulations

Naokazu Takemoto, Japanese Minister of State for Science and Technology Policy, visited Manila last week to meet with Secretary Raul Lambino, administrator and CEO of the Cagayan Economic Zone Authority (CEZA), local media reported Saturday. The two officials discussed the future of fintech businesses in both countries and the Asian region, especially those related to cryptocurrencies, blockchain technology, and security tokens. According to the Manila Bulletin:

Japanese Minister Naokazu Takemoto and Secretary Raul Lambino of CEZA urge Philippine Congress to write laws on security tokens, cryptocurrencies, and other financial technologies.

CEZA is the government agency responsible for managing the Cagayan Special Economic Zone and Freeport, located at the northeastern tip of the country, surrounded by the waters of Balintang Channel, China Sea, and the Pacific Ocean. Lambino was appointed member of the Philippine Cabinet by President Rodrigo Roa Duterte on July 5, 2017. Takemoto has been serving as Japan’s minister of state for science and technology policy since Sept. 11, 2019.

Security Token Offerings and Cooperation Among Asian Countries

While the Philippines currently has no law covering security token offerings (STOs), Japan is expected to revise its Payment Services Act in April to include this fundraising method, which the two officials discussed in detail.

“This digitalization is expected to enable people who could not participate in the investment process to make small-scale investments,” Minister Takemoto explained. “STO is now becoming a worldwide funding method of financing, but the STO market in Asia, including Japan, has just begun to develop.” Furthermore, “To achieve the philosophy of enhancing financial markets and enriching the economy by using technologies to benefit the entire population,” the Japanese minister asserted:

Cooperation between financial systems and technologies among Asian countries is essential and must be considered.

STOs have attracted worldwide attention, including in Japan. Five major Japanese financial institutions — SBI Securities, Kabu.com Securities, Daiwa Securities, Nomura Securities, and Rakuten Securities — established the Japan STO Association in October 2019.

New Laws Needed

Security token platforms are able to set up shop in the Philippines’ Cagayan Special Economic Zone and Freeport. CEZA currently has 25 principal Offshore Virtual Currency Exchange licensees from Europe and Asia. Among them is a Japanese security token exchange called Allex. According to the Manila Bulletin, the platform’s tokens comply with Japan’s KYC and AML standards. However, even though security tokens are issued inside the Philippines, the country cannot benefit from them due to the lack of relevant laws, Lambino pointed out, claiming:

Congress needs to enact laws surrounding STOs and virtual currencies and appoint a particular government agency to have jurisdiction to supervise the implementation of this.

Lambino opined that without appropriate laws, CEZA “will end up being a mere host for back offices or business processing office (BPO) for foreign fintech companies while all the buying, trading, and offering payments will be done offshore.”

Allex now helps train Philippine blockchain developers on how to create security tokens. Secretary Lambino believes there is an urgent need for regulations that would help the Philippines become more competitive in this field. Referring to security tokens, he elaborated:

This matter is unstoppable. It’s now being practiced and accepted by many jurisdictions, including the U.S.

CEZA has built the Crypto Valley of Asia in a joint initiative with private developer Northern Star Gaming and Resorts Inc. Efforts are underway to build an airport for the crypto valley.

Meanwhile, the country’s central bank, Bangko Sentral ng Pilipinas (BSP), has authorized 13 crypto exchanges to operate in the country. Companies wanting to sell securities to Filipinos or exchange tokens into fiat currency must be registered with the BSP or the country’s Securities and Exchange Commission. Recently, the authorities in the Philippines, including the central bank, had technical help from the International Monetary Fund (IMF) including in the area of crypto assets.

Do you think Asian countries need better crypto regulations? Should they cooperate for better crypto oversight? Let us know in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Images courtesy of Shutterstock and the Manila Bulletin.

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South Korea Imposes $69M Tax Obligation on Crypto Exchange Bithumb

30/12/2019 by Idelto Editor

The National Tax Service of South Korea (NTS) has decided to withhold income tax from Bithumb’s foreign customers. The total tax to be imposed on their transactions amounts to more than 80 billion won (over $69 million), the leading Korean cryptocurrency exchange announced.

Also read: Poles Hit With Backdated Tax on Crypto Trades

Bithumb to Challenge the Move Which Lacks Legal Grounds

In what has been described by Korean media as the first such attempt by the government in Seoul, the NTS is preparing to withhold the tax even before the country’s legislation has been amended to allow for the taxation of cryptocurrencies. The new provisions are expected to be adopted next year. Quoted by the Korea Joongang Daily, a notice published Friday through the Financial Supervisory Service’s system by Bithumb’s largest shareholder, Vident, detailed:

We confirmed that the NTS will impose 80.3 billion won of withholding tax on our foreign clients.

No specific taxation standards for crypto assets are in place at the moment, the outlet noted in its report. The Ministry of Strategy and Finance announced earlier this month that the 2020 tax law reform will introduce taxation for incomes and profits from cryptocurrency transactions. Industry sources say the Bithumb case is just the first step which reveals that the government will make good on its intentions.

Bithumb’s foreign clients have become the first to be targeted. But it’s actually the exchange that’s supposed to withhold and deposit the tax to the treasury. However, Bithumb is planning to take legal action against the tax claim, Vident clarified in its announcement. That means the payment may eventually be different from the stated amount.

Speaking to the newspaper, Professor Kim Woo-cheol from the University of Seoul remarked that when there’s income, there’s tax as well. He added, however, that the current situation can be described as a “tax bomb” for the digital asset trading platform. “Bithumb can pay 80.3 billion won and afterward collect the amount from its foreign clients, but practically that’s impossible,” the academic elaborated.

Crypto Profits Categorized as Miscellaneous Income

According to other tax experts quoted by the publication, the NTS has based its figure on the amounts withdrawn by foreign users from Bithumb accounts. Their earnings from trading on the exchange have been categorized as ‘miscellaneous income,’ which is subject to a tax rate of 22%. In this case, withdrawals from the platform have been estimated by the government at over 401 billion won, or around $347 million.

Miscellaneous income is one of the possible interpretations of revenues generated in cryptocurrency trading, with the other one being capital gains such as those from the sale of real estate or stock. The chosen category refers to irregular income and tax is collected once a year, while the capital gains tax should be reported paid for each deal. Such a scenario would’ve meant that Korean exchanges would have been required to report every trading record which is impractical and complicates oversight.

Besides this questionable approach, other issues stand in the way of taxation too. Before December 2017, foreigners were free to trade on Korean exchanges but many transactions were conducted under fake names or by anonymous traders, including local residents. Establishing who’s behind a certain trade and the size of their profits would be extremely difficult for trading platforms, if at all possible.

A legal challenge against the tax agency’s decision is very likely to succeed also because the move is not based on any law. Under the current Korean legislation, the state cannot impose taxes on incomes that are no specifically defined in the country’s tax code. Besides, a question that still hangs in the air is whether Seoul views decentralized cryptos as currencies or some kind of assets.

What do you think about South Korea’s decision to withhold tax from Bithumb’s foreign customers? Share your opinion on the subject in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any third party products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Images courtesy of Shutterstock.

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German Fintechs Rush to Offer Crypto Custody Services Under New Law

12/12/2019 by Idelto Editor

Fintech companies in the Federal Republic are quickly moving to develop and offer custodial solutions for digital assets under the new German legislation that will allow banks to store, transfer and trade cryptocurrencies next year. Berlin-based Solarisbank has established a subsidiary that will focus exclusively on the niche. The new entity and another German startup, Finoa from Potsdam, are planning to apply for new crypto custody licenses.

Also read: Skrill Now Lets You Swap BTC for BCH

Solaris Digital Assets to Apply for Bafin License

As an important partner of crypto companies in Germany and Europe, Solarisbank aims to be among the first financial institutions in the Federal Republic to start keeping cryptocurrencies. The tech company maintains a digital banking platform to which other businesses can connect and use its API to build and offer their own financial products and services. It obtained a German banking license in 2016 which allows it to operate also in other jurisdictions in the European Economic Area (EEA).

Solarisbank has been involved with important projects in the European crypto space such as the development of the crypto trading app Bison and the launch of the digital asset trading platform BSDEX by the Boerse Stuttgart stock exchange. Its partnership with cryptocurrency banking provider Bitwala allows customers in 31 EEA countries to have a German bank account with an integrated bitcoin wallet. The new subsidiary which was presented Wednesday will allow it to take full advantage of the new German anti-money laundering law permitting banks to hold cryptocurrencies.

Solaris Digital Assets will offer crypto custody services in compliance with the regulatory requirements of Germany’s Federal Financial Supervisory Authority (Bafin), the leading German business daily Handelsblatt reported. To be able to do so, the entity is going to apply with Bafin for one of the newly introduced licenses for custodial activities in 2020. Cryptocurrency storage solutions will be the new company’s main product at the initial stage but the subsidiary plans to expand its offerings in the future. Michael Offermann, Managing Director of Solarisbank’s Blockchain Factory, told the newspaper:

We have been working intensively on crypto custody for a year and a half. With the new regulation, a good time has come to start. After all, we are not a research institute but a commercial bank.

Bringing Fundamental Change to the Financial Market

According to the publication, Solarisbank will remain true to its well established approach to provide white label solutions. The company will offer the new service only to other financial institutions and business clients while private customers will not be able to open a direct account with the Solaris Digital Assets subsidiary. “So far, we have done well with our focus on business customer offerings. Our partners keep in contact with end customers and that should remain so,” Offermann stressed.

The Solarisbank executive believes that digital assets will fundamentally change the financial market. “As soon as the purchase and safekeeping of bitcoin and company becomes easier, we expect strong growth,” he added. Michael Offermann described the decision to create a separate entity instead of offering crypto custody directly through Solarisbank as a good move in case the regulatory environment in Germany changes again.

Since its establishment about three years ago, the fintech company has more than tripled its revenues to €7.4 million in 2018. At the end of last year, Solarisbank’s balance sheet totaled €120 million, Handelsblatt remarks. Its success is part of the rapid development of the crypto banking sector in the past few months and years that led to the introduction of a variety of new services in the space. Platforms like Cred, for example, offer bitcoin enthusiasts an opportunity to earn up to 10% on their BTC and BCH holdings through custodial services.

Another German startup that’s been working on a new crypto storage product is the Potsdam-based Finoa, which already operates as a crypto depository and claims to be serving over 50 professional investors. The company hopes to receive a provisional license from Bafin around the end of the year and, like Solarisbank, is going to apply for a full crypto custody license in 2020.

Do you think we are going to see more crypto custody services in Europe following the adoption of the new German legislation? Share your expectations in the comments section below.

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New Ukrainian Law Says ‘Virtual Assets’ Can Be Used for Payments

09/12/2019 by Idelto Editor

The Verkhovna Rada, Ukraine’s legislature, has approved amendments that introduce legal terms and definitions pertaining to the crypto space. The new legislation, which aims to transpose the FATF standards into national law, also identifies who is to take responsibility for the oversight of cryptocurrencies in the country.

Also read: Crypto Startups to Get up to $75,000 From the Government of Ukraine

Using Crypto for Payments and Investments

The draft law on the prevention of the legalization of proceeds from crime and the financing of terrorism and weapons of mass destruction proliferation was supported by a significant majority in the Rada. The bill was amended to incorporate “virtual assets” which have been described as property and as a digital expression of value that can be traded or transferred and used for payment or investment purposes.

Ukraine’s anti-money laundering (AML) legislation introduces the standards for virtual assets adopted this year by the Financial Action Task Force (FATF). The members of the inter-governmental organization recently agreed to monitor and assess the implementation of the crypto requirements in different countries, as news.Bitcoin.com reported in October.

The law also introduces the term “provider of services related to the transfer, exchange and storage of virtual assets,” the crypto information outlet Forklog reveals in an article. An interesting detail is that not only corporate entities but private individuals as well will be allowed to offer such services under the new regulations.

All crypto operations will be subject to different levels of financial monitoring depending on the amount and destination of each transaction. The Ministry of Digital Transformation, which has been quite active this year, will be tasked to regulate the circulation of virtual assets in Ukraine. It will also conduct oversight to verify compliance with AML regulations in the crypto sphere.

Kiev to Increase Oversight as Part of EU Commitments

The amendments dealing with cryptocurrencies have been prepared by lawmakers from the multi-partisan parliamentary group ‘Blockchain4Ukraine’ with the help of the EU-funded expert and analytical center Better Regulation Delivery Office (BRDO) and members of the industry. They were voted on second reading this past Friday after the first reading took place on Nov. 1. The adoption of the law is part of Ukraine’s commitments under its association agreement with the EU, Ukrinform noted in a report, and will open the way for a tranche of €500 million in financial assistance.

Laws in Ukraine are typically passed on three consecutive readings. During the first one, deputies in the Rada accept the draft in principle. Then they have two weeks to propose amendments before the second reading takes place. The law is finally approved on a third reading. However, bills are often adopted during the second reading and sometimes even after the first. The status of the FATF-inspired bill on the Rada’s website is currently “adopted” and “being prepared for signing.” New laws in Ukraine are signed by the president.

During the last voting on Dec. 6, a strong majority of over 240 deputies supported the law that also incorporates provisions from EU’s Fourth and Fifth Anti-Money Laundering Directives. One of the amendments introduced during the discussions in the Ukrainian parliament reduces the initially proposed penalties for breaches of the AML legislation. Another one obliges Ukraine’s financial regulators to align their substatutory acts with the new legislation within three months of its entering into force.

The current administration in Kiev, which took power after the election of Volodymyr Zelensky as president and the general election this summer — in which his Servant of the People party won a majority of seats — has been quite positive towards the country’s crypto community. A fund established recently by the Ukrainian government will distribute $18 million in grants among startups from innovative sectors of the economy including the blockchain industry.

Do you think Ukraine has the potential to become Europe’s next regulated crypto-friendly jurisdiction? Share your expectations in the comments section below.

Images courtesy of Shutterstock.

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Initiative to Curtail Negative Interest Rates Gains Traction in Germany

24/08/2019 by Idelto Editor

Ban on Negative Rates Initiative Gains Traction in Germany

Negative interest rates, a common occurrence in Europe these days, are unpleasant for both banks and clients. And financial institutions have been increasingly transferring the bulk of the burden on to their customers. Some political factions in Germany, however, aren’t happy with the trend and are pushing for adequate protection for the ordinary small saver, who is often their voter too.

Also read: Major Swedish Bank Orders Negative Interest Rate on Euro Deposits

Bavarian Leader Wants Berlin to Outlaw Punitive Interest

Germany needs to ban banks from passing negative rates to retail clients and it has to do so with a law. That’s according to Markus Söder, the prime minister of Bavaria, the largest and richest German state, and leader of the Christian Social Union (CSU). The local official with national prominence recently opened a front against subzero rates announcing an initiative in the Bundesrat, the upper house of the federal parliament, to exempt deposits of up to €100,000 from the punitive interest.

Initiative to Curtail Negative Interest Rates Gains Traction in Germany — Markus Söder

According to Söder, negative interest rates do not correspond to the financial culture in the country. German savers are already losing billions due to the low interest rates of the European Central Bank (ECB), he recently told Bild. The German politician thinks a change of course is necessary in terms of interest rate policy at European level. Berlin should make it clear to Christine Lagarde, nominated to become the next ECB president, that negative rates are not a sensible way forward, Söder stressed.

The head of the Bavarian executive power thinks it’s absurd when even banks that have ‘savings’ in their name have to resort to imposing negative interest rates which thus make saving unattractive. “We need a legal ban in Germany that prevents these negative rates from being passed on to small savers,” the official insisted. Unlike small depositors, wealthier savers have started looking for and some have already found alternative investment opportunities. He further commented:

Banks would have to balance their costs differently. Saving must be rewarded and not punished.

Push Against Subzero Rates Gathers Support

The initiative for a ban on punitive interest rates has already garnered political backing on national level. Söder’s proposal was welcomed by Wolfgang Steiger, secretary general of the Economic Council of the Christian Democratic Union (CDU). While CSU is based only in Bavaria, its larger counterpart, the CDU, is present in all other 15 states of the Bundesrepublik. The two conservative sister parties form a common parliamentary group in the Bundestag called the Unionsfraktion.

With these interest rates, Steiger noted recently, German savers pay for the rescue of the euro. Prime Minister Söder rightly demands a shift in the European monetary policy, he stressed, calling his colleague’s efforts important. CDU’s high-ranking representative elaborated that in a functioning competitive order, private property must be protected from arbitrary interference and stated:

Zero and negative interest rates are nothing but expropriation. It is therefore high time for the ECB to reduce its so-called unconventional monetary policy, stop the creeping financing of sovereign debt, and allow interest rates that reward savers and not punish them.

Speaking to the German press, Wolfgang Steiger bluntly warned that the pensions of millions of people are literarally sinking. This, in his view, undermines basic trust in politics while also inflicting permanent damage to the cohesion of society.

Söder’s effort received support from another corner of the political spectrum. The idea sounds good according to Olaf Scholz, Germany’s finance minister and vice chancellor in Angela Merkel’s coalition government. Scholz, who is a representative of the Social Democratic Party (SPD), indicated he is willing to check if small savers can be protected from penalty interest by law. “Negative interest rates are a real burden for private savers,” a spokeswoman for the Federal Ministry of Finance told the Bild. That’s why the ministry is now examining closely whether it’s legally possible to prevent them.

Scholz expects interest rates to remain very low in the next few years. Last week, he was quoted by Reuters saying that companies should seize the opportunity for near-zero borrowing costs to boost private sector investment. He pointed to the United States, where businesses and entrepreneurs are much more willing to put money into new projects. “My wish is that we also achieve such a cultural change here,” Scholz emphasized and added: “Don’t do it my way. I simply put it in my savings account.”

The German finance minister also noted that central banks are currently pursuing a loose monetary policy. The ECB has already signaled it’s planning more measures to stimulate the euro zone economy in order to avoid recession, including a new rate cut to an all-time low of -0.50% in September and restoring quantitative easing efforts in October by purchasing assets worth €15 billion ($16.6 billion).

Some Doubt a Ban on Negative Rates Is Going to Work

A move to ban negative interest rates in Germany is likely to face some challenges. Financial institutions in the Eurozone are now forced to pay a subzero, -0.40% penalty on their deposits with the European Central Bank (ECB). And they are obliged to keep mandatory reserves there. Under these unfavorable conditions, 115 banks are already partially passing on the punitive rates to their private and business clients, an analysis conducted by the German financial portal Biallo shows. Preventing them from doing so with legal means may involve dealing with certain constitutional issues and hence take time to accomplish.

Doubts have been expressed by representatives of legal and financial circles in the Federal Republic as well. According to Daniela Bergdolt from the German Bar Association, the country’s legislature has the power to introduce such restrictions, but a law banning negative rates for small savers would still be difficult to implement because of obligations to provide equal treatment to all depositors. A prohibition would also breach the autonomy of the financial institutions through government intervention in their business.

Others think a ban on subzero rates would be unlawful and push banks into an even deeper earnings crisis. Some have already rejected Söder’s initiative. According to the German Savings Bank Association, statutory prohibitions won’t help in any way. The lenders would pass on the negative interest, which they themselves have to pay to the ECB, regardless of the imposed restrictions. That could be done through higher account management fees, for example. Besides, a German law would not change the risky monetary policy of the European Central Bank in any way.

Danske Bank Investigated for Overcharging Clients

European banks, however, owe customers fair treatment after all, as a recent case in Denmark shows. The country’s financial regulator has prepared a draft report for the police about Danske Bank’s practice of overcharging some of its clients. The Financial Supervisory Authority (FSA) revealed earlier this summer it was investigating the major Danish bank for continuing to sell its Flexinvest Fri investment product despite expectations for poor performance which remained hidden from customers, according to Reuters and the local daily Jyllands Posten. The institution knew the return after fees would be less than the 0% rate on the deposit accounts.

Following these revelations, Jesper Nielsen, Danske’s interim CEO at the time and head of its domestic bank, was fired. And in June, the credit institution promised to compensate investors with 400 million Danish kroner (almost $60 million). Details came out while the bank’s management was trying hard to restore public trust after its name was involved in a huge money laundering scandal in Europe. In damage control mode, the bank recently announced it’s not planning to impose negative rates on personal savings accounts or introduce additional fees for its wealthy depositors.

If you don’t want to be punished with negative interest rates and excessive bank fees, cryptocurrencies offer an attractive alternative. You can save in decentralized digital assets using the services of platforms like Cred which, in partnership with Bitcoin.com, provides you with up to 10% interest on your BCH and BTC holdings.

Do you expect Germany to adopt a law banning subzero interest rates on savings? Share your thoughts on the subject in the comments section below.

Images courtesy of Shutterstock.

Do you need a reliable bitcoin mobile wallet to send, receive, and store your coins? Download one for free from us and then head to our Purchase Bitcoin page where you can quickly buy bitcoin with a credit card.

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