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Bitcoin Is Financial Instrument, Clarifies Germany, Crypto Custodians Qualify as Financial Institutions

03/03/2020 by Idelto Editor

The Federal Financial Supervisory Authority of Germany, Bafin, has issued guidance to clarify the status of cryptocurrencies and the regulations that apply to related business activities. The recommendations are based on the country’s current legislation, taking into account the latest changes.

Also read: Turkey to Inspect Cryptocurrency Exchanges as Part of Government Offensive Against Online Gambling

The Keepers of Your Crypto Are Financial Institutions in Germany

The guidance document concentrates on the requirements for the providers of crypto custody services operating in the Federal Republic. Starting from 2020, German banks and other regulated financial institutions are allowed to manage cryptocurrencies such as bitcoin on behalf of their clients, after Berlin adopted amendments transposing Europe’s anti-money laundering rules into national law. German fintechs also rushed to offer similar services.

Regulators begin with defining what a crypto custody business is – the safekeeping and managing of crypto assets or private cryptographic keys that serve to hold and store crypto assets that can be transferred to others, which is a financial service. The definition stems from the German Banking Act, while providing this type of service was made possible by the law implementing EU’s Fourth Anti-Money Laundering Directive. The changes came into force on Dec. 12, 2019.

Germany now considers service providers who offer the exchange of virtual currencies for legal tender and vice versa, or for other digital assets, to be financial service institutions. Cryptocurrencies, depending on their design, are generally regarded as financial instruments. The exchange of cryptos falls into the category of regulated banking and other financial services transactions. The broad definition has been given in order to account for all crypto assets relevant to the financial market, including digital coins that are not considered units of account.

Coins and Tokens Are Digital Representations of Value

The guidance further describes cryptocurrencies as a digital representation of value that has not been issued or guaranteed by a central bank or public body and does not have the legal status of a currency or money. At the same time, a crypto can represent an agreement for, or an actual exercise of, a payment or investment. It can be accepted as a medium of exchange by natural or legal persons and be transmitted, stored and traded electronically. Coins and tokens can also bear rights similar to those of traditional securities.

German regulators have made it clear that any organization which wants to conduct banking business in the country or provide financial services commercially needs permission from Bafin. This applies to domestically operated companies, or in other words entities that are based in the Bundesrepublik even if they serve non-residents only, and companies that have established a local office from which they maintain their business activities.

Firms operating in the crypto sector must apply for a Bafin license by the end of November, 2020. So far, over 40 financial institutions have declared intent to offer services related to cryptocurrencies under the country’s updated legislation, as news.Bitcoin.com reported in February. Entities that already work with crypto assets have until March 31 to at least express intent to apply for a license. This is not part of the actual application procedure, but an important step towards acquiring the necessary license.

Do you think Germany’s efforts to regulate the crypto space will create favorable conditions for the development of the industry? Share your opinions on the subject in the comments section below.

Images courtesy of Shutterstock.

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Tax Rules Hit Brazilian Crypto Exchanges, Forcing Trading Platforms Acesso Bitcoin and Latoex Out of Business

15/02/2020 by Idelto Editor

Tax regulations implemented even before dedicated legislation has been adopted have hit Brazilian cryptocurrency exchanges. Digital asset brokers failing to comply with the new reporting requirements face fines and the stricter rules are hurting smaller platforms, which are shutting down due to dwindling trading volumes.

Also read: Tax Agents ‘Confiscate’ Bitcoin From Criminal but Keep the Coins in His Wallet

Exchanges Struggle With Compliance Costs and Diminishing Returns

One of the affected exchanges, Acesso Bitcoin, points to the current situation created by the new regulations as the main reason for its decision to quit. “After the Federal Revenue Service introduced these rules we noticed a significant decrease in the traded volume,” said cofounder Pedro Nunes, quoted by the crypto news outlet Portal do Bitcoin. “We also feel that the market has cooled off for smaller exchanges,” he added.

Porto Alegre-headquartered Acesso Bitcoin recently advised clients on how to proceed with withdrawing their funds. Anyone who keeps bitcoin core (BTC) with the exchange should transfer the coins to a private wallet or another exchange. Customers who have balances in Brazilian real (BRL) can withdraw the money at any time in accordance with the terms and conditions that were applicable when the platform operated normally.

Latoex, formerly known as the São Paulo-based platform E-juno, is another cryptocurrency exchange that’s shutting down due to difficulties meeting the tax authority’s new requirements. Last week, the closure was confirmed by Diego Velasques, chief executive officer of Latoex Capital, the investment arm of the exchange which separated from the crypto trading platform in December.

Latoex (Latin America Token Exchange) is now looking to sell its assets to other companies and return remaining funds to its clients. The asset manager is also trying to reverse a suspension order issued by CVM, Brazil’s Securities and Exchange Commission, which threatened to impose a 100,000 Brazilian rial ($23,000) fine in case the group does not comply with its decision.

Brazil is yet to adopt legislation tailored to regulate the crypto space. In the absence of a dedicated law, interactions in the industry are now largely governed by Normative Instruction 1888 issued by Secretaria da Receita Federal do Brasil (RFB), the Department of Federal Revenue. The substatutory act was published in May and entered into force on Aug. 1, 2019.

According to the instruction, all transactions carried out through Brazilian crypto exchanges must be reported to the RFB, regardless of the amount traded. Noncompliant brokers and companies that present inaccurate information will be fined. Failure to file a monthly declaration would cost them between 500 and 1,500 rial ($350) per violation. But even without fines, compliance requires additional investments as the whole sector is trying to adapt to the new regulations.

Three Crypto Bills Stuck in the National Congress

Multiple proposals to comprehensively regulate the crypto industry and place it under the oversight of the Central Bank of Brazil have been filed in both houses of the country’s National Congress. The main draft so far, Bill 2303/2015 which was introduced to the Chamber of Deputies almost five years ago, was archived in 2018 and later placed back on the agenda in March 2019. A special commission has been appointed to analyze it and make revisions, if necessary.

Two other bills, PL 3825/2019 and PL 3949/2019, are currently under review in the Senate. Both aim to establish general rules for the cryptocurrency market with particular focus on implementing regulations for digital asset brokers and investor protection measures. No specific time frame has been set for the enactment of either of these pieces of legislation which are still subject to deliberation.

The new challenges for crypto companies in Brazil mirror some regulatory developments European businesses have to deal with. Stricter due diligence requirements were introduced in the EU with the bloc’s Fifth Anti-Money Laundering Directive (AMLD5) that member-states had to transpose into national law by Jan. 10, 2020. Several crypto startups have already closed down or relocated to other jurisdictions in order to preserve their business models and keep their customer base. The European Commission is still working on a comprehensive proposal to regulate crypto-related activities in the union.

What are your expectations about the future of crypto businesses in Brazil? Share your thoughts 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 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, Acesso Bitcoin.

Did you know you can buy and sell BCH privately using our noncustodial, peer-to-peer Local Bitcoin Cash trading platform? The local.Bitcoin.com marketplace has thousands of participants from all around the world trading BCH right now. And if you need a bitcoin wallet to securely store your coins, you can download one from us here.

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Swiss Financial Watchdog Proposes $1,000 Client Identification Threshold for Crypto Transactions

08/02/2020 by Idelto Editor

Famous for its favorable business climate that has attracted hundreds of crypto companies, Switzerland is now expanding its financial regulatory framework. Some of the upcoming rules will increase oversight in the blockchain industry in compliance with new international standards regarding operations with digital assets.

Also read: With New Regulations, Europe’s Crypto Companies May Be Running Out of Options

Finma Updates Regulatory Framework

As part of the regulatory update, the Swiss Financial Market Supervisory Authority (Finma) has proposed changing the client identification threshold values established in its Anti-Money Laundering Ordinance. Finma wants to lower the limit for cryptocurrency exchange transactions that requires user verification from the current 5,000 Swiss francs to only 1,000 francs (a little over $1,000). The regulatory body says it’s “acknowledging the heightened money-laundering risks in this area,” but the measure may not be to the liking of many crypto businesses operating in the country and their privacy sensitive customers.

The amendments come as a result of Switzerland’s new Financial Services Act and Financial Institutions Act. Both bills were passed by the Swiss parliament in June 2018. During a meeting in November 2019, the Federal Council, which holds the executive power, decided that they would enter into force on Jan. 1, 2020 along with ordinances regarding financial services, financial institutions and supervisory organizations.

The two laws oblige Finma to adopt various implementing provisions that will be “mainly technical in nature,” the regulator announced Friday. Finma has already created a new Financial Institutions Ordinance that “regulates the details of professional indemnity insurance for portfolio managers, trustees and managers of collective assets, details on calculating the de minimis threshold for gaining authorization as a portfolio manager, and on risk management and internal control system for managers of collective assets.”

According to the press release, the financial watchdog has prepared amendments to other ordinances and circulars as well. The authority will also abolish three circulars that will become redundant following the adoption of the new regulations. The changes will be put up for public consultation within the next couple of months, Finma notes in the announcement.

Switzerland Complies With International AML Standards

Like many other nations, Switzerland is taking steps to implement the new global standards for crypto assets that were adopted by the Financial Action Task Force (FATF) last year. According to the recommendations of the intergovernmental organization, companies dealing with cryptocurrencies such as exchanges, wallet providers and payment processors should verify clients who transfer more than $1,000 or €1,000 worth of crypto. Virtual asset service providers should also keep and share user data.

Stricter due diligence requirements in Europe were also introduced with the EU’s Fifth Anti-Money Laundering Directive (AMLD5) which member-states were expected to transpose into national law by Jan. 10, 2020. The stringent regulations have already forced a number of businesses from the sector to either close down or relocate to other, friendlier jurisdictions rather than radically change their business models and risk losing customers.

Up until now Switzerland has been a magnet for crypto companies thanks to its positive attitude towards the industry and favorable regulations. Its traditional financial institutions have gradually started to cooperate with blockchain startups. The Crypto Valley, centered on the canton of Zug, is now home to over 800 of these businesses that created 1,000 new jobs in 2019 alone, as a recently released survey revealed. Only time will tell if the Swiss government will manage to keep them in the country.

What’s your opinion about the upcoming Swiss regulations concerning the crypto space? Share your thoughts on these developments in the comments section below.

Images courtesy of Shutterstock, Finma, FATF.

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Malaysia Announces Digital Asset Guidelines

19/01/2020 by Idelto Editor

Malaysia Publishes Digital Asset Guidelines

The Securities Commission Malaysia has published the country’s guidelines on digital assets which set out the regulatory framework for token sales. All token offerings must now be carried out only through platforms approved by the commission. The guidelines also detail the obligations of approved platforms as well as the requirements token issuers must meet.

Also read: Regulatory Roundup: EU-Wide Crypto Regulations, New Rules in Europe, US, Asia

New Digital Asset Guidelines

The Securities Commission Malaysia (SC) announced on Wednesday that it has released the Guidelines on Digital Assets pursuant to section 377 of the Capital Markets and Services Act 2007. The commission explained that the guidelines incorporate feedback it received after issuing the consultation paper on the subject, adding:

The guidelines set out the requirements for all offerings of digital tokens to be carried out through an initial exchange offering (IEO) platform operator that is registered with the SC.

These platform operators must seek authorization from the commission and have a minimum paid-up capital of 5,000,000 ringgits ($1.23 million). Among other requirements, they must carry out the necessary assessment and due diligence to verify the compliance of the issuer, its board, and the token to be offered, the announcement details.

Implementing the New Rules

The guidelines also set out the requirements for anyone seeking to raise funds through token offerings. A prospective issuer must satisfy governance and capital requirements to be eligible to raise funds using this method. It must be a company incorporated and have its main business in Malaysia, with a minimum paid-up capital of 500,000 ringgits. “Issuers are required to demonstrate that their proposed project or business provides an innovative solution or a meaningful digital value proposition for Malaysia,” the commission further stated, noting:

An issuer may raise funds up to a ceiling of RM100 million and tap on investments from retail, sophisticated as well as angel investors, subject to the investment limits provided in the guidelines.

An offering must be accompanied by a whitepaper furnished to the commission and approved by an approved IEO platform. The whitepaper must contain material information on the issuer, the token, and how the funds are to be used. The commission explained that it will conduct “post issuance monitoring of the utilisation of the proceeds” after the offering has been completed, elaborating:

The guidelines will be brought into force in the second half of 2020 to allow potential issuers, platform operators and investors to familiarise themselves with the requirements in the guidelines … until the coming into force of the guidelines, no person is permitted to offer or issue any digital tokens in Malaysia.

The commission will work with relevant platform operators in assessing eligible issuers during the first phase of implementation of these guidelines. It is accepting feedback on the regulatory framework until May 15. Malaysia is already regulating the crypto sector and has approved several crypto exchange registrations.

What do you think of Malaysia’s guidelines for token sales? 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.

Did you know you can buy and sell BCH privately using our noncustodial, peer-to-peer Local Bitcoin Cash trading platform? The local.Bitcoin.com marketplace has thousands of participants from all around the world trading BCH right now. And if you need a bitcoin wallet to securely store your coins, you can download one from us here.

The post Malaysia Announces Digital Asset Guidelines appeared first on Bitcoin News.

With New Regulations, Europe’s Crypto Companies May Be Running Out of Options

13/01/2020 by Idelto Editor

European crypto companies are finding themselves in a changing regulatory environment. The new realities they have to deal with stem from the fifth edition of the European Union’s anti-money laundering directive. AMLD5 introduces stricter customer due diligence requirements and some in the industry have realized their business models, based on key principles of the crypto space, are hardly sustainable under the new rules.

Also read: EU Countries Commence Crypto Regulations as Mandated by New Directive

Netherlands to Introduce Licensing When New Directive Requires Only Registration

Although the amendments had to be transposed into national law by Jan. 10, 2020, member-states are at different stages of their implementation. The approach to complying with the Pan-European directive also varies between countries with some governments opting to expand their regulatory frameworks beyond what Brussels requires at this point. Several EU nations have indicated this is the direction they want to move in and the Netherlands is one of them.

The new Dutch legislation transposing AMLD5 is yet to enter into force. The bill prepared by the government is more restrictive than the directive requires, Luuk Strijers, CCO at Deribit, told news.Bitcoin.com. The Amsterdam-based crypto derivatives exchange announced recently its decision to relocate to Panama because the “new regulations would put too high barriers for the majority of traders, both – regulatory and cost-wise,” the company detailed on its website.

The Senate of the Netherlands is scheduled to discuss the new law on Jan. 28, 2020. Strijers pointed out that the draft framework has the characteristics of a licensing regime, while AMLD5 dictates the obligation to register instead of obtaining a license. “If Deribit falls under these new regulations, this would mean that we have to demand an extensive amount of information from our current and future customers,” the executive said and emphasized:

We believe that crypto markets should be freely available to most, and the new regulations would put too high barriers for the majority of traders, both – regulatory and cost-wise. The implementation of these changes would greatly affect the exchange and its customers.

Therefore, Deribit have decided to operate their platform out of Panama. From Feb. 10, 2020, it will be assigned to a new entity, DRB Panama Inc., a wholly owned subsidiary of the Dutch company, Deribit B.V. “The team and leadership will remain the same, with John Jansen as the CEO,” noted Luuk Strijers. All open client positions, holdings, equity, trade history, fees, rate limits, wallets, portfolio margin arrangements, and other system settings will be transferred from Deribit B.V. to DRB Panama. The platform’s servers, which will also remain the same, will be moved to London. The Deribit CCO explained:

We considered multiple other (EU) jurisdictions in an elaborate regulatory review performed over the past period and came to the conclusion that Panama is the best option for our clients.

Crypto Companies Can Run but Can They Hide?

Despite the relocation, however, certain changes regarding Deribit’s due diligence procedures will be implemented. “As of Feb. 10, 2020 our new KYC requirements will be applicable to all our clients, so our European clients will have to meet the same requirements as clients from (most of the) other counties in the world,” remarked the company executive. Like up until now, residents and citizens of the United States will not be allowed to trade on the exchange. Clients will have to accept DRB Panama as their new contracting partner under a new set of terms and conditions in order to continue to use the services provided by Deribit.

Although various changes in the global regulatory landscape do not apply to Panama, Deribit will introduce two KYC levels. All current users will initially be registered as Level 0 clients, which comes with some restrictions. Withdrawals will be limited to up to 1 BTC per 24 hours. Providing a passport or other government issued ID will raise user status to Level 1, remove the withdrawal limit and unlock portfolio margining, for example. Deribit will use a solution by Jumio aimed at providing client identity verification and services by blockchain forensics firm Chainalysis to monitor transactions for anti-money laundering purposes, Strijers revealed.

The announcement, the company representative assured, “has received positive response from our clients as it clearly outlines the strategy going forward and addresses concerns they might have had.” Deribit’s decision to change the jurisdiction from which it operates shows that relocation can be a solution, but only a partial one for crypto companies that want to keep their privacy-sensitive clients happy. In a world where most governments abide by global standards adopted by international organizations such as the Financial Action Task Force (FATF) and customers’ residence matters, moving a platform to a different jurisdiction is not likely to bring much change for its users.

In December, U.K. crypto payments provider Bottle Pay announced it’s ceasing operations because of the latest update in the EU’s anti-money laundering regulations, despite raising $2 million in seed funding a few months earlier and expanding its user base significantly. “We have taken the painful decision to shut Bottle Pay down completely rather than become subject to these new regulations,” the company stated in a blog post, explaining that “the amount and type of extra personal information we would be required to collect from our users would alter the current user experience so radically, and so negatively, that we are not willing to force this onto our community.”

Panama is one of the alternative destinations suggested to Bottle Pay by members of their Telegram channel. “How come BottlePay can’t just move operations to a new jurisdiction outside of the UK like say Panama?”, asks one of them. “That’s what I also was curious about. But I guess that even they will gonna move to the different jurisdiction people who would want to use bottle in the Europe through the twitter or whatever will not be allowed to do that,” comments another. “So, Malta certifications will not help”…

“Wow sounds more like prison than citizenship,” the conversation goes on. “Bitsahara sent compliance notices yesterday. I can’t help but think that this is EXACTLY everything crypto was created to fight,” remarks someone else. “Why you don’t want to hire attorney to help avoid this stuff?” queries another member, to which Bottle Pay founder Peter Cheyne replies: “we were working on it for months behind the scenes. so we already pursued those kind of avenues, and the feedback led us to the decision we made last week … the trade offs would have been substantial.”

Several other crypto companies operating in Europe have shut down so far due to the new EU regulations, including crypto mining pool Simplecoin and bitcoin gaming platform Chopcoin. News.Bitcoin.com’s questions about Bottle Pay’s plans for the future are as of yet unanswered by the group at the time of publication. On a positive note, however, the Get Started page on its website currently states: “Effortless Bitcoin payments will be back soon.”

What future do you see for crypto companies in Europe and around the world? Share your thoughts on the subject in the comments section below.

Images courtesy of Shutterstock.

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