Regulation

Lithuania Rakes in 6.4 Million Euros From Selling Seized Cryptocurrencies

25/11/2020 by Idelto Editor

Lithuania’s tax authority has sold the cryptocurrencies it previously seized for 6.4 million euros (approximately $7.6 million). The three cryptocurrencies confiscated were bitcoin, ether, and monero. This was the first time the tax authority sold seized cryptocurrencies.

Lithuania Sold Seized Cryptocurrencies

The State Tax Inspectorate (STI) under the Ministry of Finance of the Republic of Lithuania announced Tuesday that it has sold the cryptocurrencies it confiscated in February and transferred 6.4 million euros to the state budget. The tax authority explained that this is the first time it has sold seized cryptocurrencies.

Irina Gavrilova, Director of the STI Non-Payment Administration Department, commented:

The whole process was new for the tax administrator, from the takeover of the confiscated cryptocurrencies to their sale.

She added that in the future, it will be much easier and faster to sell seized cryptocurrencies. “The smooth conversion of cryptocurrencies into euros took almost a day,” the announcement described. The STI explained that the three cryptocurrencies seized were bitcoin, monero, and ethereum. However, it did not provide further information on the seizure or how they were sold.

“In preparation for the conversion of virtual currencies into euros, it was necessary to create a virtual currency wallet — cryptocurrencies received from law enforcement agencies were transferred to it, and the conditions for the sale of the virtual currencies were prepared,” the announcement details.

What do you think about Lithuania selling seized cryptocurrencies? Let us know in the comments section below.

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CFTC’s New Rules Cause Coinbase to Stop Offering Crypto Margin Trading

25/11/2020 by Idelto Editor

Cryptocurrency exchange Coinbase is disabling its margin trading product in order to comply with the new rules set by the Commodity Futures Trading Commission (CFTC).

CFTC’s Rules Affecting Margin Trading Offerings

Coinbase’s chief legal officer, Paul Grewal, explained in a blog post on Tuesday:

In response to new guidance from the Commodity Futures Trading Commission, we are disabling our margin trading product.

Starting on Wednesday, Nov. 25 at 2 p.m. PT, customers currently using Coinbase’s margin trading will not be able to place new margin trades and all open limit orders will be canceled, Grewal detailed. “The product will be taken offline in December once all existing margin positions have expired.”

The chief legal officer further explained that Coinbase believes “clear, common sense regulations for margin lending products are needed to protect” U.S customers, adding that the company “look forward to working closely with regulators to achieve this goal.”

Coinbase began offering margin trading to customers several years ago but discontinued the service after it was investigated by the CFTC following an ethereum flash crash. However, the company rolled out margin trading on Coinbase Pro this year for customers residing in 23 U.S. states, its website details.

While Coinbase did not specify which specific CFTC rules it is trying to comply with, the derivatives regulator published the “Final Interpretive Guidance on Actual Delivery for Digital Assets” in March. Similar rules were used in the CFTC’s enforcement action against Bitfinex back in 2016.

On social media, crypto users are concerned that other exchanges could follow Coinbase and disable their margin trading products. Investor Adam Cochran commented: “Huge blow to US crypto and likely to drive price impact as it will take a lot of money off the table. Wonder how long before other US exchanges are forced to comply.”

Do you think other exchanges will stop offering margin trading to U.S. users too? Let us know in the comments section below.

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SEC Chairman Jay Clayton Explains US Crypto Regulation, Calls Bitcoin a Store of Value

23/11/2020 by Idelto Editor

The chairman of the U.S. Securities and Exchange Commission (SEC) has explained how the U.S. government is regulating cryptocurrency. He calls bitcoin a store of value, noting that its rise is driven by the inefficiencies of the current payment system.

How Bitcoin Is Regulated in the US

SEC Chairman Jay Clayton explained how the U.S. government is regulating bitcoin during an interview with CNBC Squawk Box on Thursday.

He began by responding to a comment made by JPMorgan CEO Jamie Dimon regarding bitcoin regulation. Dimon said that he was not a supporter of bitcoin because in his experience, the government “can regulate whatever they want when they feel like it.” Given the current bitcoin market capitalization of about $340 billion, Dimon asserted that “If it gets bigger and bigger and bigger, it will be regulated.”

Clayton described that at the SEC:

We determined that bitcoin was not a security, it was much more payment mechanism and store of value.

“We did not regulate bitcoin as a security,” the SEC chairman affirmed. He added that during the initial coin offering (ICO) craze, “people were using ICOs and essentially making public offerings of securities without registering them with the SEC,” reiterating that “When people use crypto assets as securities to raise capital for a venture, the SEC regulates that.”

Regarding bitcoin as a payment mechanism, the chairman emphasized:

The government does regulate payments and what we are seeing is that our current payment mechanisms, domestically and internationally, have inefficiencies, those inefficiencies are the things that are driving the rise of bitcoin.

“We are going to see more of that … we are going to see this mature and we are going to see more regulation around the payment space,” the SEC chairman noted.

Clayton confirmed on Nov. 16 his plans to conclude his tenure at the end of the year after serving for more than three and a half years at the SEC. “Chairman Clayton was sworn in on May 4, 2017, and will leave the SEC as one of its longest-serving chairs,” the SEC wrote.

What do you think about the US crypto regulation and Clayton’s view? Let us know in the comments section below.

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End of Western Union Remittance Service to Cuba a Boon for Crypto

23/11/2020 by Idelto Editor

As new U.S. government measures that impose restrictions on remittances to Cuba becomes effective after November 22, Western Union, which has been operating in the island nation since 1999, will close shop. The new rule, which was published on October 27, gave Western Union 30 days to implement new restrictions. The new rule is likely to increase the appeal of crypto assets as Cubans are now expected to find a suitable alternative in a very short space of time.

Targeted Sanctions

At the time of the initial U.S. government announcement, the global remittances giant had promised to find a solution for its Cuban customers. However, in a later update on November 13, Western Union said it was unable to “find a solution in this limited timeframe.”

For its part, the U.S. government says remittances to Cuba can still flow, but “not through the hands of the Cuban military, which uses those funds to oppress the Cuban people and to fund Cuba’s interference in Venezuela.” According to U.S. officials, Western Union’s partner in Cuba, Fincimex is controlled by the Cuban military hence the new measures.

In the meantime, the end of the formal remittances service to Cuba by Western Union is likely to rattle the communist country’s financial position. Cuba counts remittances as one of its top sources of foreign currency and some estimates placed total remittances in 2017 at $3.5 billion.

For Cuban families that rely on remittances sent from the United States for survival, the end of Western Union’s remittance service presents a new challenge. Either the senders will resort to using the sometimes unsafe informal channels or they will simply switch to digital alternatives like bitcoin.

The Growing Use of Cryptocurrency Remittances

Already, reports suggest a growing use of cryptocurrencies by some Cuban residents. Cryptocurrencies are being used to pay for utilities and for cross border payments. Furthermore, the restrictions on human movement imposed to curb the spread of Covid-19, appear to have sparked an increase in usage of cryptocurrencies by Cuban expatriates when sending money.

For instance, peer to peer platform, Bitremesas which enables the sending of remittances via bitcoin, reported increasing business during the lockdown period. According to one report, recipients that use Bitremesas will have their local bank card credited with the Cuban Convertible pesos (CUC) or Cuban Pesos (CUP) upon the transfer of funds from abroad using bitcoin. This system is independent of banks and since it uses decentralized cryptocurrencies like bitcoin, neither the US government nor authorities in Cuba can censor transactions.

Another organization, Cubacripto uses an almost similar process where a “trusted” third party receives the bitcoins. In return, the trusted party will credit the named beneficiary’s bank account with the local currency equivalent. In Cubacripto’s case, all trades are initiated via social media channels like Telegram and Whatsapp.

Peer to Peer Transactions to Grow

As a result of the rule changes by the US government, many Cubans will find it logical making the switch to cryptocurrencies. Sadly, however, due to the overarching effect of the US government’s restrictive measures, regulated peer-to-peer exchange platforms will refrain entering the Cuban to fill the void left behind by Western Union. Already, exchange platforms like Paxful and Localbitcoins have-just like Western Union-been forced to abandon the Cuban market. Cuban residents can access local.bitcoin.com, the noncustodial and peer-to-peer marketplace that allows users to trade BCH with cash and 30+ payment methods.

Consequently, both Cubans abroad and the homebound recipients of remittances will likely be compelled to create crypto wallets. The crypto wallet will not only enable them to receive funds directly from the senders but it will help recipients to bypass certain Cuban government scheme that forces families to buy expensive state-produced goods.

Furthermore, cryptocurrencies will not only help with the safe transfer of funds to the beneficiaries but will also enable recipients to shield these funds from inflation, currency depreciation, and even expropriation.

Do you agree that the new restrictions will spur on the use of cryptocurrencies when sending remittances to Cuba? Share your views in the comments section below.

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OCC Wants to End Banks’ Discrimination of Disfavored Businesses Including Crypto Companies

23/11/2020 by Idelto Editor

The OCC is proposing a rule change that compels large U.S. banks to offer and provide fair access to financial services to anyone that wants them. The proposition seeks to clarify the obligation of large banks to provide fair access to financial services in a manner consistent with the Dodd-Frank Act’s mandate.

Discrimination Against Disfavored Businesses

The Dodd-Frank Act already recognizes a broad and longstanding anti-discrimination principle that individuals are entitled to be treated fairly by national banks. The Office of the Comptroller of the Currency’s (OCC) proposed rule change now seeks to end the persistent discrimination against “disfavored” businesses like crypto companies. The OCC action would have the force and effect of law and enable the agency to take supervisory or enforcement action, when appropriate.

In a public notice on the proposed rule change, the OCC argues that “some large banks continue to employ category-based risk evaluations to deny customers access to financial services.” Apparently, banks have continued with the practice despite previous calls by the OCC for them to “make the services they do offer available to all customers except to the extent that risk factors particular to an individual customer dictate otherwise.”

The OCC has said it wants banks to use the “principle of individual rather than category-based customer risk evaluation” and this has been “reinforced in numerous OCC reports, the testimony of OCC officials, and other agency releases.” However, despite the repeated OCC reminders, banks have not taken heed due in part to pressure from certain organizations. According to the notice:

Banks are often reacting to pressure from advocates from across the political spectrum whose policy objectives are served when banks deny certain categories of customers access to financial services.

The OCC hopes to use the new powers gained from the rule changes to enforce provisions of the Dodd-Franck Act while thwarting powerful lobbyists.

Operation Chokepoint

Meanwhile, reacting to the OCC proposition is Marco Santori, the chief legal officer (CLO) at Kraken cryptocurrency exchange. Santori, who applauds the proposed rule change, claims that “crypto OGs know the single greatest impediment to widespread adoption has been and continues to be the lack of access to banking services.”

Specifically, Santori zeroes on the so-called “Operation Chokepoint“, an infamous plot by certain government agencies that “pressured banks to cut off access to financial services to disfavored (but not unlawful) sectors of the economy.” The OCC, which itself was not part of the plot, argues that the now exposed and discredited operation cannot be the basis for denial of access to financial services.

In a Twitter thread, Santori states that “in its early days, bitcoin was caught up in Operation Chokepoint, and crypto more broadly is still caught up today.” The CLO then gives one reason why it has been necessary for the “government to get to tell a private bank who it must and must not serve.”

Santori explains:

Well, it was the gov that granted banks monopoly power over banking in the first place. If you support a free market, why object to the gov limiting the discretion of the monopolist? This proposal reins in the abusive consequences of the monopoly.

Santori says he is hopeful that “Democrats and other left leaners” will not object to the changes.

What do you think of the OCC’s proposal? Share your thoughts in the comments section below.

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