‘A Framework’: UK Issues Cryptocurrency Guidance

The regulatory framework for Bitcoin and other digital assets continues to … as much regulatory pushback as Facebook’s proposed virtual currency.

The regulatory framework for Bitcoin and other digital assets continues to evolve globally, albeit slowly.

The U.K. financial services regulator, the Financial Conduct Authority, finalized its guidance on crypto assets in July, clarifying which tokens fall under its jurisdiction.

The recent announcement from the FCA classifies cryptocurrencies such as Bitcoin and Ethereum as “exchange tokens.” They are not regulated, although anti-money-laundering rules still apply.

The FCA has proposed banning the sale of crypto-derivatives to retail consumers and is proposing rules to address the sale of derivatives and crypto exchange-traded notes.

Three Expert Takes

Aries Wang, CEO and co-founder of Bibox, a digital asset exchange, said in a statement: “The FCA is by no means driving regulatory change but as an influential force in the European market, we foresee the typology and guidance being rolled out as an industry standard. The paper critiques a supposed inherent intention to remove token holder rights in the case of what the FCA categorizes as ‘exchange tokens,’ the umbrella term for cryptocurrencies, crypto coins and payment tokens.”

Charles Phan, the founding engineer of Interdax, a cryptocurrency exchange, said: “Given how the FCA has listened to the industry about which tokens to regulate, actively seeking industry feedback, it is unfortunate they have taken a blanket approach regarding crypto derivatives.”

Crypto derivatives are a “field ripe with innovations benefiting the retail investor,” and it would be unfortunate for U.K. firms to be excluded due to events experienced in the regulated financial world, he said.

“While the guidance seems sensible and aligned with the approach taken in several other countries, their proposed ban of derivatives built on top of the ‘exchange tokens’ seems excessive, ill-suited and could simply push innovation overseas,” he said.

“These products will continue to thrive in the coming years to potentially become the most valuable niche of the crypto ecosystem, replicating what happened in the traditional markets. If the FCA is too stringent on in-demand crypto assets, it risks further isolating itself from a rapidly growing and highly fruitful market.”

Iain Wilson, advisor to NEM Ventures, the venture capital and investments arm of the NEM blockchain ecosystem, said in a statement: “Repositioning the token taxonomy to distinguish security tokens from e-money tokens is positive; regulation for securities should be structured differently from payments,” he said.

“The overall guidance provides a framework for distinguishing between regulated and unregulated tokens, as well as detailing the firm and individual activities that fall within the scope of FCA authorization. Whilst some survey respondents continue to look for global regulatory harmonization, we feel that this is unlikely in the foreseeable future.”

Facebook, Walmart Jump On Digital Asset Bandwagon

In the U.S., Facebook, Inc. (NASDAQ: FB) and Walmart Inc (NYSE: WMT) have both made an extremely bold move into the cryptocurrency space with the planned launch of digital coins.

This has drawn interest from regulatory authorities in the U.S.

In July, Facebook faced scrutiny in a Senate hearing over its plans for the Libra cryptocurrency.

Walmart Coin

In contrast, the reaction to the Walmart Coin has been more agreeable.

Bloomberg reports that Cowen analyst Jaret Seiberg has said that Walmart’s proposed digital coin should not face as much regulatory pushback as Facebook’s proposed virtual currency.

Libra and Walmart’s crypto proposal differ in scale, the analyst said: Facebook has global intentions that do not appear to be shared by Walmart.

CoinCorner CEO Danny Scott said Walmart has filed a patent for a U.S. dollar-pegged stablecoin.

“While the publicity is obviously good news for the crypto industry, we believe it is a waste of time and resources for these companies — something that will eventually show as time passes. There are already a number of decent stablecoins out there, all doing exactly the same job,” he said.

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Kik Fights Back Against ICO Complaints

“An Initial Coin Offering (ICO) is the cryptocurrency space’s rough equivalent to an IPO in the mainstream investment world. ICOs act as fundraisers of …

DIsgraced mobile messaging app ‘Kik’ is battling back against the United States Securities and Exchange Commission who has accused the company of running an illegal initial coin offering.

Thankfully, it’s been a while since we’ve heard about initial coin offerings (or ICOs) so here’s a quick reminder on what they are all about, according to Investopedia:

“An Initial Coin Offering (ICO) is the cryptocurrency space’s rough equivalent to an IPO in the mainstream investment world. ICOs act as fundraisers of sorts; a company looking to create a new coin, app, or service launches an ICO. Next, interested investors buy in to the offering, either with fiat currency or with preexisting digital tokens like ether. In exchange for their support, investors receive a new cryptocurrency token specific to the ICO.”

Kik have been accused of breaking the law by failing to register their ICO back in 2017 by the SEC, since then a lawsuit has been on-going. Now, Kik are fighting back. The ICO in question was run in return for Kin, a token native to the Kik network. Kik in essence do not believe that Kin, the token fits the requirements to be registered with the SEC, therefore Kik did not believe they should have to register their ICO. Moreover, in response to the on-going legal proceedings, Kik have accused the SEC of twisting the facts and essentially lying about the Kik network. According to Financial Times:

“In a lengthy 131-page response to the SEC’s complaint, Kik said the watchdog had made a consistent effort to twist the facts by citing quotes out of context and misrepresenting the documents and testimony that the commission gathered in its investigation. For example, the SEC alleged that a consultant warned the company that Kin needed to be a registered offering. But Kik said the consultant then immediately went on to say that in the case of a community currency, this would not be the case. You’re just selling units of property that you created that are used for a particular purpose in your app, the consultant allegedly said.”

The whole ICO culture has caused a hell of a lot of drama within the cryptocurrency industry. Many ICOs have proven to be scams and ave caused the SEC quite a headache. As a result, ICOs are now far less common, simply because we, as investors are all pretty weary of them. This case with the SEC and Kik is no doubt going to continue for some time, as the two have a battle of words. A formal trial is set to take place soon however, during which we will finally find out who’s right in this instance. Is it the SEC, or do Kik have a point?

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New Jersey issues cease and desist order to two crypto companies

The bureau accuses Zoptax of conducting an unregistered sale of securities through its initial coin offering (ICO). The ICO has a $500,000 soft cap and …

The New Jersey Bureau of Securities has issued emergency orders to two cryptocurrency firms, demanding that they cease offering unregistered securities in the state. In a press release yesterday, the bureau accused the two of violating the state’s securities laws, making misleading statements and withholding pertinent information from investors.

The cease and desist orders are against Zoptax LLC and Unocall. The bureau accuses Zoptax of conducting an unregistered sale of securities through its initial coin offering (ICO). The ICO has a $500,000 soft cap and a $3.4 million hard cap. The bureau further accuses the firm of “making materially false and misleading statements and/or omitting to state material facts in connection with the offer and sale of its securities, including how the funds raised in the ICO will be used, information relating to the persons or entities that developed Zoptax, and its physical address and principal place of business.”

The bureau also accused Unocall of an unregistered ICO. Unocall is alleged to offer tokens to raise capital to build an ecosystem that will offer a token trading platform. The Unocall website is also alleged to offer potential investors the opportunity to earn a guaranteed interest of 0.18%-0.88% per day. Unocall also purportedly made “materially false and misleading statements and/or omitting to state material facts in connection with the offer and sale of its securities.”

New Jersey’s Attorney General Gurbir Grewal commented, “Today’s action demonstrates that our Bureau of Securities stands ready to enforce our investor protection laws in cases involving initial coin offerings and cryptocurrency-related investment schemes. As innovation in the online cryptocurrency-related investment market continues, market players need to understand that the rules still apply to them.”

The bureau’s chief Christopher Gerold reiterated the AG’s views, reminding investors that investing in cryptos was risky.

“With the price of Bitcoin increasing over the last few months and the announcement of Facebook’s Libra, there has been a sharp increase in public solicitations to invest in crypto-related products that appear on their face to be suspect,” he stated, adding, “The two actions today are a reminder to investors that investing in cryptocurrencies or crypto-related products have significant risks and investors must do their diligence before investing.”

New Jersey has continued to crack down on crypto businesses as part of Operation Cryptosweep. The operation is led by the North American Securities Administrators Association and seeks to sniff out unlawful crypto businesses. Last month, the bureau filed a case against Pocketinns, a blockchain company operating in the state for violation of securities laws.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as SegWitCoin BTC coins. Altcoins, which value privacy, anonymity, and distance from government intervention, are referenced as dark coins.

Bitcoin Satoshi Vision (BSV) is today the only Bitcoin project that follows the original Satoshi Nakamoto whitepaper, and that follows the original Satoshi protocol and design. BSV is the only public blockchain that maintains the original vision for Bitcoin and will massively scale to become the world’s new money and enterprise blockchain.

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South Korean Crypto Exchange Coinone Teams With Two Firms To Upgrade Security

… said in a press release that CertiK and Xangle will provide “public disclosure information” and “smart contract audit information” for cryptocurrencies …

David Pimentel

South Korean crypto exchange Coinone has teamed with cybersecurity audit firm CertiK and disclosures company Xangle to improve its security and transparency features.

Coinone, the third-largest crypto exchange in South Korea after the Kakao-backed Upbit and Bithumb, said in a press release that CertiK and Xangle will provide “public disclosure information” and “smart contract audit information” for cryptocurrencies listed on its platform.

Under the partnership, Xangle will be using its cryptocurrency disclosure platform to provide protection for crypto investors and make projects more transparent. CertiK, on the other hand, will use advanced mathematics to verify if programs are safe and secure.

“Coinone strives to establish a listing system and strengthen the public function of the exchange (market surveillance, disclosure, and internal listing) in order to harmonize the two goals of actively listing cryptocurrency and securing investor confidence,” the exchange said.

The news came after Coinone announced that its subsidiary Coinone Transfer has partnered with SBI Ripple Asia, the Asia-Pacific partnership of Japanese financial services company SBI Holdings and blockchain startup Ripple, to promote Ripple’s overseas remittance solution and foster domestic blockchain ecosystem in South Korea.

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New Jersey Securities Watchdog Issues Cease And Desist Orders Against Two ICOs

… regulators during ‘Operation Cryptosweep,’ are a reminder to investors that while not every initial coin offering or cryptocurrency-related investment …

David Pimentel

The Bureau of Securities in New Jersey has issued two cease-and-desist orders to stop online crypto-related investment entities from fraudulently offering unregistered securities.

The two emergency orders against Zoptax and Unocall were announced by the Office of the Attorney General as part of “Operation Cryptosweep,” aimed at cracking down on unregistered and fraudulent crypto-related investment products, such as initial coin offerings (ICO).

According to the Bureau, the two firms violated securities laws and made materially false and misleading statements in connection to their ICOs. Zoptax was seeking to raise between $500,000 and $3.4 million for its Zoptax Coins, while Unocall was offering a website-conducted ICO, as well as opportunities in its ‘Staking Program’ which purportedly provides guaranteed interest of 0.18% to 0.88% per day.

“The Bureau’s actions today, and the actions taken by other securities regulators during ‘Operation Cryptosweep,’ are a reminder to investors that while not every initial coin offering or cryptocurrency-related investment is fraudulent, there are significant risks involved with these products,” said Paul R. Rodríguez, Acting Director of the Division of Consumer Affairs. “Investors must be on alert and not be tempted to invest in cryptocurrency-related investments without first vigorously vetting any transaction.”

To date, the Bureau has issued eight crypto-related enforcement actions. In July of this year, the Bureau filed a lawsuit against Pocketinns, a Princeton-based blockchain-driven online rental marketplace, and its president Sarvajnya G. Mada, alleging that they offered and sold more than $400,000 of unregistered securities from New Jersey in the form of a cryptocurrency.

“With the price of bitcoin increasing over the last few months and the announcement of Facebook’s Libra, there has been a sharp increase in public solicitations to invest in crypto-related products that appear on their face to be suspect,” said Bureau Chief Gerold. “The two actions today are a reminder to investors that investing in cryptocurrencies or crypto-related products have significant risks and investors must do their diligence before investing.”

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