Time for HK to take a serious look at crypto issues

The order also requires financial institutions across the mainland to adopt necessary and effective measures to prevent their existing payment channels from being used for virtual currency trading, in a determined attempt to crack down on cryptocurrency users and investors in China. Likewise, the South …

Coincheck, a cryptocurrency exchange based in Japan, announced last month that it suffered a loss of US$500 million in customer assets as a result of a massive hacker attack.

The incident has once again renewed international concern about the current state and potential risks related to cryptocurrencies.

At present, countries around the world differ in many ways when it comes to the policies and regulatory approaches toward cryptocurrencies.

Take Japan as an example. In recent years the country’s financial regulatory authorities have remained relatively receptive to the trading of cryptocurrencies.

Last year the Japanese government even officially recognized bitcoin as a legitimate means of transaction and exchange, and allowed a total of 11 cryptocurrency exchange platforms to register and operate in the country.

According to statistics, currently nearly one-third of the world’s total bitcoin transactions are cleared in the Japanese yen.

Apart from Japan, Israel has also been relatively positive about virtual currencies.

Shmuel Hauser, former chairman of the Israel Securities Authority (ISA), once said that the Israeli government must clearly differentiate among the blockchain, bitcoin and initial coin offerings (ICOs).

He urged Tel Aviv to establish a proper regulatory framework over cryptocurrency trading in order to set the country on a steady course towards becoming the world’s ICO hub.

On the other hand, some countries and regions, such as Russia, Dubai and Sweden, have adopted a different approach.

Instead of setting up legal frameworks to regulate the transaction and trading of digital currencies, these countries have taken one major step further by issuing their own official cryptocurrencies in order to make it easier for their regulatory authorities to trace inbound and outbound capital flows.

More importantly, by issuing their own virtual currencies, these countries can eliminate black market trading and reduce their tax losses.

However, while some countries have remained receptive to cryptocurrencies and even recognized them as legal currencies, there are also some others, such as China and South Korea, which have remained highly skeptical about the virtual units.

As far as China is concerned, it has been taking a tough stance on cryptocurrencies.

For instance, after banning all ICOs of virtual currencies and shutting down all transaction platforms in the mainland last year, the People’s Bank of China recently issued an order which bars banks and their subsidiaries from providing any form of transaction services for cryptocurrency trading.

The order also requires financial institutions across the mainland to adopt necessary and effective measures to prevent their existing payment channels from being used for virtual currency trading, in a determined attempt to crack down on cryptocurrency users and investors in China.

Likewise, the South Korean government also banned all forms of cryptocurrency ICOs, and required that all virtual currency trading activities must be carried out only in an identifiable manner.

In the meantime, the Seoul administration is also working aggressively to push a bill through the Korean parliament under which all cryptocurrency exchange institutions and their trading activities could be banned within the country.

In comparison, the US, Britain and Singapore have been steering a middle course over the trading of digital currencies.

Simply put, these countries are largely sitting on the sidelines over the trading of virtual currencies, and have no plan yet to ban them altogether.

However, regulatory authorities in these countries are keeping a close eye on any cryptocurrency trading activity that might violate existing financial regulations, and are working painstakingly to warn their citizens against the potential risks of crypto investments.

The biggest challenge posed by the rise of cryptocurrencies is that these digital currencies aren’t tied to any country and can transcend borders easily. As a result, it would be very difficult for any individual sovereign state to oversee and regulate cryptocurrency trading effectively.

That said, I believe in the long run, the establishment of a multilateral regulatory framework would be necessary in regulating the trading of virtual currencies. The European Central Bank has already called upon countries that will be attending the G20 summit next month to pay more attention to the cryptocurrency issue.

As to Hong Kong, the Financial Services and the Treasury Bureau and the Investor Education Center have made a joint effort in educating the public about the risks of cryptocurrency investments.

Nevertheless, I believe public education campaign alone is not enough. The government should also study how to establish a regulatory mechanism for the trading of virtual currencies so as to protect the interests of our citizens and investors.

This article appeared in the Hong Kong Economic Journal on Feb 13

Translation by Alan Lee with additional reporting

[Chinese version 中文版]

– Contact us at [email protected]

RC

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Korea Accounting Institute Considers Classifying Virtual Currencies into Liquid Assets

In addition, their value as an asset will be fair value in the case of crytocurrencies with active markets where price information is reliable as the market has high transaction volume and transaction frequencies but historical cost will be regarded as the value of virtual currencies without active markets.

The Korea Accounting Institute said on February 21 that the institute is considering a plan to classify crytocurrencies such as Bitcoin into liquid assets in financial statements. The institute can, however, allow them to be classified into non-current assets depending on the purposes and periods (one or more years) of holding them.

In addition, their value as an asset will be fair value in the case of crytocurrencies with active markets where price information is reliable as the market has high transaction volume and transaction frequencies but historical cost will be regarded as the value of virtual currencies without active markets.

The Korea Accounting Institute added that they were discussing damage treatment methods when the book value of virtual currencies is lower than expected selling prices.

This discussion about a virtual currency accounting standard was had at the request of Bithumb, a December settlement corporation, among virtual money market exchanges. Bithumb is an exchange that is subject to the External Audit Act along with Korbit and Coinone. “A virtual currency accounting standard is still in the draft stage. We need to discuss more about it,” said an official of Korea Accounting Institute said. “We will prepare the virtual currency accounting standard by next month.”

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PayPal CFO: Bitcoin’s Success is Very Likely

Earlier this year, PayPal CEO Dan Schulman called Bitcoin “an interesting experiment” in a Facebook Live event, while also noting that “it could change the world.” At the same time, Xapo CEO Wences Casares even went so far as to predict a future in which one single Bitcoin could be worth $1 million.
· February 21, 2018 · 8:00 pm

There’s a lot of doubt surrounding Bitcoin’s potential as a viable, real-world currency – but PayPal’s chief financial officer sees only positive things in the dominant cryptocurrency’s future.


A ‘Very High Likelihood’ of Success

According to John Rainey, PayPal’s chief financial officer, Bitcoin, and other cryptocurrencies will one day become a popular method of payment – just not yet. Rainey toldThe Wall Street Journal:

Given the volatility of bitcoin right now, it’s not a reliable currency for transactions because if you’re a merchant and you have a 10% profit margin, and you accept bitcoin, and the very next day bitcoin drops 15%, you are now underwater on that transaction.

Nevertheless, Rainey recognizes Bitcoin as a legitimate currency, even if it’s not quite ready for mainstream adoption yet. Says Rainey:

At some point there is very high likelihood. The technology, there is real merit to it. I do think, though, it will be years down the road before we see the kind of ubiquity and acceptance that make it a form of currency that is used every day.

PayPal and Cryptocurrency

This is not the first time PayPal has shown support for Bitcoin and cryptocurrency. PayPal was one of the first companies to accept cryptocurrency as a currency on its platform, allowing merchants the option to be paid in Bitcoin as early as 2014/2015.

Earlier this year, PayPal CEO Dan Schulman called Bitcoin “an interesting experiment” in a Facebook Live event, while also noting that “it could change the world.” At the same time, Xapo CEO Wences Casares even went so far as to predict a future in which one single Bitcoin could be worth $1 million.

Differing Opinions

Of course, not everyone agrees with Rainey’s and Schulman’s optimistic long-term assessment of Bitcoin’s future as a currency. Earlier this week, Bank of England Governor Mark Carney claimed Bitcoin has already failed on virtually every front, stating:

It has pretty much failed thus far on … the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange.

Differing Opinions

Venture capitalist and Tezos investor Tim Draper, however, recently claimed Bitcoin is “the future” of currency while claiming a large portion of the world’s currency will someday be comprised of cryptocurrencies.

What do you think about Bitcoin’s potential as a mainstream currency? Do you think digital currencies are the way of the future? Let us know in the comments below!


Images courtesy of Reuters, Fortune

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Japanese Crypto Exchange Accidentally Gives Bitcoins Away for Free

Bitcoin skeptics such as JPMorgan CEO Jamie Dimon have often claimed that Bitcoin is “worth nothing.” For approximately 18 minutes at one cryptocurrency exchange in Japan, these skeptics were right.
Yen Japan BitcoinYen Japan Bitcoin
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Bitcoin skeptics such as JPMorgan CEO Jamie Dimon have often claimed that Bitcoin is “worth nothing.” For approximately 18 minutes at one cryptocurrency exchange in Japan, these skeptics were right.

On Tuesday, Zaif — a cryptocurrency exchange operated by Osaka-based Tech Bureau Corp. — revealed in a statement that a technical error had allowed several traders to purchase Bitcoin for 0 yen, a considerable discount off its fair market value of ~1.2 million yen.

Zaif said that the glitch occurred during an 18-minute window on Feb. 16, and seven customers were able to purchase BTC at the 0 yen rate. The company has since corrected customer balances, although it said that is still trying to sort the matter out with one of the traders, who apparently attempted to transfer the coins out of the exchange following the transaction.

The glitch caused the system to temporarily report inaccurate trading data but otherwise had no effect on the platform’s other users.

“We apologize for any inconvenience and inconvenience caused to you by our customers,” the company said in the statement, according to a rough translation. “We will strive to prevent recurrence and we will continue to work on improving our services.”

According to data from CoinMarketCap, Zaif processed $17.3 million worth of trading volume over the preceding 24 hours, ranking it 51st among exchanges that charge trading fees. This, however, does not include the exchange’s BTC volume, which the website reports as depicting abnormal activity.

Reuters reports that Zaif is one of 16 cryptocurrency exchanges that are currently licensed by Japan’s Financial Services Agency (FSA). Another 16 — most notably the recently-hacked Coincheck — have been allowed to continue operating while their registration applications are pending.

The FSA conducted spot inspections of these exchanges following the Coincheck hack, which occurred at the end of January and resulted in the theft of $530 million worth of NEM tokens (XEM), making it the largest ever cryptocurrency exchange heist.

As CCN reported, the 16 licensed exchanges are currently drafting plans to establish a self-regulatory body that will be registered with the FSA.

Featured image from Shutterstock.

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What do people think of Bitcoin?

Since Bitcoins‘ meteoric rise to above $10,000/BTC last year, plenty of opinions about the cryptocurrencies, and others like it, permeated into mainstream economic discussion. These opinions range from cautious enthusiasm, to abject opposition. With the increased interest in regulating private …

Since Bitcoins’ meteoric rise to above $10,000/BTC last year, plenty of opinions about the cryptocurrencies, and others like it, permeated into mainstream economic discussion. These opinions range from cautious enthusiasm, to abject opposition. With the increased interest in regulating private currencies, these opinions and the people who hold them are bound to make an impact on these markets.

For the most part, West Virginia’s policymakers are in clear opposition. Even in 2014, before the rise in price, Sen. Joe Manchin wrote a letter to federal regulators, such as Federal Reserve Chairman Janet Yellen, calling for the total ban of bitcoin, according to a press release from the senator. Last year, the state legislature, at Manchin’s urging, passed stricter money-laundering legislation specifically mentioning cryptocurrency.

The sentiment channeled by Manchin is largely paternalistic, geared at protecting people from the instability of the currency or the illicit activities often associated with it.

In his letter, Manchin stated, “This virtual currency is currently unregulated and has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy.”

The argument that cryptocurrency is destructive to the economy is fairly weak. Cryptocurrencies simply don’t have the scale to make much impact across the economy, even now. What Manchin likely means is that some people may speculate on bitcoin and suffer from losses. Of course, anyone who did speculate on bitcoin in 2014 is probably doing very well right now.

Although Manchin’s letter was largely considered for show, West Virginia’s electorate loves paternalistic government — as any speech from Gov. Jim Justice will show — there are economists with similar beliefs. Most notably Nobel Prize winning economist Joseph Stiglitz, who called for banning bitcoin.

“It’s a bubble that’s going to give a lot of people a lot of exciting times as it rides up and then goes down,” Stiglitz said on Bloomberg.

The other perspective on cryptocurrency, which is arguably the broader school, sees it as a promising experiment that should be allowed to continue. These economists wouldn’t tell you cryptocurrency is a great investment, but they’re not convinced they must ban you from taking the risk.

Mario Draghi, president of the European Central Bank (ECB), stated it is not the job of the ECB to regulate bitcoin, according to Reuters. Other economists cited the promise of the blockchain technology, which is the bedrock of how cryptocurrency works, to make finance more secure.

There has even been some talk of central banks or international institutions establishing their own forms of cryptocurrency. According to CNBC, Christine Lagarde, managing director of the International Monetary Fund (IMF) has not ruled out the possibility of using crypto-technology — noting the Special Drawing Right, a financial asset created by the IMF that could potential incorporate the technology.

Many activists will even point back to statements made by Nobel Prize winning economist Milton Friedman (who revolutionized monetary economics), discussing how the internet could change currency in a very similar way that cryptocurrency does, well before bitcoin launched.

The cautious optimists seem likely to take the day in this case. Not only is it just not possible to shutdown cryptocurrencies, but people will not take well to being told they are being protected from a risky investment when it is their own money to risk.

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