Vladimir Putin Mandates New Rules for Cryptocurrencies and ICOs
Russian President Vladimir Putin has mandated new regulations around cryptocurrencies, including registration requirements for miners and the application of securities laws to initial coin offerings (ICOs).
The Kremlin published five orders from Putin over the weekend, representing perhaps the most direct move to date by the Russian government to oversee activities around the tech. Not only do the orders from Putin mandate new legal structures around cryptocurrency within Russia, they ambitiously establish a plan to use the technology to create a “single payment space” within the Eurasian Economic Union, which features Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia as members.
Notably, Russia intends to apply rules for initial public offerings to the ICO use case, through which cryptographic tokens are sold to bootstrap a new blockchain network. Putin also ordered that the government, under Prime Minister Dmitry Medvedev, develop a system for cryptocurrency miners to register and pay taxes on their income.
One of the decrees seems to throw its weight by existing efforts within the State Duma, Russia’s national legislature, as well as the central bank to develop legislation that regulates cryptocurrency activities.
“The Government of the Russian Federation, in conjunction with the Bank of Russia, shall ensure that changes are made to the legislation of the Russian Federation providing for…[the] determination of the status of digital technologies used in the financial sphere and their concepts (including such as “technology of distributed registries”, “digital letters of credit”, “digital mortgage”, “crypto-currency”, “token”, “smart contract” “) [b]ased on the obligation of the ruble as the only legal tender in the Russian Federation.”
The Russian government also wants to throw its weight behind efforts by startups to develop new financial services around the tech.
One of the decrees mandates the creation of a so-called regulatory “sandbox,” or a framework within which companies can test products in limited settings. Some countries, including the UK, have set up finance-oriented sandboxes that have attracted a number of blockchain-focused companies to date.
Editor’s Note: Some of the statements in this report have been translated from Russian.
Image Credit: Frederic Legrand – COMEO / Shutterstock.com
Written by CoinDesk
FCA Accuses Banks of Anti-Competitive Practices Towards DLT Start-Ups
The UK financial regulator, the Financial Conduct Authority (FCA) has accused financial institutions of withholding financial services from distributed ledger technology (DLT) start-ups on a wholesale basis. The assessments have been published in a report examining the outcome of the nation’s ‘regulatory sandbox’ one year after its launch.
The FCA Has Accused UK Banks Of “Denying Certain Customers Bank Accounts on a Wholesale Basis”
In a report discussing the achievements and lessons learned one year after the FCA’s establishment of a regulatory sandbox, the financial conduct authority has accused financial institutions of intentionally denying banking services to companies operating in the blockchain industry.
The FCA states that it has “witnessed the denial of banking services first-hand across a number of firms in the first two cohorts of the sandbox. Difficulties have been particularly pronounced for firms wishing to leverage [blockchain technology to] become payment institutions, or become electronic money institutions.”
The FCA states that it is “concerned by what appear to be blanket refusals for certain kinds of applicant firms,” adding that there are “apparent inconsistencies within individual banks regarding how they apply their assessment criteria in approving access to banking services.” The FCA states that the decision by the banking sector to deny services to DLT companies is motivated by “strategic business decisions”, among a range of factors.
The FCA Has Emphasized the Negative Effects That an Inability to Access Banking Services Will Have Upon the Nascent DLT Industry
The FCA states that it is “concerned that denying certain customers bank accounts on a wholesale basis causes significant barriers to entry and could lead to poor competition in certain markets.” The report states that the current banking practices “pose [risks] to innovation and competition.”
The FCA state that “if certain firms cannot secure bank accounts it is possible that they will be unable to meet our conditions for authorization and would therefore be unable to enter the market, even to test in the sandbox.” The report asserts that “some firms have been unable to conduct their tests as initially planned” as a consequence of being sidelined from accessing financial services.
Money Laundering Risks and Blockchain Technology
The FCA asserts that financial institutions repeatedly cited perceived money laundering risks associated with blockchain technology as the basis for refusing to provide services to DLT companies.
The FCA has rejected this argument, stating that it is “clear that effective money laundering risk management need not result in wholesale de-risking”. The report adds that the FCA “work[s] to ensure that the UK financial system is a hostile environment for money launderers.”
Are you surprised by the FCA’s assessments regarding a refusal to provide financial services to distributed ledger technology start-ups? Share your thoughts in the comments section below!
Images courtesy of Shutterstock, fca.org.uk
Crippling Economic Problems Accelerate Bitcoin’s Adoption in Argentina
Every time a big fat whale on Wall Street says that Bitcoin might be bubble, it makes me want to write about why I “hodl” my Bitcoin.
I could lecture on monetary theory and describe the characteristics of a currency and compare them to Bitcoin, or I could about of the supply shortage curve of Bitcoin, or about another of the myriad reasons Bitcoin is likely to be successful in the long term. Today, though, I’d like to talk about adoption.
One look at South America will help you understand why Bitcoin has become such a phenomenon.
In my last article I gave small examples of what already happened in Brazil in monetary terms and how it impacted my perception of Bitcoin’s value. Today I want to move on to Argentina, and address the reasons for that country’s adoption of Bitcoin.
Populist governments don’t know math; after some time the money runs out and it becomes necessary to use “creativity” in their accounting. It is not by chance that there are at least two recent economic facts that impacted the Argentines and made them realize the value of a deflationary currency.
The first was the “Corralito,” when in 2001 the government froze all money in bank accounts for a full year, only allowing extremely limited withdrawals for household necessities.
In 2011, exactly 10 years later, the “cepo” exchange control implemented by former president Cristina Kirchner was created. This move led the country to revive symbols of hyperinflation from the 1980s, such as the figure of the “arbolitos” – money-changers stopped (like trees) at the corners of the tourist spots – and the “cuevas” normal stores with black market exchange for those who wanted to sell dollars in a much better price than in the official government exchange rate, basically the market was paying double.
Just two years after the emergence of Bitcoin, the Argentines felt betrayed by their own national currency, suffering from heavily manipulated exchange rates. Those who suffer from the effects of such monetary policy are likely to look favorably upon a new, deflationary, currency such as Bitcoin. Argentina is ahead of many South American countries in terms of adoption; their crisis began in 2011, while Brazil’s only began in 2014.
Wall Street bankers with their million dollar bonuses might not understand Bitcoin or see any point to it, as they make lofty proclamations from their Manhattan penthouses. But for ordinary people suffering under crippling economic conditions, Bitcoin could literally keep them alive as their national currency drops like a stone.
Written by Cointelegraph
American Express Files Patent on Blockchain-Based Personalized Customer Rewards System
American Express Travel Related Services Co., Inc., the travel and merchant unit of financial services firm American Express (Amex), has filed a patent for a personalized customer reward system using Blockchain technology. Under the system the company will offer customer-specific types of rewards that include points, a digital currency, or specific items linked to a product.
Based on the patent application published by the US Patent and Trademark Office (USPTO) in mid-October 2017, Amex will provide rewards by collecting personalized data about its customers, including their historic spending patterns. The company will use the technology as a resource for storing and updating information.
Part of the application reads:
“The Blockchain structure may include a distributed database that maintains a growing list of data records. The Blockchain may provide enhanced security because each block may hold individual transactions and the results of any Blockchain executables. Each block may contain a timestamp and a link to a previous block.”
Amex’s projects on Blockchain technology
In its bid to effectively compete against its competitors, credit card provider Amex has also advanced projects to develop applications based on Blockchain just like its competitors. The company has also joined the Hyperledger Blockchain consortium in January to facilitate its works on the technology. The consortium is led by the Linux Foundation.
According to Amex chief information officer (CIO) Marc Gordon, they joined the consortium at the time to fully exploit what Blockchain has to offer for their customers and partners, as well as in transforming their own business processes and applications.
“We’re excited to join Hyperledger, as we’re looking to take full advantage of Blockchain to deliver new and innovative products for our customers and partners, while transforming existing business processes and applications.”
Various banks have been on a patents filing spree this year, with Bank of America filing the most number of patents so far.
Early Bitcoin Adopter Jeff Garzik Goes The ICO/Altcoin Route
On Tuesday Jeff Garzik’s company Bloq announced what the company claims is a groundbreaking advance. The “world’s first cross-blockchain cryptocurrency,” Metronome (MTN), is “expected to launch in early December 2017,” a press release announced.
Jeff Garzik’s December Gamble
It’s the “cross-blockchain” phrasing that has enthusiasts buzzing.
According to MTN’s outline, crypto portability can be achieved through “a proof-of-exit receipt when users leave one blockchain, which enables them to enter another.” Through Ethereum and other support networks such as Rootstock (for Bitcoin), users “select the blockchain that suits their requirements for governance and security, or even upgrade the MTN contract if needed,” the company asserts.
The rest of its specifications seem rather in line with industry standards, as tokens “will be managed by its user community, with the system managed by autonomous smart contracts. There will be no third party with any special privileges either within the system or in the MTN marketplace.”
A deeper dive involves reading the twentyseven page MTN Owner’s Manual. Version 0.9 expands on the “cross-blockchain” concept. Business media has termed it ‘interloping’ or ‘jumping’ from chain to chain indefinitely, which is not the case. Obviously, agreements would have to be struck between networked chains before any jumping can take place.
Debate surely will arise as to whether MTN would be welcome. Nevertheless, its manual boldly notes how every “other cryptocurrency is tied to one blockchain network,” reminding there are “risks in being tied to just one railroad: management discord, supply uncertainty, etc. [Furthermore the] market does not know that cross-blockchains are even possible, much less [needed]. Metronome is the first cryptocurrency that is not tied to one blockchain forevermore” (page 5).”
A Halo to Dismiss Contradictions, Maybe
“We’ve built a thousand-year cryptocurrency, something that’s built to last,” co-founder Matthew Roszak told Bloomberg‘s Olga Kharif by phone. By “last” Mr. Roszak refers to MTN’s ability to move between networks, potentially, as an effort to avoid “infighting” for greener pastures.
This is particularly curious because MTN’s project lead and Bloq co-founder, Jeff Garzik, has himself been a vocal advocate of arguably the most contentious debate in crypto circles, the coming 494,784 block height Segwit2x hard fork. Mr. Garzik’s halo of having been a first mover in the ecosystem, however, makes his affiliations noteworthy regardless of philosophical contradictions.
Maybe the idea isn’t so unreconcilable. In fact, perhaps he’s fulfilling his ideas by potentially allowing crypto users to end-run around online exchanges. Fees, price volatility, make these risky moves when trading among currencies. MTN portends to solve those problems. Instead of chains forking, users “fork,” keeping egos in line.
Whatever the case, Mr. Garzik’s latest effort will be scrutinized closely.
Is a cross-blockchain token welcome in the ecosytem? Tell us in the comments below!