Russia Finalizes Federal Law on Cryptocurrency Regulation
Legal Crypto Definitions
The Russian government has officially published the draft federal law entitled “On Digital Financial Assets” which regulates cryptocurrencies in Russia.
This draft law was introduced by the country’s finance ministry at the end of December. It was followed by much discussion and amendments to the bill before it was finally released to the public on Wednesday. Article 5 of the document states that “This federal law shall enter into force 90 days after the date of its official publication.” According to the document:
This federal law regulates the relations arising in the creation, issuance, storage and circulation of digital financial assets, as well as the exercise of rights and performance of obligations under smart contracts.
The draft law provides Russia’s official cryptocurrency-related definitions for the first time including the definition of cryptocurrency, tokens, smart contracts, crypto exchanges, and mining.
Cryptocurrency is defined as “a type of digital financial asset created and accounted for in the distributed registry of digital transactions by participants in this registry in accordance with the rules of maintaining the registry of digital transactions.” Meanwhile, a token is defined as “a type of a digital financial asset that is issued by a legal entity or an individual entrepreneur (hereinafter referred to as an issuer) in order to attract financing and is recorded in the registry of digital records.”
As for mining, it is deemed “an entrepreneurial activity aimed at creating a cryptocurrency and / or validation in order to receive compensation in the form of a cryptocurrency.” Mining activities are subsequently described as “legally valid” actions.
Rights to Exchange to Other Assets
The document clarifies that Russians have the right to trade their cryptocurrencies for other digital assets and for fiat currency, stating:
Holders of digital financial assets have the right to make transactions for the exchange of digital financial assets of one type for digital financial assets of another type and / or the exchange of digital financial assets for rubles, foreign currency and / or other property only through the exchange operator of digital financial assets.
“Citizens of Russia will be able to buy and sell cryptocurrencies and tokens only through professional participants of the securities market,” Forbes Russia emphasized.
Exchanges and Wallets
After providing the definition of cryptocurrency exchanges, the document proceeds to explain, as also previously reported by news.Bitcoin.com.
Operators of the exchange of digital financial assets can only be legal entities.
The exchanges must be “established in accordance with the legislation of the Russian Federation and carry out the types of activities specified in Articles 3 to 5 of Federal Law No. 39-FZ of April 22, 1996 ‘On the Securities Market’.” Alternatively, they can also be “legal entities that are the organizers of trade in accordance with the Federal Law of November 21, 2011 No. 325-FZ ‘On Organized Trading’.”
The document also puts restrictions on wallets. A wallet is defined as “a software and hardware tool that allows you to store information about digital records and provide access.” However, the draft law states that a wallet must be “opened by the operator of exchange of digital financial assets only after passing the procedures of identification of its owner in accordance with the Federal Law of August 7, 2001.”
Token Sales and Their Investors
A large part of the document addresses initial coin offerings (ICOs). It specifies rules for token sales such as the issuing procedures and what documents and information need to be disclosed prior to the sales. For each ICO, the issuer must also provide an investment memorandum containing all information related to the issuer and the tokens. The rules state:
An offer for the release of tokens, an investment memorandum, rules for keeping the register of digital transactions, as well as other documents…must be published no later than 3 working days before specified in the offer for the release of tokens.
Furthermore, tokens “may not be offered to potential purchasers in any form or by any means using advertising” prior to the publication of an offer for the release of tokens. In addition, the draft law imposes restrictions on non-qualified investors, stating:
Persons who are not qualified investors in accordance with the Federal Law No. 39-FZ of April 22, 1996 ‘On the Securities Market’ can purchase tokens in the amount of not more than fifty thousand rubles within a single issue.
Written by Bitcoin.com
‘Micro’ Finance Giant Robinhood Makes Big Bet on Bitcoin Trading
Stock trading mobile app provider Robinhood is jumping on the crypto-trading bandwagon.
Announced today, the company, which was founded in 2013 as a way to democratize stock trading, said it plans to roll out bitcoin and ether trading services via its mobile apps next month. Not only does the company hope to attract cryptocurrency enthusiasts to its more traditional products, but it’s also launching the service to catch some of the momentum cryptocurrency has seen as of late.
“We’ve come to understand that cryptocurrencies as an asset have exhibited clear and underlying resiliency and have integrated themselves as part of a diversified and balanced portfolio,” Robinhood co-founder and CEO Vlad Tenev told CoinDesk.
To start with, the service will only be offered to users in California, Massachusetts, Missouri, Montana and New Hampshire, but more states are set to follow.
The company, which is regulated in the U.S. by the SEC and the Financial Industry Regulatory Authority (Finra), plans to offer the crypto trading service for free. Plus, it promises instant transfers on cryptocurrency purchases for amounts of $1,000 or less, a significant improvement on the time it generally takes for people to buy cryptocurrency for the first time.
“We view entering crypto as a way to extend our user base and build our brand.”
Crypto meets stock
While offering the service for free could seem risky, Tenev said, the company hopes to attract investors from the $550 billion cryptocurrency industry to the platform and its products, which already provide revenue streams.
Specifically, the firm charges for a premium service called Robinhood Gold that enables margin trading and after-hours trading. The company also generates revenue by collecting interest on cash and securities in user accounts similar to a traditional bank.
Having raised a total of $176 million in venture capital, the crypto functionality is in line with Robinhood’s push to add more products to its offering. Last month, the firm rolled out options trading and a month earlier, it added a web-based platform to its mobile services.
But the move isn’t just about luring cryptocurrency enthusiasts to its traditional products, it’s also about giving users normally focused on traditional investment vehicles exposure to cryptocurrency.
According to Tenev, the firm recently crossed 3 million accounts and $100 billion in total transacted volume.
Speaking to the company’s interest in bringing together traditional assets with nascent crypto assets, Tenev said:
“We envision a world where people can have your cryptos alongside your stocks, ETFs, and more.”
Robinhood has not built its own cryptocurrency wallet, but will be using a third-party provider. While Robinhood will manage custody of the cryptocurrencies on the user’s behalf, Tenev said the company does not intend to make investments with the cryptocurrency its customers store.
Coins to come
While Robinhood customers will only have access to bitcoin and ethereum trading, effective immediately, the company will let customers add 16 different cryptocurrencies (bitcoin and ethereum included) to their “watchlist,” a feature allowing them to monitor market data, read related news and create price alerts.
Other coins that can be added to the watchlist are bitcoin cash, litecoin, XRP (Ripple), ethereum classic, zcash, monero, dash, stellar, qtum, bitcoin gold, omisego, NEO, lisk, and dogecoin.
For now, Tenev isn’t revealing any possible plans to start trading those other currencies, however, he said that a “listing committee” had been established to analyze factors such as security, functionality and demand to assess cryptocurrencies that could be added to the trading functionality or the market data list.
And, while the company is interested in adding new cryptocurrencies to its trading platform, Tenev said Robinhood would not be adding more complicated asset classes tied to crypto, such as bitcoin or ethereum futures.
“We’re focused right now on the coins themselves, and I think in the near future we anticipate adding a variety of other coins before we extend to new asset classes.”
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Ripple and Zcash Company, the for-profit entity that develops the zcash protocol..
App graphic via Robinhood
World Leaders Are Talking Crypto at Davos
World leaders have struck a cautionary tone on cryptocurrencies in statements made during the World Economic Forum (WEF) event in Davos, Switzerland.
From the Prime Minister of the U.K. to the Treasury Secretary of the U.S., the event has seen a number of notable figures make remarks on both cryptocurrencies like bitcoin as well as blockchain technology as a whole. As reported yesterday, notable finance figures including Goldman Sachs CEO Lloyd Blankfein have already weighed in on the topic, suggesting that cryptocurrencies are quietly emerging as a major area of discussion at the gathering of the global elite.
For example, Steven Mnuchin, who leads the U.S. Treasury Department, remarked on one panel that “illicit use” of cryptocurrencies is a major concern for American regulators.
“My number-one focus on cryptocurrencies, whether that be digital currencies or bitcoin or other things, is that we want to make sure that they’re not used for illicit activities,” Mnuchin remarked, according to a report from Reuters.
Similarly, fellow panelist and International Monetary Fund head Christine Lagarde said bitcoin’s anonymity enables the movement of hidden funds.
“The anonymity and lack of transparency and the way in which it conceals and protects money laundering and financing of terrorism, is just unacceptable. It needs to be taken into account but then there will be innovations coming out of these movements,” Lagarde, a former finance minister of France, was quoted as saying.
Lagarde predicted that national governments are likely to further regulate cryptocurrencies to prevent these use cases. Perhaps proving Largarde’s point, U.K. Prime Minister Theresa May told Bloomberg that cryptocurrencies should be looked at due to how they are used “particularly by criminals.”
Perhaps most significantly, French President Emmanuel Macron called for an international approach to regulating cryptocurrencies, saying “we need to establish a global contract for global investment.”
Weighing the impact
Others at Davos commented specifically on the exact economic impact of cryptocurrencies today, with comments drawn from finance watchdogs from Asia and Europe, among other areas.
China’s securities regulator vice-chairman, Fang Xinghai, said during a panel that it is unclear what impact bitcoin would have on the economy.
Bank of Canada Governor Stephen Poloz echoed those remarks, adding that he believes there would be little impact on the economy if the cryptocurrency market were to crash.
He went on to caution against investing in cryptocurrencies, saying:
“When we had the tech wreck, that was a much more widespread exposure. And the fact it barely had [a] perceptible effect on the real economy because it was not a stock market crash but just a segment of the stock market. But it was highly speculative, there was all kinds of bubbles there.”
The British Chancellor of the Exchequer, Philip Hammond, argued in turn that bitcoin has the potential to grow to a point where it would have a more significant impact.
He called for further regulations “before the amount of outstanding bitcoin becomes large enough to be systemically important to in the global economy,” predicting that it would reach that point “soon.”
Bullish on blockchain
Despite their concerns about cryptocurrencies, world leaders and regulators at Davos remarked positively about blockchain as a technology.
Poloz, for example, called it “a true piece of genius,” adding that he expects it to be applied to different aspects of the economy.
“The reason that it has such appeal in the case of bitcoin is it gives you finality of settlement that eventually grinds through the distributed ledger and therefore you trust that,” he remarked, according to CNBC, on the topic of a central bank-issued digital currency. “Whereas the central bank, if the Bank of Canada, were to issue a digital currency, well you already trust the Canadian dollar, and so you don’t need a distributed ledger in order to believe you just received final payment in your digital wallet.”
Lagarde called the technology “fascinating,” noting its censorship-resistant characteristics, among others.
She also suggested that other innovations are likely to emerge from the blockchain space, cautioning that regulators will need to monitor such developments over time, saying during the panel:
“…there will be new things and innovations coming out of this movement, and we just need to keep them under our watch.”
Image Credit: Drop of Light / Shutterstock.com
Bitcoin’s Lightning Network Has a Problem: People Are Already Using It
Fake money is boring.
At least, that’s the contention of many micropayment enthusiasts, whose impatience for the Lightning Network has led to an influx of real bitcoin being transacted over the network, even though developers caution people against doing so since it’s still in the testing phase.
“The testnet just doesn’t have the same adrenaline rush,” representatives of VPN service TorGuard told CoinDesk, after announcing it would be accepting Lightning payments.
And they’re not the only ones – Blockstream launched a Lightning-only merchandise store using its own Lightning implementation, c-lightning, and a Lightning main net explorer suggests more than $33,000 in bitcoin has been transacted via Lightning Networks.
The excitement is not hard to explain – the off-chain technology promises near-instant transaction speeds with vastly reduced fees – and many enthusiasts believe using the network on the bitcoin mainnet, as opposed to on the testnet, will speed up the time it takes to get the Lightning Network ready for prime time.
“I think it’s time for [Lightning Network] to go live, even if still buggy. But this is the best way to harden it,” one Twitter user wrote.
Yet using the network while it’s still in development has not only led to confusion as to its readiness, but it’s also caused several people to lose real bitcoin funds. Because of that, Blockstream’s decision has been criticized, and others have called opening Lightning channels with hundreds and thousands of dollars of bitcoin “crazy.”
In spite of persistent warnings, though, mainnet implementations of Lightning already have over 205 nodes and 548 channels, at press time, with no sign of stalling.
Yet, what this momentum is slowing, according to developers, is the rate at which Lightning will be safe to use on the bitcoin mainnet.
As Pierre-Marie Paidou, who develops Lightning at ACINQ, told CoinDesk:
“Recently we have seen more and more users configuring their software for mainnet, some thinking that this will make Lightning Network deployment happen faster somehow.”
Distracting the devs
But that’s just not the case.
In a recent interview, CEO of Lightning Labs, Elizabeth Stark, approximated the developer count on the Lightning Network to be as low as ten individuals – a factor which as detailed by CoinDesk could be slowing down the release of the tech. Perhaps due to this shortage, Lightning Labs has appealed to users to stop sending money over the system, stating that, “It has become an unnecessary distraction for our devs.”
“A lot of people want to get on mainnet and it’s hard to tell them that it’s not quite ready and that they should test on testnet,” said Alex Bosworth, a Lightning developer. “I wouldn’t recommend using mainnet unless you are explicitly testing and fully know what you are doing.”
According to Bosworth, who runs two of his own mainnet nodes, one major problem Lightning developers could run into as they move to release a mainnet implementation is needing to be backwards-compatible, so that the upcoming release would interoperate with the current prototypes being developed.
If the nascent mainnet continues to mature – it has doubled in node count in the past 72 hours – it could “reduce the speed of development,” as devs would “have to worry about keeping backwards compatibility with previous versions,” Bosworth said.
Yet, even with all this in mind, there’s no sign active use will stop.
“We plan on keeping our Lightning Network nodes up and running permanently to help support the network,” said TorGuard CEO Ben Van Pelt.
And that aligns with Lightning adopter David R. Sterry’s defense of the active use of the in-development network, saying the criticism “isn’t unanimous,” and adding that developers “could have made it harder to do if [they were] really against it.”
He continued, “There are some issues you’ll only find with real money.”
And mainnet testing has led to the uncovering of several bugs.
According to the International Business Times, Blockstream’s deployment of the tech led to the discovery of 20 bugs in the first 14 hours following its launch. And the CEO of TorGuard, Ben Van Pelt, told CoinDesk the company has encountered a few bugs along the way, but none that have caused the company or its users to lose money.
In this same vein, CSO of Blockstream Samsom Mow tweeted: “Using Lightning Network on mainnet isn’t just bug fixing, stickers and being #reckless. It’s also learning about usability issues that we may not be considering.”
But Paidou thinks this overlooks an important point, saying once the network is live, “Every bug encountered will potentially be orders of magnitude more costly in terms of development resources. That’s why on the way to a stable, working Lightning Network, rushing things will not make us actually go faster.”
The active network “just puts more pressure and adds more distraction to the already small number of people actually doing the development,” he continued, adding:
“Let’s not forget that [developers] are the scarcest resource of all.”