Top Crypto News – 21/06/2018

Amid Crypto Bear Market, Attention Turns to Small-Time Investors


“It’s all being bought by retail.”

Speaking at CB Insights’ Future of Fintech conference Wednesday, Nasdaq president and CEO Adena Friedman hit on a theme almost everyone at the event echoed: the central role normally marginal figures – small-time investors and millennials in particular – play in the cryptocurrency market (as well as financial technology or “fintech” more broadly).

During the first day of the conference in New York City, Friedman spoke about retail investors – who she called “Mr. and Mrs. 401(k)” – and their interest in crypto tokens created via initial coin offerings, or ICOs, a funding mechanism that exploded in late 2017 and early 2018.

And while Freidman expressed “real concerns about transparency” and the fear that ICOs could “take advantage of people,” she acknowledged that the technology opens up access to the early-stage investments, particularly now that IPOs are subject to so many rules that she said “no longer serve a purpose … or protect investors.”

Even though IPOs are a big source of revenue for Nasdaq, Freidman said of ICOs:

“You want to make it so that retail has access to great companies.”

Still, quite a bit of ambivalence was displayed about the fundraising mechanism, made popular by ethereum’s ERC-20 standard but now available in several different forms on many different blockchains.

Even as a conservative Republican with inclinations toward light regulation, Mick Mulvaney, the acting head of the Consumer Financial Protection Bureau (CFPB), raised the frightening prospect of no oversight at all – speculating on what would happen if Mt. Gox “became a regular occurrence.”

However, he went on to recognize that the application of old laws and regulations to cryptocurrency could produce “an absurd or unintended result,” which the CFPB wants to avoid.

Retail will be fine

Still, several speakers noted that retail investors will need both help and protection in interacting with the high-risk, high-reward ICO market.

These are not wealthy investors, after all, who the SEC treats – in Friedman’s words – “like big boys, big girls.”

In contrast, Vlad Tenev, co-CEO of Robinhood, the millennial-focused, mobile-only investing platform, expressed no hint of high-minded concern for retail investors. These small-time traders are Robinhood’s “bread and butter,” he said unapologetically.

The app started out offering commission-free trades in equities, followed by options – commonly regarded as high-risk investments – and then, in January, added bitcoin and ether to the investment options. In May, the company raised $363 million in a Series D to build the “largest crypto platform.”

This move into crypto – which is currently available to people in 16 states – came after large numbers of users began requesting that Robinhood list cryptocurrencies, Tenev said, making no mention of agonizing over how best to protect this group of investors.

If anyone should be worried about their financial futures, it is the stock brokerages and cryptocurrency exchanges that charge high fees, he continued, adding:

“If you look at cryptos, people are paying exorbitant fees right now – four, five percent per transaction – and it’s very similar to brokerage before we came in and lowered fees dramatically.”

Robinhood’s small-fry millennial customers, he seemed to be saying, are too smart to pay those kinds of fees.

Don’t mention the bears

And yet, what went mostly unsaid at the conference was telling.

Bitcoin prices have waltzed off a cliff since hitting nosebleed highs around $20,000 in December 2017. According to CoinDesk’s Bitcoin Price Index, the cryptocurrency is trading for around $6,750 at the time of writing – down more than two-thirds from its all-time high.

But no one seemed particularly eager to talk about the pain this bear market might have caused retail investors. Friedman and Mulvaney hinted at it in the abstract but made no mention of the fact that many retail investors are nursing steep losses right now.

At the same time, speakers and attendees sometimes appeared to salivate over the goldmine that millennials and other small-time investors represent. Soon the younger generation will be worth trillions of dollars, a CB Insights researcher pointed out in one presentation.

And Tenev boasted that over a million people signed up to Robinhood’s waiting list to trade cryptocurrency within the span of a few days – this at the very height of the recent mania. He also mentioned that equity trades on the platform are often in the “tens or hundreds” of dollars – in other words, implying that its users are hardly wealthy (though maybe they’re just cautious).

As such, it was perhaps easy for some to come away from the conference with the same see-sawing misgivings that Mulvaney and Friedman seemed troubled by.

While some ask why regular people shouldn’t be able to access potentially lucrative crypto opportunities, the space is rife with half-truths, sketchiness and outright scams, and in turn, another question presents itself: should often-inexperienced investors be expected to fend for themselves? These questions aren’t likely to go away soon.

But this new asset class, Robinhood’s Tenev said:

“Has staying power, significant staying power.”
Future of Fintech conference image via CoinDesk
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North Carolina Banking Bill Passes — Adds Virtual Currency License Requirements


North Carolina House Bill 86 Includes Money Transmission Changes and Licensure Guidelines in Regard to Virtual Currencies Passes Unanimously

North Carolina Banking Bill Passes — Adds Virtual Currency License Requirements On June 14, 2018, North Carolina’s general assembly unanimously ratified House Bill 86 which adds new language to the state’s permissible investments and statutory trust under the Money Transmitters Act. The bill’s final revision includes legal definitions concerning virtual currencies like bitcoin and other tokens. North Carolina’s legislation also requires the licensure of businesses that work with cryptocurrency activities. Furthermore, the state’s Commissioner of Banks Ray Grace can request data from the licensed cryptocurrency firm at any time. North Carolina House Bill 86 states:

If the licensee possesses virtual currency as permissible investments under this Article, the Commissioner may at any time request that the licensee verify, in a manner acceptable to the Commissioner, aggregate virtual currency transmission obligations outstanding and virtual currency held as permissible investments, including virtual currency stored offline.

Coinbase Believes North Carolina’s Bill ‘Helps Cryptocurrency Companies Comply With the Letter of the Law’

North Carolina Banking Bill Passes — Adds Virtual Currency License Requirements
Coinbase executive Mike Lempres

Commissioner Grace had also helped write the revised edition which included virtual currency definitions and licensee requirements. The firm Coinbase applauded the passage of House Bill 86 and formally thanked the banking commissioner, representatives Tim Moore, Dan Bishop, Jon Hardister, Bill Rabon, Stephen Ross, Jason Saine, and Jeff Tarte for helping bolster the legislation.

“Passage of House Bill 86 exemplifies how regulators and legislators can work together to foster innovation by either licensing cryptocurrency money transmissions or exempting cryptocurrency from money transmission laws,” the Chief Legal and Compliance Officer at Coinbase, Mike Lempres said last Thursday.

By helping cryptocurrency companies comply with the letter of the law, leaders in both states are paving the way for the economic and social benefits of this new technology to flourish within their communities.

The firm also complimented the state of Wyoming for recently passing its blockchain and cryptocurrency legislation after it had issues with the state prior to the passage of Wyoming’s guidelines. A while ago Coinbase suspended its services to Wyoming residents and the firm said at the time that the state’s Division of Banking made Coinbase operations impractical. As both North Carolina and Wyoming change their money transmissions laws the state’s look like they may see more business operations due to the legislative changes.

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Korean Government Details Regulatory Plans After Multiple Crypto Exchange Hacks


Korean Government’s Solution

Following recent reports of multiple security breaches at cryptocurrency exchanges, the South Korean government has revealed the details of the new bill to regulate crypto exchanges, local media report.

Korean Government Details Regulatory Plans After Multiple Crypto Exchange Hacks
Choi Jong-ku.

On Tuesday, June 19, South Korea’s second largest crypto exchange, Bithumb, posted a notice on its website and tweeted that about 35 billion won (~US$31 million) worth of cryptocurrencies was stolen. However, the exchange promptly removed the notice and deleted its tweets about the theft shortly afterward. The Bithumb incident came just 10 days after the country’s seventh largest crypto exchange, Coinrail, claimed that it was hacked on June 10, with the damage estimated at approximately $40 million.

Choi Jong-ku, Chairman of the country’s top financial regulator, the Financial Services Commissions (FSC), commented on the Bithumb news on Wednesday. He was quoted by Newsis saying:

In order to prevent this, we need to make the [crypto] transaction system stable and strengthen the protections of the traders by virtual currency handling businesses.

He explained that an amendment bill to the Act on Reporting and Using Specified Financial Transaction Information has already been submitted to the National Assembly in order to achieve this.

Crypto exchanges are currently “in the blind spot” of the Korean regulators, Newspim wrote, adding that they are “expected to be monitored by the financial authorities through the ‘report system’.” The publication elaborated, “This will block illegal money laundering using virtual currency exchanges and enhance the rules for transactions with commercial banks in cooperative relations such as opening virtual accounts.”

The Revised Bill

Korean Government Details Regulatory Plans After Multiple Crypto Exchange HacksAccording to the proposed bill, the government “will define a virtual currency exchange as a virtual currency handling business,” the publication described, noting that the obligation to prevent money laundering will be imposed on all crypto handling businesses.

“If the bill passes the National Assembly, a virtual currency exchange must be obliged to report to the Financial Intelligence Unit (FIU) as a virtual currency handling business and be regularly supervised by the FIU,” the news outlet detailed. If the authorities find any illegal activities, then the Financial Supervisory Service (FSS) and the FIU will inspect and investigate them.

Son Sung-eun, FIU’s Director of Planning and Cooperation Team, was quoted saying:

We could not afford to let virtual currency centers become a hotbed for money laundering.

The proposed amendment also obligates all financial companies to “preserve financial transaction data and information related to the implementation of obligatory transaction reporting, high cash transaction reporting, customer confirmation, etc. for five years.”

Penalties and Punishments

Sanctions will be imposed on any crypto businesses in violation of or failing to comply with the financial regulators’ rules. They include “recommending the dismissal of officers at the same level as banks and securities companies, suspending business operations, warning of institutions, and corrective orders.”

FIU manager Kim Ji-woong explained one particular disciplinary measure:

The defendant’s fines will be charged at 30 million won [~$27,077] if the virtual currency provider does not go through the customer verification process or does not check or report suspicious transactions.

Hong Sung-ki, Vice Director of Virtual Currency Countermeasures, was quoted by Hankyung reiterating that the enactment of this bill “does not mean that virtual currency exchanges are legally recognized and absorbed into the system.”

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