Taiwan’s Legislature Amends AML, CFT Laws to Place New Requirements on Crypto Exchanges

Taiwan’s legislature has passed amendments to existing anti-money laundering (AML) and counter terrorism financing (CFT) laws to place new requirements on crypto exchanges. The development was reported by FocusTaiwan, the English language news website of Taiwan’s national news agency, on Nov. 2.

Under the new changes to Taiwan’s Money Laundering Control Act and Terrorism Financing Prevention Act, the Legislative Yuan — the Taiwan-based unicameral legislature of the Republic of China — has given Taiwan’s Financial Supervisory Commission (FSC) the authority to bar anonymous crypto transactions.

The FSC can now demand that exchange operators require their customers to register using real-names: if they fail to do so, banks can block anonymous transactions and report them to the watchdog if they deem them to be suspicious.

Taiwan’s Ministry of Justice (MoJ) has said that the changes align the country more closely with international AML standards, and that the ensuring “good” AML and CFT practices will help to foster a “compliance culture and mindset” among local businesses and institutions.

The ministry further remarked that earlier amendments to the country’s Money Laundering Control Act had “not “fully prevented related financial crimes,” and that the latest action from the Legislative Yuan is expected to better Taiwan’s performance in its upcoming assessment by Asia/Pacific Group on Money Laundering (APG), due to take place Nov. 5-16.  

Last month, the Financial Action Task Force (FATF), an international organization that develops policies and AML standards, implemented changes to its AML and CFT standards for firms involved in crypto-related activities, such as exchanges and providers of financial services for Initial Coin Offerings (ICOs).

Taiwan has previously announced plans to release release draft Initial Coin Offering (ICO) regulation by June 2019, with the FSC chairman telling the Legislative Yuan on Oct. 22 that “the more we regulate, the more this new economic behavior wanes.”

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Hong Kong Issues New Rules to Regulate Cryptocurrency Funds and Exchanges

Hong Kong’s securities regulator issued a statement setting out guidelines for funds dealing with cryptocurrency Thursday, Nov. 1, saying it could move to formally regulate exchanges.

In what it called “guidance on regulatory standards,” the autonomous Chinese territory’s Securities and Futures Commission (SFC) set in motion a series of steps that chief Ashley Alder hinted would culminate in a formal regulatory environment.

Hong Kong differs significantly in its approach to cryptocurrency from mainland China, with cryptoasset exchange and related activities legal, though formal regulation is pending.

“The market for virtual assets is still very young and trading rules may not be transparent and fair,” Bloomberg quoted Alder as saying during a fintech forum Thursday:

“Outages are not uncommon as is market manipulation and abuse. And there are also, I am afraid, outright scandals and frauds.”

The latest proposals pertain to any fund managers investing more than 10 percent of their holdings in cryptocurrency, with entities serving exclusively professional traders able to join a sandbox scheme designed to give more room to develop new products and services.

For others, a licensing process will require entities to inform the SFC about their business practices.

The statement reads:

“In order to afford better protection to investors, the SFC considers that all licensed portfolio managers intending to invest in virtual assets should observe essentially the same regulatory requirements even if the portfolios (or portions of portfolios) under their management invest solely or partially in virtual assets, irrespective of whether these virtual assets amount to ‘securities’ or ‘futures contracts.’”

Cryptocurrency exchanges could also fall under the the SFC’s supervision more directly in future.

“…It is proposed that the standards of conduct regulation for virtual asset trading platform operators should be comparable to those applicable to existing licensed providers of automated trading services,” it adds.

Hong Kong’s sharpening of its regulatory oversight comes while more and more jurisdictions move to do the same, as Bitcoin and major altcoin markets stabilize and a general acceptance of their longevity begins to crystalize.

Last week, Taiwan announced it would release dedicated rules governing Initial Coin Offerings (ICOs) by June next year, having previously chosen not to regulate the sector.

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Chinese Crypto Bans on WeChat Accounts, Events, and Exchanges: What Happened and Why

This week, the government of China has cracked down on crypto-related WeChat accounts, blockchain events and digital asset exchanges, solidifying its negative stance on cryptocurrency trading and the Initial Coin Offering (ICO) market.

WeChat ban and PBoC’s warning against ICOs

On Aug. 22, Cointelegraph reported that WeChat, China’s biggest messaging app that has over 1 billion active monthly users, banned the accounts of cryptocurrency investors, users and businesses.

At the time, Lanjinger, a local financial media outlet, reported that the accounts of Deepchain, Huobi News, Node Capital-backed Jinse and CoinDaily were suspended or taken down permanently, as they violated its policy entitled “Interim Provisions on the Development of Public Information Services for Instant Messaging Tools” by promoting ICOs and cryptocurrency trading.

While CoinDaily confirmed that its WeChat channel with more than 100,000 subscribers was suspended by WeChat, Leonhard Weese, the president of the Bitcoin Association of Hong Kong, said to Cointelegraph that many accounts — destined to have been temporarily or permanently suspended — were actually taken down due to other sensitive subjects outside of crypto:

“They got blocked for talking about the vaccination scandal, not because of crypto. We find this counterintuitive, but reporting on scandals like that is far more sensitive than talking about crypto or doing crypto. I expect them to have their accounts reinstated in a week or a month.”

Expert argues WeChat ban is unrelated to crypto

In late July, the Chinese medical industry was involved in a major scandal after the country’s main drug industry watchdog released its findings that accused two pharmaceutical firms of developing inferior vaccines and deceiving local regulators.

Specifically, Changsheng Biotechnology was said to have released falsified data on the sale of more than a quarter million ineffective diphtheria, whooping cough and tetanus vaccinations, as Fortune reported.

Weese argued that, given the magnitude of the scandal in China and the global medicine sector, it is more likely that apart from the case of large-scale cryptocurrency accounts like CoinDaily, Deepchain, and Huobi News, most of the accounts that were banned by WeChat were involved in spreading misinformation about the scandal.

But, as one WeChat official confirmed to Lanjinger, the Chinese government vowed to take a stricter approach in cracking down on ICOs and token sales, and Chinese social media platforms will continue to shut down the accounts of individuals and businesses that are utilized to promote and advertise ICOs in the Chinese market, which were banned by the government in late 2017.

“[Accounts were permanently shut down for being] suspected of publishing information related to ICOs [initial coin offerings] and speculations on cryptocurrency trading,” the official said.

In a statement obtained by South China Morning Post (SCMP), the Huobi team denied that the ban of its account was related to the government’s restriction of cryptocurrency, but rather by the “broad action targeting industrial media” by WeChat.

Facebook blockchain initiative to affect China relationship?

In July 2018, Facebook, which was banned in China in 2008, obtained a license to operate an office in China. The social media conglomerate has opened a $30 million subsidiary called Facebook Technology in Hangzhou to finance emerging startups and technology-related initiatives.

“We are interested in setting up an innovation hub in Zhejiang to support Chinese developers, innovators and start-ups,” Facebook told Verge in a statement.

Given the rumors around Facebook wanting to introduce its own cryptocurrency to the global market, it remains unclear whether Facebook’s supposed idea of integrating cryptocurrencies or launching its own blockchain platform could impact its current relationship with the Chinese government.

Chinese social media platforms like Baidu and WeChat have not seen any rumors in both domestic and international cryptocurrency communities regarding cryptocurrency and blockchain-related initiatives, possibly to avoid any conflict with local financial regulators.

PBoC issues warning against ICOs

On Aug. 25, the People’s Bank of China (PBoC), the central bank of the country, issued a warning against ICOs, firmly declaring that raising funds through token sales is illegal in the country. The PBoC and local financial authorities added in an official announcement that it was difficult to track and monitor transactions made through ICOs, even if the token sales are done domestically.

“The funds for these illegal activities are mostly overseas, and supervision and tracking are very difficult.”  

The PBoC further emphasized that, while the country has encouraged the development and commercialization of blockchain technology, ICOs cannot be considered to be legitimate operations or developments on the blockchain. The document reads:

“Such activities are not really based on blockchain technology, but rather the practice of speculative blockchain concepts for illegal fundraising, pyramid schemes and fraud. The main features are as follows:

  1. Risk of illegal activities, unregulated overseas markets and inability to track or monitor transactions made in ICOs.
  2. Deceptive, opaque and concealed fundraising methods, relying on celebrities and influencers to manufacture hype around investments to tempt investors.
  3. Illegal operations like profit-generating pyramid schemes and creating Ponzi schemes by describing them as ‘financial innovations.’”

Sheng Songcheng, an adviser to the People’s Bank of China, also confirmed to state-owned publication ce.cn that the government has decided to strengthen its ban on ICOs, banning public accounts, channels and communication platforms utilized to spread information about token sales.

Rise of OTC trading, Alipay takes notice

In December of last year, during the peak of the cryptocurrency market, when the combined valuation of all of the digital assets in the market totaled at $900 billion, China’s National Committee of Experts on Internet Financial Security — a government-backed research group — reported that the volume of the over-the-counter (OTC) Bitcoin market was rapidly increasing.

“Over-the-counter trading is booming. This warrants further attention,” the researchers said.

At the time, speaking to South China Morning Post, biggest mainstream publication in Hong Kong, Weese said that Telegram has been the go-to platform for large OTC trades due to the connections between local financial authorities and the operators of WeChat, but that a small portion of investors were still using the Chinese messaging platform. Weese explained:

“Telegram is very popular for large, over-the-counter trades. While WeChat is used by the less paranoid.”

Operators of various cryptocurrency exchanges and OTC platforms — including Tidebit — confirmed the rise in activity in the Bitcoin OTC market, stating that investors who could no longer trade within the Chinese market have started to explore peer-to-peer alternatives to invest in the asset class.

This week, Alipay — the most widely utilized fintech platform in China, with a 90 percent market share and a $150 billion market valuation — formally banned OTC trading on the Alipay network, preventing users of the Alipay mobile app to initiate transactions for Bitcoin or digital asset purchases.

Red Li, a cryptocurrency researcher and the founder of Chinese cryptocurrency community 8BTC, revealed that Alipay has begun the process of shutting down accounts involved in OTC Bitcoin trading, most likely due to the government’s request for banks and financial networks to shut down all possible payment channels that could be used to send funds to cryptocurrency trading platforms.

A rough translation of the statement released by Alipay disclosed the intention of the company to permanently ban any account that is reasonably suspected of funding Bitcoin exchanges to invest in the cryptocurrency space.

With the prohibition of OTC cryptocurrency trading by Alipay, the only channel that is left for local investors to allocate funds into the cryptocurrency market is the Hong Kong cryptocurrency exchange market.

Given that investors in China still send millions of dollars to Hong Kong shell companies’ bank accounts to purchase multi-million dollar properties on the Hong Kong real estate market, the possibility of investing through Hong Kong digital asset trading platforms with local bank accounts still exists.

But, due to the country’s strict capital controls and the government’s newly implemented initiative to track down savings and brokerage accounts utilized to evade taxes, it could become even more difficult to send money out of China to overseas markets.

Ban of crypto events

This week, Binance — the world’s largest cryptocurrency exchange by daily trading volume — had to cancel a cryptocurrency-related event in Beijing on August 23, as the government announced a ban on commercial blockchain conferences and meetups.

The local government of the Chaoyang District in Beijing revealed that it has informed hotels and other large-scale venues in the country that they are not allowed to host events that are related to cryptocurrency and blockchain, as part of its larger initiative to completely crackdown on ICOs and distributed fundraising.

In an interview with The Wall Street Journal, a Binance spokeswoman said that she was not aware of the closure of the event because the exchange hosts many events across the world.

“We have so many meetups around the world, and [they] may be canceled due to any reason.”

The People’s Daily, the publication operated by the Communist Party, reported that so-called venture capital-backed media outlets in China have made a significant fortune by creating hype around ICOs, but it is unsure whether the publications will be able to continue promoting ICOs in the long term. The publication could lead investors to believe that local authorities may target independent media outlets that promote ICOs in the months to come.

“These ‘media’ outlets have made huge fortunes in the speculative waves of cryptocurrencies, but due to their nature, it’s doubtful how long their barbaric growth can keep on going.”

Conclusively, in the past two months, the government of China has allocated the majority of its resources to strengthening its ban on cryptocurrency trading and the ICO market.

Given the censorship practiced by WeChat, Alipay and other platforms, along with Beijing’s ban on crypto events, it is likely that the country will see a decline in the adoption of blockchain technology and cryptocurrency development, which is ironic, as China has spent more than $3 billion in funding blockchain projects this year.

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Thailand's New ICO Rule Has Already Attracted 20 Crypto Exchanges

Thailand’s new licensing rule that governs initial coin offerings (ICOs) has gained interests from companies setting out to offer token sales and exchange services just weeks after the rule went into effect, official said.

In a news report from Bangkok Post on Thursday, Rapee Sucharitakul, the secretary-general of the Thailand Securities and Exchange Commission (SEC), said a total of 20 crypto exchanges already filed applications, seeking to become licensed trading venues.

CoinDesk previously reported that a rule setting out to regulate ICOs took effect on July 16 after a royal decree on the topic was made public in May. As part of the licensing rule, projects that aim to offer crypto exchange services must also gain approval from the SEC before trading starts.

“Many companies interested in opening digital asset exchanges have said digital assets and cryptocurrency trading in the Thai market are quite active,” Sucharitakul said.

In addition, the SEC said around 50 ICOs indicated interests in obtaining licenses to conduct token sales in the country with full compliance.

However, before the SEC can grant any license to individual projects, it will first select the so-called “ICO portals,” which are online marketplaces where potential ICO issuers can operate their token sales. Sucharitakul said out of the five companies that seek to become ICO portals, three have already filed applications.

And, just last week, regulators from the Philippines also took similar efforts to have released a draft rule for regulating token sales and is currently seeking public comment on how to let ICOs continue in a regulated environment.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Survey: Crypto Exchanges Want Regulation but See Strict Policies as a Threat

Economy & Regulation

The majority of crypto exchanges want to see the industry regulated, although many consider excessive regulation to be the biggest threat, according to a new study. A third of the platforms in the poll also fear a market crash that could suddenly devalue digital assets. A fifth of the exchanges dislike anonymity.    

Also read: Huobi Informs Users on Decision to Launch P2P Trading in India

Crypto Exchanges Want Regulation

Survey: Crypto Exchanges Want Regulation but See Strict Policies as a ThreatA new study reveals that a sizable majority of crypto exchanges, 88%, would like to see regulation in place that can help the rapidly developing industry mature, and a third of the companies trading coins say the greatest threat comes from the perceived criminality of the sector. 17% of the polled platforms, however, believe overly strict regulation is the biggest threat to cryptocurrency and its wider adoption. Another 40% say lifting the barriers to funding crypto activities by banks will improve the acceptance of cryptocurrencies.

The survey has been conducted by a Lithuania-based payment company, Mistertango, which has contacted 24 exchanges across Europe, Asia, South America and Oceania, with a total daily trading volume of over $100M USD. The authors have attempted to assess the attitudes towards regulation, anonymity and the maturation of the crypto market. Gabrielius Bilkštys, Business Manager at Mistertango, commented that “The industry is crying out for regulation and the response from partners has shown this”. He also said:

Uncertainty is the biggest fear, and regulation is critical to provide the stability we need. Unfortunately, there is no regulatory consensus – worldwide or otherwise. For cryptocurrencies to move towards the scale and ubiquity possessed by fiat currency, it needs cohesive, considered and comprehensive regulation. Thus, regulation will be a catalyst, not an inhibitor to the crypto market’s development.

According to Oleksandr Lutskevych, CEO of crypto exchange CEX.IO, the assumption that crypto companies want to avoid a regulated environment is far from the truth. Quoted in a press release, he noted that “Until now, the industry has not had its say on regulation […] The industry is all too aware that regulation will lead to the maturity of the market and ensure businesses remain free from suspicion of involvement with illegitimate uses of cryptocurrency.”

Survey: Crypto Exchanges Want Regulation but See Strict Policies as a Threat

A Call for Banks to Lift Barriers

Survey: Crypto Exchanges Want Regulation but See Strict Policies as a ThreatAt the same time, a very import development that crypto companies would like to see is a change in the attitudes of the traditional financial institutions. Almost 40% of the participants in the study have suggested that this would have the biggest impact on the wider acceptance of cryptocurrency, followed by about 30% who gave priority to increased but also positive regulation.

A key finding in the poll is that trading platforms generally favor the implementation of know your customer and anti-money laundering policies, despite the fact that precisely anonymity has drawn a lot of people to the crypto space. 55% of the questioned exchanges said crypto users should be subject to KYC and AML checks, similar to those employed by the providers of traditional financial services. A fifth of the respondents said that anonymity and the lack of transparency was the biggest threat.

Another important figure in the survey shows that a third of the respondents fear a significant crypto market crash that could unexpectedly devalue cryptocurrencies. They consider the possibility of such an event to be the major threat for the industry and the space, in general.

What are your thoughts on the findings in the study? Let us know in the comments section below.


Images courtesy of Shutterstock.


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Survey Finds That 88% of Crypto Exchanges Are Crying Out for Regulation

A survey conducted by crypto-friendly payment company Mistertango has found that almost 9 out of 10 digital currency exchange platforms want to see the industry regulated. However, there are also some fears that said regulation could stifle crypto innovation.

Cryptocurrency Companies Crave the Stability that Regulation can Create

The survey conducted by Mistertango targeted 24 different cryptocurrency exchanges from around the world. These included platforms based in Europe, Asia, South America, and Australia. Each of the participants has a trading volume of over $100 million per day.

The goal of the survey was to get a feeling for exchange’s attitudes towards regulation and how to move forward to a more mature cryptocurrency market. Some of the most interesting findings of the study are listed below:

  • 88% of digital asset exchange platforms are in favour of regulation
  • A market crash represents the largest threat to the current crypto market according to 30% of respondents
  • 40% believe that more mainstream acceptance can be achieved if banks reduce the imposed barriers to crypto activity
  • Over half of those responding said that users of crypto should adhere to KYC and AML checks like those using traditional banking services do
  • 17% of Mistertango’s clients believe that too aggressive regulation represents the largest threat to the future of crypto.

According to a report by Finextra, the business manager of Mistertango stated that the crypto space needs regulation to help the industry achieve the level of stability necessary for the market to mature. Gabrielius Bilkštys continued:

“Unfortunately, there is no regulatory consensus – worldwide or otherwise. For cryptocurrencies to move towards the scale and ubiquity possessed by fiat currency, it needs cohesive, considered and comprehensive regulation. Thus, regulation will be a catalyst, not an inhibitor to the crypto market’s development.”

Meanwhile, the CEO of one of the exchanges responding to the survey also told the publication about the industry’s take on regulation. Oleksandr Lutskevych of CEX.io stated that contrary to popular opinion, those operating some of the services required by the industry want regulation. He continued:

“The industry is all too aware that regulation will lead to the maturity of the market and ensure businesses remain free from suspicion of involvement with illegitimate uses of cryptocurrency.”

It appears that  some of the industry’s leading players are organising to ensure that the space is regulated as quickly as possible.

Just this week the NASDAQ stock exchange held closed door meetings with other high-profile exchange platforms and legacy financial firms to discuss cryptocurrency-related regulation. Whilst the conclusions of this specific meeting are currently unknown, the dialogue between the companies present is believed to be ongoing and could bring about the kind of safeguards that those companies surveyed by Mistertango are craving.

Featured image from Shutterstock.

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88% Of Crypto Exchanges Want Industry Regulation, New Study Reveals


Lithuania-based crypto payment company Mistertango has released a study which reveals that 88% of cryptocurrency exchanges want industry regulation. The study was based on responses from 24 crypto exchanges across the world with a total daily trading volume of over $100 million. The responses show an industry that wants to be part of the formal system, not outside of it — contrary to public perception.

Cryptocurrency Exchanges Want Regulation

The study reveals that 88% of crypto exchanges want regulation, as they believe it could stabilize prices and create a level of certainty that the market has not experienced for a while.

Mistertango Business Manager Gabrielius Bilkštys said the market needs regulation more than ever as it would create the required level of stability investors crave.

“The industry is crying out for regulation, and the response from partners has shown this. Uncertainty is the biggest fear, and regulation is critical to provide the stability we need. Unfortunately, there is no regulatory consensus – worldwide or otherwise. For cryptocurrencies to move towards the scale and ubiquity possessed by fiat currency, it needs cohesive, considered and comprehensive regulation. Thus, regulation will be a catalyst, not an inhibitor to the crypto market development.”

Regulation could solve some of the threats that have plagued the market in the past, but some fear that too heavy a hand could also destroy the market. Seventeen percent of respondents said that they believe “overly strict regulation is the biggest threat to the cryptocurrency.” We’ve witnessed scenarios where regulators came down hard on exchanges. This has become quite popular in Asia, where trading has been shut down in the past, which led to extreme price volatility.

Oleksandr Lutskevych, CEO of CEX.IO — one of the top crypto exchanges based on market volume — believes the market will mature better when it’s regulated.

He said:

“Until now, the industry has not had its say on regulation. It has been widely supposed that crypto companies want to avoid a regulated environment, but this is far from the truth. The industry is all too aware that regulation will lead to the maturity of the market and ensure businesses remain free from suspicion of involvement with illegitimate uses of cryptocurrency.”

Banking

Merrill Lynch Bitcoin Fund
Exchanges hope that new cryptocurrency regulations could make it easier for them to form banking partnerships.

While anonymity — or in the case of most cryptocurrencys, pseudonymity — has been one of the biggest allures of the market, 55% of respondents are willing to beam the light on customers trading on their platforms using KYC/AML checks, as is done with traditional financial services, in a bid to make crypto free from illegal uses.

Some of the respondents believe the banks hold the aces when it comes to crypto adoption. About 40% of crypto exchanges in the study think “reducing barriers to funding crypto activity by banks will improve acceptance.” This is one of the factors driving adoption in South Korea, known as one of the largest markets for cryptocurrency trading.

Shinhan Bank, the second largest bank in the country, provides local exchanges with virtual bank accounts, which traders can also use to withdraw and deposit without having to use their actual bank account. The respondents believe a change in the attitude of banks will have a massive impact on the global acceptance of cryptocurrency but that this can only be achieved if the industry is regulated.

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Japanese Cryptocurrency Exchanges Plan Limits on Borrowed Margin Trading


Japan’s primary self-regulatory body for cryptocurrency exchanges is finalizing a proposal to enforce a limit on the amount of funds investors can borrow for margin trading of cryptocurrencies.

The Japan Virtual Currency Exchange Association (JVCEA) is proposing a 4-to-1 limit on margin trading wherein investors will only be allowed to borrow up to four times their original deposit, Nikkei reported Thursday.

The proposed plan, the JVCEA explained, is to limit the risk of losses faced by investors in a relatively volatile market that sees no restrictions on margin trading borrowing at the present time. The report further revealed that some domestic exchanges a leverage limit of up to 25-to-1, the default upper limit margin for foreign exchange trading.

The body is also considering exceptions under certain conditions such as effecting default circuit-breaker mechanisms based on market conditions.

While Japan’s Financial Services Authority (FSA) has taken an hands-on approach to regulating the cryptocurrency sector – domestic cryptocurrency exchanges are required to be licensed and registered by the FSA – the lack of rules in margin trading sees the cryptocurrency sector devising its own draft rules that includes bans on insider trading and plausibly restricting support for privacy-focused coins like Dash and Monero.

Launched in March, the JVCEA is a concentrated effort between Japan’s sixteen licensed cryptocurrency exchange operators to regain confidence and safeguard investors in the space following January’s $530 million hack of Tokyo-based exchange Coincheck.

According to the FSA’s own figures released in April, there are over 3.5 million active crypto traders in the country while annual trading in bitcoin soared from $22 million in 2014 to $97 billion in 2017. Pointedly, a significant majority of trading comprised of derivatives trading of cryptocurrencies, amounting to $543 billion last year.

Meanwhile, the FSA is also rumored to be looking at revising its existing regulatory framework by bringing cryptocurrency exchanges under the purview of the Financial Instruments and Exchange Act (FIEA). In such an event, the cryptocurrency industry would operate under the same laws afforded to traditional stock brokerages and securities firms.

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Japanese Crypto Exchanges Working on Lowering Margin Trading Limits

Exchanges

Japanese cryptocurrency exchanges may soon set a strict limit on the leverage they offer for margin trading in order to better protect investors. The association comprised of 16 government-approved crypto exchanges is reportedly imposing a leverage limit as part of its self-regulatory rules. There will be a grace period and exceptions.

Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space

Leverage Limit on Margin Trading

The Japan Virtual Currency Exchange Association (JVCEA) is reportedly planning to impose a leverage limit for crypto margin trading in order to protect investors, local media reported Wednesday.

Japanese Crypto Exchanges Working on Lowering Margin Trading LimitsThe association’s members are all of Japan’s 16 government-approved crypto exchanges. It was set up in response to the hack of Coincheck in January in order to rebuild public trust in the crypto space.

The JVCEA has been working on self-regulatory measures. Nikkei reported Wednesday that the proposed rules include “an across-the-board cap on the extent to which traders can use borrowed funds to magnify gains and losses,” adding:

The self-regulatory body for Japan’s cryptocurrency exchanges is firming up plans to set a 4-to-1 leverage limit on margin trading, aiming to reduce the risk of massive losses given the volatility of these assets.

“The measure would take effect after a one-year grace period. The organization is considering allowing exceptions if exchanges meet certain conditions, such as implementing automatic stop-loss mechanisms,” the publication detailed. With the volatility of crypto trading, “some highly leveraged cryptocurrency investors in Japan have suffered heavy losses, spurring criticism from consumer protection groups.”

Japanese Crypto Exchanges Working on Lowering Margin Trading LimitsWhile the association itself has not confirmed its plans, the news outlet wrote that the “draft rules also include bans on insider trading and dealing in cryptocurrencies suspected to be used in money laundering.”

Last month, six of the association’s members received business improvement orders from Japan’s top financial regulator, the Financial Services Agency (FSA). Subsequently, Yuzo Kano and Hiroyuki Noriyuki, representative directors of Bitflyer and Bitbank Corporation, who were serving as vice presidents of the association, resigned to focus on their exchange businesses.

Exchanges Set Their Own Limits

Each cryptocurrency exchange in Japan sets its own limit for margin trading. DMM Bitcoin, the crypto exchange of Japanese e-commerce and entertainment giant DMM Group, for example, offers 5 times leverage.

Japanese Crypto Exchanges Working on Lowering Margin Trading LimitsZaif, operated by Tech Bureau, offers up to 7.77 times leverage. “You can choose leverage from 1x to 7.77x, according to your trading style,” the exchange wrote on its website.

GMO Coin, the exchange subsidiary of Japanese internet giant GMO, offers 5 times and 10 times leverage for BTC/JPY. However, only 5 times leverage is offered for the margin trading of ETH, BCH, LTC, and XRP against the JPY.

Bitpoint offers leverage of 2x, 5x, 10x, and 25x for BTC/JPY, BTC/USD, BTC/EUR, and BTC/HKD. Bitflyer’s Lightning platform allows leverage of up to 15 times.

Nikkei further elaborated:

Japan currently lacks limits on cryptocurrency margin trading…Some exchanges permit leverage of up to 25 times the deposit, citing regulations, setting that as the ceiling for foreign exchange trading.

Do you think Japanese exchanges should have a lower leverage limit? Let us know in the comments section below.


Images courtesy of Shutterstock and the FSA.


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Japanese Crypto Exchanges Push for Limit on Margin Trading Borrowing

A self-regulatory organization formed by cryptocurrency exchanges in Japan is proposing a limit on how much investors can borrow when margin trading.

According to a report from Jiji Press on Tuesday, the Japan Virtual Currency Exchange Association (JVCEA) has suggested domestic trading platforms enforce a restriction that investors can only borrow up to four times their deposit.

The JVCEA said the proposed plan aims to protect domestic investors because there are currently no market rules governing the upper limit of how much cryptocurrency investors can borrow in margin trading.

According to statistics released by Japan’s market watchdog the Financial Services Agency (FSA) in April, there were around 142,000 crypto traders focused on derivatives in 2017, comprising a small fraction of the total 3 million traders in Japan.

However, over 80 percent of the entire cryptocurrency trading volume in the country in 2017 came from derivatives trading, which recorded $543 billion last year. And more than 90 percent of that was from margin traders.

Formed by Japanese crypto exchanges in a response to a heist on the Coincheck platform early this year, the JVCEA seeks to impose self-regulatory rules in a bid to create a healthy cryptocurrency trading market. It is now planning to submit the proposal to the FSA to get the regulator’s endorsement for a potential wider implementation.

That said, the association indicated the new rule could lead to crypto investors’ departure from exchanges. As such, it aims to add measures gradually and would allow exchanges to independently set their own limits.

Japanese yen image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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The Daily: Minsk Mulls Rules for Exchanges, Qiwi Awards Employees with Tokens

The Daily

In today’s Bitcoin in Brief, Belarus, which legalized crypto activities this spring, is now turning its attention to adopting standards for companies operating crypto exchanges and issuing tokens. We’ve covered the decision of the Russian payment provider Qiwi to motivate its employees with tokens. The Daily also features crypto news from China and Canada.

Also read: Anti-Crypto Politician Backed by Payments Firm, Grayscale Raised $250m in H1

Belarus Working on Standards for Crypto Exchanges

The Daily: Minsk Mulls Rules for Crypto Exchanges, Qiwi Awards Employees with Tokens
Belarus Hi-Tech Park

Having legalized crypto-related activities earlier this year, Belarus is now fine-tuning and expanding the regulatory framework. The Hi-Tech Park in Minsk (HTP) is currently developing standards for companies operating crypto exchanges and providers of services related to issuing and placement of tokens. According to media reports, state bodies and representatives of the legal and tech communities in the country are involved in the process.

The new set of rules and regulations is intended to supplement the basic framework outlined in the presidential decree “On the development of the digital economy”, which entered into force on March 28, Denis Aleinikov, senior partner at a Belarussian law firm, told Forklog. He shared details on the progress so far: “We’ve established that a token is not a security […]. Any organization is allowed to issue and sell tokens through residents of the High-Tech Park.”

The Daily: Minsk Mulls Rules for Crypto Exchanges, Qiwi Awards Employees with Tokens

The legal expert added that entities in the field will be obliged to prove charter capital of at least $500,000. The standards will also regulate the activities of HTP residents and detail the requirements for those that want to issue and trade digital tokens. The Hi-Tech Park is actively participating in the process after it was granted right of legislative initiative with another presidential decree in June.

Payment Provider Qiwi to Award Employees with Tokens

The Daily: Minsk Mulls Rules for Crypto Exchanges, Qiwi Awards Employees with TokensThe blockchain subsidiary of the Russian payment provider Qiwi plans to supplement the salaries of its employees with awards paid in tokens. The motivational program will be launched by Qiwi Blockchain Technologies in the second half of 2018 and will be based on the Russian Masterchain platform. Several dozens of employees will receive their awards in QBT tokens by the end of the year. The subsidiary plans to allocate up to 50 percent of its profit to the program.

The tokens will be divided into two categories. Part of them will come with voting rights, allowing their holders to participate in different company decisions. Employees won’t be able to exchange the tokens for fiat money but will have the opportunity to convert them to corporate bonuses. According to Konstantin Koltsov, Director for Corporate Affairs, the system will allow employees to be directly involved in the company’s development. Qiwi also plans to create a blockchain-based HR platform.

Companies with ‘Blockchain’ in The Name Surge in China

The Daily: Minsk Mulls Rules for Crypto Exchanges, Qiwi Awards Employees with TokensIt’s no secret that adding “crypto” or “blockchain” to the name of a company comes with some image benefits. Since cryptocurrencies are not favored by authorities in Beijing, Chinese companies from the crypto sector have been left with only one choice. As a result, China has seen a sixfold increase in the number of new firms registered with “blockchain” in their names, The South China Morning Post reported.

According to an estimate based on government data gathered by Qixin.com, there are now more than 4,000 Chinese companies that identify with blockchain. Over 3,000 firms registered since January use the Chinese translation of the term describing the distributed ledger technology behind cryptocurrencies like bitcoin – “qukualian”. In comparison, their number for the whole 2017 was only 555.

The analysis of the official data has produced another interesting finding – 16,600 companies that were established within the past 12 months had “blockchain” listed as part of their lines of business. SCMP comments that despite the reservations of the Beijing government on crypto exchanges, coin offerings and mining, the interest towards the technology in China remains strong.

Bitcoin Ownership and Awareness Increase in Canada

The Daily: Minsk Mulls Rules for Crypto Exchanges, Qiwi Awards Employees with TokensA survey conducted by the Bank of Canada has detected a twofold increase in the number of people owning bitcoin (BTC) over 12 months. About half of crypto owners said they regularly use bitcoin to buy goods and services or transfer money. The Bitcoin Omnibus Survey was carried out in December, when the prices of cryptocurrencies reached all-time highs, but the results were published recently.

According to another study, “Bitcoin Awareness and Usage in Canada: An Update”, the awareness of Canadians about bitcoin increased from 64 to 85 percent during the same period. The authors also found that the residents of the predominantly francophone province of Quebec were the most Bitcoin-aware citizens.

Meanwhile, the province’s state-owned power company Hydro-Québec has been allowed to charge crypto miners and blockchain promoters increased rates until regulations for the industry are introduced. Régie de l’énergie du Québec, the local energy sector regulator, has recently accepted most of the new Hydro-Québec’s demands. A rate of 15 cents (CAD) per kWh, double the tariff for residential clients, will be applied.

What are your thoughts on today’s news tidbits? Tell us in the comments section below.


Images courtesy of Shutterstock, HTP.


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Huobi Launches Service to Build Crypto Exchanges in the Cloud

Huobi, the world’s third-largest cryptocurrency exchange platform by trade volume, is now offering a business arm to help customers build their own digital asset exchanges.

Dubbed the Huobi Cloud, the service is set up to provide clients “a one-stop solution … [to enable] its partners to build secure and stable digital asset exchanges quickly,” according to the official press release, though it did not provide specifics on what it will offer these partners.

The company goes on further to explain:

“Over the past five years, Huobi has accumulated rich and valuable [research and development], security, compliance and operational experience through its digital asset trading platforms … Huobi is looking to share its expertise and experience with the entire blockchain ecosystem and through this, develop the industry further to achieve mutual benefits for all stakeholders.”

As such, Huobi Cloud is envisioned to strike up new global partnerships in an attempt to “promote the rapid and healthy development” of the blockchain space worldwide.

The announcement comes a day after the exchange announced it was making efforts to deepen alliances within the industry through the establishment of the “Huobi Blockchain Plus Industry Alliance.”

The Alliance will focus on “community-based operations” to bring together experts and academics in the blockchain field to work together and leverage Huobi’s “ecological resources.”

These resources give members access to “jointly building blockchain labs with partners free of charge, sharing the research capability, technical capability and Blockchain Plus practical experience accumulated by Huobi Group over the past five years,” among others.

Indeed, the cryptocurrency exchange giant has been making efforts to build stronger networks for the blockchain industry in recent months. In June, after launching a new investment option for retail investors, Huobi revealed they would be facilitating an investment fund envisioned to raise $93 million for blockchain startups in both China and South Korea.

Huobi image via Piotr Swat / Shutterstock

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How Coinmarketcap Incentivizes Exchanges to Report Fake Volume

Exchanges

Bitforex, a cryptocurrency exchange that scarcely scraped the top 100 by trading volume until recently, has been accused of generating false trades on a mammoth scale. Crypto Exchange Ranks, which pulls in open source data from exchange APIs, has published a report in which it accuses Bitforex of creating fake volume and Coinmarketcap (CMC) of being complicit in the scam.

Also read: Powerful Cryptocurrency Firms on the Road Towards Becoming Banks

Bitforex, Coinmarketcap and the Case of the Fake Volume

How Coinmarketcap Incentivizes Exchanges to Report Fake Volume
Everything about Bitforex looks off – including its logo

Fake trading volume, defined as buy and sell orders designed to artificially create the impression of demand, are a running motif in the cryptocurrency world. For as long as anyone can remember, various exchanges have been accused of wash trading and inflating their volume. It’s the equivalent of a half-empty airliner placing its passengers in window seats to give the impression that the plane is full. Creating fake volume may sound like a relatively minor transgression, but it can have major ramifications for traders.

“Cooking the books” by falsifying activity lures traders into signing up for an exchange that may be untrustworthy, insecure, and far less liquid than it looks. Any exchange that is willing to create false volume may have few qualms about committing more egregious crimes against its users. Until recently, Bitforex was a little-known exchange, languishing around 70th in the world by trade volume. It now stands at 12th according to data provided by Coinmarketcap, with 24-hour volume of $227 million.

How Coinmarketcap Incentivizes Exchanges to Report Fake Volume

Crypto Exchange Ranks calls out Bitforex

In a detailed and compelling blog post, Crypto Exchange Ranks outlines its case for Bitforex having generated fake volume. Aside from the fact that Bitforex’ trade volume has multiplied by almost 100x in recent weeks, and now stands at more than 10x that of established exchanges like Kraken and Kucoin, there’s its modest social media presence that includes less than 2,000 Twitter followers. The Singapore-based exchange does have 65,000 Telegram followers, but much of this can be attributed to the usual spate of bots coupled with airdrop token chasers.

How Coinmarketcap Incentivizes Exchanges to Report Fake Volume
Bitforex’ claimed trade volume according to its website

Bitforex claims in its Twitter bio to be licensed in the EU, but there is no evidence to support this; in fact its website states that the platform is licensed in the Seychelles and Philippines. The site also includes such bold claims as having 1.8 million users, to be attracting 15,000 new users a day, and to have amassed $1.5 billion of trade volume, taking it as high as number five on Coinmarketcap’s exchange rankings.

Bit Who?

Crypto Exchange Ranks isn’t buying Bitforex’ claims, writing “We see that the number of UU [unique users] of BitForex is 29K. In turn, Kucoin has 889K unique users. Kraken has 666K unique users. KuCoin’s number of UU is 30 times higher than that of BitForex, Kraken’s number of UU is higher by 23 times.” It concludes:

As we have already discovered through SimilarWeb, the exchange receives the bulk of the new traffic through the referral source — CoinMarketCap; thus, the platform immediately attracts attention. Here’s the explanation: creating and implementing marketing and communication strategies and building a community in an organic way is more expensive than forging trade volumes.

While CMC is unlikely to be abetting Bitforex, in publishing the exchange’s figures without question, it is unwittingly complicit in the deception. Other crypto comparison sites have been less eager to report the sort of inflated figures produced by the likes of Bitforex, regardless of what the data pulled by API might say. With its shoddy web design, poor English, and almost certain fake volume, Bitforex does not inspire confidence. But until Coinmarketcap makes a stand against blatantly falsified volume, exchanges will be incentivized to cheat the system and lure in gullible traders eager to try out the next big platform.

Do you think Bitforex’ trading volume is real? Let us know in the comments section below.


Images courtesy of Shutterstock, Coinmarketcap, and Bitforex.


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