FED'S GEORGE: FED SHOULD WEIGH ASSET SALES TO CURB INFLATION – WSJ

14 February 2022, 12:45

In an interview with the Wall Street Journal on Monday, Esther George, President of the Federal Reserve Bank of Kansas City, argued that the Fed should weigh asset sales to curb inflation, as reported by Reuters.

Geroge further added that they should remove stimulus in a systematic way.

Market reaction

These comments don't seem to be having a significant impact on the dollar's performance against its major rivals. As of writing, the US Dollar Index was rising 0.23% on a daily basis at 96.25.

NH Governor Signs Executive Order to Bring 'Regulatory Certainty' to Cryptocurrency Industry

The governor of the U.S. state of New Hampshire has signed an executive order establishing a commission on cryptocurrencies and digital assets. “Federal and state governments must work to bring legal and regulatory certainty to the digital asset industry because clear rules of the road foster technology and innovation,” said the governor.

NH Executive Order on Cryptocurrency

Governor Chris Sununu of New Hampshire announced last week that he has signed an executive order establishing “the governor’s Commission on cryptocurrencies and digital assets.”

The Commission will focus on several key areas, including:

Reviewing and investigating the current status of United States federal and state laws and regulatory rules, and laws of other non-United States jurisdictions, applicable … to banks and other businesses that provide services with respect to cryptocurrencies and other digital assets.

The governor explained: “New Hampshire is a hub of financial innovation, and this executive order will further our commitment to attracting high-quality banking and financial businesses in a safe and responsible manner.” He stressed:

Federal and state governments must work to bring legal and regulatory certainty to the digital asset industry because clear rules of the road foster technology and innovation.

Members of the Commission shall include the Attorney General, the Commissioner of the Bank Department, one state senator, one state representative, and “three public members with recognized experience with cryptocurrencies,” the order details.

The Commission will hold public hearings to hear testimony regarding the development of cryptocurrency and digital asset economies.

In addition, it will make recommendations for specific modifications and improvements to laws and regulations applicable to cryptocurrency.

According to the executive order, “No later than 180 days from the date of this order, the Commission shall submit a report containing its findings, determinations, and recommendations to the governor, the speaker of the House, and the president of the senate.”

What do you think about this executive order by the New Hampshire governor? Let us know in the comments section below.

Will Paraguay Adopt Bitcoin as Legal Tender?

The topic of who will join El Salvador's lead in adopting Bitcoin as the country's legal tender is one that many are debating. The question of whether or not 2022 will be the year when other countries follow the crypto legalization trend is still up in the air.

Without a doubt, 2021 was a watershed moment in Bitcoin's history and journey, with the entire globe watching as a sovereign country adopted BTC as its legal tender.

The crypto community expected other countries, particularly small ones, to follow El Salvador's lead; in fact, the prominent JPMorgan bank argued at the time that there may be a "domino effect" once Bitcoin became a legal currency in El Salvador.

However, four months have passed and no other country has joined the hall of fame yet, despite the fact that certain countries, such as Tonga, have shown clear intentions of copying the Salvadoran model.

Recently, however, an announcement from the ‘CEO’ of El-Salvador (as he calls himself) has sparked a debate of whether Paraguay is set to become the second country to accept Bitcoin.

The tweet does mention two countries, however, for now, the majority of the crypto analysts are pointing towards Paraguay to be the second country in the race of accepting cryptocurrencies.

Here are some reasons why the Paraguayan crypto dream could become a reality in 2022:

1. The Boss Man Said It

The tweet shared above by the President of El-Salvador, Nayib Bukele, is no joke. This is because his authority and the level of connections he has in the political and crypto world are second to none. Many crypto developments promised by El-Salvador’s CEO have come to fruition in 2021, including the legalization of Bitcoin.

Another reason why Nayib might be right is that El-Salvador is a part of Latin America, along with Paraguay and other countries. Nayib’s decision of legalizing Bitcoin in 2021 had a big impact on the world and more so in its surrounding countries. Paraguay may very well be on its way to legalizing Bitcoin in 2022, and this takes us to a much stronger reason why this could happen.

2. Official Cryptocurrency Bill Passed in Paraguay’s Parliament

In December 2021, the Senate of Paraguay enacted a law aimed at regulating Bitcoin and cryptocurrency trading and mining in the country.

Senator Fernando Silva Facetti, a bill co-author, said on Twitter that the law will be debated in the Chamber of Deputies of Paraguay in 2022. The bill in Paraguay does not make bitcoin legal tender. However, it does hint at tighter regulation from the country's officials when it comes to bitcoin mining, as well as an overarching goal of protecting investors from businesses that provide bitcoin services.

Paraguayan Congressman Carlitos Rejala told Bitcoin Magazine: “With this we want to welcome the innovation of cryptocurrencies in Paraguay to the world”

“This is the result of a very strong and arduous teamwork of many experts in the field, both local and foreign.”

“While El Salvador’s final bill was just a few pages of text representing easily the most favorable, accommodating Bitcoin legalese ever passed, the early draft of Paraguay’s legislation set a different tone”

3. Adoption of Cryptocurrencies in Latin America

Since the acceptance of Bitcoin in El-Salvador as legal tender, a tsunami of cryptocurrency acceptance has been witnessed in the world, especially in Latin America. Countries like Brazil and Tongo are also on the verge of accepting Bitcoin as legal tender.

According to one of Tonga's former MPs, the Polynesian island is preparing to make Bitcoin an official tender.

In a series of tweets, Lord Fusitu described the probable move, saying that a ruling very comparable to the El Salvador bill was being worked on.

He unveiled a five-point strategy that saw Bitcoin become legal tender by November.

Tonga's government and financial leaders have yet to officially discuss any plans for incorporating digital assets into the country’s economic model, but Fusitu'a's weight of influence in the area commands enough international recognition for his remarks to be taken seriously.

Several ministers, including Fusitu'a, are crypto fans, which has fueled speculation about Tonga's plans to make Bitcoin legal tender in 2022.

The proposal is similar to El Salvador's move last year when President Nayib Bukele took his country to the brink of Bitcoin adoption by making it legal tender alongside the US dollar.

In addition to Tonga, Brazil is seen as the core hub of cryptocurrencies by major exchanges like Coinbase, Binance and others. Binance told Coindesk: “It is a key strategic market for Binance, for sure. It is the largest market in Latin America in all metrics and with enormous potential; and it is also very important for the company globally,”

Considering this increased interest in the crypto craze in the region of Latin America, Paraguay might be making Bitcoin legal tender in 2022.

Final Verdict: Will Paraguay Accept Bitcoin as Legal Tender?

The answer to this question depends on world politics and decisions made in Congress when the bill will be debated again in 2022. However, at present, the majority of economists have predicted this bill to pass due to the reasons discussed in this article.

Fed releases new research on risk and promise of stablecoins

The Federal Reserve released a new research report on stablecoins today, noting the risks and potential of the emerging digital assets.

In the report, researchers Gordon Liao and John Caramichael examine the current stablecoin ecosystem and the impact of stablecoins on credit intermediation and the central bank balance sheet. The paper identifies potential threats to the stability of US Federal Reserve monetary policy and examine ways they could be mitigated. 

Safe haven assets

The report found that dollar-pegged stablecoins have exhibited "safe asset qualities," compared to other crypto assets. Their price occasionally rises above their peg during market distress events, which leads to more issuance, compared to other digital assets that plummet. Essentially, when prices of cryptos like bitcoin decline, traders seek safety in stablecoins.

"These episodes demonstrate the potential for stablecoins to serve as a digital safe haven during market distress," said the report.

But, a run, or mass redemption of safe haven assets could severely disrupt markets. The authors recommend audits and liquidity requirements to mitigate the fallout of potential runs. Tether, the largest stablecoin, has historically avoided offering a full audit, according to regulators. 

"We think this type of instability is addressable with proper institutional and/or regulatory guardrails such as transparent financial audits and adequate requirements on the liquidity and quality of stablecoin reserves," they said.

Systems for stability

The Fed research dives deeper on credit intermediation, essentially how broad adoption of stablecoins could impact balance sheets of financial institutions and how that would affect the interactions between consumers and banks. It compares stablecoin narrow banking, in which physical cash is tokenized and backed by full reserves at the central bank, to two-tiered intermediation, in which stablecoins are backed by deposits issuers hold at commercial banks.

"Among the various scenarios, a two-tiered banking system can support both stablecoin issuance and maintain traditional forms of credit creation," said the report. "In contrast, a narrow-bank stablecoin framework can bring the most stability but at the potential cost of credit disintermediation."

Researchers found a two-tiered system creates less risk to US financial stability. A narrow bank approach guarantees the stablecoin peg remains unmoved, but financial distress could create a situation in which large swaths of people move their money from commercial bank deposits to safe haven stablecoins, which puts the system at risk. 

"Though this credit disruption effect could be mitigated by limits on stablecoin holdings and differential reserve interest rates, the overall structure of the narrow bank approach to stablecoin reserves is potentially destabilizing for the banking system," said the report. "Additionally, the narrow bank approach could lead to an expansion of the central bank’s balance sheet in order to accommodate the demand for reserve balances from stablecoin issuers."

As for the future, the Fed paper noted that stablecoins could see further use cases outside of trading. 

"In conclusion, the current usage of stablecoins is primarily driven by cryptocurrency trading, limited peer-to-peer payments, and DeFi," the paper noted. "Looking forward, stablecoins may see further growth through their facilitation of more inclusive payments and financial systems."

The wider conversation

Stablecoins have been on the mind of regulators in recent weeks. Both chambers of Congress have hearings scheduled for February to discuss the President’s Working Group on Financial Markets Report on Stablecoins. That report came out in November and urged Congress to limit stablecoin issuance to insured depository institutions.

During last year's House hearing on stablecoins, lawmakers heard from a number of crypto CEOs, including stablecoin issuer Circle's Jeremy Allaire and Bitfury CEO Brian Brooks, who allowed banks to hold stablecoin reserves during his time as Acting Comptroller of the Currency. 

Correction: A previous version of this article attributed the witness list to the Feb. 8 hearing. No witness list has yet been posted. We regret the error.

Why Brazil Is the Big Latin American Bet for Global Crypto Exchanges

A cocktail of inflation and devaluation is generating a crypto boom that players such as Binance, Coinbase and Crypto.com do not want to waste.

Amid a crypto boom in Brazil, several global exchanges see the country as Latin America’s main market in 2022.

Binance, Coinbase, Crypto.com and other exchanges’ interest in Brazil has been growing as the region’s largest economy wrestles with significant economic imbalances.

Brazil registered a 10% inflation rate in 2021 and a steady depreciation of the Brazilian real against the U.S. dollar, which pushed the local currency from $0.25 in January 2020 to $0.18 this month.

This article is part of CoinDesk Brasil, a brand-new partnership between CoinDesk and InfoMoney, one of Brazil's leading financial news publications. Follow CoinDesk Brasil on Twitter.

That cocktail of macroeconomic imbalances fed the crypto boom in recent years. In 2020, crypto exchanges began to notice that Brazilian stablecoin traders were quadrupling in number.

Between January and November 2021, locals traded $11.4 billion in stablecoins and almost tripled the total traded in 2020, while bitcoin trading reached $10.8 billion over the same period, according to Receita Federal, the Brazilian tax authority.

Brazilians have incentives to purchase crypto instead of U.S. dollars to hedge against inflation or devaluation. When acquiring foreign currency, Brazilians are forced to pay a tax on financial operations – IOF is its acronym in Portuguese – that ranges between 1.1% and 6.38%. The tax does not apply to stablecoins.

Moreover, the Brazilian Central Bank prohibits locals from saving U.S. dollars in a domestic bank account. To be sure, the monetary authority abolished that prohibition by approving a new exchange rate framework in December 2021, but it hasn’t implemented it yet.

Brazilians also prioritize crypto over other more traditional investments. According to data from the Central Bank of Brazil (BCB), as of August 2021 Brazilians held $50 billion in crypto, compared to $16 billion held in U.S. stocks.

Locals are familiar with digital money, as the country leads the way in digital payments in Latin America. In October 2020, the BCB launched a real-time retail payment system, Pix, which by November 2021 had more than 104 million users – in a country of 214 million – and concentrated more than 70% of total transactions.

In the crypto arena, the BCB plans to carry out the first tests of its CBDC in 2022, while the local senate will discuss three bills seeking to set the rules for the crypto ecosystem in the country.

Binance, the world's largest crypto exchange, has a special interest in Brazil. “It is a key strategic market for Binance, for sure. It is the largest market in Latin America in all metrics and with enormous potential; and it is also very important for the company globally,” the company told CoinDesk in an email.

Over the past three years, Binance has focused on hiring Brazilians to strengthen its support team, the company said. Now, the exchange is looking for a general manager to lead its Brazilian business, according to one of eight job openings it has in the country.

In November 2020, Binance started accepting Brazilian reals through a fiat gateway, which boosted the number of active transacting users by 125% in 2021 compared with the previous year, the company told CoinDesk.

In that same month, crypto exchange Coinbase announced the creation of an engineering hub in Brazil, for which it has nine open positions on its careers page. The company appears to have a particular interest in payment services.

Singapore-based crypto exchange Crypto.com is another heavyweight looking to expand into Brazil.

According to Guilherme Sacamone, Crypto.com’s head of growth in Brazil, the company has been operating in the local market for "a few months" and is currently working to integrate its fiat wallet with the government's payment system, Pix. In addition, Crypto.com plans to launch a Visa debit card in Brazil, Sacamone told CoinDesk, without providing an exact launch date

Crypto.com is also looking for a country manager to lead its Brazilian operation, in addition to strengthening its institutional customer base through hiring a director of institutional sales.

“Latin America is an important region for Crypto.com and Brazil, being its largest market, has become a global priority for the company,” Sacamone said.

Brazil is also starting to attract European exchanges. Bit2me, a Spanish crypto exchange that raised EUR 20 million via an initial coin offering in 2021, plans to land during the first quarter of 2022, Bit2Me's CEO, Andrei Manuel, told CoinDesk.

Bit2Me plans to allow users to buy and sell crypto with fiat and provide crypto to crypto trading. It has a team of 20 in Brazil and plans to hire 20 more employees in 2022 to boost its marketing, compliance, product and support teams, the executive added.

But the fervor for the Brazilian market is not limited to exchanges. The global payments company Ripple considers Brazil the key trigger to growth in Latin America. It is currently looking for a business development manager to coordinate "strategic relationships" that include “payment and fintech companies, financial institutions, and digital asset infrastructure players,” among others.

A regional fight

Regional crypto exchanges already operating in Spanish-speaking markets are also eyeing Brazil. But they face the challenge of competing with Brazil’s dominant local player, Mercado Bitcoin.

Founded in 2014, Mercado Bitcoin is the largest crypto exchange in Brazil, with 3.2 million users. It also raised $250 million in a Series B funding round from Softbank in 2021, making it the first Brazilian crypto unicorn.

Mercado Bitcoin's main competitor in Brazil is Bitso, a Mexico-based crypto exchange that raised $250 million in a Series C funding round that made it the first crypto unicorn in Latin America.

José Molina, Bitso’s vice president of marketing, told CoinDesk that the company plans to become the largest exchange in the country in 2022. Although it did not disclose its customer base in Brazil, Bitso told CoinDesk that its Brazilian business unit grew 97% in the last six months.

Bitso currently has more than 30 job openings in Brazil with the aim of “growing rapidly,” Molina said. The company hired Facebook veteran Vaughan Smith in August 2021 to boost its expansion in the country.

Bitso has more users than Mercado Bitcoin – 3.7 million versus 3.2 million – when accounting for Argentina, Brazil, Colombia and Mexico, which are the markets in which it currently operates.

But the numbers may change in 2022, since Mercado Bitcoin is looking to expand into the Spanish-speaking part of Latin America through acquisitions in Argentina, Chile, Colombia and Mexico, 2TM CEO Roberto Dagnoni told CoinDesk in June.

Bitso is not the only Latin American crypto exchange targeting Brazil. In January 2021, Argentina-based crypto exchange Ripio acquired BitcoinTrade, the second-largest crypto exchange in Brazil.

For 2022, it plans to launch its corporate trading desk, Ripio OTC, aimed at institutional investors and high-net-worth traders, Ripio Brazil's country manager, Enrique Teixeira said. In parallel, the company is working on "various payment products" with Visa Brazil, including a crypto card and several projects with local fintech companies.

El Salvador buys its cheapest 410 Bitcoin as prices reach $36K

President Nayib Bukele confirmed that the purchase of 410 BTC was made against $15 million, placing the trading price at approximately $36,585 per BTC

The Central American country of El Salvador has added 410 Bitcoin (BTC) to its central reserve as BTC prices trade below $37,000, a price last seen on July 26th, 2021. 

The fresh addition to El Salvador’s BTC reserve was announced by President Nayib Bukele, who confirmed that the purchase of 410 BTC was made against $15 million, placing the price at approximately $36,585 per BTC.

El Salvador adopted BTC as a legal tender on Sept. 7, 2021, as a means to overcome catastrophic inflation amid the weakening spending power of the nation. Fast forward to today, the country has strategically accumulated 1,801 BTC over the past four months, especially when the market sees a momentary price fall.

The latest purchase is currently the cheapest acquisition for El Salvador ever since the country adopted BTC as a legal tender.

With BTC trading just above the $36,000 mark and the resultant sell-off, Bukele believes that “some guys are selling really cheap,” supporting his long-term vision of mainstream Bitcoin adoption.

As evidenced above by data from Cointelegraph Markets Pro and TradingView, BTC experienced a steady rise in prices from mid-July, which resulted in an all-time high of almost $69k in the first week of November. However, the next three months saw a steep decline in market prices as investors redirected BTC profits into buying other tokens.

SkyBridge Joins the SEC’s List of Rejected Spot Bitcoin ETFs

The U.S. Securities and Exchange Commission (SEC) has, once again, rejected a spot bitcoin ETF application. It was filed earlier by the investment management company First Trust Advisors and the hedge fund SkyBridge led by Anthony Scaramucci.

• In a statement published on Thursday (January 20, 2022), the SEC said the reason for the rejection was that they failed to meet the requirements.
• According to an excerpt from the SEC document:

“Because NYSE Arca has not demonstrated that its proposed rule change is designed to prevent fraudulent and manipulative acts and practices, the Commission must disapprove the proposal.”

• Back in March 2021, SkyBridge partnered with First Trust to file a Bitcoin ETF application with the SEC. On May 25, the Commission began an official review of the ETF proposal.
• Later in July, the SEC first postponed its decision on the application till August 25, with another delay happening in November 2021.

A statement from the SEC document said:

document said:

“The Commission further concludes that NYSE Arca has not established that it has a comprehensive surveillance-sharing agreement with a regulated market of significant size related to bitcoin.”

• Meanwhile, the SEC’s latest rejection is not surprising, given that the agency is yet to greenlight a spot Bitcoin ETF product. In December, the securities watchdog disapproved an application by Valkyrie and Kryptoin. NYDIG’s proposal has been delayed until March 16, 2022.
• However, the SEC seems to show a preference for ETFs that track bitcoin futures. ProShares made history as the company with the first approved futures-backed Bitcoin ETF in the United States. Others have come from VanEck and Valkyrie.

Russian Banks Begin Testing Digital Ruble Payments

Banks in Russia are preparing to dive into the pilot phase of the digital ruble project and some are already testing transactions with the currency. Trials have started with customer-to-customer (C2C) payments and Bank of Russia plans to expand the types of operations in the future.

Digital Ruble Pilot Launches With 12 Participating Banks

The Central Bank of Russia (CBR) completed the prototype of the digital ruble platform in December and is now beginning to experiment with transactions. A dozen banks have been invited to join the first stage of the project’s pilot phase. The monetary authority plans to gradually expand the range of participants to include other financial service providers and types of transactions.

Right now, the majority of Russian banks are gearing up to start testing the new central bank digital currency (CBDC), Tass reported after contacting the institutions. One of them, Promsvyazbank (PSB), is currently processing C2C payments, Maxim Khrustalev, advisor to the deputy chairman of the bank told the news agency.

After the customer-to-customer transactions, “the technical testing of C2B, B2C and B2B payments will begin. Based on the results of the piloting, Bank of Russia will start to introduce the digital ruble platform into commercial operation,” Khrustalev added.

Tinkoff Bank is also joining the efforts to trial the new, digital form of Russian fiat. “Tinkoff is preparing to pilot the digital ruble in the near future,” according to a statement from the online neobank. Tinkoff recently entered the crypto space by acquiring a controlling stake in the Swiss-registered fintech startup Aximetria.

Another major Russian bank, VTB, said its infrastructure is ready to pilot the digital ruble. “Piloting includes integration with the digital ruble platform and the introduction of services such as opening a wallet through a mobile application and digital ruble transfers between individuals,” the bank’s press office detailed.

According to Vitaly Kopysov, chief innovation officer at SKB-Bank, the digital ruble will become a driver for the development of new national payment services for both citizens and companies. Speaking with Tass, he elaborated:

The digital ruble will give an additional impetus to the creation of offline cashless payment services for businesses in the absence of Internet access at a point of sale, which is very important given the geography of the Russian Federation.

Russia’s central bank has maintained a hardline stance on cryptocurrencies and recently proposed a wide-ranging ban on crypto-related activities. It began contemplating a digital ruble three years ago and decided to explore options to issue the CBDC in 2020, when it published a consultation paper on the matter. In April 2021, the bank released a digital ruble concept outlining its principal architecture.

Other banks taking part in the first stage of the pilot are Ak Bars, Alfa-Bank, Dom.rf Bank, Gazprombank, Rosbank, Sberbank, Bank Soyuz, and Transcapitalbank. The Federal Treasury, along with financial intermediaries, will join at the second stage when transactions between private individuals and corporate entities will be carried out, including consumer-to-business (С2B), business-to-business (B2B) and business-to-government (B2G) transactions

Do you think Russia will be able to successfully launch a digital ruble? Share your expectations in the comments section below.

Iran to Pilot ‘National Cryptocurrency,’ Considers Blockchain Tech for Stock Market

The Central Bank of Iran soon plans to launch the pilot phase of its digital currency project, an official unveiled. The Islamic Republic hopes to a join a growing club of nations that want to take advantage of having a sovereign coin, while it also seeks to implement blockchain technology in other areas.

Iran to Begin State-Backed Digital Currency Trials

The monetary authority of Iran intends to pilot its central bank digital currency (CBDC) in the near future, a high-ranking representative of the financial regulator said, quoted by the Iranian Labour News Agency (ILNA). The news comes in the fourth year since the initial announcement of the project.

According to a statement by Mehran Moharamian, deputy governor for IT at the Central Bank of Iran, the CBI sees digital currencies as a solution for resolving certain inconsistencies and decentralizing resources. Other countries have already begun to benefit from CBDCs, he noted.

Moharamian did not provide specific details about the start of the pilot phase. Authorities in Tehran tasked the country’s Informatics Services Corporation with developing a “national cryptocurrency” in 2018. The CBI arm is operating the country’s banking automation and payment services network.

Later, the company explained that the Iranian digital currency has been designed using the Hyperledger Fabric platform, a blockchain framework implementation and one of Hyperledger’s projects hosted by the Linux Foundation.

Blockchain Expected to Revive Iranian Stock Market

Although the Iranian crypto space remains largely unregulated — aside from mining — another report this week indicated that officials have been looking for various ways to employ the technology that underpins cryptocurrencies like bitcoin.

Iran’s capital market should genuinely consider using blockchain technology as it can help address some major needs of the share market and create new opportunities for its revival, Majid Eshqi, head of the Iranian Securities and Exchange Organization recently commented. Quoted by SENA and the English-language business daily Financial Tribune, he elaborated:

At the latest, in two years we will be compelled to make use of blockchain technology… It will not be long before we start tokenizing physical assets and stocks that can be easily traded on the new platforms.

He added that the time has come to consider the potential of blockchain technologies to solve some existing issues, such as identity verification of shareholders, for example, and start the infrastructure process.

Earlier in January, Iranian media revealed that Tehran is going to allow local companies to use cryptocurrencies in international settlements with their partners abroad. The Central bank and the government of the sanctioned country have reportedly given the green light to the adoption of a mechanism facilitating payments with digital coins in the field of foreign trade.

Do you think Iran will continue to explore ways to implement cryptocurrency and blockchain technology? Tell us in the comments section below.

SEC Chairman Gary Gensler Stresses Crypto Trading Platforms Must Be Regulated to Ensure Investor Protection

The U.S. Securities and Exchange Commission (SEC) is focusing on bringing cryptocurrency exchanges “inside the investor protection remit,” Chairman Gary Gensler has revealed. “If the trading platforms don’t come into the regulated space, it’d be another year of the public being vulnerable,” he stressed.

SEC Focusing on Regulating Crypto Exchanges

The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, talked about crypto regulation and the SEC’s priorities in a virtual press conference Wednesday.

Gensler said that he’s hopeful cryptocurrency trading platforms will take steps to become more directly regulated in the coming months. The chairman emphasized that additional oversight of crypto trading platforms is crucial for crypto investors to get the same kind of protection they have when trading stocks or other regulated financial instruments.

“I’ve asked staff to look at every way to get these platforms inside the investor protection remit,” the SEC boss revealed, elaborating:

If the trading platforms don’t come into the regulated space, it’d be another year of the public being vulnerable.

Gensler has repeatedly expressed the need to regulate cryptocurrency trading platforms. He believes that many of them are trading securities without registering. In May last year, he said crypto exchanges need more regulation and asked Congress to weigh in.

“We don’t have enough investor protection in crypto finance, issuance, trading, or lending,” he warned in September. “At this time, it is more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted.”

In December, the chairman said that the crypto asset class is “rife with fraud, scams, and abuse in certain applications,” emphasizing, “Right now, we just don’t have enough investor protection in crypto.”

Binance banned in Malaysia, given 14 days notice to shut down operations

The crypto exchange has been served with a notice to stop offering its services in the country.

Malaysia is the latest regulatory theater to come after Binance as authorities in the country have accused the exchange giant of continuing to operate in the country illegally.

According to an announcement released on Friday, the Securities Commission (SC) Malaysia has served a public reprimand against Binance, calling for the exchange and all of its entities to cease operations in the country.

The SC stated that Binance continued to operate in Malaysia despite previous warnings. Indeed, back in July 2020, Cointelegraph reported that Binance was not permitted to operate in Malaysia.

At the time, the SC published an "Investor Alert List" containing several digital asset exchanges offering services in the country without due authorization from Malaysian regulators.

Binance has 14 business days from Tuesday to comply with the order that includes disabling its website and mobile apps, as well as discontinuing any media campaign for its services in the country.

The announcement also mandated that Binance's CEO, Changpeng Zhao, ensures full compliance with the order. Malaysia's securities regulator also urged citizens to desist from trading with crypto exchanges operating in the country illegally.

Responding to Cointelegraph's request for comments, a spokesperson for the exchange explained that Binance.com does not operate out of Malaysia, adding:

Related: Binance CEO wants to 'work with regulators' as the exchange expands

The news out of Malaysia concerning Binance is only the latest in sweeping regulatory actions specifically targeted at the exchange giant. From warnings to investigations and now outright bans, the platforms appear to be under the cosh of financial watchdogs across the globe.

Earlier in July, Italy's financial regulator issued a warning against Binance, stating that the platform was not authorized to offer services in the country. Apart from Italy, countries like Germany, Poland, Japan, Thailand, Singapore, the United States and the United Kingdom, among others, have also issued warnings about Binance.

Binance, for its part, has taken steps to mitigate the situation, with its CEO promising to work with regulators amid plans for even further expansion across the globe. There has also been a flurry of policy changes at the exchange with withdrawal limits reduced for users who are yet to complete the platform's identity verification protocols.

Meanwhile, the exchange has also announced plans to shut down crypto derivatives trading in Europe, beginning with Germany, Italy and the Netherlands.

RIPPLE’S XRP VENTURES INTO TOKENIZATION, SEC GENSLER WARNS OF SECURITY ISSUE: “MAKE NO MISTAKE”

“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities.”

Gary Gensler, Chair of the Securities and Exchange Commission, spoke about security-based swaps before the American Bar Association Derivatives and Futures Law Committee.

He started off by noting that “I’m not speaking on behalf of my fellow Commissioners or the SEC staff”. This short sentence is now vital as the agency prepares to face the deposition of ex-SEC Director William Hinman for a speech he gave about the nature of Ether – “not a security” – in 2018.

The SEC Chair spoke about security-based swaps in the aftermath of the Archegos meltdown and the SEC’s completion of the implementation of derivatives oversight in the United States, eleven years after Dodd-Frank.

At the end of the speech, Mr. Gensler mentioned the intersection of security-based swaps and financial technology, including with respect to crypto assets.

“There are initiatives by a number of platforms to offer crypto tokens or other products that are priced off of the value of securities and operate like derivatives”, said the SEC Chair.

“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime.

“If these products are security-based swaps, the other rules I’ve mentioned earlier, such as the trade reporting rules, will apply to them. Then, any offer or sale to retail participants must be registered under the Securities Act of 1933 and effected on a national securities exchange”, he added.

The SEC has already filed complaints against retail offerings of security-based swaps and is likely to charge more blockchain firms in the near future.

FinanceFeeds has recently covered the phenomenon of tokenization of assets and named Binance as one of the leading firms already offering such products, having started with a tokenized version of the Tesla stock (TSLA) as the operator aims to allow non-U.S. based users to trade the instrument and many more after that.

Binance, among a growing number of firms, could be meaning to bypass the regulatory framework in the United States and other jurisdictions. The counterreaction is what we’re seeing today: a global crackdown on Binance.

Ripple is also venturing into asset tokenization utilizing its renowned XRP Ledger, RippleNet’s General Manager Asheesh Birla announced earlier this month.

“Tokenization is transforming how people buy, sell, track and manage assets – everything from art and real estate to intellectual property, equities, and supply chain goods. In fact, the World Economic Forum projects 10% of the world’s GDP will be tokenized by 2027”.

“We’re expanding from a cross-border payments network to a platform providing tokenized services that will bring crypto capabilities to the enterprise and prepare them for a future where crypto is front and center. RippleNet was initially built to solve the challenges with speed, cost, and transparency in cross-border payments for those that have been grossly underserved by the financial system at large.”

The Asia Pacific’s progressive crypto regulation is probably where Ripple will find momentum for its new product, but there is no lack of clarity in regard to blockchain-powered products that provide exposure to underlying securities: they are implicated by the US securities laws. SEC Chair Gary Gensler made that abundantly clear.

Lack of clarity has been a very serious issue within the crypto ecosystem in the United States. So much so that this week, SEC Commissioners Hester Peirce and Elad Roisman have made public statements that admit to that – “a gift from the heavens“, said attorney Jeremy Hogan.

The admission of lack of clarity from top SEC officials will be used by Ripple and the individual defendants to support its fourth affirmative defense and the motion to dismiss the case, respectively.

The bombshell comes in good timing for the Ripple counsel, who will have ex-SEC Director William Hinman depose on July 27 in order to further strengthen its fair notice defense.

The following day, July 28, is the deadline for the requested response from SEC Chair Gary Gensler to Senator Elizabeth Warren. She has requested information about the regulator’s “authority to properly regulate cryptocurrency exchanges and to determine if Congress needs to act to ensure that the SEC has the proper authority to close existing gaps in regulation”.

That letter also sent shock waves of speculation regarding what could be deemed as an orchestrated powerplay to outflank the CFTC.

Binance Warned by its Headquarters Jurisdiction

Binance has been warned by regulators in the country it is based, the Securities and Futures Commission (SFC) of Hong Kong, to stop providing “stock tokens” services.

“SFC wishes to make it clear that no entity in the Binance group is licensed or registered to conduct ‘regulated activity’ in Hong Kong,” they say.

Binance quickly complied, stating “we are announcing that we will be winding down support for stock tokens on Binance.com to shift our commercial focus to other product offerings. Effective immediately, stock tokens are unavailable for purchase on Binance.com, and Binance.com will no longer support any stock tokens after 2021-10-14 19:55 (UTC).”

They have a partnership with CM-Equity AG, a licensed investment firm in Germany, and say they may move Europeans there.

“Users may transition their stock token balances to CM-Equity AG once its new portal is established,” Binance said.

This is the latest regulatory action against the global crypto exchange based in Hong Kong which has been under the scrutiny of US authorities.

They were founded in an Initial Coin Offering (ICO) in 2017 which gave rise to both Binance the exchange and the BNB token now operating in the Binance Chain.

Their initial base in Japan faced regulatory difficulties as FSA there did not license them. So they moved to Malta, but a change of administration led to the Maltese authorities clarifying that “Binance is not authorised by the MFSA to operate in the crypto currency sphere.”

Since then speculation has intensified regarding their headquarters with Binance putting their HQ on Linkedin as “everywhere.”

Changpeng Zhao, Binance’s CEO, has refused to state in interviews where they are based, giving rise to rumors that Cayman Island is their HQ or Seychelles.

The Cayman Islands financial authority (CIMA) also said earlier this month Binance does not have a license there and they are investigating “whether Binance, the Binance Group, Binance Holdings Limited or other companies affiliated with this group of companies have activities operating on or from within the Cayman Islands that may fall within the scope of the Authority’s regulatory oversight.”

Binance’s own terms and conditions, however, have Hong Kong as its jurisdiction, stating:

“These Terms (including this arbitration agreement) shall be governed by, and construed in accordance with, the laws of Hong Kong.”

Hence Binance.com itself now has to comply with whatever Hong Kong authorities say, while previously actions from UK’s FCA and other jurisdictions had as response something akin to: a subsidiary operates there and thus Binance.com is not affected, we’ll just launch binance.[country].

That’s unless Binance moves again, with the exchange operating in somewhat of a gray zone as it was publicly funded from the get go, unlike Coinbase which was privately funded and opened to the public only after it reached a valuation of $100 billion.

The global public, by having the choice to invest in Binance from the get go, has greatly benefited from the success of the exchange. While the public has not benefited at all from the success of Coinbase as they were prohibited from investing in it for the first nine years of its existence when it saw massive growth.

Something the United States regulators do not like as such US prohibition in public funding of startups can only work if it is global.

It’s not clear however why Europe in particular, which is the only globally respected jurisdiction that can stand up to the United States, is not providing a home of sorts.

One reason might be because Zhao has not quite asked them. They picked the tiny jurisdiction of Malta instead, when it could have been very different if it was Germany, or one of its principates like Luxembourg and Liechtenstein, or France.

That may well be the way they have to go especially as they already have a partnership with CM-Equity AG. Then the exchange would be outside of US’s global jurisdiction, which clearly also includes tiny Hong Kong, but of course they’ll have to comply with European law.

However, they’ll potentially have the opportunity to shape or influence such laws with both Germany and France keen to provide jurisdictional competition by taking a different approach to this ancient prohibition in startups public financing.

But what Zhao will do remains to be seen with his options limited now that his home country, China, has turned hostile towards cryptos.

South Africa Regulator Wants Mirror Trading International to Pay Millions as Penalty For Contravening Financial Sector Law

A South African regulator, the Financial Sector Conduct Authority (FSCA), has informed key figures behind Mirror Trading International (MTI) that it intends to impose a fine of $7 million against the now-defunct crypto investment company.

Contravention of Financial Sector Law

According to a July 6 letter, which has also been sent to the CEO and other members of the managerial team, the regulator says its proposal to fine the company stems from MTI’s involvement in activities that it says “contravened a financial sector law.”

The confidential letter’s emergence as well as its leak to the South African media comes just a few days after a court issued a final liquidation order against MTI. Also, as previously reported by Bitcoin.com News, the letter is coming a few months before the court hears submissions from liquidators who plan to argue in favour of having MTI declared a Ponzi scheme.

Meanwhile, the FSCA letter also explains how MTI executives — Johann Steynberg, the CEO, and Cheri Marks in particular — used misrepresentations to perpetuate the Ponzi scheme before it finally unravelled in December 2020. It reveals the various provisions of South Africa financial sector law which were allegedly violated by MTI starting in April 2019.

For instance, the letter suggests that MTI’s first infraction occurred when “trading was conducted in derivative instruments based on forex pairs, through a platform broker named FX Choice.” Concerning this trading, the FSCA asserts that MTI was “not in possession of a financial services provider licence as contemplated in section 8 of the Financial Advisory & Intermediary Services Act 37 of 2002 (FAIS Act).” The regulator also added:

As this was done without a license, MTI was also in contravention of section 111 of the Financial Sector Regulation Act 9 of 2017 (FSR Act).

MTI Misrepresentations

Similarly, the regulator alleges that during the period between August 2019 and October 2020, MTI contravened the same section of the FSR Act after Steynberg claimed that the company had “employed a bot together with a head trader and trading team to make all its trading decisions.”

Meanwhile, in what the FSCA calls the third period — October 2020 to December 2020 — MTI claimed it had “changed its trading activities to trade in derivative instruments based on bitcoin.” This according to MTI meant “it no longer required an FSP licence.” However, the FSCA insists this was not the case as Steynberg’s own submissions to the regulator suggest otherwise. The FSCA said:

It is not correct as the submissions received from Steynberg revealed that the crypto assets were alleged to be traded in the form of a derivative product, which means MTI still required a licence from the Authority. It also means that MTI and its senior management was still contravening section 7(1) of the FAIS Act.

In the meantime, the letter reveals that members of MTI’s managerial team will be afforded the opportunity to make submissions on the investigation report as well as on the proposed administrative penalty. However, if no such submissions are received by close of business on August 6, 2021, the FSCA “may proceed with the proposed enforcement and regulatory action” the letter said.

What are your thoughts on the FSCA’s proposal to hit the now-defunct MTI with a $7 million fine? Tell us what you think in the comments section below.

Chinese Bank Employees Told to Entice 300 Customers to Use the Digital Yuan

In mid-May, a report stemming from residents in Shenzhen, China explained that the digital yuan wasn’t seeing widespread participation, which the Chinese government has alluded to in many press releases. Now a handful of China’s state-owned banks have asked staff to recruit 200 to 300 digital yuan users. The banks are also giving away small presents in order to tempt the customers into leveraging the central bank digital currency (CBDC) wallet.

Chinese Banks Are Now Luring Customers Toward the Digital Yuan

Similar to how banks try to sell services to customers like loans, savings accounts, and investment vehicles, Chinese state-owned banks are telling employees to sell the benefits of the digital yuan. The Industrial and Commercial Bank of China, alongside five other top financial institutions in the country, are tasking their employees with pushing the CBDC wallet on hundreds of branch customers.

According to a rough translation of the announcement published by shenliancaijing.com, bank employees from each branch have been asked to produce 200-300 CBDC wallet users. “On average, each person needs to promote 200 to 300 people,” the statement says, and employees from each branch can get year-end bonuses. Furthermore, employees can entice people with small presents like tissues, umbrellas, electronics cables, cardholders, and laundry detergent.

Chinese Banks Have Been Told to Recommend Digital Yuan Over Competitors

The push to lure customers to the People’s Bank of China’s (PBOC) digital yuan follows a handful of state-owned banks in Shanghai being told to promote the CBDC over payment processors like Wechat and Alipay. The “political mandate” Reuters reported back in May, was enforced by six big state banks that were “quietly promoting digital yuan ahead of a May 5 shopping festival.”

At that time, a few Chinese banking officials who were not authorized to speak with the press but still spoke in anonymity, said the six banks followed the mandate to push the digital yuan in Shanghai under the guidance of the PBOC.

“People will realise that digital yuan payment is so convenient that I don’t have to rely on Alipay or Wechat Pay anymore,” the Chinese banking official said.

While the digital yuan wallet is still being tested in various forms, it’s also integrated with apps owned by Didi, Bilibili, Meituan, and JD.com. However, there are no third-party connections between the digital yuan and payment processors like Alipay and Wechat Pay. During the May promotional mandate, a banker told the press the PBOC felt the need to add “information segregation.”

“[The] PBOC doesn’t want to see the money being routed through third-party payment systems,” the banker added.

What do you think about the Shenlian Caijing article that says six Chinese banks are asking employees to recruit digital yuan users? Let us know what you think about this subject in the comments section below.

4,000 Institutional Funds in Germany Can Now Invest 20% of Portfolios in Crypto Assets

Around 4,000 institutional funds with almost 2 trillion euros in assets under management in Germany can now invest 20% of their portfolios in cryptocurrency, including bitcoin.

• The highly anticipated Fund Location Act (Fondsstandortgesetz) went into effect on July 1 in Germany. The German federal parliament, the Bundestag, cleared the legislation on April 22.
• Under this law, new and existing domestic special funds (Spezialfonds) are permitted to invest up to 20% of their portfolios in crypto assets, like bitcoin.
• There are approximately 4,000 such special funds covered by this legislation. According to a report by BVI Investments, 1.88 trillion euros ($2.23 trillion) were invested in open special funds, excluding special real estate funds, as of the end of December 2020.

• If all special funds were to allocate the full 20% in cryptocurrency, it would equate to more than 376 billion euros ($446 billion).
• Traditionally, special funds are open-ended, regulated investment funds limited to institutional investors, such as financial institutions, insurance companies, corporations, foundations, and churches.

What do you think about this law allowing special institutional funds to invest in cryptocurrency? Let us know in the comments section below.

Crypto Derivatives Exchange Bybit to Introduce Stringent KYC Policy

The British Virgin Islands-based Bybit Fintech Limited has announced the cryptocurrency derivatives exchange is introducing an updated know-your-customer (KYC) policy on July 12. Bybit notes that it already had certain KYC requirements implemented, but the new system reform is meant to “improve security compliance for all traders.”

Bybit Says Companies and Individual Clients Mandated to Complete Systematic KYC Policy by July 12

The cryptocurrency derivatives exchange Bybit plans to introduce a systematic KYC element to the platform by July 12. The exchange is letting customers know in various terms of service (ToS) updates. The firm will be applying the update next week and it applies to individual traders and companies as well.

“If your company wants to withdraw more than 2 BTC a day, you’ll need to complete KYC verification,” Bybit’s ToS update published on July 5 details.

Documents show that Bybit Fintech Limited is headquartered in Road Town, Tortola, British Virgin Islands. The company is regulated by the British Virgin Islands’ finance and insurance sector. According to Bybit’s company profile on Dun & Bradstreet, the crypto derivatives exchange has over 100 employees and generates $3.42 million in sales.

Bybit’s recently added KYC updates for companies and individuals, follow the warning that the Financial Conduct Authority (FCA) issued against Binance Markets Limited last week. Regulators have been cracking down on virtual currency service providers (VASPs) worldwide in order to comply with the crypto recommendations drafted by the Financial Action Task Force (FATF).

Real Name, Proof of Residency, Photo ID, and Facial Recognition Screening Required

The crypto derivatives exchange Bybit also notes that “all token withdrawal limits shall follow BTC index price equivalent value,” which means 2 BTC equivalent withdrawals need to pass KYC. Bybit’s website further notes that after July 12, KYC requirements will mandate the need for a document issued by the country of origin (passport/ID), full name, date of birth, a front and back official document photo, and the user will need to pass “facial recognition screening” as well.

Similar to the FCA’s recent warning to Binance, Bybit got a warning from Japan’s top financial watchdog on May 28, 2021. The Japanese government’s Financial Services Agency (FSA) had claimed at the time, the crypto exchange Bybit allowed residents of Japan access to the exchange. A report published in August 2020, indicates Bybit “added support for the Japanese yen and South Korean won.”

Bybit also faced a hearing on June 21, with Canada’s Ontario Securities Commission when the regulator alleged that Bybit was “accountable for disregarding Ontario securities law and to signal that crypto asset trading platforms flouting Ontario securities law will face regulatory action.”

Bybit’s recent regulatory compliance update notes that once KYC documents are verified customers can then “withdraw up to 100 BTC a day.” The KYC process can take up to fifteen minutes or in more complex situations “KYC verification may take up to 48 hours,” Bybit details.

What do you think about the cryptocurrency derivatives exchange Bybit introducing a systematic KYC element to the trading platform? Let us know what you think about this subject in the comments section below.

New Bill to Ban Crypto Payments in Iran, Support Mining and Regulate Exchange

Urged by the growing popularity of cryptocurrencies, Iranian lawmakers have prepared new legislation to introduce comprehensive rules for the expanding industry. While the bill effectively bans crypto payments in the country, it aims to support cryptocurrency mining and regulate the exchange market.

Draft Law Prohibits Crypto Payments in Islamic Republic

Members of the Islamic Consultative Assembly, the Iranian parliament, now have a plan to put the crypto space in order. The new bill, drafted under the supervision of the parliamentary Economic Commission, allocates responsibilities among regulators and answers some outstanding questions to determine the future of cryptocurrencies in Iran.

If adopted in its current version, the draft law would ban the use of cryptocurrencies as a means of payment in the Islamic Republic, Tasnim News Agency reported. Besides crypto payments, other domestic transactions with cryptocurrency would also be prohibited. Iranian lawmakers have provided for only one exception and that’s reserved for a state-issued digital currency (CBDC).

The Central Bank of Iran (CBI) is to take charge of crypto market oversight within three months of the bill’s adoption. The monetary institution will also regulate the exchange of cryptocurrencies in the country. Iranian authorities have tried to curb crypto trading in the past few months but the CBI authorized domestic banks and exchangers to utilize cryptocurrency mined inside Iran in payments for imports.

Iranian Regulations to Support Cryptocurrency Mining

The legislation presented in the Iranian Majlis has also been described as a plan to foster “support for cryptocurrency mining and organizing the domestic market for exchanges,” Tasnim noted. Unlike digital coin trading, crypto mining has been a legal activity for licensed Iranian companies for around two years now.

According to the draft, Iranian cryptocurrency miners will in the future be allowed to participate in projects to construct and operate new power plants. In order to do that, authorized mining companies will need to acquire special permits from the Ministry of Energy, the report detailed. Miners will even be able to sell surplus energy generated by their stations.

Iran’s Ministry of Industry, Mines and Trade will exert regulatory control over the crypto mining industry, the bill postulates. The department will continue to be responsible for issuing the licenses needed to set up and run new cryptocurrency mining farms.

The lack of comprehensive regulations and various restrictions have impeded the development of Iran’s crypto industry in the past few months. In May, the Majlis leadership called on financial regulators to adopt a cautious approach to dealing with the complicated matter. In June, the country’s Economy and Finance Minister Farhad Dejpasand stated that the government cannot interfere with the development of crypto technologies for too long.

What’s your opinion about the proposed crypto regulations in Iran? Let us know in the comments section below.