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Regulation

G20 With A Deadline For Crypto Anti-Money Laundering Standard

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The G20 member countries will now look at an October deadline for reviewing the global anti-money laundering (AML) standard on cryptocurrency, according to a statement issued on Sunday.

As the statement says, finance ministers and central bank governors of all the G20 member countries recently hosted a meeting and re-liberated the position on a plan towards “vigilant” monitoring of cryptocurrencies.

They even called on the Financial Action Task Force (FATF) which is the intergovernmental body that was formed to fight money laundering and terrorist financing – all in order to clarify how its existing AML standards can apply to cryptocurrency within three months.

As the document reads:

“While crypto-assets do not at this point pose a global financial stability risk, we remain vigilant. … We reiterate our March commitments related to the implementation of the FATF standards and we ask the FATF to clarify in October 2018 how its standards apply to crypto-assets,”

Previously (March 2018), the G20 asked for an AML standard from the FATF in order to see a wider push for global regulatory recommendations on the issue. Last month, reports said that FATF is planning to develop binding rules of AML for the crypto exchanges.

In response to the G20’s request in March, the Financial Stability Board, which is an organization focused on the analysis of the global financial systems, presented several key metrics for monitoring crypto assets before the weekend meeting.

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Regulation

China: Cryptocurrency Exchange Huobi Creates Communist Party Committee

Huobi Group is in the latest news around regulation and even politics this time on our DC Forecasts crypto news site. The exchange has recently created a Communist Party committee which makes it the first blockchain-based company to do so in China, according to reports from the South China Morning Post. What's interesting is that this community was created through a Huobi subsidiary called Beijing Lianhuo Information Service - registered as a business earlier this year and owned by Li Lin, who is the founder of Huobi. Lin referred to the launch of the committee as a new milestone for his company, hailing the Communists party for its friendly policies towards the blockchain industry and sharing his excitement by stating:
“Under the cordial care of the Party Working Committee of Haidian, the party branch of the Beijing Lianhuo Information Service Ltd. was gloriously established.”
The laws of the Communist party make it compulsory for enterprises, especially state-owned companies (with at least three Communist Party members as employees) to set up a branch of this party. Huobi, however, is not the first one to set up such a committee - before it we saw similar ones from companies like Tencent and Alibaba Group. The Chinese government is still friendly to blockchain while ignoring the crypto space and putting a hold of it. As you probably remember, it was the Communist party that put a blanket ban on crypto earlier last year - leading to an exodus of exchanges to the neighbouring conutries.
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Blockchain Archive

CHFC: Cryptocurrencies Should Be Regulated To Prevent Money Laundering

A recommendation from the Canadian House Finance Committee for regulating cryptocurrencies to prevent money laundering is in the blockchain news today according to a report from the Canadian digital newspaper iPolitics. The Canadian House Finance Committee proposed a suggestion to regulate cryptocurrencies during the review of the Proceeds of Crime Money Laundering and Terrorist Financing Act that happens once in five years. The committee started meetings in February 2018 and came up with a couple of ideas on how the government could regulate cryptocurrencies. The first idea is to control exchanges that allow fiat to cryptocurrency while defining the entity that provides the exchange as a service business. The second idea is backed up by the new regulation released in Canada this summer where cryptocurrencies are defined and exchanges as money-service businesses. The second recommendation is meant for the government to require a license from crypto exchanges much like New York’s BitLicense. In the article there are plenty of suggestions by the IJW financial adviser and law firm Duran Morrisseau which refer the dubious crypto transactions done in an unregulated space:
 “Cryptocurrency transactions may be used by parties to swiftly move large amounts of wealth across borders, and that regulating (exchanges of fiat currencies for cryptocurrencies) would address the (anti-money-laundering) concerns of the cryptocurrency space.”
The last recommendation is to regulate all crypto-wallets to make tracking easier. The government is required to provide an answer to these suggestions in 120 days. Crypto regulation is a major subject around the world and many countries are implementing the regulation.
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Regulation

SEC’s Paragon Ruling And The Possibility Of Sending ICOs To Bankruptcy

As we have seen from the recent crackdown on two initial coin offerings (ICOs) by the US Securities and Exchange Commission (SEC,) Paragon and AirFox, the situation could also lead to many other blockchain and crypto projects that would declare bankruptcy in the coming months. This is what is making headlines in today's crypto news. As we reported earlier, both Paragon and AirFox were served a fine of $350,000 from the SEC and a refund to all the investors who participated in the token sale. The problem, right now, is that the two tokens have been asked by the US SEC to refund $12 million and $15 million accordingly to their investors. Since their ICOs, the prices of cryptocurrencies like Bitcoin and Ethereum has declined substantially, blockchain projects have used most of their funds from their token sales in order to fund operations. The official SEC document reads:
“Both companies have agreed to return funds to harmed investors, register the tokens as securities, file periodic reports with the Commission, and pay penalties.”
Aside from this, another issue for ICOs is the right to sue projects to be compensated for their losses, which the SEC clearly outlined. In other words, if an investor invested in a token and recorded a 80% loss, they are eligible to file a lawsuit against the initiator of the token sale and eventually receive the funds back.
“On a date no later than sixty (60) calendar days… distribute by electronic means reasonably designed to notify each potential claimant,  notice and a claim form, both of which shall be in a form not objected to by Commission staff, informing all persons and entities that purchased PRG potential claims under Section 12 (a) of the Securities Act, including the right to sue “to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if [the purchaser] no longer owns the security.”
Upon this crackdown, the co-director of the SEC's Enforcement Division, Stephanie Avakian, heavily emphasized that the SEC will continue to investigate token sales which violated federal security laws with the intent of bringing down ICOs considered as securities by the commission.
“We have made it clear that companies that issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities. These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets," she concluded.
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Regulation

SEC Shuts Down Two Crypto Startups For Illegal ICOs

In the latest crypto news, we have the US Securities and Exchange Commission (SEC) and a new round of regulation efforts from it. A new press release that apparently shuts down two cryptocurrency-related startups which have reached settlements with the agency for failure to register their tokens as securities or their token sales as securities offerings. Since 1934, the United States law sees selling anything that can resemble an investment contract (virtually) without first registering with the SEC or applying for an exemption. The Securities Act of 1934 was designed to prevent future crashes on the order of the crash of 1929 which led to the "Great Depression." Paragon and Airfox (officially registered as CarrierEQ) are the names of the startups which have been banned. Paragon, for example, sold $12 million in tokens but has a market capitalization of not quite $3,000,000 and as such it would seem that there are people interested in pursuing as much. As the press release by the SEC reads:
“The orders impose $250,000 penalties against each company and include undertakings to compensate harmed investors who purchased tokens in the illegal offerings. The companies also will register their tokens as securities pursuant to the Securities Exchange Act of 1934 and file periodic reports with the Commission for at least one year. Airfox and Paragon consented to the orders without admitting or denying the findings.”
The settlement also illustrates one non-fraud ICO case and the point 17 in the Paragon document illustrates a familiarity with token technicalities, reading:
“PRG tokens were distributed to purchasers on October 22, 2017, on the Ethereum blockchain using the ERC-20 protocol.”
The Enforcement Co-Director at SEC, Steven Pelkin, also believes that the enforcement actions against Airfox and Paragon will help stimulate the registration of other US-based ICOs in advance of further non-fraud prosecution.
“By providing investors who purchased securities in these ICOs with the opportunity to be reimbursed and having the issuers register their tokens with the SEC, these orders provide a model for companies that have issued tokens in ICOs and seek to comply with the federal securities laws," he stated.
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