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Cyprus SEC Embraces Blockchain Despite Unclear Crypto Regulation

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The Securities and Exchange Commission (CySEC) of Cyprus has published a report in which it discussed about the ongoing activities of its Innovation Hub – a new cooperative entity which launched in October 2018 with the main goal to engage the communication between CySEC and entities operating in the fintech and regtech sectors. The Cyprus SEC now embraces the blockchain technology and is intended to facilitate knowledge-sharing between regulators and innovators.

The commission will also be in charge of promoting the development of regulations which foster innovation and ensure compliance within dynamic and emerging tech industries. It will also engage with third parties seeking to participate with emerging financial innovations, including law firms, credit institutions and education institutions.

A press release shows that the chairwoman at Cyprus SEC Demetra Kalogerou described the Hub as working to strengthen investor protections “by embracing new innovations in financial and regulatory technology,” adding that the regulator’s mission is to “create a robust ecosystem in which fintech firms can flourish responsibly in Cyprus.”

Despite the efforts to foster innovation within the DLT sector, activities involving cryptocurrencies remain an unregulated activity within the country. A recent interview showed Kalogerous saying that the agency is still “evaluating the risk and benefits of crypto innovation to determine whether further actions and legislative requirements are needed to ensure full investor protection.”

The chairwoman also added that the Cyprus SEC team does not wish to act prematurely as its main mission is to prevent “any dislocation in an otherwise smooth functioning […] capital market.”

Before this, CySEC published warnings regarding three unauthorized forex and cryptocurrency brokers including Naga Markets, CALIBUR CAPITAL and IcFxMarkets of operating illegally within the country. The commission noted that the companies fraudulently claimed to have affiliation with entities regulated within the jurisdiction.

As the blockchain news showed, the Cyprus securities regulator partnered with the University College London’s Blockchain Technology for Algorithmic Regulation and Compliance (BARAC), which researches applications for blockchain technology in automating the compliance and regulatory procedures.

In 2019, the cabinet in the country published its National Strategy on Distributed Ledger Technologies, aiming to provide a platform for both public and public-private initiatives employing blockchain applications.

 

DC Forecasts is a leader in many crypto news categories, striving for the highest journalistic standards and abiding by a strict set of editorial policies. If you are interested to offer your expertise or contribute to our news website, feel free to contact us at editor@dcforecasts.com

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Regulation

UK Adds New Anti-Money Laundering (AML) Regulations

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The latest UK crypto regulation news show that United Kingdom's finance and economics department has recently announced the addition of new Anti-Money Laundering (AML) regulations. As per the official announcement, the new AML regulation in UK was launched in a bid to combat the increasing risks that are linked to the crypto transactions and networks. As the UK Finance and Economics Department said, the UK adds these measures in order to reduce the risk of laundering and other crimes related to crypto. The Director of Retail and Regulatory Investigations, Therese Chambers, had a speech on March 6 and said that the new Money Laundering Regulations (MLR) position the UK's Financial Conduct Authority (FCA) as the new Anti-Money Laundering overseer for a couple of crypto objectives. As she explained, the new regulations that UK adds go beyond the 5th Anti-Money Laundering Directive (5AMLD) and include a new broader set of activities, including ICOs as it was recommended by the FATF in 2019. In that manner, the 5AMLD was entered as law by the European Union in July 2018 and came into effect officially on January 10, 2020. Chambers told the media that cryptocurrencies and crypto-related businesses are now associated with money laundering because they allow anonymous financial transfers. She also explained that the FCA's regulatory oversight mainly focuses on the business dealings within the cryptocurrency space. The UK adds these new changes in order to help exchanges dealing with crypto pairings. Custodial wallet providers, ICOs, IEOs and crypto ATMs are also part of the list. Chambers was also featured in the crypto news and cryptocurrency regulation news, noting that any crypto operating firm must possess FCA risk assessment, customer due diligence, transaction monitoring, record-keeping and suspicious activity reporting. What's also interesting is the fact that crypto firms have been leaving the UK and EU because of their continuous stringent regulations on crypto firms. The EU enacted new AML regulations in July 2018, called the 5th Anti-Money Laundering Directive (5AMLD) which has rules that led several crypto exchanges to leave UK and EU-related countries. Most recently, we had Simplecoin and Chopcoin, both crypto platforms which closed their operations due to the EU's AML regulations. As Simplecoin then said, the latest AML and KYC regulations were the main reason why crypto businesses are leaving.
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Revised Crypto Laws In Japan Will Be Enforced Starting May

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The revised crypto laws in Japan will be enforced at the start of May hoping to regulate cryptocurrencies in the country as we are reading in the cryptocurrency regulation news below. The Payment Services ACT and Financial Instruments and Exchange ACT which are two parts of the cryptocurrency regulation frame passed by the Japanese House of Representatives in 2019, that aimed to regulate cryptocurrency, were scheduled to come into effect this month but with the unexpected delays because of the Coronavirus pandemic, there has been a delay in the date which is not set yet but is expected to start somewhere at the start of May. In the edition of the official government newsletter, it was announced that the newly revised crypto laws of the PSA and FIEA would be enforced in Japan starting on May 1 as per the latest cryptocurrency regulation news. There are no official laws for cryptocurrency regulation in Japan which amend the existing regulations that are the only way for cryptocurrencies to have any kind of legal status in the country. The changes to the PSA range from changing basic terminology to virtual currency rather than a crypto asset to lightening restrictions on the crypto custodians. In addition, the crypto exchanges that operate in Japan will have to manage the users’ money separately from their own cash flows which means finding a third-party operator to keep the money of the clients and to use reliable methods will be needed. If the users still want to use hot wallets, the exchanges will have to hold the same kind of quantities and the same kind of crypto assets as their users to reimburse correctly in the event of theft which was added in response to the MT. Gox hack which led to a loss of 850,000 Bitcoin. The revisions of the FIEA include the concept of electronically recorded transferable rights to define the ICOs and the STOs which would be regulated under the act. The new law refers to tokens issues in the expectations of profit or security tokens. The crypto derivatives are unregulated in Japan so, from the beginning of May, the crypto asset derivatives will be regulated under the FIEA. The FIEA will ban anyone in Japan from engaging in activities such as dissemination of rumors or the use of fraudulent means to buy, sell of engaging in crypto assets or derivatives transactions.
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BIS Calls For Central Bank Digital Currencies (CBDCs) And Digital Payments

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The Bank of International Settlements, known as BIS, recently issued a report in which it argued in favor of the central bank digital currencies (CBDCs) as well as digital payments during the COVID-19 pandemic. As we can see from the cryptonews today, BIS calls for the use of central bank digital currencies by countries that have established them. The bulletin published by the organization (which counts more than 600 members in 60 countries) urges the central banks to consider developing CBDCs in light of concerns related to the spread of the coronavirus through existing payment methods. We can also see that while BIS calls for use of digital payments and CBDCs, there is a negative change in consumer attitudes regarding the use of cash in response to the World Health Organization (WHO) which warned regarding the spread of COVID-19 through banknotes. While the BIS echoes WHO's concerns, this report shows that the risk of coronavirus transmission through contact with credit card terminals and PIN pads is even a greater risk. The report reads:
“Scientific evidence suggests that the probability of transmission via banknotes is low when compared with other frequently-touched objects, such as credit card terminals or PIN pads.”
We can also see that BIS calls for better handling of money, and in the report notes that “in past crises, demand for cash has often increased, as consumers have sought a stable store of value and medium exchange.” Still, the current data "does not yet paint a uniform picture" with ATM withdrawals declining in the United Kingdom. In the medium term, this report predicts that the outbreak could “lead to both higher precautionary holdings of cash by consumers and a structural increase in the use of mobile, card and online payments.” BIS calls for better actions and anticipates that the current climate could lead to central bank operated payment infrastructures such as CBDCs which would quickly gain prominence. Still, the report emphasizes the need for CBDCs to be designed to withstand a wide array of shocks including "pandemics and cyber attacks." All in all, the Bitcoin and altcoin news today show that BIS warns that a move away from cash as a generally adopted means of payment “could open a ‘payments divide’ between those with access to digital payment and those without" - and this could in turn have a “severe impact on unbanked and older consumers.”
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Bank Of France: ETH And XRP Could Power Central Bank Crypto

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The central bank of France is apparently thinking about a cryptocurrency initiative in the future. In fact, we can see that they already launched an experimental program that will investigate the feasibility of rolling out its own central bank digital currency (CBDC) for interbank settlements. As a document in the Ethereum news shows after it was released on Monday, the Bank of France already invited the interested parties to participate in the program and the applications are due by May 15th. The plan, right now, is to identify a number of economic benefits and potential use cases for such a digitized national currency. As officials from the bank said:
“The challenge of these experiments is not to replace these two existing forms of central money, but to identify how innovative technologies could improve the efficiency and fluidity of payment systems and financial infrastructures, allowing a better financial sector to ensure the smooth financing of the economy.”
The central bank of France is also eyeing the idea of using cryptocurrencies to power CBDCs. In this respect, an internal report in the Ripple news emerged showing that both Ethereum (ETH) and Ripple (XRP) are the two crypto assets that could be used in an initiative like this. The initiative reads:
“This solution could be employed to carry out end-to-end transactions, including final settlement, using assets that are tokenised on a blockchain… Since the attributes of a unit of the wholesale CBDC (file representing the currency unit, keys enabling use) may be integrated in a cryptoasset circulating on another blockchain, which is possible on Ethereum and Ripple, for example, it would then become possible to use the unit on this blockchain. The wholesale CBDC unit could be exchanged via the secondary blockchain between entities not belonging to the digital currency’s formal circulation network.”
The experimental project was scheduled in December 2019 by François Villeroy de Galhau, who is the governor of the bank of France. According to reports, Galhau wants to make France the first country that will issue a central bank digital currency (CBDC). As the regulator said, a CBDC could be the solution that people need in search of a more liquid and safe payment instrument which can help and keep up with the fast-paced technological changes.
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