Crypto-Backed SALT Claims $1.3 Billion Backlog, Suspends New Memberships

Crypto-Backed SALT Claims $1.3 Billion Backlog, Suspends New Memberships

Secured Automated Lending Technology (SALT) has an enviable problem if its recent Medium post is to be believed. The membership-based crypto-as-collateral loan platform has declared “a demand of over $1.3b in loan requests” is forcing it to suspend “new membership registrations, loan requests, and purchases of SALT.”

Also read: How To Regain Control From Nanny Zuck

SALT Comes to a Halt

Colorado-based SALT has only been around since late 2017, but during that time it claims to have issued “over $23m in blockchain-backed loans.” If that wasn’t enough, “there is still a demand of over $1.3b in loan requests that we are diligently working to address,” a recent communication from the company explained.

Using a member’s cryptocurrency holdings as collateral for cash loans, enthusiasts are able to leverage their gains in decentralized currency markets in the event they’d like to pay off debt or whatever financial spirit moves them. And they’re able to do it without giving up crypto holdings per se.  

Crypto-Backed SALT Claims $1.3 Billion Backlog, Suspends New Memberships

Evidently, it’s catching on. “Due to the enormous demand and loan requests we will be temporarily suspending new membership registrations, loan requests, and purchases of SALT on our platform. Existing members will still be able to deposit SALT on the platform and upgrade their membership in the interim. We plan to begin adding members and turn on all associated features as soon as we have satisfied the automation of our current loan process and have served the current pending loan requests.”

SALT’s business model is essentially larger loans floated by accredited investors; those with a net worth of more than a million dollars or with six-figure salaries. The minimum loan is 5,000 USD, and it does seem to be working well – maybe too well – to the tune of over 60,000 members. 

Alternatives to SALT

“The process of scaling and automating our processes and technology,” SALT continues, “has been progressing well but we’ve recognized an opportunity to focus our team’s time and resources on this important goal and on addressing the existing demand before we continue to add new memberships and loan requests.”

Cypto-Backed SALT Claims $1.3 Billion Backlog, Suspends New Memberships

While SALT figures out how to scale, other lending programs abound within the ecosystem. Coinloan is a crypto asset collateral lending program that offers significantly smaller loans and easier access. Ripio’s RPN Global Lending is more peer-to-peer in its approach. Ethlend of Switzerland works off of the Ethereum blockchain, and touts its decentralized features.

And even though SALT is “temporarily halting these features we will be able to dedicate all of our time and energy on serving those that have been integral to our success thus far, as well as positioning our platform to address the future demand for SALT’s lending platform,” which includes moving into US states such as Arkansas, Delaware, New Jersey, and North Carolina to push commercial loans.

What are your thoughts on crypto loan programs? Let us know in the comments section.


Images courtesy of Pixabay, SALT, Coinloan.


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France Cracks Down on Bitcoin Derivatives

France Cracks Down on Bitcoin Derivatives

Autorité des marchés financiers (AMF), the independent regulatory body governing France’s stock market, issued two statements today, one on initial coin offerings (ICOs) and another on the prospect of bitcoin derivatives. Both point to more oversight to come for crypto in France, including everything from formal authorizations to a ban on advertisements.  

Also read: How To Regain Control From Nanny Zuck

France Cracks Down on Bitcoin Derivatives

AMF, France’s markets regulator, insists bitcoin derivatives are subject to the European Union’s Markets in Financial Instruments Directive (MiFID II) which trigger all manner of new rules and authorizations. In its 22 February published missive, The AMF considers that the offer of cryptocurrency derivatives requires authorisation and that it is prohibited to advertise such offer via electronic means,” the agency argues. “The AMF has reached the conclusion that platforms which offer these products must abide by the authorisation and business conduct rules, and that these products must not be advertised via electronic means.”

During its analysis the AMF determined “the legal qualification of the notion of “derivative” in the context of cryptocurrency derivatives and […] to consider whether a cryptocurrency could be legally regarded as an eligible underlying. The notion of “derivative” is not defined in EU legislation per se.”

France Cracks Down on Bitcoin Derivatives

The AMF describes growth in crypto exchanges as a boom, offering “binary options, CFDs or Forex contracts with an end-of-day maturity (rolling spot forex), where the underlying is a cryptocurrency. Such contracts allow investors to bet on a cryptocurrency’s rise or fall, without holding the underlying.”

As a result, the legal status of crypto is almost irrelevant because the AMF determined “a cash-settled cryptocurrency contract may qualify as a derivative.” Furthermore, the agency found the European Market Infrastructure Regulation (EMIR) will be invoked, along with MiFID II, setting into motion rules for over the counter (OTC) derivatives and their online exchanges such as complying with “authorisation, conduct of business rules, and the EMIR trade reporting obligation to a trade repository. Above all, these products are subject to the provisions of the Sapin 2 law, and notably the ban of advertisements for certain financial contracts.”

AMF Also Takes a Hard Look at ICOs

The AMF publishes the summary of responses to the public consultation on initial coin offerings (ICO) was also revealed the same day, summarizing 82 comments from the French public concerning ICOs and their regulatory fate.

According to the agency, “a large majority of respondents expressed support for setting up an appropriate legal framework for this new type of fundraising.” Respondents were “digital economy players, individuals, finance professionals, market infrastructures, academics and law firms.”

France Cracks Down on Bitcoin Derivatives

The AMF offered three options for consideration going forward: “Promote a best practice guide without changing existing legislation (option 1); Extend the scope of existing texts to treat ICOs as public offerings of securities (option 2); Propose new legislation adapted to ICOs (option 3).” Of those, option 3 received 66% approval.  

“Respondents unanimously consider that an information document is necessary to inform buyers of tokens,” and should include project specifics, rights, distribution scheme, along with identifying the project’s heads and team. “Finally, the vast majority of respondents favour the establishment of rules making it possible to ensure the escrow of funds raised, and the setting up of a mechanism to prevent money laundering and terrorist financing,” the release concluded.

In response to the respondents, AMF officials have vowed to “continue work” on the prospect of regulating ICOs.

Is France overreacting? Let us know in the comments section.


Images courtesy of Pixabay, AMF.


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Venezuela Orders Government Services to Accept Any Cryptocurrency

Venezuela Orders Government Services to Accept Any Cryptocurrency

Venezuela’s president Nicolas Maduro has ordered the country’s consular services, as well as several other services and gas stations, to accept any cryptocurrency including the nation’s own petro. In addition, he has announced the launch of another cryptocurrency, this time backed with gold.

Also read: Indians Look to Buy Bitcoin Overseas as Regulations Tighten

Maduro’s Orders

Maduro has ordered various government services to accept any cryptocurrency including the petro, Venezuela’s oil-backed currency which began its private pre-sale on February 20. This announcement was broadcasted nationwide from the Miraflores Palace and also reported on the website of the Superintendency of Cryptocurrencies. The president said:

I order the payment of consular services in all embassies and consulates of the Bolivarian Republic of Venezuela in the world, [and] all consular services in the country, in the petro currency or in any cryptocurrency.

Maduro Orders Government Services to Accept Any CryptocurrencyMaduro also announced that “the National Association of Airlines will be able to pay in petro or in any cryptocurrency [for] the fuel and the services associated to the airlines in the rendering of their services in Venezuela.”

Furthermore, he ordered “a manual be established for the payment of tourist services in the country through the Venezuelan cryptocurrency or any other virtual currency.” According to him, “service providers, hotels, inns, national and international tourist services” asked him for authorization so they can “begin charging in cryptocurrencies and petro.”

Crypto Accepted at Border Gas Stations

Maduro Orders Government Services to Accept Any CryptocurrencyAt the petro launch event, Maduro also revealed, “we are going to establish new international gasoline services at the border.”

He elaborated that his government “will charge in petro [for] all Venezuelan fuel that is sold in the service stations located at the different points of the border of Venezuela and Colombia.” Citing that several service stations are charging in Colombian pesos and bolivars in international prices, he declared that starting on Wednesday:

In the revitalized gasoline services plan to combat the smuggling of gasoline at the border, we will proceed to charge in all cryptocurrencies, especially the petro.

Major State-Owned Companies to Use Petro

Maduro Orders Government Services to Accept Any CryptocurrencyThe Superintendency of Cryptocurrencies confirmed on Wednesday that three state-owned companies “will also make sales and purchases with the petro.” They are the oil and natural gas company Petróleos de Venezuela (Pdvsa), its petrochemical subsidiary Pequiven, and the conglomerate Venezuelan Guayana Corporation (Cvg).

Consequently, Maduro explained that “suppliers and creditors of these companies must conduct their commercial transactions of purchase-sale in a percentage of their products and supplies in the petro [starting] from today.”

Furthermore, during a Patria Para Todos (PPT) party event on Wednesday, the Venezuelan president revealed that:

Next week we will launch the petro-gold that will accompany the petro…We already have 36 exchange houses in the world that are working with Venezuela and the petro.

Petro Skeptics

Maduro Orders Government Services to Accept Any CryptocurrencySince the launch of the petro, many skeptics have expressed doubt towards the cryptocurrency. Harry Colvin, director and senior economist at Longview Economics, told CNBC that it is doubtful the petro will be a success, adding that “Venezuela has been known for misappropriation of assets in the past and the central bank has just created hyperinflation so I imagine there’ll be trust and transparency issues.”

Moreover, the Venezuelan National Assembly has already declared the petro illegal ahead of its launch. “If Maduro loses the election in April – or is forced out of power – then petros would probably be made illegitimate,” Colvin noted.

Johns Hopkins professor Steve Hanke, a noted economist and Senior Fellow of the Cato Institute, tweeted on Wednesday:

With Venezuela’s traditional currency failing, why should investors have any faith that the petro will be a stable currency. The petro is just another desperation play by Maduro.

What do you think of Maduro’s plans? Let us know in the comments section below.


Images courtesy of Shutterstock and the Venezuelan government.


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Venezuela Says Pre-Sale of Oil-Backed Petro Cryptocurrency Has Raised $735 Million

Venezuela Says Pre-Sale of Oil-Backed Petro Cryptocurrency Now Available

Venezuela has announced that the pre-sale of its oil-backed cryptocurrency, the petro, has attracted $735 million on the first day. The government has also published a buyer’s manual and confirmed that buyers can use “hard currencies and cryptocurrencies, but not bolivars.”

Also read: Indians Look to Buy Bitcoin Overseas as Regulations Tighten

Petro Pre-Sale Starts

The private pre-sale of Venezuela’s oil-backed cryptocurrency, the petro, was scheduled for February 20 at 8:30 am (Venezuela time 04:00 UTC), according to the petro’s whitepaper. However, at midnight local time on February 20, the government announced that the petro pre-sale had started and published a buyer’s manual as well as an anti-money laundering (AML) compliance manual.

Venezuela Says Pre-Sale of Oil-Backed Petro Cryptocurrency Now Available
Petro’s pre-sale launch event.

A total of 82.4 million petro tokens are offered for the pre-sale phase, the whitepaper details. The country’s vice president, Tareck El Aissami, confirmed from Miraflores Palace on Monday, “The petro cryptocurrency tokens can be purchased by Venezuelan nationals as well as other foreign nationals.”

The Superintendent of Cryptocurrencies, Carlos Vargas, was quoted by Telesur TV:

The presale and initial offer will be made in hard currencies and cryptocurrencies, but not bolivars…Our responsibility is to put (the petro) in the best hands and then a secondary market will appear.

Interested buyers can visit the Etherdelta platform to place private orders to the Ethereum address given by the Superintendent. However, at the time of this writing, no orders have been matched and no prices are displayed on the price chart. This could be due to technical glitches in the buying process such as a Javascript error which prevents users from completing their purchases.

Venezuela Says Pre-Sale of Oil-Backed Petro Cryptocurrency Now Available

According to the Minister for University Education, Science and Technology, Hugbel Roa, the traffic to the petro website “quintupled with the global announcement of the pre-sale of the Venezuelan cryptocurrency,” shortly after midnight local time.

Venezuela Says Pre-Sale of Oil-Backed Petro Cryptocurrency Now Available
Hugbel Roa’s traffic chart for the petro’s website.

Despite technical challenges, Venezuela’s president, Nicolas Maduro, claimed:

Venezuela had received $735 million in the first day of a pre-sale of the country’s “petro.”

Instructions to Buy the Petro

Venezuela Says Pre-Sale of Oil-Backed Petro Cryptocurrency Now Available
Maduro announcing petro’s pre-sale.

“The only thing needed for the petro is to open a digital petro wallet,” according to the petro’s website. “Once opened, your wallet will generate an email address that you can share with anyone who wants to transfer PTR to your wallet. You will be able to receive and deposit your PTRs in this email address.”

The buyer’s manual details a step-by-step process of how to register and gain access to a petro wallet, which requires prospective buyers to download a zipped, self-deleting installation file. “The data package for the creation of the digital wallet is configured to self-destruct once the installation is complete,” the instructions warn.

Alongside the steps to register and install the petro wallet, the manual goes over protecting users’ private keys but stopped short of asking users to generate a public key, which would be needed for any kind of cryptocurrency deposit. More curiously, however, was the vague announcement regarding the use of the NEM blockchain:

The Blockchain launched by the Venezuelan State has robust security mechanisms since its programming elements are related to a technological platform called: NEM blockchain.

The cryptocurrency NEM, which uses centralized servers running closed-source code, has recently been in the news frequently following the hack of one of the largest Japanese crypto exchanges, Coincheck, which lost 58 billion yen (~USD$539 million) worth of the cryptocurrency.

Do you (still) want to buy the petro? Let us know in the comments section below.


Images courtesy of Shutterstock and the Venezuelan government.


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US Lawmakers Eye National Crypto Regulation

US Lawmakers Eye National Crypto Regulation

Gun control? Russia? Health care? Members of the US House of Representatives and Senate in both parties tend to differ, and often vehemently. Similar to issues of national security and war, however, it appears cryptocurrency regulation is decidedly less divisive. Both traditionally pro-market Republicans and open-minded Democrats are producing bipartisan rhetoric in support of federal legislation to tame the crypto revolution.  

Also read: Switzerland Enacts ICO Guidelines

Crypto Regulation Rhetoric Is Bipartisan

Senator Chris Van Hollen, Democrat, walked a tight rhetorical line on the burgeoning cryptocurrency phenomenon, saying, “The goal here is to have rules of the road that protect consumers without trying to squash innovation.”

Cynics have long contended both political wings in the United States are part of the same sick bird. They seem to have differences, responding to various constituencies with requisite amounts of intensity, but when it comes to guns and butter, and especially butter, cosmetic differences are set aside and a strange uniformity kicks in.

US Lawmakers Eye National Crypto RegulationRepublican Senator Mike Rounds told Reuters, “There’s no question about the fact that there is a need for a regulatory framework.” Indeed, at an open hearing under the auspice of Senator Rounds’ committee, both Chairs of the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) were decidedly agnostic on extending their own powers, but in agreement future focus would need to be placed upon cryptocurrencies specifically. Whether that came in the form of a dedicated and separate agency or some hybrid within existing institutions is all up for grabs.

Calls for regulation seemed to dry as bitcoin tumbled some 60 percent recently, signaling to those less literate in crypto such markets were ending in a natural death. However, across the board cryptocurrencies are rebounding, showing a resilience troubling to lawmakers. “The SEC is properly the lead on the issue. Six months ago, we didn’t see this explosion. The marketplace has changed,” Republican House member Bill Huizenga noticed. His committee is taking up the issue of crypto regulation next month, and he’s on record as supporting oversight.

Election Season Is On and Cracking

Adding to US regulatory fever is an off-year election this November. The entire 435 lower legislative body, the House of Representatives, is up for reelection, and Republicans hold a slim and narrowing majority. A third of the US Senate’s 100 member chamber is also up, and Republicans hold a slight lead there as well. With a Republican President set for two more years after, both parties see this November as a chance to alter political fortunes. American politicians typically hit on easier targets, and crypto’s considerable bad press, linking it to crime and fraud, might be just a topic to gain the electorate’s attention.

”A lot of people don’t realize there’s nothing backing these virtual currencies,” warned House Democrat Carolyn Maloney. Congresswoman Maloney wishes to expand SEC jurisdiction over cryptocurrencies.  

US Lawmakers Eye National Crypto Regulation

Republican House member Tom MacArthur cautioned, “We have to look carefully at all of the cryptocurrencies and make sure individuals don’t get taken advantage of.”

House Freedom Caucus member Republican Dave Brat gave an equivocation, “I‘m a total free-marketer, so I don’t want to regulate, but if it’s a currency that could destabilize the whole economy, you’re going to have that conversation.”

The White House, for its part, has expressed worry with regard to bitcoin and crime, but it hasn’t put forth any policy proposals as of yet. Asked about the prospects for a federal regulation agenda emanating from the Oval Office, Special Assistant to the President Rob Royce explained, “I think we’re still absolutely studying and understanding what the good ideas and bad ideas in that space are. So I don’t think it’s close.”

What do you think of the sentiments expressed by Congress? Let us know in the comments section.


Images courtesy of Pixabay.


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Japanese Crypto Exchanges Tap Star Power for Marketing Arms Race

Japanese Crypto Exchanges Tap Star Power for Marketing Arms Race

Japanese cryptocurrency exchanges have been very active in advertising their services. Several exchanges including Bitflyer, DMM Bitcoin, Tech Bureau’s Zaif and the hacked exchange Coincheck have been tapping into star power and launching TV commercials with original music.

Also read: Indians Look to Buy Bitcoin Overseas as Regulations Tighten

Japanese Exchanges’ TV Commercials

Japanese Crypto Exchanges Tap Star Power for Marketing Arms Race
Actress in Zaif’s commercials.

Japanese cryptocurrency exchanges have been actively advertising their businesses. Last week, Tech Bureau’s Zaif exchange joined Bitflyer, DMM Bitcoin, Bitrade, and Coincheck in tapping into Japan’s star power to promote its services.

According to CM Soken Consulting, a commercial researcher operated by Tokyo Kikaku Co, “the presence of TV commercials by cryptocurrency exchanges has significantly increased in the past year,” Japan Times reported. “Between Dec. 20 to Jan. 19, TV ads by Coincheck and Bitflyer were aired 819 times in the Kanto region, comparable to major firms such as Toyota Motor Corp, NTT Docomo Inc, and Mcdonald’s Japan.”

Japanese Crypto Exchanges Tap Star Power for Marketing Arms Race
Actress in DMM Bitcoin’s commercials.

The news outlet also pointed out that a huge billboard for “DMM Bitcoin featuring a Japanese celebrity coated in gold” is prominently displayed in Shibuya, one of the busiest and most famous shopping districts in Tokyo. “When I was in London I would see ads all over Facebook, but never on TV or in the streets like this,” a 20-year-old British tourist admitted as he stood beneath the billboard.

Kenji Harashima, a senior researcher specializing in financial technologies for the Mizuho Research Institute, was quoted:

Japanese exchanges are the most active in the world. Not only is this the result of tight regulations in China and South Korea, it is also because you can use leverage to make investments.

DMM Bitcoin, Bitflyer and Coincheck “have all advertised on web platforms such as Youtube, Facebook, and Instagram. These same exchanges have also aired TV commercials,” the publication added.

Tech Bureau’s Zaif

Last week, Tech Bureau which operates Zaif crypto exchange started broadcasting a commercial nationwide featuring Japanese actress, model, and singer Ayame Goriki. According to her Wikipedia page, she has been in 37 TV series and has appeared in 7 movies.

The 1-minute commercial also features an original song loosely translated as “Zaif for bitcoin” by a band called “Kaneko Mari & Zaif 2 Da Moon.” Zaif says that the nationwide promotion is aimed at increasing service awareness as well as “improving the image of the industry as a whole.”

Bitflyer

Japan’s largest cryptocurrency exchange by volume, Bitflyer, was the first to run TV commercials at the end of April of last year, according to Japan Times. At the time, the Japanese government had just legalized bitcoin as a legal method of payment.

Bitflyer hired Japanese actress and model Riko Narumi to be the company’s spokesmodel and appear in its commercials.

DMM Bitcoin

Japanese Crypto Exchanges Tap Star Power for Marketing Arms Race
DMM FX commercial featuring Laura.

DMM Group started advertising for its bitcoin exchange at the start of the year. The company launched a crypto exchange under the brand name DMM Bitcoin in January which supports 7 cryptocurrencies. Recently, it also launched a mining farm and a showroom in Kanazawa City, Ishikawa Prefecture, Japan.

DMM Bitcoin’s commercials feature an actress and model known as Laura and another actress called Rika Nakagawa. Laura has also been in other DMM Group’s commercials including those for the company’s foreign exchange arm, DMM FX.

Too Much Ad Spending?

Bittrade and Coincheck crypto exchanges have tapped into star power to advertise their businesses. Bittrade hired Japanese actress Ruriko Kojima to be its face. Coincheck hired popular local comedian Tetsuro Degawa. However, Coincheck’s ads were removed following the hack that cost the exchange 58 billion yen worth of NEM.

“Coincheck executives have admitted that they might have put more priority on attracting customers with ads rather than enhancing security,” Japan Times wrote and quoted SBI Holdings’ CEO Yoshitaka Kitao saying:

The thing that makes me the most angry is that they spent money on commercials that should have been spent on their systems.

The Japan Cryptocurrency Business Association (JCBA), an industry group with over 150 members including Coincheck, has requested its members to “advertise responsibly.”

What do you think of Japanese crypto exchanges’ advertising strategies? Which ads do you like most? Let us know in the comments section below.


Images courtesy of Shutterstock, Zaif, Bitflyer, and DMM Bitcoin.


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Israel Tax Authority: Bitcoin is Property, Not Currency

Israel Tax Authority: Bitcoin is Property, Not Currency

Israel Tax Authority issued a professional circular on February 19 (4 Adar 5768), clarifying the country’s tax policy on cryptocurrencies in general and bitcoin in particular. “Bitcoin and its like” are discussed in what’s referred to as a “final circular” on crypto and value-added tax (VAT) along with capital gains.

Also read: Switzerland Enacts ICO Guidelines

Israel VAT Good News on Crypto

“The Tax Authority’s position, which was expressed in the past, is [bitcoin is] a property, not a currency,” the Israeli agency clarified upfront. Israel is the economic jewel of Southwest Asia, routinely ranking alongside countries many multiples its size in terms of innovation and output. Punching above its weight in cryptocurrency as well, the country has grappled with bitcoin since at least 2013 in one form or another. Openness to the decentralized currency idea extends all the way to its current Prime Minister. Its tax policy might be not only a regional trendsetter but a world model.

Going forward, “For purposes of income tax – in accordance with the circular, a distributed means of payment is an asset, and therefore a person whose activity as aforesaid does not reach a business is only entitled to capital gains tax and the person whose activity in the field reaches a business (trade in a distributed method of payment and / Such a measure), tax will be paid as any business activity,” the circular noted, suggesting it was speaking to the Israel Securities Authority (ISA) policy as well.  

Value-added tax (VAT) in Israel is applied to most goods and services at the 17% mark, and electronic accounting for VAT is regulated by law in the country. As such, “a distributed means of payment is an intangible asset, and therefore anyone whose activity in the field is for investment purposes only, which does not reach a business, is not liable for VAT,” which leaves the average Israeli investor be, at least on that score.  

“A dealer whose receipts are accepted by means of a distributed payment method will be paid VAT according to his business activity,” however, “regardless of the manner of receipt, so that as a rule, VAT will not be paid; A person whose activity in a distributed means of payment reaches a business (from such trade) shall be classified as a financial institution; And those whose activities are mining, will be classified as a dealer for VAT purposes,” the agency explained.

Israel Tax Authority: Bitcoin is Property, Not Currency

Because bitcoin is an asset, property, it is subject to Israeli capital gains, which range to a high of 25 percent. Miners, if the implications remain, seem to be stuck with the worst of it, as they’re not only to pay capital gains but also VAT, which could boost their tax bill to some 42%.

What do you think about the Israeli plan? Let us know in the comments section.


Images courtesy of Pixabay.


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CFTC Offers $100,000 Bounty to Crypto Pump-and-Dump Whistleblowers

$100,000 Bounty Available to Crypto Pump-and-Dump Whistleblowers

The US Commodity Futures Trading Commission (CFTC) has created a bounty to encourage whistleblowers coming forward in exposing “pump-and-dump” schemes. “Customers should not purchase virtual currencies, digital coins,” the CFTC warned, “or tokens based on social media tips or sudden price spikes. Thoroughly research virtual currencies, digital coins, tokens, and the companies or entities behind them in order to separate hype from facts.”

Also read: Citibank India Bans Bitcoin 

Pump-and-Dump Bounty

To eat at scammers’ anonymity at least, the CFTC is offering, “If you have original information that leads to a successful enforcement action that leads to monetary sanctions of $1 million or more, you could be eligible for a monetary award of between 10 percent and 30 percent.” 

Customer Advisory: Beware Virtual Currency Pump-and-Dump Schemes is a two-page effort from the CFTC, “advising customers to avoid pump-and-dump schemes that can occur in thinly traded or new ‘alternative’ virtual currencies and digital coins or tokens.”

$100,000 Bounty Available to Crypto Pump-and-Dump Whistleblowers

As these pages have long documented, scams and schemes of old are reappearing anew in a space filled with inexperienced investors. For those familiar with, say, the American stock market experience, boiler room cold calls of yore, penny stocks, hot tips, and sure things are all haunting phrases investors have encountered at one time or another.

The ubiquity of message boards and of stock trading websites only encouraged scammers in this regard. Price action moved on pumps, on posts and general chatter about the potential of a given stock only a few were privy. Greed did the rest. Regulatory bodies in the US have had enough time to see their likes come and go.

$100,000 Bounty Available to Crypto Pump-and-Dump Whistleblowers

Old Wine, New Bottle

And while such scams seem new under the cloak of hip lingo such as cryptocurrency and blockchain and disruptive and game changer, it’s all pretty much the same old dance. Indeed, “Pump-and-dump schemes have been around long before virtual currencies and digital tokens. Historically, they were the domain of ‘boiler room’ frauds that aggressively peddled penny stocks by falsely promising the companies were on the verge of major breakthroughs, releasing groundbreaking products, or merging with blue chip competitors.”

The artifice of demand, such as it was, reflected in the price. “When the prices reached a certain point, the boiler rooms would dump their remaining shares on the open market, the prices would crash, and investors were left holding nearly worthless stock.” What might be slightly different in our present era is the relative sophistication and ability to hide true identities. And with basically one click, thousands of people can be reached rather easily.

For the broader ecosystem, self-regulation often happens in the form of news, Youtubers, message boards, and generally works itself out. Some enthusiasts insist it’s crypto’s charm, the engine of innovation, to police itself with heavy doses of caveat emptor. Part of the problem with accepting rat traps of the government regulatory body variety is what’s being invited. Running to Big Brother empowers Big Brother, a concept easily missed in the heat of pursuing justice. Often such bounties are used as metrics to buttress future enforcement budgets and to encourage more activist legislation. But these too are lessons this brave new world must learn anew.

What do you think about the CFTC bounty? Let us know in the comments section below.


Images courtesy of Pixabay, CFTC


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Switzerland Enacts ICO Guidelines

Switzerland Enacts World’s First ICO Guidelines

Just days before the tiny nation of Gibraltar was said to draft their first initial coin offering (ICO) regulations, Financial Market Supervisory Authority (FINMA) of Switzerland appears to have stolen its thunder in an eleven page document published today. It could be the standard by which developed countries look to install their own versions.

Also read: Citibank India Bans Bitcoin 

Switzerland Publishes ICO Guidelines

“The guidelines also define the information FINMA requires to deal with such enquiries and the principles upon which it will base its responses,” an agency press release began, “creating clarity for market participants.”

ICOs have bedeviled regulators the globe over since their inception Summer of 2013 as a creative way to crowdfund projects. They deliberately mirror initial public offerings, IPOs, which are famously used to bring traditional companies to market. However, IPOs have taken all the trappings that come with success: barriers to entry making them a very expensive proposition, requiring gaggles of lawyers and regulatory hoop-jumping. ICOs, due to their nascency, have gotten around all that to the tune of 6 billion USD in 2017 alone.

Switzerland Enacts World’s First ICO Guidelines

“FINMA has seen a sharp increase in the number of initial coin offerings (ICOs) planned or executed in Switzerland and a corresponding increase in the number of enquiries about the applicability of regulation,” the regulator insists. Following up on their Spring of last year Guidance document, “setting out how it intends to treat enquiries from ICO organisers,” FINMA wishes to solidify “transparency at this time” as it “is important given the dynamic market and the high level of demand.”

ICOs are a participatory token economy in the literal, digital sense. They usually focus upon a specific project, and combinations and permutations on this idea are as vast as the myriad of ICOs themselves: ownership in a company, payouts, tradeable coins, some of which are expected to appreciate beyond just being a digital stock certificate. They’re an adventuresome investment, and, as these pages have well-documented, slickly written white papers and website landing pages have often amounted to little more than exit scams.

Not All ICOs are Equal

A vast majority of ICOs rely upon the Ethereum platform and its Ethereum Request for Comments (ERC20), which is used for smart contracts. Something like over twenty one thousand such contracts exist, and estimates hold that ERC20 commands a supermajority ICO marketshare.

Swiss guidelines are “not applicable to all ICOs. Depending on the manner in which ICOs are designed, they may not in all cases be subject to regulatory requirements. Circumstances must be considered on a case-by-case basis […] At present, there is no ICO-specific regulation, nor is there relevant case law or consistent legal doctrine.” As such, “FINMA will focus on the economic function and purpose of the tokens (i.e. the blockchain-based units) issued by the ICO organiser. The key factors are the underlying purpose of the tokens and whether they are already tradeable or transferable.”

Switzerland Enacts World’s First ICO Guidelines

Swiss guidelines subdivide tokens into three classes: payment, utility, and asset. Payment tokens are basically cryptocurrencies as most understand them; utility tokens are access to services; asset tokens function more like derivatives, bonds, equities, and can serve as interest or dividend payments.

FINMA’s deepest worry involves anti-money laundering (AML) law subversion. “FINMA’s analysis indicates that money laundering and securities regulation are the most relevant to ICOs,” and as such guidelines contain “requirements for financial intermediaries including, for example, the need to establish the identity of beneficial owners.” Revealingly, the agency baldly asserts, “Money laundering risks are especially high in a decentralised blockchain-based system, in which assets can be transferred anonymously and without any regulated intermediaries.”

Switzerland Enacts World’s First ICO Guidelines

Supportive of Blockchain Technology

ICOs with payment token arrangements FINMA won’t be thought of as securities, and instead be required to comply with AML regulations already in place. Additionally, utility token ICOs “do not qualify as securities only if their sole purpose is to confer digital access rights to an application or service and if the utility token can already be used in this way at the point of issue.”

Asset token ICOs, however, “FINMA regards asset tokens as securities, which means that there are securities law requirements for trading in such tokens, as well as civil law requirements.” Where there are hybrids, it appears the most regulation applies rather than a default to a less regulated token.  

The Swiss body was careful to suggest it supports blockchain development, and it quotes FINMA head Mark Branson as insisting, “The application of blockchain technology has innovative potential within and far beyond the financial markets. However, blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework. Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system.”

Do you think FINMA’s guidelines will be the world standard? Let us know in the comments section.


Images courtesy of Pixabay, FINMA


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Steps towards Self-Regulation in Croatia and Slovenia

Steps towards Self-Regulation in Croatia and Slovenia

Communities in two countries, which share a border, history and perspectives, have expressed similar views about the future of the cryptocurrency sector. A new association in Croatia hopes to lay the foundations of self-regulation in the industry. In neighboring Slovenia, entrepreneurs and government officials have promised to work together to “educate the public” on the benefits of the blockchain technology.

Also read: Crypto Exchanges Launch P2P Platforms from Latvia and Bulgaria

Croatian Crypto Companies to Advise Regulators

Businesses and enthusiasts in Croatia have united their efforts to help authorities take informed decisions about the cryptocurrency sector. A new umbrella organization will be bringing suggestions and important matters to the attention of policy makers in Zagreb, Bitfalls reported this week. The Blockchain and Cryptocurrency Association will be advising regulators on anything from buying and selling cryptocurrencies, to crypto payments and salary payouts in bitcoin.

UBIK [“Udruga za Blockchain i Kriptovalute”] intends to create “a focused and strong community of people involved with the blockchain technology and the domain of cryptocurrency in Croatia”, but also in the region. Providing relevant information, education and knowledge about the crypto economy is among its priorities. The Croatian crypto association plans to help authorities and its members with legal, financial, and technological support in the development of the regulatory framework and realizing strategic blockchain projects.

Steps towards Self-Regulation in Croatia and Slovenia

Interest in bitcoin, other cryptocurrencies and the underlying technology has grown significantly in Croatia in the past year that saw skyrocketing prices on crypto markets. The local community has expanded with new companies working with blockchain technologies and more businesses accepting crypto payments.

A comprehensive regulatory policy is yet to be adopted by Croatian authorities. During a discussion on digital currencies back in 2013 the Croatian National Bank reportedly stated that bitcoin was not illegal in the country. More recently, in 2017, HNB noted that cryptos were neither legal means of payment, nor electronic money under current law in Croatia. The country has appealed for common EU decisions in regards to cryptocurrencies.

Government and Businesses to Educate Slovenians about Blockchain

More positive signals came this month from Croatia’s neighbor Slovenia, another former Yugoslav republic and current member of the EU. Government officials and blockchain companies promised to work together to “educate the public on the benefits and the opportunities that the innovative technology brings”. They met to set up an open dialogue between authorities and entrepreneurs, necessary to clarify and address the challenges. Slovenian Prime Minister Miro Cerar also took part in the meeting hosted by Viberate, a startup developing a decentralized live music marketplace.

Steps towards Self-Regulation in Croatia and Slovenia“We have called for regulation that would assist blockchain projects with existing financial limitations and allow us easier recruitment processes. The government has agreed that it will provide us with more favorable conditions in due time”, Insurepal, one of the participating companies, said in a blog post. It expressed hope that similar public discussions will help Slovenia become one of the most advanced countries in the field of blockchain.

The companies, which took part in the meeting, also announced the establishment of the Blockchain Alliance CEE. It will focus their efforts on improving visibility and raising the reputation of the sector through unified communication.

The current government in Ljubljana has a positive attitude towards the crypto industry. Speaking at the Digital Slovenia 2020 conference last year Prime Minister Cerar acknowledged the progress made by local businesses and said his country could become a leader in blockchain-development in the European Union. Slovenia is also among countries that do not tax individuals on capital gains from bitcoin and other cryptocurrencies.

Do you think positive developments in Southeast Europe in regards to crypto regulation will influence decisions in the EU? Share your thoughts in the comments section below.


Images courtesy of Shutterstock. 


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