This week in tech: India, Turkey, UK make moves as China’s investment drops

January 25, 2020 Harry DeVries 0 Comments



The world's first central backed digital currency is yet to see the light of day, but progress is being made. This week, the Bank of England announced that it plans to explore possible use cases for a digital currency. The BoE has joined hands with the Bank of International Settlements and five other central banks in the project, among them the Bank of Japan and the European Central Bank. The move could be among the most significant steps in the push for the use of CBDCs across Europe and beyond.

The move by the BoE is one of many in the past year, as the world seeks to adopt blockchain-based digital currencies. According to the World Economic Forum, central banks are waking up to digital currencies. During the Davos 2020 conference this week, the WEF launched the CBDC Policy-Maker Toolkit that's aimed at helping central banks find the best way to integrate digital currencies into their monetary systems. The organization gathered insight from central bank researchers, international organizations, global policy‑makers and experts from over 40 institutions.

Still on CBDCs, the MIT blockchain research group believes that most of them will use technology currently being applied by existing digital currencies. The Digital Currency Initiative published a report this week stating that most CBDCs will copy features such as "the usefulness of programmability in money and the importance of preserving user privacy."

In India, the government is struggling to find some middle ground on crypto and blockchain. While the Reserve Bank has had its issues with crypto, the country's securities regulator believes blockchain will play a key role. Ajay Tiagi, the chairman of the Security and Exchange Board of India is urging the exploration of blockchain applications in the securities market, such as in clearing, settlement and record-keeping.

Still in India, the country's Telecoms and IT Minister has called for blockchain solutions for improving quality of government schools. Ravi Prasad called on the National Informatics Center to develop solutions for public schools, saying he is very keen on leveraging blockchain technology in primary education. He was speaking during the inauguration of a blockchain center of excellence in Bengaluru.

In Turkey, the city of Konya is working on integrating blockchain, including developing its own digital currency. The city has blockchain experts already looking into how the technology can be integrated in social programs. The proposed digital currency, City Coin, will be used in the social programs as well as other state payment systems.

The world's largest brewing company is also using blockchain, leveraging the technology to help African farmers prove their income. Anheuser-Busch InBev, the maker of the popular Budweiser, has developed a blockchain-powered system that keeps track of all the farmers supplying it. This system replaces the tedious paper trails previously used. The farmers can use it to prove their income to banks and other financial institutions, a crucial factor in acquiring credit facilities.

Argo Blockchain had the best year yet in 2019, a report this week revealed. The report claimed that the crypto mining company saw a tenfold increase in its revenue last year. Argo, which is listed on the London Stock Exchange generated $11 million, up from $987,000 in 2018.

While blockchain technology is rising to the top, China has scaled down its investment in the technology. A report by state-run Xinhua revealed that the country saw 245 financing deals in blockchain in 2019. These deals accounted for $3.6 billion, a 40.8% drop from the previous year. Beijing, Shenzhen and Hangzhou had the most deals, the report stated.

FATF Holds Global Forum to Discuss Crypto Supervision

January 18, 2020 Harry DeVries 0 Comments



The Financial Action Task Force (FATF) and over 50 delegations involved in crypto supervision recently gathered to discuss how to regulate crypto assets and related service providers. While examining three key areas, they stressed the importance of international cooperation, citing that cryptocurrencies are global products.

FATF-Led Discussion on Crypto Supervision
The Financial Action Task Force held a "supervisors' forum" in France last week to discuss crypto asset supervision. The aim of the forum was "to promote more effective supervision by national authorities" in the area of crypto assets and related service providers. The FATF is an intergovernmental organization with a focus on developing policies to combat money laundering and terrorism financing. Supervisors are designated authorities or non-public bodies with compliance responsibilities of each country.

According to the FATF, this event was the first opportunity for regulators to discuss how to implement new measures for crypto assets and related service providers since it finalized them in June 2019. Attendees included 135 representatives from over 50 delegations involved in virtual asset supervision, the FATF detailed, elaborating:

Supervisors play an important role in ensuring that regulated entities, such as banks and financial institutions, implement the FATF's standards to detect and prevent money laundering and terrorist financing.

3 Key Areas Discussed
The event's participants shared their knowledge and experience in supervising and regulating virtual assets and virtual asset service providers (VASPs). They discussed three main topics, starting with the lessons learned so far from countries that have already established a regulatory framework for cryptocurrencies and VASPs.

The second topic concerns common issues when drafting VASP laws and regulations. Representatives shared their approach to developing an AML/CFT regime for VASPs in their jurisdictions and outlined how they were implementing the FATF's recommendations. The third topic discussed was about the tools, skills, procedures, and technology needed to effectively supervise VASPs. The FATF remarked:

The importance of international cooperation was also highlighted, as virtual assets are inherently global products.

The supervisors and regulators identified a number of areas that need further action which they plan to discuss at the next FATF Plenary and other supervisors' meetings to be held in May.

Implementing the FATF Standards
The supervisors' forum is an initiative of the Chinese Presidency of the FATF to promote more effective supervision by national authorities. Two have been held so far, the first of which was held in November 2019 in Sanya, China. It focused on the effectiveness of supervision without discussing crypto assets.

The FATF's explanation from its crypto guidance.
The FATF issued guidance for crypto assets and VASPs in June 2019, with the support of the G20 countries. The money-laundering watchdog subsequently revised its assessment methodology. It sets out how the FATF will determine whether countries have successfully implemented its recommendations and are regulating the crypto sector. The FATF's rules apply both when cryptocurrencies are exchanged for fiat currencies and for other digital assets.

The challenge now is for countries and affected entities to effectively implement its recommendations, the FATF affirmed. By bringing together practitioners from around the world, the organization explained that it "is beginning to develop a global knowledge base on 'what works' in supervising virtual assets," adding:

This will help ensure a consistent global approach to supervision and will help the VASP sector adjust to the new regulatory environment.

A FATF meeting.
While acknowledging that implementing its requirements will be challenging for the crypto sector, the FATF believes that "it will ultimately increase trust in blockchain technology as the backbone behind a robust and viable means to transfer value." Noting that adopting its rules will "ensure transparency of virtual asset transactions and keep funds with links to crime and terrorism out of the cryptosphere," the money laundering watchdog declared:
Countries need to implement the FATF's measures, and soon … The FATF will evaluate next steps in June 2020.

CabbageTech founder sentenced to 33 months in prison

January 18, 2020 Harry DeVries 0 Comments



Patrick McDonnell has been sentenced to 33 months in prison by a New York court. The founder and CEO of CabbageTech Corp., a fraudulent crypto trading company, entered a guilty plea last year for defrauding investors. The court also ordered him to pay back the money he defrauded his investors.

McDonnell was first arrested in March last year and charged with fraud. The Staten Island, New York resident was the mastermind behind CabbageTech, otherwise known as Coin Drop Markets, a company he touted as a crypto advisory and trading firm. He posed on social media platforms as an expert trader, promising to make his investors huge profits if they invested with his firm. However, he channeled most of the investment into his personal use.

Following his arrest, McDonnell pleaded guilty to wire fraud. And now, Judge Nicholas G. Garaufis has sentenced him to serve 33 months in prison for his crime. He will also have to pay $224,352 in restitution to his investors.

The U.S. Attorney for the Eastern District of New York Richard Donoghue, who led the prosecution, sounded a warning to other crypto scammers. He stated, "Patrick McDonnell is headed to prison for deceiving investors, using an alias, false promises and false balance statements for one purpose only—so that he could steal their money. This Office will continue to vigorously prosecute white-collar criminals who defraud the investing public."

McDonnell conducted his scheme between November 2014 and January 2018, the Department of Justice revealed in its press release. He promised his investors that he would offer trading advice and even trade cryptos on their behalf. He ended up doing neither, and instead, he published false financial statement indicating a thriving business. He ended up collecting $194,000 in fiat, 4.41 BTC, 2016 Litecoin, 620 Ethereum Classic and 1.3 million Verge tokens for a total of $224,350.

The Commodities Futures Trading Commission has been instrumental in the McDonnell case, having been the first agency to investigate him. The Commission requested the court to treat cryptos as commodities for this particular case, giving it jurisdiction over the proceedings. McDonnell had argued that the CFTC had no authority to regulate his business, an argument that the judge rejected, ordering him to pay $1.1 million – $290,000 in restitution and $870,000 in penalties.

New York wants crypto companies to pay their own way

January 12, 2020 Harry DeVries 0 Comments



New York has a love/hate with cryptocurrency. It's the only state that requires companies in the industry to obtain a separate license, the BitLicense, to operate, while recognizing that digital currency is legitimate. There is even talk of the state issuing its own quasi-crypto, minus the decentralization, and Gov. Andrew Cuomo now believes that companies should take a more vested interest in their activity if they want to operate within the state's borders. Cuomo has proposed changes to New York's Financial Services Law (FSL) that would require those entities to cover all expenses related to regulation and licensing.

In Cuomo's State of the State (in pdf) plan, he explains that there are gaps in the oversight of companies licensed under the Bank Law and Insurance Law, and those covered by the FSL. Entities covered by either of the first two are obligated to provide payments to the New York Department of Financial Services (NYDFS) to cover their regulatory costs, but this isn't the case for those covered by the FSL. The governor wants to amend the FSL in order to close these gaps.

While the plan doesn't specifically mention cryptocurrency businesses, they're regulated by the NYDFS and the FSL. This can only mean that they would be subject to the same regulations as any other entity under the FSL's guidance.

No mention is made about how much any costs would be, or when the plan might be put into action. Nor does it indicate if businesses already licensed would have to pay any retroactive fees, or if they would automatically be grandfathered into the policy. The governor's office is now accepting public comments on the proposals, with any input expected on or before January 27.

Several lawmakers in New York, along with a law professor from Cornell, have introduced a plan that would see a statewide digital currency become active. Dubbed "public Venmo," the project would introduce an electronic banking platform and a digital currency that would be available for use across the state.

According to Vice, Public Venmo is the brainchild of Senator Julia Salazar, Assemblyman Ron Kim and Cornell law professor Robert Hockett. Kim explains, "I believe that our proposal, the Inclusive Value Ledger, has the potential to be truly revolutionary," Kim said in a public statement. "The creation of a free public savings and payment platform that all New Yorkers can use, not only to pay for goods and services but also to transfer money directly to each other through, could fundamentally reshape New York into a fairer, healthier, wealthier, and more inclusive place for all."

As opposed to other digital currencies, Venmo wouldn't be completely decentralized. It would be issued, monitored and regulated by a central government-led entity that maintains a government-controlled master wallet.

IMF Helping Philippines Become Important Crypto Market

January 04, 2020 Harry DeVries 0 Comments


The International Monetary Fund (IMF) is providing the Philippines with technical assistance regarding crypto assets. The IMF believes the country may become an important crypto market and has provided the Bangko Sentral ng Pilipinas with suggestions for the country's crypto regulation, including quarterly data collection from approved crypto exchanges.

IMF Helping Philippines' Central Bank
The International Monetary Fund published a 34-page Technical Assistance Report on the Philippines this week as part of its periodic consultation with the country's regulators. The report and recommendations within it are based on an assessment the IMF staff conducted in July. The contents of the report constitute technical advice provided by the IMF staff to the authorities of the Philippines in response to their request for technical assistance, the report details.

The IMF is also helping the Philippines' central bank, the Bangko Sentral ng Pilipinas (BSP), in several areas to improve the quality of monetary and financial statistics compiled by the central bank. "At BSP request, the mission also delivered a lecture on the treatment of crypto assets in macroeconomic statistics," based on the latest methodology released by the IMF's Statistics Department, the organization detailed. Emphasizing the growing number of crypto exchanges approved by the BSP, the IMF asserted:

The Philippines may become an important market for crypto assets.
The BSP adopted a formal crypto regulatory framework through the issuance of Circular No. 944 in 2017. Businesses engaged in the exchange of cryptocurrencies for fiat money in the Philippines are required to register with the central bank as remittance and transfer companies.

IMF Encourages the BSP to Collect Data From Crypto Exchanges
According to the BSP's most recent list, there are currently 13 approved crypto exchanges in the Philippines. They are Betur dba Coins.ph, Rebittance, Bloomsolutions, Virtual Currency Philippines, Etranss Remittance International, Fyntegrate, Zybi Tech, Bexpress, Coinville Phils, Aba Global Philippines, Bitan Moneytech, Telcoin, and Atomtrans Tech.

The IMF report also notes that "The mission encourages the BSP to start exploring the possibility of collecting data on these exchanges for macroeconomic analysis, in particular international financial flows using crypto assets," elaborating:

The mission suggests requesting aggregated data, on a quarterly basis, on gross transactions, indicating the country of origin and destination of the funds transacted.

"In addition, it would be useful to breakdown the parties involved in the transactions between individuals, financial corporations, and nonfinancial corporations," the staff advised.

The suggestions by the IMF are similar to the recommendations by the Financial Action Task Force (FATF), an intergovernmental body responsible for developing policies to combat money laundering. The FATF issued guidance on a risk-based approach to virtual assets and related service providers in June. It urges countries and obliged entities to design customer due diligence processes to meet both the FATF standards and national legal requirements. Its recommendations include "identifying the customer and, where applicable, the customer's beneficial owner and verifying the customer's identity on a risk basis and on the basis of reliable and independent information, data, or documentation to at least the extent required by the applicable legal or regulatory framework."
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