The EU continues to push forward with a relatively welcoming strategy for digital assets.

The European Union is a supranational entity consisting of 28 sovereign countries that delegate a portion of their authority and sovereignty to an amalgamate state-like entity (the Union)  in order to improve and work together towards a common goal.

Virtual currency regulation in the European Union is still in its early stages, and even though the FinTech Task Force is working on the harmonization of the existing national laws regulating virtual currencies, most individual member states have undertaken separate legislative strategies in accordance with their specific legal traditions and practices.

The legal definition of virtual currencies in the EU

Even though it’s been ten years since the advent of Bitcoin, questions about the economic nature and the legal definition of virtual currencies are still a source of great contention within academic circles around the world.

Back in October 2012, the European Central Bank was among the first reputable institutions in the world to weigh in and present its own response to the questions. In the report titled “Virtual Currency Schemes,” the ECB defines bitcoin as a convertible, bidirectional and decentralized virtual currency, or a “type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community.”

In 2015, the ECB produced another, updated and revised Virtual Currency Schemes report, in which the Central Bank argues that virtual currencies do not fully meet the three golden criteria of “money” as defined in the economic literature: medium of exchange, store of value, and unit of account. Accordingly, the ECB proposed a new definition: “virtual currency is a digital representation of value, not issued by a central bank, credit institution or e-money institution, which, in some circumstances, can be used as an alternative to money” – purposefully omitting words such as “digital money” or “unregulated.”

AML & CFT regulations

On July 5, 2016, the European Commission (a politically independent body representing EU’s executive branch) proposed an amendment to the 4th AML Directive in which it affirmed that “gaps still exist in the oversight of the many financial means used by terrorists, from cash and trade in cultural artifacts to virtual currencies and anonymous pre-paid cards.”

According to the Commission, the biggest problem regarding virtual currencies is the fact that most virtual currency transactions cannot be linked to identified persons.

Following the proposal, on December 15, 2017, the European Council and the European Parliament finally agreed to the new set of rules, and the 5th AML Directive was born. The intention of this new-and-upgraded Directive was to bring virtual currency exchanges and custodian wallet providers under the umbrella of the existing European AML legislation.

This means that – as soon as the Directive is incorporated into the national legislation of EU member states – virtual currency exchanges and custodians will have to register with the relevant AML authority in their jurisdiction, identify users, monitor transactions, report suspicious activity, and give national investigators greater access to information.

Furthermore, the 5th AML Directive contains the first legally binding definition of virtual currencies and is, simultaneously, the most significant regulatory action towards the regulation of virtual currencies on the supranational level in the EU.

Tax treatment of virtual currencies

Following the request for a preliminary ruling made by the Swedish Supreme Administrative Court in 2015, regarding the proceedings between Mr. Hedqvist and the Swedish Tax authority, the European Court of Justice (ECJ) passed the following judgment: for tax purposes, bitcoin (read: virtual currencies) should be treated as a currency rather than as a commodity; consequently, bitcoin transactions are exempt from VAT according to the current EU laws and regulations.

Even though most, if not all, countries in the EU have Romano-Germanic legal systems i.e. civil law, the binding force of the case law of the ECJ has been recognized without objection by the totality of EU member states and their courts. Put simply, this means that virtual currencies will be exempt from VAT across all jurisdictions of EU member states.


Cryptocurrency in the EU: Conclusion

All in all, the EU has been working hard to create an optimal normative environment that stimulates the growth and advancement of the blockchain industry and, aside from the GDPR, has done an exceptionally great job thus far.

The EU authorities are surprisingly cognizant of DLT’s impact on the FinTech sector, and they’re actively subsidizing European blockchain startups in order to position the EU as a true world leader in the crypto scene.

This post is credited to cryptobriefing

The U.S. Securities and Exchange Commission (SEC) has rejected a total of nine applications to list and trade various Bitcoin (BTC) exchange-traded funds (ETFs) from three different applicants, according to a three separate orders published by the SEC today, August 22.

The disapprovals come one day ahead of the anticipated deadline, August 23, stipulated for a pair of BTC ETFs that had been submitted by ProShares in conjunction with the New York Stock Exchange (NYSE) ETF exchange NYSE Arca.

The SEC has now rejected a further seven proposed ETFs alongside the ProShares pair –– these being five further proposed ETFs from Direxion, also for listing on NYSE Arca –– and two proposals from GraniteShares, for listing on CBOE.

For all three disapprovals, the SEC has stated that:

“[T]he Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”

The SEC has today reinforced its qualms over inadequate “resistance to price manipulation” in an insufficiently sized BTC derivatives market. In the case of ProShares’ two ETFs –– and repeated in the two other disapproval orders –– the SEC has stated that:

“Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’ That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary.”

As a March 2018 registration statement from the SEC noted, “the [ProShares] Funds do not intend to hold Bitcoin Futures Contracts through expiration, but instead intend to either close or ‘roll’ their respective positions.” This had been specifically designated as a potential risk for the two ETFs in question –– in addition to the “extreme volatility and low liquidity” attributed to both Bitcoin spot and derivatives markets.

In today’s three orders, the SEC has however notably stated that:

“[The agency] emphasizes that its disapproval does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment.”

The SEC’s fresh disapprovals echo the concerns the agency had already articulated in its initial rejection of a high-profile Bitcoin ETF application from the Winklevoss twins in March 2017:

”When the spot market is unregulated –– there must be significant, regulated derivatives markets related to the underlying asset with which the Exchange can enter into a surveillance-sharing agreement.”

This July the SEC rejected the Winklevoss’ petition following their initial application’s denial, in which the twins claim that crypto markets are “uniquely resistant to manipulation.” In their rejection of the petition, the agency said that “the record before the Commission does not support such a conclusion.”

At the beginning of August, the SEC delayed its decision over yet another Bitcoin ETF application –– this time filed by by investment firm VanEck and financial services company SolidX, for trading on CBOE. Notably, instead of proposing a Bitcoin futures-based fund, the application proposed a physically-backed model, which will raise the further question of custody.

Bitcoin is currently trading around $6,380, down about 2.2 percent on the day to press time.

This post is credited to cointelegraph

Scammers tricked victims to pay ransom in bitcoin for compromising video that didn’t exist.

Image: Shutterstock
Sometimes scammers just need to say they hacked you to pull in the cash. Since July, cybersecurity researchers, journalists and victims, have seen a spike in extortion letters and emails demanding hefty sums of bitcoin. The twist is that the scammers send the victim one of their own passwords, likely gleaned from an already public breach, and use that as an intimidation tactic. The blackmailers then claim they have hacked into the target’s webcam while they were watching pornography. Pay up, or they’ll release the (made-up) video.
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Now, researchers have found this scam has been pretty profitable, especially considering the low-level of work involved on the fraudsters’ part.
“What is worrying is that, scammers were able to siphon off [$500,000], from old passwords dumps, with very little effort,” Suman Kar, CEO of cybersecurity firm Banbreach, told Motherboard in an online chat.
In July, cybersecurity journalist Brian Krebs reported on the new wave of sextortion emails.
“I’m aware that [victim’s password] is your password,” one part of an example email Krebs published reads. “First part recorded the video you were viewing (you’ve got a fine taste haha), and next part recorded your webcam (Yep! It’s you doing nasty things!),” the version Krebs published adds, before demanding the victim sends $1,400 in bitcoin to a specific bitcoin address.
It’s an enticing, if not devilish, proposition. Banbreach looked at around 770 wallets in total, according to a spreadsheet the company shared with Motherboard. The majority of those, around 540, did not receive any funds. But the remaining ~230 had over 1,000 transactions, receiving a total of around 70.8 BTC.
This figure is also likely only a conservative estimate, considering Banbreach’s methodology would not have captured all, or perhaps even the majority, of sextortion emails. Kar said Banbreach collected different bitcoin addresses used in this style of extortion by scraping comments on related media coverage, and picking them out from journalists’ articles. Kar said the company also fielded reports from victims in India, where scammers appear to be targeting at the moment in particular.
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“$1000 is a lot of money for the average Indian,” Kar said.
Banbreach believes some of the passwords used to trick victims came from the LinkedIn and Anti-Public Combo list data breaches, the latter being a large collection of various data caches from multiple sources. Those two breaches turn up when entering sextortion victims’ email addresses into breach notification site Have I Been Pwned, Banbreach said in a write-up of its research provided to Motherboard. However, it is still difficult to fully determine where a password did ultimately come from, the company added.

This post is credited to motherboard.vice

A working group led by cryptocurrency exchange Gemini will hold its first meeting in September to discuss forming a self-regulatory organization (SRO) to oversee the burgeoning U.S. crypto trading market.

Announced on Monday, the Virtual Commodity Association (VCA) initially includes participation from four cryptocurrency exchanges that serve U.S. customers: Gemini, Bitstamp, Bittrex, and bitFlyer USA.

Representatives from these firms will meet in September to discuss forming an SRO, which will include drafting best practices for the industry and determining guidelines for membership in the VCA. They will also choose an executive director for the organization.

“This is the first of many steps in policing the digital asset markets and answering the call of regulators,” said Yusuf Hussain, head of risk at Gemini.

“We believe in the value of self-regulation, which we pursued in Europe almost from our inception, and look forward to following a similar path in the U.S. Those that can’t or won’t comply with regulations put consumers – and their own operations – at risk,” added Bitstamp CEO Nejc Kodrič

In the meantime, the VCA’s interim executive director is Maria Filipakis, who formerly served as executive deputy superintendent at the New York Department of Financial Services (NYDFS) and helped draft the agency’s controversial cryptocurrency regulatory framework, commonly referred to as the “BitLicense.”

“I applaud the VCA and its members in their commitment to strengthen the digital asset industry’s regulatory landscape, rules for the protection of customers, and bring forth industry setting best practices and market transparency,” Filipakis said.

Notably absent from the VCA’s list of initial members is Coinbase, which according to market research firm Bernstein accounts for half of all U.S. cryptocurrency trading and was one of the first exchanges to receive a BitLicense. The San Francisco-based company did not immediately respond to a request for comment.

As SEC Slaps Down Bitcoin ETF, Industry Wants to Show it’s Grown up

Jay Clayton SEC
The SEC, which is led by Chairman Jay Clayton (right), has not yet approved a bitcoin ETF, though there are several applications on its desk. | Source: YouTube/Brookings

Gemini, which was founded by brothers Cameron and Tyler Winklevoss, first proposed the VCA in March, arguing that “a thoughtful SRO framework that provides a virtual commodity regulatory program for the virtual commodity industry is the next logical step in the maturation of this market.”

At the time, the proposal earned praise from sitting CFTC Commissioner Brian Quintenz, who published a statement of support on the regulatory agency’s official website.

The formation of the VCA follows the SEC’s recent announcement that it had denied the Winklevoss twins’ second attempt to create a bitcoin ETF. By establishing an SRO, industry exchanges likely aim to signal that the industry is mature enough to warrant exchange-traded products (ETPs).

This featured Image is credited to Flickr/TechCrunch .

This post is credited to CCN

A U.S. Congressman has invited 32 cryptocurrency industry organizations to Capitol Hill to discuss initial coin offering (ICO) regulation.

Axios reports that the summit, sponsored by Rep. Warren Davidson (R-OH), will take place on Sept. 25 and feature participation from a variety of businesses and non-profits, including Intercontinental Exchange (ICE), Nasdaq, CME Group, Andreessen Horowitz, Union Square Ventures, Circle, Kraken, Ripple, and Coin Center, among others.

Chief among Davidson’s questions is whether ICOs should be regulated as securities offerings, which fall under the oversight of the Securities and Exchange Commission (SEC). To date, the agency, led by Chairman Jay Clayton, has maintained that it’s conceivable that an ICO could be structured such that it is a “utility token” and not subject to SEC oversight. However, Clayton has also said that he has never personally seen an ICO that is not a security.

That said, the agency has left open the possibility that a cryptocurrency token may shed the security label by becoming sufficiently decentralized. As CCN reported, a top SEC official announced earlier this year that ether — the native token of the Ethereum platform — is not a security, despite the fact that a large supply of ether tokens was initially distributed through an ICO-style crowdsale in 2014.

Davidson, the publication reports, intends to introduce an ICO regulation bill later this year. The Ohio Republican, who sits on the House Financial Services Committee, has said that he favors a “light touch” approach to cryptocurrency regulation.

Elsewhere, industry companies are considering how to adopt self-enforcement policies to demonstrate to regulators that the ecosystem is maturing into a respectable marketplace.

Earlier this year, Nasdaq reportedly hosted a closed-door meeting to discuss ways to legitimize cryptocurrency as an asset class. Just today, a group of U.S. cryptocurrency exchanges led by Gemini announced that they had formed a working group to discuss creating a self-regulatory organization (SRO) whose mission would be to police American exchanges.

Featured Image from Warren Davidson for Congress/YouTube

This post is credited to CCN

Chilean cryptocurrency exchange Crypto MKT has recently announced that the country’s citizens can now buy products and services with cryptocurrency from over 5,000 merchants through a new integration with a crypto payment processor.

According to the announcement, a partnership between Crypto MKT and online payments platform Flow.cl allowed the merchants to add cryptocurrency payment options through a platform called CryptoCompra.com.

CryptoCompra’s platform is available in Chile, Argentina, Brazil, and Europe, and lets customers pay businesses using bitcoin, stellar, or ethereum, while letting merchants receive their payments in pesos, the country’s fiat currency.

From Crypto MKT’s end, there’s a guarantee fund that ensures payments made in crypto aren’t affected by significant price fluctuations. The announcement reads (roughly translated):

“There is a guarantee fund that allows payments not to be affected by large increases or decreases in the price of Bitcoin, Ethereum and Stellar. This gives tranquility and security to the client, since it will not have surprises in its payments.”

It further states that accepting cryptocurrencies allows businesses to accept payments from all over the world, and gives them a chance to be recognized as a “vanguard company” that can enjoy fast, secure payments.

The development is notable, as Chile is a country in which the top cryptocurrency exchanges, Orionx, Buda, and Crypto MKT, endured what was considered a blanket ban on the crypto industry, as local banks shut down their accounts, prompting them to seek clear regulations.

The ordeal saw the exchanges take the banks, Itau Corpbanca, Bank of Nova Scotia, and state-owned Banco Estado, to an appeals court that agreed to hear them. Chile’s anti-monopoly court ordered two major banks, Banco Estado and Itau Corpbanca, to re-open the accounts of Buda, an exchange that was reportedly seeing a daily trading volume of over $1 million before its accounts were closed

As CCN covered, Orionx later on won its case against Banco Estado, as the court noted the financial institution made an “arbitrary and illegal action” in closing its account. While it’s unclear whether Crypto MKT managed to see banks re-open its accounts, the other two cases seemingly point that way.

The president of Chile’s central bank, Mario Marcel, has earlier this year revealed he is considering implementing cryptocurrency regulations that would give financial institutions information needed to “monitor associated risks.”

Featured Image from Shutterstock

This post is credited to CCN

Bitcoin investors might be suffering under the weight of one of the asset’s heaviest-ever bear markets, but for cryptocurrency derivatives exchanges like BitMEX, the mood is anything but sour.

“What market downturn?,” began a press release sent from a public relations firm representing BitMEX, reporting that the Seychelles-based exchange had on Wednesday crossed 1 million BTC in daily trading volume for the second time.

Altogether, the platform saw 1,027,214.62 bitcoin contracts traded for the day, worth approximately $6.6 billion at the present exchange rate.

“Once again meeting our own record of 1 million bitcoin traded within 24 hours is a major milestone for the crypto-coin market and testament to the strong community BitMEX is growing,” said BitMEX CEO Arthur Hayes.

bitcoin price chart
For cryptocurrency exchanges and derivatives platforms, bear markets are often not nearly as dire as for individual investors. Though aggregate volume generally declines, exchanges can still reap significant profits from intraday volatility.

Hayes attributed the milestone in part to the firm’s recently-launched ETH/USD perpetual swap product, which allows traders to make leveraged bets on the ethereum price without ever holding ether.

The exchange previously crossed the 1 million BTC mark on July 24, notching a record both for the exchange and the industry at large. At the time, those contracts equated to more than $8 billion in 24-hour volume.

BitMEX isn’t the only cryptocurrency derivatives platform that has seen an uptick in trading in spite of the bear market. As CCN reported, U.S. exchanges CME and CBOE have each seen a steady rise in bitcoin futures volume since these products launched in December, with the two platforms accruing a combined $572 million in volume on the same day in which BitMEX crossed 1 million bitcoin contracts for the first time.

LedgerX, a lesser-known U.S. cryptocurrency derivatives exchange that exclusively serves wealthy investors and institutions, also reported that its clients had traded a record $50 million worth of contracts on the CFTC-regulated platform during July.

Featured Image from Shutterstock

This post is credited to CCN