A report based on the analysis conducted by a blockchain working group that was appointed earlier this year has been adopted by the collective head of state and government of Switzerland, the Federal Council.

Among other things the report has concluded that the legal framework of Switzerland can handle new technologies such as blockchain with only selective adjustments being made and not fundamental ones.

The Federal Council currently sees no fundamental issues regarding financial market law that specifically concern blockchain/DLT-based applications and would require fundamental adjustments. Swiss financial market law is generally technology-neutral and able to deal with new technologies.

Specific areas

The individual areas which need targeted adjustments according to Switzerland’s governing body include banking law, civil law, insolvency law, and anti-money laundering law. In civil law, the Federal Council has recommended that the legal certainty involving the transfer of rights via digital registers be increased.

With regards to financial market infrastructure law, the Federal Council has called for a new and flexible authorization category specifically focusing on blockchain-based financial market infrastructures to be devised. The governing body of Switzerland stated various reasons for this including the specific challenges that blockchain-based business models face:

…such challenges exist namely in the areas of trading tokens via central trading platforms and in the application of financial market law to decentralised financial market “infrastructures” …  Hence, it seems more expedient to address the challenges in financial market infrastructure law that are specific to blockchain/DLT applications by means of specific amendments (instead of a regulatory carve-out).

Insolvency Law

Switzerland’s governing body also proposed adjustments in insolvency law calling for clarification with regards to the segregation of cryptocurrencies and other digital assets in the case of bankruptcy saying it ‘considers it necessary to provide for unambiguous rules regarding the segregation of crypto-based assets from the bankrupt’s estate by analogy to the owner’s right to segregation under current law.’

According to the Federal Council, there is lack of clarity especially in cases where crypto-based assets are deposited with third parties and whether in such a case a debtor has the power to dispose of such assets if the third parties have asserted their rights.

Other areas where the Federal Council has proposed changes include the anti-money laundering law where the body has proposed that decentralized trading platforms be more explicitly subjected to the country’s Anti-Money Laundering Act.

In making the report, the Federal Council has indicated that its goal is to ‘create the best possible framework conditions so that Switzerland can establish itself and evolve as a leading, innovative and sustainable location for fintech and blockchain companies’.

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Switzerland’s financial watchdog, the Swiss Financial Market Supervisory Authority (FINMA), unveiled a new set of guidelines on December 3, 2018, to propel the development of the local blockchain and cryptocurrency industry. Notably, local crypto startups will now be able to handle deposits of up to $100 million.

Details of the New Guidelines

The newly disclosed guidelines by FINMA specify strict rules and regulations which must be adhered to in order to obtain the coveted “FinTech” license. Having the permit would allow businesses to manage public deposits of up to CHF 100 million ($100,455,000), assuming the amount is not re-invested, and no interest is paid at any time.

Available in German, French, and English languages, the document mandates cryptocurrency businesses to submit a plethora of official documents to the financial authority along with their registration application.

Some of the details to be provided include reasons for applying for a license, description of the proposed business activity, organization structure (along with the geographical scope and target client class), and complete information about the business premises, infrastructure, and personnel, among other things.

With regard to the financial details of the entity, detailed information must be provided about the share capital structure. Further, details of participants with a direct or indirect holding more than five percent must also be disclosed.

Additionally, FINMA requires complete accountability of all board members of the business-to-be, including their addresses, educational details, CVs, and past criminal records, if any.

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The new development by FINMA is seen as a significant step forward for the Swiss cryptospace which has attracted businesses from all over the world, courtesy of its tax haven tag.

Switzerland Leads the Global Crypto Marathon

Switzerland has been at the forefront of developments in the blockchain and cryptocurrency space. Earlier in September 2018, the Swiss Bankers Association (SBA) introduced simplified guidelines after seeing cryptocurrency companies’ lack of access to the banking sector.

On a more recent note, BTCManager reported on November 19, 2018, how Switzerland gave the go-ahead to cryptocurrency startup Amun AG’s exchange traded product (ETP) to be traded on Europe’s fourth-largest stock exchange, SIX Swiss Exchange.

The decision is seen as a massive impetus for the cryptocurrency industry, especially at a time when its total market capitalization has dropped by more than 30 percent in a month.

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Japan’s financial regulator is set to introduce new Initial Coin Offering (ICO) regulations to protect investors from fraud, local news outlet Jiji Press reported Dec. 1.

According to “informed” sources cited by Jiji, business operators conducting ICOs will be required to register with Japan’s Financial Services Agency (FSA).

The agency is reportedly planning to submit bills revising financial instruments, exchanges and payment services laws to the ordinary parliamentary session that starts in January.

This action has been undertaken “in view of a number of possibly fraudulent ICO cases abroad” as a way “to limit individuals’ investment in ICOs for better protecting them.”

A study reported by Cointelegraph this July identified 80 percent of the ICOs conducted in 2017 as scams.

As Cointelegraph Japan reported last month, the FSA Study Group on Virtual Currency Exchange industry conducted its tenth meeting to discuss ICOs. The tokens emitted during ICOs where classified into three categories: virtual currencies without issuer, virtual currencies with issuer and tokens with issuers that are also obliged to distribute revenues.

According to the report, the first and second token classifications are subject to settlement regulation such as the Financial Instruments and Exchange Act. The third of ICO tokens is subject to investment regulations like the Financial Instruments and Exchange Act.

This post is credit to cointelegraph

The East African country of Uganda is set to regulate cryptocurrencies to prevent scams and protect investors. ETHNews spoke with the chair of the Blockchain Association of Uganda to learn more about the local cryptocurrency ecosystem and what may have led to this development.

Reports indicate Uganda’s state finance minister, David Bahati, has responded to parliamentary concerns over operators posing as cryptocurrency dealers. He spoke of government plans that will apply to both cryptocurrencies and pyramid schemes, the latter of which are also prevalent in the country: “In October, Cabinet approved the National Payment System Bill. We intend to bring it to Parliament next month so that it caters for all these forms of digital financial transactions.”

Members of the Ugandan Parliament have raised concerns that the government has provided no framework of supervision or legislation, allowing the illegitimate schemes to take hold. One MP, Mathias Mpuuga, spoke of Ripcoin, Namecoin, and Telex Free, and called unregulated actors “a potential bomb.”

Though the Central Bank of Uganda has warned investors to be cautious, the new bill is the first formal step by the country to create a legal framework for cryptocurrency operators to function within the law and to deter bad actors.

Kwame Rugunda, chair of the Blockchain Association of Uganda, told ETHNews that Ponzi schemes, often operating as multi-level marketing or pyramid schemes, have been “a problem for many years” in the country, adding: “Ugandans are familiar with these, and now the Ponzi schemes are either using cryptocurrencies or purporting to be crypto businesses and the Central Bank has warned society about them.”

Rugunda also provided examples of common scams in the country, calling them a “menace.”

“The most common of them is called One Coin promoted by the One Life Network; others include D9, DRC Gold coin, Telex Free, Onyx Coin, Billion coin, etc. They unfortunately distort the proper understanding and great opportunity that crypto enables.”

He explained that citizens who seek investment opportunities are “repetitively fleeced by these Ponzi schemes, and there are numerous court cases.”

Cryptocurrency adoption in Africa, outside of South Africa, has been relatively slow but is growing. Binance recently launched Binance Uganda, a local fiat-to-cryptocurrency exchange where users can buy Bitcoin and Ethereum with the Ugandan shilling. Binance said it had two goals for this: firstly, to increase economic activity in Uganda and wider Africa, and secondly, to provide education, as well as a secure way to buy cryptocurrencies. Local interest in Binance Uganda has been strong, Rugunda confirmed.

When asked if the Binance development may have impacted the move toward cryptocurrency regulation, Rugunda said:

“Binance has engaged the various authorities in Uganda, and such large companies often prefer to work in regulated environments and to work with the governments where they operate. In Uganda, they have engaged the regulatory bodies and offered to share their global experience as Uganda puts in place its policies and regulatory frameworks.”

Though there is little information on the scope of the new National Payment System Bill, more may become apparent when it goes to the Ugandan Parliament in December 2018. Other East African countries, namely Kenya and Tanzania, are now looking at similar bills, with Kenya directly following Uganda’s lead.

Although cryptocurrencies appear to have been quickly adopted by bad actors within Uganda, the new regulations may allow more legitimate cryptocurrency use to come to the fore in the country, where blockchain adoption is garnering attention.

The Blockchain Association of Uganda organized the largest blockchain conference in Africa in May 2018, attended by 800 delegates from 23 countries. In response, and with the support of Ugandan President Yoweri Museveni, a national task force is now investigating blockchain and other fourth industrial revolution technologies.

In addition, Rugunda told ETHNews the Central Bank of Uganda has created a blockchain working group and regulatory sandboxes are now emerging to encourage blockchain innovation.

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On November 2, Taiwan officially tightened anti-money laundering (AML) policies targeted at crypto exchanges, requesting exchanges to monitor and prevent any illegal transaction processed using digital assets.

According to the newly drafted Money Laundering Control Act and Terrorism Financing Prevention Act approved by the Legislative Yuan, one of the five branches of the Taiwanese government, the country’s Financial Supervisory Commission (FSC) now has authority over crypto exchanges to ban transactions suspected of being tied to fraudulent operations.

Taiwan’s Ministry of Justice (MoJ) released a statement following the approval of the new AML bill, emphasizing that the government is working towards meeting international AML standards by encouraging businesses to foster a “compliance culture and mindset.”

Until this year, the government of Taiwan was skeptical towards regulating the local cryptocurrency exchange market and blockchain sector.

South Korea, the third largest cryptocurrency exchange market, also refrained from implementing practical and efficient regulations to govern its local digital asset market until 2018, because it feared that investors would recognize it as a move to legitimize the cryptocurrency industry.

Based on its recently passed AML bill and the stance of the country’s main financial watchdog towards the cryptocurrency sector, Taiwan is likely leaning towards regulating its local cryptocurrency and blockchain space to prevent fraudulent operations and criminal activities using cryptocurrencies.

China’s complex relationship with Taiwan

For decades, Taiwan has had a complicated relationship with China. The official name of Taiwan is the Republic of China (RoC) and since the RoC’s loss of the mainland to the People’s Republic of China (PRC) governed by the Communist Party of China, the PRC has consistently claimed sovereignty over Taiwan and said that the ROC is no longer in legal existence.

Although Taiwan has claimed to be the legitimate government of China, the loss of Hainan in 1950 has limited the jurisdiction of the Taiwanese government to Taiwan and its two outlying islands Quemoy and Matsu.

In recent years, mostly due to the increasing support of the U.S., the tension between Taiwan and China has continued to increase. On October 22, reports revealed that Taiwan is preparing to pitch for more U.S. arms and weaponry, after the U.S. approved the purchase of $330 million of arms sales to Taiwan in September.

Representatives of Taiwan, the  U.S., and China had drastically contrasting viewpoints on the increasing arms sales from the U.S. to Taiwan.

Lo Chih-cheng, a ruling-party lawmaker on the parliament’s defense committee, said that regardless of the relationship between Taiwan and China, the government of Taiwan must possess credible defense and sufficient weapons to defend the region from potential attacks:

“In the worst case, we have only ourselves to rely on. We should not be so dependent on the U.S. in the long term. But we still need to buy weapons from the U.S. to secure our defenses while we are building our capabilities.”

The Institute for National Defense and Security Research, an organization funded by Taiwan’s defense ministry, noted that the established conflict between the U.S. and China was “a strategic window of opportunity for Taiwan” to build a strong defense system to protect the region.

However, the government of China fiercely opposed the arms sales of the U.S. to Taiwan. The foreign ministry in Beijing said in June of last year that the $1.4 billion deal had “severely damaged China’s security and sovereignty,” describing Taiwan as an “indispensable part of China’s territory.”

At the time, Michael Kovrig of International Crisis Group said, “if this is, in fact, intentional timing, this does represent a change of tone. The Americans would clearly be aware that this is going to irritate the Chinese. It’s not leaving room for the Chinese to save face,” adding that any additional arms sales to Taiwan could worsen the relationship between the U.S. and Taiwan.

Did China have any impact on the new AML bill?

In a period in which the Chinese mainstream media and state-backed publications are accusing U.S. President Donald Trump of playing a high-stakes game backing Taiwan, any activity to fuel the already intensified tension among the U.S., Taiwan, and China could lead to serious international conflicts and what the Chinese government call, “dire consequences.” The China Daily editorial reported on October 24:

“Military hawks in Washington have tried hard to scare Beijing and console Taipei. But they should consider the dire consequences of their country being dragged into a costly confrontation that would in the first place be both unnecessary and avoidable.”

One of the few common areas the government of Taiwan and China agree on is the prevention of money laundering through the utilization of electronic payment systems including cryptocurrencies.

Recently, in an attempt to completely ban money laundering efforts and fraudulent activities in the global cryptocurrency sector, the government of Japan also called for the establishment of standardized AML regulations regarding cryptocurrencies, specifically concerning anonymous cryptocurrencies like Monero, Zcash, and Dash. An FSA official said on October 24:

“It should be seriously discussed as to whether any registered cryptocurrency exchange should be allowed to use such currencies. It’s nearly impossible for Japan to handle the problem alone. Even if trade is restricted to only domestic transfers or monitoring is enhanced, it’s still not enough to counter money laundering. It would be best if all the group of 20 industrial and emerging nations and regions (G20) would take the same steps toward prevention.”

Over the past several months, led by Taiwan legislator and congressman Jason Hsu, the government of Taiwan has demonstrated a more proactive and open-minded approach towards regulating the local cryptocurrency market.

In an interview, Hsu explained that a parliamentary coalition had been formed in Taiwan to focus on regulating blockchain and crypto with a set of guidelines targeted at cryptocurrency exchanges. He added that Taiwan is set to cooperate with Japan, South Korea, Singapore, Hong Kong, and other Asian countries to facilitate the growth of the local cryptocurrency space.

Hence, rather than China’s direct impact on Taiwan, a collective effort by the lawmakers and Congress of Taiwan to regulate the country’s cryptocurrency space most likely led to the changes in the new AML bill.

“We have set up a parliamentary coalition in Taiwan’s parliament for blockchain, which is a bipartisan alliance designed to help support the industry. I have also launched self-regulatory organizations for blockchain and crypto, where we are working together to come up with a set of guidelines to regulate exchanges. These guidelines will provide basic parameters as to how crypto exchanges and other taxations are defined. When we announce the guidelines in the coming weeks, it will be a regional consensus with Taiwan, Japan and Korea, Singapore, Hong Kong as well as other Asian countries.”

Taiwan legislator and congressman Jason Hsu

Even China is protective of crypto to a certain extent

China officially banned cryptocurrency trading in September 2017, expressing concerns towards money laundering and capital controls. The government has limited the outflow of the Chinese yuan to overseas markets for decades, and through exchanges, investors were able to bring capital outside of the local market prior to the ban.

As Cointelegraph extensively reported, the government actively banned nearly every area in the cryptocurrency sector including events, media, and over-the-counter (OTC) trading, requesting AliPay, the country’s most widely utilized fintech application to block any transaction that is suspected of being connected to cryptocurrency exchanges.

However, on Oct.r 25, 2018 the Shenzhen Court of International Arbitration officially stated that under local regulations, cryptocurrencies like Bitcoin and Ethereum are considered properties and as such, holding or transferring Bitcoin is not illegal in China.

“Chinese court confirms Bitcoin is protected by law. Shenzhen Court of International Arbitration ruled a case involving cryptos. Inside the verdict: China law does not forbid owning and transferring Bitcoin, which should be protected by law because of its property nature and economic value.”

The ruling from the Shenzhen Court of International Arbitration essentially provided merchants with a green light to accept cryptocurrencies as a payment method without being in conflict with existing regulations.

As of November, China’s oldest technology publication, Beijing Sci-Tech Report (BSTR), and several hotels and restaurants accept cryptocurrencies.

Beginning January, BSTR will officially sell its yearly subscription in Bitcoin at a fixed price of 0.01 BTC. But, the publication reaffirmed that the purpose of the integration is to demonstrate the real-world potential and use case of the blockchain, and that if the price of BTC rises substantially, the publication will refund the buyers.

Hence, while cryptocurrency trading remains prohibited in China, technically, owning or transferring cryptocurrencies is not illegal. As such, it can be argued that China, to a certain extent, is not wholly dismissive of crypto, given the government’s optimism towards blockchain technology as a core pillar of the fourth industrial revolution.

The Xiongan government, tasked to build Chinese President Xi Jinping’s dream city, the Xiongan New Area, has made blockchain technology a key component of the project, working with Ethereum-related institutions, including ConsenSys, the largest blockchain software studio in the global sector, led by Ethereum co-creator Joseph Lubin, to develop blockchain-based tools for the government .Lubin said in July:

“As one of our first major projects in the People’s Republic of China, we are excited to help define the many ‘use cases’ that could benefit from the trust infrastructure enabled by ethereum technology.”

Can Taiwan be the next crypto Hub?

Singapore, Hong Kong, South Korea, and Japan, the four regions congressman Jason Hsu mentioned, have already evolved into major markets.

Upbit, South Korea’s second largest cryptocurrency exchange and Binance, the world’s largest digital asset trading platform, according to the Blockchain Transparency Institute, have already established offices in Singapore and entered beta testing of their trading platforms with banking partners secured.

Japan and South Korea, as two of the largest cryptocurrency markets, have demonstrated significant progress in terms of regulation and industry growth.

To compete against the four markets, Taiwan would have to establish a strong selling point to attract cryptocurrency exchanges and blockchain-related businesses.

Recently, the FSC of South Korea declared that banks are free to work with crypto exchanges and the Seoul Central District Court ruled a case between local cryptocurrency exchange Coinis, and major commercial bank Nonghyup, in favor of Coinis, establishing a precedent for the industry.

Attorney Kim Tae-rim, who represented Coinis, said that the case is a milestone for the cryptocurrency sector as it would encourage banks to refrain from unfairly treating digital asset exchanges.

“Cryptocurrency exchanges, by default, have the right to freely deposit and withdraw funds to and from major banks in South Korea, and an abrupt termination of partnership and services by the bank [in this case Nonghyup] without sufficient evidence or reasoning falls under the breach of contract.”

So far, Taiwan has not led sufficient initiatives to lure in some of the biggest cryptocurrency and blockchain-related businesses from other major markets. But, if Hsu and the coalition continue to drive the adoption of crypto in Taiwan, in the mid-term, companies enter the market given that stable banking services and support from the government are guaranteed.

This post is credit to cointelegraph

Cryptocurrency custody services company InVault, from Shanghai, has launched in Hong Kong just in time to take advantage of the special administrative region’s new rules for cryptocurrency exchanges and asset managers. 


At the start of Nov 2018, Hong Kong’s Securities and Futures Commission (SFC) issued guidance on the regulatory standards expected of cryptocurrency exchanges, platform operators, and fund managers. It’s also working on a future “conceptual framework” for the regulation of “trading platform operators.”

Near Complete Insurance Cover is Now Required

As part of the new guidelines, cryptocurrency exchanges and asset holders must have comprehensive insurance for investors’ funds to prevent losses — which is where cryptocurrency custodial services for high-volume coin-holding businesses come into play. However, cryptocurrency businesses can also look to self-custody and hot wallet storage, as long as they have the required level of insurance. For exchanges storing cryptocurrencies online in “hot wallets,” this is 100% coverage. The regulator says:

The SFC generally expects that the insurance policy would provide full coverage for virtual assets held by a Platform Operator in hot storage and a substantial coverage for those held in cold storage (for instance, 95%).

InVault currently holds around one million ether in custody in mainland China and has announced it is the first custody service operator to enter the market in Hong Kong. The company is backed by venture capital fund Matrix Partners China which has invested nearly $6 billion in the crypto-storage business. It has reportedly gained a new “trust license” from the SFC allowing it to offer a fully automated service in the region as of December.

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A Bridge Between Cryptocurrency and Traditional Asset Protection

InVault’s founder Kenneth Xu told the South China Morning Post (SCMP) that he believes trusted custodial services will provide a regulated “conduit” between the cryptocurrency space and traditional financial systems. He revealed that InVault is now in discussions with a number of insurers to provide the coverage required by the Hong Kong regulator as part of its services. Xu says the challenge for insurance companies is to accurately measure risk and price premiums accordingly.

InVault, and Xu, now expects much of the demand for its custody services to come from Hong Kong and also Singapore under new regulations.

Singapore’s regulators, the Monetary Authority of Singapore (MAS), discussed its approach to cryptocurrency classification and openness to cryptocurrency adoption at the Singapore Consensus 2018 September. MAS also revealed new regulation to cover cryptocurrency service providers last week.

Cryptocurrency custody services protect investor’s assets with physically secured storage for client’s private cryptocurrency wallet keys — which can often be forgotten, lost, stolen, and hacked. SCMP also refers to incidences of cryptocurrency exchange employees accessing and stealing from, client wallets.

The SFC’s new guidelines seek to protect investors in Hong Kong as well as adding some formal regulatory oversight to the burgeoning industry. SFC Chief Executive, Ashley Alder, said in the release revealing the new regulation:

We hope to encourage the responsible use of new technologies and also provide investors with more choices and better outcomes.

Do you think all cryptocurrency exchanges and operators should be required to have comprehensive insurance or use the services of a custody company? Let us know in the comments below!

This post is credited to bitcoinist