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Category Archives: Blockchain, Crypto, Digital Assets Regulations

Cryptoassets as National Currency? A Step Too Far

IMF Blog | Tobias Adrian and Rhoda Weeks-Brown | Jul 26, 2021

cryptoassets - Cryptoassets as National Currency? A Step Too FarNew digital forms of money have the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and competition among payment providers, and facilitate cross-border transfers.

But doing so is not straightforward. It requires significant investment as well as difficult policy choices, such as clarifying the role of the public and private sectors in providing and regulating digital forms of money.

Some countries may be tempted by a shortcut: adopting cryptoassets as national currencies. Many are indeed secure, easy to access, and cheap to transact. We believe, however, that in most cases risks and costs outweigh potential benefits.

Cryptoassets are privately issued tokens based on cryptographic techniques and denominated in their own unit of account. Their value can be extremely volatile. Bitcoin, for instance, reached a peak of $65,000 in April and crashed to less than half that value two months later.

See:  Ripple Pilots a Private Ledger for Central Banks Launching CBDCs

And yet, Bitcoin lives on. For some, it is an opportunity to transact anonymously—for good or bad. For others, it is a means to diversify portfolios and hold a speculative asset that can bring riches but also significant losses.

Cryptoassets are thus fundamentally different from other kinds of digital money. Central banks, for instance, are considering issuing digital currencies—digital money issued in the form of a liability of the central bank. Private companies are also pushing the frontier, with money that can be sent over mobile phones, popular in East Africa and China, and with stablecoins, whose value depends on the safety and liquidity of backing assets.

Cryptoassets as legal tender?

Bitcoin and its peers have mostly remained on the fringes of finance and payments, yet some countries are actively considering granting cryptoassets legal tender status, and even making these a second (or potentially only) national currency.

If a cryptoasset were granted legal tender status, it would have to be accepted by creditors in payment of monetary obligations, including taxes, similar to notes and coins (currency) issued by the central bank.
Countries can even go further by passing laws to encourage the use of cryptoassets as a national currency, that is, as an official monetary unit (in which monetary obligations can be expressed), and a mandatory means of payment for everyday purchases.

See:  Moody’s says Crypto regulation a plus for banks, fintechs

Cryptoassets are unlikely to catch on in countries with stable inflation and exchange rates, and credible institutions. Households and businesses would have very little incentive to price or save in a parallel cryptoasset such as Bitcoin, even if it were given legal tender or currency status. Their value is just too volatile and unrelated to the real economy.

Even in relatively less stable economies, the use of a globally recognized reserve currency such as the dollar or euro would likely be more alluring than adopting a cryptoasset.

A cryptoasset might catch on as a vehicle for unbanked people to make payments, but not to store value. It would be immediately exchanged into real currency upon receipt.

Then again, real currency may not always be readily available, nor easily transferable. Moreover, in some countries, laws forbid or restrict payments in other forms of money. These could tip the balance towards widespread use of cryptoassets.

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NCFA Jan 2018 resize - Cryptoassets as National Currency? A Step Too Far The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Binance CEO says he’s willing to step down as world’s biggest crypto exchange welcomes regulation

CNBC | Ryan Browne | Jul 27, 2021

changpeng zhao binance - Binance CEO says he’s willing to step down as world’s biggest crypto exchange welcomes regulation

The boss of cryptocurrency exchange Binance says he’s willing to step down from his role as the company seeks to become a regulated financial institution.

Speaking at a virtual press conference Tuesday, Changpeng “CZ” Zhao said he had no immediate plans to quit his role but that the company does have a succession plan in place.

“We’re going to pivot to be a fully regulated financial institution going forward,” Zhao told reporters, adding that, during that pivot, he would be “very open” to finding a replacement CEO with more regulatory experience.

Binance is the world’s largest digital currency exchange by trading volume. However, it has come under intense regulatory scrutiny lately as authorities around the world seek to clamp down on the fast-growing crypto industry.

See:  Bitcoin rises as UK financial watchdog bans Binance cryptocurrency exchange

In the U.K., the Financial Conduct Authority banned Binance’s British unit from undertaking any regulated activity. Binance was one of many crypto firms that withdrew their applications to the U.K.’s temporary licensing regime due to failing to meet anti-money laundering requirements, the FCA said.

Regulators in Japan, Canada and Italy have also clamped down on the firm, warning it is not authorized to operate in the countries.

Planning for the future

Binance aims to set up a number of regional headquarters around the world and will seek licenses wherever they are available, Zhao said. He has previously said Binance has no official headquarters.

Zhao insisted there were no immediate plans for his succession, adding Binance was “keeping our options open.”

“I’ll be honored to continue to run Binance as a regulated financial institution until we find somebody who may do a better job,” he said.

In May, Bloomberg reported that Binance was facing a federal investigation by the U.S. Department of Justice and Internal Revenue Service.

See:  More regulation coming: SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps

Binance said it couldn’t comment specifically on any ongoing discussions with regulators, whether in the U.S. or elsewhere.

On Monday, the company said it was reducing the maximum leverage — or borrowed funds — users can use to trade futures contracts, amid concerns such high-risk bets were leaving clients with hefty losses.

Earlier this month, Binance said it would no longer offer “stock tokens,” digital digital versions of shares like Tesla, Apple and Coinbase, to shift its commercial focus to other products. German regulators had warned the instruments may have violated securities laws.

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NCFA Jan 2018 resize - Binance CEO says he’s willing to step down as world’s biggest crypto exchange welcomes regulation The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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More regulation coming: SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps

Market Insider | Camomile Shumba | Jul 22, 2021

gary gensler  - More regulation coming:  SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swapsThe US Securities and Exchange Commission's chair, Gary Gensler has indicated stablecoins and other security-backed tokens will not be exempt from the regulator's upcoming rule changes.

Gensler told the American Bar Association Derivatives and Futures Law Committee's virtual mid-year program on Wednesday that stablecoin issuers would need to register with the regulator and ensure certain levels of transparency in how they transact.

"Make no mistake: It doesn't matter whether it's a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities," Gensler said. "These platforms - whether in the decentralized or centralized finance space - are implicated by the securities laws and must work within our securities regime," he said.

Stablecoins, which are crypto coins pegged to an asset such as the dollar, such as Tether, have come under greater scrutiny from regulators given their potential for destabilizing payments systems.

See:  Moody’s says Crypto regulation a plus for banks, fintechs

Transparency is a big topic in the crypto-space as digital tokens are popular, in part because of their decentralized nature, and the relative anonymity they afford their users.

But the US regulator has started to clamp down on some aspects of the crypto market to prevent the use of these coins in illicit activities, such as money laundering. The SEC also sued Ripple Labs late last year over sales of its network's XRP token, which the regulator said should be treated as a security and not a currency.

Gensler said greater transparency would mean that, even for over-the-counter swaps deals, the public would be able to see both the price and the volume at which these transactions took place.

He said that for a company to register a stablecoin, it would have to have solid back-office controls and adequate cushions against losses, through both its own capital reserves and customer margin.

See:  Crypto in Canada: Where are we today, and where are we heading?

On top of that, the Genlser said the SEC will require companies to have a host of new counterparty requirements for capital and margin, including internal risk management systems, supervision and chief compliance officers, trade acknowledgement and confirmation, record-keeping and reporting procedures.'

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NCFA Jan 2018 resize - More regulation coming:  SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Designing a Central Bank Digital Currency with Support for Cash-Like Privacy

SSRN | Jonas Gross et al | Jul 22, 2021

retail CBDC with cash like privacy - Designing a Central Bank Digital Currency with Support for Cash-Like Privacy

Most central banks in advanced economies consider issuing central bank digital currencies (CBDCs) to address the declining use of cash and to position themselves against increased competition from Big Tech companies, cryptocurrencies, and stablecoins.

One crucial design dimension of a CBDC system is the degree of transaction privacy. Existing solutions are either prone to security concerns or do not provide full (cash-like) privacy.

Moreover, it is often argued that a fully private payment system and, in particular, anonymous transactions cannot comply with anti-money laundering (AML) and countering the financing of terrorism (CFT) regulation.

See:  BIS Research: CBDCs beyond borders: results from a survey of central banks

In this paper, we follow a design science research approach (DSR) to develop and evaluate a holistic software-based CBDC system that supports fully private transactions and addresses regulatory constraints.

To this end, we employ zero-knowledge proofs (ZKP) to impose limits on fully private payments. Thereby, we are able to address regulatory constraints without disclosing any transaction details to third parties.

We evaluate our artifact in interviews with leading economic, legal, and technical experts and find that a regulatorily compliant CBDC system that supports full (cash-like) privacy is feasible.

Continue to the full article and download the 44 page PDF --> here


NCFA Jan 2018 resize - Designing a Central Bank Digital Currency with Support for Cash-Like Privacy The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Moody’s says Crypto regulation a plus for banks, fintechs

Investment Executive | James Langton | Jul 19, 2021

US federal reserve - Moody's says Crypto regulation a plus for banks, fintechsFederal Reserve’s plans for stablecoins could bring transparency and safety to the sector

U.S. banking regulators increasing their oversight of stablecoins would be a positive for banks and fintechs, says Moody’s Investors Service.

U.S. Federal Reserve Board Chair Jerome Powell discussed stepping up regulation of stablecoins in Congressional testimony last week. Among other things, he said  the Fed intends to publish a white paper in early September about digital assets including stablecoins, central bank digital currencies (CBDCs) and others.

See: 

Stablecoins are a form of digital asset whose value is linked to an underlying asset, such as U.S. dollars, in an effort to increase their appeal as a method payment and a store of value while providing the benefits of digital assets.

The prospect of greater oversight of stablecoins would be positive for banks, Moody’s said, “because it would help to increase safety and transparency around stablecoins and may limit some of the risks to financial stability and the potential competitive threats posed by the currently unregulated stablecoin industry.”

However, Moody’s said there’s little regulation around stablecoins. Without rules on disclosure or how the reserves that are backing stablecoins can be invested, “there is no guarantee that stablecoins are indeed backed by the equivalent value in assets,” it said.

The U.S. Office of the Comptroller of the Currency (OCC) has issued guidance for banks, which allows them to hold stablecoin reserves “if they can verify that the reserves are equal to outstanding stablecoin tokens to help withstand large client outflows,” it said.  “However, crypto currency firms issuing stablecoins are not required to follow OCC guidance, and no other enforceable regulation exists,” Moody’s said.

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NCFA Jan 2018 resize - Moody's says Crypto regulation a plus for banks, fintechs The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Bank of Canada (Aug 13 Deadline): Retail Payment Advisory Committee is Seeking New Members

Bank of Canada | Jul 22, 2021

Retail payment systems - Bank of Canada (Aug 13 Deadline): Retail Payment Advisory Committee is Seeking New Members

Retail Payment Advisory Committee

The Retail Payment Advisory Committee is seeking new members. Find out why, who is eligible and how to apply.

In 2020, the Bank of Canada established the Retail Payments Advisory Committee (RPAC) to solicit advice and expertise from industry members of the retail payments ecosystem. The Retail Payment Activities Act received Royal Assent on June 29, 2021, and the Bank of Canada is looking for new members for RPAC.

Read more about RPAC’s mandate and their past meetings.

Responsibilities

Members will attend approximately six meetings over a 12-month period, where they will be able to:

  • discuss supervisory topics
  • share best practices
  • raise organizational or industry concerns
  • provide potential solutions

See:  Bank of Canada to become new regulator of fintech companies doing payments processing

Eligibility

The Bank will choose RPAC members from a broad spectrum of the payments industry that represents different sizes, maturities and scopes. This will help the Bank gain advice and expertise from a representative selection of industry members. We invite payment service providers to submit an expression of interest to join RPAC for the upcoming term.

Deadline for submissions

Submissions will be accepted until August 13, 2021. The Bank will contact the entities selected for further information.

 


NCFA Jan 2018 resize - Bank of Canada (Aug 13 Deadline): Retail Payment Advisory Committee is Seeking New Members The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Non-Fungible Tokens in the media and entertainment industry

Herbert Smith Freehills | James Balfour, Ghislaine Nobileau and Vrinda Vinayak | Jul 22, 2021

NFT media and entertainment - Non-Fungible Tokens in the media and entertainment industry

Non-fungible tokens (“NFTs”) have been dominating technology columns in the media lately. Items that would previously not have been considered traditionally ‘marketable’ or high value are now being sold for eye-watering sums. For example, a digital artwork by Beeple sold for US$69 million, a token of Jack Dorsey’s first tweet sold for US$2.9 million, a token of a GIF of the ‘Nyan Cat’ created a decade ago was auctioned for US$590,000, and a NFT representing Tim Berners-Lee’s original source code for the world wide web was recently sold for US$5.4 million. NFTs have also meandered into the musicsport and fashion industries among others.

See:  OpenSea best month ever, NFT Avatars trend continuation, and Web 3.0 tipping point

In this first article in a series of posts, we provide a high level overview to NFTs and some of the key legal issues arising from their unique nature. Subsequent posts will take a closer look at these and a variety of other key legal and regulatory considerations when applying existing concepts and regimes to NFTs and their underlying technology.

Application in the media and entertainment industry

In a move to counter the abundancy and availability of media content on the internet, NFTs have the potential of (i) reintroducing scarcity into an industry where the presence of intermediaries means that creators often take little part in the profit sharing and (ii) generating new revenues from content catalogues owned by media companies or investors.

Musicians have been venturing into NFTs as a way to increase revenue streams after a halt of live music performances due to the pandemic. Kings of Leon was one of the first bands to release a new album as an NFT along with a moving digital album cover and an exclusive physical vinyl, they also enabled fans to purchase a super token which granted them a golden ticket to access VIP seats at concerts. Earlier this year, musician and artist Grimes also sold 10 digital artworks at auction to raise a total of around US$6 million. In addition to authenticity and traceability, NFTs enable artists to cut out expenses of intermediaries which could solve the issue of musicians struggling to profit from their work. As the technology is still in its infancy, fans have complained of the poor user experience when purchasing NFTs which often requires purchasing crypto-currencies on an exchange, creating and accessing different crypto wallets and incurring a host of third party fees along the way, often doubling the purchase price of the token. However, this innovation is seen by some as an opportunity to generate revenue for artists with a smaller yet loyal fan base who receive meagre revenues from streaming services.

See:  TechCrunch Founder on Selling His Apartment as an NFT in Groundbreaking Deal

The NBA has been using NFTs to monetise its content by setting up its “Top Shot” marketplace powered by Dapper Labs, where fans can buy packs of NFTs featuring key highlights during games. Like Pokemon cards, the purchasers do not know which moments are included in the pack, but they have the ability to sell the NFTs on a secondary marketplace where the most sought after highlights have sold for up to $200,000 dollars.

The film industry has also been buying into the NFT craze as some filmmakers intend on seizing the opportunity to raise money for new productions by selling digital collectibles (such as artwork or sections of the film’s score), to publicise the release of a movie or to boost awareness of an issue. For example, in March 2021, Adam Benzine released 10 limited edition copies of his 2015 documentary “Claude Lanzmann: Spectres of the Shoah” on Rarible for an initial selling price of 100 ETH (approx. $260,000) – to this day 9 copies have yet to receive bids. Around the same time, Nick Box, a filmmaker, released a unique edition of his feature length art horror film called “Elevator to Insanity” on Mintable, he also attached the VOD distribution rights to the token – however it did not receive bids. While NFTs may create new revenue streams for filmmakers, potentially bypassing studios and distribution companies for financial contributions, these have yet to appeal to NFT purchasers and attract as much enthusiasm as other NFT use cases previously described. It is thought that this lack of success may be a direct result of an issue with low storage space on the blockchain. Until recently, the blockchain could only accommodate smaller files resulting in shorter video clips such as NBA sporting highlights mentioned above. However, a collaboration between companies VideoCoin and Filecoin has resulted in a recent announcement that they have managed to solve this storage issue by creating enough file capacity to store 725 million 1080p high resolution film NFT files. With news of this technological development, it will be interesting to see whether NFTs in the film industry gain more traction.

Continue to the full article --> here


NCFA Jan 2018 resize - Non-Fungible Tokens in the media and entertainment industry The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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