Hong Kong to Propose Regulation for Cryptocurrency Trading

Hong Kong’s financial watchdog is looking to tighten investor protection by regulating cryptocurrency trading platforms.

The Securities and Futures Commission (SFC), however, is limited by its legal regulatory reach of securities only, according to Carlson Tong Ka-shing, the outgoing chairman.

Outgoing SFC Chairman Says Ban on Cryptocurrency Trading “Will Not Work in Today’s Internet World”

In his last interview before leaving the SFC, Ka-shing told the South China Morning Post that a ban on cryptocurrency trading “will not work in today’s internet world when trading can cross national boundaries. Even if we were to ban them, transactions can still be easily conducted via platforms in overseas markets.”

Taking a completely different stance from Mainland China’s full ban on digital currency trading, the SFC has only issued warnings of caution to investors.

However, as the market grows within the retail and institutional trading frames, the regulator faces increased pressure to put in place formal rules while being limited to securities regulation.

“We have to carefully consider the regulatory approach for these platforms because they are new technology and may not qualify as securities. They do not fit in the custodian, audit or valuation requirements, for instance, normally expected under the Securities and Futures Ordinance.”

Tong added that the SFC is evaluating the best approach to regulate cryptocurrency platforms “to a standard that is comparable to that of a licensed trading venue, while at the same time ensuring investors interest are being protected.”

The SCMP reached out to Angelina Kwan, chief operating officer of the bitcoin Mercantile Exchange (BitMEX), and Jeremy Allaire, founder and chief executive at U.S.-based Circle, on the proposed regulations.

“We hope the guidelines or regulations being considered will keep pace with market developments. The U.S. has introduced regulations over cryptocurrency and there are futures products being traded by the CME Group and the CBOT. This shows that a regulatory authority can help to develop a new industry,” Kwan said.

As for Allaire, he is aware that Circle operates in a non-regulated space and vowed to proactively work with the Hong Kong authorities on emerging licensing or regulatory frameworks.

Circle’s mCEO wants rules in place to protect the “real risks for investors” and to “ensure the long-term potential of the digital asset industry.”

The SFC’s annual report published in June stated the regulator would monitor the cryptocurrency market and step in with penalties when it needs to.

Mainland China, on the other hand, has a much harsher approach to digital currency trading. Alipay recently ended all Bitcoin over-the-counter (OTC) trades on its platform, as part of the ban announced in 2017.

Featured image from Shutterstock.


Source: Newsbtc


Fincen Claims Iran Is Using Crypto to Evade Sanctions

ranian Bitcoin Transactions Estimated at $3.8M Since 2013


The Financial Crimes Enforcement Network has warned U.S financial institutions that the Iranian government might be dodging economic sanctions by using cryptocurrencies. The document highlights challenges arising from peer-to-peer virtual currency exchanges and encourages banks to monitor blockchain ledgers for transactions tied to the country.

Also Read: Church Mining Cryptocurrency to Pay Higher Electricity Rates

Iranian Bitcoin Transactions
Estimated at $3.8M Since 2013

The U.S. organization, known as Fincen, issued the warning in an advisory to assist U.S. banks and other financial actors such as cryptocurrency exchanges in identifying “potentially illicit transactions related to the Islamic Republic of Iran.” The document includes a lengthy section relating to crypto, as well as an estimate that “since 2013, Iran’s use of virtual currency includes at least $3.8 million worth of bitcoin-denominated transactions per year.”

Fincen noted that “while the use of virtual currency in Iran is comparatively small, virtual currency is an emerging payment system that may provide potential avenues for individuals and entities to evade sanctions.”

P2P Exchanges Highlighted as
Key Crypto Conduit

Fincen Warns of Iran Using Crypto to Evade SanctionsWhile reports have indicated that the Central Bank of Iran has prohibited domestic financial institutions from touching cryptocurrencies, Fincen stated that “individuals and businesses in Iran can still access virtual currency platforms through … Iran-located, internet-based virtual currency exchanges; U.S.- or other third country-based virtual currency exchanges; and peer-to-peer (P2P) exchangers.”

Fincen said that P2P cryptocurrency exchangers are a significant means through which Iran can bypass economic sanctions. It defined such individuals as people who offer to purchase, sell or otherwise exchange virtual currencies, either face to face or through websites. It added that “P2P exchangers may operate as unregistered foreign (money services businesses) in jurisdictions that prohibit such businesses; where virtual currency is hard to access, such as Iran; or for the purpose of evading the prohibitions or restrictions in place against such businesses or virtual currency exchanges and other similar business in some jurisdictions.”

Financial Institutions Urged to
Conduct Due Diligence

Fincen also said that U.S financial institutions should remain aware of the “highly dynamic” nature of the global market for cryptocurrencies.

“New virtual currency businesses may incorporate or operate in Iran with little notice or footprint,” it explained. “Institutions should consider reviewing blockchain ledgers for activity that may originate or terminate in Iran.”

Fincen urged institutions to use technology to keep an eye on open blockchains and monitor P2P transactions. Examples of the latter could include “wire transactions from many disparate accounts or locations combined with transfers to or from virtual currency exchanges.”

In addition, the organization reminded institutions and individuals in the U.S. that handle virtual currencies to refer to a list of frequently asked questions on international sanctions that was published by the Office of Foreign Assets Control earlier this year. “Financial institutions and virtual currency providers that have (Bank Secrecy Act) and U.S. sanctions obligations should be aware of and have the appropriate systems to comply with all relevant sanctions requirements and (Anti-Money Laundering/Combating the Financing of Terrorism) obligations,” Fincen said.

Do you think regimes such as Iran will increasingly turn to cryptocurrencies to dodge economic sanctions? Or do you think the concerns outlined in the Fincen document are overblown? Share your thoughts in the comments section below!

Images courtesy of Shutterstock

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Total Ban on Crypto Exchanges Unnecessary: Hong Kong Regulator

Cryptocurrency Hong Kong

The outgoing chairman of Hong Kong’s securities regulator has – unlike China – ruled out a total ban on domestic cryptocurrency exchanges, suggesting formal regulations instead.

Hong Kong’s Securities and Futures Commission (SFC) is drawing plans in reaction to the growing appetite for cryptocurrencies like bitcoin among retail investors and traders – by regulating the sector.

Speaking to the South China Morning Post in a report on Monday, outgoing chairman Carlson Tong Ka-shing insisted that autonomous, self-governing administrative region south-east of mainland China will not follow the latter’s approach with an outright ban on the cryptocurrency sector.

“We do not think imposing a total ban on these platforms is necessarily the right approach,” the senior official told the SCMP, remarking that traders will find ways circumvent all barriers.

“Even if we were to ban them, transactions can still be easily conducted via platforms in overseas markets,” Tong added.

Instead, the SFC is looking to usher in a formal regulatory framework for domestic cryptocurrency trading, even if the sector falls beyond its purview as the authority’s reach only extends to securities.

Cryptocurrency trading, Tong stressed, do not fall within the custodian, audit or valuation requirements under the SFC’s Securities and Futures Ordinance. They “may not qualify as securities,” the official said, suggesting the necessity for a careful regulatory approach to oversee crypto trading platforms.

He added:

“We need to see if and how these platforms can be regulated to a standard that is comparable to that of a licensed trading venue, while at the same time ensuring investors interest are being protected.”

The suggestion has been welcomed by domestic exchange operators in Hong Kong. The report cites  Circle, with a base of operations in Hong Kong, and BitMEX, which hired a former regulator as its operations chief after moving into some of the world’s most expensive office spaces, looking forward to the regulations encouragingly.

The Hong Kong crypto market has been scrutinized by the securities regulator extensively in recent years. Earlier in March, the authority shut down an initial coin offering (ICO) citing “potential unauthorized promotional activities and unlicensed regulated activities.” The following month, SFC deputy chief July Leung labeled many ICOs as “dubious, down right frauds

Featured image from Shutterstock.

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