The week’s developments in the crypto currencies world including Prime Factor Capital Receives FCA Approval

FCA Prepares a Potential Ban of Crypto CFDs for Retail Investors

The FCA is preparing a potential ban on the sale of crypto derivatives to retail investors, according to an official document released on July 1 titled “Restricting contract for difference products sold to retail clients”. The FCA revealed that the regulator will soon publish a consultation paper (CP) on a potential ban on crypto derivatives such as bitcoin (BTC) futures and other crypto-related trading products. The initiative follows the UK Cryptoasset Taskforce Final Report, which was published in July 2018, and updated in October 2018. The FCA emphasized that the new rules in the upcoming CP will replace the final regulation of crypto-based contracts for difference (CFDs). In another public policy statement on restricting CFDs, the FCA considered CFDs “complex, leveraged derivatives” that are commonly offered to retail clients and represent excessive risk.

Source: “British Regulator FCA Prepares a Potential Ban of Crypto CFDs for Retail Investors”, available at https://cointelegraph.com/news/british-regulator-fca-prepares-a-potential-ban-of-crypto-cfds-for-retail-investors/

Prime Factor Capital Receives FCA Approval

London-based crypto asset management firm Prime Factor Capital has obtained a license from the FCA to operate as a full-scope AIFM. The press release claims that Prime Factor is the first dedicated cryptocurrency asset management firm authorized by the FCA. Nic Niedermowwe, CEO of Prime Factor, stated, “This Being FCA-regulated brings us under the purview of one of the most recognised financial markets regulators globally. This is particularly relevant in the cryptocurrency space, which has repeatedly captured headlines for poor operating standards and even fraudulent activity.”

Source: “Prime Factor Capital Receives Approval From UK Financial Regulators”, available at https://askrypto.com/news/2019/07/prime-factor-capital-receives-approval-from-uk-financial-regulators//

Dutch Ministers Call for Cryptocurrency, Cash Use Regulations

In a statement dated July 1, Dutch ministers urged the government to regulate cryptocurrencies and certain cash payments citing money-laundering concerns. The officials suggested that the government should ban cash payments over 3,000 euros, regulate cryptocurrencies and ban 500 euro banknotes, as these instruments can purportedly facilitate money laundering. The statement also proposes an increase in the enforcement capacities of financial regulators and relevant authorities and watchdogs groups such as the Financial Intelligence Unit, the police, the Fiscal Information and Investigation Service and the Public Prosecution Service.

Source: Dutch Ministers Call for Cryptocurrency, Cash Use Regulations, available at https://cointelegraph.com/news/dutch-ministers-call-for-cryptocurrency-cash-use-regulations

BaFin President Urgently Called for International Standards Regarding Facebook Libra Project

The German Federal Financial Supervisory Authority (BaFin) director has requested legislators to come up with suitable standards, in regards to the ongoing crypto project from Facebook called Libra. Felix Hufeld, the current head of BaFin, strongly emphasized that lawmakers, as well as regulators, should be more involved and concerned with Facebook Libra project. Hufeld has mentioned some potential regulatory solutions from BaFin, and called for a regulatory framework on a global scale, “[w]e certainly can not just watch. We will have to respond appropriately in any way. I can only hope that we will succeed in developing at least European, if not globally, basic standards.”

Source: “BaFin President Urgently Called for International Standards Regarding Facebook Libra Project”, available at https://thecryptosight.com/bafin-president-urgently-called-for-international-standards-regarding-facebook-libra-project/

Is Google Chasing The 90% Potential Of Blockchain That Facebook Left Out?

Facebook’s Libra program is a significant stepping stone for the adoption of cryptocurrency as Facebook has over two billion users who will soon be exposed to the world of tokens and cryptocurrency. However, there is a lot more potential in blockchain beyond tokens. A recent partnership between Google and Chainlink (a company that provides on ramps and off ramps for information necessary to run smart contracts) demonstrates this. The smart contract applications offered by the blockchain offers huge potential beyond just the issuance of tokens. Google’s decision to partner with Chainlink allows for Ethereum app builders using Google software to be able to integrate data from sources outside the blockchain. So, whereas Facebook is focused on tokens and payments, Google is looking at the smart contract applications of blockchain beyond just tokens and building the infrastructure to make those developments possible.

Source: “Is Google Chasing The 90% Potential Of Blockchain That Facebook Left Out?”, available at https://www.forbes.com/sites/darrynpollock/2019/07/02/is-google-chasing-the-90-potential-of-blockchain-that-facebook-left-out/#319f45dd3185/

Cuba Eyes Cryptocurrency as Solution to Financial Woes

Cuba has announced it is considering the use of cryptocurrency in order to bolster its finances as part of a package aimed to boost incomes for as much as a quarter of Cubans and assist with market reforms. The move is possibly influenced by the nation’s ally, Venezuela, which launched its own “petro” cryptocurrency early last year. It’s not clear from the report if Cuba might launch its own token or use existing alternatives. Like Venezuela, Cuba is suffering from tough U.S.-led sanctions and has also seen a drop-off in aid from Venezuela which is undergoing both financial and political crises of its own. In the TV announcement, Cuba’s President Miguel Diaz-Canel indicted that the cryptocurrency plan is aimed to raise national production and demand in order to boost growth. The package would reportedly boost some pensions and wages for employees within public administration, social services and state-run media, almost doubling their average monthly wage.

Source: “Cuba Eyes Cryptocurrency as Solution to Financial Woes”, available at https://www.coindesk.com/sanctions-hit-cuba-eyes-cryptocurrency-as-solution-to-financial-woes/

Claire Cummings

Claire practises financial services law with a focus on regulatory issues, cryptocurrencies and tokens, trading and brokerage documentation and advising both existing and start-up funds and fund managers.

If you would like to discuss any of the points we raise, please contact me or one of our other lawyers.

Phone: 0207 585 1406
Email: claire.cummings@cummingsfisher.com

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