FCA policy statement and final guidance on cryptoassets
The FCA has published a policy statement containing final guidance on cryptoassets (PS19/22). The guidance is set out in Appendix 1 to PS19/22, with accompanying Q&A set out in Appendix 2 to PS19/22. The Q&A supplements the guidance and must be considered with both the guidance and the FCA’s Perimeter Guidance manual (PERG). The aim of the guidance is to clarify the FCA’s expectations for firms carrying on cryptoasset activities in the UK. In particular, the guidance will enable market participants to understand whether certain cryptoassets fall within the regulatory perimeter or are otherwise regulated. From the FCA’s perspective, the guidance provides a basis on which it can proactively engage with cryptoasset firms to determine whether they are carrying on regulated activities.
The FCA expects market participants to take the guidance into consideration. If a firm acts in line with the guidance, the FCA will treat them as having complied with the relevant rule or requirement. By providing regulatory clarity for firms, the FCA seeks to achieve greater market integrity and consumer protection for the cryptoasset market. A secondary regulatory outcome the FCA seeks to achieve is to help consumers better understand the cryptoasset market. The FCA intends to use a number of different approaches to measure its success in achieving these outcomes.
Cummings Fisher will be publishing a “Legal Long” to provide a more detailed analysis of the FCA’s statement.
Source: “FCA – PS 19/22: Guidance on Cryptoassets”, available at https://www.fca.org.uk/publications/policy-statements/ps19-22-guidance-cryptoassets
British tax authority seeks customer data from crypto exchanges in search of tax evaders
HM Revenue & Customs, the British tax authority, is pressuring cryptocurrency exchanges to reveal customers’ names and transaction histories, in a bid to claw back unpaid taxes, industry sources said. Letters requesting lists of customers and transaction data have been received by at least three exchanges doing business in the U.K. – Coinbase, eToro and CEX.IO – in the last week or so, the sources to Coindesk have said. In response to a Freedom of Information (FOI) Request submitted by CoinDesk, HMRC said it was withholding details about its demands for information since disclosing them could jeopardize the assessment or collection of tax.
But the agency confirmed such demands are within its remit, saying “[t]hese exchanges can retain information on their clients and the transactions that they have completed. These transactions may result in potential tax charges and HMRC has the power to issue notices requiring exchanges to provide this information.” HMRC’s move is following a pattern set by the U.S. Internal Revenue Service (IRS) and other governments. Last month, the IRS began sending warning letters to over 10,000 Americans who it says participated in virtual currency transactions but did not report them properly.
Source: “British tax authority seeks customer data from crypto exchanges in search of tax evaders”, available at https://www.coindesk.com/british-tax-authority-seeks-customer-data-from-crypto-exchanges-in-search-of-tax-evaders
Safeway shoppers can now get bitcoin back as change at 894 US stores
Bitcoin rewards shopping app Lolli has partnered with major American grocery chain Safeway to give customers 3.5% back in Bitcoin on all their purchases. In an interview with Yahoo! Finance, Lolli CEO & co-founder Alex Adelman said that teaming up with “one of the most well-recognized food retailers in the United States […] will give people the ability to get involved in holding and owning Bitcoin — perhaps for the first time.” He added that earning Bitcoin will be the “first wave that gets Bitcoin in the hands of the masses.” As compared with retailers’ traditional fiat currency-denominated loyalty cards, he argued that cryptocurrency was a better store of value, likening it to a savings account that could reap lucrative rewards to long-term holders. As Cointelegraph reported earlier this summer, Lolli has recently added major booking service Hotels.com – to its partners, which lists over 325,000 properties in around 19,000 locations worldwide. Back in November 2018, Lolli had raised $2.25 million in an oversubscribed seed round from investors including Digital Currency Group.
Source: “Safeway shoppers can now get bitcoin back as change at 894 US stores”, available at https://cointelegraph.com/news/safeway-shoppers-can-now-get-bitcoin-back-as-change-at-894-us-stores
Data protection authorities call for openness on Libra cryptocurrency
Data protection authorities from around the world, including the UK’s Information Commissioner’s Office (ICO) and the European Data Protection Supervisor, have called for more openness about the proposed Libra cryptocurrency and infrastructure. On 5 August 2019, they issued a statement to Facebook and 28 other companies behind the project (the Libra Network) asking for details of how customers’ personal data will be processed in line with data protection laws. The statement notes that, “[w]e are supportive of the economic and social benefits that new technologies can bring, but this must not be at the expense of people’s privacy”. It asks a set of detailed, non-exhaustive questions of the Libra Network, for example, about the provision of clear and transparent information, informed consent, data sharing, use of processors, data privacy impact assessments, and how privacy policies and standards will work consistently across multiple jurisdictions. The signatories note that they will work together to assert strong privacy safeguards at a global level.
Source: “Joint statement on global privacy expectations of the Libra network”, available at https://edps.europa.eu/data-protection/our-work/publications/other-documents/joint-statement-global-privacy-expectations_en
Walmart wants to patent a stablecoin that looks a lot like Facebook’s Libra
Retail giant Walmart has applied for a cryptocurrency patent resembles the Libra token proposed by Facebook in mid-June. In its application with the U.S. Patent and Trademark Office, Walmart touts the concept of a digital currency “tied to a regular currency” (i.e., a stablecoin). The filing suggests that the proposed coin could help provide finance for those with limited access to banking services. Walmart says its token could store user’s purchasing histories on the blockchain, and then apply related savings to their subsequent purchases in a similar way to loyalty points. Other novel features suggested in the very broad filing include the ability to remove the need for credit cards, and acting as a “pre-approved biometric (e.g., fingerprint or eye pattern) credit.” Walmart is already using blockchain for tracking products like fresh greens and pharmaceuticals. It’s also has been investigating various use cases of the technology, with projects including connecting automated delivery drones.
Source: “Walmart wants to patent a stablecoin that looks a lot like Facebook’s Libra”, available at https://www.coindesk.com/walmart-wants-to-patent-a-stablecoin-that-looks-a-lot-like-facebook-libra/
U.S. Department of Justice is shielding information with blockchain tech
The United States Department of Defense, which is currently looking into ways of applying blockchain as a cybersecurity shield. According to a report titled Digital Modernization Strategy, the Department of Defense is looking into ways to advance the nation’s digital defenses with the integration of cloud and quantum computing, AI and improved communications through distributed ledgers. The research wing of the Department of Defense is already experimenting with blockchain technology to create a more efficient and secure platform for secure messaging and process transactions. The application is expected to be used in many different ways, including facilitating communication between units and headquarters and transmitting information between intelligence officers and the Pentagon. The Defense Advanced Research Projects Agency is also looking to develop an unhackable code with the help of blockchain technology, shielding sensitive data from the Pentagon against any hackers or attacks.
Source: “U.S. Department Of Justice Is Shielding Information With Blockchain Tech “, available at https://cryptocoin.news/news/u-s-department-of-justice-is-shielding-information-with-blockchain-tech-28412/
North Korea stole $2 billion in cryptocurrency from exchanges, says UN
In a confidential report acquired by mainstream media outlets including Reuters on Aug. 5, the U.N. Security Council North Korea sanctions committee said that hackers formed an essential part of government funding. “Democratic People’s Republic of Korea cyber actors, many operating under the direction of the Reconnaissance General Bureau, raise money for its WMD (weapons of mass destruction) programs, with total proceeds to date estimated at up to two billion US dollars,” Reuters quoted the report as stating. the FBI reiterated the U.N. view that North Korea was deliberately stealing money in order to counter the effects of international sanctions, which the report now said were likely to remain due to a lack of progress in talks. “We call upon all responsible states to take action to counter North Korea’s ability to conduct malicious cyber activity, which generates revenue that supports its unlawful WMD and ballistic missile programs,” it added.
Source: “North Korea Stole $2 Billion in Cryptocurrency From Exchanges, Says UN”, available at https://cointelegraph.com/news/north-korea-stole-2-billion-in-cryptocurrency-from-exchanges-says-un//
Thailand government will amend AML laws to regulate cryptocurrency
A Thai regulator announced that the regulator will amend regulation to prevent crypto use for illicit activities. Per the report, Acting Secretary-General of the Thai Anti-Money Laundering Office (AMLO), Pol Maj Gen Preecha Charoensahayanon, stated that cryptocurrencies will be used for money laundering. For this reason, he reportedly announced that AMLO will also focus on amending existing anti-money laundering regulations to prevent the use of digital currencies for illegal activities in the near future. Charoensahayanon intends to start with changing the Anti-Money Laundering Act to include requirements for digital currency exchanges to report their activities to the office.
Source: “Thailand Gov’t Will Amend AML Laws to Regulate Cryptocurrency” available at https://cointelegraph.com/news/thailand-govt-will-amend-aml-laws-to-regulate-cryptocurrency/
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