The week’s developments in the crypto currencies world including Libra could drop basket and issue individual fiat stablecoins

FCA Consultation Paper: CP19/29: Recovery of costs of supervising cryptoasset businesses under the anti-money laundering regulations

The FCA will be the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for cryptoasset businesses, from 10 January 2020. The Treasury has announced, in the Economic Crime Plan, that the FCA will be the anti-money laundering and counter terrorist financing (AML/CTF) supervisor of UK cryptoassets businesses under the The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

Evidence of increased risks from growing use of cryptoassets for illicit activity, as well as risks to consumers and markets has resulted in the Government and financial regulators moving to minimize those risks. The EU are addressing these through the Fifth Money Laundering Directive (5MLD). The UK are doing so through amendment to the MLRs.

All UK cryptoasset businesses carrying on activities under the MLRs will need to register with the FCA from 10 January 2020. This includes all businesses already FCA registered or authorised for other activities.

Source: “Recovery of costs of supervising cryptoasset businesses under the proposed anti-money laundering regulations: fees proposals”, available at https:// https://www.fca.org.uk/publications/consultation-papers/cp19-29-recovery-costs-supervising-cryptoasset-businesses-under-aml-regulations

FATF guidance on a risk based approach to virtual assets to form part of mutual evaluation assessment

On 18 October 2019, the Financial Action Task Force (FATF) published a statement regarding the Money laundering risks from “stablecoins” and other emerging assets. The statement confirms that from now on FATF’s guidance for a risk-based approach to virtual assets and virtual asset service providers (published June 2019) will be assessed as part of the mutual evaluation of countries. Countries that have already undergone their mutual evaluation will be required to report back during their follow-up process on the actions they have taken in this area. The June 2019 guidance has been incorporated into the FATF anti-money laundering (AML) and counter-terrorist financing (CTF) standards.

Libra could drop basket and issue individual fiat stablecoins

The Facebook-led Libra project may consider a fundamental change to the way its planned global payments system will operate, according to its chief.

Speaking at a banking seminar, according to a Reuters report on Sunday, co-creator of Libra David Marcus said that the firm could consider dropping the currently planned “synthetic” stablecoin – which is to be pegged to a basket of fiat currencies and government bonds – and instead issue a number of individual coins pegged to national fiat currencies such as the dollar, pound and euro.

Marcus told Reuters that the new path isn’t necessarily Libra’s desired option, but that the project needs to be “agile.” That presumably in the face of kickback from global regulators who have almost to a voice condemned the project as a threat to financial stability and monetary policy, and a financial crimes risk.

A number of lawmakers, including in the U.S. and the EU, have demanded that the project doesn’t launch until these issues are addressed. Libra for its part has said it is working with regulators and designed its launch timeline to allow such concerns to be addressed. It has further pushed back on claims it is a threat to nations’ monetary sovereignty.

Libra is still sticking to its launch timeline of mid 2020 amid all the regulatory problem-solving.

Marcus told Reuters: “We’ll see. That’s still the goal … it’s not entirely up to us.”

Source: “Libra could drop basket and issue individual fiat stablecoins”, available at https:// https://www.coindesk.com/libra-could-drop-basket-and-issue-individual-fiat-stablecoins

Fidelity Digital Asset Services opens to more qualified investors

Fidelity Digital Asset Services (FDAS) is “now engaged in a full rollout” of its custody and trading services, expanding from the limited trial users in the platform’s final test stage, according to a Financial Times interview. A spokesperson said Monday that FDAS’ license application with New York State is still pending while more clients are being added to test the platform. The $2.8 trillion asset manager is one of the first established traditional financial institutions to offer digital asset custody services as other peers are still waiting to see how the crypto industry comes into formation. While there are several platforms providing similar services, Johnson said Fidelity’s large client base and network were distinct advantages.

(Source: “Fidelity Digital Assets Opens to More Qualified Investors”, available at https:// https://www.coindesk.com/fidelity-digital-assets-opens-to-more-qualified-investors

UNICEF fund manager: cryptocurrency could revolutionize humanitarian aid

First responders and organizations that deliver humanitarian aid realize that urgent action saves lives and for this reason they are always searching for ways to streamline their processes.

Cointelegraph recently reported that the United Nations Children’s Fund (UNICEF) had announced the launch of a cryptocurrency-backed fund aimed at supporting the development of open-source technology that benefits young people around the world. According to UNICEF the Cryptocurrency Fund will “hold and make transactions in cryptocurrency,” specifically Bitcoin (BTC) and Ether (ETH).

Sunita Grote, Program Funding Manager for UNICEF Innovation told Cointelegraph that “…cryptocurrency-based donations will not be converted to government-backed currencies. The idea is to receive, hold, and disburse crypto as crypto. At no point in the process does it get converted into any other currency. This allows us to fully leverage the benefits that crypto offers. We can track all transactions via the blockchain, and can see how recipients use the funds. Recipients have also agreed to not convert the funds into any other digital asset or government-backed currency. UNICEF appreciates that all transactions are stored in the blockchain, and this is part of the reason why we prefer to leave crypto as crypto.” In addition, ” Blockchain can improve efficiency and transparency by tracking the flow of resources and transactions in a more transparent way. Blockchain makes us more accountable and has the potential to reduce the amount of resources we need to do our work.”

Source: “UNICEF Fund Manager: Cryptocurrency Could Revolutionize Humanitarian Aid”, available at https://cointelegraph.com/news/unicef-fund-manager-cryptocurrency-could-revolutionize-humanitarian-aid

Russian Ministry slams brakes on legal status of bitcoin and cryptocurrency

Russia’s Ministry of Finance is reportedly postponing a decision on the fate of cryptocurrency trading in the country. According to a report from the Russian news service Tass, the Chairman of the State Duma Committee on Financial Markets, Anatoly Aksakov, a bill on how Russia will handle crypto assets will likely be passed this autumn. Leaders had initially hoped to pass the legislation this month. Aksakov says Russian citizens will likely be allowed to buy and sell cryptocurrencies on foreign sites, even if local exchanges are not legalized in the country.

Source: “Russian Ministry slams brakes on legal status of bitcoin and cryptocurrency”, available at https://dailyhodl.com/2019/07/16/russian-ministry-slams-breaks-on-legal-status-of-bitcoin-and-cryptocurrency/

U.S. Senate approves Blockchain Promotion Act to formally explore opportunities for the technology

The U.S. Congress is working on legislation defining blockchain.

The Senate Commerce, Science and Transportation Committee approved the Blockchain Promotion Act, CNET reports. The bipartisan legislation instructs the U.S. Department of Commerce to set up a working group to define what “blockchain” is.

The bill aims to create a blockchain definition on the federal level to ensure uniformity in definition among states. Besides preparing the definition, the Blockchain Working Group will also provide recommendations on potential applications of blockchain, including on how federal agencies could take advantage of the technology.
Members of the working group will include both governmental and non-governmental stakeholders: representatives of Federal agencies that could benefit from blockchain as well as information and communication technology manufacturers, suppliers, software providers, service providers, vendors, and subject matter experts.

“Blockchain is an exciting new technology with great potential and promise,” said U.S. Sen. Ed Markey, a co-sponsor of the bill. According to Markey, the legislation would help “further understand applications for this technology and explore opportunities for its use within the federal government.”

(Source: “U.S. Senate approves Blockchain Promotion Act to formally explore opportunities for the technology”, available at https://finance.yahoo.com/news/u-senate-approves-blockchain-promotion-192440961.html

 

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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