Global Crypto Exchanges Must Now Share Customer Data, FATF Rules
FATF has finalized its recommendations on regulating cryptocurrencies for its 37 member countries, including a requirement that “virtual asset service providers” (VASPs), including crypto exchanges, pass information about their customers to one another when transferring funds between firms. This requirement will ensure that when crypto businesses send money, they ““… obtain and hold required and accurate originator [sender] information and required beneficiary [recipient] information and submit the information to beneficiary institutions … if any. Further, countries should ensure that beneficiary institutions … obtain and hold required (not necessarily accurate) originator information and required and accurate beneficiary information.” Blockchain proponents have argued it would be onerous if not impossible to put this into practice with crypto, harmful to user privacy, and counter-productive to law enforcement goals. However, U.S. Treasury Secretary Steven Mnuchin has stated that “[w]e will not allow cryptocurrency to become the equivalent of secret numbered accounts [and] we will allow for proper use, but we will not tolerate the continued use for illicit activities.”
(Source: “Global Crypto Exchanges Must Now Share Customer Data, FATF Rules”, available at https://www.coindesk.com/fatf-crypto-travel-rule/
Swiss Central Banker Relaxed about Facebook’s Libra Crypto
As reported by Reuters on Tuesday, Thomas Moser, alternate member of the governing board at the Swiss National Bank, said Facebook has indicated it is “willing to play according to the rules” and has been in touch with regulators over the Libra project, making him “relaxed” about the cryptocurrency. This is in contrast to other jurisdictions where Facebook is facing regulatory scrutiny. Also quoted in the Reuters report, Domenico Gammaldi, head of market and payment system oversight at Italy’s central bank, said more information is needed on the Libra project and that a mere white paper is not sufficient. France has moved to create a task force within the Group of Seven nations to examine the issues raised by Libra and look at how cryptocurrencies are regulated to avoid money laundering, consumer protection and other potential issues.
In the U.S., the House Financial Services Committee has announced it will host a hearing on Facebook’s cryptocurrency next month, just a day after the Senate Banking Committee holds its own hearing.
Maxine Waters, chair of the House committee called on Facebook to suspend development of the project several times last week. She stated, “We’ve got to protect our consumers. We just can’t allow [Facebook] to go to Switzerland with all of its associates and begin to compete with the dollar,” Waters reportedly said on Thursday. In another article from Reuters, the FCA stated that it needed more information on Facebooks plans for crypto payments and since Facebook’s Libra could ultimately be important in terms of public policy, said FCA CEO Andrew Bailey, therefore the company should make more information available.
(Source: Swiss Central Banker Relaxed about Facebook’s Libra Crypto, available at https://www.coindesk.com/swiss-central-banker-relaxed-about-facebooks-libra-crypto)
Ripple Deal Could Make XRP Cryptocurrency Compliant With FATF Anti-Money-Laundering Rules
Ripple, the largest single owner of the XRP cryptocurrency (currently valued at $20 billion), has signed a deal with regulation technology startup Coinfirm, to investigate how the third-largest cryptocurrency is being used.
Coinfirm will provide AML information about cryptocurrency users such as whether the cryptocurrency has been processed by technology called a “mixer,” designed to launder cryptocurrency by privately exchanging funds from multiple counterparties; information on clustering, when small amounts of currency are sent via many different addresses to disguise the size of large transactions; and whether or not the funds come from a known theft or hack.
The new information will not include the actual identities associated with public addresses where cryptocurrency is stored but it will include information like whether or not an address is owned by an exchange that allows anonymous trading, and whether or not the entity that owns the address is registered in a country deemed high risk. A report then grades the address as low, medium or high risk and gives it a score of 0 to 99, with 99 being the highest risk for money laundering.
The FATF recently issued guidance requiring that cryptocurrency exchanges share information with each other, including names of counterparties, as required of the traditional banking system, this latest development shows how developers of cryptocurrency technology continue to imagine new ways to protect users identities. Coinfirm’s CEO believes the data it provides is sufficient for the FATF guidance, despite that it does not include personal data.
(Source: “Ripple Deal Could Make XRP Cryptocurrency Compliant With FATF Anti-Money-Laundering Rules”, available at https://www.forbes.com/sites/michaeldelcastillo/2019/06/26/ripple-deal-could-make-xrp-cryptocurrency-compliant-with-fatf-anti-money-laundering-regulations/#50deb5813aab)
Coinbase Hit with Outage as Bitcoin Price Drops $1.8K in 15 minutes
Crypto exchange Coinbase experienced a brief outage Wednesday afternoon, with both its website and API rendered temporarily inaccessible, as the price of bitcoin dropped more than $1,700 in the span of 15 minutes.
The platform was rendered inaccessible on mobile and desktop browsers around 20:45 UTC. Bitcoin’s price, which saw a high of nearly $13,900 on Wednesday, fell over the past hour, dropping as low as $11,900. BTC’s price was at about $13,685 just prior to the fall. According to data BitMex, nearly $250 million in volume traded hands in a 5-minute period surrounding the initial price drop, with nearly $690 million in volume trading across 15 minutes after the drop began across its XBT/USD perpetual swap contract market.
(Source: “Coinbase Hit with Outage as Bitcoin Price Drops $1.8K in 15 minutes”, available at https://www.coindesk.com/coinbase-hit-with-outage-as-bitcoin-price-drops-1-8k-in-15-minutes/)
Northern Trust Hands Off Blockchain Solution to Fintech Firm
Northern Trust has handed over its blockchain-based private equity (PE) management solution to Broadridge for further improvement. The platform purports to streamline and automate certain tasks, such as middle office functions. The PE blockchain solution will initially roll out “to all PE funds domiciled in Guernsey and Delaware, including those administered by Northern Trust.” As previously reported by Cointelegraph, Northern Trust partnered with Big Four consulting and auditing network PwC to provide a repository of audit data on its private equity blockchain to interested parties. The solution was reportedly built using the open source Hyperledger Fabric framework as well as the IBM Blockchain to provide security and scalability.
(Source: “Northern Trust Hands Off Blockchain Solution to Fintech Firm”, available at https://cointelegraph.com/news/northern-trust-hands-off-blockchain-solution-to-fintech-firm/)
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.
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