The week’s developments in the crypto currencies world including China Passes First-Ever ‘Crypto Law’ Going Into Effect January 2020

China Passes First-Ever ‘Crypto Law’ Going Into Effect January 2020

The Standing Committee of the 13th National People’s Congress in China has passed a new law regulating cryptography on Oct. 26 that will take effect on Jan. 1, 2020, reports local news outlet CCTV. Per the report, the new regulatory framework aims to set standards for the application of cryptography and the management of passwords. The new regulatory framework establishes the role of a central cryptographic agency meant to lead public cryptographic work, creating guidelines and policies for the industry.

The text is largely focused on government centralized password management and does not explicitly mention cryptocurrency, though it does focus on cryptography, a key component underpinning cryptocurrencies such as Bitcoin. It is believed that that the law is building the foundation for the upcoming Chinese national cryptocurrency.

CFTC says cryptocurrency ether is a commodity, and ether futures are next

Last December, the Commodity Futures Trading Commission (CFTC) issued a public call for feedback to “better inform the Commission’s understanding” of the Ethereum network and the cryptocurrency ether. Now CFTC Chairman Heath Tarbert, who just took over the role in July, has come to a decision on its status. Tarbert believes ether (ETH) is a commodity, and thus falls under the jurisdiction of the CFTC. He also anticipates ether futures trading on U.S. markets in the near future.

“We’ve been very clear on bitcoin: bitcoin is a commodity. We haven’t said anything about ether—until now,” Tarbert said on stage at Yahoo Finance’s All Markets Summit in New York City on Thursday. “It is my view as chairman of the CFTC that ether is a commodity.” Tarbert agrees with the SEC’s previous guidance that bitcoin and ether are not securities. And he says the CFTC is working with the SEC on these issues.

Source: “CFTC says cryptocurrency ether is a commodity, and ether futures are next”, available at

Chinese Central Bank official calls for commercial bank blockchain adoption

The head of the technology department at the People’s Bank of China (PBoC) has called for commercial banks to adopt blockchain technology in digital finance.

As reported by Reuters, bank official Li Wei spoke Monday at a forum in Shanghai on commercial bank adoption.

The central bank is already currently developing its own digital yuan that is expected to launch soon. The potential launch of the Facebook-led Libra cryptocurrency payments network prompted calls for the PBoC to accelerate work on the digital currency.

Li Wei’s comments come hard on the heels of Chinese president and general secretary of the Communist Party Xi Jinping’s call for widespread blockchain adoption in China on Friday.

“[We must] clarify the main direction, increase investment, focus on a number of key core technologies, and accelerate the development of blockchain technology and industrial innovation,” Xi said at the time.

Alongside a 16 percent leap in bitcoin’s price over the weekend, blockchain-related Chinese tech stocks jumped following Xi’s comments,. Bloomberg reports that the Shenzhen Information Technology Index jumped 5.3 percent Monday, with dozens of firms shooting past the daily 10-percent onshore limit.

Source: “Chinese Central Bank official calls for commercial bank blockchain adoption”, available at

Crypto Capital principal indicted on fraud, confirming Bitfinex allegations

Crypto Capital principal Oz Yosef was indicted on three criminal counts by the U.S. Attorney’s Office of the Southern District of New York Wednesday, Oct. 23, confirming statements made by Bitfinex’s general counsel Stuart Hoegner Friday.

According to court documents, Yosef, aka Oz Joseph, has been indicted on conspiracy to commit bank fraud, bank fraud and conspiracy to operate an unlicensed money transmitting business.

In an overt act cited by court documents, Yosef sent a text to an unnamed source “regarding the need to transfer $10,000,000 to a bank located in the Bahamas, knowing that the funds would be transferred from a bank account maintained with a bank located in Manhattan, New York.”

Following criminal investigations by multiple international bodies, including U.S. authorities, this past Spring, Crypto Capital’s funds were frozen. Of the funds seized from the banking solution platform, $880 million belonged to crypto exchange Bitfinex which maintained a relationship with the company. The lost funds triggered an investigation by the New York Attorney’s Office into the relationship between Bitfinex and sister firm Tether.

On Thursday, Crypto Capital president Ivan Manuel Molina Lee was extradited to Poland by Polish authorities on charges of money laundering. Lee is charged with laundering 1.5 billion zloty, or about $390 million.

Upon Lee’s arrest, Hoegner released a statement on behalf of the exchange which claimed Bitfinex to be the victim of fraud. Hoegner stated Yosef had been indicted by the Southern District of New York, although court documents had not yet been released to support that.

As a result of the indictment, Yosef will forfeit listed assets “representing the number of proceeds traceable to the commission of said offenses.”

Court documents name a list of specific assets including those of Crypto Capital principal Reginal Fowler, charged with running a shadow banking service by the U.S. Attorney’s Office this past Spring and Global Trade Solutions LLC, the parent firm of Crypto Capital. Eligibility Criterion, Eurocontrol, and Spiral Global Development are also listed by the court.

Source: “Crypto Capital principal indicted on fraud, confirming Bitfinex allegations”, available at

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://

Blockchain startup raises $5M to automate airport security checks

Blockchain startup Zamna raised $5 million to automate airport security checks using blockchain and biometrics technology, tech news outlet Silicon Republic reports on Oct. 28. The startup plans to use the funding to deploy its Advance Passenger Information platform. Zamna also said that International Airlines Group (IAG), Emirates Airlines and United Arab Emirates’ General Directorate of Residency and Foreigners Affairs are now among its clients.

Zamna, formerly known as Vchain Technology, aims to share passenger data between airports, governments and security firms via blockchain.

The platform says it will enable secure sharing between involved parties and provide instant passenger data checks, which is expected to reduce manual document checks up to 90%.

(Source: “Blockchain startup raises $5M to automate airport security checks”, available at

Largest American food coop to pilot Mastercard’s blockchain tech

Topco Associates, the largest American retail food group purchasing organization, will pilot Mastercard’s blockchain tech in its operations. According to a press release on Oct. 27, Topco will test a traceability platform developed by logistics firm Envisible. The Wholechain platform is based on Mastercard’s blockchain-based Provenance Solution. Topco will use the platform to trace the provenance of produce, meat and seafood.

Blockchain technology has found widespread application in the food industry with multiple high-profile companies. Major American retailer Walmart began using blockchain tech to track Indian shrimp supply chains earlier this month. This is reportedly the first time that the technology has been used to track shrimp from the country. Walmart China started tracking food through its supply chain with VeChain’s Thor blockchain in June.

The retailer previously stated that blockchain technology allows the firm to more quickly recall products in the event of a possible health issue. In August, Switzerland’s largest supermarket chain and retailer Migros announced that it would use TE-Food’s blockchain-based food traceability system for its products.

Source: “Largest American food coop to pilot Mastercard’s blockchain tech”, available at

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