Financial Stability Board: Blockchain Could Raise Cross-Border Data Issues – CoinDesk

An international group of regulators and government officials created in the wake of the 2008 financial crisis has released a wide-ranging report on financial technologies including blockchain.

The report grew out of a months-long process within the Financial Stability Board (FSB), which first revealed it was researching blockchain and its impact on the global financial system in February 2016. The board is composed of central bank governors and financial regulators from nations in the G20 group, as well as its predecessor Financial Stability Forum, and the European Commission.

Though the study states that “there are currently no compelling financial stability risks from emerging fintech innovations,” it outlines 10 potential issues that regulators should focus on. In the context of blockchain, the FSB report identifies the implications of the technology’s cross-border nature and legal uncertainty around smart contracts.

The authors go on to note:

“These and other legal issues could be even more prevalent when considering cross-border activities. For example, blockchain has raised questions, such as data privacy concerns across jurisdictions, and identifying the location of an asset when no one bank or entity is the custodian of the record.”

More at: Financial Stability Board: Blockchain Could Raise Cross-Border Data Issues – CoinDesk

Coin Center: US Senate’s Digital Currency Bill Is ‘Counterproductive’ – CoinDesk

An anti-money laundering bill before the US Senate and focused in part on digital currencies “could upset years of policy and compliance work”, according to Washington, DC, advocacy group Coin Center.

A new blog post penned by Coin Center executive director Jerry Brito dives into the specifics of the bill, arguing that the Combating Money Laundering, Terrorist Financing and Counterfeiting Act of 2017 – introduced in late May by a group of influential senators – largely replicates rules put in place by the Financial Crimes Enforcement Network (FinCEN), which first issued guidance on digital currency activities in 2013 and later 2014.

According to Brito, the Senate bill’s approach as written is “counterproductive” to its intended goal of countering illegal activities.

More at: Coin Center: US Senate’s Digital Currency Bill Is ‘Counterproductive’ – CoinDesk

FCA Releases Discussion Paper on Distributed Ledger Technology – JDSupra

As discussed in our alert of 2 March 2017 [reedsmith.com] global regulators are paying increasing attention to distributed ledger technology (DLT) (also known as blockchain). The European Securities and Markets Authority (ESMA) [esma.europa.eu] and the U.S. securities self-regulatory organisation, the Financial Industry Regulatory Authority (FINRA) [finra.org] both have asked for, and received, stakeholder feedback on issues around surrounding DLT, and the International Organization of Securities Commissions (IOSCO), has also recently published reports and held a roundtable with leading market analysts to discuss potential DLT issues.

Regulators globally are trying to understand industry participants’ and customers’ views on DLT’s potential perils and possibilities, as well as how DLT can potentially increase cost and time efficiencies and resiliency. Also, on 10 April 2017, the UK Financial Conduct Authority (FCA) published discussion paper DP17/3 on distributed ledger technology (FCA Discussion Paper). This followed a speech by the Executive Director of Strategy and Competition at the FCA, Christopher Woolard, at the Innovate Finance Global Summit. The FCA’s initiative on DLT follows on from its Project Innovate, which has included the creation of the FCA’s ‘regulatory sandbox’, whereby firms, including those developing DLT platforms, have been able to test innovative products and solutions in regulated financial services. [fca.org.uk]

The FCA Discussion Paper is aimed at users and providers of DLT technology in the financial services sector that falls within the FCA’s supervision. Generally, the tone of the FCA Discussion Paper is positive, noting and requesting examples of benefits of DLT, while recognising that DLT is a nascent technology and its uptake will ultimate depend on the willingness of firms to adopt it. Compared with IOSCO, which takes a more conservative approach towards public blockchains in its reports, the FCA is interested in feedback on the potential risks of closed networks that exclude non-incumbents.

The FCA encourages market participants to send their comments by 17 July 2017 through the online response form on its website. The FCA will then review the comments and publish a summary of responses or a formal consultation paper.

More at: FCA Releases Discussion Paper on Distributed Ledger Technology – JDSupra

Forfeit Your Bitcoin? Congressional Bill Draws Fire Over Border Check Rules – CoinDesk

A group of US lawmakers wants to see cryptocurrency holdings declared at the nation’s border – and advocates of the tech are pushing back.

Introduced last month, the Combating Money Laundering, Terrorist Financing and Counterfeiting Act of 2017 – which is actually the third iteration of a bill that debuted in 2011 – would bring a range of digital currency services under federal scrutiny, including those that provide transaction mixing services.

Yet, the provision that has attracted the particular ire of cryptocurrency advocates – especially those who prefer a regulation-light environment – is one that would make such holdings subject to disclosure requirements at US customs checkpoints. This means if a person trying to enter the country has more than $10,000 worth of bitcoin in their possession, under the proposed legal change, they would need to inform the relevant authorities.

Such requirements are already in place for payment methods like cash. But given the rising public profile of cryptocurrencies like bitcoin, coupled with the perception among policymakers that they could be used to fund terrorist activities, is driving legislative efforts like the bill currently under consideration.

One observer, Joe Ciccolo of Canada-based BitAML, remarked that cryptocurrency has become the “new face in an old debate”, going on to say that policymakers and law enforcement officials have long sought to expand the definition of what constitutes a “monetary instrument”.

Ciccolo told CoinDesk:

“Earlier this decade, we saw a push to include ‘prepaid access’ such as gift cards. Law enforcement went so far as to pursue card readers to scan prepaid access devices for their balance. Now that digital currencies have gained traction, they’ve been included in the same conversation. As in the past, I suspect there will be strong opposition from across the financial services community.”

Perianne Boring, president of the Chamber of Digital Commerce, a blockchain trade advocacy organization, said the legislation is “not necessary” given the existence of regulations from the Financial Crimes Enforcement Network (FinCEN), which require exchanges services to register as money transmission businesses and adhere to federal reporting requirements.

“While we encourage thoughtful and meaningful study of the prevention of cross-border financial crime, the storage of virtual currency carries different and complex considerations than those attributable to prepaid access,” she told CoinDesk.

More at: Forfeit Your Bitcoin? Congressional Bill Draws Fire Over Border Check Rules – CoinDesk

Your Guide to Five Major US States and Their Stance on Bitcoin Regulation – The Cointelegraph

When it comes to cryptocurrency regulations, lawmakers are jousting with different opinions and viewpoints. Some believe that Bitcoin should be regulated, while others are firm that Bitcoin should be left to its own devices.

Before legislators can take action, they must understand the nature of Bitcoin and other cryptocurrencies. This is a great challenge because the Blockchain Technology must be understood, as well as its impact on different industries. Even though many experts think that US is a step behind Bitcoin regulation, there seems to be ongoing progress this 2017.

Let’s take a look at the current regulation landscape in five prominent US States: Washington, Illinois, Hawaii, California, and Florida.

More at: Your Guide to Five Major US States and Their Stance on Bitcoin Regulation – The Cointelegraph

Delaware Senate Advances “Distributed Ledger Shares” Bill – ETHNews.com

Recently, the Delaware Senate passed Senate Bill (SB) 69, which would amend the Delaware General Corporation Law (DGCL). This bill paves the way for “distributed ledger shares,” a development that could have national implications.

On June 6, 2017, the Delaware Senate passed SB 69, an Act to Amend Title 8 of the Delaware Code Relating to the General Corporation Law, by a vote of 20-0 (with one abstention). According to public records, on June 14, the bill was reported out of the House Judiciary committee and placed on the ready list. The bill still needs to be approved by Delaware’s House of Representatives and signed by Governor Jack Carney before it can become law.

SB 69 would legalize corporate authorization, issuance, transfer, and redemption of shares through a distributed ledger. In addition, the amendment of the DGCL would protect companies from lawsuits alleging breach of fiduciary duty for utilizing blockchain technology. The bill represents a major achievement for the Delaware Blockchain Initiative (DBI), started by former Governor Jack Markell.

Andrea Tinianow, a Delaware state official, and Caitlin Long, president of Symbiont, noted the importance of this legislation on the Harvard Law School Forum on Corporate Governance and Financial Regulation. “By being the first to adopt the technology, the State will maintain its leadership in corporate registry services,” they wrote.

More at: Delaware Senate Advances “Distributed Ledger Shares” Bill – ETHNews.com

Initial coin offerings present dangers to investors, new challenge for U.S. regulators – Reuters

NEW YORK (Thomson Reuters Regulatory Intelligence) – The explosive growth of “initial coin offerings,” a capital-raising tool that uses bitcoin and other crypto-currencies to fund projects that leverage technologies such as blockchain, has sparked concern among experts who warn that the lack of transparency around the issuance of such coins is a concern for both investors and regulators.

The Securities and Exchange Commission is said to be taking a hard look at the increased use of such offerings, with the growth of so-called ICOs surging in recent months. The overall value of the coin market is estimated at over $90 billion, and the frenzied activity has fueled a record-breaking rise in the price of bitcoin, which hit an all-time high of $2,911.86 this week, according to the CoinDesk Bitcoin Price Index (BPI)[here].

ICOs have become mired in an ongoing industry debate, with critics likening the phenomenon to the dotcom bubble in the 1990s, while proponents say the use of such coins and offerings facilitates the type of innovation that could radically transform existing business processes and industries.

Source: Initial coin offerings present dangers to investors, new challenge for U.S. regulators – Reuters