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Swift Blockchain Success Sets Stage for Sibos

Once considered perhaps the largest middleman at risk

of being disrupted by blockchain, Swift took a notable step today toward becoming a disruptor. Revealed on the eve of its largest annual event, Sibos, the inter-bank platform, along with six banks including BNP Paribas, BNY Mellon and Wells Fargo, has deemed its flagship blockchain trial a success from both a technical and business perspective. First announced in January, the proof-of-concept tested whether moving funds stored in nostro-vostro accounts for international transactions to a blockchain could free up those funds to further investment.

But in spite of the PoC achieving multiple objectives, Swift says there's still a long way to go before implementation, primarily since its 11,000 members will not benefit equally from the project In conversation, Swift's head of R&D Damien Vanderveken explained that some banks that have invested heavily in traditional, centralized solutions for nostro-vostro accounts are already experiencing efficiency gains, and as such might not be as keen to invest in a blockchain-based solution.

Vanderveken said:

"The PoC demonstrated that it can fulfill the requirements. The business value depends on the level of automation of the participants. We will need to make sure for the final solution that we take care of the different levels of investment."

As a result, instead of a one-size-fits-all solution, Vanderveken said each Swift member will eventually have to analyze the value offered by blockchain and weigh it against the costs of implementation.

Benefits of blockchain 

Built as part of Swift's Global Payments Innovation initiative (GPI) within its newly revealed DLT sandbox, the PoC uses the open-source Hyperledger Fabric platform to test two main applications. The first used real, anonymized production data from each of the banks to provide "the account owner and the account servicer a complete view of all the nostro-vostro accounts that they own or serve," Vanderveken said.

The second simulated back-office procedures, which gave the participants a node hosted in the cloud to test the benefits of moving funds from multiple accounts to a single distributed ledger. These two applications provided users not only increased visibility of and access to available funds, but also simplified the reconciliation process, which uses Swift's ISO 20022 standard. "The feedback from everybody is unanimous," said Vanderveken. "What we have built in terms of applications actually does meet the requirements."

Technical limitations

While the nostro-vostro blockchain PoC was deemed a success, Swift also noted several limitations. In particular, Vanderveken said Swift is concerned about the possibility that cryptographic security could be hacked with quantum computers. A technology still in the proverbial petri dish, the thought has pushed Swift to create a "hybrid architecture," where some transaction components were distributed on a blockchain, while others were "operated by a neutral third-party."

At the top of the list for the latter was the identification of participants, or as Swift described it earlier this month in a paper jointly written by BCG Financial, "a universally trusted global KYC registry." For businesses like Swift, which operate in permissioned systems, this is considered a crucial security feature.

Vanderveken said:

"If you want to ensure data confidentiality, and you don't want to rely solely on encryption — which is prone to failure in the long run as encryption becomes hacked by technology progress — you need to have solutions where data is then segregated."

Swell for Sibos?

This successful test of Swift's blockchain PoC is particularly notable leading up to the Sibos conference in Toronto, since the financial incumbent has stiff competition with distributed ledger startup Ripple hosting a competing event called Swell. Twice during Sibos, Swift will demo the PoC in front of a live audience. But while participants (of both events) perform their own cost-benefit analysis of blockchain, the second phase of Swift's POC will already be underway.

Since Sept. 27 financial institutions — including ABN Amro, Deutsche Bank and JPMorgan Chase — have been validating the PoC results, with a final decision expected by the end of year. But one thing is certain, Vanderveken said Swift only intends to move forward in implementing the new technology if its members benefit.

He said:

"We need to take care of the differences of the various banks to make sure such a solution is successful."

Chuck Reynolds


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Collaboration FTW: How Blockchain Came So Far, So Fast

Looking ahead to next week's annual Sibos conference,

Palatnick takes stock of blockchain technology's progress in transforming the plumbing of global markets, and explains why cooperation is critical for further advancement. While 2016 was referred to as the year of the blockchain proof-of-concept, 2017 has become the year of the blockchain pilot. While the progress has been remarkable, it's important to be mindful of the critical role that industry collaboration has played in accelerating development and advancement.

Shortly after the blockchain conversation started across the financial services industry in 2014, a number of participants began to realize the value that distributed ledger technology could bring to the financial markets. For DTCC, distributed ledger technology represents a generational opportunity to reimagine the post-trade infrastructure through its potential to harmonize and streamline the costly, burdensome reconciliation process the market currently operates in. By providing a single version of the truth to all parties, DLT can fundamentally alter how financial transactions are entered, stored and shared.

Just three years later, the industry has made significant strides in turning blockchain from a concept to reality. We've seen initiatives move from PoC to pilot, and a number of efforts are underway to operationalize the tech. Although still in the early stages of implementation, the industry has learned that collaboration is critical. The key to reaching the full potential of blockchain technology lies in fostering industry-wide collaboration and aligning the technology with the industry's longstanding core principles of mitigating risk, enhancing operational efficiencies and driving cost efficiencies.

From realization to reality

After all, the underlying technology itself calls for collaboration. Interoperability and standardization in utilizing blockchain can only be achieved when the industry joins in support of a common goal and a single ledger. DTCC believes the core of any distributed ledger solution for the global financial industry must be based on open source, not owned by any single vendor and aligned around best practices and established standards. Until recently, there were no viable open-source models for distributed ledger technology. However, that is quickly changing due to the development we’ve seen this year from organizations like Hyperledger and the Enterprise Ethereum Alliance.

Hyperledger, the first enterprise-oriented open-source collaboration project created to advance cross-industry blockchain technologies, recently gained support from 10 new members, including the Gibraltar Stock Exchange and DLT Labs, bringing its total membership to 18,765 members. The recent release of Hyperledger Fabric 1.0 is an example of what the industry can achieve through community effort, where 159 developers from 28 organizations joined together to incubate the project. The release marked a significant milestone in the evolution of distributed ledger technology, proving the critical need for collaboration.

Having been established just earlier this year, the Enterprise Ethereum Alliance has quickly gained 120 members to its consortium, which has the mission of evolving ethereum into an enterprise-grade technology. The rapid growth in membership and support from major players such as State Street, JPMorgan Chase and BNY Mellon, as well as DTCC, shows the evolving acceptance and deployment of open-source distributed ledger technology in the global marketplace.

DTCC believes this is one of the many ways in which the industry has and will continue to benefit from collective contributions, and is why we're leveraging the Hyperledger network to provide a DLT framework to drive further improvements in derivatives post-trade lifecycle events. Through our work with IBM, Axoni and R3, we're rebuilding our trade information warehouse, which provides processing services for about 98 percent of all credit derivative transactions globally. The initiative is underway and, in 2018, nearly the entire global $11 trillion market for credit default swaps will run on a distributed ledger.

Are you in?

As the adoption of distributed ledger technology grows, as in any open market, many different innovations will be proposed and pursued. The challenge for the financial industry, and for an emergent technology like distributed ledger, is about creating networks that share information and technology, and the need for continued collaboration.

Without collaboration, DLT solutions will leverage proprietary, separate models that will ultimately recreate the many silos and disjointed systems that already exist today. In the financial industry, this could lead to bifurcated markets, reduced liquidity, greater risks and a suboptimal experience for the investing public. It is essential that we work together across industry organizations, technology providers, market participants and market structure providers to develop best practices and interoperability standards for this technology in order for DLT to truly live up to its potential.

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Surreptitious cryptocurrency miners hide on Politifact and hundreds of other sites

Surreptitious cryptocurrency miners hide on Politifact and hundreds of other sites

Politifact is the latest and perhaps most high-profile website

to have hosted code that secretly hijacks visitors’ CPUs to mine cryptocurrency. Driven by a boom in cryptocoin value and a lack of protections against JavaScript routines like this one, this surprising form of audience monetization is now found on hundreds of sites.

(Update: Politifact has removed the code and is looking into how it got there.)

It’s not quite an ad, and it’s not quite malware, nor is it strictly speaking a virus or exploit. JavaScript is used for all kinds of things in the background of practically every major website, from tracking users to displaying custom fonts. Generally speaking, these apps are running code hosted on another server that the end user can’t inspect, and often doesn’t even realize their browser is executing.

In recent months, several JavaScript-based cryptocurrency miners have appeared. The idea, supposedly, is that instead of showing your visitors ads, you have their CPU run the calculations necessary to mine a currency like Bitcoin. As the administrator, you could control the CPU load and reap any resulting coins. CoinHive is a new business that offers this as a service. Predictably, this already questionable approach to monetization has already been repurposed by malicious actors. Injecting a bit of JavaScript into the front page of a website is often simpler to do than penetrate its databases or phish its admins; and once it’s in, it runs itself — all you have to do is give it a wallet to put the coins in.

That seems to be what happened at Politifact; my blocker registers a CoinHive instance on the main pages of the site, with new requests coming in multiple times a second. Inspecting the site’s JavaScript shows an enormous chunk of CoinHive miner code sitting amongst the ordinary scripts. It’s pretty hard to miss, and if not blocked it takes over the whole CPU until the tab is closed. With a few million users mining for a minute or two each while they check out the latest political shenanigans, those cycles add up quick.

I’ve contacted the site’s team to ask what the story is; someone there told The Register that they’re looking into it, but I’ll update if I hear back with more details. The site is far from alone: a study by ad blocker company AdGuard showed that hundreds of sites, most of them on the shady site (porn and torrent sites, for instance) are running CoinHive code, or some other JavaScript-based miner.

What can you do? Well, this is a great reason to install an ad blocker, if you haven’t already: in addition to getting rid of intrusive ads and trackers, some of them block unknown scripts or have a blacklist of known malicious ones. I use uBlock Origin, which also makes it easy to whitelist sites (like this one) that only feature organic, free-range advertisements. But you could also use NoScript, AdBlock or any one of the many out there, depending on your platform and browser.

Chuck Reynolds


Marketing Dept
Contributor
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PBoC Digital Currency Director Calls for Centralized State Cryptocurrency

China may not recognize bitcoin as a legal currency,

but it seems to have a clear vision for a state-issued alternative. At a meeting hosted by the International Telecommunication Union this week, Yao Qian, the Director of the Digital Currency Research Institute under the People's Bank of China, reportedly boasted about the potential of a state-owned digital currency, while suggesting that there is an inherent lack of value anchoring public cryptocurrencies like bitcoin.

According to a report by Yicai, Yao also framed a state-issued digital currency as a way to stabilize domestic fiat currency, while better securing country's financial status. Although the publication made clear Yao's comments reflected his own opinions, the remarks nonetheless reveal how the country may choose to direct the future development of digital currency.

Yao told attendees:

"The value of cryptocurrencies such as bitcoin primarily comes from the market speculation. It will be a disaster to recoganize it as a real currency. And the lack of a value anchroing inherently determines that bitcoin can never be a real one."

Launched by China's central bank in June this year, the Digital Currency Research Institute focuses on R&D related to blockchain-based digital currency. Currently head of the institute, Yao also served as the deputy director of PBoC's technology department.

Pointed barbs

Elsewhere, Qian had more criticism for public cryptocurrencies. In yet another statement, he was quoted as saying that the deflationary nature of economic systems utilizing the technology could be a hinderance to their success. "A total cap of 21 million like bitcoin whose current supply also halves every four years is actually driving backward along the currency evolution," he said. Yao went on to argue that a state-owned digital currency, however, creates tangible economic values and helps stabilize the market position of fiat currencies.

"The nature of a state-owned digital currency is a government liability issued to the public," he said. "And it's backed by the sovereign credibility." Yet, Yao takes a different approach from current trials of other central banks' cryptocurrency projects that focus on the distributed ledger technology. Citing the RSCoin design concept by the Bank of England as a promising example, Yao argued that such state-owned digital currency should not be confined by the ideology of the blockchain and DLT. "RSCoin pictures a system that is controlled by the central bank," he said. "The role of central banks may not just be deciding how much to supply but also designing the rule of the supplying algorithm."

Chuck Reynolds


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World stocks hits fresh highs, as bitcoin keeps climbing – business live

World stocks hits fresh highs, as bitcoin keeps climbing – business live

All the day’s economic and financial news,

as new Chinese trade figures beat expectations

  • Bitcoin hit $5,800
  • Chinese imports surge by 18.7%, suggesting strong demand
  • US surplus hits record high, but trade with North Korea tumbles
  • MSCI World Index hits new peak
  • FTSE 100 hit new closing high last night
  • Coming up: US inflation; IMF meeting

A worker processes panda soft toys for export to American and European markets at a factory in Lianyungang, Jiangsu province,

China, this week.

…The cryptocurrency community is aware of the sheer energy consumption issue. Therefore, it is looking for alternative solutions to the Mad Max problem.

One alternative may be Proof of Stake. Miners are not asked to show they put in work (computing power) in validating but to commit valuable resources beforehand, indicating they have a stake in the proper outcome. For example, miners may have to put an amount of cryptocurrency in escrow which is only released if no fraud is detected, otherwise forfeited.

That sounds like a smart idea. However, it implies that only those wealthy enough to be able to put resources in escrow can join the mining process. This creates a plutocracy, which sits uncomfortably with cryptocurrency’s anarchistic and libertarian roots.

My conclusion is that finding a sustainable and fair solution to the Mad Max Problem is one of the biggest challenges for the cryptocurrency community today.

The US inflation figure was the main focus in the day’s data, says Connor Campbell, financial analyst at Spreadex,

and it came in below expectations:

US consumer confidence hits highest level since 2004

The survey’s chief economist Richard Curtin said:

The October gain was broadly shared, occurring among all age and income subgroups and across all partisan viewpoints. The data indicate a robust outlook for consumer spending that extends the current expansion to at least mid 2018, which would mark the 2nd longest expansion since the mid 1800’s.

While the early October surge indicates greater optimism about the future course of the economy, it also reflects an unmistakable sense among consumers that economic prospects are now about as good as could be expected. This “as good as it gets” outlook is supported by a moderation in the expected pace of growth in both personal finances and the overall economy, accompanied by a growing sense that, even with this moderation, it would still mean the continuation of good economic times.

…Nothing in the latest survey indicates that consumers anticipate an economic downturn anytime soon – which contrarians may consider a clear warning sign of trouble ahead. Nonetheless, consumers anticipate low unemployment, low inflation, small increases in interest rates, and most importantly, modest income gains in the year ahead. It is this acceptance of lackluster growth rates in personal income and in the overall economy that signifies that consumers have accepted, however reluctantly, limits on the pace of improving prospects for living standards.

Wall Street opens higher

The dollar has weakened following the US data, in particular the inflation figures. But – barring political ructions – the Federal Reserve is still on track for a rate rise in February, says James Knightley,

chief international economist at ING Bank:

Inflation pressures are grinding higher and domestic activity is strong, suggesting that the main barrier to a higher Fed funds rate is political rather than economic.

The US CPI report shows inflation pressures are rising, but this is primarily an energy story reflecting higher oil prices and refinery shutdowns relating to Hurricane Harvey. At the headline level it rose 0.5% month on month/2.2% year on year (a tenth of a percentage point below what was expected). Energy prices rose 6.1% month on month, but excluding food and energy inflationary pressures were more muted, rising just 0.1% month on month/1.7% year on year (again a tenth of a percentage point below expectations).

In terms of core inflationary pressures, we are starting to see a bit more upward movement in the housing component, but medical care, apparel and education prices are very soft. Nonetheless, with the economy growing quite strongly, the jobs market looking tight with wage growth starting to show some signs of life we would expect inflation rates to creep higher….

September retail sales [data] has also been released and is strong, rising 1.6%MoM with small upward revisions to August’s data. Hurricane effects are clearly visible – higher gasoline prices boosted gasoline station sales 5.8%MoM while the fact unit car sales rose to a 12 year high helped boost the value of sales with a 3.6%MoM rise. Strength can also be seen in other components and it is likely that there was some uplift as households start to replace lost items following the recent hurricanes. This has come on top of what is already a strong story for the consumer with employment, wages and confidence all looking healthy.

We expect the positive story to continue into next week with industrial production rebounding following storm disruption. After all, the ISM manufacturing index is at a 13 year high, the dollar is making exports more competitive and we are seeing stronger global growth.

With overall economic growth looking good, inflation pressures gradually increasing and the Fed’s worries about asset valuations and financial stability becoming more prominent in speeches, a December rate hike is looking likely. The main risk remains the potential for an economically/market destabilising government shutdown.

Meanwhile US retail sales have bounced back in September, albeit just shy of expectations:

Newsflash: inflation across America rose last month, but by less than expected.

So, is bitcoin a sensible investment at today’s record levels, or should you keep well away?

The moment bitcoin hit a new all-time high over $5,800 today Photograph: Bloomberg But critics argue that the recent rally is a bubble, that could burst if there is a rush to the exits. Lee Wild, head of equity strategy at Interactive Investors, says anyone considering investing in

digital currencies needs to be cautious:

“The value of bitcoin has almost doubled in less than a month which is clearly attracting further interest from speculators. There’s evidence of growing institutional activity, too, and if China reopens cryptocurrency exchanges after the Communist Party Congress which starts next week, some believe the price could reach $10,000 by the end of the year.

“However, there could be near-term turbulence around changes to the code the bitcoin network runs on, due to be implemented in mid-November. “It is crucial that retail investors understand the many risks involved in cryptocurrency trading, not least the volatility – bitcoin has lost more than a third of its value on two occasions since June. It is clearly not for the faint-hearted.”

The pace of bitcoin’s rally in recent weeks is quite remarkable.As this chart from Bloomberg shows, it’s quadrupled in value this year, despite faltering last month when China announced a crackdown on bitcoin exchanges.Our economics editor, Larry Elliott, has been holding the World Bank to account at their

Annual Meeting with the IMF in Washington:

Chuck Reynolds


Marketing Dept
Contributor
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Bitcoin hits new highs

Bitcoin hits new highs

India’s stock market has been swept to a new alltime high today:

 

The Nifty has hit 3 fresh records in the last 2 months but it has been one roller-coaster ride!

China also hit a milestone for iron ore imports last month, as it bought more higher-quality stocks from abroad.

Bloomberg has the details:

Iron ore imports by China surged above 100 million metric tons to a record, smashing the previous high set in 2015, as the country’s concerted push to clean up the environment stoked demand for higher-grade material from overseas while hurting local mine supply.

Chuck Reynolds


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Tell Us Why You Bought Bitcoin Or Face Account Closure: US Bank To Customer

Tell Us Why You Bought Bitcoin
Or Face Account Closure:
US Bank To Customer

US bank PNC allegedly “wants nothing to do with Bitcoin”

but still threatens to close accounts if customers do not reveal why they bought it. That’s according to a story circulating on social media getting increasing attention from the cryptocurrency community. A post by PNC account holder u/EliToohey Thursday recounts how the bank contacted them demanding to know why Bitcoin had been purchased from exchanges Coinbase and Xapo. “I've had a banking relationship with PNC Bank for 15 years and I just got a call to verify unusual activity,” the post reads. “He asked me to confirm a couple transactions then asked ‘For what purpose are you buying Bitcoin’”.

When the user refused to divulge the “purpose,” the bank’s representative threatened to close the account. “I told him I wouldn't answer, he then asked ‘What are you going to do with the Bitcoin’”, u/EliToohey continues. “I again told him I wouldn't answer. He then informed me that his security team told him they would ‘exit the relationship with me’ if they didn't get satisfactory answers.” The episode is not unusual in the often bizarre relationship banks have with cryptocurrency.

Tales of threats and sudden account suspensions have surfaced not just in the US, but also in Europe, with UK-based Barclays becoming one of the worst offenders in terms of contradictory and overreaching policy. Banks’ treatment of Bitcoin combined with bankers’ championing fiat has led to increasing ridicule from cryptocurrency investors in light of JPMorgan CEO Jamie Dimon’s allegations that Bitcoin is a “fraud.” Unlimited fiat money supply was a topic touched on by entrepreneur and commentator Tuur Demeester Wednesday, who highlighted a quote from the

US Federal Reserve on the issue.

Imagine if Satoshi's white paper said: "Bitcoin's total money supply doesn't really matter" Tuur Demeester (@TuurDemeester) October 11, 2017

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$5k Forever! Bitcoin Price Surges To Claim New All-Time Highs

$5k Forever! Bitcoin Price Surges To Claim New All-Time Highs

Analysts are more confident than ever that Bitcoin

will stay above $5000 today as prices continue surging towards new highs of $5050. Technical data from multiple sources indicates no slowdown in Bitcoin’s charge to retake the historic price level, having increased by $600 since Monday. Now, forecasts of resistance range from $5200 to $7000 should the largest digital currency

Hold above the barrier.

If we pass 5k, next possible resistance at 7k if we follow the same trend pattern #BTC #XBT #bitcoin $crypto #blockchain #moon #hodl pic.twitter.com/U8cZArrnaR, $BTC Over $5000 soon !
If It's gone try to $5200 pic.twitter.com/wmqhYGrQTu

More resilient

Bitcoin passed $5k for the first time September 2, before dropping back markedly as markets reacted to subsequent regulatory moves in China. A period of volatility, which saw prices dip below $2000 soon reversed, Bitcoin becoming rapidly more resilient to further

Hostile reactions from authorities.

"This week’s decision to block access to cryptocurrency exchanges in Russia, for example, had barely any effect on Bitcoin’s upward trajectory."

While BTC is no stranger to corrections, buoyant short-term predictions by well-known investors are flowing. On Wednesday, Mike Novogratz told CNBC he “would not find it surprising” if one bitcoin cost $10,000 by April 2018. At press time, BTC was trading around $5050 per coin according to Bitcointicker’s tracking of Bitstamp rates. In altcoin markets meanwhile, activity was flat as investors appeared to turn to Bitcoin.

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Vladimir Putin: Cryptocurrency Poses ‘Serious Risks’

Russian president Vladimir Putin said in a meeting today

that cryptocurrencies pose significant risks related fraud and money laundering. Quoted by Russian state news service TASS, Putin was speaking during a meeting that was focused on the subject of cryptocurrencies and financial tech more broadly. In the meeting, he formally voiced his support for new rules around cryptocurrency trading, stating that Russia should look to international examples as a guide when developing those regulations.

Indeed, the meeting represents some of Putin's most comprehensive comments on the subject to date. He first spoke about cryptocurrencies in the summer of 2015, remarking at the time that there were "serious, really fundamental issues related to its wider usage." In his new statements, Putin highlighted the rising profile of the technology, while also echoing those 2015 comments.

Putin was quoted as saying:

"Virtual [currencies] or cryptocurrencies are becoming and have already become more popular. They have already become or are turning into a full-fledged payment instrument and an investment asset in certain countries. At the same time, use of cryptocurrencies also carries serious risks."

On the subject of the rules themselves, Putin threw his support behind regulations that would protect consumers and facilitate the development of new financial products. "We should develop such a regulatory system on the basis of international experience that will make possible to make relations in this sphere systemic, definitely protect interests of citizens, business and the government, and provide legal guarantees for work with innovative financial instruments," he said.

His comments come after a senior official for Russia's central bank stated publicly that his institution will support efforts to block access to external websites that offer cryptocurrency brokering services in the country. Representatives from the Bank of Russia were also present at the Putin meeting, according to sources.

Chuck Reynolds


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Abu Dhabi Issues Cryptocurrency and ICO Regulations

Abu Dhabi Issues Cryptocurrency and ICO Regulations

 

The government of Abu Dhabi, through its markets regulator,

has released guidelines on virtual currencies and initial coin offerings (ICOs). The government of Abu Dhabi has published [PDF] guidelines to bring clarity to its regulatory approach to ICOs and virtual currencies for ICO organizers and digital currency adopters. After deliberation, the Financial Services Regulatory Authority (FSRA)– Abu Dhabi’s financial markets regulator – has decided that a “one size fits all” approach to virtual tokens, be it ICO tokens or digital currencies or any other implementation of blockchain solutions powered by crypto tokens, is “inappropriate.”

ICOs – Only Regulated if Seen as Securities

“The ICO market is incredibly diverse in terms of quality, there are some ICOs which constitute high risk,” said Christopher Kiew-Smith, head of fintech strategy at the FSRA. “The disclosures are not there, there are no financial statements, those are extremely high risk for those seeking returns.

Under the new guidelines, companies wishing to organize an ICO are now mandated to approach the FSRA where the authority will determine if the token offering is to be regulated as a security. If the FSRA determines the token falls outside the definition of a security, the token offering will remain unregulated. The FSRA underlined ICOs as “a novel and potentially more cost-effective way of raising funds for companies and projects.” Altogether a decidedly contrasting approach to the likes of China and South Korea who imposed blanket bans on ICOs.

FSRA chief executive director Richard Teng stated:

ICOs have transformed the capital formation landscape and global regulatory frameworks are evolving to adapt to such innovation. Participants exploring the issuance of ICOs that offer real value to the market and wish to operate within our regulatory framework are encouraged to engage us early to gain insights into the applicable regulatory regime.

Cryptocurrencies = Commodities

The FSRA, which also serves as Abu Dhabi’s financial watchdog, has determined that virtual currencies aren’t legal tender with characteristics more common with physical commodities like precious metals and fuels, due to their inherent value.

The FSRA explained:

Therefore from a regulatory perspective, virtual currencies are treated as commodities, which are not Specified Investments as defined under the FSMR. This means that a “mining” or spot transaction in virtual currencies will not constitute a Regulated Activity in itself.

Nonetheless, any regulated firms enabling or using virtual currencies for financial services will have to adhere to existing anti-money laundering/combating the financing of terrorism (AML/CFT) laws.

Bitcoin Could Still be Regulated, in the Future

The Abu Dhabi regulator has not ruled out the possibility of bringing cryptocurrencies like bitcoin under its regulatory purview. Pointing to a recent FinTech pact with its regulatory counterpart in Japan, FSRA capital markets director Wai Lum Qwok revealed that the watchdog is in discussions with Japan’s Financial Services Agency (FSA) about its regulation of bitcoin. Japan recognized bitcoin as a legal method of payment in April this year. More recently, the authority issued 11 licenses for bitcoin exchanges to operate in the country.

In notable quotes, FSRA’s capital markets director Wai Lum Qwok stated:

For us, we do see a lot of challenges in regulating something which was designed not to be regulated. We recently established a fintech reach with the Japanese FSA, and through such cooperation we hope to see how they regulate these and if there are risks they see…We are open to carving virtual currencies into the regulated space.

Chuck Reynolds


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