Wednesday, May 13, 2015
itBit was granted a trust charter by the New York Department of Financial Services last week. What does that exactly mean? Houman B. Shadab, a professor at New York Law School and the Editor-in-Chief of the Journal of Taxation and Regulation of Financial Institutions wrote an excellent article on the subject. It answers some interesting questions that have cropped up in the media concerning the status of the charter outside the state of New York. You can read it here
Wednesday, May 6, 2015
Exploring and understanding the uses of digital currency was a key theme around the globe in March. Finding ways to fit digital currency under the umbrella of existing laws and regulations, particularly with respect to anti-money laundering efforts, was also a major push seen in several countries.
North America
California
Bill proposes license requirement for bitcoin businesses
A bill introduced in the California legislature would prevent digital currency businesses from operating in the state unless they have been licensed by the Department of Business Oversight and received an exemption.
The bill comes from Assemblyman Matt Dababneh, chairman of the California Banking and Finance Committee. A spokesman for the assemblyman told CoinDesk, “This bill is something that has been in the works in the state for a couple of years, and as the leader of that committee, Matt dedicated himself on the issue and thought it was the right move to make for the state of California at this time.”
Licensing requires businesses to pay a non-refundable $5,000 for registration and also ask companies to hold a certain portion of their funds in “investment-grade permissible investments.”
Asia
Hong Kong
Official says legislation not needed for bitcoin regulation
Secretary for Financial Services & the Treasury Prof KC Chan said that because bitcoins are not widely used in Hong Kong, legislation that would ban or regulate virtual commodities from trading remains unnecessary.
In his statements, Chan reiterated that such currencies were speculative, and thus posed a risk to users. He also noted that his office would keep a watchful eye on digital currencies and said that, should the need arise, regulators could utilize existing laws to deal with issues of fraud or crime related to digital currencies.
Europe
U.K.
Report on digital currency regulation released
The U.K. Treasury Department released a report about digital currencies in March, which outlined current views on digital currency and noted potential regulatory actions. According to the report, “The government considers that digital currencies represent an interesting development in payments technology.” The report also goes on to say that such currencies could have advantages for micro-payments and cross-border transactions.
The document also relays plans to apply Anti-Money Laundering laws to digital currencies. The government would seek comment on the potential action, and its impact, later this year.
Isle of Man: Regulation for digital currency introduced
Starting on April 1, digital currencies operating in the Isle of Man will be subject to the country’s AML laws after the government amended the 2008 Proceeds of Crime Act to cover bitcoin companies.
According to CoinDesk, that means that those operating in the digital currency business will have to adopt certain know-your-customer (KYC) practices. This includes collecting ID information, which would be given to the authorities if money-laundering activity is suspected.
The country is also set to amend the Designated Businesses (Registration and Oversight) Bill 2014, which would subject digital currencies to required registration and oversight by the Isle of Man Financial Services Commission.
Around the Globe
FATF takes a pragmatic view on Bitcoin
The Financial Action Task Force has indicated that banks should take a risk-based approach when it comes to opening bank accounts for Bitcoin companies. The regulatory think tank has warned of the risk of virtual currency in the past.
The FATF has published a report that establishes a conceptual framework of key definitions to form the basis for further policy development.
North America
California
Bill proposes license requirement for bitcoin businesses
A bill introduced in the California legislature would prevent digital currency businesses from operating in the state unless they have been licensed by the Department of Business Oversight and received an exemption.
The bill comes from Assemblyman Matt Dababneh, chairman of the California Banking and Finance Committee. A spokesman for the assemblyman told CoinDesk, “This bill is something that has been in the works in the state for a couple of years, and as the leader of that committee, Matt dedicated himself on the issue and thought it was the right move to make for the state of California at this time.”
Licensing requires businesses to pay a non-refundable $5,000 for registration and also ask companies to hold a certain portion of their funds in “investment-grade permissible investments.”
Asia
Hong Kong
Official says legislation not needed for bitcoin regulation
Secretary for Financial Services & the Treasury Prof KC Chan said that because bitcoins are not widely used in Hong Kong, legislation that would ban or regulate virtual commodities from trading remains unnecessary.
In his statements, Chan reiterated that such currencies were speculative, and thus posed a risk to users. He also noted that his office would keep a watchful eye on digital currencies and said that, should the need arise, regulators could utilize existing laws to deal with issues of fraud or crime related to digital currencies.
Europe
U.K.
Report on digital currency regulation released
The U.K. Treasury Department released a report about digital currencies in March, which outlined current views on digital currency and noted potential regulatory actions. According to the report, “The government considers that digital currencies represent an interesting development in payments technology.” The report also goes on to say that such currencies could have advantages for micro-payments and cross-border transactions.
The document also relays plans to apply Anti-Money Laundering laws to digital currencies. The government would seek comment on the potential action, and its impact, later this year.
Isle of Man: Regulation for digital currency introduced
Starting on April 1, digital currencies operating in the Isle of Man will be subject to the country’s AML laws after the government amended the 2008 Proceeds of Crime Act to cover bitcoin companies.
According to CoinDesk, that means that those operating in the digital currency business will have to adopt certain know-your-customer (KYC) practices. This includes collecting ID information, which would be given to the authorities if money-laundering activity is suspected.
The country is also set to amend the Designated Businesses (Registration and Oversight) Bill 2014, which would subject digital currencies to required registration and oversight by the Isle of Man Financial Services Commission.
Around the Globe
FATF takes a pragmatic view on Bitcoin
The Financial Action Task Force has indicated that banks should take a risk-based approach when it comes to opening bank accounts for Bitcoin companies. The regulatory think tank has warned of the risk of virtual currency in the past.
The FATF has published a report that establishes a conceptual framework of key definitions to form the basis for further policy development.
Exploring and revising digital currency legislation were the key trends in February. A number of state and federal governments continued to do their due diligence with hopes of identifying the best way to regulate bitcoin usage and digital currency companies.
New York: Revised BitLicense Proposal
The New York Department of Financial Services (DFS) introduced its revised proposal for the BitLicense legislation.Several changes were made following the last round of comments on the previous iteration of the proposed legislation, including but not limited to the following: Companies that use digital currencies for non-financial purposes, such as miners and technology firms, will no longer be required to register for a license. The two-year conditional BitLicenses that will be available to startups and small businesses will now be eligible for renewal if a company continues to meet the operating criteria. The proposal also includes a requirement that firms report suspicious transactions to the DFS.
Changing Requirements: The requirements that licensees report addresses and other data from all transactions have been removed. These firms will only be require to record information from their own customers. The licensees must also disclose the risks of digital currencies to their customers.
New Jersey: Exploring Regulation
Earlier this month, New Jersey lawmakers held a panel on bitcoin with nine business owners and legal experts to discuss the potential approaches to regulating digital currencies. Legislators asked the panel, which included itBit CEO Charles Cascarilla, about the advantages and risks of bitcoin and about how other states have approached the technology thus far. Marco Santori, global policy counsel for Blockchain.Info, outlined the main approaches that other states have taken in digital currency regulatory guidance and suggested a new approach for New Jersey, one that considers new legislation that would incentivize digital currency businesses to base themselves in the state, balanced with assurances that these businesses will be monitored in how they manage money.
Clarity Above All:
Regulatory clarity seemed to be important to all panel members. Coin Center’s Jerry Brito, for instance, strongly urged clarification in how existing regulations apply to bitcoin, as well as encouraging an eye toward innovation in future legislation.
Vermont: Shuts Down Lone Bitcoin ATM
Vermont Department of Financial Regulation Commissioner Susan Donegan spoke with CoinDesk following the controversial decision this month to shut down Vermont’s only operating bitcoin ATM. Donegan claimed the issue was that the company operating the machine was not licensed in Vermont. Title 8, Chapter 79 of the Vermont Statutes, which deals with money services, references “monetary value evidenced by digital record,” which the state believes applies to bitcoin and other digital currencies. Donegan believes bitcoin falls under the definition of monetary value, even if it is neither currency nor money.
Face-To-Face Contact:
Under the existing legislation, digital currency businesses must meet with the state to discuss their business plan before getting licensed.
Canada: New Digital Currency Regulations in Quebec
Québec has enacted new regulations governing digital currency in the province. As of this month, any business operating either a bitcoin ATM machine or a platform by which digital currency is traded must obtain a license issued by the Autorité des Marchés Financiers (the “AMF”).
Existing Regulations Evolving: The AMF has modified the policy statement of its previously existing Money-Services Businesses Act of 2012, which regulates people and entities who operate any money-services businesses in Québec.
Spain: Proposal for Bitcoin Regulation
Unión Progreso y Democracia, a social liberal political party in Spain, submitted a proposal for bitcoin legislation to the Spanish Congress in January. The submittal outlined the risks inherent in digital currencies and outlined the importance the party believes regulation will have upon improving security and preventing fraudulent and criminal activity.
Slow But Steady Progress: The Spanish government had ruled back in September 2014 that bitcoin and other digital currencies should be treated as electronic payment systems.
Italy: Bitcoin Intermediaries Asked to be Cautious
The Financial Intelligence Unit (FIU) of Italy’s Central Bank issued a public statement on February 2, stating that since those dealing with and in digital currencies are not subject to money laundering legislation in the country, those intermediaries dealing with bitcoin and other digital currencies should exercise prudence and evaluate such transactions carefully, reporting any suspicious transactions to the FIU whenever possible.
High Levels of Responsibility:
The FIU stressed that it is the responsibility of those required to report suspicious transactions to raise awareness among those staff members responsible for the evaluation of suspicious transactions, and to develop appropriate means of evaluation.
Isle of Man: Law Amended to Address Digital Currencies
Brian Donegan, the Isle of Man’s head of operations for digital development and e-business, told CoinDesk that the 2008 Proceeds of Crime Act is in the process of being amended to address bitcoin and other digital currencies. The proposal will be put in front of the island’s parliament for approval at some point later this year.
Hurry Up and Wait: It was first reported back in July 2014 that the Isle of Man government was in the process of attempting to address concerns with the effects of digital currencies on existing regulations. It appears the island is now close to achieving some semblance of regulation in this area.
North America
New York: Revised BitLicense Proposal
The New York Department of Financial Services (DFS) introduced its revised proposal for the BitLicense legislation.Several changes were made following the last round of comments on the previous iteration of the proposed legislation, including but not limited to the following: Companies that use digital currencies for non-financial purposes, such as miners and technology firms, will no longer be required to register for a license. The two-year conditional BitLicenses that will be available to startups and small businesses will now be eligible for renewal if a company continues to meet the operating criteria. The proposal also includes a requirement that firms report suspicious transactions to the DFS.
Changing Requirements: The requirements that licensees report addresses and other data from all transactions have been removed. These firms will only be require to record information from their own customers. The licensees must also disclose the risks of digital currencies to their customers.
New Jersey: Exploring Regulation
Earlier this month, New Jersey lawmakers held a panel on bitcoin with nine business owners and legal experts to discuss the potential approaches to regulating digital currencies. Legislators asked the panel, which included itBit CEO Charles Cascarilla, about the advantages and risks of bitcoin and about how other states have approached the technology thus far. Marco Santori, global policy counsel for Blockchain.Info, outlined the main approaches that other states have taken in digital currency regulatory guidance and suggested a new approach for New Jersey, one that considers new legislation that would incentivize digital currency businesses to base themselves in the state, balanced with assurances that these businesses will be monitored in how they manage money.
Clarity Above All:
Regulatory clarity seemed to be important to all panel members. Coin Center’s Jerry Brito, for instance, strongly urged clarification in how existing regulations apply to bitcoin, as well as encouraging an eye toward innovation in future legislation.
Vermont: Shuts Down Lone Bitcoin ATM
Vermont Department of Financial Regulation Commissioner Susan Donegan spoke with CoinDesk following the controversial decision this month to shut down Vermont’s only operating bitcoin ATM. Donegan claimed the issue was that the company operating the machine was not licensed in Vermont. Title 8, Chapter 79 of the Vermont Statutes, which deals with money services, references “monetary value evidenced by digital record,” which the state believes applies to bitcoin and other digital currencies. Donegan believes bitcoin falls under the definition of monetary value, even if it is neither currency nor money.
Face-To-Face Contact:
Under the existing legislation, digital currency businesses must meet with the state to discuss their business plan before getting licensed.
Canada: New Digital Currency Regulations in Quebec
Québec has enacted new regulations governing digital currency in the province. As of this month, any business operating either a bitcoin ATM machine or a platform by which digital currency is traded must obtain a license issued by the Autorité des Marchés Financiers (the “AMF”).
Existing Regulations Evolving: The AMF has modified the policy statement of its previously existing Money-Services Businesses Act of 2012, which regulates people and entities who operate any money-services businesses in Québec.
Europe
Spain: Proposal for Bitcoin Regulation
Unión Progreso y Democracia, a social liberal political party in Spain, submitted a proposal for bitcoin legislation to the Spanish Congress in January. The submittal outlined the risks inherent in digital currencies and outlined the importance the party believes regulation will have upon improving security and preventing fraudulent and criminal activity.
Slow But Steady Progress: The Spanish government had ruled back in September 2014 that bitcoin and other digital currencies should be treated as electronic payment systems.
Italy: Bitcoin Intermediaries Asked to be Cautious
The Financial Intelligence Unit (FIU) of Italy’s Central Bank issued a public statement on February 2, stating that since those dealing with and in digital currencies are not subject to money laundering legislation in the country, those intermediaries dealing with bitcoin and other digital currencies should exercise prudence and evaluate such transactions carefully, reporting any suspicious transactions to the FIU whenever possible.
High Levels of Responsibility:
The FIU stressed that it is the responsibility of those required to report suspicious transactions to raise awareness among those staff members responsible for the evaluation of suspicious transactions, and to develop appropriate means of evaluation.
Isle of Man: Law Amended to Address Digital Currencies
Brian Donegan, the Isle of Man’s head of operations for digital development and e-business, told CoinDesk that the 2008 Proceeds of Crime Act is in the process of being amended to address bitcoin and other digital currencies. The proposal will be put in front of the island’s parliament for approval at some point later this year.
Hurry Up and Wait: It was first reported back in July 2014 that the Isle of Man government was in the process of attempting to address concerns with the effects of digital currencies on existing regulations. It appears the island is now close to achieving some semblance of regulation in this area.
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