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India Drafting New Cryptocurrency Regulations After Controversial (and Unfounded) Banking Ban

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An Indian sub-committee tasked with exploring cryptocurrency regulations has drafted a new bill that will be presented to lawmakers next month, one of the nation’s top economic advisers confirmed. The news is the latest positive sign that the world’s fastest growing economy will loosen the clamp on digital currencies after a controversial ban was announced earlier this year.

Draft Crypto Bill Finalized

Department of Economic Affairs secretary Subash Chandra Garg has confirmed that a draft cryptocurrency bill will be presented to government officials in the first week of July.

“We are fairly close to developing a template that we think is in the best interests of the country,” Garg told the nation’s largest financial media outlet in reference to new crypto regulations.

He added:

“We’ve actually moved quite a lot [in drafting regulations] in that, what part of the [cryptocurrency] business should be banned, what should be preserved and what not. That kind of detailed work has happened. Now should be in a position to wrap this up in the first fortnight of July.”

As Hacked previously reported, the Indian government has appointed a special panel to evaluate crypto regulations, including the RBI’s recent action. The group has already said it opposes the central bank’s edict preventing regulated financial institutions from serving digital currency exchanges and its users.

Curiously, the RBI has admitted that the blanket ban on digital currency activity was done arbitrarily. This was confirmed by an information request submitted under India’s Right to Information directive.

In that request, New Delhi lawyer Varun Sethi asked the RBI to provide rationale for its decision – namely, whether it conducted research, sought consultation or received recommendation for the banking ban. The central bank answered “no” to all three questions.

Crypto to the Supreme Court

Several Indian firms have challenged the central bank’s ban on grounds that it does not take their views into account. They’ve hired a slew of attorneys who are trying to convince the courts that a blanket ruling on digital currencies is not appropriate given the complexity and diversity of the marketplace.

A Supreme Court hearing on the matter was scheduled for July 20 but has since been expedited to July 3, according to one of the firms challenging the RBI’s edict.

It was previously reported that the High Court was not accepting further petitions against the RBI past the July 20 date. Shortly after the ruling was announced, the High Court of Delhi issued a notice to the central bank and other government agencies that the banking ban was unconstitutional.

India’s digital currency market has bet that trading will survive the central-bank ban, with investors and exchange operators using the three-month window to convert rupees into cryptocurrencies. At the time of writing, the new measures are scheduled to come into force next week after they were announced in early April.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 603 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Market News

Manipulation, Fraud and Abuse: New York Attorney General Issues Stern Warning Against Cryptocurrency Exchanges

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The New York State Attorney General’s office has ratcheted up its war of words against cryptocurrency exchanges, warning consumers of the myriad of risks they face in depositing money on these platforms.

Crypto Exchanges at Risk of Manipulation

In a lengthy report on the “Virtual Markets Integrity Initiative,”  New York’s Attorney General argues that online cryptocurrency exchanges are vulnerable to manipulation, fraud and other types of abuse. Consumers of these platforms therefore “face significant risks” from hackers and the exchange operators themselves, some of which have been known to exploit “deceptive and predatory practices, market manipulation, and insider abuses.

“[V]irtual asset trading platforms now in operation have not registered under state or federal securities or commodities laws,” the report says. “Nor have they implemented common standards for security, internal controls, market surveillance protocols, disclosures, or other investor and consumer protections. Accordingly, customers of virtual asset trading platforms face significant risks.”

The report, which examines ten cryptocurrency exchanges operating in the U.S. and internationally, concludes a six-month investigation that was initiated by New York Attorney General Eric T. Schneiderman. Back in April, Schneiderman sent letters to 13 exchanges requesting information on their operations and internal controls.

Several Exchanges in the Hot Seat

At least four cryptocurrency exchanges were outed by the Attorney General’s office as being most problematic and possibly operating illegally in the state of New York. Not coincidentally, these exchanges refused to participate in the Attorney General’s request for information.

The report reads:

“Customers should be aware that the platforms that refused to participate in the OAG’s Initiative (Binance, Gate.io, Huobi, and Kraken) may not disclose all order types offered to certain traders, some of which could preference those traders at the expense of others, and that the trading performance of other customers on those venues could be negatively affected as a result.”

According to Forbes, a representative from the Attorney General’s office has referred three of these exchanges – Binance, Gate.io and Kraken – to the New York State Department of Financial Services “for possibly operating unlawfully in New York.”

Kraken has been on the hot seat ever since the company’s CEO publicly denounced the Attorney General’s request for more information. In a series of tweets, CEO Jesse Powell called the request “insulting” and likened it to “abuse.”

He added: “The resource diversion for this production is massive. This is going to completely blow up our roadmap! Then I realized we made the wise decision to get the hell out of New York three years ago and that we can dodge this bullet.”

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 603 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Altcoins

Bitcoin, Ether and Ripple Up in the Air as SEC Delivers a Sobering Reminder

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The U.S Securities and Exchange Commission just delivered a sobering reminder to the crypto community regarding the legal status of Bitcoin and Ethereum. SEC Director of the Division Corporation Finance William Hinman originally told a San Francisco conference in June that:

“…based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”

SEC Clarifies Crypto Security Stance

Today the SEC Chairman Jay Clayton released this official statement in which he reminded everyone that media statements made by SEC personnel should not be taken as legal pronouncements. Clayton stated:

“The Commission’s longstanding position is that all staff statements are nonbinding and create no enforceable legal rights or obligations of the Commission or other parties.”

In a particular sentence that may have been included specifically to cool the enthusiasm generated from his colleague Hinman’s original statement, Clayton states:

“…our divisions and offices, including but not limited to the Division of Corporation Finance, the Division of Investment Management and the Division of Trading and Markets, have been and will continue to review whether prior staff statements and staff documents should be modified, rescinded or supplemented in light of market or other developments.”

The last part about ‘modifying, rescinding or supplementing’ future documents suggests that the SEC are starting to worry about the effects their own words have on the very market they’re attempting to regulate.

When the original statement by Hinman hit the headlines in June, Bitcoin immediately surged by around 6%. Ethereum benefitted even more from the news and spiked 10% within the space of an hour.

Consequences for Bitcoin, Ether and Alts

The reminder from the SEC is unlikely to affect the average bag-holder, who in all likelihood disregards much of what comes out of such traditional institutions as the SEC. The news is more likely to strike hesitation into the minds of large-scale, corporate investors who thought all of this uncertainty was already behind them.

It could also spell either good or bad news for Ripple, which is currently fighting five lawsuits – including two federal lawsuits – against claims that its token sale represents a security issuance.

Director Hinman’s original statement back in June suggested that decentralization was key to avoiding being classed as a security. He suggested that coins and tokens from centralized blockchains would have a harder time with the SEC:

“Over time, there may be other sufficiently decentralized networks and systems where regulating the tokens or coins that function on them as securities may not be required. And of course there will continue to be systems that rely on central actors whose efforts are a key to the success of the enterprise. In those cases, application of the securities laws protects the investors who purchase the tokens or coins.”

With XRP being the third largest capped coin in existence, its prominence has made it a prime target for those suspicious of the currency’s relationship to the Ripple company. As the lawsuits began to pile up, many began to question what Hinman’s words would mean for XRP.

Today’s clarification by Chairman Clayton could be seen as a reprieve for XRP, as it essentially shelves the decentralization issue for the time being. On the other hand, it could mean that even if XRP is proved to be wholly decentralized, it may have even larger requirements to fill before gaining a positive classification – as could the rest of the entire crypto market.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 58 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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U.S. Federal Judge Says Initial Coin Offerings Fall Under Securities Laws

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A U.S. federal judge has ruled that initial coin offerings (ICOs) may fall under securities laws, handing regulators a major victory in their efforts to rein in the multi-billion-dollar crowdfunding industry.

Landmark Decision

The decision, which was handed down Tuesday by U.S. District Judge Raymond Dearie in Brooklyn, came in a case against Maksim Zaslavskiy, a fraudulent ICO promoter accused of raising money for assets that never existed. According to Bloomberg, the businessman was charged with conspiracy and two counts of securities fraud related to two coin offerings purportedly backed by investments in real estate and diamonds.

Zaslavskiy’s lawyer argued that the coin offerings in question were currencies and not securities, placing them outside the jurisdiction of the U.S. Securities and Exchange Commission (SEC). The businessman also said that securities laws are not clear enough to apply to ICOs.

“Per the indictment, no diamonds or real estate, or any coins, tokens, or currency of any imaginable sort, ever existed — despite promises made to investors to the contrary,” Dearie said, as quoted by Bloomberg. “Simply labeling an investment opportunity as a ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract – a security – into a currency.”

While a jury will ultimately decide whether Zaslavskiy’s ICOs were securities, the indictment would support such a conclusion.

Zaslavskiy was charged in September 2017 for defrauding investors through several ICO scams, including REcoin, which was allegedly backed by real estate and diamonds.

SEC’s Jurisdiction

The ruling on Tuesday affirms the SEC’s long-standing position that coin offerings fall under federal securities laws. Previously, coin issuers had argued that there was a difference between “security” tokens and “utility” tokens.Under this classification, utility tokens fund the development of a project but are later used to purchase goods or services on the network. However, SEC Chairman Jay Clayton has repeatedly said he has not come across any coin offering that was not a security.

The agency uses the so-called Howey Test to determine whether an asset should be classified as a security. Using this as a baseline, an ICO is a security if it is an investment in money; invests in a common enterprise; expects to earn a profit; and whose profit is generated from the effort of others.

As a security, an ICO would have to satisfy provisions set forth by the SEC Investment Company Act of 1940 in order to raise funds. This means only accredited investors are eligible. What’s more, securities can only trade on regulated exchanges. To avoid getting bogged down by the SEC, many ICO projects have barred U.S. investors from participating in their crowdsale.

Roughly $7 billion has been raised this year by ICOs but funding has slowed considerably in recent months. The crowdfunding method raised in excess of $6 billion in all of 2017.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 603 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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