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U.S. Justice Department Is Putting Together a “Comprehensive Strategy” for Cryptocurrency

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The U.S. Justice Department will take the lead on drafting up a “comprehensive strategy” for cryptocurrencies, according to Deputy Attorney General Rod Rosenstein. But the path forward won’t be easy as regulators play catch up to dark web criminals using cryptocurrencies to launder money.

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Comprehensive Strategy

Rosenstein expressed the DOJ’s position at the Financial Services Roundtable in Washington over the weekend, where the subject of cryptocurrency was brought up during the question-and-answer period.

Cryptocurrency “is a new challenge” because it does not “flow through the traditional financial system,” Rosenstein said. Magnifying the issue is the encryption techniques cryptocurrencies employ to obscure the origin of the funds. Depending on which coin you use, tracing where the money came from is extremely difficult.

“What we’re working on now with our cyber crime task force is a working on a comprehensive strategy to deal with that,” he added.

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The task force will be made up of representatives from several law enforcement agencies, including the FBI and Drug Enforcement Agency.

Although government agencies appear to be ramping up their fight against crypto-based cyber crime, Rosenstein urged banks to step up their anti-money laundering efforts.

Rosenstein, a 30-year veteran of the DOJ, also brought attention to the evolving threat of cyber crime, and urged consumers to use several types of identification when making purchases online.

Strategy Does Not Equal Regulation

It remains unclear whether this new strategy will lead to new market regulations in the future. Earlier this month, a top White House official indicated that the Trump administration was no closer to adopting a comprehensive plan for regulating digital currencies.

White House cyber security coordinator Rob Joyce said regulators must first wrap their heads around cryptocurrency before they decide to regulate it. In his view, this could be a long ways off.

“I think we’re still absolutely studying and understanding what the good ideas and bad ideas in that space are,” Joyce told CNBC at the Munch Security Conference in Germany. “So, I don’t think it’s close.”

U.S. commodity and securities regulators have a limited mandate to regulate cryptocurrencies. The Commodity Futures Trading Commission (CFTC) has investigative powers, but no jurisdiction over domestic exchanges, which operate at the state level. Meanwhile, the Securities and Exchange Commission (SEC) has taken special interest in ICOs, but has made no mention of overarching regulation for the digital currency class.

Criminals Favor Cryptocurrency

Criminals have been quick to embrace the enhanced privacy features offered by cryptocurrencies. According to a recent report, digital currencies such as Litecoin, Ethereum and even Dash are growing in prominence on the dark web. Although bitcoin remains the number one cryptocurrency embraced by cyber criminals, Litecoin has experienced a spike in popularity due to better transaction speeds.

So-called privacy coins offer even better masking techniques, with the likes of Zcash and Monero growing in popularity. Both currencies are said to offer more enhanced privacy and encryption features.

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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4.5 stars on average, based on 453 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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Regulation

SEC Chairman Again Declares ICOs to Be Securities as Thailand Champions New Crypto Laws

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The Chairman of the U.S. Securities and Exchange Commission (SEC) has once again stated that initial coin offerings (ICOs) are securities and should be regulated as such. The statement comes as Washington’s top securities regulator looks poised to expand its oversight of the token market even as issuers continue opting out of the U.S. jurisdiction.

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Clayton Chimes In, Again

Speaking at the Invest in America town hall meeting in Atlanta on Wednesday, Chairman Jay Clayton reminded token issuers of their obligations when offering securities.

“Blockchain technology has incredible promise for securities and other industries,” Clayton said, adding that the technology behind ICOs has clear “rules on how to conduct fundraising when you’re offering securities.

Much of what I have seen in the ICO or token or ICO space, is a security offering… I don’t know how much more clear I can be about it.”

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Clayton has described ICOs as securities on multiple occasions but has been careful not to equate them with scams. He has publicly acknowledged that not all token raises are used for elicit behavior but has warned investors against fake projects.

The SEC is using more taxpayer dollars to better govern the cryptocurrency market in general and ICOs in particular. Earlier this month, the regulator designated Valerie Szczepanik as the new crypto czar where she will support the Division of Corporate Finance on aspects related to digital assets and innovation.

SEC Thailand Unveils New Crypto Laws

However, the SEC’s efforts pale in comparison to Thailand’s Securities and Exchange Commission, which is taking a more active approach to screening fraudulent projects. In fact, SEC Thailand is preparing to expand the unit for ICO registration as well as coordinate with the office dedicated to initial public offerings. This includes hiring more employees to keep pace with demand.

Thailand recently unveiled new regulations targeting cryptocurrencies and ICOs. For ICOs, authorities have declared that fundraising projects must oversee their offerings for at least one year while maintaining a minimum base capital requirement of 5 million baht (roughly $155,000 U.S.).

The new decree also stated:

“Each ICO offering can be offered to institutional and ultra-high-net-worth investors at an unlimited investment amount, but the investment is capped at 300,000 baht for retail investment per person and per ICO project, or no more than 70 percent of total value of offered tokens.”

According to Bangkok Post, five new ICOs are expected to enter the market shortly with at least 45 more already registered.

Thailand’s proactive approach to ICOs and crypto regulation suggests more nations are going their own way instead of relying on U.S. lawmakers to break ground. Investors are still awaiting a clear blueprint from the U.S. SEC or Commodity Futures Trading Commission (CFTC) on how domestic markets will be governed.

ICO fundraisers have raised nearly $5.4 billion through the first six months of the year and are fast approaching last year’s $6 billion total. However, the total amount raised has slowed in five of the last six months, including a sharp decline in 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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4.5 stars on average, based on 453 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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Regulation

Reserve Bank of India Admits It Banned Cryptocurrency With No Guidance or Research

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Indian Government Blocks GitHub, Vimeo, and Others for Hosting ISIS Content

A new information request by a New Delhi lawyer has shed light on India’s decision to ban state-backed financial institutions from dealing with cryptocurrencies. The request, which was filed under India’s Right To Information (RTI) directive, revealed that central bankers were actually clueless in reaching their decision.

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No Research, No Problem

After spending the better part of four years warning investors about the dangers of cryptocurrencies, the Reserve Bank of India (RBI) in April directed lenders to shut down bank accounts of domestic exchanges and its users. What compelled the RBI to finally lower the boom?

Was the decision based on the findings of a research paper? No.

Did the RBI seek guidance from its global counterparts on cryptocurrency regulation? No.

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Was the conclusion formulated on the basis of recommendations put forward by a state-backed panel? No.

Those were the answers Varun Sethi received in an information request submitted to RBI officials back in April. The contents of the letter were shared with Quartz on Tuesday. The local lawyer told Quartz that the ban seemed “arbitrary,” having come into force “without any thought from the RBI.”

Curiously, the central bank chose not to answer Sethi’s question about how it reached its decision.

Although the ban was announced in April, the RBI gave lenders three months to sever ties with cryptocurrency exchanges. The decision has created a firestorm in India, with various exchanges appealing to the country’s top court for clarity.

Industry Response

Several Indian companies have challenged the ban on grounds that it is arbitrary and does not take their views into account. Attorneys representing the blockchain industry argue that any crackdown should be dealt with on a case-by-case basis rather than a sweeping ban. The contents of the Sethi’s information request likely strengthens their case.

A Supreme Court hearing is scheduled for July 20.

Even with the ban coming into effect, several crypto startups have announced plans to launch or expand exchange services in the country.

CoinDCX, which claims to be India’s largest crypto-to-crypto-exchange, continues to operate in the country. Meanwhile, Singapore-based Alluma is planning to enter the Indian market later this year. CoinRecoil, another entrant, plans to set up shop as early as August.

These and other digital currency providers are betting on a reversal of the ban following the Supreme Court showdown next month. According to India Times, a government-backed panel has voiced its opposition to the ban and may suggest tighter regulations instead of outright prohibition.

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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4.5 stars on average, based on 453 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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CFTC Widens Cryptocurrency Manipulation Probe, Demands Trading Data from Exchanges

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U.S. regulators have demanded that several cryptocurrency exchanges hand over trading data tied to an ongoing investigation into price manipulation, The Wall Street Journal has learned. The request, which was initiated by the Commodity Futures Trading Commission (CFTC), is part of a six-month probe into whether bitcoin futures contracts are distorting market prices.

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Investigation Widens

The price-manipulation probe was launched by CFTC regulators back in December shortly after CBOE and CME introduced the first-ever bitcoin futures contracts. According to WSJ sources, CME asked four exchanges to share trading data following the settlement of its January futures contract. The four exchanges were Bitstamp, Coinbase, itBit and Kraken.

Although the exchanges provided some data, they ultimately refused to grant comprehensive information to CME, which is supposed to monitor trading activity to ensure that individual trades do not skew futures prices. The data that was handed over to CME was limited to a few hours of activity instead of the initial request for a full day.

Frustrated by the dispute, the CFTC subpoenaed the exchanges for the data. It is not entirely clear where the situation stands. However, a spokesperson for CME told WSJ that “all participating exchanges are required to share information, including cooperation with inquiries and investigations.”

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Regulatory Spotlight

Cryptocurrency exchange Bitfinex is also facing scrutiny from the CFTC over alleged ties to Tether, the dollar-backed stablecoin that has been unable to prove the extent of its dollar-denominated assets.  Both companies share the same executives, which has prompted an investigation into price manipulation. (Basically, Tether has vastly increased the supply of USDT tokens without providing adequate proof that it holds the same amount of U.S. dollars. Some analysts have claimed that Bitfinex has facilitated this growth, and is largely responsible for bitcoin’s massive price growth since early 2017.)

The CFTC, which considers bitcoin to be a commodity, isn’t the only regulator flexing its investigative powers. The U.S. Securities and Exchange Commission (SEC) has subpoenaed over 80 cryptocurrency firms as part of an ongoing probe into digital assets.

The SEC recently appointed a crypto czar to oversee digital currencies and initial coin offerings (ICOs), a sign that the agency was planning to issue more comprehensive rulings on the subject. Chairman Jay Clayton has strongly implied that all ICOs are securities, which would put them under the purview of the SEC.

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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4.5 stars on average, based on 453 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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