Cryptocurrency Exchange and Payment Solutions Continue to Expand
By: Nicholas C. Mowbray
This week, Blockchain.com, a London-based supplier of digital wallets, announced that it is moving into the trading side of cryptocurrencies with a London-based exchange. The exchange will offer Bitcoin, Ether, Bitcoin Cash, Tether Litecoin and Paxos Standard (PAX), with customers being able to deposit funds immediately and trading to begin shortly thereafter. This week Bittrex announced that it is partnering with a Bahrain-based cryptocurrency exchange and custodian to launch a digital asset trading platform for customers in the Middle East and North Africa. The platform will offer all tokens that are currently available on Bittrex, including four bitcoin trading pairs with local fiat currencies.
This week Prime Trust, a crypto custodian and trust company, issued a press release announcing new features that reportedly allow its account holders to “instantly transfer any crypto asset with other account holders in real time.” Another announcement this week provided details on a partnership between bitcoin rewards company Lolli and a major U.S. grocery store chain. The partnership will allow users of the rewards company to receive fractional amounts of bitcoin for all online purchases the users make with the grocery chain. It marks the first major collaboration between a major grocery chain and a bitcoin rewards company in the United States. A final development on cryptocurrency payments comes from Brazil, where the city of Fortaleza is reportedly exploring an option to allow bitcoin payments on its public transportation network.
In the traditional financial services sector, this week one of the world’s largest money transfer platforms announced a two-year partnership with a well-known blockchain technology payments and remittance firm. The partnership will reportedly include cross-border payments and foreign exchange settlements via digital assets, with the goal of providing increased liquidity and settlement. In related news, an international bank this week announced the launch of a payment-focused stablecoin pegged to the Philippine peso. The stablecoin is intended to provide transparency and automate payment executions by resolving reconciliation issues and easing audit and compliance issues.
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New UK Guidance Published, Licenses Received by Cryptocurrency Firms Across Globe
By: Robert A. Musiala Jr.
This week the UK Financial Conduct Authority published its Guidance on Cryptoassets Feedback and Final Guidance to CP 19/3, which “aims to give market participants and interested stakeholders clarity on the types of cryptoassets that fall within the FCA’s regulatory remit and the resulting obligations.” This “Final Guidance” defines three key categories of cryptoassets: “exchange tokens” for buying and selling goods and services; “utility tokens” for accessing a product or service; and “security tokens,” which provide rights and obligations akin to specified investments. Elsewhere in Europe, beginning Jan. 1, 2020, German cryptocurrency-related businesses such as exchanges and wallet providers will be required to be licensed by the German Federal Financial Supervisory Authority (BaFin) and comply with AML regulations.
In Switzerland this week, Aximetria, which offers a personal finance app for cryptocurrencies, was reportedly awarded a license from the Swiss Financial Services Standards Association (VQF), which allows the firm to start operations as a crypto financial intermediary under the Swiss Anti-Money Laundering Act. In another report from Switzerland, Zug-based startup Smart Valor has announced a new exchange operating from both Switzerland and Liechtenstein that will provide custody, trading and brokerage services.
In Gibraltar this week, Quedex announced that it was granted a Distributed Ledger Technology (DLT) Providers license for trading of cryptocurrency derivatives and for custody of cryptocurrencies by the Gibraltar Financial Services Commission. According to reports, this makes Quedex “the first regulated entity of its kind globally.” In Bermuda this week, XBTO International (XBTOI) became the third firm to receive a Bermuda Monetary Authority License under Bermuda’s 2018 Digital Asset Business Act.
Finally, in the U.S., a press release this week announced that startup ALTA has been accepted into the Arizona Attorney General’s Office FinTech program. According to the press release, ALTA is seeking to launch a service that would allow cash-intensive businesses “to pay each other for goods and services using a proprietary blockchain-based, U.S. dollar-backed stablecoin digital asset instead of cash.”
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Cryptocurrency Enforcement Actions Continue From IRS and DOJ
By: Joanna F. Wasick
The IRS is prioritizing tax compliance for cryptocurrency investors. According to reports, last week the agency began sending letters to thousands of U.S. taxpayers warning of potential civil and criminal enforcement action if they do not amend their returns to accurately report any cryptocurrency-related income. “Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties,” IRS Commissioner Chuck Rettig said in a statement. He further emphasized that the IRS is increasing its use of data analytics to expand its efforts involving this space.
Late last month in California, BTC-e, a now-defunct cryptocurrency exchange, and Alexander Vinnick, a Russian national and BTC-e senior executive, were indicted for money laundering, operating an unlicensed exchange and unlawful money services business, and other related charges. BTC-e reportedly touted itself as an anonymous way to trade cryptocurrency and, over its six years in operation, reportedly served 7,000,000 users who traded over $296 million worth of assets. The government charges that a significant amount of those assets were proceeds from illegal activity. The defendants face penalties of over $100 million. Vinnick is currently detained in Greece, with both the U.S. and Russia seeking his extradition.
The U.S. Attorney’s Office of the Southern District of New York recently announced charges against Jon Barry Thompson, the principal of the cryptocurrency escrow company Volantis Escrow Platform LLC (Volantis). According to the government, Thompson induced investors to transfer millions of dollars to Volantis for further investment into cryptocurrencies. However, Thompson allegedly stole the funds instead of investing them. He faces up to 60 years in prison. Also in New York, Lawrence Ross was arrested for charges related to the importation, manufacture and distribution of over 10 kilograms of ecstasy and over 45 grams of methamphetamine. According to the government, Ross sold the drugs through the Dark Web and Wickr (an instant messenger application), distributed them through the U.S. mail, and accepted bitcoin as payment.
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