Fastest Crypto Exchange Launches, Zcash Founder, Fighting Fraud
Crypto euphoria is wearing off as skepticism around Facebook’s Libra project grows, but Mark Zuckerberg isn’t throwing in the towel. In the company’s earnings call Wednesday, the CEP said he will win over Libra regulators ‘however long it takes.’ Sean Keefe, Managing Partner, Straight Up Capital, came on Cheddar to discuss Facebook’s chances at pulling off a successful launch.
FATF’s New Crypto Surveillance System is Fake News
On August 9th, a story that seems to have originated on Japan-based news source Nikkei Asian Review spread across the crypto media. The story claimed that under the guidance of the Financial Action Task Force (FATF), 15 countries had teamed up to create a new system that would collect and share personal data.
The story was reported on a number of reputable crypto industry websites, including Finance Magnates. However, the story is, in fact, incorrect–there is no such task force being formed.
London Summit 2019 Launches the Latest Era in FX and Fintech
FATF Senior Policy Analyst Tom Neylan has confirmed in a call with Finance Magnates that “the [FATF] not developing any systems–and we wouldn’t take the data anyway,” Neylan confirmed–after all, FATF is not a law enforcement body, nor is it in the business of creating technological solutions; it merely “set standards and promotes their effective implementation.”
However, the FATF is “talking to and working with the private sector as they are developing systems, but it’s important that they are their systems and that they own them.”
In late June, the FATF released a new set of guidelines for the crypto currency industry requiring that many of the regulations that are applied to banks more “traditional” financial institutions also be applied to crypto currency exchanges.“[FATF’s] new standards require all crypto exchanges in all jurisdictions to know who their customers are.”
“The new standards require all crypto exchanges in all jurisdictions to know who their customers are–so they’ve got to do customer due diligence,” Neylan explained.They need to keep that information securely and privately so that it’s available to law enforcement authorities when it’s needed to investigate money laundering and terrorist financing.
Additionally, “they’ve got to be able to know who they’re doing business with in order to screen for sanctions–for example, against Al Qaeda or against North Korea.”“We’ve asked the crypto sector themselves–because they know their technology better than we do–to develop systems to make sure they can apply the Travel Rule.”
“These are the same requirements that already apply to banks and other financial institutions,” Neylan said. “So it’s not something new that we’re doing with the crypto sector–it’s the same sort of customer due diligence that is already applied by traditional financial institutions.”
One of FATF’s new requirements is the application of the travel rule to crypto currency exchanges. The travel rule requires financial institutions to pass on certain pieces of identifying information to the next financial institution that a transaction.
“We’ve asked the crypto sector themselves–because they know their technology better than we do–to develop systems to make sure they can apply the Travel Rule.”“This isn’t meant to breach everybody’s privacy. This is meant to ensure that criminals and terrorists can be identified once law enforcement are aware that they’re involved.”
Neylan said that reactions from the industry so far have been existed on a spectrum: “some of the industry are very resistant to regulation in general, and particularly the travel rule.”
“On the other end of the spectrum, there are a lot of the more developed exchanges, particularly from the countries that already regulate this sector, who are comfortable with being regulated and are already working on the design and the governance, the technical solutions to implement the travel rule.”
“They’re very concerned about data privacy–which, to be honest, we are as well,” he added. “This isn’t meant to breach everybody’s privacy. This is meant to ensure that criminals and terrorists can be identified once law enforcement are aware that they’re involved.”
Neylan said that the FATF is already “working with a couple of industry groups who are actively starting to develop [solutions].”
“We’re talking to the International Digital Asset Exchange Association (IDAXA), [as well as] a number of other groups and experts who are using FATF’s standards as a starting point for industry-led efforts to work out exactly how to implement this globally.”
However, “we’re not picking favorites,” Neylan added–no entity has been chosen as The Developer for a compliance solution. “This is about the industry collectively adopting one or more solutions…virtual asset service providers have got to be able to exchange information between each other in a way that protects data and privacy.”
“They’re the ones who need to protect their customers’ information, so they’re the ones that have to figure out a solution that they can all apply.”
Although it is unlikely that anyone sought to deliberately mislead anyone else in this instance, there are quite a few companies who may seek to opportunistically assert their products as the industry’s solution to FATF’s compliance demands. This kind of opportunism could potentially contribute to the spread of misinformation.
After all, when FATF announced its crypto currency industry guidelines in mid-June, the industry was abuzz with concerns over how cryptocurrency exchanges and other service providers could become compliant with them. After all, the new set of standards contained requirements that, while easy for banks to comply to, are very difficult–practically impossible–for crypto currency service providers.
As such, a number of individuals and organizations saw an opportunity: if they can manage to create a solution to FATF compliance that could be adopted by exchanges, serious money can be made.
So, there is quite a bit of interest in creating a compliance solution that could be quickly and easily adopted by major industry players–and while a number of organizations and individuals have begun developing these solutions, none has emerged as the clear leader.
Therefore, it could be in the interest of some of these opportunistic organizations to begin “priming the ears” of the industry for the announcement of a possible compliance solution, without naming themselves or anyone else directly–so, while ill-intent is unlikely, it certainly could be possible.
At press time, Nikkei had not responded to requests for commentary. Finance Magnates will update the story if commentary is provided.
New Zealand government to tax salaries paid in crypto
The New Zealand government has, after a dry internal debate, decided companies can pay salaries using crypto currency—so it can tax it. But, despite the state being all too happy to tax such payments, it steadfastly maintains that crypto isn’t money.
In a long and rambling document, Susan Price, the report’s author and director of public rulings at the Inland Revenue used the Oxford English Dictionary’s definition of “salary” as a justification for why crypto is taxable.
The document, quoting the dictionary, notes that a salary is generally composed of regular payments, in money, at a fixed rate, in exchange for work done, before going further. “Where an employee has agreed to receive part of their regular remuneration in the form of crypto-assets, most of these requirements would be met,” the document states.
It concludes that cryptocurrencies when used as regular payments in exchange for work, function like money does. And yet, even though it treats it as money, and taxes it as money, the New Zealand government says it’s something completely different. Instead, it views it as property.
“Crypto-assets are not “money” as commonly understood (at least not at the present time). In particular, because crypto-assets are not issued by any government, they are not legal tender anywhere,” the report adds.
This touches upon a bigger idea swirling around digital money: If everyone were to adopt the use of crypto currencies, then governments wouldn’t have as much control over their economies—such as printing money to help control inflation, or not. Despite this, the New Zealand government is willing to not look this particular gift horse in the mouth.