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U.S. derivatives regulator to review bitcoin futures risks

by UNTV News   |   Posted on Friday, January 5th, 2018

FILE PHOTO: A Bitcoin (virtual currency) coin is seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, June 23, 2017. REUTERS/Benoit Tessier/Illustration

WASHINGTON (Reuters) – The U.S. derivatives regulator will hold two meetings to discuss the procedure and operational controls for listing and trading digital currency futures, it said on Thursday, amid rising concerns over the risks bitcoin poses to the financial system.

The Commodity Futures Trading Commission (CFTC) said it would convene its technology and risk advisory committees this month to discuss its “self-certification” process for listing digital currency futures and how those products are risk-managed and policed.

The Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASSA) have issued new warnings to investors over the risks of investing in bitcoin, cautioning regulators may not be able to protect them from fraudsters.

CME Group Inc (CME.O) and CBOE Global Markets Inc (CBOE.O) launched bitcoin futures in December, sparking criticism from some industry participants who said the regulator should have consulted the market more widely before allowing the products.

In December, the Futures Industry Association wrote to the CFTC expressing concern about the risks potentially posed by allowing futures in volatile virtual currencies to be traded alongside more traditional financial products.

The price of bitcoin soared to record highs of more than $19,000 in December, only to slump more than 28 percent – although it still ended the year up 1,300 percent.

The CFTC has been increasing its jurisdiction over the cryptocurrency market, which has no overriding federal regulator, but is restricted by its limited legal power to actively block exchanges from launching futures products.

CFTC regulations allow designated exchanges to list products for trading without prior CFTC approval by filing a written self-certification with the regulator.

Under the self-certification process, which is a quirk of the futures market, the exchanges file a submission to the CFTC confirming the product complies with the Commodity Exchange Act and CFTC regulations – including a key provision that requires that the contract is not susceptible to manipulation.

The CFTC has the power to block the contract but can only do so under exceptional circumstances.

The pair of advisory committee meetings are aimed at giving stakeholders the opportunity to discuss the issue.

“The responsible regulatory response to virtual currencies is consumer education, asserting CFTC authority, surveilling trading in derivative and spot markets, prosecuting fraud, abuse, manipulation and false solicitation and active coordination with fellow regulators,” CFTC Chair Christopher Giancarlo said in the statement, adding the CFTC was following this course of action.

On Thursday, his counterpart at the SEC Jay Clayton along with Commissioners Kara Stein and Michael Piwowar, warned investors that many actors in the virtual currency market were violating state and federal laws.

“The SEC and state securities regulators are pursuing violations, but we again caution you that, if you lose money, there is a substantial risk that our efforts will not result in a recovery of your investment,” they said in the statement.

Reporting by Pete Schroeder; Editing by Jonathan Oatis and Susan Thomas

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Singapore explores rules to protect investors in cryptocurrencies

by UNTV News   |   Posted on Friday, March 2nd, 2018

Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 13, 2018. REUTERS/Dado Ruvic/Illustration

SINGAPORE (Reuters) – Singapore’s central bank is assessing whether additional regulations are required to protect investors in cryptocurrencies, an official said in a speech released on Thursday.

The city-state – which is aiming to be a hub for financial technology and so-called initial coin offerings in Asia – does not regulate virtual currencies and last year called for the public to exercise“extreme caution” over investment in cryptocurrencies.

Its central bank does regulate activities involving virtual currencies if they pose specific risks. For example, it imposes anti-money laundering requirements on intermediaries providing virtual currency services.

“We are assessing if additional regulations are required for investor protection,” Ong Chong Tee, deputy managing director (Financial Supervision), Monetary Authority of Singapore said.

Other countries such as South Korea, where trading in cryptocurrencies is more popular, are looking at ways to regulate that activity.

Reporting by Aradhana Aravindan and John Geddie; Editing by Kim Coghill

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Cryptocurrency traders to launch lawsuit against Coincheck on Thursday – lawyer

by UNTV News   |   Posted on Wednesday, February 14th, 2018

Cryptocurrency exchange Coincheck’s signboard is pictured in front of a building where their office is located in Tokyo, Japan February 2, 2018. REUTERS/Kim Kyung-Hoon

TOKYO (Reuters) – A group of cryptocurrency traders will file a lawsuit against Coincheck Inc on Thursday over last month’s theft of $530 million (£382 million) in digital money from the Tokyo-based exchange, a lawyer representing the claimants said.

The ten traders will file the claim at the Tokyo District Court over Coincheck’s freezing of cryptocurrency withdrawals, Hiromu Mochizuki, a lawyer representing the plaintiffs, told Reuters.

The traders will request that Coincheck allows them to withdraw cryptocurrencies to “wallets” – folders used for storing digital money – outside the exchange, Mochizuki said. The group may launch a second lawsuit at the end of the month to claim for damages over the heist, he added.

Coincheck representatives did not immediately respond to phone and emailed requests for comment.

The Coincheck incident highlighted the risks in trading an asset that policymakers are struggling to regulate, and has renewed the focus on Japan’s framework for overseeing these exchanges.

The Tokyo-based exchange, which froze all withdrawals of yen and digital currencies following the theft, resumed yen-withdrawals from Tuesday, according to posts on Twitter.

Coincheck said on Friday it would allow customers to withdraw yen after confirming the integrity of its system security. It added it would keep restrictions on cryptocurrency withdrawals until it could guarantee the secure resumption of its operations.

Coincheck is set to file on Tuesday a report with regulators on the heist, the safety of its systems, and measures it will take to prevent a repeat.

Reporting by Thomas WilsonEditing by Shri Navaratnam

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Gibraltar moves ahead with world’s first initial coin offering rules

by UNTV News   |   Posted on Monday, February 12th, 2018

FILE PHOTO: Cryptocurrencies are seen on a website that tracks the value of initial coin offerings (ICO) in this illustration photo taken September 5, 2017. REUTERS/Thomas White/Illustration/File Photo

LONDON (Reuters) – Gibraltar will introduce the world’s first regulations for initial coin offerings with dedicated rules for the cryptocurrency sector whose fast growth has triggered concern among central bankers.

They are worried about financial stability and protecting consumers but regulators have so far adopted a patchwork approach to ICOs, ranging from bans in China to applying existing securities rules in the United States.

This has created legal uncertainty for transactions that sometimes straddle many countries.

An ICO involves a company raising funds by offering investors tokens in return for their cash or cryptocurrency such as bitcoin, as opposed to obtaining shares in the company from a traditional offering.

Over $3.7 billion was raised through ICOs last year, up from less than 82 million euros in 2016, a leap that has rung alarm bells among central bankers as some firms rush to issue tokens before new rules are introduced.

Gibraltar’s government and Gibraltar Financial Services Commission (GFSC) said lawmakers will discuss a draft law in coming weeks to regulate the promotion, sale and distribution of tokens connected with the British overseas territory.

The GFSC said it would represent the first set of bespoke rules for tokens in the world.

“One of the key aspects of the token regulations is that we will be introducing the concept of regulating authorized sponsors who will be responsible for assuring compliance with disclosure and financial crime rules,” said Sian Jones, a senior adviser to the GFSC.

The regulation will establish disclosure rules that require adequate, accurate and balanced information to anyone buying tokens, the government and Financial Services Commission said in a joint statement.

Central bankers have lined up in recent weeks to call for cryptocurrencies and ICOs to be regulated, saying that while innovation in finance can bring benefits, consumers must be protected.

“Tokens could post substantial risks for investors and can be vulnerable to financial crime without appropriate measures,” the finance ministers and central bank governors of France and Germany said in a letter on Friday.

“In the longer run, potential risks in the field of financial stability may emerge as well,” said the letter calling on the Group of 20 economies (G20) to discuss cryptocurrencies at their next meeting.

Gibraltar’s move is being closely watched by regulators from across the world, including Britain and Singapore, who may come forward with their own rules.

Jay Clayton, head of the U.S. Securities and Exchange Commission, said on Tuesday that tokens are securities and subject to the same investor protection rules as share offerings.

French markets watchdog AMF published a discussion paper last October on ICOs, but it has not yet said if it will push ahead with rules.

Gibraltar is looking to boost its thriving financial services industry beyond gaming after Britain, along with Gibraltar, leave the European Union in 2019.

It blazed a trail in January by introducing the world’s first bespoke license for “fintech” firms using the blockchain distributed ledger technology that underpins ICOs.

“We remain fully committed to ensuring that we protect consumers and the reputation of our jurisdiction,” said Albert Isola, Gibraltar’s commerce minister.

Gibraltar is also reviewing its rules for investment funds that involve cryptocurrencies and tokens.

($1 = 0.8159 euros)

Editing by Anna Willard

 

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