By Hilger von Livonius and Philipp Riedl
The raising of funds for cryptocurrency projects (also called Initial Coin Offerings or ICOs) gain more and more market interest. Although there is no specific and coordinated regulatory framework applicable to ICOs, it is not something happening in a completely unregulated area.
By Michelle Chasser and Felix Charlesworth
On Thursday 17 August 2017, the Minister for Justice tabled the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 (Bill).
The Bill will extend the Australian AML regime to cover digital currency exchange providers. Currently the AML regime applies only to ‘e-currencies’ which are backed by physical things such as bullion or precious metals while digital currencies backed by a cryptographic algorithm such as Bitcoin are excluded. The Bill repeals the definition of ‘e-currency’ and replaces it with the broader term ‘digital currency’ which is defined as a digital representation of value that:
By Judith Rinearson and Rizwan Qayyum
On August 10, 2017, the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) jointly published a Consumer Advisory document which urged consumers to exercise due diligence before investing in digital tokens, with particular emphasis on the emergence of Initial Coin Offerings (ICOs). In Singapore, several ICOs have taken place in the past year and this has resulted in organisations raising millions of dollars in a few days since their launch.
An ICO is a crowdfunding method, facilitated by blockchain, through which a project or venture, usually a start-up organisation, raises funding by creating and selling its own digital asset, currency or token in exchange for digital currencies or assets of immediate value such as a Bitcoin. The practice is thus far unregulated and enables a new brand of alternative finance. An ICO campaign ‘runs’ for a defined period during which investors are able to support the project, with the aspiration that this digital asset becomes successful and their investment reaps profit.
By Jim Bulling and Michelle Chasser
Steps have been taken this year in Japan and Norway towards the integration of digital currencies such as Bitcoin into the mainstream financial sector. Japan has amended financial laws to include coverage of digital currencies as a type of ‘prepaid payment instrument’, and an online bank in Norway has announced plans to offer clients the ability to link their bank accounts with cryptocurrency accounts.
By Judith Rinearson and Eric A. Love
The U.S. GAO has issued a long-awaited report on the fintech industry, which focuses on the regulation of marketplace lenders, mobile payments, digital wealth management platforms and distributed ledger technology (“DLT” – often referred to as blockchain). For each of these fintech industry “subsectors,” the GAO report details the nature of the subsector and how it operates, as well as its potential benefits and risks. Moreover, the GAO report addresses industry trends, regulation and oversight for each subsector.
Marketplace lenders. The GAO report indicates that marketplace lenders may provide expanded and quick access to credit at lower cost than banks, although the report also notes risks related to loan term transparency and certain protections for small business borrowers. Read More
By Nicole C. Mueller and Clifford C. Histed
On March 17, 2017, a Manhattan federal jury convicted Trevon Gross, a pastor, and Yuri Lebedev, a software engineer, of bribery and of conspiring to operate bitcoin exchange Coin.mx as an unlawful money transmitting business. The jury also convicted Lebedev of fraud. Sentencing is scheduled for July 2017.
Lebedev and Coin.mx operator Anthony Murgio were charged in 2015. Coin.mx allegedly operated as a conduit for cybercrime-related funds, and in violation of state and federal money transmitting laws. Prosecutors argued to the jury that Murgio and Lebedev sought to trick the financial institutions through which Coin.mx processed transactions into believing its unlawful bitcoin exchange business was simply a members-only “collectibles club.” Part of the Coin.mx scheme included processing and profiting from bitcoin transactions conducted on behalf of victims of ransomware attacks by allowing the victims to buy bitcoins to pay ransom payments while generating revenue for Coin.mx. Murgio pleaded guilty before trial.
Tom Wallace and Tyler Kirk contributed an article to American Lawyer on the impact blockchain is having on companies around the world. The article discusses the potential business development opportunities and the ways companies can leverage the technology including what companies must do in order to capitalize on this emerging area.
To read the article, click here
Global Advisors (Jersey) Limited (“Global Advisors”), the investment manager of the Global Advisors Bitcoin Investment Fund PLC (“GABI”) announced on 19 December 2016 that the Channel Islands Securities Exchange (“CISE”) has approved the admission to listing of all of the redeemable participating no par value shares of the open ended fund. The CISE listing means that GABI becomes the first regulated bitcoin fund to be listed on any exchange globally.
GABI was launched in 2014 as the world’s first regulated bitcoin fund when it received certification as an Expert Fund from the Jersey Financial Services Commission. Its listing on the CISE means that it joins over 2,000 listed securities on the exchange comprising a market capitalisation of over £300 billion. It is the first digital asset-related listing on the exchange.
GABI is the third exchange listing for Global Advisors. The firm currently manages two Bitcoin Exchange Traded Certificates – COINXBT and COINXBE – on NASDAQ’s OMX in Stockholm. The firm is developing as a platform for digital assets combining digital asset management, direct market access and working with start-up firms developing distributed ledger technologies, including Glint, Gradbase and Aventus Systems.
On November 10, 2016, the French Government issued a decree against the financing of terrorism which contains various measures addressing anonymous electronic money [source in French]. This new regulatory measure applies to electronic money issuers as well as their distributors, credit institutions, finance companies, consumers, and to any person who physically transfers money from a certain amount.
In addition to reinforcing the powers of the Ministry of Economic and Financial Affairs agency against money-laundering (TRACFIN) -which will now have access to the wanted person files for the needs of criminal investigations-, the decree removed the duty of care of the financial intermediaries in the absence of any particular suspicion of money laundering and under strict conditions pertaining to electronic money:
By Jim Bulling and Michelle Chasser
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is encouraging FinTech businesses to make contact about Australia’s anti-money laundering and counter-terrorism financing regime (AML/CTF regime) and how it may affect their business. A dedicated online contact form has been established which allows enquiries to be made directly to the Policy and Guidance team.
Businesses which provide a ‘designated service’ are reporting entities which have obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. There are a number of designated services that a FinTech business may provide including making loans, issuing a stored value card, giving effect to remittance arrangements, issuing interests in a managed investment scheme and (in the capacity of an Australian financial services licensee) arranging for a person to receive a designated service.
Currently activities relating to digital currencies such as BitCoin are not designated services. However, in October 2016 the Attorney General’s Department released its draft project plan for the implementation of the recommendations from the statutory review of the AML/CTF regime. Under the project plan, legislative proposals to regulate digital currencies under the AML/CTF regime will be developed by the first half of 2017.
Copyright © 2025, K&L Gates LLP. All Rights Reserved.