Nasdaq Delves Deeper into Crypto to Tackle Market Manipulation

During the big crypto rush of late 2017 driving factors were primarily based on fomo and speculation. The following year was a different story as the selloff gathered momentum and inexperienced traders ran for the hills. The serious players stayed in the game and they don’t come much bigger than Nasdaq which is now working with seven different crypto exchanges.
Volume Manipulation a Concern
Nasdaq’s proprietary surveillance technology is available to those that can foot the hefty bill for it but crypto exchanges need more than just money. Stories of trade volume and market cap manipulation in the industry have increased in recent months so the need for fraud free figures has never been greater.
According to Forbes Nasdaq has a team of around 20 people that work on due diligence processes for crypto exchanges ensuring that they adhere to strict reporting and security standards. Only seven crypto exchanges have passed this test and only two have been publicized; Gemini and SBI Virtual Currency.
Demand for the technology is increasing as more exchanges open up and join the competition for clients. To get the upper hand they need reliable volume figures and Nasdaq has become the standard for providing them. Nasdaq’s head of exchange and regulator surveillance team, Tony Sio, shared some insights with the media yesterday on how the company on boards new exchanges.
“Historically, we don’t do such a large vetting process for our clients because they are much more well-known. But as we started working with less well-known names, startups, then we realized we needed to do this check process,” he said.
The selection process is broken into three categories; Business Model, KYC/AML, and Exchange Governance & Controls. The first of which is concerned with the reputability of tokens available for trade on the exchange. Nasdaq is concerned about who is using crypto and how it is being used.
The KYC/AML part is also concerned with the organizational structure and owner’s background in terms of technical and financial market knowledge. Nasdaq is carrying out its own KYC procedures on the exchanges and is only willing to work with proven entities. The third criterion involves the crypto token listing process and how clear it has been made. Some exchanges are rather vague when it comes to new listings, others such as Coinbase publicly post their processes.
Using Nasdaq’s SMARTS surveillance system will be a huge plus for any crypto exchange in an increasingly crowded market place. The company is also heavily invested in a number of crypto startups and believes in the future of the asset class;
“The objective that we’re trying to work with crypto, is we see this as a growing asset class. So we’re working to help provide our technology, it could be around matching, it could be around surveillance, to help our customers as they grow their marketplaces,” added Sio.
The interest and involvement from financial heavyweights is a testament to the longevity of an industry that has only just begun.
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Source: New

Coinbase and PayPal – A Match Made in Crypto Heaven?

Crypto exchange giant Coinbase usually blows its own trumpet when a new option is available on its trading platform. This has not been the case however with the recent addition of PayPal as an option to withdraw fiat for a small number of its customers.
There has been no official announcement however the company FAQ page has been updated with the following notice:
“Beginning in November, Coinbase will add the ability for customers to link their PayPal and Coinbase accounts. Depending on country of residence, customers can either withdraw cash to PayPal or sell their crypto to their PayPal account.”
Currently the countries of residence are reportedly limited to the US, UK, EU and Canada but at the time of writing the PayPal option was not available via the UK portal when we tried to link an account as confirmed by the Coinbase support chatbot.

The announcement goes on to state;
“Currently, customers are only able to use PayPal to withdraw or sell, and transaction availability depends on region. Coinbase does not support the ability to purchase digital currency using your PayPal account.” It also states that all of the regular KYC requirements must be satisfied before the PayPal option is made available.
Varying reports are filtering down the Coinbase Reddit stream from users that have tried withdrawing to PayPal. Some are claiming it takes 13 days to transfer out, others stating that it doesn’t work for Canadians yet, and our own experience of failure from the UK portal indicates that there is probably a reason Coinbase has kept this quiet.
PayPal’s Excessive Fees Are Another Case For Crypto
Whether the option is available or not, PayPal is hardly a bastion of decentralized finance. It does not adhere to any global banking regulations and can freeze or close accounts at its whim – which appears to be the source of the highest number of complaints from its users.
In addition to the vice-like grip of control over it maintains over customer finances and accounts, PayPal has some of the highest foreign exchange fees in the industry. Converting currencies can cost as much as 5% if you do it via PayPal. That is a cost of $50 to send $1000 if converting to or from another currency. This is evidently how the company has made over $13 billion profit in 2017.
In addition to excessive forex fees, and waiting times of up to a week for bank withdrawals, PayPal is constantly increasing its base fees which are often much higher than high street banks. This will eventually send users to crypto where transfers are virtually instant and cost a fraction.
PayPal is the antichrist when it comes to cryptocurrencies and the entire model of decentralized peer-to-peer finance. Coinbase also gets its fair share of complaints about higher than industry average fees, and rather zealous account controls. In this scenario it appears to be modeling itself as the PayPal of the crypto world.
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Source: New

Brazil Tax Authority Orders Crypto Exchanges to Provide Monthly Reports

Brazil’s tax regulator, the Department of Federal Revenue, is requiring local cryptocurrency exchanges to report their operations on a monthly basis in order to verify tax compliance and improve the country’s fight against money laundering and corruption.
Brazillian Cryptocurrency Exchanges to Report Monthly Trading Data to Authorities
Citing the examples of Australia and South Korea, the Brazillian authorities announced they will require monthly reports from local digital currency exchanges from now on.
The document points to a significant increase of cryptocurrency trading in Brazil. In 2017, the number of user accounts on crypto operators surpassed the number of user accounts registered on the Sao Paulo stock exchange.
Annual Bitcoin trading volume has jumped from 44.8 million BRL ($12.12 million at current rates) in 2014, to 113 million BRL ($30.57 million) in 2015. Volumes only got larger in 2016 (363.2 million BRL or $98 million at current rates) and 2017 (8.3 billion BRL, which is $2.25 billion at current rates).
It is important to note that the value of the country’s currency has fallen by approximately half throughout that period and the value of Bitcoin reached its all-time high in late December 2017, around the $20,000 area.
Daily trading volumes on Brazil’s largest digital currency exchanges, registered on July 10, 2018, also reveal a substantial cryptocurrency market. Mercado Bitcoin daily volume was of 3.1 million BRL ($840,000), with Foxbit reaching 1.2 million BRL, and Bitcointrade reporting 2.2 million BRL ($600,000). BrasiliEX and Bitcointoyou facilitated the trading of 790,000 and 974,000 BRL in one day, respectively, which is $213,000 and $263,000.
The document also points out that currency trading operations are subject to capital gains tax, at progressive rates based on the amount realized: 15% on an amount not exceeding BRL $5 million up to 22.5% on an amount that is at least BRL $30 million or more. Money laundering and corruption is a concern, especially now that Brazilians have just elected Jair Bolsonaro for President, a populist who pledges to end corruption.
“With the imposition of an ancillary obligation for exchanges to provide information on the purchase and sale of crypto assets, we seek to verify tax compliance, as well as to improve the fight against money laundering and corruption, and increase the perception of risk in taxpayers who intend to avoid taxes.
In Australia, exchanges are obliged to report users’ identities for anti-money laundering purposes and to fight the funding of terrorism. In South Korea, tax authorities have collected the equivalent to 24 percent of cryptocurrency exchanges’ revenues in tax. The regulator requires segregated accounts and KYC processes.
Brazil’s main regulatory authority, the CVM, has released a comprehensive document that offers guidance to fund managers looking at adding cryptocurrencies to their portfolios. The documents warn of illegal operations relating to money laundering, fraud, and price manipulation.
The regulator recommends fund managers to only use regulated cryptocurrency operators and independent auditors. The agency also published a circular providing guidance to help managers detect and avoid fraudulent digital assets.
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Source: New

Global Money Laundering Watchdog to Establish Crypto-Focused Guidelines by June

The global entity responsible for setting international money laundering guidelines is finally ready to lay the foundation for its first crypto-specific set of rules by June 2018.
FATF Readies Global Crypto Regulation on Money Laundering
Paris, France-based money laundering watchdog, Financial Action Task Force (FATF), has seen increasing pressure from global governments to unify regulation of the cryptocurrency industry under its wing. This is rather than continue down the path of allowing countries to define their own approach and create fragmentation across the market.
Now, according to Reuters, FATF is preparing to establish the first set of guiding principles for the emerging asset class, to be ready for June of next year.
“By June, we will issue additional instructions on the standards and how we expect them to be enforced,” explained Marshall Billingslea, FATF president Marshall Billingslea.
Billingslea, who also serves as the assistant secretary for terrorist financing in the U.S. Department of Treasury, added that participating countries will be heavily scrutinized for how they implement the regulatory guidelines set forth by FATF.
He suggested that any countries not adhering to the rules could see their access to the global financial market restricted, and be added to a FATF blacklist.
FATF will require cryptocurrency exchanges and crypto wallet firms across the globe to become licensed and regulated in an attempt to thwart attempts to launder money using cryptocurrencies like Bitcoin and Monero. Initial coin offerings (ICOs) will be subject to the same governing policies FATF sets forth.
Is Crypto Money Laundering the Risky Situation Regulators Think?
While concerns across the globe surrounding criminal efforts to launder money through cryptocurrencies are mounting, there are conflicting reports on how severe an issue cryptocurrency money laundering really is.
Data security company CipherTrade released a report in July expecting cryptocurrency money laundering to explode in 2018, reaching $1.5 billion in total – an amount over three times that of 2017’s money laundering total of $266 million.
Meanwhile, a recent report from the Wall Street Journal claims only $88 million in cryptocurrency had been laundered across 46 cryptocurrency exchanges, with the bulk of money laundering happening on ShapeShift. Erik Vorhees, ShapeShift’s CEO, refuted the claims.
Another report from Japan’s – a country riddled with crypto-related crime, mostly in the form of exchange hacks – National Police Agency, says only 669 cases of cryptocurrency-related money laundering were reported between December and April. This is compared to a staggering 347,000 reports from traditional banks dealing in fiat currencies.
Funding terrorist organizations is another chief concern of the money laundering watchdog. However, Yaya Fanusie, director of analysis for the Foundation for Defense of Democracies Center on Sanctions and Illicit Finance, told Congress last month that terrorist organization have repeatedly failed to raise funds via cryptocurrencies, negating any risk that these organizations were laundering a significant amount of digital assets.
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Source: New

Lawyer: ShapeShift’s Membership Move Follows “Threats” From Regulators

News came yesterday that the Bitcoin exchange ShapeShift are introducing a new membership initiative — implying that users will have to provide more personal data in order to use the platform’s services.
ShapeShift Announces Membership Program
According to the company’s Tweet, which also contained a link to a more expansive definition of the new terms:

“ShapeShift has big news for our users! We are now offering a new membership program, which will provide users with more benefits & better user experience.”

As of now the registration is optional, but in the future it will become obligatory. The company positions the new initiative as a sort of loyalty program that will offer users additional benefits like favorable exchange rates and rewards for FOX token transactions.
ShapeShift’s CEO Erik Voorhees admits that the compulsory registration is a painful but necessary measure, dictated by the unclear regulatory landscape:

“Yes, that last detail sucks. We would prefer if the collection of personal information were not a mandatory element. We still firmly believe that individuals, regardless of their race, religion, or nationality, deserve the right to financial privacy, just as they deserve the right to privacy in their thoughts, in their relationships, and in their communications. Such privacy is a foundational element of civil and just society and should be defended by all good people. We remain committed to that cause, and it is best served if we are smart about our approach.”

Response in Crypto Community
In response to this news, Washington D.C.-based lawyer Jake Chervinsky stated that the moves have in fact been fueled by yet unidentified regulators, saying ShapeShifts’s decision to start collection user’s personal information is in response to threats perceived by financial authorities, and that, “in short, this is how regulators silently invade crypto.”
He begins by pointing to the fact that Voorhees is “a true bitcoiner who speaks passionately about financial privacy & separating money from state.” And adds that enforcement agencies rely heavily on financial surveillance, saying that the concept of anonymous cryptocurrency exchanges and transactions is a “nightmare for regulators & investigators.”
One of his Tweet’s read:

“Our financial system is expressly designed to give the government maximum insight into our financial behavior. To that end, most financial institutions have to perform customer due diligence and share information with regulators. We call this “know your customer” (KYC).”

He followed up by saying:

“Now, I’m *not* saying that I think ShapeShift qualifies as a money services business or that it’s legally obligated to perform KYC. But, I *am* guessing that FinCEN (or another agency) has threatened ShapeShift with an enforcement action if it doesn’t start to comply.”

In the end, Chervinsky reiterates that the announcement is not a sign that Voorhees has “sold out,” but instead places blame on regulatory authorities, saying that “[the government’s] fingerprints are all over this decision.” As of yet, no government agencies have made any official statements regarding ShapeShift’s moves.
That, Chervinsky says, “is just how regulation works.” A few hours ago Voorhees tweeted;

To clarify, the Membership program and the FOX token are systems we wanted to build for our users. The imposition of mandatory KYC within that Membership program is not something we want to do, nor something any user wants. It's a heavy decision done to derisk under duress.
— Erik Voorhees (@ErikVoorhees) September 6, 2018

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Source: New

ShapeShift To Require Membership Amid Regulatory Concerns

ShapeShift is launching a new membership program that will become mandatory later this year, the company announced today on its website. The Switzerland-based cryptocurrency platform is ending its “exchange without accounts” policy that enables individuals to privately trade Bitcoins, Ethereum and other digital coins with anonymous counterparties located anywhere in the world.
But to alleviate privacy and know-your-customer (KYC) concerns from its users, the company positioned its new requirement as a “loyalty program” called ShapeShift Membership.
Continue reading ShapeShift To Require Membership Amid Regulatory Concerns at Crypto Daily™.
Source: Crypto Daily