Crypto Industry Update

The below is an update on the cryptocurrency and blockchain industry.

Banks State Risk of Disruption

JP Morgan wrote in their report released at the end of February: “Both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies such as cryptocurrencies, that require no intermediation”.

Bank of America made similar statements in their own SEC filing last week: "Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies."

Banks Turn to Blockchain

JPMorgans Blockchain Initiative; The Interbank Information Network — is now working, according to CFO Marianne Lake.  The platform, which is built on top of the bank's private Quorom blockchain, allows JPMorgan to exchange information with other banks to address compliance issues in certain cross-border payments.

Meanwhile, Barclays, UBS, and Credit Suisse are among the banks that participated in a pilot using Ethereum's blockchain to prepare for Markets in Financial Instruments Directive (MIFID II), a sweeping regulatory overhaul in Europe that went live this year.

Cayman Based Invictus Capital Announces New Offerings

The Cayman based Crypto20 team announced the launch of Invictus Capital on Thursday, which will offer two new funds to investors; The Invictus Kinetic fund & The Invictus Hyperion fund.

The Kinetic fund will utilize a variety of kinetic indicators to manage the portfolio with periodic rebalancing, whilst the Hyperion fund will focus on early-stage investments in blockchain technology.

Bermuda looks to regulate the Blockchain Market

Wayne Caines, the Minister of National Security, has announced that they will be working on the creation of ICO legislation.

Austria to use Gold as model for Crypto Regulation

Austria has joined the list of countries planning to regulate cryptocurrencies and will use as a model, existing rules for the trading of gold and derivatives.

"Cryptocurrencies are significantly gaining importance in the fight against money laundering and terrorism financing," Finance Minister Hartwig Loeger was quoted as saying.

The government will apply existing rules regarding market manipulation, insider trading and front-running, and organizers will be required to submit "digital prospectuses" to the country's Financial Market Authority (FMA).

Germany to treat Crypto as Legal Tender

Germany will regard bitcoin as the equivalent to legal tender for tax purposes when used as a means of payment.

Liechtenstein Bank Starts Selling Crypto

Bank Frick has made it possible to invest in the digital currencies Bitcoin, Bitcoin Cash, Ether, Ripple and Litecoin once a day via the Frick platform.

Cornerbank, Falcon, IG Bank, Leonteq, Swissquote and Vontobel already offer similar services in Switzerland.

AML/KYC Growth to Continue as Crypto Grows

The end of 2017 saw a surge of interest in crypto currencies, which left many of the crypto exchanges overwhelmed. With regulators showing growing interest in the space, Crypto companies are reacting by adopting checks and verification procedures that are commonly seen in regular financial institutions. Many of these companies are now reaching out to third party specialists to help scale the process of document verification. The growth of this market is not going unnoticed with smaller companies specialising in KYC/AML for the crypto space, forming to take up demand.

Pawel Kuskowski, a former senior RBS compliance banker, who set-up Coinfirm in 2016 told Business Insider: "Demand is huge, and it is increasing. And this demand isn’t just being pushed by smaller crypto and blockchain startups, but by huge, blue-chip multinationals who want to transact in crypto. This demand will become too big to ignore”.

Securrency is a combined FinTech/RegTech platform looking to capitalise on that demand. Offering a suite of tools, Securrency enables the instant transfer across all forms of value including, fiat currencies, exchange listed securities (stocks), digital currencies and tokens. Backing these services is RegTeX™, a software platform providing services including KYC/AML processes and reporting, validation of investor accreditation and eligibility to participate in offerings, securities reporting, and tax submissions.

As Cryptocurrencies push into the developing market, providing cross jurisdictional regulatory compliance at scale will continue to be problem. It seems likely that the market will see further innovation and disruption as these platforms begin to mature.

We are grateful for the contributions by Crypto consultant Nick Hoskins.

If you would like further information please contact: ​

Chris Humphries Managing Director Tel:(+1 345) 814 7911 chris.humphries@stuartslaw.com