Money Transmitter License Not Required for Crypto Businesses in Pennsylvania

Money Transmitter License Not Required for Crypto Businesses in Pennsylvania

Economy & Regulation On Wednesday, Jan. 23, the Pennsylvania Department of Banking and Securities (DoBS) published guidance for virtual currency businesses operating in the state. The state’s financial agency has decided a money transmission license for cryptocurrency operations is not required. Also Read: Former Mt Gox CEO Reflects on Incarceration in Japan While Facing More Prison Time Banking Department in Pennsylvania Declares Cryptocurrency Businesses Don’t Need a Money Transmitter License Banking officials from the state of Pennsylvania have revealed that cryptocurrency business operators are not required to apply for a money transmission license. The DoBS has issued a statement concerning the state’s Money Transmitter Act (MTA) and guidance for virtual currency businesses explaining that bitcoin and other digital assets are not considered legal tender in the U.S. In fact, the Pennsylvania guidelines emphasize that thus far, there is no state in the country that has “designated virtual currency as legal tender.” Furthermore, the DoBS explains that it has received “multiple inquiries from entities” who were looking for further guidance toward money transmission laws and setting up a cryptocurrency operation. “The DoBS will not be responding to these requests for guidance on a case-by-case basis, the DoBS is providing the following guidance on the applicability of the Money Transmission Business Licensing Law,” reads the banking department’s announcement. Cryptocurrency Kiosks, ATMs, and Vending Machines Don’t Need a License If the platform does not directly deal with handling fiat currency then a money transmission license is not needed. When a business operating in Pennsylvania solely transacts in virtual currency settlements then ultimately the platform is not engaged in the business of providing payment services or money transfer services. The DoBS also stated that operators of virtual currency kiosks, automated teller machines (ATMs), and vending machines have all attempted to contact the agency. “In both the one-way and two-way Kiosk systems, there is no transfer of money to any third party — The user of the Kiosk merely exchanges fiat currency for virtual currency and vice versa, and there is no money transmission,” the DoBS MTA guidelines explain. Thus, the entities operating the Kiosks would not be money transmitters under the MTA. Regulatory Inconsistencies Across Several States and the Federal Government Over the course of the past few years, U.S. officials…

ZB.Com User Accuses Crypto Exchange of Reporting Him to Police

ZB.Com User Accuses Crypto Exchange of Reporting Him to Police

A Chinese user of the cryptocurrency exchange ZB.com said that the exchange reported him to local police in a post on the 8btc forum, a major Chinese crypto community, on Jan. 21. In the post, which has been viewed over 12,000 times with 135 comments, the user claims that ZB.com froze his account containing a 400,000 yuan ($58,000) balance. The user surnamed Zhang said that the exchange called police after he earned money on the ZB.com platform. Zhang claimed that he tried to report the asset freeze to police, but was rebuffed when authorities said that no case could be filed, as he could not provide basic information like the exchange’s address. The account was reportedly frozen after Zhang violated part of the user agreement stating that:   “Users shall not maliciously interfere with the normal operation of crypto asset transaction, and shall not influence the normal operation of the platform and other customers’ activities on the platform by any technical means or other means.” Zhang reportedly realized that there are no pending orders with a bid ranging from 10–20 yuan ($1.47–$2.94) on the platform. Accordingly, if he posted buy orders offering over 10 yuan and posted sell orders higher than the buying price, buyers and sellers would always take his orders and he could keep the difference. He reportedly made frequent transactions with the PCC/ZT trading pair, earning about 700,000 ZT in two days, worth about 200,000 yuan (equivalent to nearly $30,000). On the day before his account was frozen, he sold 10,000 PCC. Earlier this month, ZB.com briefly overtook Binance and became the top cryptocurrency exchange on CoinMarketCap when it saw a daily trade volume of $606.7 million. Recently a report revealed that, despite an increase in the decentralized cryptocurrency exchanges, their centralized counterparts still control over 99 percent of the total crypto exchange volume.

Crypto Could Take 10+ Years to Regain 2017 High, But Then Will Be Mature: Cardano Founder

Crypto Could Take 10+ Years to Regain 2017 High, But Then Will Be Mature: Cardano Founder

Crypto markets might need more than a decade to regain 2017’s price highs, but the industry will a “dramatically different ecosystem at that point,” according to top altcoin Cardano’s (ADA) founder, Charles Hoskinson. The industry expert made his comments in an interview with Cointelegraph at the Crypto Finance Conference, Jan. 17. Hoskinson compared crypto’s major growth spurt in 2017 with Amazon’s performance during the dot-com bubble. The entrepreneur — who is also the co-founder of Ethereum (ETH) — noted that it took 11-12 years for the internet giant to recover its all-time highs at the peak of the bubble. He argued that by 2011-2012, the firm was a “very much more mature company, much more realistic company.” According to Hoskinson, crypto as an industry could experience a similar growth pattern. The expert argued:   “It might take 11 years for us [the crypto industry] to recover in fact where we were in 2017 but we will be a dramatically different ecosystem at that point. We’ll have millions, perhaps even billions of users will be in many consumer products the easy-to-use landmark.” Another key point for the evolution of cryptocurrencies is to attract institutional investors, Hoskinson said. Wall Street is constantly waiting for new assets to invest in, he claimed, and crypto developers have to present a reasonable roadmap to achieve greater adoption. Apart from money, the founder claimed that institutional investors will bring better regulated marketplaces to the crypto space, stating: “Institutional investors are pretty picky. They’re very intelligent investors, but then they also require an ecosystem of sophisticated trading strategies and tools […] They need derivatives, they need options, they need to get a short sell, and if our markets can get these things, what will happen is that you’ll no longer see this massive volatility.” Institutional adoption has been a major topic of discussion in the crypto sphere this past year. For instance, Mike Novogratz, an ex-Goldman Sachs partner and founder of crypto merchant bank Galaxy Digital, said in October that institutional demand will bring Bitcoin to new highs in Q1 or Q2 2019. Nonetheless, a recent study published by the Global Blockchain Business Council shows that the vast majority of senior business executives are not committed to crypto and blockchain in particular.…

‘Decentralized Airbnb’ Starts Charging Fees as ICO Model Falters

‘Decentralized Airbnb’ Starts Charging Fees as ICO Model Falters

Bee Token – a crypto startup seeking to create a decentralized home-sharing platform – has begun charging fees for some customers as part of a pivot meant to boost revenues. It’s a significant development for the company, which raised millions in an ICO as an alternative to Airbnb that could cut costs for users by reducing fees and eliminating ads from online services. But Bee found that users haven’t been moving to its site fast enough. Now, the company, founded by Uber alumni, is moving to a more traditional path to sustainability, according to an interview with co-founder and CEO Jonathan Chou. The company announced the closure of its ICO in early February 2018, raising 5,000 ETH (roughly $4.5 million as the sale closed). Of the total supply of 500 million BEE tokens, 213 million are in circulation. The coin had a market cap of around $11 million in April, but the total value currently sits at less than $500,000. Chou told CoinDesk in interview: “It’s definitely a pivot. The focus is to have a sustainable revenue model.” The company has also shed staff in recent months. While Bee Token employed 20 people in the early part of last year, it’s currently a team of just 10. Chou says most of the people who are now gone were employed making the token sale happen, though he added that three people have transitioned out due to the changing nature of the business. What had to change Bee Token set out to create a protocol for home-sharing, one in which the company’s work building the system would be repaid through the rising value of its token supply. But Airbnb, it turns out, has a very big advantage: instant brand recognition with consumers. The thinking at the time went like this: as more and more users of the platform purchased BEE in order to pay for stays in people’s homes, the more valuable the team’s compensation package would be. This token model was typical of companies conducting ICOs in 2017 and early 2018. Bee Token’s website promises zero commissions on bookings through the site. According to the Bee Token white paper, centralized services charge anywhere from 3 to 15 percent commission, depending on various factors. The theory was that by…

A16z-backed Startup Anchor Labs Launches Crypto Custodial Service

A16z-backed Startup Anchor Labs Launches Crypto Custodial Service

A crypto startup has launched a custodial service for institutions that it claims is more secure than cold storage yet offers easier access to assets. Anchor Labs, which previously raised $17 million in a series A round backed by Andreessen Horowitz, Max Levchin, Khosla Ventures, Blackrock’s Mark McCombe, Elad Gil and AngelList co-founder Naval Ravikant, announced the launch of Anchorage, a digital asset custodian, on Wednesday. Anchorage says it can deliver “all the benefits of asset accessibility,” which include capturing the yield from staking a cryptocurrency, voting, confirming proof of existence and faster transactions. The company was co-founded by Diogo Mónica and Nathan McCauley, who previously worked on Square’s encrypted credit card reader and ran Docker’s security team. “Until now, investors have been constrained by the limitations of ‘cold storage’ custody, which is vulnerable to human error (or worse), and holds assets inaccessibly so they are slow to move and can’t be used to capture yield, which can lead to depreciation due to dilution over time,” they wrote in a Medium post. Mónica and McCauley said in their blog post that there is institutional interest in the crypto space, but that any firms looking to store their assets have had to make a tradeoff “between security and asset productivity.” Indeed, this tradeoff has led several cold storage custodians, such as BitGo and Kingdom Trust, to form partnerships with liquidity providers in which trades can be executed quickly without the coins ever leaving the vault. However, it is not clear exactly how Anchorage intends to let clients have their cake and eat it too as specifics of the solution were not provided in the blog post. When contacted by CoinDesk, a spokeswoman for Anchor Labs said that while cold storage relies on people, “Anchorage is the only custodian to have solved digital asset custody by eliminating human points of failure,” but did not elaborate. She also said Anchorage clients “can move their assets within minutes of transaction approval.” Bringing in whales Explaining the origin of the idea, the Anchor Labs founders wrote that digital asset funds had come to them requesting assistance managing their private keys securely: “As we grew to understand the problem, we envisioned a solution based on the security principles we understood well: one that combines multi-person…

UK Financial Watchdog Plans Oversight of Security Tokens, Some Stablecoins

UK Financial Watchdog Plans Oversight of Security Tokens, Some Stablecoins

The U.K.’s Financial Conduct Authority (FCA) has set out proposed guidance for how crypto assets should be regulated in the country. In a consultation paper published Wednesday, the watchdog assigns the various crypto tokens into three categories and suggests whether these can be accommodated under existing rules overseen by the FCA – for example, as specified investments, financial instruments or e-money. Explaining the reasons for guidelines, the agency said that crypto assets carry risks for consumers and investors, and clarification of what is regulated and what is not would help firms wishing to operate compliant businesses based around crypto assets. In a statement, Christopher Woolard, the FCA’s executive director of strategy and competition, said: “This is a small but growing market and we want both industry and consumers to be clear what is regulated, and what isn’t. This is vital if consumers are to know what protections they’ll benefit from and in ensuring we have a market functioning as it should.” According to the draft paper, “exchange tokens,” such as bitcoin and litecoin, are not specified investments as they are currently not recognized as legal tender in the U.K. and are volatile compared to other investment avenues such as fiat currencies and commodities. Therefore, the buying and selling of these tokens do not fall under the FCA’s remit, the paper states. On the other hand, “security tokens” are classed as specified investments, since their definition meets the one set out in the Financial Services and Markets Act 2000 (Regulated Activities) Order. “These products are also capable of being financial instruments under MiFID II [Markets in Financial Instruments Directive II],” the FCA states. While “utility tokens” may meet the criteria of e-money in certain circumstances, these would not generally be regulated by the FCA. “As utility tokens do not typically exhibit features that would make them the same as securities, they won’t be captured in the regulatory regime, unless they meet the definition of e-money,” the watchdog says. Stablecoins, tokens pegged to a fiat currency like USD or GBPs, might meet the definition of e-money if “backed by certain assets (which may include Specified Investments), a basket of cryptoassets, or potentially through algorithms that maintain the supply of the token.” For security tokens, all the rules covering…

OTC Desks Proliferate as Volume Shifts From Spot Markets

OTC Desks Proliferate as Volume Shifts From Spot Markets

Markets and Prices While trading volume on the top cryptocurrency exchanges declined dramatically during the second half of 2018, all signs suggest that over-the-counter (OTC) markets are now attracting increasing liquidity, with a number of prominent cryptocurrency exchanges entering the OTC space. Additionally, several major existing OTC desks have recently spoken of experiencing significant growth in trade volume. Also Read: The Daily: Huobi Downsizes, New OTC Desk to Launch in US Major Exchanges Race to Launch OTC Trading Desks For traders seeking to execute large-sized positions, the OTC markets offer a number of possible advantages over spot markets including the elimination of slippage, greater privacy, and more liquid orderbooks. Since the start of the new year, a slew of cryptocurrency exchanges have sought to open OTC desks, suggesting significant demand for over-the-counter services. On Jan. 22, Coinbase announced new features and services for “high-volume customers in Asia and Europe” including access to Coinbase Custody and the exchange’s “recently launched OTC trading desk.” The news came approximately one week after Bittrex announced the launch of an OTC desk providing support for nearly 200 cryptocurrencies. During the previous week, Bitgo announced a partnership with Genesis Global Trading to provide institutional clients using the company’s custody service with access to real-time pricing for buy and sell orders, with trades to be settled on the same day. Australia’s Coinspot also announced the launch of an OTC service restricted to traders placing orders of more than AUD $50,000, while leaked documents from rival Australian exchange Lupo Toro show a surge in Russian OTC trading from December 2018 onwards. Other exchanges that have made moves within the OTC sector this month include Okex, which announced support for Thai baht and British pounds on its OTC platform, and Seed Cx, which launched spot cryptocurrency markets for “institutional” investors only. OTC Desks Report Surging Volume The plethora of companies now operating in the OTC markets are competing for what has recently shown to be a growing pool of trade activity. At the start of the month, Circle announced that its OTC trading desk had produced a notional volume of $24 billion during 2018. Cumberland, a DRW-owned cryptocurrency trading platform that launched in 2014, announced in early January that its OTC buy/sell ratio had increased by roughly…

Bitfury Launches Set of Tools to Drive Lightning Network Adoption

Bitfury Launches Set of Tools to Drive Lightning Network Adoption

Blockchain technology firm Bitfury Group has released a series of new tools for merchants and developers in a bid to drive wider adoption of the Lightning Network (LN). The launch was announced in a blog post from Bitfury’s LN engineering team, “Lightning Peach,” Jan. 23. Bitfury’s new LN-related offerings span an open source LN-enabled Bitcoin (BTC) wallet, a hardware LN payments terminal and e-commerce software for merchants, a host of developer tools, and a public LN node to facilitate users’ creation of LN payment channels. The Lightning Network is a second-layer solution to Bitcoin’s scalability limitations, which works by opening payment channels between users to keep the majority of transactions off-chain, turning to the underlying Blockchain only to record the net results. Valery Vavilov, CEO of Bitfury, has said the products’ release aims to enable everyday use of Bitcoin and encourage worldwide adoption of blockchain technology. In a summary of the new wallet’s functionality, dubbed “Peach,” Bitfury has clarified that the wallet will be able to handle both regular on-chain BTC transactions and LN payments. The wallet will reportedly also be able to create a channel using a user’s Lightning address ID and their counterpart’s host IP, create invoices and support recurring subscription payments between Peach users. “Peach Commerce,” as Bitfury names its merchant LN plugin, will reportedly enable individual retailers and payment processors to add support for LN payments into their existing infrastructure for e-commerce services — the latter via a web-based Peach API. The product will support BTC micropayments and allow for LN invoice management. Bitfury further claims its plugin can confirm payments “in seconds,” with scalability of up to thousands of transactions per second. Lastly, Bitfury is also launching a point-of-sale hardware terminal to allow for fast and secure LN payments, as well as a “Peach public node” — the latter aiming to make payment channel creation easier by allowing users to connect their individual nodes or wallets to the public node. As reported last month, the capacity of the Lightning Network has recently surpassed $2 million, despite the year-long bear market. As of Dec. 23, LN-supporting node channels were able to facilitate 496.8 BTC — worth about $2 million at the time. Bitfury, for its part, is continuing to branch out…

Bitcoin Wallet Xapo Leaves Hong Kong for Switzerland Due to ‘Opaque’ Regulations

Bitcoin Wallet Xapo Leaves Hong Kong for Switzerland Due to ‘Opaque’ Regulations

Major global Bitcoin (BTC) wallet Xapo will relocate key business operations from Hong Kong to Switzerland, according to Swiss news agency Swissinfo on Jan. 21. Speaking at the World Web Forum in Zurich, the wallet’s president Ted Rogers revealed that the main purpose of the move was the search for a better crypto regulatory environment. According to Xapo’s president, Hong Kong used to be thought of as “the holy grail of crypto regulations,” but that in fact the jurisdiction has “become more opaque.” Rogers argued that he always considered Switzerland “the right place” for blockchain and crypto-related projects to flourish, stating that Swiss regulators are “smart, interested and sophisticated in dealing with the financial markets.” According to the report, Xapo’s geographic transfer of operations will involve moving support for non-United States clients from Hong Kong to Switzerland, while cash accounts will reportedly operated from London. In November 2018, the Hong Kong’s Securities and Futures Commission published a statement with guidelines for funds dealing with cryptocurrencies. The new regulations received a critical response from some industry experts, who claimed that the guidelines might prevent new crypto businesses from entering the market. Meanwhile, another company has recently moved to Switzerland, reportedly also for a better regulatory situation. On Jan. 1, Bitcoin ATM supplier Lamassu relocated to Switzerland, citing regulatory difficulties in other countries.

Nasdaq Leads $20 Million Funding Round for Blockchain Startup Symbiont

Nasdaq Leads $20 Million Funding Round for Blockchain Startup Symbiont

Enterprise blockchain startup Symbiont has closed a $20 million Series-B funding round led by Nasdaq Ventures with participation from Galaxy Digital, Citi, Raptor Group and others. The firm, which has kept a fairly low profile the last two years as the cryptocurrency market’s gyrations overshadowed the enterprise sector, previously raised a combined $15.4 million from a seed round in 2014 and Series A in 2017. Symbiont CEO Mark Smith told CoinDesk that the firm doubled its staff last year, and now has more than 60 employees. “We have been very good stewards of capital for the six years we have been in business. I think we have done more with less than anybody out there,” Smith said. “So it was time for us to do a bigger round and adding the Nasdaq as an investor and partner, and Citi as an investor and partner, really solidifies our strategy.” As part of the investment, Nasdaq Financial Framework, a software company owned by the exchange, will integrate Symbiont’s Assembly smart contracts platform to explore new avenues involving tokenization. Smith, a veteran of the early days of financial market matching engines, explained there has been a big movement towards combining blockchain with traditional exchange technology. “Symbiont will give Nasdaq the ability to originate a financial instrument and the smart contract to custody it on a blockchain, to allow trading to occur with their matching engine, to allow surveillance to occur across the network using Nasdaq technology and then to perform settlement on a blockchain,” he said. To be clear, Symbiont is not working with the Nasdaq proper, just the software arm, which sells tech to other exchanges, clearing houses and central securities depositories in about 50 countries. As Smith put it: “We are infrastructure people: dirt under the fingernails, digging the ditches, laying the roads.” Win some, lose some Indeed, Symbiont has kept a firm focus on building capital markets infrastructure using a proprietary blockchain and smart contracts architecture. The startup has lasered in on a handful of carefully selected use cases and partners, such as index data management with investment giant Vanguard; making the mortgage market transparent and more efficient with Wall Street legend Lewis Ranieri; and optimizing the syndicated loans market with Ipreo’s Synaps platform. However,…