Tezos Co-Founder Kathleen Breitman: Platform Will Soon Be Launched

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Kathleen Breitman, the co-founder of the self-governing Blockchain protocol Tezos[1], has promised to “go rogue” and launch the platform in several weeks, despite ongoing lawsuits plaguing the project. The announcement took place during the UCLA Blockchain Lab’s Cyber Days conference[2] Feb. 17-18.

Tezos raised a record-breaking $232 mln[3] during its Initial Coin Offering[4] (ICO) in July 2017. The project has since been a subject of scrutiny and multiple lawsuits[5] over the question of its compliance with the U.S. Securities and Exchange Commission[6] (SEC) regulations, among other things.

It is alleged that the tokens sold to US investors during Tezos’ ICO were actually securities. Since the company has not registered them with the SEC, this would constitute securities fraud.

However, at a UCLA conference which took place last weekend, Kathleen Breitman promised to “[go] rogue in the next few weeks” and release the “tezzies” tokens (XTZ) on their own terms, despite legal troubles. “Things needed to move forward. It’s unfair, but we need to ship the code,” Breitman added.

Notably, Tezos is managed separately[7], with Kathleen Breitman and her husband and co-founder Arthur Breitman controlling the project’s source code, and the Tezos Foundation controlling all the funds collected during the ICO.

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Singapore’s Government Blockchain Experiment Is a Road to Regulatory Understanding

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Last  Monday, Feb. 12[1] Chief Fintech Officer of the Monetary Authority of Singapore (MAS) Sopnendu Mohanty mocked[2] the excessive speculatory activity that is “perhaps negatively impacting the whole experimentation of cryptocurrency.” He nevertheless confirmed his dedication to the Singapore central bank’s Blockchain project — “Ubin.” In Mohanty opinion, it is in two years when we’ll see the real impact of the project. So what precisely is the “Ubin project,” a Blockchain initiative by Singapore CB?

What is Project Ubin

At Nov.16 2016[3],  MAS announced it would be partnering[4] with R3, a Blockchain technology company, and a consortium of financial institutions on a proof-of-concept project to conduct inter-bank payments using Blockchain technology.

Instantly, this was evidence of the Singapore Central Bank and related authorities looking to the potential of Blockchain and cryptocurrencies, rather than shunning and running from it. In their initial announcement, MAS stated[5]: “The project will develop a pilot system in which Blockchain infrastructure is used to issue and transfer funds among participants.”

They identified that Blockchain has the power to “make financial transactions and processes more transparent, resilient and at lower cost.” What was also outlined in this preliminary announcement is that this experiment could lead to banking alternatives: “This will also help MAS and the industry to develop simpler to use and more efficient alternatives to today’s systems.”

Phases of implementation

The rolling out of project Ubin has been ongoing since late 2016 and is still in its opening phases. It is a project that is long-standing and ongoing, incorporating a list of impressive advisors and partners. The participating financial institutions are Bank of America Merrill Lynch[6], Citi, Credit Suisse[7], DBS Bank Ltd, HSBC Limited, J.P. Morgan[8], Mitsubishi UFJ Financial Group, OCBC Bank, Singapore Exchange, Standard Chartered Bank, and United Overseas Bank.

Accenture[9] was appointed to manage and develop the prototypes. R3, IBM and ConsenSys[10] were engaged to provide support on the respective DLT platforms of Corda, Hyperledger Fabric and Quorum. Microsoft[11] was engaged to support the deployment of the prototypes on Azure Blockchain[12].

Phase 1 was announced with Deloitte being commissioned to produce a report[13] that covers all aspects of Distributed Ledger technology aimed at settlement systems, and also to detail the design of the prototype. This report was viewed as the basis for the MAS Blockchain protocol.

On Oct. 5, 2017, the project moved onto phase two[14], which involved the above-mentioned consortium of financial institutions, had “successfully[15] developed software prototypes of three different models for decentralized interbank payment and settlements with liquidity savings mechanisms.”

Going forward, the idea is to leverage two spin-off projects that will provide important lessons from the prototypes developed. “The first project[16] driven by the Singapore Exchange (SGX), focuses on making the fixed income securities trading and settlement cycle more efficient through DLT. The second project[17] focuses on new methods to conduct cross-border payments using central bank digital currency.”

How does it affect regulation?

Sopnendu Mohanty, chief fintech officer at MAS, in an interview with CNBC[18] at the conclusion of Phase Two, had a tone of learning and understanding, indicating that this experiment from MAS is for the greater good of the ecosystem: “It is away to bring the broader ecosystem together, so we all learn together.”

Essentially, the goal that MAS is trying to achieve globally is that regulators should not fear experimentation with Blockchain and that they need to understand the possibilities before making a call. Indeed, Mohanty said to CNBC that this experiment may not necessarily become a commercial project or even shape regulations:

“Don’t fear doing experiments and don’t fall into traps of signaling policy changes. Some regulators are afraid to do experiments because of this tremendous external pressure on them. We are trying to drive that culture globally.”

Not the only example

Project Ubin is a Blockchain project that spells out a lot of interest and intrigue from a Central Bank of a major nation. It is a project that is being taken seriously and is well planned and calculated, drawing from a number of resources already vested in the financial space.

However, this is not the only instance where more crypto-positive nations have made a move to understand Blockchain technology in order to better utilize it.

In South Africa, there was an announcement[19] last year that the Reserve Bank would be allowing a Blockchain Solutions company to operate in a regulations sandbox in order to monitor the potential, as well as the difficulties, of Blockchain technology.

This Sandbox scenario is far more focused on regulations as the Bank looks to test regulations and controls within this sandbox and BankyMoon[20] in order to strike a balance. At the announcement of this partnership, in July last year, Lorien Gamaroff[21], the CEO of Bankymoon, admitted that: “All we are doing at this point is seeing how far this relationship will go on within this sandbox.”

This may not be the same as the MAS creating its own cryptocurrency trial. However, it is indicative of regulators and governments now taking enough notice of Blockchain and cryptocurrencies that they feel the need to not only regulate but support.

Learning from the Sandbox

South Africa’s sandbox approach seems to show that the African nation wants cryptocurrencies to not only fall in line with legislation and regulations, but also flourish and not be stifled.

Gamaroff spoke to Cointelegraph since this initial meeting with the Reserve Bank saying he is pleasantly surprised how interested and keen the regulators are on Blockchain and related facets of the ecosystem: “Things have started getting a lot more formal, and the regulators from the Reserve Bank are investigating further, looking at other companies that are dealing with different things, like the tokens and currencies associated with Blockchain.” He also added:

“They are doing an assessment with all these companies and are hoping to draw up guidelines that companies can follow when it comes to integrating cryptocurrencies or anything like that. But they are being very suggestive, open and welcoming, there is no negative sentiment at all about this space and regulating it. They like pushing the boundaries and exploring all that Blockchain can do to help people.”

This approach by South Africa is different to Singapore, but there is clearly a correlation in attitude between the two companies as both Mohanty, and now Gamaroff has confirmed the regulators are open and positive towards Blockchain technology, they just want to make sure they get it right for everyone. “Additionally, the whole of Africa will be looking at South Africa to see how they handle this and, the way things are going, it could be a positive thing for the whole continent,” Gamaroff concluded.

Learn to love

The approach of Singapore and South Africa in the above examples indicate that there are dreaded regulators who are willing to learn and to compromise. Balance in regulation will be the only way in which Bitcoin and other cryptocurrencies become widely accepted.

Blockchain technology has been praised almost all round, but it is the cryptocurrency sphere that has its issues. However, a little understanding by those who make the calls could lead to rules that are inpace to let Blockchain flourish, protected cryptocurrency users, and maintain order in the financial sector.

Blockchain Alliance R3 Launches Training Consortium For Lawyers

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The R3 Blockchain[1] consortium has announced their creation of a Legal Center of Excellence (LCoE) today, Feb. 20 — a team consisting of ten law firms that will educate lawyers globally about new Blockchain[2] technologies, according to a press release published on FinExtra[3].

R3, which is made up of over 100 financial institutions, launched the Blockchain platform Corda in 2015, a distributed ledger system that facilitates and standardizes financial transactions. In December of last year, Amazon Web Services announced a partnership[4] with R3 to allow the Corda distributed ledger on its marketplace, allowing users to both deploy and develop DApps onto the AWS platform.

The ten firms that make up the LCoE are Ashurst, Baker McKenzie, Clifford Chance, Crowell & Moring, Fasken, Holland & Knight, Perkins Coie, Shearman & Sterling, and Stroock.

According to the press release, these law firms will be able to participate in Corda training workshops for attorneys, have access to R3’s Blockchain research, and receive project demos of real world Blockchain use every month.

Richard Gendal Brown, CTO at R3, sees the new LCoE as a way for lawyers to deal with the increasing number of questions surrounding the legal and regulatory status associated with Blockchain:

“A key feature of Corda is its ability to record an explicit link between human-language legal prose documents and smart contract code. This enables agreements between businesses to be executed automatically with minimal need for human intervention. The LCoE will allow R3 to directly engage with the lawyers that will be advising on and helping draft the smart contracts used by the network of Corda users across the globe.”

R3’s new team closely resembles the Enterprise Ethereum Alliance (EEA), the world’s largest open-source Blockchain initiative[5], that was launched in February 2017.

Wyoming Passes Bill To Relax Securities Law For Some Blockchain Tokens

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The US state of Wyoming has passed a bill[1] Feb. 19 allowing certain Blockchain tokens[2] to bypass securities regulations if they meet three key requirements as of July , 2018.

House Bill HB0070 was sponsored by seven representatives and five senators of the Legislature of the State of Wyoming. The bill passed the Wyoming House of Representatives unanimously[3] in its third reading with the approval of all 60 members.

The move comes as US regulators at the national level seek to crack down[4] on illegitimate offerings from the cryptocurrency and Blockchain space, placing emphasis on the need to monitor the market for the sake of protecting investors.

According to the new bill, if tokens are offered in Wyoming — or simply to the state’s residents — via an Initial Coin Offering (ICO)[5] or otherwise, the tokens will not need to be registered as securities in the state if they conform with the following three statutes:

“(i) The token has not been marketed by the developer or seller as an investment;

(ii) The token is exchangeable or provided for the purposes of receiving goods or services; and

(iii) The developer or seller of the token has not entered into a repurchase agreement of any kind or entered into any agreement, arrangement or scheme with the principal intent and effect of manipulating or attempting to manipulate the price of the token on a secondary market.”

HB0070 is one of two cryptocurrency-related projects sponsored by the twelve-member group currently making their way through the state legislative system.As Cointelegraph reported[6] Monday Feb. 19, Wyoming Senate Bill 111 seeks to exempt crypto from state property tax obligations, in place since March, 2014.

RMIT University Launches Australia’s First Blockchain Course

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RMIT, an Australian public research university, has launched Australia’s first university Blockchain course[1], according to Business Insider Australia[2].

The 8-week course, entitled “Developing Blockchain Strategy”, was designed by RMIT’s Blockchain Innovation Hub and partners with consulting firm Accenture and fintech hub Stone & Chalk. The online course description promises a practical program that goes beyond the conceptual aspect of Blockchain[3]: “You won’t just get a theoretical understanding of blockchain: you’ll learn how to use it.”

Jason Potts, the director of the Blockchain Innovation Hub, tells Business Australia Insider that:

“It’s one of those things where a whole lot of different technologies have come together to contribute to it working […] Much of this course is designed to help executives and business leaders to understand not just how this new technology works, and understanding what’s actually behind it, but also how it reflects business models and business strategy.”

The general manager of Stone & Chalk, Alan Tsen, sees the strong connections between fintech, banks, and Blockchain means that this kind of course is needed:

“Banks are already behind blockchain technology in a big way […] There is a real demand for blockchain training and a skills gap in the market that needs to be addressed.”

RMIT’s course isn’t the first time that Blockchain and academia have found an intersection[4]. UC Berkeley offers an interdisciplinary course on Blockchain, and a separate Southern California study will be released in June on the potential Blockchain career pathways for students.

In December 2017, Australian Securities Exchange’s (ASX) announced that they be the world’s first securities exchange to use Blockchain[5] to replace their current equity processing system.

In January of this year, the Brisbane Airport reported its plans[6] to make its entire airport terminal cryptocurrency friendly, with stores and restaurants located in the terminal able to accept Bitcoin[7], Ether[8], and Dash[9].

Illicit Uses of Cryptocurrency Gaining Attention Around the World: Expert Take

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In our Expert Takes, opinion leaders from inside and outside the crypto industry express their views, share their experience and give professional advice. Expert Takes cover everything from Blockchain technology and ICO funding to taxation, regulation, and cryptocurrency adoption by different sectors of the economy.

If you would like to contribute an Expert Take, please email your ideas and CV to a.mcqueen@cointelegraph.com[1].

The growing concern about the rise of cryptocurrencies use in illicit activity all around the world is getting louder and louder – almost competing with stories about cryptocurrency volatility.

Over sixty financial investigators from the Interpol and Europol organizations of over 30 countries in January attended a cryptocurrency workshop to discuss measures that can be taken to combat the misuse of cryptocurrencies by criminals[2].

According to Rob Wainwright, head of Europol[3], as much as $5.5 billion USD was being laundered through cryptocurrencies annually.

While Blockchain provides a public ledger of all crypto transactions, criminals are using cryptocurrency tumblers [4]or cryptocurrency mixing services to obscure the trail back to the fund’s original source.

Dark Web Poll Results

Source: Recorded Future

Newer cryptocurrencies such as Cloakcoin, Dash, PIVX, and Zcoin have built in mixing services as a part of their Blockchain network. Monero, drug dealer’s favorite crypto, provides anonymity without tumbling services due to its privacy-centric Blockchain design. Therefore more effort needs to be placed upon the monitoring cryptocurrencies with privacy or mixing services features, crypto mixers and tumblers since they can impede tax collection, anti-money laundering practices, and law enforcement agencies.

In the aftermath of this workshop, many regulatory agencies around the world, including the US, EU, Japan, and Australia, stepped-up their fight against  “financial crimes” utilizing cryptocurrencies.

European Union (EU)

The 45 member committee of the European Parliament will launch an investigation into money laundering and tax evasion related to the digital economy that thrives in the shadows of tax havens. On February 7 2018 the EU Parliament voted to create a committee provisionally entitled Taxe 3, that will investigate for the first time tax privileges established under citizenship programs or non-dom regimes offered by Portugal[5], Italy, Malta, the United Kingdom, Cyprus as well as crown dependencies and overseas territories.

Since the power to levy taxes is central to the sovereignty of the EU Member States, which have assigned only limited competences to the EU in this area, Taxe3 will need to be confirmed by a plenary vote in March[6] in order to undertake the financial crimes inquiry within the next twelve months.

United States (US)

The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) regulates cryptocurrency exchanges under existing legislation for money transmitters.  It also requires US holders of a financial interest in or signatory authority over foreign financial accounts (including crypto denominated accounts) to file a foreign bank account report titled FinCEN 114 if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.  FinCEN has indicated that it is “aggressively” pursuing cryptocurrency tax evaders and platforms that lack strong internal safeguards against money laundering[7]– even those located outside of the US.

Internal Revenue Service-Criminal Investigation (IRS-CI) – IRS-CI indicated that it bolstered its staff by ten additional new investigators to make it easier to track down cross-border crypto tax evaders[8].

The U.S. Immigration and Customs Enforcement (ICE) – The ICE indicated that it uses undercover techniques to infiltrate and exploit peer-to-peer cryptocurrency exchangers who typically launder proceeds by using mixers[9].

Japan

Financial Services Agency (FSA) – FSA began inspecting all cryptocurrency exchanges after hackers stole $530 million worth of digital money from Coincheck[10] exchange in one of the biggest cyber heists on record.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) – AUSTRAC on December 13 2017 amended its Anti-Money Laundering and Counter-Terrorism Financing Act 2006 to combat money laundering and terrorism financing using cryptos. Under this amendment, crypto exchanges are required to identify customers more stringently and report suspicious transactions[11]. AUSTRAC is currently consulting the industry[12] seeking feedback on the newly introduced draft rules.

The views and interpretations in this article are those of the author and do not necessarily represent the views of Cointelegraph.

Selva Ozelli, Esq., CPA is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for TaxNotes, Bloomberg BNA, other publications and the OECD.

Russian Blockchain Association To Launch ‘First’ Guarantee System For ICO Funding

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The “first” guarantee system for Initial Coin Offering (ICO[1]) investments[2] is set to launch in Russia[3] in 2018, local media outlet Izvestia[4] reported Feb. 19.

The system, dubbed ICO-hub, is being developed by Globex[5] Bank, which is a subsidiary of state-owned Vnesheconombank[6] (VEB) bank, together with the Russian Association of Cryptocurrency and Blockchain (RACIB), and the CrowdHub[7] platform.

According to Alexander Mineev, Globex’s head of e-commerce and remote banking services development, the ICO-hub project is expected to be launched for testing in March, 2018.

For those looking to raise funds via ICO, the ICO-hub system makes it possible to accept both crypto and fiat — an escrow account[8] is opened with Globex for accepting fiat money, and a CrowdHub wallet opened for accepting cryptocurrency[9].

An escrow is a system in which a financial instrument or asset is held by a third party on behalf of two other parties that are in the process of completing a transaction.

Mikhail Lapin of consulting service Bell Integrator[10] told Izvestia that the use of escrow accounts for ICO projects would provide both parties guarantees, as well as minimize the risks of a deal breaker or fraud[11]. The head of Russian tax firm TSK countered the idea in a comment to Ivestia, pointing out the lack of a mechanism for legal protection of investors’ rights, given the current absence of legislation around cryptocurrency[12] in Russia.

Earlier this month, Russia’s Ministry of Communications published requirements[13] for those running ICOs, demanding they have at least $1.7 mln in nominal capital and a license issued by the Ministry in order to launch an ICO.

Hong Kong Regulator: We’ll ‘Continue To Police’ Crypto Exchanges And Sales

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Hong Kong’s financial regulator vowed to keep “policing” cryptocurrency and ICO markets Friday during a fresh warning[1] to potential investors.

In an announcement from the territory’s Securities and Futures Commission (SFC), CEO Ashley Alder said that following a vetting of exchanges and ICO providers for compliance, “market professionals” should also play their role in ensuring the legality of token issuance and exchange. This echoes similar sentiments[2] from US regulator the Securities and Exchange Commission (SEC) in December.

“We will continue to police the market and enforce when necessary,” he commented. “But we are also urging market professionals to do proper gatekeeping to prevent frauds or dubious fundraising and to assist us in ensuring compliance with the law.”

Hong Kong has sought to strike a balance[3] between permissiveness and investor protection regarding cryptocurrency and ICO regulation.

In contrast to mainland China, where crypto trading[4] and ICOs[5] are both de facto banned, lawmakers have chosen a middle-of-the-road approach, with the SFC issuing warnings[6] instead of restrictions prior to China’s ban in September 2017.

The result has been a burgeoning crypto startup scene in Hong Kong, with major international crypto exchange Bitfinex[7] among the best-known residents. Binance, currently the world’s second largest crypto exchange[8] by trading volume, has also been based there, despite CEO Zhao Changpeng opting[9] for a multi-country presence.

As China seeks to close the net[10] on remaining exchange loopholes, the outlook for Hong Kong meanwhile remains broadly similar to before, the SFC hints.

“If investors cannot fully understand the risks of cryptocurrencies and ICOs or they are not prepared for a significant loss, they should not invest,” Julia Leung, the organization’s executive director of intermediaries continued in the announcement, underscoring the responsibility of investors themselves.

“Investors who store their fiat currencies and cryptocurrencies with unregulated cryptocurrency exchanges should be aware of the risks of hacking and misappropriation of assets.”

SEC Refuses Request For Information On Disputed Tezos ICO In Ongoing Lawsuit

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The U.S. Securities and Exchange Commission (SEC[1]) declined to provide information on Blockchain[2] project Tezos[3] requested by attorney David Silver via the Freedom of Information Act (FOIA)[4], Reuters reported Feb. 10[5].

Silver represents plaintiffs in a lawsuit filed against Tezos back in November, 2017[6], the second of several lawsuits against the company since it gathered $232 mln in a record-breaking ICO in July, 2017[7].

In the response letter to Silver’s request for information, the SEC denied information disclosure regarding Tezos, citing Exemption 7(A) of FOIA. According to Reuters, the letter did not imply that Trezor was under SEC investigation.

The SEC stated in the letter that such an exemption is used when the release of information could “be expected to interfere with enforcement activities”:

“This exemption protects from disclosure records compiled for law enforcement purposes, the release of which could reasonably be expected to interfere with enforcement activities. Since Exemption 7(A) protects the records from disclosure, we have not determined if other exemptions apply. Therefore, we reserve the right to assert other exemptions when Exemption 7(A) no longer applies,”

Tezos[8] ICO, in second place in terms of most funds raised by any ICO, has been a subject of scrutiny and multiple lawsuits[9] since over the question of its compliance with SEC regulations. The lawsuits claim that during their ICO Tezos was selling securities to US investors without registration and approval of the SEC.

During the SEC and CFTC hearings Feb. 6[10], Jay Clayton, chairman of the SEC, emphasized that many ICOs are violating existing laws and warned that ICOs to “should pay more attention” since the SEC will investigate those potential violations further.