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Europe Proposes a Crypto Single Market

FrankfurtThe European Commission has proposed an “innovation-friendly” framework that “does not pose obstacles to the application of new technologies.” In a ten pages document the entire crypto space is covered…

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The European Commission has proposed an “innovation-friendly” framework that “does not pose obstacles to the application of new technologies.”

In a ten pages document the entire crypto space is covered with a number of objectives laid out:

“The first objective is legal certainty, which is needed both for crypto-assets that are not covered by existing EU financial services legislation and for the application of DLT [Distributed Ledger Technology, aka blockchain] in financial services and the tokenisation of traditional financial instruments.

The second objective is to support innovation. To promote the uptake of DLT and development of crypto-assets and crypto-assets services, it is vital to put in place a sound and proportionate framework to support responsible innovation and fair competition.

The third objective is to ensure appropriate levels of consumer and investor protection and market integrity. The fourth objective is to ensure financial stability.”

The draft law is expected in the third quarter according to the European Commission, but they have sent to Member States what they call a non-paper, which they say is for “facilitating discussions.”

We managed to get our hands on this non-paper, and there they present a nuanced approach towards cryptos. They say:

“The regulation of a crypto-asset should follow its economic function. Securities tokens, i.e. crypto assets which have all the characteristics of a financial instrument, should be regulated and supervised under MiFID II (Directive 2014/65/EU).

In order to clarify this and ensure full harmonisation on this approach, a modification of the notion of financial instruments (Article 4(15)) could be considered to make it sure that such financial instruments can be issued on a digital ledger.”

That translates to if SpaceX wants to go public in an IPO style ICO, they need to comply with current rules in regards to IPO-ing but those rules need to be modified to make it clear it can be what Germany calls a crypto e-stock.

We’ll have to wait for the full draft law to clarify how new regulations will adapt to digitization, but a second category mentioned here is hybrid tokens.

They don’t specify what are these hybrid token, but the stated principle is that new regulations would cover aspects that current regulations do not cover.

So a hybrid token is probably something like Trustnodes gives you a TN token for free if you subscribe or it could be the defi tokens that are given for free to incentivize liquidity provisions.

Thus that would presumably cover anything that is not clearly a security which would fall under “a bespoke regime for markets in crypto-assets (MiCA).” They say:

“The main requirement of MiCA on issuers would be to mandate the publication of a harmonised whitepaper/information document accompanying an issuance of crypto-assets in the EU with mandatory disclosures (detailed description of the issuer, the project and planned used of funds, conditions of the offer, rights and obligations attached to the crypto-assets and risks).

Certain exemptions to this whitepaper would also be implemented for small offerings of crypto-assets (value under €1 million within a twelve-month period) and for offerings aimed at qualified investors as defined in the Prospectus Regulation.”

What is interesting about this whitepaper requirement is that it does not require authorization by a National Competent Authority (NCA), but they need to be notified of it and if it doesn’t comply they can take steps as can the Single European Market Authority (SEMA).

This qualified investors exemption does raise the question of whether our SpaceX example is correct or otherwise with it to be seen just how they fully define all these matters, with the European Commission stating:

“For the purposes of the Regulation, MiCA would also define among others, the following notions: ‘crypto-asset’, ‘utility token’, ‘asset-backed crypto-asset’, ‘significant asset-backed crypto-asset’, and the different services related to crypto-assets, such as the service of custody (i.e. wallet providers) and of exchange, the operation of a trading platform.”

They lay out some requirements for crypto custody and service providers, trading platforms and exchanges, which seem to be common sense things.

Also in regards to asset backed cryptos and/or stablecoins they lay out rules in regards to conflict of interest, capital requirements, and generally what you’d expect.

In addition, “a pilot regime on DLT market infrastructures that would be similar to a sandbox approach would be envisaged.

This would enable both market participants and regulators to gain experience on the use DLT, the benefits of that technology and the novel form of risks it creates.”

Sandboxes have been shown to be a pretty effective tool, but the hardest task here is how do they treat exactly these shares that are tokens, these e-stocks, and how the fundraising framework will be adapted to the new capabilities of a token itself being ownership. They say:

“The bespoke regime, MiCA, is presently being considered in the form of a Regulation to establish harmonised requirements at EU level for issuers that seek to offer their crypto-assets across the Union and crypto-asset service providers wishing to apply for an authorisation to provide their services in the single market.

This initiative would replace existing national frameworks applicable to crypto-assets not covered by existing EU financial services legislation.”

So this is continental level legislation, and the setting up of a jurisdiction that can amount to the biggest in the world.

In addition, e-stocks could be a way to get a continental stock exchange with the European stock market currently fragmented between Dax and FTSE Milan and other national exchanges that on their own can’t compete with NYSE which has protectionist measures in regards to foreign listed stocks.

So naturally everyone wants to go to NYSE because it is bigger, but if there was a continental equivalent in Europe, then people would be forced to choose between NYSE’s protectionism and the European market which in combination is huge where the single market union is concerned, something that is a lot bigger than the European Union.

And if they get right this e-stocks thing, then that could well be a big leap into digitization which could be a big boost to market operations, and thus to the economy of all of Europe.

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Ripple Plans To Cash Out 33% Of Its MoneyGram Stake With A Significant Profit

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  • The San Francisco-based payment protocol has filed a document on Friday with the US Securities and Exchange Commission (SEC). It reads that Ripple Labs has entered into an agreement with MoneyGram, which entitles Ripple to sell up to 4,000,000 shares of common stock.
  • Ripple’s option to sell these shares will expire “upon the earliest of March 31st, 2021, the time at which the maximum amount shall have been sold, or the occurrence of certain other customary events affecting the issuer.” 
  • CryptoPotato reported last year that Ripple and MoneyGram announced a strategic partnership. The initial term of the agreement was for two years. Ripple had agreed to provide a capital commitment amounting to $50 million in exchange for equity through the two-year period.
  • As per the SEC filing, Ripple owns 6.22 million shares of the giant money transfer company (or 8.6% of shares outstanding). However, the blockchain company has a warrant to buy up to another 5.95 million shares, amounting to a total equity position of 12.2 million shares or 17% of MoneyGram’s shares outstanding).
  • With the initial investment in 2019, Ripple purchased the MoneyGram shares at 4.10 per stock, which was a significant premium to the market price. 
  • Nevertheless, MoneyGram’s stocks (MGI) have surged in 2020, closing Friday’s session at $7.42. As such, Ripple can cash out with an 80% profit, despite the initial premium.
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Source: https://cryptopotato.com/ripple-plans-to-cash-out-33-of-its-moneygram-stake-with-a-significant-profit/

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South Korea To Postpone Previously Planned Crypto Income Tax

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Lawmakers in Korea are planning to postpone a recently considered tax on crypto assets profits. Reports say the tax rule delay will be about three months – instead of October 2021, January 2022.

The New Crypto Income Tax Rule To Wait Until January 2022

According to a recent media report, the South Korean congress plans to put off the recently considered cryptocurrency income tax rule. A planning and finance committee of the National Assembly has issued a report, which proposes the necessity of implementing the crypto income tax rule from at least 2022.

A few months ago, in July, a report stated that South Korea’s Minister of Finance and Economy believes that the country should come up with a tax on cryptocurrency trading and investing. Back then, he added that South Korea has been in discussion with other countries about introducing a new digital law.

In July 2020, the country’s Ministry of Economy and Finance amended its tax code, where it included the plan for charging residents a 20% tax on gains from cryptocurrency trading, which are worth more than 2.5 million Korean won (about $2,000).

Lawmakers in the National Assembly are to approve the Government’s plan, which was to carry into effect the cryptocurrency income tax rule from October 2021.

Reason For The Delay – Time Is Tight

As per the media report, the reason for the postponement of the crypto tax law is based on some concerns, raised by local crypto exchanges. They have claimed the lack of time to build their proper tax reporting system and infrastructure, needful for the process to begin.

The so-called “Specific Financial Information Act” would be enforced from March next year, so crypto exchanges have to complete the necessary reporting system by September 2021 for verifying their real names of deposit withdrawal accounts.

As CryptoPotato reported, South Korea announced the planning of the crypto income tax in June this year. The Asian country went through some different views on how and whether it should tax profits from cryptocurrency. Firstly, at the beginning of 2020, the Ministry of Economy and Finance did not consider that digital asset trading gains as taxable income. A month later, another local report said the Ministry believes that the nation could start label cryptocurrency trading profits as “other income.”

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Source: https://cryptopotato.com/south-korea-to-postpone-previously-planned-crypto-income-tax/

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Bitcoin and Crypto Worth $4 Billion Seized From PlusToken Ponzi Group

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Chinese authorities seized around $4 billion worth of bitcoin and other cryptocurrencies from the notorious crypto Ponzi group PlusToken. This comes after the Chinese police arrested the core team running the scheme in July.

Around $4 Billion Worth Of Bitcoin And Crypto Assets Seized

According to CryptoPotato’s previous report on the PlusToken saga, the crypto shysters (27 key operators) were arrested by the Chinese police in July earlier this year. Along with them, the police also arrested 82 other members.

Now according to the latest reports, Chinese authorities have confiscated close to $4 billion worth of bitcoin and cryptocurrency holdings from PlusToken operators. Estimates say that they duped much more than this amount by beguiling investors.

Cryptocurrencies collected from users as a joining fee were valued at at least 14.8 billion yuan ($2.3 billion) as of June 2019…

The document released by the ruling court also mentioned the details of the seized crypto stash: 94,775 BTC, 833,083 ETH, 487 million XRP, 79,581 BCH, 1.4 million LTC, 27.6 million EOS, 74,167 DASH, 6 billion Doge, and 213,724 USDT.

On a rough calculation, the value works out to be a little over $4 billion. As per the court’s observations:

The platform had no actual operations or functions. The accused used the digital assets for expenses including paying employees, and sold some of them to buy properties and luxury cars for themselves or relatives.

Also, a few organizers of the PlusToken scam hid and transferred bitcoin and crypto-assets worth about 150 million yuan (~$23 million) at the time. This resulted in some losses, according to the document.

The Scam Story Continues With COVID-19 And DeFi

It doesn’t come as a surprise that the cryptocurrency space is scam-laced. The modus operandi of scammers has changed, though. The onset of COVID-19 scammers motivated them to milk the pandemic and fleece unsuspecting investors dry.

Perpetrators used various methods, such as impersonating popular health and charity organizations. Despite the visible differences in terms of content and requests, the online robbers asked for payments to be made in bitcoin.

Apart from the above, the cryptocurrency ecosystem’s hottest space (read DeFi) too has become a breeding ground for innumerable scams and Ponzi schemes. As per a recent report, an anonymous DeFi user reportedly lost around $140,000 worth of Uniswap UNI tokens to a yield farming scam.

The above wannabe yield farmer intended to leverage the yield farming hype by putting some of his UNI tokens in UniCats, a new DeFi scheme (like many others). UniCats allowed investors to farm its MEOW tokens, after which they can withdraw their tokens.

But, things didn’t go as planned as malicious codes in the project’s contract allowed the fraudulent developers to withdraw the victim’s UNI tokens. This theft was possible because of an earlier approval grant by Doe for the project to spend an unlimited number of UNI tokens.

The rogue devs made away with 36,000 UNI tokens in two rounds bringing the rogue actor’s loot to about $140,000.

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Source: https://cryptopotato.com/bitcoin-and-cryptocurrency-worth-4-billion-seized-from-top-crypto-ponzi-group/

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