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UK Financial Conduct Authority: We Will Not Regulate Bitcoin and Ether

The British Financial Conduct Authority (FCA) has confirmed that they will not be regulating cryptocurrencies such as Bitcoin and Ether as it falls out of their perimeter.

The FCA first issued a finalized policy statement on digital assets titled “PS19/22: Guidance on Cryptoassets”. This policy statement update is in response to the feedback received from the previous policy statement issued in January. The objective of the final guidance is to bring more clarity on the regulation for the existing types of digital assets.

Bitcoin and Ether, which are considered major cryptocurrencies, are classified as “exchange tokens.” These exchange tokens are not backed by any central authority and are usually decentralized and primarily used as a means of exchange. The FCA has stated that they will not be regulating exchange tokens. However, Anti-Money Laundering regulations still apply.

Security tokens and utility tokens have been classified to fall under the regulatory perimeter and may be regulated as stated by the FCA. Security tokens that have features that provide rights and obligations to specific investments such as shares or debt instruments. Utility tokens, on the other hand, maybe regulated if they meet the definition of electronic money or a security token.

It was suggested in the statement that market participants should use the guidance as to the first step in understanding how they should treat cryptocurrencies. However, definitive judgments can only be made on a case-by-case basis.

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FinTech in Belt and Road – the UK FinTech Bridge

In the second round of our interviews at the Belt and Road Summit 2019 in Hong Kong, Blockchain.News gained further insights from European representatives Germany, as well as soon to be European exiters—the UK to learn more about their countries’ latest developments related to the Belt and Road Initiative.

Belt and Road Initiative—UKAs the UK moves slowly toward some kind of exit from the European Union some Brexiteers are looking at China’s Belt and Road Initiative as a way out of threatened isolation

The UK’s Brexit has thrown parts of the region into macro-economic uncertainty. It has also made many observers question what role the UK could have in China’s Belt and Road Initiative. It is with the heartland of industrial Europe that China is intent on connecting, and unless China is interested in Britain’s ports, it’s difficult to see how Beijing can regard the UK as a key link in the Belt and Road.

Frances Moffett-Kouadio is the Director of Trade & Investment at the Department for International Trade (DIT) in the UK and believes opportunities for the UK are abundant within the BRI. She said, “We see a lot of potential for UK companies, primarily because of our expertise in major infrastructure projects globally. In Hong Kong, we’re leveraging the large number of UK companies already headquartered here to mobilize and contribute to projects on the Belt and Road. To do this, we are collaborating with our colleagues in other Belt and Road countries, such as Cambodia or the Philippines, and bringing them into Hong Kong to support and connect with all of the UK companies who are already here doing business on projects like the third-runway or the MTR expansion.”

One relationship of note is between the DIT and the Asia Infrastructure Investment Bank (AIIB). Moffett-Kouadio highlighted, “We have a team of colleagues focused entirely on the BRI based in our embassy in Beijing and they have a very close relationship with the AIIB. The UK was the first western nation to come out in support of the AIIB and through the maintenance of that relationship we can mutually support each other on projects in the Belt and Road.” She added, “Another great mechanism we have to support the Belt and Road infrastructure is UK Export Finance. We have large amounts of government funding available to companies and only 20 percent of their projects must be British to qualify for the export finance.”

Hong Kong to the UK— The FinTech Bridge The City of London is a major financial center and has been very proactive in the development of FinTech—an area in which Hong Kong has been lagging when compared to another developed Asian cities. Moffett-Kouadio said, “We have been very fortunate in the UK, we have our own FinTech awards that we launched in Hong Kong and China and we are also very innovative—if you look at London, many of the big names like Google and BT have bought in and have set up their own hubs to encourage new innovative companies and SMEs to start up.” She concludes, “So our goal is to form a FinTech bridge to make sure we have two-way traffic of UK companies brining innovations to Asia but also Asian companies exporting their own innovations to the UK and Europe.”

On Brexit and the macroeconomic uncertainty of the US-China trade war, Moffett-Kouadio commented, “The results of the Brexit referendum has made countries look beyond Europe into new markets, such as Belt and Road countries and of course, Hong Kong. For example, trade with Hong Kong and China has increased from the UK, a third of all of our trade with China comes from Hong Kong, which demonstrates the importance of Hong Kong as a hub for the region. I think every cloud has a silver lining—companies are pragmatic, and they will move their business where it benefits them, and the DIT will help them do that.”

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UK Financial Watchdog Increased Crypto Investigations by 74% in 2019

The Financial Conduct Authority (FCA), the primary financial regulatory body in the United Kingdom, has seen a sharp rise of 74% in crypto-related investigations in 2019.

According to a Financial Times report, the 74% increase was seen when compared to the number of inquiries the FCA made between January and October of 2018. The report stated that the FCA is currently looking into 87 firms in the space, either as part of “early-stage scrutiny” or “full-blown enforcement investigations.”

David Heffron, a partner at the Pinsent Masons law firm, told the Financial Times that the increased investigations “reflects the FCA’s increasingly hands-on and no-nonsense approach to enforcing the law in the cryptocurrency market.”

However, Heffron also noted that the increase in the number of crypto-related investigations could be positive for the industry as it removes the bad players in the market. He stated:

“For cryptocurrency businesses acting lawfully, these statistics will be encouraging – they want bad actors pushed out.”

The FCA previously stated that it would not regulate Bitcoin and Ether in its policy statement issued on digital assets.

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Brexit Border Issues Solved by Blockchain? The EU Has Doubts

ELAND, a consortium of border security professionals, IoT experts, and haulage industry professionals, have come together with a plan to use blockchain technology to track cross-border trade after the United Kingdom leaves the European Union.

The plan specifically focuses on the trade between Northern Island (UK) and the Republic of Ireland to avoid the return of a hard border between the two nations.

The consortium proposed that the solution would involve building a secure freight transit system based on digital-locking containers, GPS routing records, and automated certification and anti-tampering enforcement, all recorded on the blockchain.

Charles Le Gallais, CEO of ELAND and former British soldier, stated:

“In essence, it is a bonded warehouse on wheels and cuts the Gordian knot of how the UK can both leave the EU and maintain the guarantees set out in the Good Friday Agreement. We are enabling the seamless movement of goods across borders to continue without the need for an Irish backstop.”

Le Gallais stated that the British Brexit officials had been informed on the plans. In response to the plans, a British government spokesman said, “the government is grateful for all input in this matter, which it considers carefully.”

ELAND described its proposal as based on “proven technology” and would be “demonstrable within three months” and “could be fully implemented within one year.”

On the other hand, EU officials have been skeptical of the proposal as London has never come up with these solutions.

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Crypto OTC Trading Platform B2C2 Launches New Bitcoin-Settled Gold Derivative

Cryptocurrency over-the-counter (OTC) trading platform B2C2 created the first gold derivative product, priced and settled in Bitcoin.

B2C2 stated that the gold-bitcoin derivative would allow institutional clients to trade gold via its OTC trading operations regulated and licensed by the United Kingdom’s Financial Conduct Authority (FCA).

Max Boonen, founder and CEO of B2C2 explained that the move for the launch of the product was due to the increasing demand from large-volume traders:

“Clients trade an ounce of gold (minimum trade size) priced in bitcoin, and the derivative is settled in bitcoin. The clients we are seeing demand from are those who have their own user base of traders and macro hedge funds.”

Boonen clarified on the benefits of the product, “the benefits of trading gold (or bitcoin) in a derivative form (synthetically) is that it’s simpler to trade than the cash underlier for a variety of operational reasons, and typically represents the majority of activity in the product/asset.

With the fear of the impact of the US-China trade war and other macroeconomic factors, the price of gold has climbed to a great degree. Boonen further explained:

“The current macro environment, dominated by uncertainty over economic growth and inflation, is prompting central banks to rethink monetary policy and market participants to reassess the likely path of interest rates. Conflicting narratives abound, fueling market activity, and we expect demand to only grow for ways to gain and manage exposure to deflationary assets such as gold and bitcoin.”

Pax Gold, which was launched recently as a gold-pegged token issued by stablecoin firm Paxos, also allows clients to settle trades in tokens. Boonen told The Block, “we are agnostic as to which of the major tokens our clients choose to use to settle their trades with us, be it Paxos Gold or another. These tokens will give them access to the underlying metal since they correspond to ownership of physical gold in vaults.”

First-Ever Real Estate Blockchain Portal Set to Launch in the UK

OpenBricks, a new blockchain-powered property portal in the UK, is set to be launchedin January 2020 following months of testing and preparation with six agents.

OpenBricks is eyeing to be the world’s first blockchain-based portal as it won’t have any centralized authority, as well as many staff because it will thrive on agents’ own servers using a distributed ledger network.

It expects to attract many real estate agents who are faced with huge costs of utilizing the main portals. Each branch is to be charged £100.

The Chief Operating Officer at OpenBricks, Adam Piggott, noted: “The blockchain technology will prevent us from turning the screws and hiking up the fees; it will be the agents who decide that and not the board of OpenBricks. It’s your portal.”

He added: “Our decentralized portal will be a big ‘spider’s web’ network linking agents together and enabling them to control how they share their listings rather than handing it over to a portal – because with OpenBricks there won’t be a central entity.”

Piggott believes that the OpenBrix model is different because it is blockchain-powered for the first time outside the financial spectrum across the globe. Additionally, each estate agency will be required to pay the same amount. They will also be provided with one vote that they can utilize when being balloted on issues like marketing budgets.

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UK’s First Regulated Crypto Bank to be Launched by Former Barclays Tech Head

The former Head of Technology for the Barclays group, and former CTO at Starling Bank in the UK, Mark Hipperson is planning to launch a regulated crypto bank with his digital banking venture Ziglu.

Foreign currencies will be made available for exchange at interbank rates, and cryptocurrencies sell and buy prices will also be at the best price across various exchanges.

By using a Mastercard debit card, any currency held in the account can be spent anywhere in the world, including cryptocurrencies, which are converted at the time of sale.

Ziglu has applied to the UK’s Financial Conduct Authority (FCA) to become a regulated issuer of electronic money. Currently, only UK residents who are over the age of 18 are permitted to use Ziglu’s services and are eligible to apply for an account.

FCA’s policy statement on digital assets

The FCA first issued a finalized policy statement on digital assets in August 2019, titled “PS19/22: Guidance on Cryptoassets”. This policy statement update is in response to the feedback received from the previous policy statement issued in January. The objective of the final guidance is to bring more clarity on the regulation for the existing types of digital assets.

Bitcoin and Ether, which are considered major cryptocurrencies, are classified as “exchange tokens.” These exchange tokens are not backed by any central authority and are usually decentralized and primarily used as a means of exchange. The FCA has stated that they will not be regulating exchange tokens. However, Anti-Money Laundering regulations still apply.

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UK Tech Companies Partner to Develop Blockchain-Based Parcel Tracking Application

Triad, a notable UK provider of IT consultancy services and technology solutions, has partnered with Stratis, a London-based enterprise blockchain technology company, for blockchain-enabled solutions to organizations including a parcel tracking application.

Through the strategic collaboration, Stratis will be instrumental in narrowing down areas that are best suited for blockchain solutions when resolving business challenges faced by Triad clients. The two companies will also market, deploy, and develop blockchain applications to help organizations minimize costs, propel security, and boost operational procedures.

Blockchain-Propelled Parcel Tracking Application

By joining hands, the two companies seek to undertake the first project that will entail developing a blockchain-enabled parcel tracking application.

Triad has already designed this application, and it will be pegged to the Stratis platform, and it will operate using Stratis smart contracts.

Expressly, smart contracts enable businesses to automate the execution and verification of agreements. As a result, the urge for intermediaries is eliminated.

Chris Trew, Stratis CEO, noted: “Our partnership with Triad is a game-changer when it comes to opening up Microsoft-based blockchain applications to businesses. By working together, we will make it easier than ever for companies to access the benefits of blockchain and build business-specific applications on a flexible, easy-to-use platform. In the first instance, this will mean porting an existing parcel tracking application designed by Triad to the Stratis Platform so that it can run our recently launched Stratis Smart Contracts. Beyond this, we look forward to a deep and fruitful relationship with Triad by collaborating whenever we see an opportunity for blockchain to add value to their clients.”

Adrian Leer, Triad’s managing director, ascertained that blockchain would be a game-changer in meeting the customers’ needs and preferences.

He acknowledged: “We pride ourselves on finding the right technology to meet our clients’ business needs. For this reason, we have been actively trialing blockchain technology to explore use cases – such as parcel tracking – where it can unlock tangible operational efficiencies. The partnership with Stratis gives us access to a highly respected and trusted partner to help formalize our blockchain offering. Where appropriate, we will now offer our clients bespoke blockchain-based solutions and work with Stratis to build these on the .NET-based Stratis Platform. Ultimately, this will speed up accessing the business value that blockchain technology can deliver.”

By leveraging on blockchain technology, Triad will be able to quickly develop applications, such as parcel tracking, on the Stratis platform.

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UK’s Financial Regulator Seeks to Hire Crypto Specialist to Spearhead Digital Asset Regulations

The UK’s financial industry regulator is seen getting serious about cryptocurrency. The Financial Conduct Authority (FCA) posted a job listing seeking to recruit a crypto intelligence expert to join its core function team.

The FCA is the UK’s financial regulatory body, whose role involves overseeing and regulating financial product offerings in the country. The financial watchdog aims to boost its involvement in cryptocurrency assets and crypto-related businesses.

The agency is currently seeking someone with experience in working with crypto assets, blockchain, distributed ledgers, and emerging fintech products. The job listing emphasizes on crime, compliance, and 5MLD (EU’s fifth money laundering directive).

The regulator requires the right candidate to have a good working knowledge of specific legislation, including General Data Protection Regulations, Regulation of Investigatory Powers, and Financial Services and Market Act. The candidate’s main responsibility is to act as an internal expert on all things associated with crypto and its possible regulation. The successful candidate will be responsible for providing intelligence advice and support to other parts of the FCA, which are tasked with regulating the sector.

The crypto intelligence associate will involve a considerable amount of stakeholder management and liaison with different government agencies. This focus is on obtaining information on crypto assets, economic and financial crime related issues and the role of various processes in regulating crypto activities, and to assist the FCA in making informed decisions regarding specific cases.

The responsibility of the recruit lies with the regulator’s new crypto-crime team that is expected to have regular anti-money laundering inspections of other high-risk companies. The candidate would report on how companies manage financial crime risks and the controls put in place.

By focusing its hiring efforts in crime and intelligence decisions, the regulator could be looking at ways to harden the relative laissez-faire approach it has embraced in the country until now.

Financial Conduct Authority, the Pacemaker of the UK FinTech Revolution

Financial Conduct Authority, on the 2 Key Initiatives to the Era of Open Finance

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DAG Global Seeks to Break New Ground as First UK Bank to Support Crypto Businesses

DAG Global, a UK financial services company, aims to set a precedent by gaining a UK banking license to close the void between banks and crypto businesses. As reported by the Financial Times on Feb 10, DAG intends to become the UK’s first bank to support cryptocurrency businesses.

Is DAG Global walking a tightrope?

DAG Global revealed that it could resubmit its application for a banking licence in March 2020 as it remains optimistic about offering support to crypto businesses with bank accounts from 2021. The mission will act as a litmus test for the industry as they observe to see whether regulators have reached a new level of maturity regarding digital assets.

Explicitly, companies that deal with cryptocurrencies, such as Bitcoin, have not had rosy relationships with mainstream banks based on their alleged associations with criminal activities like money laundering.

DAG Global, however, seeks to solve this stalemate by making it easier for crypto businesses to access financial and banking services as incredible growth is being witnessed in the crypto space.

Constructive dialogue witnessed

Sean Kiernan, DAG Global CEO, said, “It’s a lack of understanding and reputation risk that has kept others away — we think it can be a cleaner sector [than mainstream finance].”

He also noted that since the bank made its first submission in May 2019, a series of constructive dialogues have taken place with the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and UK regulators.

Kiernan revealed that so far, no red flags have been raised by regulators. Nevertheless, DAG Global has had to deal with delays. This is because it had hoped to have gotten the go-ahead of supporting crypto businesses by 2019. This has been primarily triggered by the stringent scrutiny being undertaken by UK regulators.

For instance, both the PRA and FCA have previously warned banks about the dangers associated with crypto businesses. Despite banks not being discouraged by neither to offer services to them, they were asked to be on the lookout to act prudently and maintain effective risk strategies when it came to crypto-assets.

It, therefore, remains a test of time whether DAG Global’s objective of supporting crypto businesses will materialize. Banks are continuously seeking to stamp their authority in the crypto space. For instance, in August 2019, San Diego-based Silvergate Bank contemplated being a crypto lender.

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