FSA to Propose Rules for Crypto Service Providers

Rules relate to such areas as burglary incidents, cryptocurrency listing on exchanges, financial and price disclosures, margin trading and custodial services
29 December 2018   613

The Financial Services Agency of Japan (FCA) has published a final report, which sets out the proposed rules for cryptocurrency service providers to follow. This is reported by Bitcoin.com.

The rules relate to such areas as burglary incidents, cryptocurrency listing on exchanges, financial and price disclosures, margin trading and custodial services.

The report is based on last week’s meeting of a working group on the study of cryptocurrencies, and details the requirements “as a precondition of the proper principle of self-responsibility”.

In particular, the Agency expects that crypto service providers will follow these rules either by themselves or under the guidance of a self-regulatory organization (SRO). Currently, FCA has approved the work of only one SRO - the Japan Association for the Exchange of Virtual Currencies.

The report identifies nine areas that should be considered in connection with the activities of cryptocurrency exchanges and other service providers in this area.

Where private keys of customers’ deposited virtual currency are managed online … service providers [are required] to maintain net assets and funds for reimbursement of the same or greater amount. The funds must consist of the same types as the deposited virtual currency.

Financial Services Agency of Japan

In addition, the exchanges must "develop [a] framework to entitle customers to [a] statutory lien that secures their claim to deposited virtual currency", and also disclose their financial statements.

The report explains that cryptocurrency providers need to disclose information regarding trade prices in order to ensure proper business conduct. They are also forbidden to advertise, promote or promote speculative trading. In addition, they must follow the rules established by the SRO. The agency noted that registration of non-SRO members who did not establish internal rules, equivalent to the rules of SROs, may be rejected or canceled.

Cryptocurrency service providers are also prohibited from “making transactions in virtual currencies that may interfere with user protection or proper and reliable business transactions.” The last requirement in this category is for service providers to notify the FSA “about every change in the virtual currency line” in advance.

The first proposed condition in this category states that the registration requirement for “trading on the foreign exchange market (Forex trading)” will be imposed on cryptocurrency service providers offering margin trading.

There will also be restrictions on the leverage of each cryptocurrency “based on [actual] price fluctuations of the virtual currency.”

In addition, service providers will have to explain the risks specific to cryptocurrencies, and establish minimum amounts of margin. Finally, cryptocurrency loans will follow the same rules as margin trading, since they have similar functions and risks, the report says.

The FSA report also outlines the rules for crypto-depositary services and “dishonest actions” in spot trading. In particular, “inappropriate behavior, spreading rumors and price manipulation” are prohibited to all individuals and legal entities.

Virtual currency exchange service providers [are] to monitor transactions and prohibit transactions aimed at profiting based on nonpublic information.

Financial Services Agency of Japan

Status of "certified business association in the field of financial settlements" Japanese Association of Virtual Currency Exchanges (JVCEA) received in October 2018.

Bitfinex's LEO Token Whitpaper to be Released

Public stage of tokensale may not be conducted if hardcap of $1B won't be reached during closed sale
08 May 2019   271

Bitfinex Cryptocurrency Exchange published the whitepaper LEO token, with which it intends to raise $ 1 billion during the initial exchange offering (IEO).

It is expected that this amount will allow to fill the previously formed deficit of $ 850 million - the site operator will redeem tokens monthly for an amount of 27% of the profits.

Private stage of tokensale ends on May 11. If the intended hardcap won't be reached by this time, Bitfinex may refuse the public part of the campaign.

If fewer than 1 billion USDt tokens are sold by private token sale, the Issuer may thereafter sell remaining tokens at times and in a manner it deems appropriate in its sole discretion, consistent with applicable law. 

LEO Whitepaper

The issuer of the LEO token is Unus Sed Leo Limited, the newly registered IEO-iFinex platform.

The document also says that iFinex, which will be launched in June, will actively participate in the development of the second-tier Lightning Network.

iFinex has joined with a number of other companies and individuals to help develop and finalize the support for digital assets on Lightning Network. Ideally, digital assets developed and introduced by iFinex, including the LEO token, will be among the first digital assets launched on the Lighting Network.

LEO Whitepaper

In addition, Bitfinex plans to create a “a licensed and regulated security tokens exchange”, launch a derivative product with security at USDT and leverage up to 100x, as well as the Dazaar Big Data Marketplace and Betfinex exchange rates.

Another project will be the modular set of tools, libraries and protocols μFinex, based on the principles of open source. It will be used in both exchange and derivative products.

It worth reminding that in late April, the Attorney General’s Office of New York reported receiving a court order against Bitfinex in connection with the alleged loss of the last $ 850 million and the concealment of this fact from market participants.

Representatives of the trading platform said that we are not talking about permanent loss. These funds are frozen in bank accounts of Panamanian processing Crypto Capital Corp., located in four countries.

To ensure liquidity, Bitfinex was forced to use Tether Limited's funds for a loan and, according to the AG’s Office, has already received $ 750 million from the company's reserves. This was considered by the department as a crime.

On May 7, the New York State Supreme Court upheld the injunction against the Bitfinex Bitcoin Exchange, which does not allow Tether Limited to use its reserves for Exchange lending and other investment activities.