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SEC And CFTC Both Make Moves Against XBT Corporation

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SEC And CFTC Both Make Moves Against XBT Corporation
SEC And CFTC Both Make Moves Against XBT Corporation

The United States Securities and Exchange Commission (SEC) has filed charges against XBT Corp. SARL on the same day that the Commodity Futures Trading Commission (CFTC) settles charges against the same company.

In a press release on Oct. 31, the SEC alleged that the Switzerland-based securities dealer, XBT Corp. SARL, operating under the name First Global Credit, offered and sold unregistered security-based swaps to U.S. investors without complying with the registration and exchange requirements governing security-based swaps. 

The SEC went on to say that XBT Corp. SARL used a multitude of marketing methods to entice U.S. individuals into using Bitcoin (BTC) to buy and sell a variety of investment products. Reportedly the company attempted to use different terminology to describe the investments it offered, such as “Bitcoin Asset Linked Notes,” to which regional director of the SEC’s Fort Worth regional office David Peavler commented:

“Federal securities laws impose specific requirements for offering and selling security-based swaps to retail investors in the U.S. These obligations cannot be avoided merely by describing the swap transaction by a different name or funding it with digital currencies.”

The SEC’s complaint further stated that XBT Corp. SARL also failed to transact its security-based swaps on a registered national exchange and also failed to properly register as a security-based swaps dealer. Without admitting or denying the findings in the SEC’s order, XBT Corp. SARL agreed to a cease-and-desist order and to pay disgorgement of $31,687 and a penalty of $100,000.

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The CFTC filed and settled similar charges against XBT Corp. SARL for its failure to register with the Commission as a futures commission merchant. The CFTC’s complaint requires the company to pay another $100,000 civil monetary penalty and disgorge gains received in connection with its violations and to cease from future violations of the Commodity Exchange Act. CFTC Director of Enforcement James McDonald said:

“This case demonstrates that the CFTC will hold intermediaries accountable if they solicit or accept orders without properly registering with the agency. This case also underscores that the Commission will continue working with our law enforcement and regulatory partners to ensure the integrity of our markets.

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Maylasian Cash Transaction Limit Set to $6K – Will This Push People Into Crypto?

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Maylasian Cash Transaction Limit Set to $6K - Will This Push People Into Crypto
Maylasian Cash Transaction Limit Set to $6K - Will This Push People Into Crypto?

Malaysia is planning to impose a $6,000 limit on cash transactions in 2020, according to a deputy governor at the country’s central bank. The new restrictions aim to prevent the use of cash in illicit activities, and won’t affect regulated financial institutions or other entities transacting for humanitarian aid purposes.

Abdul Rasheed, the deputy governor in question who works for Bank Negara Malaysia (BNM), claimed that the measures will apply to all transactions involving physical cash, including payments for goods and services, reports local English-language newspaper The Star. The limit of 25,000 Malaysian ringgits ($6,048) will also apply to donations and transfers between entities like people and businesses, the report notes. According to Rasheed, who also serves as chairman at the National Coordination Committee to Counter Money Laundering, most Malaysian households spend around 8,000 ringgits ($1,935) per month. Rasheed also noted that the fines for violating the proposed measures will not exceed three times the amount of the committed offense.

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Rasheed highlighted the need for a cash transaction limit in the country, given the anonymous nature of cash transactions. In a report by local publication The Edge Media Group, Rasheed said:

“Cash remains widely exposed to abuse by illegal activities. As such, this measure targets large cash transactions that are at higher risk of being abused. This is also not to hinder legitimate cash payments for goods and services — most of which are for small ticket items.”

Citing similar practices adopted by Indonesia, Rasheed expressed his willingness to collect public feedback on the matter. He noted that a public policy usually takes about six months before being imposed. In August 2019, the Australian government introduced a bill that proposed to ban cash transactions over $6,900, including those transactions involving digital currencies. More than 7,000 people subsequently signed a petition against the proposal.

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Australian Home Affairs Minister Says Terrorists Use Crypto In Crimes

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Australian Home Affairs Minister Says Terrorists Use Crypto In Crimes
Australian Home Affairs Minister Says Terrorists Use Crypto In Crimes

The Australian Minister of Home Affairs Peter Dutton warned that terrorists are exploiting cryptocurrencies to “fund their deadly missions.”

During a counter-terror conference in Melbourne on Nov. 7, Dutton said that the anonymity of cryptocurrencies allow extremists to avoid scrutiny. He stated that the increased use of digital currencies, stored-value cards, online payment systems and crowd-funding platforms may provide new channels through which terrorism can be financed, adding:

“The anonymity afforded by such technologies enables terrorist financiers to obfuscate their activities.”

Dutton, who leads the Department of Home Affairs, which is responsible for immigration, border control, domestic security and law enforcement, further said that nations across the globe need to stay ahead of modern financing measures and embrace expertise from outside governments. 

The Minister also turned his scrutiny toward charities and not-for-profits, claiming they had become popular terror financing conduits and that often these organizations are not even aware that they are being manipulated for such use. Dutton has recently been the target of criticism in his home country, after claiming that climate activists should pay for the cost of police response to protests, and opposing a bill that would streamline medevac laws.

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In September, during the 19th Annual International Conference on Counter-Terrorism, United States Treasury Undersecretary Sigal Mandelker stated that cryptocurrencies could become “the next frontier” in the war on terrorism. She said:

“Terrorist organizations and their supporters and sympathizers are constantly looking for new ways to raise and transfer funds without detection or tracking by law enforcement.  While most terrorist groups still primarily rely on the traditional financial system and cash to transfer funds, without the appropriate strong safeguards cryptocurrencies could become the next frontier.”

Earlier in June, the governor of the Philippines’ central bank, Benjamin Diokno, made similar warnings against the potential use of cryptocurrencies for terrorism financing and underscored that the Bangko Sentral ng Pilipinas (BSP) will continue to closely monitor their use in the country. Since the beginning of 2017, BSP has required domestic crypto exchanges to register as remittance and transfer companies and implement specific safeguards — covering anti-money laundering, risk management and consumer protection.

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Russia Introduces A New Law Where Police Can Confiscate Bitcoin

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Russia Introduces A New Law Where Police Can Confiscate Bitcoin

Russia is planning on creating legal statutes allowing the government to achieve the impossible: confiscation of Bitcoin (BTC). As local financial news outlet RBC reported on Nov. 7 citing sources familiar with the matter, Russia’s interior ministry will work with various state organs to draw up the plans, which could enter into law in 2021.

The push does not single out Bitcoin, but instead refers to “digital assets” as a general phenomenon, chief among which are cryptocurrencies, says RBC. The publication quoted Nikita Kulikov, head of a dedicated committee at the Russian parliament, as explaining:

“The constant growth trend in crimes using virtual assets, and the lack of consumer protection in the face of this kind of criminal onslaught, naturally dictate the need to develop mechanisms for legal regulation and control of virtual asset exchange.”

Among the options under consideration is the creation of a government cryptocurrency wallet for transferring funds.

Russia has yet to implement its long-awaited package of laws regarding cryptocurrency, which has seen multiple delays. According to various parties speaking to RBC, crypto would need legal recognition before the government could justify legal grounds to confiscate it as part of judicial proceedings. 

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As with other countries’ attempts, however, the way authorities would take control of investors’ holdings remains unclear. In theory, RBC notes, crypto held on exchanges could be accessed if the exchange in question complies. 

For coins held in wallets to which the investor holds the private keys, the method of acquisition is a mystery. The plans thus speak to a potential lack of understanding of how decentralized cryptocurrencies such as Bitcoin operate. India’s recent recommendation to ban them faces similar difficulties: effectively attempting to control the uncontrollable. 

At the same time, Russia appears permissive to other facets of cryptocurrency. One of President Vladimir Putin’s aides has revealed he wants to control 20% of Bitcoin mining production from a new farm located in the country’s northwest.

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