Compliance, endorsement path: inventory cryptocurrency exchange registration holy place

The increase was 132.58%. Tongcheng Holdings announced that it had changed its name to Firecoin Technology. The founder of the fire coin, Li Lin, became the chairman of the board of directors and was once again pulled out.

Recently, the founder of Circle published an official blog, announcing the launch of Circle's new subsidiary in Bermuda and the regulatory approvals it received. At the same time, he said, "Unfortunately, due to regulatory restrictions in the United States, we are temporarily unable to provide these new services to Americans."

IPOs, buying shells, small countries registered for licenses, and stocks that have not yet fully entered the mainstream compliance society, fancy seeking endorsement.

In the face of strong country regulation, encrypted exchanges can only choose to migrate to a foreign country with loose policies.

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For example, in 2017, with the introduction of the harsh "94" document in mainland China, the cryptocurrency exchange in mainland China was forced to shut down. Therefore, many cryptocurrency exchanges in the Mainland have to choose to "go to the sea." At that time, the United States and Hong Kong, which had relatively loose cryptocurrency policies and a better financial and technological environment, often became their ideal choice.

However, in recent years, Hong Kong's regulation of cryptocurrencies has gradually become more stringent (PANews has written an article to analyze Hong Kong policy). In the United States, the regulation is becoming more and more strict. In addition to choosing to “suspend service to US users”, some exchanges also consider setting up subsidiaries in other regions or directly relocating.

In this paper, PANews sorts out the areas that are preferred when cryptocurrency exchanges are registered. However, it is worth mentioning that these areas are not absolute safe areas. For example, in August this year, BitMEX issued a notice saying that users of Bermuda and Seychelles will not be allowed to use it for regulatory reasons.

O1

Bermuda

Start with the Bermuda area mentioned in the opening paragraph.

Bermuda is one of the few jurisdictions to conduct comprehensive legislation on a wide range of DAB (Digital Assets Business) ecosystems with prudence and AML / ATF regulation, including digital asset exchanges, ICOs, payment service providers with digital assets. , a managed wallet service provider, and a market maker/dealer/dealer of digital assets.

In September 2018, The Bermuda Monetary Authority (BMA) issued the Digital Asset Business Act 2018 (DABA), outlining which documents were required to apply for a digital asset business license. In addition to the Act, BMA also issued the 2018 Digital Assets Business (Network Security) Rules, the 2018 Digital Assets Business (Customer Disclosure) Rules and the 2018 Digital Assets Business (Prudential Guidelines) (annual return) )rule". Moreover, anti-money laundering/anti-terrorist financing legislation for other financial sectors applies equally to digital asset business.

Two types of licenses: Class F (complete) and Class M (defined term)

DABA requires anyone applying for a digital asset business in Bermuda (unless exempted) to apply for a license from BMA. There are two types of licenses: Class F (full license) and Class M (defined term license) .

The M-class license is intended to be a regulatory “sandbox” for start-ups , with a special focus on companies that want to innovate and participate in new product and/or service testing. Type M licenses may impose modifications to the enterprise and certain restrictions imposed by the BMA. Regardless of the license applied by the applicant, if the BMA considers that the M-level license is more appropriate, then it has the right to grant an M-level license . The M-level license is only valid for a specified period of time. After the expiration of the period, the licensee may suspend business, file an extension request or transition to a Class F license .

A Class F license is a full license and is not limited to a specific time period, but may be restricted if the BMA deems it necessary. For example, the cryptofinance company Circle has obtained a Class F DABA license. Circle commented, “ The core of DABA is to recognize that digital assets represent a new class of assets that cannot be placed under traditional regulatory frameworks. Digital assets can serve as both investment contracts, goods, services, utilities, and payments. currency."

Minimum requirements of the applicant

For applicants, Bermuda's regulation provides a “minimum standard” that is not difficult to achieve. For example, an enterprise must operate in a prudent manner; maintain a minimum required net asset of $100,000 or other amount that the BMA may take into account the nature, size, and complexity of the licensed enterprise; appropriate insurance must be in place to cover the inherent risks that the BMA may approve or Other risk mitigation measures; A headquarters must be established in Bermuda to be responsible for the direction and management of the enterprise; a network security plan is required and external audits must be conducted annually.

O2

Seychelles

In early August, Seychelles exchange operator MERJ Exchange Ltd. listed the tokenized securities in its own stock, and its chief executive Edmond Tuohy said in an interview with Bloomberg that the purpose was to beat competitors, including The Swiss exchange company SIX and the Gibraltar Stock Exchange, which introduce securities tokens.

As an archipelago in the Midwest of the Indian Ocean, Seychelles has a more relaxed attitude toward digital currencies. According to the “non-small” data, as of press time, 51 digital currency exchanges including Firecoin Global Station, KuCoin, BitMEX and DigiFinex were registered in Seychelles .

In Seychelles, the department responsible for cryptocurrency-related matters is the Financial Services Authority (FSA) of Seychelles.

In November 2018, the Seychelles FSA released the FinTech Regulatory Sandbox Framework, hoping to provide a regulated environment that “allows private entities to conduct small-scale real-time testing of FinTech financial services or products in a controlled environment” to Enable Seychelles registered companies to conduct financial services related to financial technology in the securities industry. ”

But so far, PANews has not found follow-up reports on the framework on the FSA official website, nor has it seen the FSA's announcement of specific bills or regulations related to FinTech's regulatory sandbox.

Earlier media speculation said that the current license to set up a digital currency exchange in Seychelles is the Dealer's License for Seychelles and the Financial Adviser's License in Seychelles. Broker's License, Seychelles Securities Dealer License. Of course, these permits are all licenses in Seychelles' existing financial regulatory system, not specifically for digital currency transactions. It is worth mentioning that it is reported that exchanges registered with the International Business Company (IBC) of Seychelles are generally eligible for tax exemption.

O3

Malta

In March 2018, the company registered the company's registration in Malta; four months later, the cryptocurrency exchange OKEx announced that it would be moved to Belize by Belize; currently, Bittrex, DQR, ZB.COM, Exchain, BitBay, etc. The exchange has a trading platform or office in Malta. The legendary island country whose name is from the Phoenician “Maleth” (meaning “safe haven”) has become a safe haven for blockchain and cryptocurrency because of its open and positive attitude, and is called “ blockchain”. And digital currency paradise."

On November 1, 2018, Malta officially entered into three bills related to digital assets: the Innovative Technology Arrangements and Services Act, and the Virtual Financial Assets Act (VFAA). And the Malta Digital Innovation Authority Act. These bills "are intended to provide legal protection for investors and operators while ensuring the continued growth and development of the Malta cryptocurrency sector and DLT."

In Malta, both cryptocurrency exchanges and ICO issuers must follow these three bills. At the same time, applications for blockchain and cryptocurrency are licensed by the Malta Digital Innovation Authority (MDIA) and the Malta Financial Services Authority (MFSA).

VFAA lists the types of DLT (Distributed Bookkeeping Technology) assets: (1) electronic money; (2) financial instruments; (3) virtual tokens; and (4) virtual financial assets (VFA).

In addition, a DLT transaction refers to any trading platform or facility in Malta or other jurisdiction where any form of DLT asset may be traded in accordance with the rules of the platform or facility.

VFAA regulates DLT assets and related service providers by introducing mandatory regulatory regimes, including Initial VFA Offering (Ico) and Virtual Financial Assets Exchange (VFA Exchange, approximately equal to cryptocurrency) Exchange). In addition, VFAA has introduced a new concept, virtual financial asset agent (VFA agent).

Financial instrument test

VFAA authorizes MSFA to perform a mandatory Financial Instruments Test (FIT). For an ICO, if the test result is "Yes", then the ICO or cryptocurrency will be subject to MiFID (EU Financial Instruments Directive Market) . Of course, even if the ICO is not considered a financial instrument in Malta, it may still be considered a securities or financial product in other jurisdictions.

If the ICO test result is a non-financial instrument, then it must be registered with MDIA to comply with a range of transparency requirements and must be submitted to the MDIA white paper. A standardized list of information is included in the white paper to enable interested investors to make an informed assessment of the proposed project, token structure and characteristics, and team background. Also, the ICO sponsor team must conduct a Fit & Proper test and due diligence to ensure that the ICO project does not adversely affect the country's reputation.

For a cryptocurrency trading platform, all assets traded on this platform must be tested by financial instruments, which will determine whether the cryptocurrency exchange platform is subject to other laws and regulations. If the cryptocurrency exchange platform supports fiat money, the platform may need to obtain a payment institution license depending on how it is constructed.

Both the ICO and the cryptocurrency trading platform should develop an operational plan that outlines their systems, secure access agreements, etc., and is supervised by the competent authority.

All ICO projects must designate a VFAA-accredited VFA agent who will also be the representative of the ICO project to represent the ICO project to MFSA. The VFA agent needs to be a lawyer, account, auditor or anyone else with the authority, qualifications and experience that MFSA deems necessary and has a variety of responsibilities and expertise based on VFAA. Businesses can apply for a VFAA license for the above activities through a VFA agent.

It is important to point out that it is one of the EU member states. Malta must require its domestic ICO projects and cryptocurrency exchanges to comply with all EU regulations, such as the General Data Protection Regulation.

According to The Block on August 16th, the more stringent new AML and KYC laws will sweep across Europe in the next four months, enabling local crypto exchanges and custodians to comply with stricter compliance standards by January 2020. This may be a pressure on a relatively loose policy like Malta.

O4

Jersey

The cryptocurrency transaction on Jersey is regulated by the Jersey Financial Services Commission (JFSC).

As early as 2015, the British Jersey government had announced legislation on the operation of digital currency exchanges. On October 21, 2015, the Chief Minister's Department of Jersey issued the Regulation of Virtual Currency Policy to “establish a framework that is conducive to business and encourage financial services and numbers. Sector innovation, employment and growth are priorities for the Jersey government.

On September 23, 2016, the Jersey Parliament (for legislative affairs) issued the Proceeds of Crime (Miscellaneous Amendments) (Jersey) Regulations 2016.

According to the latest revision of the 2008 Anti-Money Laundering Order, virtual currency is also included in its regulatory scope.

A virtual currency exchange is defined as “transacting virtual currency into currency in any form, and vice versa”, but “providing services to third parties does not include companies providing services to their affiliates.”

Any £15,000 (approximately US$18,500) cryptocurrency payment and each transaction above this amount, or a group company participating in the transaction, is considered a “high value dealer” and such distributor must be registered and supervised by JFSC. And comply with Jersey's money laundering and counter-terrorism financing laws.

The Anti-Money Laundering Order requires individuals operating a “money services business” to register with the JFSC and comply with anti-money laundering and counter-terrorism financing laws in jurisdictions. If their annual turnover exceeds £150,000 (approximately US$210,000), policies and Procedures, appoint money laundering compliance officers and reporting officers, and ensure implementation of record keeping and customer due diligence measures to prevent and detect money laundering and terrorist financing. "If the annual income of the digital currency exchange exceeds 150,000 pounds for the first time, the responsible person must register in accordance with the provisions of the 2008 Act within three months from the date of the excess income, otherwise he will face criminal punishment."

Individuals who operate as virtual currency exchanges but have an annual turnover of less than £150,000 are exempt from the Act. These companies must notify JFSC that they are doing this type of business, but they are tax-free. This notice does not charge any fees. The purpose of this exemption is to create “an innovative regulatory sandbox …to test the virtual currency exchange mechanism in the actual environment of the exchange with a turnover of less than £150,000 per calendar year, without the need for normal registration requirements And related fees."

O5

Gibraltar

In Gibraltar, blockchain and cryptocurrency related matters are regulated by the Gibraltar Financial Services Commission (GFSC).

The country passed the Financial Services Regulations (Distributed Ledger Technology Providers Regulations 2017) in December 2017, and GFSC also published the Gibraltar Distributed Book Technology Regulatory Framework (Distributed Ledger Technology). Regulatory Framework, referred to as the DLT framework).

It states that from January 1, 2018, any company operating in Gibraltar or from Gibraltar, using distributed ledger technology (DLT) to store or transmit the value of others (DLT activities), requires GFSC to be distributed. " Distributed Ledger Technology Providers " (DLT Providers); and need to apply to the GFSC for "DLT Providers License". GFSC will provide applicants with application guidance and The nature and complexity of the project being applied is assessed.

The application process typically includes an initial application assessment and a complete application and presentation.

The applicant company of the DLT provider needs to apply to the GFSC for an initial application evaluation and pay GFSC a non-refundable initial application evaluation fee of £2,000. GFSC will evaluate the applicant company from the following perspectives: how to apply DLT and its maturity; the added complexity of using smart contracts; whether the company holds or controls customer assets; the types of customers the company will work with, such as retail, Experienced or professional investors, or institutions; the number and type of products and services offered to customers. Also, GFSC will ultimately determine the full application fee and expected annual fee for the assessment based on the complexity of the assessment.

In the subsequent “Complete Application and Demonstration” section, the presentation of the applicant company should generally include the following: 1) the background of key individuals driving business development, including related skills and experience; 2) business plan, including company /Group structure, products and services, target market, strategy, etc.; 3) Financial forecasting; 4) Prove how the company will meet the nine regulatory principles of the DLT framework.

It is reported that in addition to the local Gibraltar blockchain exchange (GBX), in July 2019, the Mexican cryptocurrency exchange Bitso also obtained the DLSC license of GFSC, becoming the first such regulated exchange in Latin America. In August, Lendingblock, an encryption lending platform, and Quedex, a Bitcoin derivatives trading platform, also received a DLT provider license from GFSC; the latter was the first encrypted derivative trading platform to receive this license.

Text | Niu Niu Editor | Bi Wei

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