Bancor to Restrict Access to US-based Traders

Decentralized cryptocurrency exchange (DEX) Bancor has announced that it stop providing its trading service to US-based clients.

Bancor Stops Servicing the U.S.

According to the announcement, a lack of clarity from regulators is the main reason behind the decision to ban all users with a U.S. IP address from exchanging digital currencies.

“US citizens, domiciliaries or users from US IPs will no longer be able to use Bancor’s web application, https://www.bancor.network, to convert tokens,” the announcement noted. “This decision has been made in light of increased regulatory uncertainty; at this time, we believe this is the most judicious decision for all the members of our ecosystem.”

Bancor runs as a decentralized protocol using a peer-to-peer (P2P) architecture. This is the latest development in the uncertain regulatory market for decentralized trading applications.

Previously, DEX Ether Delta’s founder was charged with operating an unregistered exchange, resulting in a fine of $300,000. It’s not clear what the regulator requirements are for firms offering decentralized financial services, in which users trade peer-to-peer.

The company also clarified that any clients, who have been identified as US citizens and not staying in the country, cannot use its trading services, while people from overseas staying in the US can still trade on the platform.

“We would like to clarify that this functionality will be blocked to users accessing the website bancor.network, which offers an interface to blockchain activity. As the Bancor Liquidity Network is a collection of smart contracts on the blockchain, and a non-custodial system, we cannot restrict users from accessing the blockchain itself. This cannot be blocked.”

U.S. Being Excluded From Several Platforms

The non-existent regulatory guidelines from official institutions in the U.S. are forcing many cryptocurrency companies to stop servicing the region. Recently, Binance one of the largest crypto exchanges in terms of trading volume, announced that it will halt trading in the U.S. starting September 12th.

Another U.S.-based crypto exchange, Poloniex, delisted nine digital currencies from its trading platform only for US-based clients, citing the same unclear regulations. It is expected that the SEC and other financial regulators in the U.S. are preparing a regulatory framework that will see many digital currencies classified as securities.

New international recommendations from the Financial Action Task Force, set for publication this week, will place stringent new ID requirements on any entity facilitating cryptocurrency trading, both in the U.S. and elsewhere.

The First DAO with Legal Status in the US by dOrg

DOrg, a Decentralized Autonomous Organization (DAO) developer founded by Ori Shimony, Asgeir Sognefest, and Jordan Ellis, has announced that it created what it calls the first Limited Liability Company (LLC) aiming to grant its DAO legal status. The news was reported by independent law firm Gravel & Shea on June 11th.

A Decentralized Autonomous Organization is essentially a company with no centralization or hierarchy, and is instead overseen by open source digital rules on a blockchain — a smart contract— and operated publicly by users via a consensus voting mechanism.

According to the report, dOrg claims that its native DAO is now the first legally established entity of its kind in the United States. Currently, the DAO is licensed as as a Blockchain-Based LLC firm in Vermont called dOrg LLC. Meanwhile, the DAO rules and implementation are available on the Ethereum blockchain.

After deploying its DAO to the Ethereum blockchain, dOrg formed a Blockchain-Based Limited Liability Company (BBLLC) in Vermont, dOrg LLC. By linking the DAO to this BBLLC, the DAO has official legal status, allowing it to enter contractual agreements and offer participants liability protections,” states the report.

Co-founder Ori Shimony has disclosed that the company chose Vermont as its base such as Vermont’s BBLLC law is unique in carving out the option for companies to reference blockchain code – in this case smart contracts – as the legitimate source of authority for the company’s operations.

He further added that the Operating Agreement establishes that the Company will only accept requests to perform services for Clients, allocate work and remuneration to Participants, add new Participants, and distribute voting rights through the DAO’s decision-making engine.

In addition to that, the DAO can now take part in contractual agreements as well as provide liability protection. DOrg reportedly contracted Gravel & Shea to provide a legal wrapper for DAOs.

Shimony made note that the company worked extra diligently to make sure that all legal agreements were very lightweight yet created no backdoors or special privileges that could short-circuit the authority of the DAO.

Respectively, the company intends to share the process so anyone can create legally licensed DAOs. While they are a DAO software developer provider, this new development could lead to making the creation of decentralized organizations easier and safer for users and investors.

“We want to make what we just did accessible to anyone in the world. Ultimately, the process of configuring and deploying a legally registered DAO will be as easy as creating a social media account.”

Meanwhile, the U.S. Securities and Exchange Commission (SEC) ruled back in 2017 that tokens issued by the now-defunct “The DAO” project were to be classified as securities. Despite being a crowdfunded firm, the SEC ruled that The DAO could not be included under its Regulation Crowdfunding exemption since it was not registered as a broker-dealer/funding portal.

Australian Tax Office Reveals Ongoing Investigation on Crypto Tax Avoidance

Australia’s tax agency – the Australian Tax Office (ATO) – is currently investigating 12 major international tax avoidance schemes, with a key focus on cryptocurrency-enabled activities. The news was reported by local news outlet on June 6th.

Senior officials from the Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO) have met in Washington, DC, this week to mark the one-year anniversary of the formation of the Joint Chiefs of Global Tax Enforcement (J5).

The ATO’s cross-border investigations were officially revealed following a meeting of the J5.

Joining Australian leaders was the Canada Revenue Agency (CRA), the Dutch Fiscal Intelligence and Investigation Service (FIOD), Her Majesty’s Revenue & Customs (HMRC), as well  Internal Revenue Service Criminal Investigation (IRS-CI).

The J5 was formed in July of 2018 to serve as an international taskforce following growing concern over the escalation of tax avoidance, cybercrime and cryptocurrency abuse. The taskforce focuses on tackling cross-national tax crime threats including cybercrime, crypto-currency, and global tax evasion, whilst working on sharing intelligence and data with the other members of the taskforce.

Following today’s announcement, ATO deputy commissioner Will Day has stated that 60 investigations were underway by the J5 members, with Australia directly involved in 12. At least one of those being targeted was a global financial institution and its intermediaries, which are believed to have enabled taxpayers hide assets and income details.

 “We’re seeing the use of cryptocurrencies in ways that we haven’t seen before. At the Australian level, there is definitely legitimate use for investment in cryptocurrencies, but we’re also seeing the use of them to facilitate tax crimes.”

He further added that there was clear evidence of people based in Australia who were facilitating the avoidance of tax or partnering with others in overseas jurisdictions in criminal activity.

“At no other time have criminals been at greater risk of being caught,” Day said. “In Australia, they are often intermediaries who are playing a role between the tax evader and an offshore entity.”

The J5’s cooperation has enabled more organized and intensive data exchange and analysis across borders. Most recently, it has been reported that Dutch tax authorities took out a crypto mixer due to the combined efforts of the J5 members.

As previously reported, the ATO has disclosed that it is seeking to contact crypto traders personally about tax issues as part of a new data collection scheme. Together with the Australian Securities and Investment Commission and the Australian Transaction Reports and Analysis Centre, the agency is trying to identify crypto traders using data sourced from domestic cryptocurrency exchanges.

Cases involving money laundering, the smuggling of illicit commodities, personal tax frauds and evasion are also being collaborated on, and there have already been more data exchanged in the past year than the previous 10 years combined between J5 partner agencies.

The taskforce focuses on using platforms that enable each country to share information in an organized manner, without needing to surrender data or control to a central database. As a result of its leadership in this space, the J5 are making it harder for people to dodge taxes by hiding their money abroad.

SEC Sues Kik Over Its 2017 Token Sale

The U.S. Securities and Exchange Commission (SEC) sued Kik Interactive Inc. for illegally raising $100 million during a 2017 token sale, making this one of its highest profile cases targeting a company for not registering an offering with the regulator.

In a filing submitted Tuesday in the Southern District of New York, the SEC said Kik violated Section 5 of the Securities Act of 1933, which requires offerings to be registered.

The current law states that all those selling financial instruments deemed securities to US investors must first register their offering with the SEC. Since Kik did not, the firm is now being sued.

Kik, whose product is an online messaging application, raised more than $55 million from U.S. investors by selling a digital token called Kin without the proper disclosures, the SEC said in a Tuesday court filing. The agency is seeking undisclosed monetary penalties.

Steven Peikin, co-head of the SEC’s enforcement division stated:

“Companies do not face a binary choice between innovation and compliance with the federal securities laws,”

The SEC has been looking with skepticism at ICOs for years, arguing that the sales are likely securities that must follow federal rules. The regulator has publicly advised investors of the risks in buying tokens during an ICO, cautioning that scammers might be using them to lure investors into frauds.

In late 2016 and early 2017, Kik faced a crisis, according to the SEC filing.

Fewer and fewer people were using Kik Messenger. The company expected to run out of cash to fund its operations by the end of 2017, but its revenues were insignificant.”

Then the company decided to do an ICO, in what a board member called “a hail Mary pass,” according to the filing.

Kik was among the biggest initial coin offerings in the past two years and had prominent backers.

Kin recently launched a crowdfunding site called DefendCrypto.org to raise money to fight back against an SEC investigation into the firm, and the agency’s broader crackdown on ICOs.

Kik argues that it has attempted to work with the SEC over the past 18 months and has spent over $5 million in the process. Many in the cryptocurrency community believe the case could help clarify when a token will be considered a security and subject to SEC regulations.

Egypt Scraps Crypto Ban, Intends to Introduce Licensing

It appears that Egypt is easing off its restrictions on cryptocurrency as a new law proposal to ban the creation, trading, or promotion of cryptocurrencies without a license is being currently drafted. The news was reported by a local online news outlet on May 28th.  Prior to this, Egypt banned all cryptocurrency under Islamic law.

The new banking law drafted for the Central Bank of Egypt (CBE) would make it mandatory to obtain licenses in advance of creating, advertising or operating platforms for issuing or trading cryptocurrencies.

According to official sources, it is stated that if the proposed bill passed, the draft law would also give CBE’s Board of Directors the right to regulate cryptocurrencies and require expensive licenses in order to operate within the country.

According to the official source, the bill aims to keep pace with fintech developments and the application of new technologies in the banking and financial services sectors. Pending regulatory rules and procedures to be issued by the CBE’s Board of Directors, the new law will accordingly establish legal status for the electronic authentication of bank transactions, electronic payment orders and transfer orders.

“The new law provides legal authority for the electronic authentication of bank transactions, electronic payment orders, and transfer orders as well as for the electronic settlement of checks and the issuance and circulation of electronic checks and electronic discount orders, provided that Board of Directors of CBE issue rules and procedures regulating all the aforementioned actions.”

Prior to this, Shawki Allam, the current Grand Mufti of Egypt, banned cryptos in early 2018, stating the technology had the potential to undermine the legal system via tax evasion, money laundering, and other fraudulent activities.

However, as the market has expanded and neighboring countries have begun exploring and embracing the technology, the government started loosen its rigid stance on the matter.

Notably, this is not the first that the Egypt is considering legalizing cryptocurrencies.

Earlier this month, it was reported that the National Bank of Egypt had recently participated in a major multinational and multibank trial of a system for letter of credit transactions using blockchain consortium R3’s platform.

Moreover, in December 2018 the CBE was reported to be conducting feasibility studies for the prospective issuance of a digital version of the Egyptian pound in order to help cut the costs of issuing and transacting physical coins and banknotes.