Huobi Joins Russian Financial Services Platform to Share Notes on Crypto Regulation

Crypto exchange Huobi will help a Russian development bank with crypto-related regulation and creating a legal basis for digital assets.

Cryptocurrency exchange Huobi has joined Russia’s VEB Innovation Fund to share notes on crypto regulation, according to a fund’s press release published Wednesday, September 19.

According to Crunchbase, the VEB Innovation Fund was created in 2011 to invest in Russian high-tech startups and to promote local innovations in the global market. The Center of Digital Transformation, where Huobi is now a resident, was created by VEB to promote blockchain and other crypto-related technologies, as its website states.

One of the main goals of the partnership with world’s fourth largest crypto exchange, as reported in the statement, is to draw on the crypto regulation experience gained by Huobi and to apply it in Russia, especially for adjusting the legal framework on digital assets.

VEB Innovations CEO Vladimir Demin explains that Huobi expertise will help create “a legal basis that could compete with current promising jurisdictions.”

Andrey Grachev, a Huobi spokesperson in Russia, further explained that Huobi has intended to enter the Russian market since April:

“We’re glad it has finally happened. Russian investors had no communication with global trading platforms so far, and Huobi is the first to open its unit in Russia”.

As cited by VEB Innovations, Senior Director of Huobi Global Edward Chen said the crypto exchange would provide Huobi Cloud services in Russia and would also allow Russian investors to use Huobi OTC.

Huobi is not the first crypto-related company to interact with the VEB-affiliated organization. According to its website, VEB has already partnered with Ethereum and Russian blockchain platform Waves.

As Cointelegraph reported earlier in May, the State Duma — a lower house of Russian Parliament — has already accepted a bill on crypto regulation in the first of three readings. In its first edition, the“On Digital Financial Assets” bill defined cryptocurrencies, as well as blockchain-related technologies such as smart contracts, mining, and Initial Coin Offerings (ICOs).

However, according to an article published by Russian newspaper “Izvestia” Wednesday, September 19, shortly before the second reading the definition of “cryptocurrencies” completely disappeared from the document, as the bill now focuses on tokens and investments.

In September, Cointelegraph wrote that a Russian lobby group of high-ranked managers, including two of of the top ten Russian billionaires according to Forbes, started to prepare an alternative bill on crypto regulation, as one of the group’s experts called the initial bill “unfinished and fragmented.”

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‘Illusionary’ Customer Protections: NY Attorney General Dampens Bitcoin ETF Hopes

cboe bitcoin etf

Following a recent report of New York State’s Attorney General, an economist believes that the document confirms “zero” chances of a Bitcoin ETF approval in 2018. ‘Odds of Bitcoin ETF Approval in 2018 = 0’ A new report of the New York States Office of the Attorney General (OAG) Barbara D. Underwood, outlined the issues which existing cryptocurrency exchanges face compared to traditional venues. According to the document, digital currency exchanges are up against serious problems

The post ‘Illusionary’ Customer Protections: NY Attorney General Dampens Bitcoin ETF Hopes appeared first on Bitcoinist.com.

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Abu Dhabi Regulator Calls for International Cryptocurrency Regulation Effort

A senior finance official has said Abu Dhabi would like to see comprehensive international regulation of the cryptocurrency arena.

The head of the financial regulator of the United Arab Emirates (UAE) capital Abu Dhabi wants “proper” international regulation of cryptocurrency, local news outlet The National reports Wednesday, September 19.

Speaking during an interview at this week’s Fintech Abu Dhabi event, Richard Teng, head of the Financial Services Regulatory Authority of the Abu Dhabi Global Market (ADGM), claimed that loss and theft of cryptocurrency negatively impacts its image as an asset.

“This space needs to be properly regulated, otherwise there is the risk of financial crime,” he said, noting:

“Every time a coin gets stolen or lost, it affects the confidence in this asset class.”

The comments mark the latest in a series of official opinions on cryptocurrencies to have emerged from the UAE in recent weeks.

As Cointelegraph reported, this month should see formal regulations emerge at a nationwide level in the UAE regarding both fintech and Initial Coin Offerings (ICO).

This week, a Dubai police chief went on record to say digital currency would “soon replace” traditional cash, while other senior law enforcement officials called for the central bank to issue a national cryptocurrency.

ADGM, meanwhile, has long engaged with the crypto market, publishing guidelines last year, with Teng noting the organization had since shared its expertise with a number of international governments. Teng added:

“We are confident that our comprehensive regime — which we have shared with global regulators […] can address these risks and bring greater confidence into this asset class.”

Recipients included the U.S. Securities and Exchange Commission (SEC), the UK’s Financial Conduct Authority, and the Monetary Authority of Singapore.

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Reuters: Brazil’s Antitrust Agency Launches Probe Into Major Banks Regarding Crypto Trade

Brazil’s antitrust authority has reportedly launched an investigation into six major banks on alleged monopolistic activity in crypto markets.

Brazil’s antitrust regulator is reportedly inspecting six major national banks for alleged monopolistic practices in the crypto space, Reuters reports September 18.

Brazil’s antitrust regulator, the Administrative Council for Economic Defense (CADE), which operates under the Ministry of Justice (MJ), has purportedly launched a probe on Tuesday to find out whether the country’s largest banks closed the accounts of brokerages trading in Bitcoin.

According to Reuters, the investigation by the CADE was initiated on the request of the Brazilian Blockchain and Cryptocurrency Association (ABCB) following several complaints. One alleged that Banco do Brasil closed the account of local crypto trading platform Atlas Quantum.

Within the ongoing probe, the CADE will inspect major registered banks such as Banco do Brasil, Banco Bradesco, Itaú Unibanco Holding, Banco Santander Brasil, as well as unlisted Banco Inter and cooperative bank Sicredi.

Reuters cites a CADE report stating that, “the main banks are imposing restrictions or even prohibiting … access to the financial system by cryptocurrency brokerages.” The banks reportedly claim that the brokers’ accounts were closed due to the absence or lack of client data, which is required under national anti-money laundering (AML) laws. Antitrust experts told Reuters:

“…illicit activities should be avoided and banks should take restrictive measures when there are indications of crimes committed by their account holders… However, it does not seem reasonable for banks to apply restrictive measures a priori on a straight-line basis to all crypto-currency companies, without examining the level of compliance and anti-fraud measures adopted by individual brokerage firms…”

Following the probe announcement, Banco do Brasil, the largest bank by assets in Brazil and Latin America, told Reuters that the company is committed to “competitive practices based on ethics and respect for free competition.” Itaú Unibanco stated that it is “confident that its conduct will be considered legitimate.”

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UK Treasury Committee Calls for End to ‘Wild West Situation’ in Crypto Market

The U.K. Treasury Committee has called for the expansion of cryptocurrency regulations in the country, citing concerns over investor protection and money laundering.

The U.K. Treasury Committee is calling for cryptocurrency regulations in order to protect investors, the BBC reported September 18.

The committee of Members of Parliament (MPs) in the House of Commons has reportedly called for a resolution to certain issues surrounding digital currency such as listing price volatility, poor consumer protection, the risk of hacker attacks, and money laundering.

As the BBC reports, the Committee also urged the Financial Conduct Authority (FCA) to supervise cryptocurrencies, though presently the FCA is not legally enabled to regulate either issuers of digital assets, or cryptocurrency exchanges.

Nicky Morgan, the chair of the Treasury Committee, is quoted saying that “it’s unsustainable for the government and regulators to bumble along issuing feeble warnings to potential investors, yet refrain from acting.” Morgan added that regulation should at least address the problem of consumer protection and anti-money laundering (AML). The Treasury Committee said:

“As the government and regulators decide whether the current Wild West situation is allowed to continue, or whether they are going to introduce regulation, consumers remain unprotected.”

CryptoUK, a self-regulatory trade association for the U.K. cryptocurrency industry, noted the Committee’s recommendations. Iqbal Gandham, the association’s chairman, said that “regulatory oversight is essential to ensuring consumer safety, guarding against malpractice and providing much needed clarity to an industry that is fast maturing.”

In May, CryptoUK addressed the Treasury Committee to advocate for favorable regulations, citing its intention to examine the role of digital currencies in the U.K., including risks connected to their usage by consumers, businesses, and the government.

CryptoUK then said that HM Treasury should impart new competencies upon the FCA, which would allow it to control cryptocurrency investment. The organization argued that regulations should focus on trading platforms and brokers, rather than the assets themselves.

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Final Draft of ICO Legislation Could Signify Next Step for Philippines Fintech Sector

The Philippine government is about to reveal industry-defining regulation for cryptocurrency

The Philippine Securities and Exchange Commission (SEC) is due to unveil the hotly anticipated draft regulation for cryptocurrencies in the next few days, if the information provided by The Manilla Times is correct. If the regulation reflects the previous enthusiastic efforts to implement cryptocurrency in the Philippines, it stands to play a seminal role in defining the country’s status as a major player in the fintech sector. The SEC chairman, Ephyro Luis Amatong, has previously emphasised the need to regulate cryptocurrency exchanges as traditional trading platforms.

The draft comes in the wake of several Philippine lawmakers calling for the creation of a properly structured and above-board regulatory environment for Initial Coin Offerings (ICO) as the country opens up to the new technology. In spite of several successful DApps being developed in the country and the start of a promising upward trend for the Filipino fintech industry, officials are aware of the need to create a competent legislative framework to both protect their citizens from scams and for the sector to develop profitably.

In stark contrast to the majority of other central banks worldwide, the Philippines central bank — Bangko Sentral ng Pilipinas (BSP) — has been extremely proactive in ushering in both the implementation and regulation of cryptocurrencies. The central bank has developed a partnership with the SEC in order to establish “cooperative oversight.” SEC Chairman Amatong explains their cooperation:

“We already discussed the matter with the BSP, since the BSP is also interested and we are also interested […] The discussion […] [involves] joint cooperative oversight over [cryptocurrency exchanges] engaged in trading.”

Back in 2016, the BSP deputy director Melchor Plabasan made clear his positive outlook on the potential of cryptocurrencies in a televised interview, stating that:

“If you want something that is fast, near real-time and convenient, then there’s the benefit of using virtual currencies like Bitcoin.”

Final draft builds on months-long efforts to create effective legislation

As previously reported by Cointelegraph, this upcoming draft is the just the latest installment of the SEC’s attempt to regulate the cryptocurrency sector.

In November 2017, the SEC announced that it would move to legalize digital currencies by classifying them as securities, using the example of new regulation in the United States, Malaysia and Hong Kong. The SEC chairman and then-commissioner Emilio Aquino shed light on the developments in a news conference:

The direction is for us to consider this so-called virtual currencies offerings as possible securities, in which case we will apply the Securities Regulation Code. The heightened frenzy and increasing popularity surrounding Initial Coin Offerings has pushed authorities to lay down new rules to protect consumers.”

In August 2018, the SEC released their draft rules for public feedback. According to the official statement released by the local SEC, any company registered in the Philippines seeking to run an ICO must submit an initial request to the commision, establishing whether their token qualifies as a security. Companies must submit their assessment requests no less than 90 days before they plan to launch their sale period. The SEC will then review the request within 20 days and provide its findings in a written report.

The report also said that if ICOs were only to be distributed among 20 people or less, then registration with the SEC may not be compulsory.

The proposed legislative framework seeks to set out clear rules to avoid the creation of fraudulent ICO projects. The SEC has been proposing to regulate crypto assets since late 2017. In April, the Philippines also floated the notion of defining cloud mining contracts as securities, given that the investors of the data centers operate the process via “investment contracts.”

The SEC specified that they invited banks and investment houses, along with the investing public, to submit feedback on the proposed rules and set a deadline of Aug. 31.

Crime and punishment: The government cracks down on scams

Like most countries in which cryptocurrency is a burgeoning platform, the Philippines has been victim to a number of scams, as naive investors seek quick returns on offers that are too good to be true while regulators scramble to keep up.

In May, an email circulated using the name of President Rodrigo Duterte, along with high-profile members of the Senate, encouraging them to part with their hard-earned pesos in order to invest in cryptocurrency, with the promise of high returns.

The presidential spokesman for the Philippines was forced to step in and make a statement denouncing the email scam after President Duterte’s brother’s name was used in conjunction with the scandal.

In his official statement, Roque said:

“For your information, now that the President’s brother [is being dragged into that cryptocurrency scam], the President has asked me at least three times to announce and inform the public not to entertain any person peddling their alleged influence with the President, including his relatives.”

In another scandal, the Philippine’s SEC issued a warning to investors about Onecash Trading, another digital currency provider promising attractive returns of over 200 percent to investors in only eight weeks:

“Facebook Account Onecash Trading is inviting the public to sign up to their website through a sponsored link and deposit an amount of P1,000 [$20] as an enrollment fee. Upon activation thereof, a member may opt to become a Trader with a promise receiving 25 percent return of investment every Thursday for eight consecutive weeks without doing anything, or to be a Builder wherein a member shall be receiving P 50.00 [$1] per direct and indirect invites, up to the 10th level.”

The SEC stated that all investment schemes that make use of either fiat money or cryptocurrencies are deemed securities and are subsequently required to comply with existing regulations in the Philippines. The statement also came with a warning: Those who fall foul of the law could end up serving 21 years in prison as well as paying up to $100,000 in fines.

Cryptocurrencies are a relatively recent phenomenon for most countries. Their sudden skyrocketing into the very center of both public consciousness and the world of finance has often caught governments and issuers by surprise. As a result of this, governments are often on the back foot when it comes to legislation, leaving the door wide open for scammers. An example of this is the January hack of Coincheck in Japan, which led to the theft of $532 million worth of NEM. Anger at the hack was compounded by the fact that Coincheck was not registered with Japan’s Financial Services Agency and was therefore not subject to the same level of scrutiny as other exchanges in the country. The exchange froze all transactions and issued an apology. The Coincheck security compromise is indicative of wider issues in the crypto world, with over $1.2 billion worth of cryptocurrency stolen worldwide in 2017 alone. However, investors and regulators alike are learning from their mistakes. With the Philippine government taking steps to crack down on cyber crime, the wild west environment that has allowed startups and scammers to flourish in equal measure is soon to draw to a close.

The current legislation put in place by the Philippine government to deter cyber criminals has been deemed too tepid for some. Opposition politician Senator Leila de Lima is pushing a bill through the senate that seeks to impose drastically stricter punishments for crimes relating to cryptocurrencies.

In her authority as a former justice secretary, de Lima used the April 4 arrest of two individuals for an alleged P900 million ($17.2 million) Bitcoin scam to emphasize the need for Senate Bill No. 1694 to be passed:

“I hope that this occurrence will push my esteemed colleagues in the Senate to take my proposed bill seriously and help pass it into law soon. Knowing that virtual currency resembles money, and that the possibilities in using it are endless, higher penalty for its use on illegal activities is necessary.”

De Lima provided a list of illicit activities that could use cryptocurrencies:

“Where unscrupulous individuals entice unsuspecting people to purchase fake Bitcoins, sending a virtual currency as payment for child pornography or a public officer agreeing to perform an act in consideration of payment in Bitcoins [direct bribery].”

De Lima’s bill would determine the severity of the criminal activity by the equivalent value of the funds raised through illegal activity. Depending on the amount illicitly raised and the circumstances in which the funds were raised, individuals could face lengthy prison sentences or even the death penalty.

Cryptocurrency and blockchain could help unite the Philippines fragmented payments sector

In a bid to keep the country at the forefront of the ever-expanding crypto frontier, the Philippine government has created the Cagayan Economic Zone Authority (CEZA). With countries like Malta and Switzerland already ahead of the curve in welcoming both blockchain and cryptocurrencies, the CEZA is the country’s response to the ‘Crypto Valley’ of Switzerland’s Zug canton. The Philippine government permitted 10 blockchain and cryptocurrency companies to operate in the zone, with the aim of promoting economic growth and generating jobs for its citizens. In spite of appearances, the zone isn’t just a tax haven free-for-all. Companies are required to contribute no less than $1 million over a two-year period, which, in turn, is topped up by up hundreds of thousands of dollars in fees.

CEZA deputy administrator for planning and business development Raymundo T. Roquero explained what businesses must do to be able to operate in the zone:

“When they apply, they will pay an application fee of $100,000 (P5.35 million) [and a] license fee of $100,000. Then you go into probity checks, then application programming integration (API), which costs an additional $100,000.”

In a ceremony granting licenses to operate in the zone in April, Roquero commented on some of the applications that had been successful:

“These are offshore companies, and they have committed investments of $1 million (P534.6 million) each. GMQ intends to build [its] infrastructure in Sta. Ana, Cagayan […] and will have an incubation period of two years, so they are already allowed to operate here in Manila.”

Crypto activity in the Philippines, however, is not confined to the CEZA alone. The U.S.-based company ConsenSys has launched Project i2i — short for “island-to-island,” a payment network built on Ethereum that aims to connect the 400 rural community banks across the Philippines. Although there are evidently banks to serve the country’s many rural communities, they are neither connected to any wider electronic networks nor international money transfer systems, meaning that thousands of people are without a means of making quick and reliable payments.

Pic

Pic2The project uses a web API in order to allow banks to connect to a blockchain backend. This allows users to both carry out transactions and to make use of smart contracts on permissioned blockchain via ConsenSys’ Kaleido platform.

Transactions signed through this system will allow for the pledging of digital tokens corresponding to an amount of Philippine pesos in an off-chain account, as well as redeeming and transferring tokens among other platform users.

Success stories help the government to keep an open mind about cryptocurrencies

In spite of a stumbling start to the outright acceptance of cryptocurrencies, the Philippine government is clearly waking up to the many advantages that the technology can bring. This change has not gone unnoticed by some of the industry players.

In an interview with Nikkei, FintechAlliance chairman Lito Villanueva said:

“With these startups come huge investments in their portfolio. Surely, each country would want to take a piece of the action. Taking blockchain and fintech players in with enabling regulations and potential investment incentives would surely make the game more exciting.”

Some of the nation’s startups have already brought in considerable investment. Perhaps the Philippines’ most well-known fintech startup success story, Coins.ph, raised $5 million in a Series A funding round, securing investment from Naspers and Quona Capital. Other Philippine crypto pioneers include Bloom Solutions and Satoshi Citadel Industries.

Aiai Garcia, global business development lead for Consensys in Asia-Pacific commented on how the Philippines central bank’s openness toward cryptocurrencies had benefited the industry within the country:

“Today, the Philippines has one of the most advanced blockchain payments apps in the world [Coins.ph], which provides 1.5 million Filipinos alternative access to their finances and other value-added services. [Philippine] regulators were also among the first to announce the regulation of Bitcoin as security.”

It appears that the government is aware that the opportunities for fintech companies can bring benefits for itself. Department of Finance spokesperson Paola Alvarez said:

‘’Secretary [Carlos] Dominguez is really pushing for the application of financial technology. He wants to harness fintech to improve business, for example, payment of taxes online.”

As both cryptocurrency and blockchain technology gain footing across the globe, the potential benefits for the underdeveloped Philippine fintech industry are hard to deny. The disparate and fragmented nature of the island’s financial system could be revolutionized thanks to initiatives such as i2i, along with the nation’s many payment apps that have sprung up in recent years. With eager anticipation from high-profile government figures, the ICO regulations seem set to take the next step in defining the role of cryptocurrency in the nation’s future.

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CFTC Chair: Crypto Needs ‘Do No Harm’ Approach That Regulators Gave the Early Internet

U.S. Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo has said that crypto needs a “do no harm” approach from regulators to flourish.

U.S. Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo has said that crypto needs a “do no harm” approach from regulators to flourish, in an interview at the annual Singapore Summit today, Friday 14.

Chairman Giancarlo said he took the precedent from the early days of the Internet, which he argued was able to develop and mature because of the government’s minimal interventions:

“I’m advocating the same approach to cryptocurrencies and all things having to do with this new digital revolution of markets, and of currencies, and of asset classes.”

Nonetheless, he distinguished between the CFTC’s short-term approach to tackling illicit activity on the crypto markets, and the agency’s longer-term – and potentially critically impactful – decisions on policy making for the nascent industry:

“When it comes to fraud and manipulation, we need to be strong. When it comes to policy making, I think we need to be slow and deliberate and well informed.”

The Chairman also rebutted accusations that the U.S. regulatory context for crypto has been slow to take clear shape, noting that the CFTC had presided over the “very first” regulated offerings of Bitcoin (BTC) futures, which launched on December 2017 on the stalwart American CME and CBOE exchanges.

The question of how cryptocurrencies should be defined and which agencies are responsible for their regulation have long been debated by U.S. regulators. A U.S. House hearing earlier this summer encapsulated the unique challenge posed by crypto, with speakers emphasizing that digital assets complicate the hard and fast distinctions of existing regulatory frameworks.

This year two federal judges have ruled on major cases that confirmed the applicability of federal commodity regulations to Bitcoin under the CFTC’s oversight, as well as – just this week – the applicability of U.S. securities laws for prosecuting crypto fraud allegations.

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US: Blockchain Security Co. BitGo Gets Regulator’s Green Light to Become Crypto Custodian

American crypto security startup BitGo has received a state trust company charter from the South Dakota Division of Banking, making it a qualified custodian for crypto.

American crypto wallet and blockchain security firm BitGo has received a state trust company charter from the South Dakota Division of Banking, making it a qualified custodian for crypto, CNBC reports September 13.

By creating its trust company, California-based BitGo will now be subject to regulatory scrutiny that encompasses know-your-customer (KYC) and anti-money-laundering (AML) checks and the filing of financial audits and monthly disclosures.

As it launches its regulated crypto custody offering, BitGo co-founder and CEO Mike Belshe told CNBC that:

“This is the missing piece for infrastructure — it’s a treacherous environment today. Hedge funds need it, family offices need it, they can’t participate in digital currency until they have a place to store it that’s regulated.”

As previously reported, the narrative that custody is one of the chief remaining obstacles for the crypto market to “mature” and draw institutional investment is widely shared. CNBC interviewed Monica Sommerville of consulting firm TABB Group, who noted that:

“Institutional investors are very interested in finding a solution, but they haven’t seen one that they think is perfect for various reasons. They still self-custody, and manage all their own keys.”

Somerville added that she worked with one family office who reportedly stores clients’ crypto in “baby carrot”-sized crypto hardware wallets organized in binders until “a better alternative” is found.

While individual retail investors have the relatively secure option of storing crypto themselves in offline cold storage, family offices and hedge funds are required by the U.S. Securities and Exchange Commission (SEC) to use a third-party regulated institution to safely store assets if they are worth over $150 million, as CNBC reports.

Alongside BitGo, this year has seen major U.S. wallet and exchange service provider Coinbase as well as Japan’s Nomura Bank launch their own custody solutions. As part of its forthcoming Bakkt offering, New York Stock Exchange (NYSE) operator ICE will also bring a new major trusted custodian solution to the crypto space.

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US: Blockchain Security Co. BitGo Gets Regulator’s Green Light to Become Crypto Custodian

American crypto security startup BitGo has received a state trust company charter from the South Dakota Division of Banking, making it a qualified custodian for crypto.

American crypto wallet and blockchain security firm BitGo has received a state trust company charter from the South Dakota Division of Banking, making it a qualified custodian for crypto, CNBC reports September 13.

By creating its trust company, California-based BitGo will now be subject to regulatory scrutiny that encompasses know-your-customer (KYC) and anti-money-laundering (AML) checks and the filing of financial audits and monthly disclosures.

As it launches its regulated crypto custody offering, BitGo co-founder and CEO Mike Belshe told CNBC that:

“This is the missing piece for infrastructure — it’s a treacherous environment today. Hedge funds need it, family offices need it, they can’t participate in digital currency until they have a place to store it that’s regulated.”

As previously reported, the narrative that custody is one of the chief remaining obstacles for the crypto market to “mature” and draw institutional investment is widely shared. CNBC interviewed Monica Sommerville of consulting firm TABB Group, who noted that:

“Institutional investors are very interested in finding a solution, but they haven’t seen one that they think is perfect for various reasons. They still self-custody, and manage all their own keys.”

Somerville added that she worked with one family office who reportedly stores clients’ crypto in “baby carrot”-sized crypto hardware wallets organized in binders until “a better alternative” is found.

While individual retail investors have the relatively secure option of storing crypto themselves in offline cold storage, family offices and hedge funds are required by the U.S. Securities and Exchange Commission (SEC) to use a third-party regulated institution to safely store assets if they are worth over $150 million, as CNBC reports.

Alongside BitGo, this year has seen major U.S. wallet and exchange service provider Coinbase as well as Japan’s Nomura Bank launch their own custody solutions. As part of its forthcoming Bakkt offering, New York Stock Exchange (NYSE) operator ICE will also bring a new major trusted custodian solution to the crypto space.

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US: Blockchain Security Co. BitGo Gets Regulator’s Green Light to Become Crypto Custodian

American crypto security startup BitGo has received a state trust company charter from the South Dakota Division of Banking, making it a qualified custodian for crypto.

American crypto wallet and blockchain security firm BitGo has received a state trust company charter from the South Dakota Division of Banking, making it a qualified custodian for crypto, CNBC reports September 13.

By creating its trust company, California-based BitGo will now be subject to regulatory scrutiny that encompasses know-your-customer (KYC) and anti-money-laundering (AML) checks and the filing of financial audits and monthly disclosures.

As it launches its regulated crypto custody offering, BitGo co-founder and CEO Mike Belshe told CNBC that:

“This is the missing piece for infrastructure — it’s a treacherous environment today. Hedge funds need it, family offices need it, they can’t participate in digital currency until they have a place to store it that’s regulated.”

As previously reported, the narrative that custody is one of the chief remaining obstacles for the crypto market to “mature” and draw institutional investment is widely shared. CNBC interviewed Monica Sommerville of consulting firm TABB Group, who noted that:

“Institutional investors are very interested in finding a solution, but they haven’t seen one that they think is perfect for various reasons. They still self-custody, and manage all their own keys.”

Somerville added that she worked with one family office who reportedly stores clients’ crypto in “baby carrot”-sized crypto hardware wallets organized in binders until “a better alternative” is found.

While individual retail investors have the relatively secure option of storing crypto themselves in offline cold storage, family offices and hedge funds are required by the U.S. Securities and Exchange Commission (SEC) to use a third-party regulated institution to safely store assets if they are worth over $150 million, as CNBC reports.

Alongside BitGo, this year has seen major U.S. wallet and exchange service provider Coinbase as well as Japan’s Nomura Bank launch their own custody solutions. As part of its forthcoming Bakkt offering, New York Stock Exchange (NYSE) operator ICE will also bring a new major trusted custodian solution to the crypto space.

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