Crypto-asset companies can now apply for licenses to handle as much as 100 million Swiss francs ($100 million) in public deposits under new regulations published on Dec. 3 by Switzerland’s Financial Market Supervisory Authority (Finma). The development underscores the European country’s efforts to promote technological innovation, as in the past only commercial banks were allowed to receive such large deposits.
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Companies Cannot Re-Invest or Pay Interest on Deposits
There is a catch, however. Blockchain and cryptocurrency-related businesses that are granted the fintech licenses to manage large amounts of investor funds “may not invest” or “pay interest” on the deposits, according to the , which go into effect on Jan. 1, 2019.
Finma has also set out stringent fiduciary and operational requirements for applicants. For example, cryptocurrency startups must submit clear documentation describing their business, target market and location. The regulator also requires full disclosure about board members, including their home addresses and any record of past criminal activity.
In addition, shareholders that directly or indirectly own 5 percent or more of the issued capital of a company must be disclosed to Finma. The same applies to foreign shareholders that hold equivalent equity stakes. Finma said that companies must submit any information on agreements, such as shareholder deals, and any “other ways in which the applicant may be controlled or materially influenced.”
“The license application must contain a detailed justification,” it added. “All relevant information must be documented, and changed documents must also be submitted with changes tracked.”
Boosting Innovation, Stemming the Flow
The fintech license was created after the Swiss parliament amended the Banking Act earlier this year, in a move aimed at boosting innovation within the cryptocurrency industry. In February 2017, Switzerland’s Federal Council released for consultation to promote innovation in the financial sector and remove barriers to market entry for financial technology companies.
Two of those measures — the extension of the holding period for settlement accounts and an authorization-exempt innovation area, or sandbox — went into force on Aug. 1, 2017. And with the announcement of the new legal amendments, it is now possible for the third measure — a new authorization category with simplified requirements in the Banking Act — to take effect on New Year’s Day. In addition, the sandbox will be extended to include crowdlending business models, under which public funds of up to $1 million in total can one day be brokered for commercial and industrial purposes, as well as private consumption.
A number of countries in continental Europe are now coming to terms with the loss of numerous digital currency businesses to competing, offshore jurisdictions such as the British Virgin Islands, Gibraltar and the Cayman Islands, where regulation is less strict. But Switzerland, with its crypto tax haven of Zug, appears intent on stemming the flow.
Progressive Stance
The country has taken a stance toward cryptocurrencies by legalizing their use and formalizing crypto transactions in a range of different contexts. But some crypto projects still struggle to open bank accounts, and cryptocurrency-focused bankers and investors still complain about a relative lack of regulatory clarity, as it remains unclear whether cryptocurrencies can be considered legal tender in certain contexts.
Switzerland sees virtual money and blockchain technology as strategic innovations in global finance. It is therefore determined to maintain and expand the jobs it has to offer in the field. The country’s tax regulator views cryptocurrencies as assets that should be subject to wealth taxes and declared on annual tax returns.
According to , Zug — also known as “Crypto Valley” — ranks favorably among the most crypto-friendly destinations in the world, boasting more than 400 crypto businesses. Four of the 10 biggest ICOs in 2017 were registered in Switzerland, which is more than any other country, according to a report by PwC.
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According to a recent published by the Japanese news publication ‘The Mainichi’, the Japanese government plans to implement a new system to prevent tax evasion on profits derived from crypto transactions. Sources familiar with the matter say that the Japanese tax regulator – the National Tax Agency (NTA) will mandate crypto exchange to report about clients suspected of evading crypto taxes.
As per the new system, the NTA can solicit some important customer details from the exchange. This includes the customer’s name, address, and the 12-digit individual identification number. Keeping the privacy concerns in mind, the NTA will request data only of those customers earning over 10 million yen through crypto transactions.
The Income Tax Act
The Mainichi publication notes that the ruling coalition will introduce these measures through the tax reform of the next fiscal year 2019. The measures will be implemented sometime by 2020. According to the existing Income Tax Act, profits derived from cryptocurrency transactions are treated as miscellaneous income. Moreover, salaried workers earning a minimum of 200,000 yen a year through such earning will have to declare it as income.
The publication also notes “A large number of people have earned large profits from cryptocurrency transactions after their market values increased sharply in 2017 and 2018. According to an NTA survey, over 300 individuals declared in 2017 that they had earned at least 100 million yen mainly from cryptocurrency deals.”
However, the NTA notes that the cases for tax evasion are currently increasing and hence the government decided to introduce the new taxation system. Last month in October, Japan’s tax authorities simplifying the tax filing regime currently in place. Japan’s Tax Commission is reportedly planning to implement an improved system that would standardized the tax filing process and make it easier for taxpayers to calculate their profits on the sales of digital assets against both fiat currencies and other cryptocurrencies.
On the other hand, the Financial Services Agency (FSA) is also to bring new regulatory measure for Initial Coin Offerings (ICOs). According to the new regulations, FSA will make registration mandatory for local Japanese companies to raise funds through ICO.
With the changing regulatory scenario across the globe, the Japanese government seems to be taking a balanced approach to protect investors’ interests as well as keep up the fire of FinTech innovation burning.
‘œThere may be a few people who genuinely think a deflationary currency is the way to go, nobody on the Grin team does.’
‘” Michael Corder (Yeastplume)
Interview location: Skype
Interview date: Friday 30th Nov, 2018
Project: Grin
Role: Developer
Outside of the most hardcore bitcoin maximalists, there are some who respect a minimal number of alternative cryptocurrency projects. My experience in creating this podcast is that you find some who say they are maximalists, but Monero is cool, or that Decred is interesting.
The ability to command respect is usually steeped in a currencies foundation sharing characteristics of bitcoin:
An anonymous founder
A focus on decentralisation
A monetary policy which does not enrich the founders and developers
No premine
One such project which has sparked interest is Grin’s implementation of Mimblewimble, a new coin which attempts to solve some of the privacy and scaling issues of bitcoin.
On August 2nd, 2016, Tom Elvis Jedusor, a contributor to the bitcoin Wizards IRC channel dropped his whitepaper, describing a blockchain with a radically different approach to transaction construction from bitcoin. In October 2016, Andrew Poelstra from Blockstream completed his analysis of the whitepaper and dropped a position paper filling in some of the gaps from the original paper to make precise the idea.
In the middle of November, Ignotus Peverell, another anonymous developer, appeared on the same IRC channel with a link to GitHub with an implementation of Mimblewimble, and this is how Grin was born.
Fast forward to today and Grin has launched its fourth testnet and is preparing to launch its mainnet in January of next year.
In this interview I talk with Michael Cordner, aka Yeastplume, a developer working on the Grin implementation of Mumblewimble, we discuss why Grin is acceptable for some Bitcoiners, their approach to monetary policy and governance, and how to mine Grin.
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