Nice research – An estimated 2.6 million UK consumers have bought cryptoassets at some point, new FCA research reveals.

It is nice, since it comes from independent organization. Some highlights from the research:

The FCA commissioned research to gain insight into the size of the market and identify
potential harm. Through a nationally representative survey of 2,132 UK consumers and 31 in-depth interviews, this research provided invaluable insights into the size of the market and where potential harms could be found. It concluded that the size of the market was relatively small with 3% of consumers having ever bought cryptoassets, spending on average £200. It also showed that awareness of cryptoassets among the general population was low.

The FCA chose to use the term ‘cryptocurrency’ throughout the research. This
term is more widely used in public domain than the broader ‘cryptoasset’ term it tend to prefer. The FCA also use ‘exchange’ to represent ‘cryptoasset trading platforms’, given
‘exchange’ is widely understood and used by consumers.

Most cryptocurrency owners appear to understand the lack of regulatory protections and demonstrate some awareness of the technology underpinning cryptocurrencies. Also, they acknowledge that prices are highly volatile and may fall.

Consumers appear increasingly aware of cryptocurrencies, as 27% had never heard of
cryptocurrencies this year, compared with 58% in our survey last year. The number of
consumers aware of cryptocurrencies has significantly increased. A possible explanation
for this increase in awareness may relate to the increased media presence. Bitcoin was
the most recognised cryptocurrency and, whilst Libra does not yet exist as a  cryptocurrency, 22% had heard of Libra. The list of cryptocurrencies included unlaunched ones (Libra), to capture awareness of potential cryptocurrency players.

When asked why they bought cryptocurrencies, 47% said they bought cryptocurrencies
‘as a gamble that could make or lose money’ compared with 31% in the 2019 consumer
research (noting this year’s survey was online whilst last years was face to face) as one
of the main reasons.

More people are first hearing about cryptocurrencies through the media, with ‘traditional media’ being the place where people are most likely to have first heard about cryptocurrencies.

Over 25% use cryptocurrencies to purchase goods and services, nearly half have never done anything with them, suggesting people purchase them with the hope of making a return.
In general, cryptocurrency holders expect to hold them for long periods of time.

According to the research, we can conclude that Cryptoassets, at the moment, are more like gold or commodity, rather than a currency (place to store value rather than a currency like EUR/GBP/USD).

 

Understanding the money laundering needs via informal/formal stakeholders public speeches

It was interesting to read the following speech of Therese Chambers, Director of Retail and Regulatory Investigations.

Crypto businesses may want to consider the following when proving services via a UK entity:

Under the MLRs, any firm undertaking one of the specified cryptoasset activities is required to satisfy the FCA when they arrive at our authorisations team that they have:

Risk assessment: to identify where the risks of money laundering lies in their business and establish policies and procedures to tackle them.

Customer Due Diligence (CDD): as there is a zero threshold for all activity in this sector, all transactions, whether occasional or part of an ongoing business relationship, will need to be subject to CDD. This means identifying the customer and verifying their identity on the basis of reliable and independent documentation or information. As cryptoasset activities are online, then they will need to establish the veracity of the information provided to ensure the person on the other side of the screen is who they claim to be. We expect that many will apply similar approaches to e-money and challenger banks who often deploy new technologies such as video/photo identification via mobile.

Transaction monitoring: cryptoasset firms will need to monitor the transactions that they execute on behalf of their customers to identify any potential suspicious or unusual transactions that indicate a risk of money laundering. While we know of several services that offer blockchain analytics software which can help with this task, we will still require that firms have the right processes in place to evaluate transactions. This is because all FCA regulation is underpinned by the notion that you can outsource work but not responsibility.

Record keeping: the MLRs require all firms to retain documents and information used as part of CDD and transaction monitoring for a period of 5 years after the end of a business relationship, but they do not need to be kept for longer than 10 years since the start of that relationship.

Suspicious Activity Report (SAR) reporting: where a firm identifies suspicious activity that they have reasonable ground to suspect is the proceeds of crime then they need to make a SAR and send it to the National Crime Agency (NCA).

When a firm arrives at the FCA’s gateway looking to apply for registration, we believe that a ‘good’ application will clearly demonstrate to our authorisations team that they have robust systems and controls to cover each of these areas. But fundamentally, we are looking for more than just whether the firm has the right policies and procedures, we need to be satisfied that the firm take seriously their responsibilities to prevent their business being used to launder the proceeds of crime.

The FCA’s crypotasset AML regime is still in its infancy, as it only came into effect on the 10 January 2020. We are expecting several key challenges. First, this is largely a market that is new to regulation, and since the premise of the technology comes from a libertarian strand of ideology which eschews identity checks and advocates digital privacy, so we are expecting compliance with AML regulation will be met with resistance. But we are keen to work with the industry to ensure our AML standards are met in this market, particularly since this sector is closely integrated with traditional financial services.

 

Digital Assets and Related Investments – What You May Need to Consider

Is it direct holdings of digital assets? If not, you may need more details about the financial product. Is it future contract, OTC contract, an option? Please get more details, and consult with your financial expert/advisor/adviser.

Custody, where the digital asset stored? Is it regulated exchange? where is it regulated? Off-shore regulated entities may be more risky than US/UK/GERMAN/AUSTRALIA/FRANCE/SWITZERLAND regulated entities 🙂

Manipulation in the digital asset markets. Can the digital asset price can be manipulative easily? If yes, the asset price can be very volatile, and you may lose your invested capital.

Fee disclosure – do you know everything about the fees you will be charged? some business can cut a large sum from your invested capital, in order to make their business richer.

Liquidation – If you will need your funds back, how fast you will be able to get it back into your bank account? Some asset are not very liquidated, and you will not be bale to exchange your digital asset back to FIAT. You may not be bale to pay your monthly expenses, including rent, electricity, mortgage, since those can only be paid with FIAT (EUR, USD, GBP, AUD, NOK, SEK etc.).

Technology and user friendly – do you know how to handle the registration process, where do you see all the disclosures, terms and conditions, your account balance, your account status, user interface, broker contact details? If not, make sure you control everything more than perfectly. No one else will do it instead of you.

What is your risk tolerance? if it is very low, you may need to consider more traditional investments, the regular stock market may be better option (S&P 500 stocks can be better option for you).

No investment products are absolutely risk-free. This can be particularly true with novel and previously-untested investment strategies. Investors should proceed with caution, ask questions, and consider their risk tolerance before investing.

Life is risky, and so is investing.

The Custody challenges of digital asset securities

According to the U.S. SEC market participants wishing to custody digital asset securities may find it challenging to comply with the broker-dealer financial responsibility rules without putting in place significant technological enhancements and solutions unique to digital asset securities. 

A broker-dealer seeking to custody digital asset securities must comply with the Customer Protection Rule. If the broker-dealer fails, customer securities and cash should be readily available to be returned to customers.

There are many significant differences in the mechanics and risks associated with custodying traditional securities and digital asset securities. For instance, the manner in which digital asset securities are issued, held, and transferred may create greater risk that a broker-dealer maintaining custody of them could be victimized by fraud or theft, could lose a “private key” necessary to transfer a client’s digital asset securities, or could transfer a client’s digital asset securities to an unknown or unintended address without meaningful recourse to invalidate fraudulent transactions, recover or replace lost property, or correct errors. Consequently, a broker-dealer must consider how it can, in conformance with the law, hold in possession or control digital asset securities.

If, for example, the broker-dealer holds a private key, it may be able to transfer such securities reflected on the blockchain or distributed ledger. However, the fact that a broker-dealer (or its third party custodian) maintains the private key may not be sufficient evidence by itself that the broker-dealer has exclusive control of the digital asset security (e.g., it may not be able to demonstrate that no other party has a copy of the private key and could transfer the digital asset security without the broker-dealer’s consent). The above mentioned risks could cause securities customers to suffer losses, with corresponding liabilities for the broker-dealer, imperiling the firm, its customers, and other creditors.

It should be noted that the broker-dealer’s difficulties in evidencing the existence of these digital asset securities may in turn create challenges for the broker-dealer’s independent auditor seeking to obtain sufficient appropriate audit evidence.

The Crypto asset market (digital asset) or the law may need to continue devolving and/or amending in order to achieve an understanding.

 

Regulators are here to prompt innovation

FCA, for instance, is placing a limit on investments in P2P (peer-to-peer) agreements for retail customers new to the sector of 10 per cent of invest-able assets. This is an important means of ensuring that retail customers do not over-expose themselves to risk. The investment restriction will not apply to new retail customers who have received regulated financial advice.

In addition, P2P platforms should have the following:

  • More explicit requirements to clarify what governance arrangements, systems and controls platforms need to have in place to support the outcomes they advertise, with a particular focus on credit risk assessment, risk management and fair valuation practices.
  • Strengthening rules on plans for the wind-down of P2P platforms if they fail.
  • Introducing a requirement that platforms assess investors’ knowledge and experience of P2P investments where no advice has been given to them.
  • Setting out the minimum information that P2P platforms need to provide to investors.
  • Applying the Mortgage and Home Finance Conduct of Business sourcebook and other Handbook requirements to P2P platforms that offer home finance products, where at least one of the investors is not an authorised home finance provider.

On the other side of the ocean, the SEC’s Strategic Hub for Innovation and Financial Technology, plays an important role in facilitating the SEC’s active engagement with innovators, developers, and entrepreneurs.

As part of a continuing effort to assist those seeking to comply with the U.S. federal securities laws, FinHub published a framework for analyzing whether a digital asset is a security. The framework is not intended to be an exhaustive overview of the law; rather, it is a tool to help market participants assess whether the federal securities laws apply to the offer, sale, or resale of a particular digital asset. Additionally, the Division of Corporation Finance issued no-action response to a market participant in connection with the proposed offer and sale of a digital asset.

In case your intentions are good, regulators are open for business. Moreover, a productive government is a great deal.

The SEC’S “CryptoMom” and exchange-traded fund (“ETF”)

According to the SEC’S Commissioner Hester M. Peirce some people call her “CryptoMom”, and they may be right.

The below is just few highlights from her full speech.

Despite interest from sponsors and investors, the Commission has yet to entertain an exemptive application for an ETF or approve an exchange rule allowing for the operation of crypto ETFs or other ETPs. The Commission has expressed a number of concerns from market manipulation to custody to retail investor protection. We need to do a better job of fostering open dialogue about the first two topics. On the third issue—retail investor protection—the reality is that retail investors will get access to these products, even if we do not allow them to do so through SEC regulated products and venues. Again, it is not the Commission’s role to be the arbiter of what constitutes an appropriate investment or to act as an investment adviser.

In disapproving a proposed rule change to list and trade shares of the Winklevoss Bitcoin Trust, the Commission focused on the underlying characteristics of bitcoin and the spot markets in which it trades. Instead of focusing on the merits of bitcoin as an investment, the Commission should have considered how the exchange-traded wrapper would work and how increased participation by institutional investors in the bitcoin market could have led to bolstered defenses against theft, greater investment in custody solutions, and lower likelihood of market manipulation.

All that said, it is important to remember that, if the SEC were to permit a Cryptocurrency ETP to trade in our markets, it would not be a seal of approval. In other words, investors would still have to do their own homework, study the product disclosures, assess their own appetites for risk, determine how much of a loss they could stomach, and—if those losses materialize—learn from them and refrain from coming to the SEC asking to be made whole.

Well, the above may or clearly justified the nickname “CryptoMom”.

Only time will tell if Cryptocurrencies is a bubble or not, until then we may need to give it the benefits other assets are enjoying.

Oh when will they ever learn?

People with no financial understanding and knowledge are suffering poorly according to the FCA. The warning suggest those hard work good people with no financial experience lost over £27 million Crypto and Forex investment scams.

As explained by the FCA this is how the scams work

Fraudsters often use social media to promote their ‘get rich quick’ online trading platforms. Posts often use fake celebrity endorsements and images of luxury items like expensive watches and cars. These then link to professional-looking websites where consumers are persuaded to invest.

Investors will often be led to believe that their first investment has successfully made a profit. The fraudster will then contact the victim to invest more money or introduce friends and family with the false promise of greater profits. However, eventually the returns stop, the customer account is closed and the scammer disappears with no further contact.

Action Fraud reports show that on average, victims were each scammed out of £14,600 from Forex and Crypto scams in 2018/19.

The FCA suggest you do the following:

  • Don’t assume it’s real – professional-looking websites, adverts or social media posts don’t always mean that an investment opportunity is genuine. Criminals can use the names of well-known brands or individuals to make their scams appear legitimate.
  • Stay in control – avoid uninvited investment offers whether made on social media or over the phone. If you’re thinking about making an investment, thoroughly research the company first and consider getting independent advice.
  • Make the right checks – Firms providing regulated financial services must be authorised by the FCA. You can check whether they are authorised on the Financial Services Register. Use the contact details on the Register, not the details the firm gives you, to avoid ‘clones’.
  • Every report matters – If you have been a victim of fraud or cyber crime, report it to Action Fraud(link is external).

Don’t be a shame to pay £1,000 to a local financial advisor it can save you a large sum.

Financial advisor = only a person with a valid licence.

Valid licence = the name of the person should be listed on the Financial Services Register

Google/Facebook is it really Rockefeller/Carnegie alike?

Time and Google/Facebook good faith will tell if our digital platforms are Rockefeller/Carnegie alike.

According to the Australian Competition & Consumer Commission report, there are issues to address and problems to be solved. Google/Facebook may need to read the report carefully, in order to protect their good business.

Google and Facebook are doing good service to all of us, but questions should be asked, and concerns should be resolved, since there is no perfection in life.

We are the guardians of our privacy, and it is up to us to determine how it will be used.

The data from the report can assist all of us in the future, for example:

  • The activities most commonly reported by digital platforms users as being undertaken on a daily basis were looking for or reading online news (48%), streaming content (39%), watching or listening to news (31%) or creating and sharing content (31%).
  • People who access news via digital platforms are also likely to access news in other ways.
  • A little under three-quarters (72%) agreed or strongly agreed that for some digital platforms, a requirement of usage was allowing the platform to use any content uploaded or shared. There were differences in views of how Digital Platforms may use their information. In particular, less than half of digital platforms users agreed that:
    A digital platform having a privacy policy meant it would not share a user’s information with others (43% disagreed or strongly disagreed with the statement)
    Mobile and tablet apps would only ask permission to access things on a user’s devices that were required for the app to work (43% disagreed or strongly disagreed with the statement).

 

It seems that we will judge if the technology provided is good or bad. Even the best ice-cream shop has complaints, and when it comes to digital platforms there are many interests involve. Therefore, this case is tricky, and maybe that’s why decentralize and non-censorship system/s will gather more attraction in the future.

Public officials and their public statements

You are invited to visit the public sector websites, and get news without the filters. News without the filters is amazing, your life will be much better, for sure!!!

In the U.S. the internet made the public sector more open and disclose, maybe block-chain will take it to the next level? The information is out their for you to read. It can help you avoiding fraud and misconduct. Simple government’s website search will do, and you will get the information you need.

Example (if you want expend your ICOs knowledge):

Public statement about ICOs (Steven Peikin, 15 May 2018):

I want to focus in more detail on this last category, in part because there has been a lot of public attention on our recent Enforcement activities in this space. As many of you know, in just a few years, cryptocurrency and ICO markets have grown from a mere concept into a phenomenon.

The novelty of ICOs, coupled with excitement about the potential utility of the underlying blockchain or distributed ledger technology, makes these offerings particularly enticing for some investors.

But the growth in the ICO market can obscure the fact that these offerings are often high-risk investments. The issuers may lack established track records. They may not have viable products, business models, or the capacity for safeguarding digital currencies from theft by hackers. And some of the offerings are simply outright frauds.

In a number of cases, the Commission has taken early action to stop or deter misconduct, protect investors, and preserve assets. One such matter involves charges against three co-founders of a purported financial services start-up who, we allege, orchestrated a fraudulent ICO that raised more than $32 million from thousands of investors last year.

In a number of our cases, there have been clear indicia of outright fraud, but the Commission has also brought cases to enforce the registration laws. Last December, we settled with a food-review startup after determining that the company’s ICO was an unlawful, unregistered offering. The company refunded investor proceeds before any tokens were distributed after the Commission intervened.

We have also suspended trading in the stock of numerous companies because of concerns about the accuracy and adequacy of information about the companies regarding, among other things, the adoption of blockchain technology.

We strongly believe regulated ICOs will protect the public better.

Also, please check out the SEC’s Office of Investor Education and Advocacy’s mock initial coin offering (ICO) website that touts an all too good to be true investment opportunity. But please don’t expect the SEC to fly you anywhere exotic—because the offer isn’t real.

 

 

Bitcoin auto-trading or anything alike

Please remember, those auto-trading services may not be regulated. They can tell you anything, and promise you the sky, but there is a chance you will not get your money back.

Please consult with your financial adviser, it worth your money. However, please remember that you should question your Financial Adviser work.

Do not use an advice without question it. You should do your own research, in order to question your Financial Adviser work.

Please make sure your your Financial Adviser is registered and license. The financial Adviser’s license is here to protect you, therefore, please make sure you check it.

If your Financial Adviser is not registered or license, you should not use its services/advice.

If you search on google “Bitcoin Trader auto-trading” you may get to https://gunbot.shop/store/ or https://www.ifcmarkets.com/en/contact-us, it seems that those websites do not have any valid/real license. If you invested through them, your money might be at risk.

It is not be fair to blame Google, they are not the regulator, but you can report about those ads to Google. Google might provide you more details about who is behind those ads, and/or stop such ads.

Some regulators are trying to fight back against those crypto frauds. For example FSMA (Belgium). FSMA issues the following:

List of cryptocurrency trading platforms about which the FSMA has received questions/complaints from consumers and has identified signs of fraud. Please find attached a link for the full list.

In addition, FSMA issued the following alert:

Cryptocurrency trading platforms: beware of fraud!

In recent weeks, a large number of new platforms offering all and sundry the chance to
invest in cryptocurrencies have appeared on the internet. The FSMA warns the public
about these new platforms, since often there are fraudsters behind them who are now
using cryptocurrencies to swindle consumers. Please find attached a link for the warning. If you heard/read the following, then you should read the alert again:

“Invest in cryptocurrencies with full confidence.”
“Invest in digital currencies in full confidence on one of the most renowned platforms on the market.”
“XXX: trading in cryptocurrencies easily accessible at last!”