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PAYMENT SERVICES AND REGULATORY ENVIRONMENT

Financial institutions operate in a heavily regulated environment. Therefore, it is crucial that we understand and anticipate the impact of regulatory and legislative developments and appraise their impact on our business and our clients.

REGULATORS

The mission of a regulator in the financial industry is to augment public value, amplify the integrity and stability of the local and global market and to promote a fair competitive market environment. Regulators are proactive in monitoring the trends in the financial market and in identifying potential risks and indicators of misconduct at an early stage. They address such risks to the benefit of the general public and the financial market at large.

Regulators have a high supervisory role which makes it crucial to have a risk-based supervisory approach as a key to enhance the effectiveness of its role. Another important responsibility is to keep up with how the market is evolving and ensure that regulations cater to such innovative markets, whilst securing that their approach keeps pace with such changes.

Regulator’s banking supervision is responsible for the oversight of all licensed banking activities which includes non-bank financial institutions (e.g payments institutions). This includes off-site and on-site examinations of all licensed institutions applying a risk-based approach. The goal is to make sure that these licensed institutions comply with all regulations and license conditions and have the necessary corporate governance and control structures in place.

Payment services companies have found solutions that truly offer a better customer experience than those offered by traditional banks. They must comply with the same regulations as applicable to the traditional banks and regulators should ensure that payment institutions are subject to the same rules in important areas such as cybersecurity, privacy and anti-money laundering procedures.

PAYTAH IS A REGULATED FINANCIAL INSTITUTION

PAYTAH Payment Solutions (Phoenix Payments Ltd) is a regulated financial institution, licensed by the Malta Financial Authorities (MFSA) to provide payment services across all 28 EU and EEA member states. We operate under the legal framework of the PSD2.

WHAT ARE THE BENEFITS OF USING THE SERVICES OF A REGULATED FINANCIAL INSTITUTION?

Consumers that already familiar with using non-banking payment services are feeling safe knowing their provider is duly authorized and registered and is being supervised by the financial authority in the home country of the provider.

A licensed payment institution is following EU regulations, including anti-money laundering, fraud prevention, terrorist financing, etc and is operating in accordance with all applicable laws and regulations. This provides customers the certainty that the provider offers trustworthy solutions and their payments are processed safely and securely.

As a result of a higher competition among all the financial industry, consumers now are entitled to demand greater standards of quality and higher convenience of making transactions.

THE FUTURE

New regulations should contribute to financial stability, supporting an ambitious environment and facilitate the delivery of high standard services to customers and society as a whole.

Top 10 crypto projects – Second Semester 2019

  1. BNB (Binance coin)

With the popularity that this issue has managed to address across the globe, it is expected that many people without knowledge of cryptocurrencies will begin to inquire about the best way to start investing, and one of the most prevalent thanks to the platform that supports it it’s the Binance coin.

Not only that when you take advantage of the platform you get a discount, but also the transaction fees are guaranteed, which is quite attractive.

 

  1. XRP (Ripple)

Although the price may look quite low, this does not define at all the characteristics that this altcoin can provide, due to its principle which works slightly different from the other cryptocurrencies.

Ripple was created to finance large institutions, and with the popularity recently taken in Asia large movements are expected.

 

  1. EOS

Although Ethereum has been highlighted as one of the altcoin with enormous technological advances, EOS has taken giant steps to make itself known in the market, with the ease of not necessarily possessing programming knowledge to understand the functions of it, together to the use of different tools and numerous other services.

 

  1. BTC (Bitcoin)

While you can hear predictions about possible declines in this altcoin, its popularity cannot be underestimated at all, being the most outstanding in the current market can bring great surprises throughout the second half of this year.

 

  1. XLM (Stellar)

This crypto has become quite important, both for its integration with smart contact protocols and also for the financial service with large corporations, there are quite a lot of expectations in this regard.

 

  1. IOTA

Being one of the well-known decentralized currencies in the market, there are expectations that IOTA can generate significant changes in the remainder of 2019, thanks to its scalability in transactions and that it is simply modular.

 

  1. ETH (Ethereum)

The top 2 of the most recognized crypto cannot simply be inconsiderate from this list, being one of the most invested by large blockchain institutions, its power in the market and in the different organizations and their hands subject to it make known what can contribute globally.

 

  1. LTC (Litecoin)

This is an interesting and one of the best long-term altcoins to invest. Litecoin is ready to become the next peer-to-peer payment facilitator, with the fastest and most efficient block processing speed that sustains impacted miners, this crypto has a much more decentralized work test algorithm than Bitcoin.

 

  1. XEM (NEM)

Not for nothing is it marked as one of the next peer-to-peer in payments and transfers, but NEM in its addition is generating quite a lot of noise in the Malaysian market, with its collaboration towards government institutions, security and technology, and its outstanding approach to business customers.

 

  1. TRX (Tron)

Recently, this altcoin has acquired BitTorrent, which allows the development of different disconnection methods in safe and decentralized torrents for the future. These innovations can facilitate the spreading of files over a network, and collect them for users to download.

Bitcoin Trends Q3 2019

Bitcoin could be setting the ground for a possible upward movement, although the negative corrections in the market can serve as a refuge for the stock market, taking into account that institutional money can enter with Fidelity and with Coinbase.

After Binance announced the limitations of trading in certain countries like Venezuela, or even states in the US, it is no longer considered decentralized, and taken as bad propaganda in previous times, it has generated some noise with movements in general for all the altcoin.

As long as the market continues to triumph on the institutional market, there is a possibility that decentralized exchanges can be absorbed by large companies with considerable relief, and yet this does not influence as much as the recent event with the United States and China.

After the economic combat of these two countries, it can be perceived in the coming months that there is a significant rally due to the stock market downturn and difficult markets and an ABC, creating greater attractiveness in commodities after the eve of a recession.

Based on this, it can positively affect Bitcoin, because it will serve as a refuge with a constant movement for people looking to avoid losses in the market.

There is a possibility that Bitcoin touches the 8800$, where there will be strong resistance, and if it manages to continue the movement at 8,900$ and break the scale, it is very possible that it can rise to 10k, we must be very attentive and that nothing is currently sung, but if there is a coincidence with the stock market crash, these changes may occur.

In other news, the chief investment officer said this week that a sharp rise in Bitcoin price indicated that investors were unsure about the Federal Reserve’s stance on interest rate cuts, as well as about the outcome of an ongoing trade war between the US and China mentioned above, that kept buying sentiment weaker in both the Western and Asian stock markets.

The growing exposure for Bitcoin has created a demand for crypto in times of stock market uncertainty. Despite claims that Bitcoin is devoid of value, the cryptocurrency competed with gold as an alternative asset class for investors fleeing the S&P 500, a trend likely to continue if the DOW takes a hit.

Undoubtedly, Bitcoin currently has the baton of the market, considering that the other currencies will not make huge differences at present while the number 1 in Coimarketcap does not generate changes, so many traders recommend maintaining caution with the other crypto.

The next Bitcoin block reward halving is estimated to occur by May 2020. Currently, about a year before its halving, Bitcoin is up substantially year-to-date and is demonstrating strong momentum in what many analysts consider as the start of a bull market.

Although short-term volatility is expected given the gain of the Bitcoin price in the past six months, the macro trend of the asset remains positive as shown by key technical indicators.

New Crypto Regulatory Framework Australia

Recently, some statements have been made regarding new guidelines in cryptocurrency by The Australian Securities and Investment Commission (ASIC) about the Initial Coin offering (ICO) mining, and trading, that is highlighted by the Australian corporations and the requirements regarding the inconveniences that occurred in the past 2017.

The new rules focus on the laws established about the signatures of the cryptocurrencies under the Australian companies law and the laws added to it. In more detail, the Securities Regulator specifies the steps required for a company focused on encryption that must be carried out with the ASIC and Australian corporation’s laws.

With respect to the established regulation, crypto will be considered as financial products, although it will be necessary to request the approval of the Australian regulators in order to acquire the necessary licenses for their implementation based on the laws.

Also, the established regulations will definitely bring another important purpose, in words of the regulator: “These regulatory requirements are in place to maintain the integrity of Australia’s financial market and ensure consumer protection.”

In this particular topic, the ASIC on the past 2018 have their focus on investors protection, the commissioner on this issue had been quite clear with those who perform the practices with keeping one foot out of the boat to understand the risks involved in the actions it may entail.

Back in 2019, the ICO and the ASIC modernized cryptocurrency trade framework do not cover the guidelines for other regulators, such as the country’s tax agency and the consumer protection group. The securities regulator says that the crypto businesses will have to make reference to the laws published by the respective agencies.

In the first published guidelines, the Australian Securities and Investment Commission said it wanted token issuers to keep their eyes open about the potential applications of the country’s Corporations Act of 2001 to ICOs. Remarking on the first ICO framework, ASIC Commissioner John Price declared:

“We want to ensure innovative firms understand the regulatory framework they may be operating under and ensure they meet any obligations they may have when raising funds in Australia.”

The statements of ASIC in this approach, encourages the producers of tokens to observe carefully and accurately if their ICO is a financial product or not. In the Austrian country, the concept of a financial product also expands to offers that involve a monetary movement.

In this way, the ICOs that contribute securities, derivatives, NCPs and managed investment schemes would be considered financial products.

 

Conclusion

Without the corresponding license granted on the basis of the new regulations, any practice considered to have an unauthorized ICO will be considered illegal in Australia, which can mean a huge gap within the terms of the law for those responsible and for those involved in it the use of them.

This will ensure a higher level of security with respect to the implementation of the currencies used in the market, and adequately protect its users.

Stellar lumens - altcoin

Updates about the Projects Stellar and Cardano

Stellar lumens - altcoin

Stellar lumens

Stellar Updates

Protocol 11 Improvements

On Monday June 10, validators will vote to upgrade the network to Protocol 11. In advance of that vote, the stellar team wants to talk through some improvements introduced in that version of the protocol, and to let the community know what they mean for developers, users, and businesses building on Stellar.

The three main changes that will occur are the following:

  • Better transaction pricing
  • Improved network capacity
  • The introduction of buy offers

When the team talk about better transaction pricing, this is referred to fees and how they will be fixed: people will be able to submit the amount they were willing to pay to add their transaction to the ledger. You can pay the fee you specified, or, if that fee was too low, ran the risk of getting clutched out by surge pricing.

Capacity is determined by validators, who vote on ledger limits as part of SCP. Preferably, they set it high enough to allow the network to support an increasing volume of activity but low enough to allow nodes with access to lower-end hardware and slower connectivity to keep up.

In addition to pricing and network adjusting improvements, Protocol 11 also leads a new operation that allows users and financial institutions to express buy offers more intuitively and accurately than before will a new exiting tool.

ManageBuyOffer, will be the perfect gizmo to submit actual buy offers. With it, you can specify the maximum amount of an asset that you are willing to buy, and the amount you’re willing to pay for it.

 

Cardano Updates

David Esser, Senior Product Manager of Cardano, joined the Cardano Effect podcast in an episode where he talked about:

  • His background, how he came to IOHK and how he collaborates with the rest of the Cardano project team
  • Some insights on the development processes used within the project
  • How IOHK’s research and formal methods approach gets translated into real code
  • The different development eras of Cardano from Byron to Basho, and how these fit together
  • How Atala fits into the story

David also shared the news that the first staking testnet is coming in June – starting with a small, closed pool of trusted stake pool operators. This will be a minimum viable product as the first iteration and we’ll be adding out more functionality and more operators over the next 3-4 months.

The Cardano Effect hosts on the podcast also point to the Best Practices stakepool channel on Telegram 36 as a place to go to get more involved.

In addition, Cardano is being developed as a decentralized public blockchain protocol and smart contracts platform that is fully open source. It is a collection of base layer protocols that will enable an ecosystem of decentralized applications to develop, facilitating the peer-to-peer.

The Cardano project is being developed and supported by three independent entities in a collaborative approach: IOHK, Emurgo and Cardano Foundation.

The Malta Virtual Assets Act and Its Impacts in the Crypto Market

The crypto market is far from reaching its full potential. The Introduction of balanced and well-planned pieces of regulation could boost the growth of this new market by attracting institutional money and adding legitimization to the ecosystem.

Regulatory measures curb money laundry activities and reduce frauds and scams, therefore protect investors and safeguards market integrity.

On the other hand, increasing the complexity and the level of requirements necessary to run an Initial VFA offering may create barriers of entry for new players possibly negatively impacting the discovery and development of innovative technologies.

The Malta Virtual Assets Act:

The Malta Virtual Assets Act (VFA Act) came into force in November of 2018. The bill is part of a regulatory framework aiming to encourage the incorporation of innovative solutions in the field of blockchain technology to traditional financial services.

The regulations main objective is to provide a safety net based on three principles: investor protection, market integrity and financial stability. As well as stablishing effective preventive measures against activities related to money laundering and financing of terrorism.

The VFA Act refers to crypto assets as DLT assets and classify them according to following four different categories:

Virtual Token;

Virtual Financial Asset (VFA);

Electronic Money and;

Financial Instrument.

As the title suggests, the Act subjects the DLT assets classified as VFAs to its rules and guidelines.

A VFA can be described as ‘any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value’, ‘intrinsically dependent on, or utilises, Distributed Ledger Technology’. And does not fall under the definition of the three other categories of crypto assets mentioned above.

The Test:

The Malta Financial Services Authority (MFSA) formulated an assessment in order to determine whether a specific crypto asset qualifies as a VFA and therefore, should be issued traded under the provisions of VFA Act. The assessment is called the Financial Instrument Test (the Test). The VFA Act determines that ‘Issuers offering DLT assets to the public in or from Malta; and’ individuals performing any activity’ associated with DLT assets must defer to the Test.

The instrument may possibly mitigate the level of information asymmetry among the market players. The set of procedures and guidelines enclosed in the Financial Instrument Test brings transparency to the classification process. It also prevents potential misinterpretations concerning what lies within the VFA Act scope.

The regulatory scope of the of the Virtual Assets Acts encompasses the provision of services associated with Virtual Financial Assets and Initial VFA Offerings, also known as Initial Coin Offerings or ICOs.

VFA Services and Licenses:

The VFA Act determines that ‘no person shall provide, or hold itself out as providing, a VFA service in or from within Malta unless such person is in possession of a valid licence’ VFA Service Licences are of four different types, or classes. The level of requirements to have a licence granted depends on the level of complexity, risks involved, and the attributes of services intended to be rendered. The subsequent class includes the services listed on the preceding one. Thus, the Class-4 license encapsulates all the services foreseen in the Act.

Class-4 license authorises the rendering of any VFA Service, including the operation of a VFA exchange.

Class-3 license holders allowed to operate ‘deal for their own account’10and to provide the VFA services included in the Class-2 and Class-1 licenses. This license does not authorize its holder to operate a VFA exchange.

Class-2 license incorporates the services authorized for the Class-1, in addition to the following ones: ‘Execution of orders on behalf of other persons’, ‘Portfolio Management’ and ‘Custodian or Nominee Services’.

Class-1 Licence holders are ‘authorised to receive and transmit orders and/ or provide investment advice in relation to one or more virtual financial assets and/ or the placing of virtual financial assets.’12 This license does not authorise to keep or to manage client’s funds.

The introduction of a regulated licencing scheme works as defence mechanism against players associated with fraud, scam and illicit activities in general. Also, increasing or decreasing the level of requirements to hold a specific licence based on the characteristics of the services protects the market integrity and the investors.

The VFA Agent:

The VFA Act also introduces a new player into the crypto market field, the so called VFA Agent. The role of the VFA Agent is key for the engine supporting the Act.

The Act presents the VFA Agent (Agent) as a person:

‘registered with the competent authority under this Act and authorised to carry

on the profession of:

(a) advocate, accountant or auditor; or

(b) a firm of advocates, accountants or auditors, or corporate services

providers; or

(c) a legal organisation which is wholly owned and controlled by persons

referred to in paragraphs (a) or (b).

The VFA Agent role is to represent and to support the VFA Service provider in its interactions with the competent authorities. When applying for a license or submitting documents for approval, the process must go through the Agent.

The issuer of a VFA and a VFA Service provider must appoint a VFA agent. Applications and submission of documents The VFA Agent safeguards compliance with the Act provisions. The Agent shall maintain a transparent relationship with the competent authority and must notify any material information addressing lack of compliance.

Agents shall maintain cohesive mechanisms capable of assessing the suitability of potential clients. And ‘shall be required to be satisfied that the applicant is a fit and proper person to provide the VFA services concerned and will comply with and observe the requirements of this Act.’

Adding a middle man to any of economic relation is adding to the equation a greater chance of increasing transaction costs and magnifying price equilibrium asymmetries. Both impacting the innovation development on a negative way.

Initial Virtual Financial Asset Offerings:

The Initial Virtual Financial Service Offering (VFA Offering) is fund raising method where usually the goal is to collect capital to finance a project implementation. The issuer offers a Virtual Financial Asset in exchange for funding.

The issuer must prepare a white paper in accordance with the requirements of the First Schedule, Article 2 of the Malta Virtual Financial Assets Act. The white paper is the document prepared by the issuer that gives information about the project, products or services planned to be launched.

The white paper must be submitted to the competent authority prior the launch of the VFA Offering. The submission process shall be made through the Agent.

The issuer is responsible for providing clear and accurate information to investors and other stakeholders. Over all communication channels including advertising, website, press releases and the white paper.

Increasing the costs and the complexity of running an Initial Virtual Financial Asset Offering may elitize a tool that gives a more democratic access to investment opportunities. Worth to mention the negative impact this may bring to the pace of the technological innovation process. Vitalik Buterin, the genius behind the invention of the Smart Contract, ran his first fund raising attempt at the age of 19.  The first publications Vitalik made about his ideas were in the forum known as BitcoinTalk, no white paper and no regulations to comply with.

Source: VFA Act – Malta Financial Services Authority

Worldwide Adoption to Bitcoin Continues

According to research by blockchain analyst Larry Cermak, currently there are over 13,000 venues all over the world that accept BTC payments. But it still seems like its impossible for one to spend their BTC as they please. The issue however isn’t finding venues that accept BTC, users are complaining that even if they do […]

Bitcoin on the threshold of “Global Breakout’’, a rally initiated by the Fear of Missing Out

Since last December in 2017, the uprising asset class has struggled in a long nine-month downswing of business and bear market and has achieved new milestones. There was a huge inconsistent enthusiasm for Bitcoin and various cryptocurrencies after a long year of experiences in the bull market.