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On Tuesday, the Ontario Securities Commission filed a statement of allegations against Poloniex, accusing the crypto exchange of “disregarding Ontario securities law.”

Moreover, the terms of the OSC’s enforcement against Poloniex point to broader implications for crypto trading platforms that operate in Canada.

Specifically, the enforcement action aims to hold Poloniex “accountable for disregarding Ontario securities law and to signal that crypto asset trading platforms flouting Ontario securities law will face regulatory action.”

The regulator noted in its statement:

“Poloniex operates an online crypto asset trading platform (the Poloniex Platform). The Poloniex Platform is available to Ontario residents. Ontario residents have opened accounts on the Poloniex Platform and have used the platform to deposit and trade in crypto asset products. Poloniex is subject to Ontario securities law because crypto asset products offered on the Poloniex Platform are securities and derivatives. Poloniex has nonetheless failed to comply with the registration and prospectus requirements under Ontario securities law.”

The subsequent terms of the OSC’s case further identify Poloniex’s crime not as offering of a security in the form of an initial coin offering — as has often been the practice of the U.S. Securities and Exchange Commission — but as holding assets in custody that renders Poloniex a third party. Effectively, the OSC appears to be arguing that any assets held in custody on a trading platform are themselves securities.

The statement of allegations reads:

“Investors do not have possession or control of crypto assets deposited or traded on the Poloniex Platform. Rather, they see a crypto asset balance displayed in their account on the Poloniex Platform. In order to take possession of crypto assets reflected in their Poloniex account balance, an investor must request a withdrawal and is dependent on Poloniex” 

It concludes its argument by saying: “While Poloniex purports to facilitate trading of the crypto assets in its investors’ accounts, in practice, Poloniex only provides its investors with instruments or contracts involving crypto assets. These instruments or contracts constitute securities and derivatives.”

The notice made reference to a March 29 statement from the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC), in which the two organizations sought to clarify how crypto platforms in the country are governed by relevant regulations. 

Per the OSC’s notice, that statement “included a deadline of April 19, 2021 for such platforms to contact Commission staff to start compliance discussions.” The OSC further said that Poloniex failed to make contact. 

The regulator seeks CA$1 million (USD$830,000) fines for each “failure to comply,” but it does not specify what constitutes a single failure. The first hearing on the matter is scheduled for June 18.

The question of which cryptocurrencies qualify as securities has long plagued the industry, with particular ramifications in the U.S. The OSC has been more sympathetic than the U.S. SEC when it comes to, for example, approval of a Bitcoin ETF, but seems to be establishing a more intensive regime for crypto exchanges in Canada. At the same time, crypto exchanges elsewhere are subject to patchwork regulations that often prove vexing.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

On Tuesday, the Senate Banking Committee held a hearing on oversight of the Federal Reserve, during which the topic of a central bank digital currency played a prominent role. 

Vice Chairman for Supervision Randal Quarles testified on behalf of the Fed. “I’m glad to see the Fed moving forward with issuing a report on central bank digital currencies,” said Senator Chris Van Hollen in one exchange. “Can you tell me whether or not the Fed would have the existing authority to launch a pilot if it so chose, or do you believe it would need congressional authority?”

Quarles responded that the study was designed to determine whether a CBDC is appropriate for the United States, which is, he said, “very much an open question.” However, “a broader pilot and certainly a CBDC itself is most likely to require additional authority,” according to Quarles.

Alongside CBDCs, digital assets came up in the context of financial inclusion and work on providing fintech firms with access to bank-like charters and services. Senator Cortez Masto asked about how emerging technologies and crypto firms can streamline services.

Quarles said: “In some cases, fintech firms are seeking to operate without banking partners. In some cases, they can operate more cheaply, which can raise inclusion, but raises questions as to how we think about those firms.”

Senator Lummis, meanwhile, asked Quarles for an update on the latest in digital asset regulation. In response, Quarles plugged the recently announced “sprint” that aims to get the Fed on the same page as other banking regulators, namely the Office of the Comptroller of the Currency and the FDIC. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The government of China’s Inner Mongolia region has proposed eight new measures to phase out crypto mining activities.

The Inner Mongolia Development and Reformation Commission (DRC) issued a proposal on Tuesday that outlined eight areas that could be deemed as illegal that relate to crypto mining activities. It is the first, more concrete proposal to emerge four days after a Chinese State Council committee raised the subject of a bitcoin trading and mining crackdown during a recent meeting.

The proposal is now set to go through a public consultation process that will last until June 1 before it takes effect. The proposed measures target not only crypto mining facilities in the region that mostly use fossil fuels but also power stations that supply energy to such operations. Internet cafes that may have been using idle computers to mine cryptocurrencies are also included.

In addition, any enterprise or individual using cryptocurrency for money laundering or fundraising activities in the region could also be liable for a criminal offense. According to the published proposal, any corporation or individual found engaging in crypto mining activities could also put into China’s List of Dishonesty, which would bar them from social activities such as getting banked, booking air or train tickets, etc.

The latest measure comes as the Inner Mongolia government is stepping up efforts to meet China’s carbon neutrality goal, as The Block reported previously. In March, the local government released a plan to shut down crypto mining activities in the region but the latest proposal intensifies such efforts with additional and specified legal liabilities for any individual or corporate that fails to comply.

Below is the full translation of the eight proposed measures:

1. For any industrial parks, data centers, power stations that provide the land and power support for crypto mining companies, there will be an intensified regulatory oversight based on the relevant laws such as China’s Energy Conservation Law and the Electric Power Law. For any entity that is intentionally hiding such activities or does not shut them down in time or does not hold a strong approval process, they will be held responsible based on the relevant regulations and the laws within the Communist Party;
2. Supervising government agencies shall cancel any policy perks for any big data center or cloud computing company that is involved in crypto mining activities and they shall be dealt with accordingly based on the Energy Conservation Law;
3. For any communications or internet companies that are involved with crypto mining conducts, the supervising government agencies shall discharge their telecommunications business licenses based on the Regulation on Telecommunications of the People’s Republic of China and they shall be dealt with accordingly;
4. For any internet cafes that are involved in crypto mining activities, their supervising agencies shall suspend and rectify their businesses;
5. For any entity that privately supplies energy to crypto mining activities without prior approval, they shall be handled by judiciary authorities based on China’s Criminal Laws;
6. For any entity or individual that is involved in using virtual currency for illegal activities such as money laundering, they shall be handled by judiciary authorities based on China’s Criminal Laws;
7. For any entity or individual that is involved in using virtual currency for fundraising activities, they shall be dealt with by their supervising agencies based on the Regulation on the Prevention and Treatment of Illegal Fund;
8. For any corporation or related personnel that is involved in crypto mining business, they will be put into China’s List of Dishonesty. Any public servants who used their positions to provide convenience or protection for crypto mining activities will be handled by the relevant Discipline Inspection Committee under the Communist Party.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

On Tuesday, a major UK trade association put out an extensive report calling on policymakers to issue clearer rules on crypto in the country.

Named for London’s famed financial district, TheCityUK is one of the most powerful forces in British finance lobbying. The organization prefaces its report with hope for the UK to “take a world-leading position in this high-growth, high-potential sector.”

In broad terms, the organization’s report advocates quick action and a certain degree of laissez-faire sensibility. It calls for a “risk-based” approach, which generally translates into banks and financial services providers doing in-house appraisals rather than responding to mandated check-lists. 

TheCityUK also proposes a taxonomy of digital assets that divides the field into seven distinct areas, several of which lack regulation. Formal taxonomies of digital assets have been a pressing issue for the industry worldwide.  

The report emphasized that a UK no longer subject to EU rules can be quicker and more flexible in responding to emerging technologies.

Many forces in UK politics have been converging to work on digital assets. Earlier this year, HM Treasury’s review of local fintech also called for more comprehensive regulation on digital assets. Just this morning, an MP wrote to the Financial Conduct Authority’s chancellor to chastise the FCA over delays to its register of crypto businesses. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

1confirmation, a crypto-focused venture capital firm, said Tuesday that it has closed a new $125 million fund. 

The fund will be used to invest in early-stage startups in the crypto space as well as cryptocurrencies and NFTs, per a blog post penned by 1confirmation founder Nick Tomaino.

Tomaino, who worked for Coinbase between 2013 and 2016, first raised a $26 million fund backed by investors like Mark Cuban, Marc Andreessen and Peter Thiel. In 2019, 1confirmation raised a $45 million fund. 

In the Tuesday post, Tomaino said that 1confirmation now had more than $800 million in assets under management. 

“We are lucky to invest in this industry and work with incredible founders everyday on behalf of a great group of LPs. This is a privilege we don’t take lightly,” Tomaino wrote. “We pledge to do our small part in helping cryptocurrency reach 1B+ users over the next 5 years by continuing to support authentic teams building products at the bleeding edge of crypto.”

Among 1confirmation’s investments are companies like Coinbase, SuperRare and dYdX, as well cryptocurrencies such as DOT, ETH and BTC. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Bank Indonesia, the central bank of Indonesia, is planning to issue a digital currency to speed up payments.

The central bank is currently assessing which technology to use for its digital rupiah, governor Perry Warjiyo told a streamed news conference on Tuesday, according to a Reuters report. Once issued, the digital rupiah will be a legal payment instrument in Indonesia, alongside banknotes. But the central bank doesn’t have a timeline yet on when it will issue it.

Indonesia, Southeast Asia’s biggest economy, has reportedly seen an increase in digital banking transactions during the COVID-19 pandemic. Per Reuters, the country’s transaction frequency in digital banking platforms rose over 60% on an annual basis to more than 570 million times in April, while value increased 46% to reach nearly 3,114 trillion rupiah (almost $217.5 billion).

While cryptocurrencies as a payment method are banned in Indonesia, it’s legal to trade them. Earlier this month, the government of Indonesia said it is planning to tax profit on crypto trades.

With today’s news, Indonesia joins a list of Asian countries that are exploring a central bank digital currency or CBDC. Hong Kong, Thailand, and South Korea are all currently working towards launching CBDC pilot programs. China, which is ahead of most countries worldwide, is nearing the launch of the digital yuan soon.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A British politician known for filibustering in parliament has put a series of tough questions to chancellor Rishi Sunak over continued delays to the Financial Conduct Authority’s crypto register.

Philip Davies, Conservative member of Parliament (MP) for Shipley, West Yorkshire, put 16 questions to Sunak in writing on May 24 — almost all of them concerning the handling of the registration process for crypto firms and the impact it has had on the United Kingdom’s reputation as a hub for financial innovation. All of the questions are due to be answered by May 26.

In one question, he asked what assessment the chancellor has made of the impact of the delays for crypto businesses on the U.K.’s international competitiveness.

This is not the first time the filibustering MP has represented the views of the crypto industry. He staged a similar cameo in December 2019, when the regulator was considering banning the sale of crypto derivatives to retail investors (a move it ultimately went ahead with).

The Block checked the register of MPs’ financial interests and, as of April 26, could find no crypto-related shareholdings connected to Davies.

Calls for Treasury to step in grow louder

The FCA’s crypto-assets register was announced after the FCA took over as the anti-money laundering and counter terrorist financing supervisor for crypto startups in early 2020. Firms in the sector were originally told they had until January 10, 2021 to get registered or cease trading, but in December the FCA established a temporary regime for some 90 firms, extending their deadline to July 9, after struggling to deal with hundreds of applications.

As of today, there are still just four companies on the crypto-asset register.

The watchdog’s inaction has already led to interventions from CryptoUK, the lobby group, which called for help from Sunak in March. Last week, conservative MP Tom Tugendhat for Tonbridge and Malling called on the Treasury to create a “safe space” for crypto innovation in the United Kingdom.

“The FCA is in a tough spot – damned if they do and damned if they don’t,” said one source close to the regulator. “Staff on the front line are pro-crypto, however senior management only see the illicit narrative.”

Davies’ office was contacted for comment but did not respond by press time. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Todd Morley, a co-founder and former executive of investment powerhouse Guggenheim Partners, has said that Ethereum has “much higher utility” than Bitcoin.

Speaking to Bloomberg TV on Monday, Morley said Bitcoin is “a thing,” but “Ethereum to me has a much higher utility through smart contracts.”

Any industry that doesn’t have a technology strategy to digitize is “going out of business,” according to Morley. He gave an example of the insurance industry and said that such industries should better have a technology strategy, or “suddenly something shows up, and your walkman looks like an abacus.”

Blockchain technology is moving very fast into other parts of the world, according to Morley. He said app developers on Ethereum, for instance, are growing at 20x for six years straight, “much much faster than Moore’s Law, so that’s where the action is.”

Moore’s Law is the observation made by American engineer Gordon Moore in 1965 that states that the speed and capability of computers will increase every couple of years, and people will pay less for them.

Morley said the large-scale deployment of Ethereum’s utility function and access to assets “hasn’t quite happened, and so we’re hoping to be leaders in that.”

Overline.Network

Morley is currently the chairman of the blockchain project Overline Network, which is building a wireless protocol. Overline, formerly Block Collider, is an interoperability protocol that can connect all blockchains, including bitcoin to decentralized finance (DeFi), allowing users to move and trade freely, according to its website.

Earlier this year, Overline launched its decentralized marketplace called Interchange that claims to enable collateral-based trading across multiple blockchains without wrapped tokens or gas fees.

The Overline Network has two coins of itself: Emblems (EMB) and Overline (OL). EMB is an ERC-20 token that provides block rewards to Overline miners that stake them, whereas OL is to Overline what ETH is to Ethereum, according to Overline’s website.

As for Overline’s business model, Morley said that the project would make money as OL’s usage and value increase over time. Further, as the world moves farther into tokenized assets, one can utilize a digital asset, according to Morley.

It is one of the reasons why Overline, along with the real-estate development group JDS, is building a new blockchain tower in New York. The tower, at 111 West 57th Street, will include “the world’s largest NFT museum,” said Morley.

“So that’s kind of the utility function inside a building rather than just owning bricks and mortar,” said Morley. “We think that Overline will be the progenitor of many projects that people can own.”

Morley also spoke about the crypto market’s price swings, and said “it’s still a very small market, so it’s illiquid,” and that’s just “typical of a young market.”

But the utility function of the crypto market, the way to connect people, and the way to create new levels of access is “really spectacular,” according to Morley. “We think it’s going to be a very very positive development for the world,” he said.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

On May 24, Marathon Digital announced plans to build a new bitcoin mining facility in partnership with Compute North. 

The new facility will house 73,000 ASIC miners in Texas and will, the firm promises, be approximately 70% carbon neutral. Marathon estimates that its total hash rate will grow to 10.37 EH/s, achieved at a cost of $0.0453 per kWh. Shares of MARA are up almost 5% on the news. 

When contacted by The Block, a representative for Marathon declined to specify what the new facility’s energy mix will be as well as how the firm plans to hit its benchmarks for carbon neutrality. Back in October, the firm made a similar announcement of a new facility in Montana, in a partnership with Beowulf that has seen a struggling coal-fired plant turned into a lucrative bitcoin mining center.

U.S.-based Bitcoin mining has been on the rise in recent months. While most mining has historically happened in China, new governmental crackdowns have seen the hash rate leave the country.

However, the U.S. has its own compliance concerns to contend with, among which is a regulatory push to reduce coal usage in the country’s energy mix. Many of the latest generation of mines are indeed setting up shop in coal plants that had shut down as energy-saving measures made them less necessary. Questions linger as to whether these miners will be able to follow through on promises to offset their emissions. 

Another critical regulatory concern facing bitcoin miners in the U.S. is the responsibility for whose transactions they verify. Marathon’s pool took the controversial step of validating only whitelisted bitcoin addresses in an effort to comply with sanctions regulations. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A tweet from Tesla CEO Elon Musk indicates he’s taking steps to encourage renewable energy usage by bitcoin miners. 

In a tweet today, Musk said he spoke with bitcoin miners based in North America. During the conversation, those miners committed to publishing a plan for renewable usage, as well as disclosing their current modes of obtaining renewable power. They also committed to calling globally on other miners to do the same, according to Musk.

“Potentially promising,” his tweet concluded.

MicroStrategy CEO Michael Saylor said he convened the meeting. Saylor tweeted that the North American miners Musk spoke with have agreed to form the “Bitcoin Mining Council,” which Saylor said would promote energy usage transparency to “accelerate sustainability initiatives worldwide.” 

Saylor said executives from Argo, Block Cap, Core Scientific, Galaxy Digital, Hive, Hut8, Marathon and Riot were in attendance. According to Saylor, they “decided to establish an organization to standardize energy reporting, pursue industry ESG goals, & educate+grow the marketplace.”

Last week, Saylor said his “entities” collectively hold 111,000 bitcoin. He’s continuously added bitcoin to software firm MicroStrategy’s balance sheet and voiced his support for the network and cryptocurrency.

Musk was also once an outspoken advocate of bitcoin, adding it to electric vehicle firm Tesla’s balance sheet, accepting payments in the cryptocurrency and touting its innovation in the payment system. However, he later halted bitcoin payments due to environmental concerns. At the time, he said the firm was looking at using other cryptocurrencies “that use <1% of Bitcoin’s energy/transaction.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.