Global Digital Currency Regulatory Roundup: October 2014

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Every month, itBit scours the globe to bring you the latest in digital currency regulation and compliance news. Below, our Chief Compliance Officer, Erik Wilgenhof Plante, highlights the key regulations and legislation impacting retail and institutional digital currency investors around the world in the month of October.

United States

The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) released a few Virtual Currency Guidance notes in response to requests for rulings on application of existing regulations to digital currencies. FinCEN clarified that digital currency exchanges cannot avoid money transmitter status. The guidance notes could likewise apply to bitcoin processors as well as exchanges.

In New York, the extended comment period for the proposed BitLicense closed on October 21, following a clarification from NYDFS superintendent Benjamin Lawsky that many individuals and companies working in the digital currency industry, including developers, miners and individuals using bitcoin, will not need to acquire a BitLicense. There will soon be an amended proposal, which will be followed by a new comment period.

Japan

The government of Japan recently asked members of the country’s bitcoin industry to form a self-regulatory agency to be called the Japan Authority of Digital Assets (JADA). The authority will not be regulated by any specific government office, but is supported by the Liberal Democratic Party of Japan’s IT committee; it will be headed up by bitFlyer CEO Yuzo Kano. JADA will, among other things, serve as a liaison between the digital currency industry and the government, provide aid to budding digital currency companies and audit bitcoin exchanges pursuant to its own security guidelines. The Japanese government had previously ruled that it was not necessary to regulate bitcoin sales, purchases or exchanges.

Russia

The Russian government, in a bid to outlaw bitcoin, announced it will be levying fines upon those transacting in bitcoin and other digital currencies.  According to the Finance Ministry, private users could be fined up to 50,000 rubles ($1,250), public officials up to 100,000 rubles and businesses could be fined up to a maximum of one million rubles. Russia had previously stated that use of bitcoin is illegal since it is not an official currency of the country.

Serbia

The National Bank of Serbia issued an official statement on digital currencies earlier this month, laying out the basics of bitcoin and warning that it is not a legal tender in the Republic of Serbia. The Bank pointed out that as an implication of this, bitcoin cannot be subject to sale and purchase by banks and licensed exchange dealers, nor can it be subject to protection mechanisms in place for other currencies backed by the central bank. However, the Bank stopped short of banning digital currencies, simply warning that those engaging in bitcoin transactions do so “at their own risk and responsibility.”

Canada

The Banking, Trade and Commerce committee of the Canadian Senate met recently to discuss regulation of digital currencies. Andreas Antonopoulos, considered by many to be one of the foremost experts in bitcoin, spoke and answered questions at the session. A video of the session is available to view online. Antonopoulos emphasized that with bitcoin, there is no real need for centralized regulation or oversight, but that clarification on certain issues including tax statuses could be helpful.

Europe

The European Parliament this month discussed digital currencies with Britain’s Lord Jonathan Hill, the commissioner-designate for the Financial Stability, Financial Services and Capital Markets Union portfolio, in the process of questioning nominees for several European Commission posts. Lord Hill stressed the importance of balance between safety and innovation when it comes to digital currencies, particularly in the matter of protecting users. The Economic and Monetary Affairs committee submitted additional questions to Lord Hill for written responses, which were leaked to the media and also included some discussion of digital currencies.