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European Cryptocurrency Exchanges Get Ready for Heightened Scrutiny with AMLD5

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As the EU members adopt AMLD5, cryptocurrency exchanges in the region will be forced to increase their compliance costs. The Fifth Anti-Money Laundering Directive brings these entities under the purview of existing regulators.

Increased costs for exchanges

The cryptocurrency exchanges based in EU member states will have to comply with the AMLD5, which came into effect on January 10. Though the member states haven’t formed a consensus on the application and execution of the new anti-money laundering guidance, the exchanges will have to brace for impact. The Paypers, a Dutch media outlet, said that the directive could shoot up compliance costs for cryptocurrency exchanges.

European Cryptocurrency Exchanges Get Ready for Heightened Scrutiny with AMLD5

The exchanges will first have to register with their respective local financial regulators and follow the AML and Know-your-Customer (KYC) guidelines. It will be impossible for these entities to create customer accounts based on minimum documentation. The financial regulators will be able to request data from the exchanges that they deem relevant to their compliance requirements.

Exchanges are
preparing for change

Some exchanges don’t want to bear the increased compliance requirements and costs in the EU. Deribit, a Dutch crypto platform, is already planning to shift to Panama, where it could enjoy fewer restrictions and compliance oversight.

Kraken, a US-based crypto exchange giant, said that compliance costs for exchanges are on the increase. In December 2019, CryptoBridge had to shut down within two months of pledging compliance with the AMLD5. While the requirements could be too harsh for the exchanges, they may also help in developing trust for these platforms. As they will now comply with the industry standards followed by banks and other financial institutions, they will appear as safer and more trustworthy options for the users. This may further incentivize users to dive into the crypto sector.

The AMLD5 guidelines are less severe than those suggested by the Financial Action Task Force (FATF). The AMLD guidelines are concerned with fiat to crypto transactions only, but both focus extensively on preventing money laundering via anonymized digital currencies.

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BCH And BSV Halving Could Be The End Of The World For Miners

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  • Crypto mining is supposed to be incredibly lucrative, essentially creating fortunes from thin air for miners. However, Bitcoin Cash (BCH) and Bitcoin SV (BSV) miners have been lately finding it difficult to pay their bills because their mining is simply not bringing in enough cash.
  • It bears remembering that BSV and BSH divorced from Bitcoin in a less than agreeable manner.
  • Miners for the two crypto firms are doing their best to prop up the chain.
  • Part of the appeal of the two new kids on the block is that transaction fees are uncommonly low, meaning that miners get to enjoy a bigger proportion of the fruits of their labor.

Traditionally, most blockchains boast low fees. Miners make most of their money from the coins they receive from solving blocks. Bitcoin, for example, makes around $200,000 daily in transaction fees, which is tiny in relation to the daily block reward.

However, miners on BSV and BSH have it a little worse than most. These miners need very high capacity hardware and specialized equipment to do their thing and this is assuredly not easy to come by, with node operators and miners alike currently facing an ungodly amount of strain.

The Depressed State Of Bitcoin Forked Coins

Apart from high hardware costs, miners for BSV and BSH currently struggle to break even and most operate at a loss, mainly because the network is not as lucrative as it should be. More, BSV

miners face some pressure to keep their block rewards, as selling these would cause the value of the asset to tank.

Actually, since the hard fork in August 2017, BSV mining appears to have been performed altruistically, perhaps by the miner known as Bitmain. Such altruistic mining is part of what helps keep BSV relevant.

For BSV, almost 50% of the blocks are going to a miner whose identity currently appears to be unknown. This has sparked speculations as to which entity is propping up the chain.

In addition to the above, the prices of BSV and BCH have been depressed of late. Since its last market slide, BCH has ascended to around $236.28. BSV trades at roughly $116.47. Both coins currently retain all the price gains they made from the start of this year. However, their valuations are far below what they were worth around the time of the hard fork of November 2018.

Exactly why some miners and entities are indulging in apparently profitless mining is unknown. We can surmise that some hope for a future price boost. Both coins have legions of supporters, who are highly vocal and anxious to detail to any listening ear just why and how their coins are far better than Bitcoin, mainly due to lower transaction fees and bigger blocks.

Perhaps the biggest supporter of both projects is Dr. Craig S. Wright, who at every conceivable occasion claims to be the illustrious Satoshi Nakamoto. According to the good doctor, BSV and BCH are “the real Bitcoin,” whatever that means.

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ECB is far from making a decision on CBDC implementation

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The ongoing trend of the ‘virtual economy’ has become increasingly popular over the last couple of years. To keep up with the crypto-explosion and Bitcoin’s popularity, central banks all over the world are now analyzing the idea behind the issuance of digital currencies. While this idea is still in the works, Yves Mersch, Vice-Chair of the Supervisory Board at the European Central Bank, is of the opinion that “it could affect the whole financial ecosystem and could wipe out the banking system.”

On the sidelines of the latest BAFT Global Annual Meeting, Mersch commented on CBDCs in an interview, stating,

“We are testing the different technological products to see what would be possible, what would be technically feasible for us, what would be legally feasible for us. And there is a huge variety of possibilities in Central Bank digital currency, which would have more or less revolutionary consequences.”

The ECB exec further argued the idea of a banking system wipeout, commented,

“Then: who will issue the economy with loans? If it is not the banks who have the deposits that they

transfer into loans, they would need to raise money somewhere else. That will increase their funding costs in order to cover it, they need to take more risks and so on”

Mersch also revealed that while the ECB has been assessing the space to increase knowledge from the technical and academic standpoint, the central bank is very far away from a political decision on any implementation.

Previously, the ECB had pointed out the shortcomings in terms of “speed, cost, and inclusiveness,” in existing retail payments, in a document titled ‘Innovation and its impact on the European retail payment landscape’. The report had expanded on ECB’s intentions to explore the potential of global stablecoins, while also revealing that the ECB plans to launch an ‘innovative and efficient’ payment solution, much like the Single Euro Payments Area [SEPA] for pan-European countries.The document said,

“The ECB will also continue to assess the costs and benefits of issuing a central bank digital currency [CBDC] that could ensure that the general public will remain able to use central bank money even if the use of physical cash eventually declines.”

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Gemini Starts Insurance Company To Boost Cryptocurrency Coverage For $200M

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Leading US cryptocurrency exchange and custodian, Gemini Trust Company, has taken a strategic step to provide robust coverage for the cryptocurrencies in its custody.

Gemini Takes An Extra Step

Owned by the Winklevoss twins, Cameron and Tyler, the exchange announced Thursday that it had launched its captive insurance firm, Nakamoto Ltd., to secure Gemini Custody, the company’s arm that stores customer’s digital assets, against theft.

This development now allows Gemini’s customers to purchase additional insurance coverage for their cryptocurrencies with the company’s traditional and captive insurer.

A captive insurer is an insurance division that is set up by companies as a way to provide coverage for business risks that are usually huge and impossible or expensive to insure with external insurance companies.

Nakamoto Ltd. is licensed by the Bermuda Monetary Authority (BMA) and is the world’s first captive to insure cryptocurrency custody as it provides insurance coverage for Gemini Custody of up to $200 million holdings, which is the largest in the world, according to the report.

More Trust Can Lead To Mass Adoption

It is no news that crypto

exchanges and custodian companies are the primary targets of hackers. There have been several reports of exchanges losing millions of dollars due to security breaches. A cryptocurrency company could claim to be very secure until it is hacked, as we have seen in many cases. Even the world’s leading cryptocurrency exchange, Binance, was once a victim of such nefarious acts.

Traditional investors are not willing to throw their money into an industry where millions could go missing overnight unless, of course, there is a robust system to cover such risks.

Gemini believes that providing comprehensive insurance coverage for digital assets will attract more institutional investors as a lack of proper insurance is one of the barriers to mass adoption. Investors will be more open to crypto investments if they feel safe and protected from risks.

“Insurance is one of the last hurdles. In order for there to be mass adoption, the path forward is a regular, compliant exchange system that clients have become accustomed to in traditional finance,” Gemini’s head of risk, Yusuf Hussain, told Reuters in an interview.

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