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Binance applies for Taiwan AML compliance: Report

The world’s leading crypto exchange by trading volume has reportedly applied to register in Taiwan under the new AML compliance.

Binance, the world’s leading crypto exchange by trading volume, has reportedly applied to be registered in Taiwan under the Money Laundering Control Act and the Financial Supervisory Commission (FSC).

The FSC reportedly informed dozens of domestic crypto service providers that Binance is applying for Anti-Money Laundering (AML) compliance, according to a report published in local media. The report cited Chen Peiyun, the co-founder of Taiwan’s currency exchange BitShine,  as the source of the information who revealed that the FSC named Binance as one of the exchange prospects that is planning to enter Taiwanese crypto market via AML compliance.

Binance has not yet responded to Cointelegraph's request for comment.

While the cryptocurrency industry is largely unregulated in Taiwan, the FSC introduced AML guidelines in July 2021, requiring all crypto exchanges operating or offering their services in the country to comply with it.

Binance currently operates in Taiwan through a local entity called 'Binance International Limited Taiwan Branch (Seychelles).'  The registration information shows that Binance’s local entity was registered on May 12, 2023.

Apart from its registration in the island country, the crypto exchange has also collaborated with the local government to fight cybercrime. Binance didn't respond to Cointelegraph's requests for comments at the time of writing.

FSC became the primary regulator of cryptocurrencies in the island country in March earlier this year. At the time of the announcement the regulatory body's chief had noted that the focus would be on developing major rules and policies, including the separation of customer assets from company funds and investor protection practices.

Related: China announces plans for new national financial regulator

Taiwan made it clear that its crypto policies will be independent of mainland China, given, the Beijing government has imposed a blanket ban on crypto related activities since 2021. 

The reports about Binance entering the Taiwanese crypto market come at a time when the crypto exchange has faced regulatory pushback in America and Europe. The exchange is facing multiple lawsuits in the United States while it has withdrawn from multiple judications in Europe after regulatory concerns.

Magazine: DeFi faces stress test, DoJ fears run on Binance, Hong Kong’s crypto trading: Hodler’s Digest, July 30 – Aug. 5

SWIFT Plans to Launch CBDC Interconnection System in Next Two Years

Crypto debanking could drive industry underground: Australia Treasury

The Australian government is addressing the risks of cutting banking services to crypto exchanges amid flurry of banks restricting certain services over scams.

The growing trend of cutting services to cryptocurrency companies in Australia could lead to undesired consequences like making the industry less transparent, according to the state.

Australia's Treasury on 28 June published an official statement addressing potential policy responses on debanking in Australia. Debanking occurs when a bank declines to provide services to a customer citing issues like Anti-Money Laundering (AML), sanctions compliance, reputational risk considerations and others, the authority noted.

According to the Treasury, there is a clear lack of data on debanking practices in Australia, which makes it challenging to design effective policy responses. “The Government acknowledges the importance of insightful data to monitor any potential policy responses to de-banking,” the statement reads. The authority added:

“The Government recognises the seriousness of de-banking and understands that inaction on the issue will stifle competition and innovation in the financial services sector and may drive businesses underground and to operate exclusively in cash.”

Among four issued policy responses on debanking, Australia's Treasury mentioned digital currency exchanges. The authority specifically advised Australia’s four major banks — Commonwealth Bank of Australia (CBA), Westpac, ANZ Group and National Australia Bank — to publish guidance applicable to crypto exchanges.

The Treasury stressed that it has encouraged the banks to publish data on their requirements and risk tolerance of crypto services providers, the document reads.

“The Government expects banks to communicate their requirements to both existing and potential customers clearly and proactively prior to refusing or withdrawing banking services,” Australia's Treasury wrote. The state will also work closely with regulators, banks and the affected sectors to ensure that the implementation of the “agreed upon recommendations is effective and achievable.”

Related: Binance Australia got 12 hours' notice before it was debanked, exec says

Australia's Treasury moves to protect the local crypto industry came soon after CBA, the largest Australian bank, said in early June that it would restrict certain payments to crypto exchanges over scam risks. Previously, Westpac also banned customers from transacting with Binance crypto exchange in mid-May.

Australia is currently hosting a major blockchain and cryptocurrency event called Blockchain Australia. On June 26, the conference had a panel featuring executives from all “Big Four” banks in Australia, with execs providing their reasoning for shutting down services to crypto exchanges.

“One in three of the dollars that are scammed from Australians touch crypto, one in three. So it’s the single largest lever that we have to reduce this impact on our customers,” CBA managing director of blockchain and digital assets Sophie Gilder said.

Magazine: Asia Express: Huobi sues … Huobi? 3AC rises from ashes, Korea crypto contagion

SWIFT Plans to Launch CBDC Interconnection System in Next Two Years

IMF envisions ‘new class’ of cross-border payment platform with single ledger

The XC platform could operate domestically using tokenized assets, including deposits, with or without CBDCs.

The International Monetary Fund (IMF) has presented the outlines of a “new class” of cross-border payment system that uses a single ledger to record central bank digital currency (CBDC) transactions, programmability and improved information management. 

IMF officials chose a roundtable on CBDC policy to reveal their new platform concept on June 19. At the event, held in conjunction with the central bank of Morocco, IMF director of the monetary and capital markets department Tobias Adrian said the new type of platform could benefit individual and institutional users through lower fees and faster transaction times. He said:

“Some of the 45 billion dollars paid to remittance providers every year may then go back in the pockets of the poor.”

In addition, the platform would help central banks intervene in FX markets, aggregate information on capital flows and resolve disputes, Adrian said. The platform could be adapted for domestic wholesale and retail CBDC as well, he said.

The details of platform, dubbed the XC (cross-border payment and contracting) platform, were laid out in an IMF Fintech Note coauthored by Adrian and released the same day. It described the proposal:

“XC platforms offer a trusted single ledger – a document representing property rights -- on which standardized digital representations of central bank reserves in any currency can be exchanged.”

The XC platform was designed on the model of CBDC infrastructure. There would be a settlement layer with a single ledger. Access to it would be expanded. Currently, institutions have to have a reserve account with a central bank to carry out cross-border operations, but the XC platform would allow the trading of tokenized domestic central bank reserves. Liquidity would still come from institutions with reserve accounts.

Related: Retail CBDCs bring unknown ‘consequences’ to financial system — IMF director

A programming layer would offer the opportunity to innovate and customize services. An information layer would contain AML details necessary to meet trust conditions and privacy protections.

The XC platform would not require the use of CBDCs. The platform would provide interoperability among assets and money tokenized by the private sector, and “usefully instill standards and a safe environment with which to program financial contracts,” as settlement would be carried out in central bank money.

The publication noted that Bank for International Settlements general manager Agustín Carstens proposed a similar concept in a speech he delivered in February.

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SWIFT Plans to Launch CBDC Interconnection System in Next Two Years

AML rules for digital assets to come into effect in UAE

The licensed financial institutions would be required to verify the identities of all customers.

Under new rules from the Central Bank of the United Arab Emirates (CBUAE), licensed financial institutions (LFIs) would be required to verify the identities of all customers. The update will come into effect “within a month” by the end of June. 

On May 31, the CBUAE published guidance for LFIs on risks “related to virtual assets and virtual assets service providers.” A 44-page document specifies the new rules on Anti-Money Laundering and Combating the Financing of Terrorism for banking institutions engaging with crypto in the UAE. It takes into account Financial Action Task Force global standards.

LFIs, in the central bank’s definition, are all the non-crypto financial institutions establishing a relationship with virtual asset providers (VASPs), including banks, finance companies, exchange houses, payment service providers, registered hawala providers and insurance companies.

Related: UAE infrastructure for crypto is more ‘business-friendly’ than the US, says exec

According to the guidance, LFIs should submit a request to the central bank for non-objection to open accounts for each VASP on a case-by-case basis. Any collaboration with VASPs without a national license is prohibited.

Besides the general verification process for customers before establishing any relationship, LFIs would be required to “understand the nature of the customer’s business.” This step suggests creating a profile of the customer, including the types and volumes of transactions the customer is expected to engage in.

The LFIs would also have an obligation to monitor the volumes of non-institutional, individual customers’ crypto transactions with VASPs from “high-risk jurisdictions.” In these cases, customers can only transfer virtual assets to their own account outside the UAE-licensed VASP ecosystem.

Meanwhile, CBUAE representatives met with their counterparts from the Hong Kong Monetary Authority to discuss cooperation on digital asset regulations. The two central banks also pledged to facilitate discussions on “joint fintech development initiatives and knowledge-sharing efforts” with each region’s respective innovation hubs.

Magazine: Guide to Osaka, Japan’s second-biggest city

SWIFT Plans to Launch CBDC Interconnection System in Next Two Years

BitFlyer adopts crypto deposit limits to comply with Travel Rule

While adopting restrictions on transactions between exchanges, bitFlyer still supports transactions to and from self-custody wallets like MetaMask.

Cryptocurrency exchanges in Japan are preparing for the enforcement of the Financial Action Task Force’s Anti-Money Laundering (AML) regulations known as the Travel Rule.

On May 30, major Japanese crypto exchange bitFlyer announced the adoption of measures in response to the enforcement of stricter AML standards targeting crypto transactions in Japan.

BitFlyer has introduced restrictions on deposits and transfers, disabling transactions to and from exchanges that are not part of the Travel Rule Universal Solution Technology (TRUST) network. Adopted by major industry firms like Coinbase and Crypto.com, Trust is a platform allowing exchanges to securely manage customer data legally required by the Travel Rule.

How the TRUST network works. Source: Notabene

BitFlyer’s latest restrictions relate to 21 countries and regions that require information notification based on the Travel Rule. In the announcement, the listed countries and regions are shown in the table, including jurisdictions like the United States, Canada, Hong Kong, Singapore and others.

There are also restrictions on the types of crypto assets supported by TRUST. BitFlyer currently facilitates TRUST transactions for cryptocurrencies like Bitcoin (BTC) and Ether (ETH), as well as ERC-20 assets like Shiba Inu (SHIB), Polygon (MATIC) and others.

Effective immediately, BitFlyer’s new AML restrictions apply to all corporate and individual customers who deposit and send crypto assets using the exchange.

According to the announcement, Coincheck is the only Japanese exchange part of the TRUST network and can interact with bitFlyer. At the time of writing, Coincheck and bitFlyer only support BTC transactions via TRUST. More cryptocurrencies, including ETH and ERC-20 tokens, are coming in the near future, bitFlyer noted.

Related: Binance kicks off transition to new platform in Japan

While adopting significant restrictions on transactions between exchanges, bitFlyer still supports transactions to and from self-custody wallets like MetaMask.

BitFlyer did not immediately respond to Cointelegraph’s request for comment. This article will be updated pending new information.

The news comes amid Japan’s preparations to enforce new crypto AML restrictions starting from June 1. On May 23, the Japanese parliament decided to strengthen AML measures to bring the local crypto framework in line with global crypto regulations. The new rules require any platform processing a crypto transfer greater than $3,000 to pass on customer data to the recipient exchange or institution.

Magazine: Crypto City: Guide to Osaka, Japan’s second-biggest city

SWIFT Plans to Launch CBDC Interconnection System in Next Two Years

Institutions seek detailed blockchain analytics for crypto adoption — Elliptic

Large financial institutions are getting involved in digital assets by investing capital, time and effort into on-chain analytics solutions.

As more institutions explore digital assets, the need for on-chain analytics platforms has never been higher. 

Compliance experts, investigators and regulators employ these blockchain analytical tools to better understand the patterns and entities in cryptocurrency transactions.

To learn more about the tools and how they fit into broader cryptocurrency adoption, Cointelegraph sat down with Tom Robinson, the co-founder and chief scientist at analytics firm Elliptic; and Eray Akartuna, a senior cryptocurrency threat analyst at Elliptic.

Cointelegraph: What are the typical use cases you see for on-chain analytics for institutional clients?

Tom Robinson: Anti-Money Laundering (AML) and sanctions compliance for crypto exchanges and other businesses handling crypto assets: Our crypto transaction and wallet screening tools help businesses remain compliant with regulations and to reduce fraud.

Due diligence on crypto businesses: Our Discovery product provides risk profiles of exchanges and other crypto services based on analysis of their blockchain transactions. This is used by crypto businesses and financial institutions to gain insights into the businesses they are transacting with.

Magazine: ‘Moral responsibility’: Can blockchain really improve trust in AI?

Investigating crypto transactions: Investigator — our blockchain investigations software — allows graphical exploration of crypto wallets and the transactions between them. Law enforcement investigators use this to “follow the money” and link criminal activity to individuals. It is also used by crypto businesses to investigate potential illicit activity by their customers.

CT: How is Anti-Money Laundering in crypto different from mainstream AML within banks for fiat?

TR: The main difference is that most crypto transactions are visible on the blockchain. This makes it much easier to identify whether funds have originated from criminal activity by tracing them using blockchain analytics tools.

CT: Do you see a role for artificial intelligence (AI) and machine learning to play within on-chain analytics? Particularly within fraud prevention and AML?

Eray Akartuna: Yes, we already use machine learning within our blockchain analytics products. However, it’s very important to ensure the accuracy of these techniques through extensive testing.

There are certain aspects of blockchain transactions where we can use machine learning to understand or identify certain patterns. Patterns seen on the Bitcoin blockchain may not necessarily be the same as patterns on the Ethereum blockchain; they work in slightly different ways. I would point out the use of heuristics.

There are certain aspects of the blockchain transactions where we have common spend that will help us know whether the addresses are owned by a single entity or not — if I want to identify illicit activities and illicit actors on a blockchain — and identify their wallet addresses.

For instance, the North Korean cyber hackers were using a programmatic way of laundering. The hack was conducted in 2018, where they used about 113 wallets to disassociate funds from the original theft in an automated fashion. We could programmatically analyze the timestamps of those individual transactions to understand exactly how this automated software works.

If we are analyzing dark web markets or terrorist entities, etc., using heuristics can help us identify if a wallet address has been associated with a certain illicit entity. We can then use those heuristics to understand what other wallet addresses may also belong to or be associated with that entity.

We’ve got a risk score which fits into predictive analysis. When we look at the incoming and outcoming transactions to a cluster of wallets, we can see ultimately where they ended up. Entities identified as belonging to an exchange, a terrorist group or a dark market can be spotted when they are transacting with particular entities that we’re focusing on.

Let’s say about 50% of that crypto has gone to a certain dark web market; we can actually use that to provide a risk score of how risky the wallet is. The risk score is then used by exchanges and banks to decide if they want to do business with these wallet holders or not.

CT: What are the most complex problems you are solving at Elliptic? Why are they complex, and why is it important to solve them?

TR: The most complex and important problem we have solved recently is how to identify proceeds of crime in crypto, even when they have been laundered cross-asset and cross-chain. Criminals now move their proceeds between assets, using decentralized exchanges; and between blockchains, using cross-chain bridges.

We developed holistic screening as a way of automatically tracing crypto funds between assets and blockchains. This unique capability is now absolutely essential; otherwise, money launderers will exploit businesses’ lack of visibility into their activity.

CT: How do you see banks adopting digital assets and with that on-chain analytics? What has the uptake been so far?

EA: We are seeing slow but steady adoption, but compliance is top of mind for banks. Blockchain analytics is seen as an essential part of the puzzle and a way to assuage the concerns of regulators.

If institutions want to get involved in the decentralized finance (DeFi) space and plan to invest clients’ funds, they need to know whether the liquidity pool that they are investing in is credible and has the right risk profile. If the liquidity pool has illicit funds going in and out of it, there is a compliance issue there. That is a key use case for institutions who are looking to get involved in DeFi.

Recent: German banks slowly adopt crypto, mostly for institutional investors

The other use case is where some challenger banks like Revolut are allowing their customers to hold and trade cryptocurrencies. These banks will need compliance and AML capabilities before offering these products to customers.

CT: Have you had any interactions with regulators that would affect how you would serve the financial services industry, and what are the key areas of interest from a regulatory perspective?

TR: We have a constant dialogue with regulators around the world, many of whom use our products. It’s important that they understand how our blockchain analytics solutions function so that they can have confidence in the compliance programs run by the exchanges and banks that use our products.

SWIFT Plans to Launch CBDC Interconnection System in Next Two Years

Japan’s crypto Anti-Money Laundering measures to start in June: Report

The Japanese parliament has decided to roll out tougher AML procedures in line with the “travel rule.”

Lawmakers in Japan have decided to enforce stricter Anti-Money Laundering (AML) measures to trace cryptocurrency transactions from June 1.

On May 23, the Japanese parliament made the decision to roll out tougher AML procedures from next month, according to a report the same day from local media outlet Kyodo News.

The move aims to bring Japan’s legal framework in line with global crypto regulations.

Lawmakers revised the AML legislation in December after it was deemed insufficient by the international financial watchdog, the Financial Action Task Force (FATF).

According to reports, a vital feature of the new measures is the enforcement of the “Travel Rule” to keep a more accurate track of criminal proceeds.

The travel rule requires any financial institution processing a crypto transfer greater than $3,000 to pass on customer information to the recipient exchange or institution. The data should include the name and address of the sender and recipient and account information.

The Travel Rule was discussed by global leaders in mid-May at the G7 meeting held in Japan, with the G7 Committee clear in its support of the Travel Rule for crypto transactions.

It supported FATF initiatives on accelerating global standards for crypto “including the ‘travel rule’, and its work on emerging risks, including from DeFi arrangements and peer-to-peer transactions.”

Japan was one of the early adopters of crypto, legalizing it as property. Crypto regulations in Japan are some of the most stringent globally.

Japan’s financial regulator, the Financial Services Agency, tightened rules on crypto exchanges following the major hacks of the exchanges Mt.Gox and Coincheck.

Related: Binance to reenter Japan via acquired regulated exchange SEBC

The FSA has several rules for exchanges to protect customers including separate holdings of customer and company assets, with holdings verified in annual audits.

Investors cannot borrow more than twice their investments for leveraged trades on exchanges. Licensed crypto exchanges are also required to hold at least 95% of customer funds in cold wallets.

In April, the Web3 project team of Japan’s ruling Liberal Democratic Party released a white paper proposing ways to expand the country’s crypto industry.

Magazine: Crypto City: Guide to Osaka, Japan’s second-biggest city

SWIFT Plans to Launch CBDC Interconnection System in Next Two Years

Federal Reserve’s FedNow will integrate with Metal Blockchain

The integration will allow users to instantly convert cash to stablecoin for use in DeFi protocols.

The Federal Reserve’s forthcoming instant payment service FedNow will be integrated with Metal Blockchain, according to a May 11 announcement from the Metal Blockchain team. The announcement said that the integration will allow Metal users to instantly convert funds to stablecoin and back again using FedNow’s “send/receive” function.

Metal Blockchain’s listing in the FedNow Service Provider Showcase. Source: FedNow

FedNow is an instant payment system developed by the United States Federal Reserve. It allows for round-the-clock, near-instant payments between banks. Currently, U.S. residents can only make instant payments domestically through third-party apps such as PayPal and Venmo or crypto wallets. The Federal Reserve has stated that the new service will launch in July.

Metal Blockchain is a crypto network developed by Metallicus, based on a fork of Avalanche's code. It was created to offer compliance-friendly options for decentralized finance (DeFi) developers. In the May 11 announcement, Metal developers claimed that the network is “built on the foundation of BSA [Bank Secrecy Act] Compliance,” implying that it has identity verification and anti-money laundering features built in.

According to its documents, the network features a subnet called “X-Chain” that allows developers to enact rules for transferring assets. For example, a token can be issued with the rule that it “can only be sent to US citizens” or “can’t be traded until tomorrow.”

Cointelegraph couldn't verify what criteria FedNow uses for integration with the payment system. However, most blockchain networks use pseudonymous addresses as user identities, which means that they could be seen as not complying with the Bank Secrecy Act. This may explain why Metal is one of the first blockchain networks to be listed as a FedNow service provider.

In a conversation with Cointelegraph, Metallicus co-founder and CEO Marshall Hayner said Metal's integration with FedNow could enable the formation of interconnected “bank chains,” creating a larger blockchain ecosystem that is secure and does not rely on oracles. This will allow banks to communicate with each other to process payments and handle settlements while staying connected to the FedNow system. 

He stated that the integration will also allow banks to prepare for an eventual central bank digital currency (CBDC), as well as for “bank issued stablecoins that can interact within a basket of stablecoin currencies.”

Related: US wholesale CBDC has ‘promise,’ Fed governor says

FedNow has been criticized by some U.S. politicians, including Florida Governor Ron DeSantis and U.S. Presidential candidate Robert Kennedy, Jr., who have alleged that it is a first step towards a blockchain-based CBDC that they say will infringe privacy. The Federal Reserve has denied that FedNow is related to a CBDC.

When asked his opinion of the controversy, Hayner dismissed these criticisms of CBDCs.

“I believe this controversy is unfounded [...] As the same rigor that is applied to the banking system will be applied to CBDC,” he said.

SWIFT Plans to Launch CBDC Interconnection System in Next Two Years

Nearly 400 Crypto Firms Lose Their Estonian Licenses Under New Rules

Nearly 400 Crypto Firms Lose Their Estonian Licenses Under New RulesThe majority of crypto companies attracted by the once favorable Estonian regulations have either abandoned or lost their licenses. According to the latest numbers released by the Baltic nation’s anti-money laundering bureau, only 100 businesses are currently authorized to provide digital-asset services. Most Estonian Licenses for Provision of Crypto-Related Services Expire A total of 389 […]

SWIFT Plans to Launch CBDC Interconnection System in Next Two Years

Estonia squeezes out 400 crypto firms after new laws

Estonia’s money laundering regulator highlighted a number of issues it found within local crypto firms, such as dodgy execs and nonsensical business plans.

Almost 400 Virtual Asset Service Providers (VASPS) have voluntarily shut down or had their authorizations revoked in Estonia following the government’s recently enhanced Terrorist Financing Prevention and anti-money laundering laws (AML) that came into effect in March.

The amended laws expanded the defined scope of VASPs, required firms to have legitimate links to Estonia, increased licensing fees, and capital and information reporting requirements, along with introducing the Financial Action Task Force Travel Rule.

According to a May 8 statement from the Estonian Financial Intelligence Unit (FIU), the amendment to the AML laws on March 15 has since seen almost 200 domestic crypto service providers voluntarily shut down.

Source: Republic of Estonia Financial Intelligence Unit

While around 189 also had their authorizations revoked due to “non-compliance with the requirements.”

“Given the documents submitted by the service providers that have lost their authorisations, and their methods of operation and the risks involved, it can be argued that the legislator’s response with regard to the amendments to the Act, and the supervision activities both before and after the amendments, have been relevant,” noted Matis Mäeker, the Director of the Financial Intelligence Unit, adding:

“In renewing authorisations, we saw situations that would surprise every supervisor.”

Following the hefty clear-out, there were 100 active crypto firms registered in Estonia as of May 1, according to the FIU.

The FIU highlighted a number of general issues it found within the companies it forcibly shut down, particularly relating to misleading company information.

To name a few examples, some companies had registered board members and company contacts unbeknownst to the actual individuals themselves, while others companies had a number of people on the books that had falsified professional backgrounds on their resumes.

It also appears that many companies had copy and pasted identical business plans from each other, which were also found to be lacking “any logic or connection with Estonia.”

Related: Bitcoin takes flight in Liechtenstein: Minister proposes government services paid in crypto

Estonia has made a considered effort to enact strong AML laws across the board over the past few years. This is primarily due to the discovery in 2018 that around $235 billion worth of illicit capital had been laundered through the Estonian branch of Denmark megabank Danske Bank.

The ongoing war between Russia and Ukraine has also had an impact, as Estonia has pushed to “cut off revenues supporting Russia’s war machine and protect international financial systems,” via strong AML regulation as part of its partnership with the U.S.

Another factor which likely has contributed to the recently enhanced AML laws, is its membership to the European Union, therefore meaning it will soon have to implement the upcoming Markets in Crypto-Assets (MiCA) laws that are slated to come into effect in early 2025.

Under MiCA, crypto firms will be subject to stringent AML and terrorism prevention requirements.

Related: Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?

SWIFT Plans to Launch CBDC Interconnection System in Next Two Years