Matrixport View_Regulation #3

Although Corona virus still occupied the headlines of most mainstream Press, the halving of Bitcoin also became an important topic in most of the major economic news outlets during the month of May. One could hardly imagine this when the halving happened last time in 2016. More and more attention has been brought to the crypto currencies. From a regulatory and policy maker’s perspective, governments around the world are catching up. In China, the digital RMB is already in a testing phase. Political representatives were given text/education books on the topics of blockchain and cryptocurrency. This sends a strong signal that the Chinese government is ready to adopt massively this disruptive technology and its derivative products. And it is not the only one……

Below is a summary of regulatory updates from May 2020 that you don’t want to miss.

Policies and regulations around the globe:


Following the introduction of the revised Japanese Payment Services Act, Japanese cryptocurrency exchanges have begun implementing changes to make them compliant with the new act, effective May 1st, 2020. Below are some notable changes this new act introduces:

  • all references to “virtual currency” must be replaced with the term “crypto asset”.
  • Managing users’ money separately from their own cash flows. This means finding a third-party operator to keep hold of the users’ money in a trust bank or separate bank account held by the exchange.
  • exchanges now have to use “reliable methods” to manage users’ money. The regulations cite cold wallets, but mention that hot wallets can be used as long as they hold “the same kind and the same quantities of crypto assets” as the users’ crypto assets.
  • Under the new PSA, any user who sends crypto assets to an exchange has a “prioritized right of return” for any assets. If an exchange were to go bankrupt — as was the case with Mt. Gox — the user will be able to receive compensation in preference to other creditors.


The deadline is here: On May 18, unregistered Dutch crypto firms could face penalties if they do not fall into line with the Netherlands’ new anti-money laundering (AML) laws, passed by the Dutch Upper House on April 21.

According to the Anti-Money Laundering Directive, companies offering crypto-to-fiat or custodial services should have registered by today. In contrast, those offering only crypto-to-crypto services are exempt.

The Dutch Bank (DNB), the body in charge of regulating financial activities in the Netherlands, will be obliged to comply with the mandates of the Dutch government. However, they will not issue licenses for crypto businesses. Instead, paid registration will be mandatory and cost up to €34,000 per year.

XRP TipBot, a service enabling users to transfer XRP to each other via comments on Twitter, Reddit and Discord, has been saved from the threat of extinction at the hands of new regulations in the Netherlands. In a May 14 blog post, developer Wietse Wind explained that the “personal hobby project” had been at risk due to a registration deadline and vastly increased costs in order to conform to recently passed Anti-Money Laundering (AML) legislation. However, the project has been saved, through a last-minute partnership with digital payment platform Uphold.


One of the benefits of an advancing digital transformation is that it can lead to new solutions, unlocking inconceivable possibilities. This is especially true in digital services provided by governments, as the potential for innovation within the sector is vast. With that in mind, Brazil instituted its Digital Government Strategy through the Decree 10332/2020 in May. Through the decree, the Brazilian government set guidelines for the transformation of digital services, the unification of digital channels, and the development of interoperability between systems.

Primary goals for Brazil’s digital government strategy:

  • Offering intuitive and straightforward public digital services, consolidated in a single platform.
  • Promoting the integration and interoperability of governmental databases.
  • Implementing the General Data law.
  • Making digital citizen identification available.
  • Optimizing information technology infrastructures.


A higher education institution that trains Chinese Communist Party officials has published a new book about cryptocurrency. According to a local blockchain news report on May 19, the Party School of the Central Committee of the Communist Party of China — also known as the Central Party School — published the book as part of a book series on disruptive technologies. Previous entries in the series include “A Dialogue With Party Leaders About AI” and“ A Dialogue With Party Leaders About Blockchain”. The aim of the book series is to provide a source for party officials and the general public for learning about emerging new tech trends. Chinese central bank executives, commercial banking executives and regulators were invited to write the prologue for the new published crypto book.

A whole chapter of the book is delegated to Central Bank Digital Currencies (CBDCs). It explains the strategy behind the digital Yuan and the impact it would bring to the current payment system. A full comparative analysis on CBDCs, Facebook Libra and stablecoins is included.

A number of governing entities in China recently came together to issue an official document, proposing the development of a blockchain-based trade finance platform. Contributors included the People’s Bank of China, the China Banking Regulatory Commission, China Securities Regulatory Commission, and the Foreign Exchange Bureau. In the document, the four organizations submitted their opinions on how best to finance the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, with an emphasis on global trade and finance.

As a virtual commodity, Bitcoin (BTC) cannot be protected by the Chinese law, a court in Fujian province reportedly ruled on May 13. Interestingly, the recent ruling seems to contradict previous reports from China. Earlier this month, the Shanghai No. 1 Intermediate People’s Court ruled that Bitcoin is a digital asset and therefore should be protected by the law.


In an exclusive interview with Cointelegraph, Albert Isola, Gibraltar’s minister for digital and financial services, argued that every country that respects contract laws recognizes crypto payments in the absence of regulation that prohibits them.

On the question of whether Gibraltar legally recognizes crypto-asset payments, Minister Isola stated: “Yes. [T]he transfer of crypto assets and crypto payments [are] already happening.”

For hundreds of years, Gibraltar was a vital part of the British Empire. The tiny territory, known as “The Rock” due to a gigantic protrusion of limestone that dominates its skyline, sees half of the world’s shipping traffic passing.

Despite the territory’s growth, the British Empire eventually withered and died, and with it went the steady flow of wealth into Gibraltar — but not for long. Perhaps shaped by its central role in international shipping over the centuries, the territory never shook off its global ambitions. Four decades ago, Gibraltar burst forth from the smouldering ashes of the Empire, a financial phoenix in its own right.

In only 40 years, Gibraltar has gone from a port economy to an international finance hub thanks to its regulatory environment based on English law and growing reputation as an offshore-banking haven. Now, the government is adding the burgeoning crypto and blockchain sectors to its highly selective portfolio.


Vietnam’s Ministry of Finance has agreed to establish a research group charged with studying and making policy proposals regarding cryptocurrencies and virtual assets. The group, which was announced in May, will be comprised of nine members led by the vice chairman of the State Securities Commission, Pham Hong Son.

The additional members include other representatives of the General Department of Taxation — the country’s securities regulator — the National Institute for Finance, the General Department of Vietnam Customs, and the Department of Banking and Financial Institutions of the State Bank of Vietnam.

The research group will help the country stay abreast of new developments within the rapidly evolving blockchain sector, allowing Vietnam to respond to regulatory challenges with greater agility.


A new bill would presume that digital assets are not securities in California. Per new updates to a bill to amend California’s securities law introduced in the state’s legislative body on May 5, the largest economy in the United States and the world’s tech hub may be providing new clarity to crypto owners.

Updates to the definition of what constitutes a security include: “Investment contract, except any digital asset that meets one of the following criteria is presumptively not an investment contract.”

The criteria named are more or less a line-reading of the Howey Test — the federal metric for assessing whether an asset qualifies as an investment contract — as translated for digital assets.


India’s crypto exchanges are demanding that the country’s central bank provide clear guidelines regarding taxation. Following the Supreme Court’s reversal of the Reserve Bank of India’s ban on financial institutions providing banking services to crypto firms, the country’s digital asset exchanges are seeking clarity on their taxation obligations.

On May 4, India Times reported that several of India’s crypto exchanges collectively penned a letter to the RBI claiming that the current absence of regulatory clarity has led to banks continuing to deny services to exchanges dealing with crypto assets.

The report notes that the exchanges have also reached out to India’s high court regarding the matter.

Cayman Islands:

On April 28, the legislative assembly of the Cayman Islands gazetted five new pieces of legislation governing crypto businesses — especially exchanges.

The Virtual Asset Service Provider Bill would establish definitions and registration requirements for companies providing crypto services including exchanges, custodians and decentralized financial operators. Accompanying this bill are amendments to other reigning pieces of finance legislation for securities and stock exchanges.

A provision included in the VASP Bill is the sandbox license. Such licenses would allow companies working on technologies that run risks, including to anti-money laundering requirements, to register for one-year licenses to test out their models.


On May 18, the Ministry of Digital Transformation of Ukraine published a new draft bill “On Virtual Assets” that aims to determine the legal status of crypto assets, rule of their circulation and issuance in the country. The current version of the bill is not final and is open for discussion by the crypto community until June 5, 2020.

According to one of the co-authors of the new draft bill, the main purpose of the initiative is to finally enable local crypto firms like exchanges to open bank accounts. Michael Chobanian, the president of the Bitcoin Association Ukraine, an organization that co-authored the new bill alongside state authorities, law firms and industry players, says that crypto exchanges are still unable to set up a bank account in Ukraine to date.

Updates and news on the most important players in the industry:

Block One

Another Class Action Against Block.One Alleges Dirty Dealings During EOS ICO. Per a May 18 complaint, more investors are looking to recoup funds invested in the record-breaking initial coin offering for EOS — which netted a total of $4 billion in cryptocurrency. Lawyers for the plaintiffs are calling over $200 million of that money illegally raised. The complaint alleges that EOS was an unregistered security offering by is the development firm that spearheaded the ICO for EOS, which many saw as a form of investment in the company.


Telegram CEO announces the end of Telegram Open Network and Gram following regulatory battle. Per a May 12 message from Telegram CEO Pavel Durov, the company is calling it quits on the Telegram Open Network (TON) and the linked Gram tokens following a lengthy battle with the United States Securities and Exchange Commission. By abandoning the TON project, Telegram seems to have lost their long-running legal battle to the U.S. SEC. The SEC brought an action against Telegram in October 2019, a few days before the firm was planning to launch the TON network. In the lawsuit, the SEC accused Telegram of violating the U.S. securities law by conducting its $1.7 billion initial coin offering in 2018.

In March 2020, a U.S. court recognized that the SEC had a good chance of proving that Telegram’s GRAMs were unregistered securities. Telegram CEO Pavel Durov subsequently suggested a reimbursement plan on April 30, apparently accepting the court’s decision.


A Californian judge has given preliminary approval for a $25 million settlement proposed by the Tezos Foundation to end a consolidated class-action lawsuit. The lawsuit dates back to shortly after Tezos’ $232 million initial coin offering (ICO) in July 2017, when investors started filing claims against the firm, accusing Tezos of issuing unlicensed securities in the U.S.

According to court documents from an April 30 hearing, the judge wrote, “the Court will likely be able to approve the settlement, subject to further consideration at the Settlement Hearing”. The date for the Settlement Hearing is yet to be set.

If the foundation is found liable in the suit, estimates of damages range from under $1 million to more than $150 million. The proposed $25 million settlement will provide class-action members damages equivalent to between 16%, to more than 100%, of the estimated damages.



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