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Virtual Currencies are Officially Commodities

Swaps of Virtual Currencies Need to be traded in Specific Facilities or Markets!

Congratulations & Celebrations! First Virtual Currency License issued in NY

In what is being hailed as a first for state regulators in New York, the very first license has been awarded to a company which uses virtual currency. The name of that company is Circle Internet Financial. Among others, the company is the first to be issued the all-important BitLicense. This financial services industry milestone will serve the interests of the virtual currency sector well. The rules are regarded by industry regulators as an important first step towards establishing trust and credibility in the latest financial tech. With virtual currency trades, customers need to be protected against multiple issues. These include money laundering and it precisely for this reason that stringent protocols have been established by the Dept. of Financial Services.

Such is the interest among virtual currency operators that 24 other companies are in the process of having their applications reviewed. All virtual currency companies wanting to conduct business with New York must be approved accordingly. Since Bitcoin allows for the purchase of items without government-issued money, the regulatory requirements are different and the virtual currency requirements need to be treated accordingly. As time passes, many online retail companies and businesses are opting to allow trading with virtual currencies. The latest company to receive licensing – Circle Internet Financial – has customers across 100 countries, with offices in London, New York, Dublin and San Francisco. At this point, there is no data on transactions amounts or trading volumes – suffice it to say the company allows transactions in Bitcoin and USD. The company will expand its list of payments options to include the GBP, EUR and CNY in the future.

The announcement by the Commodity Futures Trading Commission that virtual currencies are now commodities is an important one. Now all Bitcoin swaps must be traded at specific contract markets or swap execution facilities. Another important ruling was made when the Commodity Futures Trading Commission (CFTC) brought legal action against a particular virtual currency dealer that failed to file paperwork accordingly.  Additionally, the LME (London Metal Exchange) made a proposal regarding position limits. To recap, these are some of the important issues to come up recently regarding virtual currencies:

  • Anthony Albanese the Superintendent for Financial Services at the NYSDFS approved the very first company for a BitLicense - Circle Internet Financial
  • According to the Commodity Futures Trading Commission (CFTC) all virtual currencies are now considered commodities according to Federal law
  • The CSBS (Conference of State Bank Supervisors) established a model regulatory framework for the purposes of virtual currency trading

The latter component is especially important, since the model framework contains essential components to provide for a regulatory scheme designed to protect the marketplace and individual consumers while fostering innovative growth in the virtual currency industry. The model framework is designed to assist individual states in their efforts at regulating all manner of virtual currency trading activities. Things like cyber security are looked at in detail, and full compliance with all aspects of the law is an intractable component of the model regulatory framework. In the event of institutional failures, the model framework has key procedures in place that are designed to protect consumer accessibility to funds.

Russia Determined Not to Get Left behind Either

The popular payments processing option known as QIWI – a Russian payment system – is eager to enter the virtual currency market with its own crypto-currency in 2016. Estimates peg the value of the virtual currency market at approximately $3.8 billion, but there are concerns in Russia that the crypto-currency could be used for illicit activities. Russian authorities have been steadfast in their determination not to pander to virtual currency operators. The Chief Executive Officer of QIWI informed the market that the virtual currency launch is slated for 2016. However, there are deep concerns about precisely how this will come about since the Russian Central Bank is the sole authority entrusted with the printing of money. Without the prior approval of the Russian Central Bank, no-crypto currency launch will be possible.

So far, no regulation exists in Russia but the central bank is considering its options. The decentralized QIWI system of virtual currency payments is predicated on Bitshares tech or Bitcoin payments. According to reports, QIWI has the largest chain of payments processing terminals globally. These can be used for all manner of purposes including banking services and money transfers. QIWI also offers all of its customers a Visa e-Wallet service which is available at a cost of $1.50. Regarding precisely which security the crypto-currency could be backed by, analysts are expecting that it may take the form of energy which is produced in Russia. By contrast, Bitcoin does not have any underlying security. The main sticking point remains authorization from the Russian Central Bank.

Bitcoin Technology in High Demand by Major Banks

It is especially important to note that many major banks are now cottoning on to the idea of utilizing Bitcoin blockchain technology. These banks include the likes of Goldman Sachs and Barclays Bank, Royal Bank of Scotland, Commonwealth Bank of Australia, State Street, UBS, JP Morgan, Credit Suisse, and BBVA. This technology is essentially capable of keeping accurate logs of all worldwide transactions posted. Owing to the large number of people, it is near impossible for any single Bitcoin user to get any fake deals approved. Hacking remains a concern however, especially in coin exchanges and digital wallets. Banks stand to save tremendous amounts of money by not having to report these transactions or determine what was bought, when it was bought and who bought it.

 

Federal Law Mandates that Virtual Currencies are Commodities
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