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Japanese Regulator Officially Proposes Cutting Crypto Margin Trading Leverage Cap

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The Japanese Financial Services Agency (FSA) — the country’s financial regulator — proposed lowering the leverage rate limit of cryptocurrency margin trading from 4x to 2x.

The FSA announced the proposed measure on Jan. 14 in a cabinet office ordinance — an official order that is issued along with a new law.

If enacted, the proposal would be a first for the Japanese government in regulating the rate of crypto margin trading. According to Nikkei, there were previously no rules set by the state.

The FSA reportedly plans to put the order into practice in April when a revised version of the Financial Instruments and Exchange Act enters into effect. The FSA is accepting public comments regarding the ordinance until Feb. 13.

Margin trading allows traders to use borrowed funds in order to increase their potential profits, but it is also a high-risk, as it introduces the possibility of losses that exceed a trader’s initial investment.

According to Nikkei, the FSA aims to protect investors from “an excessive amount of speculation and the risk of loss due to volatility”.

Some say introducing clear regulations on margin trading is urgent since 80% of crypto trades come from derivatives. Data from the Japan Virtual Currency Exchange Association (JVCEA) — the official self-regulatory organization for the crypto industry in Japan — shows that the volume of leveraged, margin and futures trading for crypto was far higher than that of spot trading in Japan from April 2017 to March 2018.

JVCEA enacted a leverage cap of 4x last year, leading some cryptocurrency exchanges in the country like Coincheck to reduce their rates. However, some economic experts have suggested that the rate should be further lowered to 2x in order to match those in other jurisdictions such as the European Union.

Source: https://cointelegraph.com/news/japanese-regulator-officially-proposes-cutting-crypto-margin-trading-leverage-cap

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Bitcoin Bull Market Gains Steam, Breaks $9K for the First Time in 2020

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On Jan. 18, Bitcoin (BTC) price finally made a strong push through the resistance level at $9,000 and rallied to $9,194 before pulling back slightly. BTC price has reached its highest level since early November, hitting $9K for the first time in 2020. 

BTC USD daily chart

BTC USD daily chart. Source: TradingView

The upside move brought the price above the main trendline of the ascending triangle in the $9.1 to $9.2K zone (highlighted pink) to set a daily higher high and open the door for further gains to $9,600.

Cryptocurrency market weekly overview

Cryptocurrency market weekly overview. Source: Coin360

Traders observing the 4-hour timeframe will notice that the price pulled right below the ascending triangle arm and this point could function as an area of resistance. 

BTC USD 4-hour chart

BTC USD 4-hour chart. Source: TradingView

Bitcoin’s previous price action from Oct. 26 to Nov. 8, 2019, suggests that bulls will need to flip $9.1K from resistance to support in order to see a continuation to $9.2 to $9.5K. 

On Jan. 18, Cointelegraph contributor Michaël van de Poppe suggested that if Bitcoin price pushed above $9,000, “ The next resistance levels [to target] are $9,400 and $10,000.”

Van de Poppe also cautioned that “Bitcoin started to rally since $6,400, so the upwards continuation will be stopped at some point to consolidate.”

In the daily timeframe, Bitcoin price action remains bullish with the relative strength index (RSI) and moving average convergence divergence (MACD) both still in bullish zones. 

BTC USD MACD, RSI and Stoch daily chart. Source: TradingView

As shown on the daily chart, $9,132 has long been a support for Bitcoin price and if bulls can flip this point to support then traders will eye $9,600, $9,960 as the next targets. 

BTC USD daily chart

BTC USD daily chart. Source: TradingView

The price is also bullish on the shorter timeframes as the MACD crossing above the signal line and the histogram flipping green above 0. 

BTC USD MACD, RSI and Stoch 4-hour chart

BTC USD MACD, RSI and Stoch 4-hour chart. Source: TradingView

Over the short term, traders should keep an eye on trading volume and the next couple of candles on the 4-hour timeframe to see if the price can again push above the ascending triangle trendline and through the highlighted zone at $9.1 to $9.2K. 

Crypto Total Market Cap chart

Crypto Total Market Cap chart. Source: Coin360

The overall cryptocurrency market cap now stands at just below $250 billion and Bitcoin’s dominance is 66.4%. Notable gainers among the top-10 altcoins were Ether (ETH) with a 4.70% gain, XRP at 5.94% and Stellar (XLM) with 7.05%.

Keep track of top crypto markets in real time here

Source: https://cointelegraph.com/news/bitcoin-bull-market-gains-steam-breaks-9k-for-the-first-time-in-2020

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Crypto Fights for Freedom in India’s Supreme Court, Critics Cite Risk

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Following the session that took place last August, a three-judge panel from India’s Supreme Court reconvened once again this week to discuss the much-hyped Crypto v. RBI case. During the last hearing, the Supreme Court had asked the Reserve Bank of India (RBI) to clarify its position as to why exactly it enforced a nationwide banking ban on the country’s crypto market, as well as to discuss the seemingly unconstitutional nature of its aforementioned move. 

Ever since the RBI decided to go ahead and issue its controversial prohibition order, a number of public and industry-led petitions have been filed by prominent members of the Indian crypto community contending that the RBI’s decision was not only unjust but also in clear violation of the law. 

As part of its reply, the RBI’s legal counsel pointed out that the institution has complete authority to operate India’s currency and credit system and to protect the nation’s overall financial stability — if it feels the need to do so.

In this regard, the ongoing petition that is currently being heard in front of the Supreme Court has been brought forth by the Internet And Mobile Association of India (IAMAI), a not-for-profit industry body that seeks to expand and enhance India’s online and mobile value-added services sectors.

Latest developments

When the aforementioned case was reopened earlier this week, Ashim Sood, the counsel for the IAMAI, started off by reviewing the arguments that had previously been discussed in court last August. For starters, he once again explained to the judges some of the basics underlying cryptocurrency and blockchain technology and also read out the guidelines issued by the Financial Action Task Force last year. 

Additionally, after explaining how countries like Australia, Malta and Japan had been largely successful in regulating their local crypto markets, he emphasized the need for conventional banking avenues to be made available to blockchain/crypto business owners. Under such favorable regulations, investors, as well as casual altcoin enthusiasts, could gain access to digital currencies in a streamlined, transparent manner.

Cointelegraph spoke to Sumit Gupta, the CEO of DCX, an Indian cryptocurrency exchange, and he believes that Sood has proffered some good arguments on the matter of how the technology works, and how it can be used, given that the right regulation is in place:

“On the question of anonymity with virtual currencies, he explained the strong KYC process practiced by various exchanges. He argued that, although the industry follows strict self-regulation, it cannot enforce them beyond a point, and hence highlighted the importance of positive regulation. He discussed that every new technology will have a grey side, however, positive regulations that curb the negatives are the need of the hour.”

As part of its defense scheme, the RBI alluded to incidents, such as the Binance KYC breach of 2019, as being clear examples of why the crypto industry at large is still in its infancy, and thus, poses a massive cybersecurity threat to the economy of any nation where it is allowed to foster and grow. 

However, Sood told the judges that such cyber attacks were exactly the reason why positive regulatory measures were needed in India — so that the sector as a whole could be better equipped to face such challenges.

He then alluded to a couple of previous judgments passed by the Supreme Court, which clearly stated that legal activities can be only be shut down if a definitive risk has first been identified by the Indian parliament and not by an administrative body like the RBI. In regards to the matter, Gupta added:

“RBI’s arguments may sound inadequate, however, that is something for the judges to decide. Our judicial processes are strong enough and we have complete trust in them.”

Lastly, Kashif Raza, founder of Crypto Kanoon, an Indian crypto news platform that has been covering the ongoing hearing live via its Twitter channel, told Cointelegraph that the main goal of IAMAI’s legal counsel is to establish the fact that the Indian crypto community is not trying to push digital assets as being currencies but rather as alternative investment options. He further added:

“The IAMAI drew the focus of the court on the fact that nowhere in the FATF’s guidelines is it mentioned that cryptocurrencies should be banned completely. India is a member of the FATF, and most of the agency’s guidelines demand for KYC and better cooperation between members when it comes to controlling the cross border movement of crypto-assets.”

Indian Judges seem to have an open mind

Indian judges, who are currently presiding over the hearing, seem to be eager to learn about crypto-based technologies and the immense economic possibilities that they represent. For example, they have requested the legal counsel for the IAMAI to explain how cryptocurrencies were being regulated in countries like Australia, Italy, Malta and Japan, and whether or not instances of money laundering or tax evasion had increased following the implementation of these measures. 

In response, Sood proceeded to take the judges through a detailed comparative table related to different countries, their regime nature and how they were handling crypto-related matters within their respective jurisdictions. Furthermore, he also cited the example of Mt. Gox, and how its collapse led to the creation of an efficient regulatory framework by the Japanese government.

Related: India’s Income Tax Department Is Secretly Training Its Officials to Investigate Cryptocurrencies

The Judges further requested a detailed explanation regarding how current crypto-crypto and peer-to-peer exchange models work as well as how digital currency trading actually takes place. Sood, in response, explained to the panel the various laws that are currently being employed in South Africa, the United Kingdom and certain states of the United States that allow people to trade digital assets in a fully legal and taxable manner.

Lastly, the Supreme Court questioned the IAMAI about various suspicious services, like Silk Road, the dark web, Tor and onion routing, and how such avenues have been used by bad actors to abuse digital currencies in the past. However, the judges did concede that crypto, like any other technology, was not bad in itself and could be used for nefarious reasons when in the hands of the wrong people. 

To elaborate on the subject, Varun Sethi, CEO of Blockchain Lawyer, told Cointelegraph that “The RBI’s argument that crypto’s anonymous nature poses a threat to national security cannot be totally ruled out.” He added that, indeed, crypto can freely flow between international borders, while the cybersecurity risks are hard to deny. He went on to say:

“However, such arguments are similar to challenges faced by other regulators also. The court would surely take cognizance of similar facts and how it was dealt with in other countries.”

Some key concerns put forth by the Supreme Court

Even though the Supreme Court seems to be finally understanding the potential that crypto and blockchain technologies possess in regards to transforming a multitude of local industrial domains, it did express concerns regarding the use of digital assets for money laundering and tax evasion purposes. 

Digging deeper into this argument, Tabassum Naiz, founder of Bit2Buzz, an Indian crypto hub that presents users with a host of educational content, pointed out to Cointelegraph that recently, a number of established Indian financial/banking entities suffered heavy losses due to a host of different cybersecurity breaches and threats. Naiz alluded to banks like HDFC, ICICI, the State Bank of India, Axis and Punjab National Bank as having been embroiled in massive scandals related to money laundering and data breaches. 

While local cryptocurrency exchanges do make use of KYC protocols to minimize the occurrence of such issues, their measures are largely self-designed and, therefore, need to be validated by a central regulatory agency. On the issue, Sethi highlighted:

“If an exchange’s KYC processes are stringent and also validated by a government regulator, then the argument that all crypto transactions are used only for anonymous trading won’t hold valid. That’s where government policy is needed.”

Gupta, too, reiterated Sethi’s sentiments and claimed that self-regulation has its limits and that a government devised regulatory framework will actually strengthen the Indian crypto ecosystem — a point that has been sufficiently argued by Sood and his team this past week.

Lastly, a World Bank report regarding mining-based electricity consumption was also read in court to highlight the potential negative impact of the crypto industry on India’s power sector. However, the judges proceeded to spell out the various advantages of cryptocurrencies and how they have the potential to serve the under/unbanked, as well as fill out the many deficiencies that currently exist within the Indian payments market.

Supreme Court grills the RBI

As aforementioned, the RBI has claimed that the reason it restricted crypto activities in India was because of a lack of clear regulations, especially in regards to things like financial anonymity, money laundering, etc. However, in the opinion of the judges, it was the responsibility of the RBI — and not the local crypto exchanges — to devise a regulatory system that incorporates crypto into India’s general financial framework. Essentially, the Supreme Court labeled the RBI’s ban as being a burden-shifting ploy that was unjust.

Similarly, when the RBI stated that digital currencies were only being used by people who wanted to mask their identities, Sood told the judges that this information was factually incorrect and that many people merely viewed cryptocurrencies as being alternative investment options to conventional stocks and bonds.

What may the verdict look like?

As things stand, it might be a little early to definitively claim to which side the verdict will swing, especially since the RBI has yet to present its complete argument in front of the judiciary. However, Gupta is confident that the IAMAI’s case is strong, and that the judges will see merit in the arguments put forth by the independent agency, “We are of the firm belief that the judges will see reason in our arguments and provide a judgment, which is fair and favorable.”

It is expected that on Tuesday, Jan. 21, the RBI will submit all of its remaining statements regarding its concerns about cryptocurrencies.

Source: https://cointelegraph.com/news/crypto-fights-for-freedom-in-indias-supreme-court-critics-cite-risk

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WisdomTree Grows a Stablecoin Today to Nurture a Crypto ETF Tomorrow

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The news that WisdomTree, a major asset manager with $63.8 billion in assets under its belt, plans to launch a regulated stablecoin — pending approval from the United States Securities and Exchange Commission — could be a significant development.

It would bring a unique combination of being an enterprise level and having financial regulatory experience to the stablecoin arena — and if talks with the SEC go well, perhaps even the first U.S.-regulated crypto exchange-traded fund.

The stablecoin will be pegged to a basket of assets such as gold, fiat currencies and government debt, Cointelegraph reported on Jan. 12. However, no formal application or proposals appear to have been filed with U.S. regulators yet.

A battle brewing?

This development may signal a nascent competition among leading U.S. asset managers for dominance in the crypto sector. WisdomTree told Financial News, which first reported the story, that it “is rushing to launch a regulated cryptocurrency in the U.S. to get ahead of industry giants BlackRock and Fidelity Investments in the digital currency space.”

“People are innovating,” Macrae Sykes, portfolio manager and analyst at Gabelli and Company, told Cointelegraph, adding that:

“Slowly, steadily we’re seeing more interest in Bitcoin among large asset managers like WisdomTree.”

Fidelity itself wrote in a Jan. 9 report that “while there are yet unanswered questions, its [Bitcoin’s] position is cemented, and its potential cannot be ignored.” In December, State Street Corp., a top-five asset manager, announced a digital asset pilot project with crypto exchange and custodian Gemini Trust. Jonathan Steinberg, founder and chief executive of WisdomTree, said during the announcement:

“You want to be early. We came to ETFs 13 years after State Street. This gives us an opportunity to be ahead of the State Streets, Fidelitys, on regulated stablecoins.”

Will a crypto ETF follow?

An exchange-traded fund is a basket of securities that are bought or sold through a brokerage firm on a stock exchange. WisdomTree specializes in ETFs and is the seventh-largest ETF provider in the U.S. It has been a leader in bringing ETF products to market, according to Sykes, who covers the firm as well as other asset managers — particularly its innovative Japan Hedged Equity Fund ETF (DXJ) and Europe Hedged Equity Fund (HEDJ). So, will a crypto ETF follow?

The firm itself has said a stablecoin is just a natural extension of its ETF business. In early December 2019, WisdomTree launched a physically backed Bitcoin exchange-traded product on Switzerland’s principal stock exchange.

Related: US Bitcoin Derivatives Market, Highlights of 2019

A stablecoin is usually tethered to a relatively stable underlying asset, like the U.S. dollar or gold, and its creation-redemption mechanism is similar to an ETF, which helps keep values close to the underlying asset. This could help, at least in theory, with solving a persistent crypto problem: price volatility.

Stablecoins like Gemini Dollar and Tether that are pegged one-to-one with the U.S. dollar generally trade at about $1.00. Luciano Somoza and Tammaro Terracciano also compared Facebook’s Libra proposed stablecoin to the financial instrument:

“[Libra] feels like dejà vu for anyone familiar with ETFs. The creation-redemption mechanism is the same and ARs (authorized resellers), as defined by Libra, operate like authorised participants in the ETF market.”

WisdomTree has acknowledged that the structure of stablecoins and ETFs are similar, but product users would differ. The firm’s stablecoin is expected to be used mostly by cryptocurrency traders. ETFs, by comparison, are often marketed to mainstream investors.

The SEC hurdle

Getting regulatory approval for a stablecoin or a crypto ETF is no easy matter. In the U.S., the SEC continues to place obstacles before the Libra stablecoin, and it hasn’t warmly welcomed crypto ETF applicants, either. More than a dozen ETF proposals have failed. Cameron and Tyler Winklevoss, the founders of Gemini, have been rejected twice.

Only this past week, Bitwise Asset Management requested the withdrawal of its SEC application for a Bitcoin ETF, “the second major ETF withdrawal in recent months following similar actions by VanEck,” as Cointelegraph reported.

It’s not hopeless

However, recent misfortunes do not mean that it’s impossible to get a crypto ETF approved. SEC Commissioner Robert J. Jackson Jr. told Roll Call last year that “eventually, do I think someone will satisfy the standards that we’ve laid out there? I hope so, yes, and I think so,”

On Jan. 13, ETF Trends CEO Lydon told CNBC’s ETF Edge that the chances of a Bitcoin ETF happening within the next year stood at 60%. Worth mentioning is that another participant on the program, DataTrek Research’s Nick Colas, gauged the probability at only 10%.

Related: The SEC Does Not Want Crypto ETFs — What Will It Take to Get Approval?

One positive sign, according to Lydon, is that the SEC recently approved its first 1940 Investment Act-approved Bitcoin fund through the NYDIG Bitcoin Strategy Fund, a newly formed investment company that offers its shares for sale, though it has a limit of only $25 million. Lydon went on to add that the growing use of Bitcoin derivatives could help mitigate the BTC liquidity concerns that the SEC harbors.

“We’re still in the early stages,” Sykes told Cointelegraph. “We’re a long way from a regulatory framework that will embrace a Bitcoin ETF.” The continued fraud cases, the pump-and-dump flimflam and a fair bit of hype are slowing regulatory acceptance. The SEC remains concerned about potential market manipulation.

Infrastructure investments

Meanwhile, WisdomTree is also investing in crypto infrastructure projects. On Jan. 7, it announced its investment in the startup Securrency Inc., one of the top institutional-grade blockchain builders in the financial and regulatory space, Cointelegraph reported.

The basic idea seems to be that an ETF can be more efficiently managed on a blockchain platform, bringing ETFs to a broader range of investors and enhancing the investor user experience, the firm said.

Overall, the crypto sector has struggled to gain validation from both institutional investors and regulators, and for that reason asset-manager WisdomTree’s multi-front embrace of regulated cryptocurrency and blockchain infrastructure can only be viewed in a positive light.

Source: https://cointelegraph.com/news/wisdomtree-grows-a-stablecoin-today-to-nurture-a-crypto-etf-tomorrow

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