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Mainstream lags in crypto understanding, think tank survey finds

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 The Royal United Services Institute and the Association of Certified Anti-Money Laundering Specialists, collaborating with YouGov, conducted a survey on authorities’ perception of the crypto industry.

“The RUSI-ACAMS Cryptocurrency Risk & Compliance Survey provides unprecedented insight into how governments, the cryptocurrency industry, traditional financial institutions, and others view the use of cryptocurrency, including its inherent risks and the robustness of compliance controls within the cryptocurrency sector,” the survey says. 

The endeavor questioned authorities worldwide, ultimately receiving 566 different insights. The survey reveals a number of results, including disagreement on the safety of crypto-asset use. Mainstream entities polled see the asset class as risky. Crypto industry participants polled also see the asset class as risky but felt that they possessed the knowledge, skills and tools to bring possible threats down to a benign level, based on their responses to the survey. This includes industry participants who are savvy around Anti-Money Laundering and Combatting the Financing of Terrorism procedures. 

The survey mentions unease from both camps on the topic of nefarious crypto use, anticipating further future guidance and regulation.  “While cryptocurrency use by criminals only accounts for around 1% of all transactions, it remains an attractive venue for those avoiding the traditional financial system,” the survey says. 

The findings also report:

“Respondents also indicate that despite current skepticism over the role of cryptocurrency in promoting financial inclusion, there might be more space for it in the future. Respondents predict both an increased role for cryptocurrency in day-to-day payments in the future as well as a decrease in cryptocurrency use for illicit activities, especially as compared to how it is viewed now.”

Given the bevy of hacks and mishaps over the last few years, participants in the crypto industry should strive to be aware of the involved risks, making prevention measures a key component of the space.



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ICO issuer charged with fraud by SEC for selling unregistered security

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The United States Securities and Exchange Commission, or SEC, has charged a cryptocurrency issuer for “making materially false and misleading statements” in connection with an unregistered security offering conducted between August 2017 and January 2018, offering further evidence that regulators were still targeting initial coin offerings from the last major market mania. 

Loci Inc., the platform behind LOCIcoin, and CEO John Wise were formally charged on Tuesday. The SEC claims that Loci and Wise misled investors about the company’s revenues, employee numbers and user base during the $7.6 million crowdsale. The regulator also alleges that Wise misused $38,163 in investor proceeds for personal expenses.

“Loci and its CEO misled investors regarding critical aspects of Loci’s business,” said Kristina Littman, the head of the SEC Enforcement Division’s cyber unit, adding:

“Investors in digital asset securities are entitled to truthful information and fulsome disclosures so they can make informed investment decisions.”

The order also requires that Loci and Wise pay a $7.6 million civil penalty for their transgressions.

Handing out penalties to cryptocurrency businesses is nothing new for U.S. authorities. Regulators from the SEC, Commodity Futures Trading Commission and Financial Crimes Enforcement Network have imposed fines of more than $2.5 billion on cryptocurrency-related businesses since 2014, underscoring the murky regulatory climate surrounding digital assets.

Elliptic Enterprises, a blockchain analytics firm headquartered in the United Kingdom, reported Tuesday that the $2.5 billion in penalties covered a broad range of infractions, including fraud, the selling of unregistered securities and a failure to uphold Anti-Money Laundering regulations.

The SEC accounted for the lion’s share of the penalties at $1.69 billion. The CFTC imposed penalties of $624 million and FinCEN slapped crypto businesses with $183 million in fines. The Office of Foreign Asset Control handed out the smallest fines among the regulators at $606,000.

Cryptocurrencies have been described by many as the wild west of finance. Tens of thousands of crypto-centric projects have launched in the wake of Bitcoin’s genesis block in early 2009. Many of these companies got their start in 2017 during the height of the initial coin offering boom.

Related: With US regulators handing out $2.5B in fines since 2014, crypto is not the ‘wild west’ of finance

ICOs allowed crypto startups to raise millions of dollars without having to meet the stringent regulations of more traditional security offerings. ICO funding reached the tens of billions in 2017 and 2018 combined, attracting unwanted attention from securities regulators. The SEC successfully charged the founders of several crypto companies, which effectively put an end to the mania — in the United States, at least.