Saudi Arabia Considering Cryptocurrency Regulations, Ban Unlikely

  • Saudi regulators are monitoring the cryptocurrency market and pondering regulations
  • A cryptocurrency ban is unlikely

The intensely volatile and overheated cryptocurrency markets of late 2017 have drawn the attention of regulators across the globe. Saudi Arabia is the latest in a long line of nations taking a closer look at the space. While some regulators tried to outright ban cryptocurrencies, others merely imposed anti-money laundering (AML) and know your customer (KYC) requirements on businesses. In Saudi Arabia, regulators are seemingly taking a more cautious approach, in order not to stifle innovation.

Speaking to Business Insider, the chairman of Saudi Arabia’s Capital Markets Authority, Mohammed ElKuwaiz, revealed officials are paying attention to the cryptocurrency space. They haven’t acted yet, as they are taking steps not to hinder activity in cryptocurrency markets.

“We are still evaluating what our appropriate regulatory response should be. I think we are likely to come up with something very soon.”

Mohammed ElKuwaiz

Just like the rest of the world, Saudi Arabia was hit with a cryptocurrency craze late last year. According to CryptoCompare, bitcoin trading volume for SAR was hitting over 20 BTC per day last month.on peer-to-peer exchange LocalBitcoins..

Although cryptocurrencies aren’t as popular in the country as they are in South Korea and Japan, a number of crypto exchanges currently serve the kingdom’s residents. Among them are Paxful, which claims to have sold over 10,000 BTC in the country, and BitOasis, which also serves users in the rest of the Middle East and North Africa.

Per ElKuwaiz, the cryptocurrency field is still emerging, and regulators “would like to see any new field develop before jumping in.” That said, Saudi Arabia’s central bank has in the past worked with UAE’s (United Arab Emirates) central bank on a cross-border cryptocurrency.

Saudi Arabia’s “wait and see” approach to the cryptocurrency space and fintech is set to allow new startups to develop pilot projects around the sector. To support the initiative, regulators created a sandbox program. Per ElKuwaiz:

"Essentially, companies are issued a provisional license over a test and pilot period in order to test their ideas," he said. "After the pilot period, we can then jointly agree to fit it into the existing regulatory regime or build a regulatory regime around it."

The kingdom’s stance toward cryptocurrencies is revealed at a time in which India’s finance minister Arun Jaitly says cryptocurrencies are not legal tender in the country.

$100 Million Crypto Startup 'Liquidated' By Swiss Regulators, 'Illegal Activity' Confirmed

Envion, a Zug, Switzerland-based firm focused on developing “mobile blockchain mining” software, has been accused of “unlawfully receiving deposits” from approximately 37,000 investors.

According to a report published on March 27th, 2019 by SwissInfo.ch, Envion’s management “unlawfully accepted over CHF90 million ($90.5 million)” through its initial coin offering (ICO). The firm reportedly did not have the required “statutory license,” however it still took money from “more than 37,000 investors” - who purchased Envion’s EVN tokens. Payments to Envion were made in USD, Ether (ETH), and Bitcoin (BTC).

FINMA: Envion Did Not Have Banking License Yet Still Accepted “Public Deposits”

Swiss Financial Market Supervisory Authority (FINMA), Switzerland’s financial regulator, has determined that accepting the payments “qualified as public deposits” under the nation’s Banking Act. In order to accept such payments, the Act requires that Envion (or any other firm) hold a banking license.

In addition to not having a banking license, FINMA revealed that Envion’s management did not issue the company’s EVN tokens “under the same conditions to all investors.” Moreover, FINMA found that there was “no international audit unit” - which is a requirement under Switzerland’s financial laws.

Feeling “Totally Exonerated” As All Proceedings Seemingly Come To An End

As noted by local news outlets, Envion is “now in liquidation” and FINMA will “not be taking any further action.” Notably, the “details of the bankruptcy proceedings” have not been disclosed, however they are currently being overseen by Zug’s bankruptcy office.

In response to FINMA’s investigation, Matthias Woestmann, the former CEO at Envion, said that the financial regulator had “not identified any misappropriation of the assets entrusted to the company.” Woestmann added that he was relieved because it seems as if there may be no further charges against him or Envion’s board of directors.

Woestmann also felt “totally exonerated” as he believes it’s “the end of the proceedings” against him and the firm’s board members. The former CEO told reporters that he hopes the funds will be returned to the investors as soon as possible.

Alleged New York Fraudster Indicted By US Department Of Justice

In a seemingly more serious crime, a New York-based crypto scammer is facing 9 different charges as he has been accused of stealing almost $200,000 from unsuspecting investors. The 46-year-old Staten Island resident has been charged by the US Department of Justice (DoJ) for “using smoke and mirrors to allegedly dupe investors into paying his company—CabbageTech, for advice and strategies on cryptocurrency trading.”

The defendant, named Patrick K. McDonnell, had allegedly been soliciting investments on Facebook and Twitter. However, the DoJ revealed in a press release (published on March 26th, 2019) that the “defendant reportedly stole the money for personal use.”