54.8% of Publicly Funded Cryptos Could Be Securities in FINMA's Eyes, CryptoCompare Research Finds

Out of the top 200 cryptoassets, 78.5% would be classified as “receiving some sort of funding” and, out of these, over half would be considered securities by Switzerland’s financial supervisor, the Financial Market Supervisory Authority (FINMA), research found.

This according to CryptoCompare’s Cryptoasset Taxonomy Report, which followed guidelines FINMA set earlier this year to support initial coin offerings (ICOs). These determined there are three different token categories: payment tokens, utility tokens, and asset tokens.

As CryptoGlobe covered at the time, payment tokens are those that are set to only be used as a payment method. Utility tokens are those “intended to provide digital access to an application or service,” while asset tokens represent a share in a company or earning stream, or an “entitlement to dividends or interest payments.”

CryptoCompare’s report noted that FINMA’s regulations are clear on non-functional tokens that are tradeable – these are classified as securities. While asset tokens are also considered securities, utility tokens only fall into the category if they also or only have an investment function. Payment tokens, if functional, aren’t securities.

The global cryptocurrency market data provider’s report, using FINMA’s classifications, determined 65% of the top 100 cryptoassets by market cap are utilities, while 22% are payment tokens. The remaining 13% are “either asset tokens or combination use-cases.”

Breakdown of cryptoasset categories

Further, the report found that out of the top 200 cryptoassets, 157 would be classified as receiving “some sort of funding.” It further reveals that out of these 157 cryptoassets, “at least” 54.8% would be considered securities.

FINMA, earlier this year, clarified financial market laws and regulations aren’t applicable to all ICOs and, presumably, to all tokens. As such, the applicability of regulations to blockchain-based tokens will be determined on a case-by-case basis.

At the time, FINMA’s CEO Mark Branson noted the organization’s approach to ICOs was “balanced,” as it allowed legitimate innovators to launch their projects in Switzerland, while “protecting investors and the integrity of the financial system.”

ICO projects that issue payment tokens reportedly have to comply with anti-money laundering (AML) regulations. At the time Oliver Bussmann, the president of the Crypto Valley Association in the canton of Zug, predicted FINMA’s approach would increase the number of Switzerland-based ICOs.

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Two Brazilian Crypto Exchanges Close Following Change in Tax Laws

  • Two Brazilian exchanges have been forced to close in the face of strict new regulations.
  • Exchanges are required to keep track of all transactions made with cryptocurrency or pay fines. 

Two Brazilian cryptocurrency exchanges have been forced to shut down following the enactment of new tax laws. 

Following reports of rampant cryptocurrency-related fraud in 2019, Brazilian politicians have created and enforced new tax regulations for the industry of cryptocurrency. 

According to a report by Bitcoin.com, exchanges Acesso and Latoex are two of the first casualties of the increased regulation. Both exchanges have decided to end operation, rather than pay the hefty fines and comply with strict regulation in the face of shrinking trading volume. 

Pedro Nunes, co-founder of Acesso Bitcoin, told Portal do Bitcoin, 

After the Federal Revenue Service introduced these rules we noticed a significant decrease in the traded volume. We also feel that the market has cooled off for smaller exchanges.

The new regulations, implemented in August 2019, require traders and brokerages to report all transactions involving cryptocurrencies. Failure to comply results in penalties ranging from 500 BRD to 1500 BRD ($120 - $360). 

Exchanges say that compliance with the new regulation requires expensive investment into new resources, which has been untenable for smaller and less profitable organizations.

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