The Great Digital-Currency Debate: ‘New’ Ethereum Vs. Ethereum ‘Classic’

The new digital currency Ethereum is only about three years old, but after a controversial software upgrade, it already has split in two.

After the so-called “forking” of the cryptocurrency was carried out July 20 to undo a hack in June that led to the theft of $60 million worth of Ethereum,  some developers of the currency fought back by essentially ignoring the fork, not updating their software and maintaining the older version of the currency,

The new name of the older version: Ethereum Classic. The somewhat confounding result is that two exact versions of the same cryptocurrency exist.

A high-profile theft in June involving Ethereum, a bitcoin-like digital platform, led to the controversial decision to rewrite the software in such a way that the theft didn’t exist.

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Oracle Faces Investor Backlash over Cloud Revenue Reporting

Earlier in the series, we discussed the lawsuit filed against Oracle (ORCL) by its former employee Svetlana Blackburn. This news weighed heavily on Oracle. As a result, its stock fell more than 4% after the lawsuit. This share price fall triggered angst among Oracle’s investors and shareholders.

On June 6, 2016, Grover Klarfeld, an investor in Oracle, filed a complaint against the company. Klarfeld, on behalf of Oracle shareholders, filed a complaint claiming that the company’s executives have put investors’ investments in the company at risk through their actions. Klarfeld’s complaint, which is directed towards Oracle management, says, “The defendants made materially false and misleading statements regarding the company’s business, operational and compliance policies.”

Oracle is reeling under the pressure of reporting top-line growth. However, despite no revenue growth in fiscal 3Q16, its cloud revenues grew 44% on a constant currency basis to $735 million. This provided relief to Oracle’s stock, which rose 4% after fiscal 3Q16 results after seeing a ~15% fall in 2015 and early 2016. To cater to investors, Oracle announced the addition of $10 billion to its current stock buyback plan in fiscal 3Q16.

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Carney Joins Yellen Going Crypto as Technology Moves Up Agenda

 

Confined by a self-imposed ban on talking about Brexit, the Bank of England governor will use his high-profile annual address to London’s financial community on Thursday to talk about the technology behind crypto-currencies. Coming two weeks after Federal Reserve Chair Janet Yellen addressed the topic, his choice underscores how central bankers are embracing an innovation that could turn finance on its head.

Carney’s thoughts on digital currencies will be the BOE’s highest profile yet on the topic, and his last public comments before the U.K.’s referendum on EU membership next week. He told lawmakers last month the speech will focus on what fintech developments mean for the structure of the financial system and what officials are “doing to enable that.” The governor has previously shown a willingness to stray beyond the realm of regular central banking, and he’s now moving into an area that has ramifications for payments, cyber security and the reach of monetary policy.

“The central bank adoption of a crypto version of a fiat currency would be a game changer,” says Daniel Marovitz, the president of Earthport Plc, a London-based firm that’s building an alternative cross-border payments network for Bank of America Corp., the World Bank, and other global institutions. “The move would show the technology can work in the real world and not just the laboratory.”

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MP pushes for tighter regulations for mobile money operations

A member of Parliament’s Finance Committee, Dr. Mark Osei Assibey-Yeboah, is pushing for tighter regulations for mobile money transactions in the country.

Dr. Assibey-Yeboah, an economist, and Member of Parliament for the New Juaben South Constituency has asked Parliament to compel the Minister of Finance to bring before the House regulations governing such transactions for amendment.

Explaining the rationale for his action on Eyewitness News, Dr. Assibey-Yeboah noted that he was forced to take such a move in the interest of the country since there is no Legislative Instrument backing such transactions.

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Ex OFWs invent anti money laundering app

Amidst the $80 million money laundering scandal, a Philippine company composed of young professionals and former Filipino migrant workers developed the country’s first money remittance platform with Anti-Money Laundering and Terrorism Financing.

The computer software, according to Mohur Inc. Vice President for Research and Systems Development Nigel E. Canonizado, is part of his company’s 247 RemitPlus, a multi-tenant and modularized computer app that is capable to “monitor” and “suspend” suspicious transactions, fraudulent transactions, covered transactions, and aggregated transactions.

The-Filipino-Times_Ex OFWs invent anti money laundering app

As the copyright owner, Canonizado said in a news release, Mohur is willing to let Anti-Money Laundering Council (AMLC) use their Money Launderer and Terrorist Interdiction Program to monitor “inward transactions” and “outward transactions” generated by banks and remittance companies.

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Canadian bank fined $1.1M by anti-money laundering agency

The federal anti-money laundering agency has levied a $1.1-million penalty against an unnamed Canadian bank for failing to report a suspicious transaction and various money transfers.

It is the first time the Ottawa-based Financial Transactions and Reports Analysis Centre of Canada, known as Fintrac, has penalized a bank — and it’s being billed as a warning to thousands of other businesses.

Generally, the centre tracks cash flows linked to terrorism, money laundering and other crimes by sifting through millions of pieces of data annually from banks, insurance companies, securities dealers, money service businesses, real estate brokers, casinos and others.

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The Banking Stepchild: Money Service Businesses

Sometimes risk analysis can result in paralysis. Finding your risk tolerance and applying it to specific situations requires a nuanced approach.

I am always wary of anyone who tells me categorical rules – e.g. we do not do business in Russia because it is too risky. In this era of oversimplification, such statements border on intellectual dishonesty.

A careful approach to risk analysis always involves a cost benefit framework. Compliance is not a function that is dedicated to identifying risk and avoiding all potential risks. Compliance is part of an overall cost benefit risk analysis.

As a perfect example of what not to do in managing risks, many of the major banks have adopted a categorical approach to risks risk and declined to do business with money service businesses (“MSBs”). A categorical approach may seem justified based on risk tolerance but it represents a simplistic answer to an otherwise complex issue. To put it another way, it represents lazy compliance thinking.

In the last few years, banks have been accused of terminating all of MSBs as customers, claiming that the risk was too high to engage these businesses. In response, FinCEN issued an order reminding banks not to engage in de-risking by eliminating an entire category of customers.

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Bankers Take Note: FinCEN Issues Guidance for Money Service Businesses

On March 11, 2016, the Financial Crimes Enforcement Network (“FinCEN”) issued guidance on anti-money laundering (“AML”) compliance obligations for money service businesses (“MSBs”) and their agents.  MSBs are defined as the U.S. Postal Service and each of six distinct types of financial services providers: (1) dealers in foreign exchange; (2) check cashers; (3) issuers and sellers of traveler’s checks or money orders; (4) providers of prepaid access; (5) money transmitters; or (6) sellers of prepaid access.  FinCEN’s guidance is intended to clarify the AML compliance obligations of MSBs that operate in principal-agent relationships with domestic agents.  This most recent FinCEN guidance is a must read, not only for MSBs, but for financial institutions that provide banking services to MSBs as well.

Background

The Currency and Foreign Transactions Reporting Act of 1970 (commonly referred to as the “Bank Secrecy Act” or “BSA”) requires U.S. financial institutions to assist U.S. government agencies in detecting and preventing money laundering.  Pursuant to this affirmative obligation, a financial institution must establish and maintain an effective written AML program reasonably designed to prevent the financial institution from being used to facilitate money laundering and the financing of terrorist activities.

In March 2013, the Department of Justice initiated an investigation into those MSBs that it thought posed higher AML risks (commonly referred to as “Operation Choke Point”).  Although the investigation primarily centered on payment processors and payday lenders, Operation Choke Point caused many banks to terminate relationships with MSBs due to perceived increased regulatory and compliance risks.  Over the past two years, FinCEN has attempted to mitigate the impact of Operation Choke Point by issuing guidance that seeks to clarify AML obligations of both MSBs and banks.  This most recent guidance from FinCEN is best understood as a further effort to reassure financial institutions that they may provide banking services to MSBs without undue regulatory and compliance risks.

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Michigan considers change for bridge tolls paid in loonies

The days of currency equality may end soon at toll booths on the Michigan side of the Blue Water Bridge.

The Michigan Department of Transportation (MDOT) said this week it’s considering a “currency parity policy” for its side of the bridge that spans the St. Clair River and connects Port Huron, Mich. with Point Edward.

(www.michigan.gov)

If the proposal moves ahead, it would end a tradition that began several years ago where Michigan toll booths have accepted Canadian currency at par.

Instead, the toll for travellers paying in Canadian currency on the Michigan side of the bridge would be set twice a year, based on the average daily exchange rate over the previous six months.

Based on the current exchange rate, MDOT said the new toll for travellers paying in Canadian currency would be $4 per car, compared to the current charge of $3. Drivers paying in U.S. funds would still pay $3.

The change would also impact tolls paid in Canadian currency for other vehicles, including trucks and buses.

If approved, the change would begin April 1, with the rate reviewed each April and October.

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