The Financial Action Task Force (FATF) and over 50 delegations involved in crypto supervision recently gathered to discuss how to regulate crypto assets and related service providers. While examining three key areas, they stressed the importance of international cooperation, citing that cryptocurrencies are global products.

FATF-Led Discussion on Crypto Supervision
The Financial Action Task Force held a "supervisors' forum" in France last week to discuss crypto asset supervision. The aim of the forum was "to promote more effective supervision by national authorities" in the area of crypto assets and related service providers. The FATF is an intergovernmental organization with a focus on developing policies to combat money laundering and terrorism financing. Supervisors are designated authorities or non-public bodies with compliance responsibilities of each country.

According to the FATF, this event was the first opportunity for regulators to discuss how to implement new measures for crypto assets and related service providers since it finalized them in June 2019. Attendees included 135 representatives from over 50 delegations involved in virtual asset supervision, the FATF detailed, elaborating:

Supervisors play an important role in ensuring that regulated entities, such as banks and financial institutions, implement the FATF's standards to detect and prevent money laundering and terrorist financing.

3 Key Areas Discussed
The event's participants shared their knowledge and experience in supervising and regulating virtual assets and virtual asset service providers (VASPs). They discussed three main topics, starting with the lessons learned so far from countries that have already established a regulatory framework for cryptocurrencies and VASPs.

The second topic concerns common issues when drafting VASP laws and regulations. Representatives shared their approach to developing an AML/CFT regime for VASPs in their jurisdictions and outlined how they were implementing the FATF's recommendations. The third topic discussed was about the tools, skills, procedures, and technology needed to effectively supervise VASPs. The FATF remarked:

The importance of international cooperation was also highlighted, as virtual assets are inherently global products.

The supervisors and regulators identified a number of areas that need further action which they plan to discuss at the next FATF Plenary and other supervisors' meetings to be held in May.

Implementing the FATF Standards
The supervisors' forum is an initiative of the Chinese Presidency of the FATF to promote more effective supervision by national authorities. Two have been held so far, the first of which was held in November 2019 in Sanya, China. It focused on the effectiveness of supervision without discussing crypto assets.

The FATF's explanation from its crypto guidance.
The FATF issued guidance for crypto assets and VASPs in June 2019, with the support of the G20 countries. The money-laundering watchdog subsequently revised its assessment methodology. It sets out how the FATF will determine whether countries have successfully implemented its recommendations and are regulating the crypto sector. The FATF's rules apply both when cryptocurrencies are exchanged for fiat currencies and for other digital assets.

The challenge now is for countries and affected entities to effectively implement its recommendations, the FATF affirmed. By bringing together practitioners from around the world, the organization explained that it "is beginning to develop a global knowledge base on 'what works' in supervising virtual assets," adding:

This will help ensure a consistent global approach to supervision and will help the VASP sector adjust to the new regulatory environment.

A FATF meeting.
While acknowledging that implementing its requirements will be challenging for the crypto sector, the FATF believes that "it will ultimately increase trust in blockchain technology as the backbone behind a robust and viable means to transfer value." Noting that adopting its rules will "ensure transparency of virtual asset transactions and keep funds with links to crime and terrorism out of the cryptosphere," the money laundering watchdog declared:
Countries need to implement the FATF's measures, and soon … The FATF will evaluate next steps in June 2020.

Blockchain technology has been focused on improving efficiency, reducing costs and improving speed—all of which translate to increased profitability for its users. However, in recent times, we've seen a rise in the use of blockchain for social good. The Global Blockchain Organization is one initiative, aiming to utilize the blockchain to create a better future. One of the founders, Mru Patel was at the Malta AI and Blockchain Summit where he spoke to CoinGeek's Stephanie Tower about GBO, the need for regulations and more.

The GBO will bring together various stakeholders, from regulators to banks and startups, and "create a standard regulated thing on basic values," he explained. These members will "shape the future of the blockchain through process, regulation and universal compliance towards blockchain for humanity."

The organization was launched in December 2019 in Oslo, Norway. It intends to work towards the adoption and utilization of blockchain in government, healthcare, energy, finance and infrastructure.

Patel stated, "The immediate impact we hope for is all about humanity—how to improve the lives people. At the end of the day we're giving to charities, we're building communities, we're going to raise a lot of funds."

Patel is also the President of EXcoin, a derivatives exchange for digital options trading. The platform allows its users to deposit and withdraw in crypto and offers trading in futures, options and CFDs. He has also been extensively involved in regulatory processes, especially concerning cryptocurrencies and blockchain technology.

He believes that governments across the globe must try to understand blockchain a bit better, so as to make informed decisions on how to regulate it. Most of them only know blockchain as a technology that underpins Bitcoin. Others relate it to the many crypto-related scams that have occurred in recent times. However, it's much more than this and could ultimately transform how governments operate.

On the perceived tug of war between blockchain and regulators, he explained, "Majority of the governments are focusing mainly on the fintech space to track money laundering and related activities, also on taxation. In my view, majority of them are dragging their feet. I have a view that what they are actually doing is protecting their jobs, pensions and the cartels they are involved with."

New York has a love/hate with cryptocurrency. It's the only state that requires companies in the industry to obtain a separate license, the BitLicense, to operate, while recognizing that digital currency is legitimate. There is even talk of the state issuing its own quasi-crypto, minus the decentralization, and Gov. Andrew Cuomo now believes that companies should take a more vested interest in their activity if they want to operate within the state's borders. Cuomo has proposed changes to New York's Financial Services Law (FSL) that would require those entities to cover all expenses related to regulation and licensing.

In Cuomo's State of the State (in pdf) plan, he explains that there are gaps in the oversight of companies licensed under the Bank Law and Insurance Law, and those covered by the FSL. Entities covered by either of the first two are obligated to provide payments to the New York Department of Financial Services (NYDFS) to cover their regulatory costs, but this isn't the case for those covered by the FSL. The governor wants to amend the FSL in order to close these gaps.

While the plan doesn't specifically mention cryptocurrency businesses, they're regulated by the NYDFS and the FSL. This can only mean that they would be subject to the same regulations as any other entity under the FSL's guidance.

No mention is made about how much any costs would be, or when the plan might be put into action. Nor does it indicate if businesses already licensed would have to pay any retroactive fees, or if they would automatically be grandfathered into the policy. The governor's office is now accepting public comments on the proposals, with any input expected on or before January 27.

Several lawmakers in New York, along with a law professor from Cornell, have introduced a plan that would see a statewide digital currency become active. Dubbed "public Venmo," the project would introduce an electronic banking platform and a digital currency that would be available for use across the state.

According to Vice, Public Venmo is the brainchild of Senator Julia Salazar, Assemblyman Ron Kim and Cornell law professor Robert Hockett. Kim explains, "I believe that our proposal, the Inclusive Value Ledger, has the potential to be truly revolutionary," Kim said in a public statement. "The creation of a free public savings and payment platform that all New Yorkers can use, not only to pay for goods and services but also to transfer money directly to each other through, could fundamentally reshape New York into a fairer, healthier, wealthier, and more inclusive place for all."

As opposed to other digital currencies, Venmo wouldn't be completely decentralized. It would be issued, monitored and regulated by a central government-led entity that maintains a government-controlled master wallet.

2019 is securely in the history books, and 2020 is ready to bring a lot of positive change for the cryptocurrency and blockchain spaces. Regulation, perceptions and laws continue to migrate toward wider acceptance, even if the transition seems slow, and this year is going to be a pivotal shift for how crypto is received. Going from 2019 to 2020 means out with the old, in with the new, and this week, the transformation week between the two years, is helping to make that happen.

Despite crypto having been received well in Australia, an executive with the Reserve Bank of Australia sees BTC as a non-practical alternative to fiat. Anthony Richards admits that he has dabbled in BTC, but he doesn't believe it can take the place of regular currency. He's correct, as crypto was never meant to replace fiat, and alternatives such as BTC and ETH are not carrying the digital currency torch the way it had been intended.

Google recently banned MetaMask, an ETH wallet and decentralized web browser from the Play Store and Apple appears to be ready to follow suit. It updated its App Store policy and might force apps that offer decentralized app (DApp) browsing capabilities to pull their products. This includes the Coinbase DApp browser, which contains a MetaMask component, and the possibility isn't sitting well with anyone. The reason Google and Apple are giving for the removal of MetaMask is because it includes a crypto mining function; however, MetaMask has already denied that assertion. For Coinbase users, the only alternative would be to use the desktop version of the Coinbase Wallet.

South Korean crypto exchange Bithumb is having to dig deep into its pockets to cover a massive tax bill. The country's National Tax Service is looking for just under $69 million from the company in the form of foreign customers' withholding taxes on gains made from crypto investments. The tax bill comes as Vidente, the exchange's largest shareholder, acquired just over 34% of the exchange's parent company. Bithumb and Vidente are prepared to pay the bill to stay on the government's good side, but will contest the legitimacy of the claim, as well.

Bitcoin SV (BSV) continues to gain strength on a number of levels. Most notably, it has recently become attractive to more crypto miners, with several new pools joining the mix recently. One of the reasons for the switch is because trends are showing that mining BSV is more profitable than mining BTC. This became more pronounced after the Quasar upgrade last year, and will grow even more with the Genesis upgrade next month.

If letting an employee go for any reason results in bad blood, it's a good idea to upgrade protocols and security measures to ensure the former employee can't look for retribution. One startup out of France learned this lesson the hard way after a former employee, disgruntled at being let go for reasons that aren't entirely clear, broke into the company's network and stole 182 BTC—around $1.3 million. Knowing how the system worked, he was able to sidestep security measures that would have sounded the alarm, but someone still noticed the sudden massive loss in holdings and contacted the authorities. The theft was traced to the former employee, who will now have to answer for his actions in front of a judge.

Huobi Japan, the Japanese subsidiary of Singaporean crypto giant Huobi Group, is set to raise $4.6 million in January 2020. The exchange will raise the funding from Japanese financial services firm Tokai Tokyo Financial Holdings. The new funding comes just two months after the exchange raised another $4.6 million from FPG Corporation.

Tokai Tokyo signed a business alliance agreement with Huobi Japan which will see the two firms strengthen cooperation in the digital assets business. The financial services giant, which mainly deals in brokerage services, believes that blockchain and cryptos are about to explode in the Japanese market and it doesn't want to miss out.

In its press release, the company stated, "Here in Japan, the relevant ministerial ordinances are expected in force next spring. Therefore, we believe that the business dealing with crypto assets and blockchain will accelerate further."

Tokai Tokyo will promote new businesses in areas such as initial exchange offerings, crypto exchange, local currency issuance and the storage and management of cryptos. The firm will "consider expanding this business to partner regional banks in the future."

Huobi Japan was launched in January 2019. This was after Huobi Group acquired local crypto exchange BitTrade in September 2018, rebranding it into its Japanese subsidiary.

In October, the company raised ¥500 million ($4.6 million) through the issuance of new shares to FPG Corporation, a Japanese financial services group. The exchange pledged to channel the funds to expansion, staying true to their promise that they would 'aggressively scale up their platform.'

While Huobi Group has found great success in Japan, its push into the United States hasn't been as smooth. Last month, the exchange announced that it was set to freeze all U.S. accounts in a few weeks' time. The freezing followed months of gradual disabling of U.S. accounts as regulatory scrutiny mounted. Users were urged to withdraw their funds before November 13 or risk losing them.

Earlier this month, its U.S. subsidiary HBUS announced that it was halting operations. HBUS was around for just over 18 months before calling it quits. In more positive news however, Huobi has continued to expand into other territories including Thailand and Argentina.

According to one researcher, quantum computing faces more hurdles than many realize when it comes to achieving viability in breaking encryption. In a recent report Dr. Subhash Kak, Regents Professor of Electrical and Computer Engineering at Oklahoma State University, notes that there are issues such as "noise" and error correction that render the buzz about quantum supremacy when it comes to Bitcoin, still largely theoretical.

Where Quantum Supremacy Falls Short
In essence "quantum supremacy" refers to the demonstration that a quantum computer can solve some problem classical computers can't. There's no doubt this has been done, but the important question for those in the crypto space centers on what kind of problem is being solved. While the development of quantum supremacy is a haunting specter indeed for hodlers worried about their private keys, there's yet little evidence the problems being solved by this technology have much utility in cracking encryption where cryptos are concerned.

"These companies are trying to build hardware that replicates the circuit model of classical computers. However, current experimental systems have less than 100 qubits. To achieve useful computational performance, you probably need machines with hundreds of thousands of qubits," states Dr. Subhash Kak in a recent article.

Though groups like D-wave boast 2000 qubits (quantum bits) the applications are different. D-wave's focus is on optimization via a process called quantum annealing which, according to Kak, is a "narrower approach to quantum computing … where qubits are used to speed up optimization problems." As such, D-wave's claims have garnered some criticism, with one recent report on the topic calling the D-wave system "skim milk" compared to other computers.

Noise and Error Correction
The real difficulty in achieving practical quantum code-cracking resides in the concepts of noise and error correction, according to Kak. The researcher details:

"For computers to function properly, they must correct all small random errors. In a quantum computer, such errors arise from the non-ideal circuit elements and the interaction of the qubits with the environment around them."

For these reasons the qubits can lose coherency in a fraction of a second and, therefore, the computation must be completed in even less time. If random errors – which are inevitable in any physical system – are not corrected, the computer's results will be worthless.

This error correction complicates things even more. The potential for noise-related errors necessitates the need for more qubit power. Theoretical physicist Mikhail Dyakonov describes the mind-boggling nature of the problem, saying:

"While a conventional computer with N bits at any given moment must be in one of its 2N possible states, the state of a quantum computer with N qubits is described by the values of the 2N quantum amplitudes, which are continuous parameters (ones that can take on any value, not just a 0 or a 1). This is the origin of the supposed power of the quantum computer, but it is also the reason for its great fragility and vulnerability.

So the number of continuous parameters describing the state of such a useful quantum computer at any given moment … is much, much greater than the number of subatomic particles in the observable universe.

In other words, the strength of practical quantum computing can also be seen as its Achilles heel. Because it can process so many variables, these seemingly endless variables also open the door for greater potential error. Resulting hardware and logistical considerations are not as often discussed as other issues, but according to the two researchers these areas are of critical importance.

Looking Past the Hype
Dyakonov, like Kak, points to the hype surrounding the field of quantum computing, which has been in development and a source of energized speculation for decades. While it is unclear exactly how far classified government and high-level scientific developments may have come by now, as far as the educated observer can tell, it seems there's a long way to go before the Bitcoin network may be in danger. At which point algorithmic upgrades have been suggested by many as a potential solution.

Still, like ongoing work in nuclear fusion, quantum computing is not to be ignored. An unforeseen breakthrough could theoretically happen at any time and change the game. Kak, for his part, remains skeptical: "As someone who has worked on quantum computing for many years, I believe that due to the inevitability of random errors in the hardware, useful quantum computers are unlikely to ever be built."

More global giants continue to adopt the blockchain, setting the stage for what could be a momentous year in 2020 for the technology. Asia has continued to set the pace, with China, South Korea and India leading the pack.

This week, China's internet giant ByteDance launched a new partnership which will develop blockchain and AI solutions for its clients. Known mainly as the owner of video sharing app TikTok, ByteDance partnered with a state media conglomerate to launch a new company named Pengpai Audiovisual Technology Co.

Also in China, the country's judiciary revealed this week that the smart courts system has been quite a success. The courts are powered by blockchain and other technologies such as AI and cloud computing. According to a recent report, these smart courts settled over 3 million cases between March and October this year.

The race for a national digital currency is still on course, with Iran revealing its intentions this week. The country's president proposed the development of a Muslim crypto this week, aimed at checking the U.S. economic dominance. He called on Muslim nations to come together and back this crypto as they seek to strengthen financial and trade cooperation.

This week, Thailand announced that it would apply blockchain in the issuance of its electronic visa on arrival. The application of the technology will speed up the process, while enhancing transparency and security.

Over in East Asia, a leading telecom operator announced the launch of a blockchain-based currency to revitalize the local economy. South Korea's largest telecom company KT partnered with Busan city to launch the currency, which will be known as Dongbaekjeon. Busan, South Korea's second largest city after Seoul, believes the currency will "revitalize its local economy and ease the management burden of small business."

In South Asia, one of the largest consultancy companies released a blockchain development kit this week, aiming to accelerate the development of decentralized applications. Tata Consultancy Services, which is the largest Indian company by market capitalization, launched the kit to allow enterprises to build and deploy dApps in a simplified way. The company claims that developers who use their kit write smart contracts 40% faster than their peers.

In Hong Kong, the United Nations is turning to blockchain to prevent the exploitation of migrant workers. Through the International Organization for Migration, the U.N. launched a blockchain tool that will introduce transparency in the immigration sector. Hong Kong is home to nearly 400,000 migrants and over half this number has been exploited in one way or another.

Over in the U.S., chipmaker AMD this week joined a blockchain alliance which aims at promoting the technology in the gaming industry. AMD becomes the first major player to join the Blockchain Game Alliance. Still in the U.S., a Gartner report this week revealed that over 75% of major companies are integrating blockchain and IoT in their operations. According to the report, transparency and security are some of the key reasons for the continued uptake.

The week also saw some legal enforcement, with two Russian crypto miners charged for using government resources to mine. This came just a month after a Russian nuclear physicist had been sentenced to three years in jail for a similar crime.