New Jersey Lawmaker Wants to Create a Crypto License

The term “digital asset” encompasses virtual currencies, digital securities and other assets, including anything with a transaction history recorded on “a distributed, digital ledger or digital data structure in which consensus is achieved through a mathematically verifiable process.”

A New Jersey lawmaker wants to license crypto exchanges and custodians looking to conduct business in the Garden State.

Assemblywoman Yvonne Lopez (D.-19) introduced the Digital Asset and Blockchain Technology Act Friday, putting forth a proposal to license any entity looking to provide digital asset trading, storage, purchase, sales, exchange, borrowing/lending or issuance services. The N.J. Department of Banking and Insurance would be tasked with overseeing this license and regulating businesses.

Under the terms of the proposed bill, individuals cannot conduct any business activity around digital assets unless they either have a license or have a reciprocal license in another state. Companies conducting business will also be required to make certain disclosures to customers.

“We must take steps to protect consumers looking to invest in cryptocurrency, while also allowing the sector to continue to develop and expand in New Jersey,” Lopez said in a statement.

She pointed to New York state’s capital expenditure requirements, saying many small crypto businesses fled to New Jersey as a result.

In her statement, Lopez said it was important to “establish fair and reasonable requirements” for these businesses.

Still, welcoming emerging industries will “keep our economy innovative and competitive,” she said.

Individuals who fail to secure the license or do not have a pending license application will be fined $500 per day, beginning when the regulator “issues a notice of failure” and extending until the individuals file their applications.

New Jersey has yet to bring any comprehensive cryptocurrency legislation into law, but Governor Phil Murphy did sign a bill last year that would create a task force to study potential use cases for blockchain.

New Settlement Layer to Offer Asian Crypto Institutions Local Alternative to Silvergate Bank

Legacy Trust’s digital asset division has plans to create the first settlement layer in Asia for institutional investors trading both fiat and cryptocurrencies.First Digital Trust (FDT) announced Friday that its new rapid settlement and clearing network (RSCN) will provide custodian clients, including some of Asia’s most prominent over-the-counter desks and financial institutions, with the means to transfer digital assets seamlessly across the region.

Based in Hong Kong, FDT also holds its clients’ funds there because the territory’s regulatory framework allows them to offer a custodial solution for both cryptocurrencies and fiat, making it possible for institutions to perform secure trades between the two asset classes.

“There isn’t a similar service anywhere in Asia,” said FTD COO Gunnar Jaerv, who added that it was high time the region had a settlement solution of its own.

Asian trading constitutes a large percentage of total cryptocurrency trading volumes. But most of the region’s institutional investors use the Silvergate Exchange Network (SEN), the settlement layer from California-based Silvergate bank – one of the few regulated financial institutions to take clients that trade cryptocurrencies.

SEN is popular with traders. The settlement layer, that allows users to move USD between cryptocurrency exchanges, processed a record of more than 14,000 transactions in Q4 2019, an increase in 17 percent from the previous quarter.

But Jaerv said it compelled its clients in Asia to follow strict U.S. financial regulation, even if the trades would not otherwise involve American entities. He added that it seemed pointless for a region, home to some of the largest OTC desks in the world, like OSL, should take the “scenic route” by processing payments with a U.S.-domiciled institution.

“If they’re trading with a U.S. counterparty then it might make more sense for them to use Silvergate exchange network, but if they’re trading with somebody in Japan, Korea or Hong Kong … it definitely makes more sense to use a local provider,” Jaerv said

Whereas Silvergate can only support the U.S. dollars, any freely tradable currency, including the Singapore and Hong Kong dollars, as well as euros, sterling and the greenback, can be used on FDT’s RSCN. That gives clients a broader range of fiat exchange rates as well as more diverse options for purchasing cryptocurrencies, Jaerv said.

FDT, which spun-out of Legacy Trust in September last year, said the RSCN was currently in the testing phase, but a full launch was slated for sometime in May. The layer will initially be restricted to fiat and crypto assets, but could be expanded to include other assets, like tokenized securities, sometime in the future, Jaerv indicated.

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