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Keeping the tradition, we ended 2019 with a new edition of our “Blockchain Retrospective”, bringing together some of the main news of the year, and, when possible, including updates to some news from 2018.

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“Yesterday, today and tomorrow are not consecutive, they are connected in a never-ending circle”. – Netflix, DARK, 1st season

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Bills in discussion in Brazil and foreign influences – To iniciate our retrospective, we will see some of the most relevant bills in 2019, involving blockchain technology.

The Bill No. 2303/2015, Brazilian Federal Congressman Áureo Ribeiro’s authorship, of the Solidariedade Party, was reopened in March 2019. It aims to regulate virtual currencies and air mile programs, including them in the definition of “payment arrangements” under the supervision of the Brazilian Central Bank. Besides this project, the Deputy affirmed, in an interview in February to Portal Bitcoin, an interview in February to Portal Bitcoin.

Said and done. In April of the same year the Bill No. 2060/2019, was presented, which disposes about the cryptoassets legal arrangement and, between other measures, establishes penalty enhancement for “financial pyramid” and fraudulent use of cryptoassets crimes.

Still about Brazil, another significant project was Bill No. 3.825, presented this year by Senator Flávio Arns, of Rede Party, which aims to discipline “the services regarding operations made with cryptoassets on digital negotiation platforms” (known as exchanges).

With regard to other countries, right on the beginning of the year, in January, the Pennsylvania Department of Banking and Securities (DoBS) published a guide in which clarified that exchanges and other service providers related to cryptoassets do not require a license for money transmission. This opinion, however, is not the same of the federal entities, since the Financial Crimes Enforcement Network – FinCEN, for example, already had said, in March 2018, that exchanges that sell ICO coins or tokens or exchange them for other values would be also, necessarily, considered “money transmitters”.

In May, Financial Action Task Force (FATF), at the Private Sector Consultative Forum, affirmed that it was finalizing the parameters that should be adopted by exchanges, showing, therefore, that agencies would start to regulate cyptoassets exchange.

In June, a guide from FATF was published to help authorities on the development of virtual currencies regulation and supervision and virtual currencies service providers.

(News published in the Newsletters: 01.29.2019, 03.12.2019, 06.07.2019, 07.19.2019 e 09.27.2019)

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Central Bank’s pronouncements – In an official publication on its website, on August 26th, Brazilian Central Bank recognized cryptoassets as “assets” and included the trading of digital assets in the Brazilian trade balance statistics.

In the same pronouncement, Central Bank considered crypto mining as a productive process, following recommendations from the text “Treatment of Crypto Assets in Macroeconomic Statistics”, from the International Monetary Fund (IMF).

(News published in the Newsletters: 09.27.2019)

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Acts enacted by “CVM” and other actions – The Brazilian Securities and Exchange Commission (CVM) had strong presence on blockchain technology area and on cryptoassets market in the year of 2019.

On 08.13.2019, CVM prohibited Atlas Quantum, a Brazilian exchange, to advertise its investment services in cryptoassets, since they would resemble collective investment contracts (CIC), which need to be subjected to the regulation of the agency. The exchange interrupted its advertisement in Brazil, since it could cost a daily fine of R$100.000, but remained operating.

Besides that, CVM issued, on the day 08.21.2019, the CVM Normative Ruling 612, repealing CVM Normative Ruling 380 and amending CVM Normative Ruling 505, which regulates the activity of intermediaries in the securities market. Some points were amended by the public hearing SDM 05/18, including the effective date, which became 01.09.2020.

On 28.08.2019, the CVM announced the draft of a Normative Ruling subjected to public hearing to deliberate about rules for the creation and operating of an experimental regulatory sandbox, acting in compliance with Brazilian Strategy for Digital Transformation, approved by Decree No. 9.319 of 2018.

The contributions were received until 10.12.2019 and the drafts is currently under the agency analysis.

The Brazilian Securities and Exchange Commission has pronounced, also, about the necessity of the agency’s authorization for fundraising related to investments in cryptoassetss, even if the application is totally made with cryptoassets, whether made by national or foreign people.

(News published in the Newsletters: 08.19.2019, 09.02.2019, 09.27.2019 e 10.16.2019).

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More and more, the implementation of Compliance policies is essential for any company operating in cryptoeconomics – Throughout 2019, we had some examples of failures that could have been avoided if effective Compliance policies had been adopted. One example was the data leak of Unick Forex. In the episode, more than 36,000 company customers had sensitive data, such as CPF (taxpayer id), email, passwords and bitcoin wallet addresses leaked.

A study drafted by the startup Coinfirm on Know-your-Customer revealed that of the 126 exchanges analyzed, 69% do not yet have an adequate Customer Verification and Identification Policy and only 26% were classified as having a high level of Anti-money laundering policies (AML), evidencing the negligence of part of the market while dealing with the subject.

Fortunately, there are also positive examples. Chainaslysis, considered a reference in compliance tools for the crypto market, made available in January of this year an anti-money laundering protocol for cryptoassets, focusing on stablecoins. Thereby it is possible to monitor all transactions made with the use of stablecoins, from its issuance to their redemption, and enable the identification of illicit uses of cryptoassets.

(News published in the Newsletters: 03.27.2019, 04.11.2019 e 02.12.2019)

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The case of Quadriga CX and the importance of Corporate Governance – Quadriga CX was the largest Canadian cryptoasset exchange, with more than 100,000 customers and transactions that, added together, reached approximately two hundred million Canadian dollars. In January 2019, it was reported that the company’s CEO, Gerald Cotten, died during a trip to India, having taken with him all the passwords of the exchange. Since he was the only person authorized to transfer funds between the exchange wallet and its cold wallet, stored on a laptop, the company’s transactions were frozen and all the amounts were inaccessible. Several judicial measures were taken, the balance of some of the wallets were accessed (all short of expectations), audits were carried out, rumors of the most varied were scattered (including that the CEO would have forged his own death and fled with all the money) and, by April, the only option left for the company was to declare bankruptcy, with Ernst & Young as its administrator.

Currently, Quadriga CX’s bankruptcy proceedings are ongoing, with the CEO’s widow agreeing to hand over $9 million in assets to the administrator.

The Quadriga CX case, although tragic, is an excellent example of how well-defined governance rules are essential. On governance, we published, throughout 2019, some texts dealing with the subject, both in our “Back to square one” and in the “Blockchain Desk Indica”, but none of them dealt with the first steps on governance (definition, types, etc.). To this end, we indicate the text “Blockchain Governance In A Nutshell”, by Demiro Massessi. Regarding the Quadriga CX case, journalist Amy Castor set up a timeline on the topic.

(News published in the Newsletters: 02.12.2019, 03.12.2019, 04.11.2019 e 09.27.2019)

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The “Lion” (Brazilian IRS), the normative ruling and the informative of crypto operations – The year of 2019 was also marked by important announcements by the Brazilian Federal Revenue (RFB) concerning the regulation of cryptoassets in Brazil. On May of 2019, it was published the IN RFB nº 1.888/19 (cryptoassets NR). as a result of the Public Consultation RFB nº 06/18 . The NR created the obligation to provide information concerning transactions involving cryptoassets, being the first normative manifestation of the entity concerning the subject.

Months later, the Brazilian IRS (RFB) published Declaratory Acts that approved and formalized the program layout and the Guidance of the Layout concerning the provision of information to the Special Secretariat of the Federal Revenue.

Before the beginning of the period of validity of the NR RFB nº 1.888/19, however, the RFB published the Normative Ruling RFB nº 1.899, of July 10th 2019, which took away the obligation of information of the wallets’ addresses of the transactions. With the amendments, the presentation of such information will only be mandatory during a formal fiscal procedure.

The relation between RFB and blockchain was not limited to obligations and inspections. The Brazilian Federal Revenue also published a regulation act creating proceedings to data sharing using blockchain, the bCPF (Individual Taxpayer Registry in blockchain).

(News published in the Newsletters: 05.10.2019, 07.05.2019 e 07.19.2019.)

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Legal security and blockchain – The year of 2019 also was marked by legal repercussions that involved from exchanges regulatory aspects to the validation of evidence registered in blockchain.

After the unilateral closure of the Foxbit bank account by Banco do Brasil, under the statement that the transactions with cryptocurrencies were carried out anonymously and without governmental oversight, São Paulo State Court of Justice (TJ-SP) determined that the bank relationship between Foxbit and the bank was reestablished.

On the other hand, the same court authorized Banco do Brasil to close bank accounts held by Mercado Bitcoin, one of the biggest exchanges of cryptocurrencies in Brazil.

Another emblematic case that reflected directly in the judicial sphere was the case of the exchange NegocieCoins. NegocieCoins, considered one of the biggest exchanges in the world in cryptocurrencies, has been the target of more than 200 judicial recovery procedures.

Besides analyzing the relation between exchanges and banks, TJ-SP also has been analyzing the validity of registers in blockchain, understanding that they can be used as evidence in lawsuits.

(News published in the Newsletters: 03.27.2019, 12.06.2019, 08.19.2019, 05.07.2019, 04.11.2019 e 04.29.2019.)

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The birth of Libra – Since February 2019 we have registered the creation trajectory of Libra, the Facebook cryptoasset.

On June of 2019, Facebook officially announced the launching of Libra, coordinated and financed by the Libra Association, a foundation that would be integrated by different market giants as Visa, Mastercard, PayPal, Uber and many other companies – some had already left the project – that would work in cooperation in the development of the project. In addition, it was also announced the creation of Calibra, that will work as a platform to ensure the cryptoassets wallet services and work as a payment facilitator, as well develop and operate other services.

On the other hand, the Congress of United States and many countries reactions were not so positive. In view of the scandals involving Facebook in recent times, the Congress of the United States required Facebook to suspend the creation of Libra and Calibra, in order to examine the risks involving the project in terms of cybernetic security, global financial markets and the subject of national security. In this regard, Facebook presented its clarifications about Libra and Calibra. The future of the initiative is still uncertain and we need to wait for the next chapters.

(News published in the Newsletters: 02.12.2019, 03.27.2019, 03.12.2019, 06.07.2019, 06.21.2019, 07.19.2019, 08.02.2019 e 11.22.2019.)

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Around the world – The regulatory scenario for blockchain technology applications advanced a lot in 2019 in Brazil and it was not different around the world.

In October this year, the Commodity Futures Trading Commission (CFTC) decided to classify the cryptoasset Ether of the Ethereum network as a commodity and therefore submit it to the regulation of the agency.

In the manner of the adoption of the technology in other countries, since Libra’s announcement, the Central Bank of China has developed its official cryptoasset with more commitment. The Swiss Financial Market Supervisory Authority (“FINMA”) has granted a license to SEBA Crypto AG and Sygnum AG to offer banking services to cryptoassets. French Economy Minister Beuno Le Maire announced that crypto-to-crypto operations are tax-exempt. Only income obtained at the time of conversion to traditional fiat coins will be taxed. On the other hand, the Russian Bank Association aims to levy a tax on cryptoasset mining.

Another government initiative is the use of the technology to register electronic titles, published by the German Ministries of Justice and Finance. In the U.S., the city of Denver has announced that it will use blockchain technology to register and store votes in its municipal elections. The technology is also being used in lawsuits, as in the case of the Chinese Internet Court using artificial intelligence and blockchain to render decisions. Washington State recognized blockchain records as a valid and enforceable evidence through Law No. 5,638/2019, which entered into force in late July. Following the same trend, the 5th Chamber of Private Law of the São Paulo Court of Justice, considered valid the registration of evidence in blockchain in a law suit related to offensive content.

(News published in the Newsletters: 11.22.2019, 08.19.2019, 09.27.2019, 10.16.2019, 03.27.2019, 05.10.2019).

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Supply chain – Throughout 2019 we reported several supply chain-related initiatives. IBM, LG Chen and Ford have announced the cobalt extraction tracking project – from input production to China’s lithium battery plant to Ford’s U.S. automaker – which pilot project is being tested in the Democratic Republic of Congo. Another innovative IBM project is the tracking of the shipment of oranges from China to Singapore, through document flow automation. In addition, Nestlé has collaborated with Carrefour to track the production of children’s milk from the Guigoz Bio 2 and 3 lines in 5,600 units of the supermarket chain in France. Starbucks went on to track its coffee, together with Microsoft, using Azure Blockchain Service. In Brazil, Minasul plans to launch a cryptoasset based on coffee supply.

(News published in the Newsletters: 01.29.2019, 02.12.2019, 05.10.2019, 12.06.2019, 05.24.2019, 07.19.2019).

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Social projects involving Blockchain – In 2019, the Red Cross of Norway, Denmark and Kenya launched a project for the use of cryptoassets in communities prone to natural disasters in order to boost the local economy after the event. Another example, this one carioca, is the Project Recycle Orla. It is an initiative of the concessionaire Orla Rio in partnership with startup Polen and aims to register in blockchain the entire process of selective collection and reintegration of recyclable waste in new production processes.

(News published in the Newsletters: 09.02.2019 e 12.06.2019)

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Day-to-day projects – We at Blockchain Desk, in the belief that technology can and will be used more and more in our daily lives, always try to select news that demonstrates that blockchain is closer to our reality than one imagines. In April, Coinbase, a cryptoasset exchange, made the Coinbase Cardavailable on the UK market to enable the payment of products and services with cryptoassets. Also believing in new forms of payment, Cielo began to enable payments with cryptoassets this year, through QR Code. In the public sector, New Zealand, through a statement in August 2019, has allowed the payment of wages in crypto, provided that services (i) are included in an employment contract, (ii) have a fixed amount of remuneration and (iii) are part of the of the employee’s remuneration. Another country that innovated in 2019 was Bermuda, which in October announced that it would allow the payment of fees, taxes and other services with “USD Coin”a stablecoin linked to the U.S. dollar launched in 2018. Finally, a partnership between Omniaz and WineConnection originated the DNRK – “drink, rewards, network, knowledge” app, available only in Asia. DNRK, launched in September 2019 , allows its users to access detailed information on wines, beers and other alcoholic beverages through its blockchain.

(News published in the Newsletters: 04.29.2019, 09.27.2019, 08.19.2019, 11.22.2019 e 01.15.2019)

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Blockchain Trend

Among the news of our newsletters in 2019, we highlight the section “Blockchain Trend”, which aims to bring unusual intersections of blockchain technology with the society.

The relationship between cryptoassets and holidays – including Christmas – is in itself something interesting, given that cryptoasset prices tend to increase in the holiday period. That is what the article “Bitcoin Price Increases During Holidays Again, But Not Because of FOMO”, states, analyzing the increase in the price of bitcoin on North-American festive dates.

Taking advantage of the year-end season and wanting, at all costs, to expand the use of its cryptocurrency, Venezuela will offer Christmas bonuses paid at Petro to its retired employees and pensioners.

Speaking of stimulating the use of cryptoassets via donations/payments in cryptoassets, we indicate the article “Ethereum as a Christmas Present — The Easy Way to Familiarize Your Employees With Blockchain Technology”, written by Philipp Sandner.

Inspired by promotions linked to Christmas calendars, Mintbase created the first Virtual NFT Advent Calendar, giving its users the opportunity to, without the need for payment, compete for cryptoassets and prizes.

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Blockchain Desk.