Cobinhood ICO Review - A Regulatory Perspective

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The Cobinhood project is first of its kind in the cryptocurrency world, as it aims to deliver a zero-fee exchange to traders globally. Although exchanges offered zero-fee trading in the past, no one has done it on a permanent basis. This, along with expected support for a wide range of fiat currencies (including Chinese Yuan), have caused a stir across the crypto trading community.

The year 2017 has seen cryptocurrencies soar to all-time highs across the board as trading volume picked up tremendously. It is not all rosy, however, as governments around the globe is finally catching up to the crypto frenzy, with restrictions of varying degree imposed in the U.S., South Korea, and China. Of the three, China has gone the furthest as it has also effectively shut down all fiat-to-crypto trading outlets in the country, leaving a large void to be filled. Given the increasingly challenging regulatory landscape, what is the likelihood of Cobinhood fulfilling these promises?

AML Compliance and Banking Challenges

For Cobinhood to rise up to the occasion, it is essential for the exchange to establish robust banking relationships. If recent history is any indication, this task is unfortunately easier said than done. Back in April some of the largest cryptocurrency exchanges in the world started to get hit by banking problems. What these exchanges shared in common was they relied on Taiwanese banks to handle their US dollar fund flows. The Taiwanese banks, in turn, must establish relationships with correspondent banks in the U.S. to be able to facilitate wire transfers, since they do not have American operational presence. As such, correspondent banks have the ability to paralyze an exchange's fiat channels, subject to their comfort level of doing business with these entities.

Judging from recent developments, that comfort level is set to see a huge boost, as Taiwan was removed from the watchlist of the Asia Pacific Group on Money Laundering (APGML) in July. This is a direct result of the Financial Supervisory Commission (FSC) taking the necessary steps to revise anti-money laundering (AML) law this year, in addition to enacting the Terrorism Financing and Prevention Law last year.

With the enactment of new regulations, opening a corporate bank account in Taiwan has become an exponentially more rigorous and vigilant process, and the complexity could only be greater for a company running a cryptocurrency exchange. As per information shared by Cobinhood staff in their Telegram channel, Cobinhood has been very upfront to their banking partners about their business nature, and the account opening process lasted a month and half. Needless to say, Cobinhood is taking a no-nonsense approach in dealing with the KYC process and is determined to go above and beyond in complying with all AML laws. To be sure, even Popo Chen readily admits that there's no guarantee to uninterrupted fiat fund flows, Cobinhood seems committed to forging transparent and lasting banking relationships, and the team is as well prepared as one can possibly be to maintain their fiat channels, and to come up with contingency plans in the event of disruption.

Fintech Regulation Outlook

As strides are being made in the AML front, lawmakers have been simultaneously working towards the passage of the Financial Technology Innovation Experimentation Act. A bill also known as a regulatory sandbox, it is intended to stimulate fintech initiatives by allowing eligible entities to operate within a relatively lax legal environment. As of the time of this writing, the bill is still awaiting passage in the Legislative Yuan. In fact, this is the sole reason that Cobinhood has thus far precluded Taiwan residents from participating in the token sale.

A recent remark by FSC chairman Wellington Koo, however, has boosted hopes of a bill approval in the near term. Specifically, Koo believes Taiwan should follow the footsteps of Japan and refrain from regulating against cryptocurrencies, and sees distributed ledger technology as a huge growth opportunity. These developments can be reasonably expected to pave the way for a more conducive regulatory landscape for blockchain businesses.

Nonetheless, in light of the absence of regulations and guidelines in Taiwan governing cryptocurrency exchanges and ICOs, Cobinhood is playing it safe by incorporating in the Cayman Islands so as to avoid getting shut down on a whim. Also, the COB token has been deliberately designed to resemble a utility token in order to minimize risks of legal run-ins with securities laws. These are sensible measures aimed at ensuring business continuity and should help reduce risks for COB token holders.

Conclusion

2017 has been a pivotal year for Taiwan's regulatory landscape. Compliance breaches at Mega Financial's U.S. branches last year served as a wake-up call for the regulators, and subsequent efforts into AML reforms have earned recognition from the APGML. Improved compliance controls across the banking system is a big positive for Cobinhood as it looks to support a wide array of fiat currencies. Furthermore, while premature, there are signs pointing to a constructive regulatory regime towards the fintech sector in the future. The Cobinhood team has treaded lightly in the space thus far, and seems well positioned to navigate the evolving landscape.

(Cobinhood exchange does not support FIAT in the early stage, but a wide range of FIAT will be supported step by step)