Australia follows Japan in move to regulate bitcoin - Financial Times

Australia follows Japan in move to regulate bitcoin

AUGUST 17, 2017 by: Jamie Smyth in Sydney

Australia plans to strengthen its anti-money laundering laws and regulate digital currencies such as bitcoin in the wake of a financial scandal involving its biggest bank, Commonwealth Bank of Australia. 

Under reforms published on Thursday, Canberra would bring digital currency exchanges under the remit of Austrac, Australia’s financial crime fighting agency

New legislation would also bolster the investigation and enforcement powers of Austrac, which earlier this month initiated a civil legal action against CBA for alleged breaches of laws on money laundering and the financing of terrorism.

“Stopping the movement of money to criminals and terrorists is a vital part of our national security defences and we expect regulated businesses in Australia to comply with our comprehensive regime,” said Michael Keenan, Australia’s justice minister. 

He said the reforms were balanced, dealing with the threat of organised crime and the financing of terrorism while ensuring that excessive regulation did not hinder legitimate financial sectors.

The proposed regulatory shake-up marks the first stage of a reform process aimed at updating Australia’s anti-money laundering and counter-terrorism financing law. It follows a high-profile money laundering scandal involving CBA, which was accused by Austrac this month of more than 50,000 breaches of the existing legislation. 

Australia’s move to regulate cryptocurrencies, including bitcoin, follows a similar move by Japan. Under new rules introduced by Tokyo this year any bitcoin or “alternative coin” exchange or money transfer business that wants to operate must come under the regulatory supervision of the Japan Financial Services Agency by October 1.

In Japan, which was the first national government to take such action, exchanges may be given annual audits and are subject to “know your customer” anti-money laundering regulations.

Tokyo’s decision to regulate bitcoin follows the 2014 bankruptcy of Mt Gox, the world’s largest virtual currency exchange. About 850,000 bitcoins from Mt Gox disappeared before its collapse, worth almost $3.5bn at today’s price of $4,080. 

By regulating the currency, Japan has officially recognised bitcoin as a legal method of payment, a move that analysts say has helped the price of bitcoins surge to record highs.

The Australian reforms will also increase the search and seizure powers of police and customs officers at the border. 

Mr Keenan said they would also provide regulatory relief to industry through the deregulation of low-risk industry sectors. 

According to the proposal, “the bill provides net regulatory relief to industry of A$36m (US$28m) annually, with the digital currency exchange sector being regulated for the first time, while deregulating low-risk industries such as cash-in-transit, which is already subject to state and territory licensing requirements”. 

How Trump’s Predecessors Dealt With the North Korean Threat - New York Times

How Trump’s Predecessors Dealt With the North Korean Threat

By RUSSELL GOLDMANAUG. 17, 2017

HONG KONG — Carrots or sticks? Aid or sanctions? Engagement or containment?

American attempts to counter North Korea’s nuclear program did not begin last week when President Trump promised to unleash “fire and fury” against the isolated government. For decades, Mr. Trump’s predecessors have waded into the diplomatic mire, trying to threaten or cajole North Korea’s ruling family into abandoning the country’s weapons programs. Each failed.

North Korea, which conducted its first nuclear test in 2006, has detonated five test bombs and is expected to explode a sixth. Since 1993, the country has also launched a series of missiles, improving their distance, accuracy and lethality each year.

Despite the North’s weapons tests and its bellicose bluster, the country has occasionally signaled a willingness to talk.

Bill Clinton

The Carrot: Oil and Aid

The early 1990s brought the Korean Peninsula to the brink of war.

North Korea threatened to withdraw from the 1970 Nuclear Nonproliferation Treaty and begin to reprocess plutonium — both of which it eventually did. In 1993, the North launched a missile capable of hitting Japan. Former President Jimmy Carter went to negotiate with Kim Il-sung, the North Korean leader, against the wishes of President Bill Clinton.

The deal, which Mr. Carter struck and Mr. Clinton would eventually agree to soon after Kim’s death, amounted to a generous offer. President Clinton promised to lift decades-old sanctions, supply the North with 500,000 tons of oil a year and provide $4 billion in aid to construct a light-water reactor capable of producing nuclear energy but not weapons.

In exchange for the reactor and oil, the North would end its weapons program and close — but not dismantle — the Yongbyon complex.

North Korea’s Response

Weeks after the agreement took effect, Republicans swept Congress in the 1994 midterm elections. Congress delivered, but often delayed, promised oil shipments and refused to lift sanctions, and the light-water reactors were never built. By 1998, the North had secretly restarted its weapons program with technology purchased from the Pakistani scientist A. Q. Khan, and by 2003, the agreement was completely abandoned.

The lesson was an important one for North Korea. By provoking the West, the government had profited: It received several years of free oil and kept its nuclear power plant intact. The United States spent millions in aid and only briefly delayed the North’s weapons program.

George W. Bush

The Stick: Punishing Sanctions

President George W. Bush confronted the North for secretly building a bomb and violating the terms of the agreement.

In 2002, in his State of the Union address, Mr. Bush called North Korea, Iraq and Iran an “axis of evil.” The administration hoped to overthrow the government of Kim Jong-il by imposing punishing sanctions.

Mr. Kim responded by announcing in 2003 that his country possessed a nuclear device and would withdraw from the Nuclear Nonproliferation Treaty. That announcement ultimately brought the United States back to the negotiating table. In 2005, Mr. Kim appeared to agree to a proposal made through the six-party talks — consisting of representatives from China, Japan, North Korea, Russia, South Korea and the United States. The deal, which was briefly enforced, traded food aid for a suspension in weapons building, and the United States removed North Korea from its list of state sponsors of terrorism.

By 2006, the North Koreans had tested a bomb and were found to be exporting weapons technology to Syria.

North Korea’s Response

The North Koreans successfully gamed the United States. As the Bush administration waited for the country to collapse under the weight of sanctions, Mr. Kim successfully developed a nuclear weapon, shifting the stakes of all future courses of action.

Barack Obama

Neither Carrot Nor Stick

Just month’s into President Barack Obama’s first term, the North detonated a series of nuclear bombs.

Rather than negotiate, Mr. Obama imposed a policy of “strategic patience,” hoping that through sanctions and espionage, the United States could wait out the isolated state.

Mr. Obama hoped that the North would eventually feel it had reason to negotiate and make a good-faith effort at talks. Instead the North pursued its weapons program and launched a series of cyberattacks on American businesses, including Sony Pictures.

Mr. Obama also talked tough with the North Koreans when he thought it necessary: In 2014, he warned that the United States “will not hesitate to use our military might” to protect American allies.

North Korea’s Response

Itwas during the Obama administration that Kim Jong-un, a grandson of the country’s founder, was named leader after the death of his father, Kim Jong-il. The youngest Mr. Kim quickly eliminated those who might challenge his leadership and began a program, using new technology, to develop an intercontinental missile.

The Americans initially hoped the young leader would represent a break from the hard-line policies of his predecessors, but instead he doubled down. In September 2016, he tested a nuclear warhead that he claimed could fit on a long-range missile.

North Korea crisis: What does Kim Jong-un really want? - BBC News

North Korea crisis: What does Kim Jong-un really want?

By Dr John Nilsson-Wright

Chatham House

13 August 2017

Kim Jong-un celebrated the successful test of an intercontinental ballistic missile in July

Long-standing tensions over North Korea's weapons programme have worsened after it tested two intercontinental ballistic missiles in July. That prompted a new round of UN sanctions and an escalation of the war of words with the United States. As the provocations continue, what does Kim Jong-un really want to achieve?

Is there anything the US could give North Korea that would make it end its nuclear and missile programmes?

Given the escalating war of words between the US and North Korea, and Donald Trump's warning of "fire and fury" if Kim Jong-un overtly threatens the United States or launches missiles against the US territory of Guam, it is unclear how useful diplomacy is as tool for moderating regional tensions.

Secretary of State Rex Tillerson and other senior Trump administration officials have stressed the importance of diplomacy, and even Mr Trump has in the past offered to talk to Mr Kim, but there are no signs that the North Koreans are open to dialogue.

Media captionPresident Trump threatened a response 'like the world has never seen'

Recent informal track two level talks with North Korean officials in Europe suggest that Pyongyang is single-mindedly focused on continuing with its missile and nuclear-weapons testing programmes.

Strikingly at the Asean Regional Forum meeting in Manila recently, there was no meeting between Mr Tillerson and Ri Yong-ho, the North Korean foreign minister, and a proposal for talks between Seoul and Pyongyang offered by Kang Kyung-wha, the South Korean foreign minister, was summarily rebuffed by the North Koreans.

In principle, there are incentives that the US could offer the North, including talks on a peace treaty ending the Korean War, preliminary steps towards diplomatic recognition (such as the establishment of a US liaison mission in Pyongyang), or an agreement on conventional arms reductions on the peninsula, but these are at best long-term objectives.

The North's repeated violations of past diplomatic agreements with the US has eroded any appetite for concessions in Washington where there is deep-seated distrust of the North on both sides of the political aisle and an assumption that pressure, via the latest round of tougher UN sanctions targeting the North's mineral and food exports, and restrictions on North Korean overseas labour, is the best way of bringing Pyongyang to heel.

How worried should you be?

Reality Check: Are Trump's assumptions right?

Is North Korea's ultimate or unswayable goal the possession of a nuclear deterrent?

Since coming to power in late 2011, Kim Jong-un's priorities have been focused consistently on two simple objectives of military modernization and delivering economic prosperity for the North Korean public.

The North's nuclear aspirations date from the 1960s and are consistent with the regime's desire for political and military autonomy in the face of opposition not only from its traditional enemies such as the United States, Japan and South Korea, but also over the objections of its historical partners such as China and Russia.

What damage could North Korea do?

Kim Jong-un, North Korea's supreme commander

Why?

Part of the North's motivation is a rational assessment of the country's strategic interests. The experience of Libya and Iraq is a reminder to Pyongyang that the only guarantee of national survival is the possession of a credible weapons of mass destruction capability.

While Washington has expressed no "hostile intent" to the North, Pyongyang maintains that the United States, as a conventionally superior and nuclear armed power, with 28,000 troops in South Korea, and a policy of maintaining a first-use nuclear option, represents a clear threat to the country.

Media captionNorth Korea's recent missile tests have escalated tensions in the region

Mr Kim's nuclear and missile testing ambitions are also an expression of identity politics. The legitimacy of the Kim dynasty's political leadership is rooted in a narrative of defence against an implacably hostile United States.

The 1950-53 Korean War, framed in North Korean propaganda as the result of direct US aggression, is used to depict the United States to the North Korean people as an adversary intent on destroying the country.

For the country's older generation that recall US actions during the war, when virtually every urban centre in the North was obliterated by American bombing, this narrative is a convincing one and is routinely reinforced for the wider population in the state's daily political messages.

Mr Trump's recent bellicose public statements are a propaganda gift to Kim Jong-un, allowing him to bolster his standing as the nation's commander in chief and protector of the country.

Can the US defend itself?

Can North Korea nuclear threat focus minds?

Could a nuclear-armed North Korea co-exist with the US?

The North's accelerated missile testing campaign and last year's two successful nuclear tests have materially enhanced the country's deterrent capabilities.

Recent intelligence reports from the US have suggested that the country may have as many as 60 nuclear bombs (a figure disputed by some analysts) and its long-range missile tests of 4 and 28 July indicate that the North may have the capacity to hit parts of the United States.

Media captionFormer diplomat Victor Gao tells Radio 4's Today "mankind will suffer" if Trump attacks North Korea

A recent report in the Bulletin of Atomic Scientists has questioned the extent to which this improved missile capability genuinely allows the North to deploy a nuclear warhead against the US, but there is little doubt that Pyongyang has made dramatic progress in the last year in securing full de-facto membership of the nuclear club.

Washington, however, has made it clear that it will not recognize or tolerate such a development. To do so would offer a propaganda victory to the North, critically undermine America's relations with its key regional allies - Japan and South Korea - prompt a destabilizing arms race in the region, and destabilize the global nuclear non-proliferation regime.

Trump's team mixed messages

Who said what: Trump or Kim?

Is any of what North Korea wants realistic?

Pyongyang's priority is to push ahead aggressively with testing, both of its missiles and its nuclear weapons, in an effort to solidify its deterrent capabilities. For Mr Kim, this makes sense as means of boosting his political authority and legitimacy at home.

He can take comfort from China's apparent reluctance to impose crippling economic restrictions on the North, despite its recent support for tougher UN sanctions.

He can also calculate rationally that ultimately the United States, as many experienced observers are arguing, will accept the need to negotiate some form of intermediate freeze in the North's military capabilities in the hope that this will stabilize the strategic situation while keeping the door open to future disarmament.

By then, Mr Kim may hope he will be able to secure a range of concessions from the US and South Korea, whether in the form of economic assistance, conventional arms reductions, or more importantly the political respect and status as an independent, sovereign state that the North has long craved.

The wild card in the current situation is how far President Trump's rhetorical brinkmanship will deter the North from pushing ahead with its missile testing programme. The North Korean military has threatened to test fire four intermediate range missiles in the vicinity of the US military facilities on Guam later this month.

No US President could tolerate a direct attack, but a test launch in the international waters close to the island would arguably represent a "grey zone" contingency that would require a more nuanced response, stopping short of full-blown military conflict.

Discussions of the current stand-off have focused on the parallels with the Cuban Missile Crisis of 1962 and the strategic judgment of the US president at the time, John F Kennedy. His caution in seeking to avoid nuclear war was shaped by his reading of Barbara Tuchman's book The Guns of August and its insights into the lessons of World War One.

It is ironic and telling that once again August is a time of acute strategic risk and uncertainty, when the rhetoric, assessments and actions of national leaders are likely to carry profound significance for regional and global security.

Dr John Nilsson-Wright is a Senior Research Fellow for Northeast Asia, Asia Programme, Chatham House and Senior Lecturer in Japanese Politics and the International Relations of East Asia, University of Cambridge