Agreement Reached Between Central Bank and Íslandsbanki

íslandsbanki

In a statement published this morning by the Central Bank of Iceland, an agreement has been reached to conclude the matter of Íslandsbanki’s controversial March 2022 sale of shares.

The statement can be read here, in Icelandic.

The Financial Supervisory Authority of the Central Bank of Iceland has been examining the alleged violations by Íslandsbanki of security trading regulations since last year. The examination by the Financial Supervisory Authority focused on the conduct of Íslandsbanki in the offering of the state’s 22.5% ownership stake in Íslandsbanki in March of last year.

The report states that “the management and CEO of Íslandsbanki have not implemented satisfactory governance practices and internal monitoring, which ensure effective and prudent management, including the failure to ensure that the bank complies with legal requirements regarding the provision of investment services and adherence to its own internal regulations.”

Íslandsbanki to Pay ISK 1.2 Billion in Fines

Preliminary findings of the Financial Supervisory Authority were sent to Íslandsbanki on December 30, 2022. In a letter dated January 6, 2023, Íslandsbanki expressed its intention to resolve the matter through a settlement with the Financial Supervisory Authority of the Central Bank.

By signing the agreement, Íslandsbanki admits to having violated specific provisions of the Act on Securities Transactions, in addition to committing to take remedial measures. Íslandsbanki is required to pay the fine to the treasury by November 1, 2023.

Among the violations described in the report are Íslandsbanki’s failure to record phone calls, providing customers with inaccurate information about the terms of the offering, and incorrectly assessing customers’ applications to be classified as professional investors. The March 2022 offering was nominally only open to professional and institutional investors. However, Íslandsbanki classified eight clients, who were retail investors, as professional investors without meeting the legal criteria.

Additionally, the bank did not take sufficient measures to prevent conflicts of interest, such as the involvement of directors and employees of the bank in the offering and adequate separation of duties, and the bank did not conduct a proper risk assessment in relation to its participation in the sales process.

Finally, Íslandsbanki was found to have failed to fully meet its obligations to operate in a fair, honest, and professional manner, in accordance with “normal and sound business practices.”

Cryptocurrency Not Supervised By Financial Supervisory Authority

Central Bank of Iceland

The Central Bank of Iceland’s Financial Supervisory Authority has no supervision over cryptocurrency mined in Iceland, Fréttablaðið reports. A considerable portion of the world’s supply of bitcoin, or up to 8%, is mined in data centres in Iceland.

The Financial Supervisory Authority has no information on and does not supervise cryptocurrency mined in Icelandic data centres. It’s believed that up to 8% of bitcoin is mined in Iceland. Around 60 companies mine bitcoin in Iceland but only the three service providers offering electronic currency trade and digital wallets are required to register with the Financial Supervisory Authority.

While cryptocurrency has been lauded as an ultra-secure decentralised mode of payment, it has come under fire for being ill-regulated and wasteful of energy. US authorities have increasingly tried to supervise the use of cryptocurrency as they are thought to be the cornerstone of various illegal operations, including terrorism, drug trade and the distribution of child pornography. Mining cryptocurrency requires a great deal of energy use. Around 5% of Iceland’s energy production is tied in data centres and around 90% of data centre operations centre on cryptocurrency mining.

When asked about cryptocurrency supervision, The Central Bank of Iceland’s Financial Supervisory Authority replied that as cryptocurrencies aren’t legal tender or currency in Iceland so they aren’t subject to legislation on payment services or electronic currency. “Cryptocurrency markets don’t require a licence, they are not subject to laws no. 108/2007 on stock exchanges and aren’t subject to Central Bank of Iceland’s Financial Supervisory Authority’s supervision.” Furthermore, the Central Bank does not have any information on the extent of cryptocurrency trade. Even if the Financial Supervisory Authority does not supervise cryptocurrency trade, they warn against its use.

Read more on bitcoin mining in Iceland.

Central Bank and Financial Supervisory Authority Merge

Central Bank of Iceland

The Central Bank of Iceland and the Financial Supervisory Authority officially merged into a single institution as of the beginning of this year. The Central Bank is now responsible for financial supervision entrusted by law to the Financial Supervisory Authority.

The Central Bank’s operations are housed in two main locations: Kalkofnsvegur 1 and Katrínartún 2 in Reykjavík. The institution plans to eventually house all operations at Kalkofnsvegur, and plans for the physical merger are already underway.

The Central Bank had 170 staff members and the Financial Supervisory Authority 120. Now all 290 are employees of the new Central Bank.

First Cryptocurrency Exchange Registers with Financial Supervisory Authority

The first company to specialize in cryptocurrency commerce and services is now registered with Iceland’s Financial Supervisory Authority, or FME, reports KjarninnMorgunblaðið reported first.

The company, Skiptimynt, is a cryptocurrency exchange dealing in Bitcoin and Auroracoin. Cryptocurrency firms are now required to register their activities with FME, following new legislation intended to combat money laundering and terrorist activities.

Crypto- or digital currencies have gained increased popularity on the international market in recent years, although the value of most have been subject to extreme fluctuations. The value of one Bitcoin is now roughly ISK 770,000 ($6,958/€5,986), but was worth as much as ISK 2,216,800 ($20,000/€17,208) at one point last year.