Regulatory changes and policy news shaping crypto.



2023 / 11

U.S. Senator Cynthia Lummis published an article criticizing the U.S. Securities and Exchange Commission (SEC)’s current approach to cryptocurrency regulation.

Cynthia Lummis accused the agency of relying on enforcement adjudication tactics, stressing that crypto asset companies seeking guidance from the SEC often face enforcement actions that lack clear grounds and ultimately harm the interests of consumers.

The SEC cannot continue to adjudicate through enforcement. Lummis said that crypto asset companies have repeatedly tried to obtain guidance from the SEC, but have been hit by enforcement actions, causing unnecessary harm to consumers.

Lummis added that Congress has a responsibility to develop a comprehensive regulatory framework that clarifies what is a security and what is a commodity in the cryptocurrency industry.

The U.S. Commodity Futures Trading Commission (CFTC) is developing a proposal to ensure that more derivatives exchanges keep customer funds separate from company cash.

The draft would expand the CFTC’s existing regulatory scope and would apply to exchanges that allow customers to trade without going through a brokerage firm.

CFTC Democratic member Kristin Johnson said the draft would help prevent FTX from competing for customer funds from its subsidiary LedgerX, which is regulated by the CFTC.

Kristin Johnson said rules requiring customer asset segregation should apply to any company using or pursuing a similar direct-to-customer model.

Whether they offer crypto products or other types of derivatives. In light of events such as the collapse of FTX, the CFTC should take immediate action to formulate rules to prevent customer funds from being misused or lost.

U.S. Senator Ted Budd has introduced a new bill, the Keep Your Coins Act, to protect citizens’ rights to self-custody Bitcoin and other cryptocurrencies.

The bill hopes to protect the rights of individuals to conduct transactions using cryptocurrency assets without the need to utilize third-party intermediaries.

In addition, Ted Budd stated that the bill aims to prevent third-party risks faced by consumers during the FTX crash.

Budd said in a statement: “As consumers face new challenges and risks associated with using digital currencies, we should empower individuals to maintain control of their digital assets. This approach will promote financial freedom and greater decentralization. cryptocurrency ecosystem.”

Brian Quintenz, director of policy at a16z, posted on social platforms that the UK Treasury has issued a conclusive statement on the regulatory system for crypto assets, and it is exciting.

Andrew Griffith MP, Economic Secretary to the UK Treasury, has made the government’s interest in embracing blockchain and crypto innovation very clear, and the government’s ambition to make the UK a global hub for crypto asset technology remains firm.

Now, with the future regulatory framework clearly outlined and the Financial Services and Markets Act having been passed, the UK is set to start and expand crypto asset businesses.

British lawmakers on Thursday passed a bill that would help law enforcement agencies seize and freeze cryptocurrencies used in crimes.

The Economic Crime and Corporate Transparency Bill, which covers a range of crimes from drug trafficking to cybercrime, is expected to be approved by the king and come into force on Thursday.

Provisions in the bill give local police broader powers and allow them to seize cryptocurrency in connection with a crime without a conviction.

The bill was introduced last September and has since been amended to ensure the measures are expanded to cover terrorism.

Separate provisions have also been added to help authorities seize other assets that could help identify cryptocurrencies linked to crimes.

EU finance ministers on Tuesday formally adopted new EU rules allowing tax authorities to share data on personal cryptocurrency holdings. The document will now be published in the Official Journal of the European Union and will enter into force in 20 days.

The law, known as the Eighth Directive on Administrative Cooperation (DAC8), forces cryptocurrency companies to report information on customer holdings, which will be automatically shared between tax authorities, meaning all crypto asset service providers based in the EU , regardless of their size, must report transactions from customers residing in the EU, a rule aimed at improving EU member states’ ability to detect and combat tax fraud, tax avoidance and evasion.

It is reported that DAC8 was proposed last year to prevent assets from being hidden overseas using cryptocurrencies, and received unanimous support from EU member states.

A copy of the draft bill shows that the rules extend existing laws to cover a variety of digital assets identified on Tuesday, including stablecoins, NFTs, DeFi tokens, and cryptocurrency staking returns.

Bitcoin Policy UK has urged the UK government to review Chase Bank’s policy of rejecting all cryptocurrency payments.

We are writing to express our deep concern about Chase Bank’s recent decision to deny customers payments related to cryptocurrency assets, the cryptocurrency advocacy group wrote.

Of course, it is a stated policy of the British government to make the UK a crypto-asset hub, but it is difficult to square this policy goal with the behavior of this UK-regulated bank.

The cryptocurrency advocacy group noted that buying, owning and selling cryptocurrency assets are legal activities in the UK, and most exchanges that offer crypto asset services are themselves regulated.

Bank for International Settlements (BIS) President Agustín Carstens said at the BIS Innovation Center meeting in Switzerland on September 27 that a legal framework ensuring user privacy and freedom to choose between central bank digital currencies (CBDC) and other forms of currency will is the key to driving CBDC adoption.

Most fundamentally, the legitimacy of a CBDC will derive from the central bank’s legal authority to issue it, and this authority must be firmly based on law.

Carstens added that different countries’ laws regulate the type of currency that their central banks can issue, which typically includes physical cash as well as credit balances in current and reserve accounts. According to a paper published by the IMF in 2021, nearly 80% of central banks are either not allowed under current laws. To issue digital currency, the legal framework is unclear.

Carstens also pointed to a study by the Bank for International Settlements, which showed that 93% of the world’s central banks are involved in developing CBDCs at various stages.

Considering that most of these institutions are actively seeking to meet public demand for digital forms of fiat currency, Carstens said that outdated or unclear legal frameworks that hinder their deployment are unacceptable.

India’s Ministry of Home Affairs has launched the Cryptocurrency Intelligence and Analysis Tool (CIAT) to combat the rising incidence of cryptocurrency scams.

The tool scans the dark web and targets cryptocurrency wallet addresses associated with suspicious activity. Additionally, it provides comprehensive transaction records, capturing details such as addresses, timestamps, dates, and the specific nature of the service.

CIAT also has a proactive alerting system that will send out alerts as soon as there are signs of suspicious crypto activity, such as when certain accounts exhibit suspicious behavior patterns or have unusually high transaction volumes.

Former U.S. Senator and Coinbase Global Advisory Committee member Pat Toomey said at a legal seminar on national security and digital assets.

While the digital asset industry desperately needs U.S. regulatory clarity and is in legal conflict with the U.S. Securities and Exchange Commission (SEC) while waiting for answers, the congressional solution the industry has long awaited is not coming anytime soon.

Toomey said the fact that the House Financial Services Committee has approved multiple crypto bills for a floor vote may not have any impact.

Even if the bills are approved by the full House, he said: “Regardless of the vote in the House, I don’t see a path forward in the Senate.”

Although Pat Toomey is pessimistic about legislation during the current U.S. administration, he believes the likelihood of legislation passing in the next Congress will increase.

U.S. Republican presidential candidate Vivek Ramaswamy spoke at an industry conference and stated that he planned to release a comprehensive cryptocurrency policy framework before the U.S. Thanksgiving Day.

Ramaswamy painted an overall optimistic outlook for blockchain technology and made a scathing indictment of the SEC’s enforcement practices.

He expressed a relatively strong view on what the future of government interaction with cryptocurrencies should look like, with a focus on regulators.

A newly released poll shows Vivek Ramaswamy trailing behind Donald Trump in the race for the nomination and ahead of Florida Governor Ron DeSantis, who is widely considered Trump’s main rival early in the campaign.

The National Bank of the Republic of Kazakhstan (NBK) has established an independent entity to lead the development and implementation of a central bank digital currency (CBDC) – the digital tenge.

According to an official statement on September 15, the National Payments Corporation (NPC) will be formed on the basis of the former Kazakhstan Interbank Payment Center.

The new agency will oversee the national payments system, including interbank clearing services, money transfers and digital identification. The National Payments Company will also be responsible for the development of digital financial infrastructure, including the implementation of the digital tenge.

Currently, Kazakhstan’s CBDC pilot is in the pilot phase using a controlled environment, real consumers and merchants.

One of the main partners in the project is Binance, which supports the pilot through its technology solution BNB Chain.

A U.S. House Financial Services Committee hearing focused on three bills that, if passed, would limit the Federal Reserve’s ability to operate a CBDC.

Rep. French Hill, who chairs the House Financial Services Committee’s subcommittee on digital assets, rejected a possible CBDC at the start of the hearing.

Hill said, “Let me make it clear to the audience here: Congress does not support CBDC.” For Republicans and several witnesses, concerns about CBDCs are multifaceted.

One concern is the impact a digital dollar could have on traditional banking, and another is that CDBCs could crowd out the stablecoin market.

Stablecoins are digital assets issued by private companies that are pegged to fiat currencies such as the U.S. dollar, allowing traders to enter or exit positions without touching fiat currencies.

Caroline Pham, commissioner of the U.S. Commodity Futures Trading Commission (CFTC), said at Korea Blockchain Week that the Digital Assets Subcommittee plans to formulate regulatory standards for virtual assets within the next two years and will announce recommendations on the 5th of next month.

According to Caroline Pham, the goal of the subcommittee is to define digital assets. The key is to distinguish whether digital assets are financial assets or non-financial assets. It is not a panacea to regulate digital assets like financial assets, because digital assets can be non-financial assets.

Pham also pointed to the need for regulation of DeFi. Pham said that he does not think that DeFi can be unregulated, and DeFi will be regulated. As far as code-based DEX is concerned, we can discuss regulatory issues by focusing on algorithms.

Caroline Pham added that she hopes to learn about innovations in the field of digital assets by visiting South Korea. Think South Korea is 10 years ahead of the U.S. in cryptocurrency because the masses are open to innovation.

The Digital Assets Subcommittee, newly formed in February this year and chaired by Mr Palm, is tasked with developing regulatory recommendations for digital assets.

The Australian Senate’s Economic Legislation Committee rejected the Digital Assets (Market Regulation) Bill 2023 proposed by opposition Senator Andrew Bragg, and instead recommended that the government continue to consult with the industry on developing digital asset regulations suitable for Australia’s purposes.

The committee’s report was consistent with partisan lines. The committee said the bill lacked detail and certainty and contradicted the government’s approach.

The committee said the bill was inconsistent with the international regime and raised genuine concerns about regulatory arbitrage and adverse outcomes for the industry.

Bragg, who represents New South Wales, criticized the veto, saying the Labor government had put cryptocurrency regulation in the slow lane.

South Korea plans to submit a bill to track and freeze illicit cryptocurrencies and virtual assets in North Korea, according to several people familiar with the matter.

The latest version of the bill, which was first announced in Nov. 22, includes measures to track and freeze virtual currency and other crypto assets stolen by North Korea through hacking.

South Korea’s intelligence service reported that North Korea stole 1.7 trillion won ($1.28 billion) worth of bitcoin and ethereum through various hacking groups in 2022 alone.

The Kentucky Public Service Commission has rejected a proposed contract that would have allowed mining companies to receive subsidies for electricity provided by utilities.

In an Aug. 28 order, the commission rejected a contract between Ebon International and Kentucky Power for a $50 million investment in a cryptocurrency mining facility in the city of Louisa.

According to the document, Ebon plans to operate a 100 megawatt (MW) mining operation by 2024 and then increase the load to 250 MW.

Environmental groups Earthjustice and Greenpeace hailed the commission’s decision as a victory for ordinary energy consumers in Kentucky.

Joshua Archer, head of the Bitcoin campaign at Greenpeace, claimed that incentivizing crypto mining companies to open factories in the state would burden taxpayers and contribute to climate change.

In an effort to stop cryptocurrency users from evading taxes, the U.S. government is proposing that brokers comply with new rules for selling and trading digital assets, using a new form to simplify the tax filing process.

Many in the crypto community believe that strict rules will keep the crypto industry further away from the United States.

Messari CEO Ryan Selkis believes that if Biden is re-elected as President of the United States, the encryption industry will not flourish in the United States.

Chris Perkins, president of CoinFund, said that other countries are already ahead of the United States, and these rules will inevitably lead to fewer innovative projects entering the US market.

He believes that instead of taking severe crackdowns, it is better to formulate simple and detailed rules to support innovation in the encryption industry.

After the U.S. Treasury Department released a proposal to tax cryptocurrency gains, the X (formerly known as Twitter) platform was quickly flooded with opposition to the proposal.

In particular, tax reporting requires the reporting of decentralized encrypted business information, which the industry considers impossible to comply with.

Miller Whitehouse-Levine, chief executive of the decentralized finance (DeFi) lobby group, said on the social media platform that the proposal was written too broadly, with provisions that allow it to capture various entities that he uses in self-custodial or non-custodial wallets. as an example.

Kristin Smith, CEO of the Blockchain Association, said in a statement: “The cryptocurrency ecosystem is very different from that of traditional assets, so the rules must be adjusted accordingly, rather than capturing ecosystem participants who do not have a path to compliance. .”

It is reported that objections must be clearly expressed to the Treasury Department and the Internal Revenue Service before October 30, and public hearings on the proposal will be held on November 7 and 8.

In his speech at the opening ceremony of the Cyberport Digital Entertainment Leaders Symposium, Hong Kong Financial Secretary Chen Maobo said that the government believes in the development potential of Web3 and blockchain, which can accelerate innovation, stimulate new business models, and provide different services for finance, trade, manufacturing, logistics and other fields. possibility.

He mentioned that the government has issued a policy declaration on the development of virtual assets, and also established a Web3 development task force in July, chaired by Chen Maobo.

Chen Maobo said that this year’s Hong Kong government budget allocated 50 million yuan to Cyberport for Web3 construction. At present, Cyberport has more than 170 companies from more than 20 countries or regions engaged in Web3-related work.