Crypto Regulation News: SEC expands accredited investor definition, lowering the barrier to private markets; IRS memo — cryptocurrency earned from a microtasking job is taxable income; ‘Crypto Valley’ residents can now pay taxes in Bitcoin; Brazil’s central bank examines the benefits of a CBDC

Paradigm

Published in

Paradigm

12 min readSep 7, 2020

Vol. 50, 24th August — 7th September

TL;DR

The Securities and Exchange Commission (SEC) has expanded its definition of qualified accredited investor to include natural persons in addition to other entities.
An Internal Revenue Service memo written in late June and published on August 28 states that cryptocurrency earned from microtasks conducted on crowdsourcing platforms is considered taxable income.
US legislators introduce bill for in-depth study of blockchain in commerce.
MIT is helping the Boston Fed build a CBDC that can be scaled for consumer use.
A US circuit court has concluded its review of a terrorism financing case that begin in 2010, saying that the NSA’s phone tapping was illegal but that it was a minor part of the evidence.
US Federal Reserve now owns over 20,000 different financial assets.
SEC’s Hester Peirce on DeFi: ‘I think it’s going to challenge the way we regulate’.
Chief executive of crypto exchange Coinbase sums up the top hurdles to widespread adoption of Bitcoin and cryptocurrency.
CFTC grants approval to LedgerX to clear derivatives products beyond those tied to crypto.
WSJ: Robinhood facing SEC investigation over dealings with high-frequency trading shops.
‘Crypto Valley’ residents can now pay taxes in Bitcoin.
Swiss crypto bank Sygnum scores approval for digital asset trading.
Bank of England governor dismissed Bitcoin as a means of payment.
The UK’s financial watchdog wants crypto firms to submit annual financial crime reports to help it cement a data-led approach to regulation.
Seoul police reportedly investigating South Korea’s largest crypto exchange Bithumb.
The president of Brazil’s central bank thinks the country’s national digital currency will be ready for launch by 2022.
Australian government report on the future of fintech and regtech suggests blockchain technology is critical to Australia’s future.
Russian ministry proposes to amend law banning crypto transactions: Crypto mining is allowed, but payout in crypto is prohibited.
A Kazakh minister claimed that there are already preliminary agreements on attracting more than $700 investment for cryptocurrency mining.
After three long years, the class-action lawsuit alleging that Tezos violated securities laws through its 2017 ICO has concluded.
And more!

Reports

Federal agencies turning to blockchain for its benefits: Federal agencies have turned to blockchain for its transparency, efficiency, security and flexibility.

According to FedTech magazine, several federal agencies like the U.S. Food and Drug Administration, or FDA, and the Department of Treasury began using blockchain.

Officials in the US Food and Drug Administration needed an effective way to help them track data on the H1N1 swine flu virus that had begun to spread again in 2017. Of course, officials at the US Food and Drug Administration did not find a better way than adopting blockchain technology.

Henry Francis, associate director for data mining and informatics evaluation and research at the FDA’s Center for Drug Evaluation and Research, has already successfully developed a blockchain-based application that automatically enables them to obtain encrypted data in real-time, from many sources.

Francis explained that the real-time Application for Portable Interactive Devices (RAPID) program is one of the first full-blown implementations of blockchain in federal government, but interest in the technology is growing.

The Department of Treasury’s Office of Financial Innovation and Transformation, or FIT, also turned to blockchain. Its first application was for tracking mobile devices and its second application was for software licenses management. FIT also tested whether the use of blockchain could improve grant payment processes in cooperation with the National Science Foundation.

Early blockchain trials showed promise but indicated that FIT needed to learn more about the technology to manage it more effectively and match it with best-use cases, said Craig Fischer, the FIT project director.

The Department of Health and Human Services (HHS) is also using distributed ledger technology to increase its bulk purchasing power, reduce its reporting burden, cut costs for industry partners and improve record-keeping for vendor transactions.

The FDA is also investigating how it can use blockchain to track and manage threats to food safety across the nation’s vast and decentralized food system and increase transparency in the pharmaceutical supply chain. And the U.S. Department of Agriculture (USDA) has already certified BeefChain, a blockchain company that traces the beef supply chain.

IMF Makes Bold Case for Bitcoin and Cryptocurrency As ‘Evolution of Money’: The International Monetary Fund (IMF) is making a strong case for the transformative potential of Bitcoin and cryptocurrencies.

In a new video posted on Twitter, the international organization highlights the use cases of cryptocurrencies by shining the spotlight on the shortcomings of traditional payment systems.

“When we buy or sell things, the payment is usually processed by a bank or credit company. Problem number one, the companies often take a cut of the transaction. Two, we have to trust these companies to protect our sensitive data from hackers. Three most international payments take a long time and are expensive.
To solve these problems, we could use a special currency that is secure and based on the science of cryptography, which is a way of protecting information using mathematics. This special type of currency is called a cryptocurrency and only exists in computer networks.
When you send someone the special currency, the money goes directly to them, removing the middleman, and at the same time, the transaction is broadcast to the entire network and recorded in a permanent way, which means it’s almost impossible to fool the system.
Costs of making payments are lower. Transactions are faster, especially across countries and even those people around the globe who don’t have bank accounts can buy or sell goods and participate in the global economy.”

While cryptocurrencies offer numerous benefits, the IMF cautions that digital assets are not free from risks.

“The transactions in most cryptocurrencies are anonymous. Some cryptocurrencies can even be untraceable. This can make it easier for the bad guys to make payments without being noticed.
If you lose your password, you could lose all your money. At the moment, cryptocurrencies are highly volatile. They can’t process large amounts of transactions quickly yet, and they’re not even widely accepted.”

Class action lawsuit targeting Tezos ends in $25M settlement after 3 years: After three long years, the class-action lawsuit alleging that Tezos violated securities laws through its 2017 ICO has concluded.

Opinions

SEC’s Hester Peirce on DeFi: ‘I think it’s going to challenge the way we regulate’:

The Block interviewed Commissioner Hester Peirce of the Securities and Exchange Commission last week to learn more about the agency’s views on decentalized finance, or DeFi
While it’s early days, Peirce said the Commission is taking notice — and DeFi is posing game-changing questions

Coinbase CEO Outlines Biggest Barriers to Mass Adoption of Bitcoin and Cryptocurrency: Chief executive of crypto exchange Coinbase sums up the top hurdles to widespread adoption of Bitcoin and cryptocurrency.

In a podcast with investor Patrick O’Shaughnessy, Brian Armstrong shares what he believes to be the biggest thorns on the side of the crypto industry.

“I think there are challenges just in terms of scalability, usability, and then privacy, and security on these blockchains. If we go from dial-up to broadband and all those kinds of things, that will be a huge unlock.”

Armstrong also emphasizes the need for clear regulatory frameworks to catalyze wider crypto adoption.

“There’s definitely some regulatory component to it. Right now there are a lot of startups that are trying to be created…. A lot of the regulatory environment is still unclear for them about ‘is this a security, what kind of security regulations might we trip up if you do this’ and so there’s all these kinds of different exemptions and stuff that people are trying to jump through hoops to try to make it work.”

The Coinbase head also mentions that the crypto exchange is working on a project to remove some of the challenges crypto startups face as they navigate through token issuance, custody, and governance.

Wyoming’s ‘Crypto Cowboy‘ unsaddled in primaries by alt-right candidate: The house Majority Whip fell as right wing factions sought to remove moderate Republicans from the party, but blockchain legislation is safe, says Tyler Lindholm.

Digital cold war? United States and China vie for blockchain supremacy: As the tech standoff heats up, China launching a CBDC before the U.S. “absolutely does not guarantee global financial preeminence.”

Blockchain regulation: Speedbumps, roadblocks and superhighways: The U.S. will likely continue enacting laws to support the use of blockchain technology for purposes beyond securities and digital currency.

A legal asset after all? Governments are cashing in on seized crypto: The way law enforcement agencies deal with seized crypto could indicate their de-facto acceptance of the asset class.

Jerome Powell throws US dollar under a bus in Jackson Hole: Fed Chairman Jerome Powell threw the U.S. dollar under a bus last week at the central bank’s annual Jackson Hole, Wyoming, meeting.

USA

IRS memo: Cryptocurrency earned from a microtasking job is taxable income: An Internal Revenue Service memo written in late June and published on August 28 states that cryptocurrency earned from microtasks conducted on crowdsourcing platforms is considered taxable income.

SEC expands accredited investor definition, lowering the barrier to private markets: The Securities and Exchange Commission (SEC) has expanded its definition of qualified accredited investor to include natural persons in addition to other entities.

Crypto leaders at odds over SEC’s ‘accredited investors’ move: Many prominent crypto players responded positively to the SEC decision, while others said the move falls short.

US legislators introduce bill for in-depth study of blockchain in commerce: US Representative Darren Soto introduced the bill, H.R.8153, to the House on September 1st, which was subsequently forwarded to the Committee on Energy and Commerce on the same day. Congress.gov sheds light on what H.R.8153 aims to accomplish.

“To direct the Secretary of Commerce, in consultation with the Federal Trade Commission, to conduct a study and submit to Congress a report on the state of the blockchain technology and use in consumer protection, and for other purposes.”

No additional documents have been filed about the bill.

Soto, a Democrat from Florida, is the co-chair of the Congressional Blockchain Caucus. Earlier this year, he urged the Treasury Department to utilize blockchain and distributed ledger technology (DLT) in the nation’s efforts to buffer the economic effects of the coronavirus crisis.

Soto’s bill is also being co-sponsored by Reps. Brett Guthrie (R-KY) and Doris Matsui (D-CA).

MIT is helping the Boston Fed build a CBDC that can be scaled for consumer use: The MIT Digital Currency Initiative, or DCI, is helping the federal reserve bank of Boston build a digital currency with the goal of scaling for consumer use. The DCI’s director Neha Narula told Cointelegraph:

“We’re trying to build a high throughput, low latency transaction system that could be used by consumers and could handle the security and resilience required for a national currency.”

US Federal Reserve now owns over 20,000 different financial assets: The nation’s money printer continues to go “Brrr”.

US federal court calls NSA’s mass phone data collection illegal: A U.S. circuit court has concluded its review of a terrorism financing case that begin in 2010, saying that the NSA’s phone tapping was illegal but that it was a minor part of the evidence.

CFTC grants approval to LedgerX to clear derivatives products beyond those tied to crypto: The Commodity Futures Trading Commission said last Wednesday that, following the approval of an amended registration order, LedgerX is now allowed to clear products not directly connected to cryptocurrencies.

Senate Banking Committee chairman seeks clarity from OCC on crypto payments rules: The chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs is pushing the Office of the Comptroller of the Currency (OCC) to craft policy on crypto payments.

WSJ: Robinhood facing SEC investigation over dealings with high-frequency trading shops: Popular millennial stock and options brokerage is said to be under civil fraud investigation into its failure to properly disclose how it routes client orders to high-frequency trading shops, according to The Wall Street Journal.

US SEC upgrades ‘accredited investors,’ puts financial knowledge first: The SEC amending its definition of accredited investors could have significant implications for regulated crypto token sales.

AlphaBay darknet market moderator sentenced to 11 years in Jail: ‘Criminals cannot hide behind technology to break the law,’ a US attorney stated.

Ministers used influence to pilfer millions in alleged Ponzi Scheme: They even wrote a self-help book about becoming a millionaire. Sounds like that may need to be updated.

FBI and Tesla thwart $4 million Bitcoin ransomware plot: The FBI have arrested one of the conspirators in a planned ransomware attack against electric car maker Tesla.

BitGo seeks to become a qualified crypto custodian in New York state: Digital asset financial services firm BitGo has formally applied for a New York Trust Charter from the NYDFS.

Europe

‘Crypto Valley’ residents can now pay taxes in Bitcoin: The canton — which has earned itself the moniker of “Crypto Valley” for its positive stance towards cryptocurrencies — will begin allowing citizens to pay taxes in Bitcoin and Ether.

According to Bloomberg on Sept. 3, “tax settlement by means of crypto currency will be available to both companies and private individuals up to an amount of 100,000 Swiss francs ($109,670).”

Roughly 127,000 people live in the region, which has previously taken steps to accept Bitcoin payments for select government services.

The new, significantly more wide-ranging move to accept taxes in crypto has been enabled by a partnership between the canton and crypto broker Bitcoin Suisse AG, which is based in Zug.

Swiss crypto bank Sygnum scores approval for digital asset trading: The digital Swiss franc issuer is now licensed as a “digital asset trading facility.”

UK FCA wants to include crypto firms in financial crime reporting rules: The U.K.’s financial watchdog wants crypto firms to submit annual financial crime reports to help it cement a data-led approach to regulation.

Bank of England governor dismissed Bitcoin as a means of payment: Cryptocurrencies like Bitcoin don’t quite convince Bailey, but he sees a lot of potential for stablecoins.

Binance joins ‘Blockchain for Europe’ association: Binance is now an official blockchain advocate in Europe alongside Ripple.

Binance.UK joins self-regulating trade group CryptoUK as Exec Member: Ahead of the launch of its U.K. regulated cryptocurrency exchange, Binance.UK vows to proactively update CryptoUK’s code of conduct to remain fit for purpose.

Asia

China plans to use its digital yuan at the 2022 Winter Olympic Games: Details about the official launch date still remain murky.

Seoul police reportedly investigating South Korea’s largest crypto exchange Bithumb: Another exchange in South Korea comes under the police spotlight.

Rest of the World

All fintech companies will use blockchain within 10 years: Aussie government report: Australian government report on the future of fintech and regtech suggests blockchain technology is critical to Australia’s future.

Top Australian BitConnect promoter banned by ASIC for 7 years: John Bigatton has been barred from providing financial services in Australia for seven years for his involvement with the BitConnect Ponzi scheme.

Brazil’s central bank examines the benefits of a CBDC: Brazil’s central bank believes you’ve got to change money, to save money.

Brazil could have CBDC in two years, says central bank president: A central bank digital currency in Brazil may be inevitable.

Russian ministry proposes to amend law banning crypto transactions: Crypto mining is allowed, but payout in crypto is prohibited.

Russia set to try again with blockchain voting despite earlier setbacks: Initial results appear promising for the Waves-developed e-voting system.

Could Russia lead Eastern Europe’s crypto boom? Russia’s new bill brings it in line with U.K. legislators, though there is a distinction between the approach of the FCA and the State Duma.

Former Georgian PM: Blockchain is the steam engine of Industry 4.0: Georgia’s former prime minister is bullish on blockchain and its potential for the future of society.

Kazakhstan on track for $700M crypto mining investment goal, says minister: A Kazakh minister claimed that there are already preliminary agreements on attracting more than $700 investment for cryptocurrency mining.

Indian exchange CoinDCX cements crypto educational agenda: Crypto exchange CoinDCX announces two new professional training courses for cryptocurrency traders and experts.

Indian crypto P2P market size triples despite regulatory uncertainty: In addition to the Indian P2P market surging in recent months, the country’s DeFi sector has been gaining momentum.