Crypto Regulation News: Ukraine accepts Bitcoin, Ethereum, USDT donations amid ongoing war, EU excludes 7 Russian banks from SWIFT, SEC investigating NFT market, Biden to sign order on crypto, EU Parliament will hold vote on crypto bill without PoW provision, Lugano to make Bitcoin and Tether ‘de facto’ legal tender, and more!

Paradigm

Published in

Paradigm

18 min readMar 8, 2022

Vol. 89, 21st February — 8th March

TL;DR

SEC investigating NFT market over potential securities violations.
Biden planning to sign executive order on crypto this week
US Treasury Department formally adds crypto rules to russian sanctions guidance. Lawmakers raise alarm on crypto for sanctions evasion as experts cast doubt. Fed Chair Powell: ‘War underscores need’ for crypto regulation
US tax agency moves to dismiss lawsuit by Tezos stakers who refused refund, demanded trial
European Parliament will hold vote on crypto bill without PoW provision. Furthermore, the Parliament proposes expanding ‘travel rule’ to every single crypto transaction
EU excludes 7 Russian banks from SWIFT. ECB wants quick action on crypto regulation following russian sanctions
Ukraine accepts Bitcoin, Ethereum, USDT donations amid ongoing war. Ukraine is buying bulletproof vests and night-vision goggles using crypto
Ukraine government cancels airdrop ahead of scheduled snapshot. Ukraine asks Binance, Coinbase, 6 other crypto exchanges to block russian users
Russian crypto volume across major exchanges plunges by 50%. Anti-war Russians start donating crypto to support Ukraine
Coinbase proposes crypto tech to promote global sanctions compliance
Swiss city of Lugano to make Bitcoin and Tether ‘de facto’ legal tender
UK FCA is investigating 50 unauthorized crypto firms. UK government wants more power to seize crypto assets
Thailand reportedly exempts 7% crypto tax for traders on authorized exchanges
The Philippines to launch pilot CBDC implementation
China’s share in Bitcoin transactions declined 80% post crackdown. Chinese police bust illegal crypto mining farm, seize 190 miners
South Korean crypto market grows to 45.9B in 2021 despite strict regulations. South Korea to invest 187M in national metaverse project
India’s top court queries government on crypto, but may not expect a response
Experts weigh in on new crypto regulations in South Africa
Binance back in Malaysia via a strategic stake in regulated digital exchange
Aussie advisory committee lists key factors for easing crypto adoption
Bitfinex security token platform goes live in Kazakhstan
Israeli authorities seize Hamas-linked crypto accounts
US Virginia Senate allows state banks to offer crypto custody services
New York Bitcoin mining moratorium bill garners more support
BitConnect founder indicted in 2.4B ponzi scheme has disappeared
FTX expands to Europe with CySEC approval
Dogecoin Foundation registers name and logos as trademarked within in the EU
Visa, Mastercard join PayPal in suspending russian operations
CryptoPunk NFT is latest donation to Ukraine’s 33M campaign
And more!

Opinions

Why Crypto Networks Should Preserve Russian Propaganda: The internet is the information war’s venue. Social giants Twitter and Facebook may delete Russian misinformation, but there’s a strong case that “fake news” should be preserved.

No, Crypto Won’t ‘Fix This’ for Russia: Cryptocurrency is an unlikely workaround for expanded U.S. sanctions against Putin’s government following the Ukraine Invasion, according to legal and blockchain experts.

Stablecoins will have to reflect and evolve to live up to their name: Stablecoins have the possibility to become a promising alternative system amid global inflation, but they must be auditable to remain stable.

Crypto industry seeks to educate, influence US lawmakers as it faces increasing regulation: Much like other activity in the digital asset space, crypto lobbying has been picking up during the past year.

Crypto offers Russia no way out from Western sanctions: Crypto use is likely to grow among ordinary citizens of both nations — though it won’t help Russia’s elite dodge economic restrictions.

What the launch of the FBI crypto task force means for the digital asset space: Consolidation of law enforcement activity sends a clear message to the industry: It is time to comply.

Are crypto and blockchain safe for kids, or should greater measures be put in place? Age verification and educations around the implications of blockchain technology should be enforced for minors dabbling in the crypto space.

Blockchain forensics is the trusted informant in crypto crime scene investigation: As mainstream adoption of crypto increases, blockchain forensics is enabling law enforcement to recover stolen crypto, making the space more secure.

Wyoming’s state stablecoin: Another brick in the wall? Stablecoins are another piece in the puzzle, like DAOs or digital identity. “And if we don’t have it just right at first, we’ll fix it.”

USA

SEC investigating NFT market over potential securities violations: NFT creators and marketplaces have been targeted by the SEC for conducting illegal activity in a new wave of regulatory action against unregistered securities.

The United States Securities and Exchange Commission (SEC), led by crypto-skeptical Chairman Gary Gensler, is reportedly investigating nonfungible token (NFT) creators and marketplaces for securities violations, according to a report from Bloomberg. Anonymous sources in the report claimed that the SEC is investigating whether “certain nonfungible tokens […] are being utilized to raise money like traditional securities.”

Throughout the last few months, attorneys from the SEC’s enforcement unit have reportedly sent subpoenas demanding information on specific NFTs and other token offerings. While crypto lending products have been the subject of great regulatory scrutiny over the past year, this report marks a major move into investigating the NFT sector. The inquiry shows that the SEC is taking a particular interest in how fractional NFTs are being used. That‘s where a more valuable NFT is tokenized into smaller pieces and onsold.

The warning signs have been clear for a while with Hester Peirce, also known as Crypto Mom, stating back in March 2021 that selling fractionalized NFTs could be breaking the law.

“You better be careful that you’re not creating something that’s an investment product — that is a security.”

This investigation is the latest in a wave of clampdowns that seek to govern the cryptocurrency market more firmly. Most recently, the SEC ordered that New Jersey-based crypto lending company BlockFi pay a record fine of $100 million for failing to list “high-yield” lending products as securities.

While Bitcoin (BTC) and Ether (ETH) have been able to avoid scrutiny owing to the fact that they aren’t considered securities by the SEC — at least, not yet — other digital assets have not enjoyed the same reprieve. Unlike the case with Ripple Labs the parent company of Ripple (XRP), which has been embroiled in a legal case overselling “unregistered securities” since late 2020. NFT sales have continued to grow, flouting the current market decline with the top two NFT exchanges LooksRare and OpenSea sharing $10.7 billion in trading volume over the past 30 days.

Biden Planning to Sign Executive Order on Crypto This Week: The White House has been working on coordinating the efforts of different federal agencies since last year.

US Tax Agency Moves to Dismiss Lawsuit by Tezos Stakers Who Refused Refund, Demanded Trial: The Internal Revenue Service argues Joshua and Jessica Jarrett had no right to refuse the refund of almost $4,000, which was paid, and therefore the case should be dropped.

Lawmakers Raise Alarm on Crypto for Sanctions Evasion as Experts Cast Doubt: Russia faces stiff financial sanctions after its invasion of Ukraine, but some say crypto is still too small to pose a major risk.

Fed Chair Powell: ‘War Underscores Need’ for Crypto Regulation: Powell is testifying before the House Financial Services Committee on the state of the economy.

BitConnect Founder Indicted in $2.4B Ponzi Scheme Has Disappeared: Attorneys said efforts to locate Satish Kumbhani could remain unfruitful.

Accused Bitfinex Launderer Heather Morgan Might Be Offered a Plea Deal: At Morgan’s arraignment on Monday, prosecutors told a federal judge they’re in talks with the defense to find a “resolution” to the criminal case that would see Morgan avoid trial.

US Treasury Department Formally Adds Crypto Rules to Russian Sanctions Guidance: U.S. officials also hope crypto exchanges will block sanctioned individuals regardless of where they’re headquartered.

US Treasury Prohibits Transactions With Russia’s Central Bank: The Office of Foreign Assets Control (OFAC) has also sanctioned the Russian Direct Investment Fund.

US Virginia Senate allows state banks to offer crypto custody services: Delegate Christopher T. Head introduced the bill back in January 2022, seeking an amendment to allow eligible banks to offer crypto custody services.

New York Bitcoin mining moratorium bill garners more support: The bill to suspend crypto mining for three years is gaining steam in New York State, while the state’s environmental agency determines how much mining impacts the environment.

New York state ramps up blockchain monitoring to enforce sanctions: Blockchain analytics will help ensure that NY-licensed companies don’t send money to sanctioned Russians.

BitMEX Founders Arthur Hayes, Ben Delo Plead Guilty to Violating US Law: The Thursday announcement stems from a late-2020 enforcement action.

VanEck files for new ETF to track crypto and gold mining companies: The ETF will track securities in an index that measures the performance of gold mining and digital assets mining firms, according to the filing.

Europe & UK

European Parliament will hold vote on crypto bill without PoW provision: “Strong support for MiCA is a strong signal from the EU Parliament for a technology-neutral and innovation-friendly financial sector,” said Stefan Berger.

The parliament of the European Union has scheduled a vote on a framework aimed at regulating cryptocurrencies after addressing concerns over proof-of-work mining. In a Monday Twitter thread, European Parliament Committee on Economics and Monetary Affairs member Stefan Berger said the committee will vote on the Markets in Crypto Assets, or MiCA, framework on March 14 following the submission of a final draft of the bill. As the rapporteur — the person appointed to report on proceedings related to the bill — Berger said the legislation will no longer include text that some had interpreted as a possible ban on proof-of-work crypto mining.

“With MiCA, the EU can set global standards,” said Berger. “Therefore, all those involved are now asked to support the submitted draft & to vote for MiCA. Strong support for MiCA is a strong signal from the EU Parliament for a technology-neutral and innovation-friendly financial sector.”

The rapporteur added that the regulation aimed to provide “legal certainty” and establish “reliable supervisory structures” for crypto assets amid concerns around the energy consumption of mining. However, the committee will still have discussions on the bill with the European Council and the European Commission following the vote.

The MiCA bill, first introduced to the European Commission in September 2020 and adopted by the European Council in November 2021, aimed “to create a regulatory framework for the crypto-assets market that supports innovation and draws on the potential of crypto-assets in a way that preserves financial stability and protects investors.” Berger postponed a committee vote on the bill originally scheduled for Feb. 28, citing the need to clarify “the question of proof-of-work” in discussions with stakeholders.

European Parliament Proposes Expanding ‘Travel Rule’ to Every Single Crypto Transaction: Two major factions within the European Parliament propose to expand the “travel rule” to virtually every transaction of digital assets.

Swiss City of Lugano to Make Bitcoin and Tether ‘De Facto’ Legal Tender: The municipality wants businesses to accept crypto in everyday transactions.

UK FCA Opened Over 300 Crypto-Related Cases in 6 Months of 2021: The regulator has 50 live investigations into businesses that have not registered with it.

FCA reiterates power to ‘suspend or cancel’ crypto firms’ registrations following Bifinity concerns: Certain individuals and entities that are part of the Binance Group may now be considered “beneficial owners” of Digivault following the Bifinity and Eqonex partnership.

European Parliament Postpones Vote on Crypto Regulations Indefinitely: A leaked draft has drawn criticism for including a provision that sought to ban the use of cryptocurrencies that rely on proof-of-work.

UK Regulator Bans Floki Inu Ads as ‘Irresponsible’: The ASA said the ads “irresponsibly exploited” consumers’ fears of missing out and trivialized investment in cryptocurrency.

UK Government Wants More Power to Seize Crypto Assets: The reforms will be set out under a new economic crime bill aimed at addressing the use of digital currencies to hide the origin of potentially nefarious funding.

EU Excludes 7 Russian Banks From SWIFT: The bloc is also studying whether crypto is being used to evade sanctions.

EU Plans 500M Euros in Weapons, Aid Package for Ukraine to Help Repel Russian Invasion: The figure was announced following an informal meeting of EU foreign ministers on Sunday night.

EU Wants New Anti-Money Laundering Authority to Have Crypto Oversight: The EU is setting up an anti-money laundering watchdog, and leaders want it to have strict oversight of crypto firms.

EU Parliamentarians Push to Limit Bitcoin Use Over Energy Concerns: A provision added to a draft regulatory package calls for the restriction of cryptocurrencies that use proof-of-work consensus mechanisms.

FTX expands to Europe with CySEC approval: Headquartered in Switzerland, FTX Europe will offer FTX products in Europe, including crypto derivatives services.

Dogecoin Foundation registers name and logos as trademarked within in the EU: The foundation took action to prevent “attempts by people completely unaffiliated with Dogecoin to register” the names for reasons of fraud and extortion, according to board member Jens Wiechers.

Asia

Thailand Eases Tax Rules on Digital Assets Until 2023: Crypto traders on government-approved exchanges will be exempt from a 7% VAT tax, the country’s finance minister said at a cabinet meeting.

Thailand is relaxing tax rules for crypto trading until the end of 2023 in order to boost the industry, the country’s finance minister said at a cabinet meeting. Starting April 1, trades of digital assets on government-approved exchanges will be exempt from a 7% value-added-tax (VAT), said the minister, Arkhom Termpittayapaisith, according to the meeting minutes posted on the government’s website. Transfers involving Thailand’s retail central bank digital currency will also be exempt from the VAT over the same time period, he said. Traders will also be able to deduct losses from crypto trading from taxes due on gains, the minister said.

A draft decree of the new tax exemptions has been proposed under Thailand’s Revenue Code, said Ekniti Nitithanpraphas, general director of the finance ministry’s revenue department, according to the meeting minutes. The draft aims to increase the competitiveness of the industry and develop payment system infrastructure that is ready for the digital economy, he said.

In January, the government scrapped a proposed 15% tax on crypto gains following pushback from traders. Crypto trading has been growing over the past year in the second-largest Southeast Asian economy, with the number of new crypto investors reportedly outpacing new stock market traders in September.

Chinese police bust illegal crypto mining farm, seize 190 miners: Guangdong province’s Development and Reform Commission confiscated 190 crypto mining machines, estimated to be worth 5 million yuan.

China’s share in Bitcoin transactions declined 80% post crackdown: PBoC: China has carried out multiple crypto crackdowns and enforced numerous bans on crypto markets since 2013, however, Chinese traders have always found a way to bypass these bans.

China’s Supreme Court Targets Illegal Fundraising Via Crypto Transactions: The ruling paves the way for violators to be criminally prosecuted, with a punishment of up to 10 years in prison and fines of up to $79,000.

Hong Kong-listed Huobi Tech launches cryptocurrency OTC service: Formerly known as Pantronics Holdings, Huobi Technology has shifted its focus from electronic products to crypto.

South Korean crypto market grows to $45.9B in 2021 despite strict regulations: The 24 licensed crypto exchanges registered a collective average daily transaction volume of near $9.4 billion.

South Korea to invest $187M in national metaverse project: The government will provide $186.7 million to stimulate the growth of a metaverse platform that it hopes businesses and industries will thrive in.

Rest of the World

Ukraine accepts Bitcoin, Ethereum, USDT donations amid ongoing war: The Ukrainian government has reached out to the crypto community on Twitter to raise funds to support its civilians and troops.

In the first week of the Russia-Ukraine war, the Ukrainian government has reached out to the crypto community on Twitter to raise funds to support its civilians and troops. Ukraine has now started accepting donations in Bitcoin (BTC), Ether (ETH) and Tether (USDT). Amid military threats throughout the country, Ukraine has sought help from numerous international organizations. However, considering that time is of the essence, the official Twitter account of Ukraine extended its call for help to Crypto Twitter.

Stand with the people of Ukraine. Now accepting cryptocurrency donations. Bitcoin, Ethereum and USDT.
BTC — 357a3So9CbsNfBBgFYACGvxxS6tMaDoa1P
ETH and USDT (ERC-20) — 0x165CD37b4C644C2921454429E7F9358d18A45e14
— Ukraine / Україна (@Ukraine) February 26, 2022

Additionally, Mykhailo Fedorov, vice prime minister of Ukraine, also shared three wallet addresses, urging the crypto community to donate and help Ukraine fight against Russian troops. While the BTC and ETH addresses remain the same, the USDT wallet address is TRC-20-based and is different than the address shared by Ukraine’s official Twitter handle.

Prominent crypto entrepreneur Vitalik Buterin, co-founder of Ethereum, initially suspected that the accounts requesting crypto donations were hacked. However, American diplomat Tomicah Tillemann later confirmed their legitimacy with Ukrainian Ambassador Olexander Scherba.

Getting some confirmations from a couple sources that it’s legit. Deleting my warning for now. But continue to be vigilant, and always be slow and careful when sending irreversible crypto transactions. https://t.co/Odv5pxf3mp
— vitalik.eth (@VitalikButerin) February 26, 2022

Ukrainian civilians-turned-refugees have reported the loss of access to their fiat savings and credit cards. The United Nations reported that over 150,000 people have been displaced from Ukraine as of Saturday.

My Ukrainian credit cards don’t work anymore. I’m safe physically in Kazakhstan, but all my savings are gone. Crypto is the only money I still have, and today I can say without exaggeration that $BTC, $ETH, and #NFT are going to save my life while I can’t come back home.
— ARTYOM FΞDOSOV (@usleepwalker) February 25, 2022

While confusion has prevailed about the intended use of the crypto donations, Buterin shared another initiative, this one a decentralized autonomous organization that focuses solely on Ukrainian citizens.

UkraineDAO, led by Pussy Riot’s Nadya Tolokonnikova, launched with the release of a one-of-one nonfungible token (NFT) of the Ukrainian flag to raise funds for Ukrainian civilian organizations working to help those suffering from the war.

On Thursday, Ukraine’s Ministry of Defence had received numerous requests from foreigners requesting it accept crypto donations. Although unconfirmed, it is now believed that donations to the addresses shared by Ukraine will be used directly by the government, while the DAO proceedings will be redirected toward citizens’ welfare via an NGO.

Ukraine Is Buying Bulletproof Vests and Night-Vision Goggles Using Crypto: Some of the military suppliers to Ukraine have crypto accounts, said the Ukraine government.

Ukraine Government Cancels Airdrop Ahead of Scheduled Snapshot: The minister of digital transformation announced the cancellation on his Twitter account.

Ukraine finds unlikely ally in efforts to bar Russian access to crypto: The Central Bank of Russia: It appears both countries want crypto to be banned in Russia following the nation’s recent war efforts.

Anti-war Russians start donating crypto to support Ukraine: Crypto could be one of few ways for Russians to help Ukrainians, as any identified assistance to Ukraine is considered as high treason by the Russian state.

CEXs refuse blanket asset freeze of all Russian users, though questions linger: If Western sanctions ramp up, CEXs may be forced to ban all Russian users from using their services, as they have previous done in Iran.

Russian crypto volume across major exchanges plunges by 50%: Despite an increase in economic sanctions on Russia, the amount of crypto being purchased in rubles across major exchanges continues to fall.

At Least $14M Out of $26M in Donated Crypto to Ukraine Already Disbursed: The founder of the Kuna crypto exchange behind the government’s crypto fundraising said on CoinDesk TV that the money is being spent “efficiently.”

Ukraine’s Defense Ministry Decides Where Crypto Funds Are Spent: The government’s crypto fund has received donations worth $16.8 million.

Ukraine Lawyer Says Country Has Received Numerous Russian Wallet Addresses for Crypto ‘Blacklist’: Ukraine also promised a reward for the information, but the exact amount will depend on how much is used for the military resistance.

Ukraine Asks Binance, Coinbase, 6 Other Crypto Exchanges to Block Russian Users: Earlier today, U.S. authorities added regulations aimed at thwarting the use of digital currencies and assets to evade sanctions.

People Are Sending Millions in Bitcoin to Aid Ukraine’s Military as Russia Advances: A digital wallet raising funds to support the Ukrainian army has received almost $5 million in bitcoin.

Russian Sanctions May Test Crypto’s Proposition: Parts of Russia are about to be cut off of the global financial system.

Animoca Brands Will Stop Offering Services to Russian Users: The Hong Kong gaming giant has received legal advice to impose restrictions, the chairman and co-founder said.

OpenSea Bars Iranian Users as US Sanctions Talk Ramps Up: Twitter users complained about their accounts being deactivated without notice.

India’s Top Court Queries Government on Crypto, but May Not Expect a Response: The question was asked during a bail hearing, and a court order didn’t say it needed an answer.

The Philippines to launch pilot CBDC implementation: BSP Governor Benjamin Diokno says that the goal of the project is to enhance “the payment system’s safety, resiliency, and efficiency.”

Swiss crypto bank Sygnum secures in-principal approval in Singapore: Prior to the latest approval, Sygnum Singapore was only allowed to offer asset management activities with its CMS license.

Experts weigh in on new crypto regulations in South Africa: Updated crypto regulations in South Africa could boost partnerships but potentially marginalize those who need it most, local experts warn.

Binance back in Malaysia via a strategic stake in regulated digital exchange: Binance has forged an array of new partnerships with regulated firms, especially in countries where it has found it difficult to get regulatory approval.

Aussie advisory committee lists key factors for easing crypto adoption: The federal advisory suggests exploring four key areas to support a safer adoption for crypto in Australia and dampen cybersecurity threats.

Bitfinex security token platform goes live in Kazakhstan: While the Bitcoin mining trading is fading in Kazakhstan, Bitfinex debuts its STO platform with a BTC mining-related token.

Israeli authorities seize Hamas-linked crypto accounts: The Israeli government has confiscated 30 crypto wallets from a small exchange based in Gaza, where the Hamas militant group has bolstered its military.

MISC

Coinbase proposes crypto tech to promote global sanctions compliance: Grewal points out that laundering of fiat currency through traditional financial institutions remains the most sought-after method for evading sanctions.

The United States-based crypto exchange Coinbase has proposed the use of cryptocurrencies to help ensure compliance with economic sanctions. This recommendation comes by highlighting the ease of laundering and sanction evasion of fiat currencies made possible by traditional financial infrastructures. Written by Coinbase’s chief legal officer Paul Grewal, the blog talks about the growing range of global sanctions put forth amid the Russia-Ukraine conflict. The crypto exchange supported the government’s decision to impose sanctions on individuals and territories, highlighting its importance in “promoting national security and deterring unlawful aggression.”

Using Crypto Tech to Promote Sanctions Compliance

By Paul Grewal, Chief Legal Officer

blog.coinbase.com

Grewal points out that despite the sanctions put forth by governments over the years, laundering of fiat currency through traditional financial institutions remains the most sought-after method for sanction evasion:

“By transacting through shell companies, incorporating in known tax havens, and leveraging opaque ownership structures, bad actors continue to use fiat currency to obscure the movement of funds.”

On the other hand, Grewal argued that digital asset transactions are inherently public, traceable and permanent — an important feature that can be leveraged by governing authorities to detect and deter evasion. In addition, prominent crypto lawyer Jake Chervinsky also highlighted why it is impossible for governments to make use of cryptocurrencies to evade sanctions. Acknowledging the same, Grewal stated that actors who intend to counteract sanctions would require “virtually unobtainable amounts of digital assets,” adding:

“As a result, trying to obscure large transactions using open and transparent crypto technology would be far more difficult than other established methods (e.g., using fiat, art, gold, or other assets).”

Some of the proactive measures taken by Coinbase to implement a global sanction program include blocking access of flagged entities during the signup process, detecting evasion attempts and anticipating threats using a sophisticated blockchain analytics program. Moreover, other crypto businesses have started taking measures to further deter the use of cryptocurrencies based on the sanctions recommended by the United States government. For example, Satoshi Labs, a Prague-based crypto wallet provider, announced to stop shipping crypto wallets into Russia. Satoshi Labs spokesperson Kristýna Mazánkov said that while Bitcoin (BTC) is apolitical, the move to restrict the shipment of crypto wallets in Russia was made as “company employees have connections to the conflict that make it personal.”

In addition to helping law enforcement track suspicious activity over a transparent blockchain, cryptocurrencies play a vital role in protecting the privacy of individuals — a principle that exists within the traditional financial system. Grewal concluded:

“We believe we can balance these interests by continuing to support law enforcement efforts while promoting policy frameworks that respect individual privacy.”

In the first week of March, the New York State Department of Financial Services (DFS) announced the implementation of a blockchain-based technology to further enforce ongoing global sanctions.

Visa, Mastercard Join PayPal in Suspending Russian Operations: The payment processors cited Russia’s invasion of Ukraine for the move on Saturday.

MetaMask, Infura Block ‘Certain Areas’ Amid Crypto Sanctions Fury: The two pillars of the Ethereum ecosystem did not say which areas were under blockade.

Foundry Digital Joins Crypto Lobbying Group Blockchain Association: The digital asset mining and staking company joins as policymakers consider regulations for the crypto industry.

CryptoPunk NFT Is Latest Donation to Ukraine’s $33M Campaign: The sought-after NFT could be worth $200,000 according to some estimates.