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Crypto Regulation News: Biden administration is reportedly reviewing ‘gaps’ in crypto regulation, WisdomTree becomes the 2 to file for an ETH ETF, Sweden moving forward in e-krona CBDC trials, Hong Kong regulators set to ban retail Bitcoin trading, China to socially blacklist Bitcoin miners in Inner Mongolia region, Bitcoin mining banned in Iran until September, Indian government is rethinking crypto ban, and more!

Vol. 69, 17th May — 31st May

TL;DR

  • The IRS plans to expand reporting expectations for crypto brokers, including exchanges, to meet the needs of President Joe Biden’s budget.
  • US Treasury proposes crypto transactions over $10K be reported to IRS.
  • WisdomTree is the second to file for an ether-based ETF, following VanEck’s submission earlier this month.
  • Fidelity’s Wise Origin Bitcoin Trust and the First Trust SkyBridge Bitcoin ETF are now under review by regulators, according to paperwork filed earlier this month.
  • SEC files lawsuit against alleged promoters of crypto Ponzi scheme BitConnect.
  • The OCC, Federal Reserve and FDIC are considering an ‘interagency sprint team’ for crypto regulation.
  • A CBDC rollout would require Congress to give the Fed more authority, says US central bank official.
  • SECchair Gary Gensler thinks crypto exchange regulation is the way to shore up investor protection gaps, and he wants help from Congress.
  • FinCEN seeks presentations on zero-knowledge proofs, other privacy tech for September event.
  • Nebraska bill creating bank framework for digital asset firms signed into law.
  • Rep. Soto prepares suite of crypto and blockchain legislation for return to Congress.
  • According to a new report in the Washington Post, White House officials are being briefed by the Treasury Department about cryptocurrency risks.
  • CEOs of major American banking institutions are heading to Washington to face legislators’ questions about how they will aid a post-pandemic economic recovery.
  • Bank of Canada: Crypto highly risky despite institutional adoption.
  • Canadian regulators accuse crypto exchange of breaking securities law.
  • Senator warns lack of regulations could harm Australian crypto innovation.
  • ECB says crypto assets appear to pose ‘limited’ financial stability risks in new report.
  • UK Treasury official: A ‘significant number’ of crypto firms fall short of AML standards.
  • Crypto app Luno forced to amend Bitcoin ads in London.
  • Bitcoin ‘of great concern,’ Ireland’s central bank official warns.
  • Sweden will trial its CBDC with a live banking participant. The experimentation will involve participation between Riksbank and Handelsbanken, a retail bank chain based in Sweden.
  • Big tech, not cryptocurrency, is the real threat to central banks’ autonomy, Danish central bank governor says.
  • Russian officials consider partial lift on crypto payment ban.
  • Iran’s government has placed an immediate embargo on Bitcoin and crypto mining to preserve electricity over the summer months.
  • China’s Inner Mongolia set to impose eight measures on crypto mining ban.
  • Chinese traders turn to OTC desks amid regulatory crackdown.
  • Restricting crypto trading to millionaires good for Hong Kong, says official.
  • Korean government clarifies crypto regulatory roles of different agencies.
  • Bank of Indonesia joins the central bank digital currency race.
  • India may form a new committee to study the possibility of regulating crypto.
  • Central Bank of Kuwait issues warning against crypto investments.
  • Uganda’s finance watchdog calls for crypto regulations in the country.
  • Crypto will ‘come to life’ in Nigeria, central bank governor says.
  • PricewaterhouseCoopers (PwC) is revealing that legacy hedge funds are contemplating increasing their investments in crypto assets before the end of the year.
  • And more!

Opinions

Gensler says he wants to work with Congress to regulate crypto exchanges: SECchair Gary Gensler thinks crypto exchange regulation is the way to shore up investor protection gaps, and he wants help from Congress. Gensler said the breadth of the space has made it challenging to create sufficient consumer protections, noting that despite thousands of token projects, the SEC has only brought 75 actions. The best point to put consumer protections in place, according to Gensler, is at the trading venues.

“I would think if we could work with Congress to try to bring investor protection where these — sometimes commodities, sometimes securities — are trading on the platforms,” said Gensler.

Without “rules of the road,” Gensler said he’s worried market participants will front-run traders’ orders. He said he hopes to bring similar protections placed on venues like the New York Stock Exchange (NYSE) and Nasdaq to crypto platforms.

Crypto volatility is not a ‘systemic concern’ for the Fed, say local presidents: A Federal Reserve president said he was “quite aware that crypto can be very volatile” but he personally did not see that as a concern for traditional markets.

Shutting down Bitcoin is impossible, Ark Investment founder says: Multiple efforts to ban Bitcoin couldn’t stop the largest cryptocurrency from becoming a $1-trillion asset earlier this year.

USA

The US Treasury wants to expand crypto reporting to fight offshore tax evasion: On May 28, the Biden administration released its budget proposal for 2022. Alongside the new budget, the Treasury released explanations for the administration’s revenue proposals. As the administration has been saying for months now, the new spending package is big, and the Biden team’s ambitions for expanding the IRS to pay for the new spending are proportionate. Notably, the Treasury spotlighted new goals of expanded crypto reporting requirements to combat tax evasion.

“Tax evasion using crypto assets is a rapidly growing problem,” the Treasury’s explanation contends. “The global nature of the crypto market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore crypto exchanges and wallet providers.”

The Treasury proposes to expand requirements of crypto brokers, including exchanges and custodial wallets, to report the beneficial owners of accounts, which would then go into the automated international reporting networks to which the U.S. is already a party. The proposal aims to make this mandatory for tax returns filed starting in 2023.

As the proposal is outlined in full:

“The proposal would expand the scope of information reporting by brokers who report on crypto assets to include reporting on certain beneficial owners of entities holding accounts with the broker. This would allow the United States to share such information on an automatic basis with appropriate partner jurisdictions, in order to reciprocally receive information on U.S. taxpayers that directly or through passive entities engage in crypto asset transactions outside the United States pursuant to a global automatic exchange of information framework. The proposal would require brokers, including entities such as U.S. crypto asset exchanges and hosted wallet providers, to report information relating to certain passive entities and their substantial foreign owners when reporting with respect to crypto assets held by those entities in an account with the broker. The proposal, if adopted, and combined with existing law, would require a broker to report gross proceeds and such other information as the Secretary may require with respect to sales of crypto assets with respect to customers, and in the case of certain passive entities, their substantial foreign owners.”

The broad aims of identifying underlying beneficial ownership of businesses and legal entities have grown enormously in prominence over the past decade. At the beginning of 2021, the U.S. passed legislation to restrict anonymous ownership of corporations nationwide, part of combatting the same problem of money laundering.

US Treasury proposes crypto transactions over $10K be reported to IRS: Saying crypto posed “a significant detection problem by facilitating illegal activity,” the government body specifically mentioned that crypto businesses were in its crosshairs.

WisdomTree becomes the second to file for an ETH ETF with the SEC: WisdomTree is the second to file for an ether-based ETF, following VanEck’s submission earlier this month.

SEC begins formal review of Fidelity, SkyBridge Bitcoin ETF applications: Fidelity’s Wise Origin Bitcoin Trust and the First Trust SkyBridge Bitcoin ETF are now under review by regulators, according to paperwork filed earlier this month.

SEC files lawsuit against alleged promoters of crypto Ponzi scheme BitConnect: The SEC has filed an action against promoters of BitConnect for their roles in an alleged unregistered securities offering.

A CBDC rollout would require Congress to give the Fed more authority, says US central bank official: Senators heard testimony on the Fed’s progress in CBDCs and the future inclusion of fintechs into the banking system.

The OCC, Federal Reserve and FDIC are considering an ‘interagency sprint team’ for crypto regulation: A “joint effort” to create a unified framework and set of definitions for cryptocurrency is already in progress involving the OCC, Federal Reserve and FDIC.

Nebraska bill creating bank framework for digital asset firms signed into law: These entities will be regulated by the state’s Department of Banking and Finance, similar to the framework already established in Wyoming.

FinCEN seeks presentations on zero-knowledge proofs, other privacy tech for September event: FinCEN is soliciting participation from companies dealing with certain privacy tech for its Innovation Hours Program on September 9, 2021.

Acting OCC chief has begun a staff review of crypto-related actions: Acting Comptroller of the Currency Michael Hsu has requested a review of pending regulatory actions, including crypto-related guidance.

White House reviews ‘gaps’ in cryptocurrency rules as bitcoin swings wildly: According to a new report in the Washington Post, White House officials are being briefed by the Treasury Department about cryptocurrency risks. They’re looking at how to ensure the industry is properly enforced without stifling innovation or damaging the markets.

“Administration officials are discussing whether guardrails on cryptocurrency can be imposed while still allowing investors to ‘dogecoin to their heart’s content.’”

Rep. Soto prepares suite of crypto and blockchain legislation for return to Congress: Legislation governing blockchain and crypto in the U.S. is set to return to the congressional agenda. Last Tuesday, Soto re-introduced the Blockchain Technology Coordination Act before the Committee on Energy and Commerce. The bill aims to establish a new office within the Department of Commerce that manages the use of blockchain in the federal government, outside of the military.

In a statement on the BTCA’s re-introduction, Soto said:

“In order to ensure that the U.S. does not fall behind on research and development, we must embrace blockchain technology and explore all of the ways in which it can help our nation grow.”

Banks cautious about crypto ahead of COVID-19 testimony before US Senate: CEOs of major American banking institutions are heading to Washington to face legislators’ questions about how they will aid a post-pandemic economic recovery.

Europe

ECB says crypto assets appear to pose ‘limited’ financial stability risks in new report: A financial stability report published by the European Central Bank last week indicates that risks to financial institutions from crypto assets “appear limited.”

The mention of crypto assets was included in the May 19 report and published on the ECB’s website. “Signs of exuberance have also been observed in the renewed interest in crypto-assets, although financial stability risks appear limited,” the report’s authors note.

The report goes on to note in full:

“The surge in bitcoin prices has eclipsed previous financial bubbles like the “tulip mania” and the South Sea Bubble in the 1600s and 1700s. While this has largely been driven by retail investors, some institutional investors and non-financial corporations are also demonstrating a growing interest. Its price volatility makes bitcoin risky and speculative, while its exorbitant carbon footprint and potential use for illicit purposes are grounds for concern. Crypto-assets are still not used widely for payments, and euro area institutions have little exposure to crypto-linked financial instruments, so financial stability risks appear limited at present.”

UK Treasury official: A ‘significant number’ of crypto firms fall short of AML standards: The economic secretary to the Treasury said that many crypto startups have failed to meet anti-money laundering (AML) standards.

Crypto app Luno forced to amend Bitcoin ads in London: Luno has been forced to amend a controversial advertising campaign in the United Kingdom capital after regulators stepped in.

London’s leading finance lobbyists call on UK policymakers to set global pace on crypto: TheCityUK puts forward a proposed taxonomy for digital assets as well as hope that the UK lead the industry.

UK MP pressures Rishi Sunak over delays to FCA crypto register: A British politician has put a series of tough questions to chancellor Rishi Sunak over continued delays to the FCAs crypto register.

Bitcoin ‘of great concern,’ Ireland’s central bank official warns: Cryptocurrency investors should be ready to lose all their holdings, according to Ireland’s central bank financial conduct director.

Sweden moving forward in e-krona CBDC trials: Sweden will trial its CBDC with a live banking participant. The experimentation will involve participation between Riksbank and Handelsbanken, a retail bank chain based in Sweden.

Dutch regulators unsure of number of crypto investors in Netherlands: Stringent KYC requirements notwithstanding, the Dutch central bank still does not know how many crypto investors are in the Netherlands.

Big tech, not cryptocurrency, is the real threat to central banks’ autonomy, Danish central bank governor says: Though Danmarks Nationalbank’s governor seems tempted to ignore cryptocurrencies, other banks in the country continue to launch new services based on crypto.

Asia

China’s Inner Mongolia set to impose eight measures on crypto mining ban: Here’s the full translation of the eight measures proposed by the Inner Mongolia Development and Reform Committion.

Chinese traders turn to OTC desks amid regulatory crackdown: Threats from China’s central government appear to have done little to quash local demand for crypto assets.

Shanghai Man: Miners banned, exchanges targeted? Here’s what’s really happening: A look at the last week of crackdowns, including a ruling from Vice Premier Liu He. Hong Kong echoes Beijing with stricter controls of its own, limiting retail investors in the administrative region.

Hong Kong regulators set to ban retail Bitcoin trading: Only millionaires will be allowed to trade Bitcoin and cryptocurrencies in Hong Kong.

Restricting crypto trading to millionaires good for Hong Kong, says official: Hong Kong’s Treasury Secretary says the government is right to pursue restrictive crypto regulations in the city.

Korean gov’t clarifies crypto regulatory roles of different agencies: After some confusion, South Korea’s government has laid out which state and regulatory bodies are charged with the oversight of various aspects of crypto-related activities.

Korea’s crypto market is among the strongest — and the strangest — in the world: Between strict capital controls and regulations, Korea’s cryptocurrency industry is so closed off that Bitcoin commands a steep premium and DeFi is in its infancy.

Bank of Indonesia joins central bank digital currency race: After banning crypto payments back in 2017, Indonesia is looking to allow payments in a digital rupiah currency.

Rest of the World

Bank of Canada: Crypto highly risky despite institutional adoption: Crypto volatility is an emerging vulnerability to Canada’s financial system, while stablecoins pose risks for the country’s monetary system, the Bank of Canada said.

Canadian regulators accuse crypto exchange of breaking securities law: Canada’s OSC continues to take action against allegedly non-compliant cryptocurrency trading platforms after announcing new compliance measures in March.

Senator warns lack of regulations could harm Australian crypto innovation: Australian senator Andrew Bragg has urged regulators to develop clear and comprehensive regulations to encourage innovation and ensure global competitiveness.

Australian tax office: Report crypto profits or else: The ATO said it already knows who is invested in cryptocurrencies and expects cooperation.

Bitcoin mining banned in Iran until September: Iran’s government has placed an immediate embargo on Bitcoin and crypto mining to preserve electricity over the summer months.

Central Bank of Kuwait issues warning against crypto investments: The Central Bank of Kuwait said that a “real” currency is one issued by the state.

New bill would require candidates in Russian elections to declare crypto: The bill must still go through two readings in the Duma before going to the Federation Council.

Russian officials consider partial lift on crypto payment ban: Some Russian officials want to allow cryptocurrencies for payments under domestic contract law.

Indian government is rethinking crypto ban: The Economic Times: A new panel will be formed to address “outdated” recommendations on crypto trading.

India may form a new committee to study the possibility of regulating crypto: Reportedly, the government of India may form a committee of experts to study the possibility of regulating crypto in the country.

Crypto will ‘come to life’ in Nigeria, central bank governor says: Emefiele said the Nigerian government will do its best to prevent crypto from being used to finance illicit activities.

Uganda’s finance watchdog calls for crypto regulations in the country: With exchanges slow to fall under FIA oversight, Uganda’s AML watchdog wants the government to make a move on crypto regulations.

MISC

Traditional Hedge Funds Look To Deploy More Capital Into Crypto: PricewaterhouseCoopers: In the firm’s latest Crypto Hedge Fund Report, PwC says that a large majority of traditional hedge funds that have invested in cryptocurrencies plan to increase their allocation to the nascent sector before the end of the year.

“Around a fifth of hedge funds are investing in digital assets (21%); the average percentage of their total hedge fund AuM invested in digital assets is 3%. More than 85% of those hedge funds intend to deploy more capital into the asset class by the end of 2021.”

Traditional hedge funds that made investments in crypto have allocated about 3% of their assets under management, according to PwC. PwC adds that 57.1% of non-crypto hedge funds invested in digital assets for general diversification purposes. About 29% of the funds are seeking “exposure to a new value-creation ecosystem.” Only 14% say they are looking for a hedge against inflation.

Harvard Law BFI throws 10.5M votes behind own proposal to fund DeFi lobby with UNI: It is not the first time Uniswap governance has been dominated by a whale.

Powers On… Why the SEC, CFTC or FTC needs to check in on Elon Musk’s frenzied crypto tweets: Elon Musk, here we go again: It is not the first time his reckless tweeting has caused serious problems, but this time they’re for crypto.

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Main sources

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