Crypto Regulation News: BIS says global CBDC bridge needs public and private cooperation, IMF recommends global crypto standards for financial stability, Chinese regulators unite forces to crack down on crypto, El Salvador mines first bitcoin with volcanic energy, and more!

Paradigm

Published in

Paradigm

16 min readOct 4, 2021

Vol. 78, 20th September — 4th October

TL;DR

CBDC impact on the banking sector could be manageable, says BIS. Global CBDC bridge needs public and private cooperation
IMF recommends CBDC and global crypto standards for financial stability
The US Treasury Department’s report on stablecoins is expected to be released in late October
SEC delays decision on 4 Bitcoin ETFs. While Gary Gensler says crypto is a ‘Wild West’. CFTC commissioner will become SEC general counsel
French regulator warns against unauthorized crypto platforms
First cryptocurrency fund approved in Switzerland
Chinese regulators unite forces to crack down on crypto. Furthermore, more crypto platforms exit China following a ban on transactions
El Salvador mines first bitcoin with volcanic energy
South Korean crypto tax delay thwarted. The country bans virtual asset services staff from trading their platform’s tokens
Singapore finance authority grants licenses to Independent Reserve and DBS. While Binance blocks fiat deposits and spot crypto trading for Singapore users
Thailand’s tourism authority is considering creating its own utility token
Brazil aims to tighten penalties for crypto-related financial crimes
Binance to cease crypto futures and options in Australia. While Binance hires former IRS-CI special agent to head intelligence division
New Zealand central bank releases issue paper on digital currency
Canadian regulators warn against ‘gambling style’ advertising and marketing in guidelines for crypto companies
UAE regulators approve crypto trading in Dubai free zone
Central bank of Ukraine to promote ‘fair’ Bitcoin regulation
Central Bank of Chile sets up team to study CBDC issuance
Nigeria to postpone its CBDC launch
SparkPool to suspend all operations
Coinbase seeks new exec to debate with policymakers
CFTC charges 12 New York crypto options businesses with failing to register
Senator Warren’s office confuses MakerDAO for failed 2016 project The DAO
Virgil Griffith pleads guilty to a conspiracy charge in North Korea sanctions case
Germany’s 2021 election: What do parties think of crypto and blockchain?
Crypto is impossible to destroy, says Tesla CEO Elon Musk
And more!

Reports

IMF recommends CBDC and global crypto standards for financial stability: The International Monetary Fund (IMF) released a set of policies for the emerging markets and developing economies to ensure financial stability amid global crypto adoption.

The IMF believes in the potential of crypto assets as a tool for faster and cheaper cross-border payments, citing the dramatic increase in the value of the crypto markets despite the bearish trends from May 2021. The report attributes high returns, transaction costs and speed and reduced Anti-Money Laundering (AML) standards as the primary drivers for crypto adoption.

To counter the resultant financial stability challenges as a result of increased trading of crypto assets, IMF recommends that:

“Policymakers should implement global standards for crypto assets and enhance their ability to monitor the crypto ecosystem by addressing data gaps. Emerging markets faced with cryptoization risks should strengthen macroeconomic policies and consider the benefits of issuing central bank digital currencies.”

The IMF report shows that the crypto market valuation has expanded beyond Bitcoin (BTC), along with a sharp increase in stablecoin offerings. Three years of IMF data suggests that risk-adjusted returns of non-stablecoin crypto assets such as Bitcoin are comparable to other mainstream benchmarks:

Besides central bank digital currency (CDBC) issuance, the IMF further recommends “proportionate regulation to the risk and in line with those of global stablecoins.” In addition to CBDC implementation, de-dollarization policies will help governments tackle macro-financial risks.

Global CBDC bridge needs public and private cooperation, says BIS: Cooperation between public and private sectors would be vital for a global CBDC system, says a new joint report.

Opinions

Money in 2030: A future where DeFi and CBDCs can work together: In coexistence with mutual benefits, decentralized finance and central bank digital currencies will finally make money universally available worldwide.

Beyond Bitcoin: The future of digital assets is bigger than the first crypto: While Bitcoin is the most recognizable digital asset, it’s just one asset class among many that are here to evolve financial services globally.

Blockchain will transform government services, and that’s just the beginning: Governments will not only use blockchain for fundamental services such as identity and voting but as a framework for economic growth.

The infrastructure bill is hanging in the balance. What would its enactment mean for crypto? Hinging on Democrats’ ability to resolve intraparty disagreements, the controversial legislation could have tangible consequences for digital finance in the U.S. and beyond.

Germany’s 2021 election: What do parties think of crypto and blockchain? What to expect from the new government in terms of its crypto regulation?

DeFi: Who, what and how to regulate in a borderless, code-governed world? The decentralized, disintermediated and borderless blockchain networks challenge regulators, but DeFi is the future of finance.

Actions speak: China’s crypto ban may reveal digital yuan CBDC goals: China’s ban on cryptocurrencies causes a mild slump, but recovering from this FUD is not new for crypto as China’s motives come under the scanner.

DeFi and DEX volumes soar amid China’s crypto ban and US regulatory risk: Data shows that crypto holders are increasingly shifting to DeFi protocols and DEXs as China continues its cryptocurrency crackdown and fears of heavy-handed regulation scare US-based traders.

Crypto adoption is a ‘huge challenge,’ says Chinese central bank exec: PBoC maintains its anti-crypto stance despite local players experimenting with digital yuan-pegged stablecoins.

Basel draft rules make crypto too costly for banks to trade, says industry: Proposed rules would make “bank involvement in the cryptoasset market cost-prohibitive from a capital perspective,” industry associations have told regulators.

Crypto is impossible to destroy, says Tesla CEO Elon Musk: The decentralized nature of cryptocurrencies may be a challenge for the Chinese government, Elon Musk suggested.

USA

Stablecoin Issuers Could Soon Face Bank-Like Regulations: Stablecoin issuers including Tether and Circle could soon be subject to bank-like regulations, according to a report from the Wall Street Journal. The reported recommendation is part of a Treasury-led presidential advisory group’s upcoming stablecoin report. First announced in July, the report is now expected to be released in late October.

A senior administration official confirmed that the report is accurate and that the federal government is looking at two different pathways. The first is the congressional pathway outlined by the WSJ, though the official did not provide specifics. The second is through the Financial Stability Oversight Council (FSOC), a panel of regulators tasked with monitoring potential risks to the financial system.

The news comes as Capitol Hill grows increasingly concerned about the lack of regulation in the $130 billion stablecoin market. In a floor speech on Wednesday, pro-crypto Sen. Cynthia Lummis (R-Wyo.) called for regular audits of stablecoin issuers and expressed concern with the lack of transparency of major issuers’ reserve backings. Securities and Exchange Commission (SEC) Chair Gary Gensler has suggested that stablecoins might be classified as securities under U.S. law, thus subjecting them to more regulatory scrutiny.

A number of stablecoin issuers are in the process of, or have stated intentions to, obtain bank-like regulatory status. Circle said in August it wants to be a national crypto bank; Paxos, which issues USDP (formerly PAX) and BUSD in partnership with Binance, got a conditional banking charter in April.

“Today’s news reports about the potential recommendations from the President’s Working Group on Financial Markets (PWG) is encouraging, as the time has come to address the risks and seize the significant opportunities of dollar digital currencies like USD Coin (USDC),” Circle Chief Strategy Officer Dante Disparte told,” adding: “Circle has already been working toward becoming a full-reserve national commercial bank, and we strongly believe that a full-reserve banking model built on digital currency technology can lead to a more efficient, fair, inclusive and resilient financial system.”

SEC Delays Decision on 4 Bitcoin ETFs: The agency extends its review of applications from Global X, Kryptoin, Valkyrie and WisdomTree by 45 to 60 days.

Fed Chair Powell Says He Has ‘No Intention’ of Banning Crypto: When asked about earlier comments he had made about CBDCs replacing private crypto, Powell said he’d “misspoken.”

CFTC commissioner Dan Berkovitz will become SEC general counsel: The commissioner has said the CFTC’s enforcement actions in the crypto space have been “aggressive,” and hinted that decentralized finance platforms were likely illegal under the Commodity Exchange Act.

SEC takes action against two meme stock wash traders: The SEC asserts that the defendants unlawfully gleaned more than $700,000 through a wash-trading scheme that targeted exchanges offering market maker rebates.

Small business advocacy group recommends US congress ‘clarify the status of digital assets’: “We encourage market participants looking to determine whether a digital asset is a security to seek the advice of securities counsel and engage with FinHub staff,” said the SEC.

SEC registrants seek DeFi and physically backed Bitcoin ETF approval: Amplify ETFs, Invesco and Galaxy submitted registrations to the U.S. SEC for Bitcoin and DeFi-based ETF offerings.

Gary Gensler Says Crypto Is a ‘Wild West.’ Others See Pure Capitalism: The SEC chairman wants to marry financial innovation to the regulatory state. Crypto wants a divorce.

Gensler Reiterates Support for Futures-Based Bitcoin ETFs: The SEC chairman struck a similar tone in August, igniting a rush in tailor-made ETF filings.

Gary Gensler, You Should Be Watching How Canada Is Regulating Coinbase: In Canada, there’s no question whether crypto exchanges offer securities and if they should be regulated as such, says our (Canadian) columnist.

Stand-Off Over $28T of US Government Debt Could Rattle Bitcoin Market: The American government has never defaulted on its debts, but congressional gridlock over raising the debt ceiling is making investors question what would happen if it did.

Opposition mounts to Biden’s OCC pick, fears she could ‘regulate crypto into oblivion’: Texas Senator Ted Cruz is among a number of politicians and bankers who are opposed to the nomination of Saule Omarova.

Biden to nominate anti-crypto and anti-big bank law professor to run the OCC: Omarova has stated she hopes to “end banking as we know it” but believes large financial firms can abuse the crypto market outside of regulators’ view.

US Senators Propose Tracking Foreign Crypto Mining: The U.S. “must get a better handle” on how cryptocurrencies are used worldwide, Sen. Hassan said.

US House Passes National Defense Act Containing Crypto Provision: The bill would clarify regulations of cryptocurrencies.

CFTC charges 12 New York crypto options businesses with failing to register: The listed crypto options providers named by the CFTC include relatively unknown names such as Bitfxprofit, Star FX Pro, Smarter Signals and BinanceFx Trade.

Senator Warren’s office confuses MakerDAO for failed 2016 project The DAO: Elizabeth Warren’s office has allegedly confused top 10 DeFi protocol MakerDAO with an early experiment in decentralized autonomous organizations that failed in 2016.

Europe

French regulator warns against unauthorized crypto platforms: French stock market regulator, the Autorité des Marchés Financiers (AMF), continues monitoring the cryptocurrency market to warn investors about unauthorized crypto services.

On Friday, AMF updated its web portals, identifying those that offer crypto and foreign exchange (forex) investments through unauthorized entities. The list included four websites related to cryptocurrency derivatives investments alongside 12 forex-related sites.

According to the regulator, the listed entities have been offering investment products without being authorized to provide such services. To protect investors from potentially fraudulent investments, AMF and French Prudential Supervision and Resolution Authority (ACPR) regularly update the blacklist of unauthorized investment providers. Still, those lists are “not intended to be complete” as “new unauthorized entities appear regularly.”

The authority strongly recommended that investors follow the list of authorized investment providers using the online register of financial service providers as well as the list of authorized providers in the financial investment advisor or crowdfunding categories.

The AMF’s latest warning comes shortly after Paris-based derivatives fund manager Melanion Capital launched a Bitcoin (BTC) exchange-traded fund (ETF) in August. Melanion CEO Jad Comair reportedly said that getting the fund approved by AMF was “a real challenge because of the sensibilities and politics currently surrounding Bitcoin and Bitcoin investing.”

Global authorities have been increasingly expressing concerns over unregulated crypto investment services recently. In mid-August, the Australian Securities and Investments Commission advised citizens to only invest in crypto via financial institutions holding an Australian Financial Services license. According to the Australian Competition and Consumer Commission, crypto scams made up more than 50% of Australian investors’ losses in the first six months of 2021.

First cryptocurrency fund approved in Switzerland: The fund tracks the performance of the 10 largest cryptocurrencies from SIX Swiss Exchange’s Crypto Market Index 10.

SEBA Bank granted the first Swiss digital asset custody license: The bank will concentrate its efforts on building an institutional-grade facility to invest in crypto assets.

Asia

Chinese regulators unite forces to crack down on crypto: The People’s Bank of China (PBoC) officially announced on Friday a set of new measures to fight against crypto adoption in China, including promoting stronger inter-departmental coordination in cracking down crypto activity.

10 Chinese state authorities, including the PBoC, the Cyberspace Administration of China and the Ministry of Public Security, have established a “coordination mechanism” to prevent financial players from participating in any cryptocurrency transactions. According to the announcement, the involved authorities and institutions have completed significant improvements to crypto monitoring platforms to identify illegal cryptocurrency transactions efficiently.

The PBoC stressed a wide number of government agencies was now going to be cracking down on crypto closely in compliance with the Chinese laws:

“Financial management departments, cybersecurity and information departments, telecommunications departments, public security departments, and market supervision departments work closely together to cut off payment channels, dispose of relevant websites and mobile applications in accordance with the law.”

Wen Xinxiang, director of the payment and settlement department at the People’s Bank of China, expressed concerns over the growing popularity of cryptocurrencies and stablecoins, calling for more measures for the traditional financial system to compete with the industry.

The latest moves by the Chinese government further reaffirm China’s anti-crypto stance as local authorities have already shut down multiple mining farms and suspended crypto trading this year. Chinese regulators had imposed similar crypto restrictions before, banning crypto exchanges from providing services in China back in 2017. Shortly after China enforced the crypto exchange ban, Bitcoin reached $20,000 for the first time in December 2017.

China’s crypto holdouts: Bitcoin nodes and OTC desks struggle on: There are still a handful of Bitcoin nodes hanging on in China, and OTC trading remains viable, but it may not be for long.

More Crypto Platforms Exit China Following Ban on Transactions: Several crypto exchanges and other crypto-service companies are giving Chinese users the boot, according to multiple reports.

Another Ethereum mining pool forced to close due to China crackdown: BeePool, the fourth-largest Ethereum mining pool will shut down operations following Beijing’s anti-crypto posture.

South Korean crypto tax delay thwarted: The crypto tax will begin for South Koreans in 2022 but some industry observers say there is no cause for concern.

S. Korea Bans Virtual Asset Services Staff From Trading Their Platform’s Tokens: Just days after the registration deadline for VASPs, South Korea announced another regulatory requirement.

Singapore finance authority grants licenses to Independent Reserve and DBS: DBSV and Independent Reserve previously received MAS’ in-principle approvals to provide digital payment token services.

Binance blocks fiat deposits and spot crypto trading for Singapore users: The crypto exchange giant has announced further restrictions to its operations in Singapore amid regulatory scrutiny.

CoinEx crypto exchange to remove all mainland China users in October: CoinEx previously blocked access and terminated the registration of new users from mainland China in March 2019.

Thailand’s tourism authority is considering creating its own utility token: The proposed TAT Coin will enable tourism operators to cash in on the popularity of cryptocurrencies.

Huobi outlines plan for Chinese investors after halting crypto trading: Huobi Group co-founder Du Jun intends to safeguard all crypto assets for Chinese accounts before permanently closing them down by Dec. 31, 2021.

Crypto has recovered from China’s FUD over a dozen times in the last 12 years: Since 2009, China and Hong Kong have “banned” or otherwise caused FUD in the crypto space on 19 separate occasions and counting.

Rest of the World

El Salvador Mines First Bitcoin With Volcanic Energy: El Salvador has officially mined the first bitcoin using volcanic energy, its president revealed. The news follows the Salvadoran president’s announcement earlier this week that the country was taking its “first steps” toward harnessing volcanic energy for bitcoin mining.

Following the approval by El Salvador’s congress for the adoption of bitcoin as legal tender in June, Bukele said he had instructed state-owned geothermal electric company LaGeo to allow bitcoin miners to tap the country’s volcanic resources. With 20 “potentially active” volcanoes according to VolcanoDiscovery.com, which account for almost 22% of the country’s energy supply, El Salvador’s harnessing of geothermal energy could provide an answer to the hunt for a reliable clean energy source to power bitcoin mining.

Brazil aims to tighten penalties for crypto-related financial crimes: The penalties are part of a new piece of legislation that also regulates crypto trading and payments.

Brazil Stock Exchange wants to provide oracles for digital real: “We are looking at it and evaluating the best ways to interact and participate in this ecosystem,” a B3 executive said.

Binance to cease crypto futures and options in Australia: Binance users in Australia have 90 days to close their positions for futures, options and leveraged tokens.

New Zealand central bank releases issue paper on digital currency: The central bank of New Zealand has outlined the major benefits of CBDC designs based on blockchain technology.

Canadian regulators warn against ‘gambling style’ advertising and marketing in guidelines for crypto companies: “Misleading advertisements and improper marketing strategies may encourage investors to take on risks they would normally avoid,” said CSA chair Louis Morisset.

UAE regulators approve crypto trading in Dubai free zone: Dubai authorities continue driving more adoption to the cryptocurrency industry by pushing more regulatory approvals.

Central bank of Ukraine to promote ‘fair’ Bitcoin regulation: Crypto doesn’t pose a big risk for the financial system until it’s adopted enough to be less volatile, the NBU said.

Central Bank of Chile Sets Up Team to Study CBDC Issuance: The team will present a white paper in first-quarter 2022 stating the objectives, requirements and regulations for the development of a digital currency.

Nigeria to Postpone Its CBDC Launch: Reports: The central bank is delaying the eNaira’s start as the African nation gears up to celebrate the 61st anniversary of its independence, according to two reports.

MISC

Second-largest Ethereum mining pool to suspend all operations: Sparkpool, the second-largest Ethereum mining pool in the world, is suspending operations due to the ongoing Chinese crackdown on crypto. The mining pool officially announced that it has suspended access to new users in mainland China on Monday in response to Chinese authorities initiating new measures to combat crypto adoption in the country.

Following the initial restrictions made last Friday, Sparkpool will continue shutting down services, and plans to suspend existing mining pool users both in China and abroad on Thursday. According to the announcement, the measures intend to ensure safety of users’ assets in response to “regulatory policy requirements.” “Further details about the shutdown will be sent out through announcements, emails, and in-site messages,” Sparkpool noted.

Launched in China in early 2018, SparkPool has emerged as one of the world’s largest mining pools for mining Ether (ETH), alongside the world’s largest Ethereum mining pool Ethermine. At the time of writing, SparkPool’s mining power makes up 22% of Ethereum’s global hash rate, slightly lower than Ethermine’s share of 24%, according to Poolwatch.io.

The news comes amid the Chinese government reinforcing its negative stance on crypto by declaring all crypto-related transactions illegal in the country last Friday. Some of the biggest cryptocurrency exchanges like Binance and Huobi have subsequently suspended new account registrations from mainland China, albeit reportedly still servicing users in Hong Kong.

Analysis Crypto community concerned over impact of infrastructure bill on DeFi: How may the $1 trillion infrastructure bill impact the thriving DeFi ecosystem and crypto community at large?

Binance hires former IRS-CI special agent to head intelligence division: Regulatory scrutiny from around the world has forced the cryptocurrency exchange to up its compliance and auditing measures.

CFTC hits Kraken with $1.25M in fines over alleged illegal offering: “Margined, leveraged or financed digital asset trading offered to retail U.S. customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations,” said Vincent McGonagle, the CFTC’s acting director of enforcement.

Coinbase seeks new exec to debate with policymakers: The U.S. exchange is looking to hire a leader with excellent political judgment to oversee relations with Washington D.C.

Acting OCC head warns that ‘fools gold’ in DeFi reminds him of lead-up to GFC: While crypto has weathered past hacks, scams and crashes, acting OCC head Michael Hsu warns that the risks may be multiplying as the technology goes mainstream.

Ethereum Developer Virgil Griffith Pleads Guilty to Conspiracy Charge in North Korea Sanctions Case: Griffith was charged with violating sanctions law by giving a cryptocurrency and blockchain presentation at a North Korean conference in 2019.

Monero’s former maintainer released from US custody: “I am actively working with my attorneys on a way to return to South Africa as soon as possible so I can address this matter and get it behind me once and for all,” said Riccardo Spagni.