Crypto Regulation News: G7 issues CBDC guidelines, SEC approves Bitcoin futures ETF, Swiss think tank initiates vote to add Bitcoin in federal constitution, Putin says crypto can’t yet replace dollar in settling oil trades, Japan will prioritize simplicity in CBDC design, and more!

Paradigm

Published in

Paradigm

18 min readOct 18, 2021

Vol. 79, 4th October — 18th October

TL;DR

G7 leaders issue CBDC guidelines
IMF reiterates more oversight for crypto in the latest report on financial stability. IMF managing director says 110 countries are ‘at some stage’ of CBDC development
SEC approves Bitcoin futures ETF, opening crypto to a wider investor base. After the SEC’s report Bitcoin climbs above 60K dollar.
US Justice Dept announces the launch of the national crypto enforcement team. While US Senator Warren introduces bill to study crypto’s role in ransomware
FinCEN identified over 5 billion dollar in transactions tied to ransomware payments based on 590 million dollar detailed in Suspicious Activity Reports
Swiss think tank initiates vote to add Bitcoin in federal constitution
Digital Pound Foundation launches to promote CBDC development in the UK. While UK jails crypto miner for 13 months for stealing electricity
Japan will prioritize simplicity in CBDC design, says central bank executive
Too early to talk about using crypto for oil trading, says Putin. Furthermore, Russia considers new energy tariffs as Chinese crypto miners relocate. Bank of Russia to assess Bitcoin holdings volumes as 36B dollar leave banks
South Korean opposition set to tackle controversial crypto tax law. Furthermore, Korean crypto exchange Upbit to halt withdrawals for unverified users
Binance to suspend Chinese yuan from P2P platform in December. Moreover, Bitmain stops shipment of Antminer crypto mining rigs into China. While China’s Zhejiang busts GPU mining operation in public facilities
Chinese blockchain project BSN expands to Turkey and Uzbekistan
Estonian regulator wants to revoke all crypto exchange licenses
Sri Lanka appoints committee to implement crypto mining and blockchain
Belarus introduces special electricity tariff for miners
Ukrainian president returns virtual asset bill to parliament for revision
New Australian ransomware plan allows for seizure of crypto
Right-wing Indian group calls for stricter crypto regulations
Mexico’s president rules out accepting crypto as legal tender
Brazil aims to tighten penalties for crypto-related financial crimes
Texas Democratic Party aims to use NFT sales for fundraising efforts
VC firm a16z pursuing crypto lobbying push in Washington
CFTC slaps Tether and Bitfinex with a combined 42.5 million dollar fine
Judge rejects XRP hodlers’ bid to join SEC against Ripple case as defendants
Circle reveals cooperation in ongoing SEC investigation
Coinbase proposes US create new regulator to oversee crypto
Uniswap Labs hires former Obama spokesman as DC’s DeFi scrutiny ramps up
Buterin calls mandatory acceptance of Bitcoin in El Salvador counter to crypto’s ‘ideals of freedom’
Only the little people pay taxes’: the Pandora papers and the case for crypto
One currency to rule them all: Facebook’s Diem has global ambitions
And more!

Reports

G7 leaders issue central bank digital currency guidelines: The Group of Seven (G7) advanced economic nations discussed central bank digital currencies (CBDCs) this week and concluded that they should “do no harm” and meet rigorous standards.

Finance leaders from the G7 met in Washington on Wednesday to discuss central bank digital currencies and endorsed 13 public policy principles regarding their implementation.

The G7, which is comprised of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, mandated that any newly launched CBDCs should “do no harm” to the central bank’s ability to maintain financial stability. In a joint statement, G7 finance ministers and central bankers said:

“Strong international coordination and cooperation on these issues helps to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.”

It noted that CBDCs would complement cash and could act like liquid, safe settlement assets in addition to anchoring existing payments systems. Digital currencies must be energy efficient and fully interoperable on a cross-border basis, the statement added.

Leaders from the G7 nations confirmed that they had a shared responsibility to minimize “harmful spillovers to the international monetary and financial system.” CBDC issuance should be “grounded in long-standing public commitments to transparency, rule of law, and sound economic governance,” the statement continued. A G7 nation has yet to issue a CBDC but several, such as the United Kingdom, are actively researching the technology and economic impacts.

Echoing a similar statement made by the larger G20, they reiterated that no global stablecoin project should begin operation until it addresses legal, regulatory and oversight requirements. The comments may be in reference to Facebook’s planned Diem cryptocurrency, which has raised red flags for financial leaders and central bankers.

IMF reiterates more oversight for crypto in latest report on financial stability: The group identified the crypto space at risk from hacking, “lack of transparency around issuance and distribution” of tokens, and operational risks including outages during periods of extreme volatility.

Ransomware Payments in 2021 Already Dwarf Last Year’s Total, FinCEN Reports: FinCEN identified over $5 billion in transactions tied to ransomware payments based on $590 million detailed in Suspicious Activity Reports.

Opinions

Regulators are coming for crypto: Is digital identity the answer? It’s time to give control over personal data in megadatabases managed by a handful of corporations and governments back to the people.

One currency to rule them all: Facebook’s Diem has global ambitions: There are two big questions on everyone’s lips now: What exactly is Facebook’s Diem, and what it will offer its potential 2 billion users?

Portfolio rebalancing through DeFi must be simplified to see adoption: The decentralized finance industry is growing rapidly, and it’s time for portfolio risk management to keep up with innovations.

The crypto industry royally screwed up privacy: Sadly, there are several reasons why the blockchain community has fallen short in making privacy a tier-one priority, and that must be changed.

The responsibility behind a crypto lender’s asset listing: With the lack of regulation and common standards, a lot depends on crypto companies’ social responsibility and blockchain-based CSR.

Crypto adoption in sights: Regulators and industry join to fight ransomware: As the crypto industry continues to develop at a rapid pace, so do the ransomware attacks, but regulators now seem ready to step in.

US debt ceiling crisis: A catalyst for crypto’s ultimate decoupling? Many in and beyond the crypto industry believe that the political standoff around the debt ceiling increase makes digital assets more attractive in the long run.

China’s crypto ban: Buy the dip or cause for concern? China’s regulatory policies toward crypto used to be a major factor in market activity.

IMF managing director: 110 countries are ‘at some stage’ of CBDC development: Kristalina Georgieva said that stablecoins “fill the digital gap in privately issued money,” but labeled Bitcoin and other cryptocurrencies as assets rather than a form of money.

Global Finance Watchdog Says $133B Stablecoin Sector Remains Niche: The Financial Stability Board, a G20 entity that provides recommendations for the global financial system, found stablecoins are not being used at any significant scale for payments at present.

SEC Commissioner says ‘safe harbor’ laws would’ve made ICO problems worse: Instead of a safe harbor for crypto firms, SEC Commissioner Caroline Crenshaw called for a “bridge” in which crypto firms work with the SEC to determine compliance plans.

Bitcoin futures ETF will likely be delayed until 2022, says research firm CFRA: Regulatory uncertainty could be the cause for yet more delays in the approval of long-awaited Bitcoin exchange-traded products.

Senator pressures OCC nominee over missing Marxism thesis from Moscow Uni: “I don’t think I’ve ever seen a more radical choice for any regulatory spot in our federal government,” said Senator Pat Toomey.

Russian Energy Minister Says Miners Should Pay More for Electricity: Using energy at retail rates for crypto miners is unacceptable, Nikolay Shulginov said.

‘Thank God for Bitcoin,’ Cynthia Lummis says on US debt limit raise: Bitcoin should be there to allow people to save in the event the government fails, Senator Cynthia Lummis said.

BitMEX CEO predicts Bitcoin will be legal tender in five countries by 2022: Developing economies are more affected by issues related to remittances and inflation, BitMEX’s CEO said.

USA

SEC Approves Bitcoin Futures ETF, Opening Crypto to Wider Investor Base: After years of trial and error by would-be fund sponsors, cryptocurrency investing is finally opening up to the masses with the tacit U.S. approval of a bitcoin futures exchange-traded fund.

The Securities and Exchange Commission (SEC) greenlighted bitcoin futures ETFs in a first for the industry on Friday, after the regulator’s five commissioners met on the issue. ProShares, which filed for its Bitcoin Strategy ETF this past summer, may be the first to launch next week. The company filed a post-effective amended prospectus on Oct. 15, stating its filing is expected to launch on Monday, Oct. 18, though the fund may not begin trading immediately.

Proponents of a bitcoin ETF believe the product will be more widely accessible for individuals interested in bitcoin than the actual cryptocurrency by giving investors a regulated alternative to the underlying digital asset. The first product will track bitcoin futures, rather than the price of bitcoin directly, however. SEC Chair Gary Gensler indicated he believes futures-based products might provide stronger investor protections due to the laws under which they operate.

The SEC has, in the past, explicitly rejected bitcoin ETF applications, but it does not need to formally approve one. Under federal law, the SEC can just allow an application to become effective, rather than make a formal announcement.

ETFStore President Nate Geraci told CoinDesk the form is “a step forward” for digital assets and bridging them with the more traditional financial sector. He confirmed that the filing of a post-effective amendment is confirmation of the SEC’s tacit approval.

“It’s an encouraging sign for the future of crypto to see SEC Chairman Gensler get comfortable in helping mainstream investors more easily access bitcoin exposure,” he said in an email. “The availability of a bitcoin ETF will now bring more investors under the crypto tent and facilitate greater education across the space.”

Biden Wants to Know More About Crypto: The Biden administration’s approach to crypto continues to take shape, and it still doesn’t look like any sort of outright ban is on the table.

SEC Chair Gary Gensler actually is pro-Bitcoin, Volt Equity CEO argues: Volt recently received approval for an ETF that includes stocks in various crypto-related companies.

US Justice Dept announces launch of national crypto enforcement team: “We need to make sure that folks can have confidence when they’re using these systems and we need to make sure we’re poised to root out abuse that can take hold on them,” said Lisa Monaco.

CFTC slaps Tether and Bitfinex with a combined $42.5 million fine: The settlement triggered concerns that the CFTC’s role in stablecoin regulation could be misunderstood by the public.

Nasdaq listing hints that the SEC may soon approve ETF application from Valkyrie: Nasdaq’s vice president of listing qualifications, Eun Ah Choi, said shares of Valkyrie’s Bitcoin ETF had been certified for listing on the exchange.

VC firm a16z pursuing crypto lobbying push in Washington: Andreessen Horowitz executives will seek to guide U.S. policymakers on standards for crypto and Web 3.0.

Texas Democratic Party aims to use NFT sales for fundraising efforts: “We can’t wait to continue turning powerful, exclusive, behind-the-scenes moments into digital assets that help fuel progressive objectives,” said Front Row co-founder Parker Butterworth.

US lawmaker is most concerned about Treasury’s response to crypto: Exactly 3% of the United States Senate attended the Texas Blockchain Summit on Friday, all addressing their fellow lawmakers’ understanding of crypto and blockchain.

US Senator Warren introduces bill to study crypto’s role in ransomware: The Ransom Disclosure Act aims to help the Department of Homeland Security gather critical data on ransom payments in cryptocurrency and fiat.

Gensler confirms SEC won’t ban crypto… but Congress could: Representative Patrick McHenry believes Gary Gensler’s SEC has disregarded standard practice when going after crypto.

US lawmaker proposes safe harbor for digital tokens in new bill: The “Clarity for Digital Tokens Act of 2021” bill seemingly builds on an initiative from SEC commissioner Hester Peirce, who has called for creating a safe harbor for projects that raise funds to build decentralized networks.

Circle reveals cooperation in ongoing SEC investigation: Circle has published filings revealing it is cooperating with a subpoena from the SEC that it received in July.

Judge rejects XRP hodlers’ bid to join SEC against Ripple case as defendants: The judge ruled that the SEC would be required to launch enforcement actions against each individual XRP holder should they be allowed to participate in the case as defendants.

Europe

Swiss think tank initiates vote to add Bitcoin in federal constitution: 2B4CH, a Swiss non-profit think tank assisting the state in exploring cryptocurrencies like Bitcoin (BTC) and blockchain technology, is launching an initiative that could make Bitcoin one of the country’s reserve assets.

On Friday, the association announced plans to start a popular federal initiative by collecting 100,000 signatures for the introduction of Bitcoin to article 99 clause 3 of the Swiss federal constitution. The initiative specifically proposes to add Bitcoin to the list of assets held by the Swiss central bank, which would change the constitutional clause to: “The Swiss National Bank shall create sufficient currency reserves from its revenues; part of these reserves shall be held in gold and Bitcoin.”

Whether the vote is successful is not really relevant, as the initiative is focused on gathering signatures to make this proposal be presented to the Swiss citizens to vote, 2B4CH’s founder and chair Yves Bennaim told.

“If the signatures are gathered successfully, the vote will legally have to happen, and so will the conversations and debates, eventually informing and educating better everyone in Switzerland, and hopefully worldwide, as we set the example,” Bennaim said. “We hope the vote will be successful, but even if it isn’t, it will already be a success if the topic is brought to the public debate,” he noted.

If the vote is successful, the Swiss National Bank, or SNB, will need to learn how to add Bitcoin into its reserves, holding it the “best and safest way,” which would make Switzerland one of the world’s leading nations in the industry and benefit its economy on many levels, Bennaim stated, adding:

“Such an addition to the constitution would affect people in Switzerland in a similar way the Silicon Valley and the London Stock Exchange have benefited the people of their respective countries.”

According to Bennaim, 2B4CH is still at the preliminary stage of the project, now testing the potential interest in the initiative. The next steps include presenting the project to the confederation and collecting signatures officially. “When this phase is successfully finished, it will take months or even years before the vote is actually taking place,” Bennaim said.

Founded in Geneva in 2017, 2B4CH is an independent non-profit association studying social and financial transformations brought by Bitcoin and blockchain technology as well as the impact of decentralized cryptocurrencies. The think tank counts fewer than 20 members so far and doesn’t accept donations to protect its independence and the privacy of its members.

Switzerland has emerged as one of the most crypto-friendly countries around the world, with the canton of Zug piloting Bitcoin payments for public services back in 2016. Last month, the Swiss Financial Market Supervisory Authority approved the country’s first crypto fund after authorizing the SIX Swiss Exchange to launch a digital asset marketplace.

Digital Pound Foundation launches to promote CBDC development in the UK: The think tank wants to ensure the United Kingdom keeps pace with the developments in the emerging digital landscape.

BoE deputy gov: Regulators should pursue crypto as a ‘matter of urgency’: The central bank official spoke about the risks that cryptocurrencies and stablecoins may pose when connected to traditional financial systems through individuals, financial institutions, hedge funds and banks.

UK Jails Crypto Miner for 13 Months for Stealing Electricity: The Crown Prosecution Service described the case as “highly unusual.”

Guernsey regulator approves Jacobi Asset Management’s Bitcoin ETF launch: GFSC-approved Jacobi Bitcoin ETF is a centrally cleared crypto-backed financial instrument with custody supported by Fidelity Digital Assets.

Estonian regulator wants to revoke all crypto exchange licenses: About 400 crypto businesses in Estonia still hold licenses after the state revoked nearly 2,000 licenses last year.

Asia

Japan will prioritize simplicity in CBDC design, says central bank executive: While Japan’s CBDC plans are still in the research stage, Shinichi Uchida, an executive of the Bank of Japan (BOJ), has said simplicity will drive the central bank’s design thesis for the digital yen.

According to Reuters, Uchida made this known during a speech delivered on Friday calling for modalities to be put in place to ensure the CBDC co-exists with existing private payment channels. For Uchida, vertical integration of the digital yen within the private sector payment matrix will require a simple CBDC design. Part of this simple design could involve creating a framework for people to use both the CBDC and electronic payment services from one wallet, thereby enabling seamless switching between both channels.

According to Uchida, vertical integration will incentivize the private sector to adopt Japan’s CBDC and thus lead to more valuable services. The BOJ has begun preliminary proof of concept studies on the possibility of issuing a CBDC. The second phase of the digital yen studies will reportedly commence in Q2 2022.

Japan is one of many nations in the Asia Pacific financial theater examining the merits of floating a central bank digital currency, especially in the wake of China’s digital currency electronic payment project. In March, the BOJ announced the creation of a Liaison and Coordination Committee that draws from public and private sector participants tasked with collaborating on the digital yen CBDC pilot.

Japan’s CBDC studies may also involve examining modalities for cross-border compatibility with other sovereign digital currencies, possibly as a counter to China’s digital yuan on the international stage.

South Korean opposition set to tackle controversial crypto tax law: Opposition lawmakers are seeking a one-year delay in the enactment of the law as well as a lowering of the tax burden on crypto traders.

Korean crypto exchange Upbit to halt withdrawals for unverified users: Major South Korean crypto trading platform Upbit will start gradually limiting services for unverified users this week.

BIT Mining’s Subsidiary BTC.com to Exit Mainland China: The announcement comes shortly after Antpool, the largest bitcoin mining pool by hashrate, said it will block internet access from mainland China.

Binance to suspend Chinese yuan from P2P platform in December: Binance is taking more measures to comply with China’s cryptocurrency crackdown with new restrictions in the mainland.

Bitmain stops shipment of Antminer crypto mining rigs into China: Bitmain plans to identify green energy mining opportunities from power generation projects in Chinese provinces.

China’s Zhejiang Busts GPU Mining Operation in Public Facilities: Bitoin mining has borne the brunt of China’s crackdown so far.

Police in China’s Zunyi City Bust a $124M Money Laundering Scam: Authorities were on the case for two months, following a directive from the country’s State Council.

Sri Lanka appoints committee to implement crypto mining and blockchain: The committee plans to propose a suitable framework for Sri Lanka after studying the regulations followed by international markets.

Rest of the World

Too early to talk about using crypto for oil trading, says Putin: The Russian president discussed potential use cases of cryptocurrencies in a Thursday CNBC interview following a plenary session of the Russian Energy Week forum. According to a full interview text published on the Kremlin’s official website, Putin said that private cryptocurrencies “can act as a unit of account,” but they are “very unstable.”

“Cryptocurrency oil contracts? It’s too early to talk about it. It works for transferring funds from one place to another, but in terms of trading, especially when it comes to energy resources, it is still premature in my opinion,” the president stated.

Putin went on to say that “everything evolves” and “has the right to exist,” adding that the Russian government is closely monitoring the cryptocurrency market. He also did not exclude the possibility that at some point cryptocurrencies will become a “means of accumulation.” “We see how this market fluctuates. It’s a bit early today,” Putin added.

The president said that cryptocurrencies are “not backed by anything yet.” When asked whether he considers the crypto holdings by Tesla CEO Elon Musk to be “worthless,” Putin said no, explaining that he only questioned crypto as a unit of account in the context of energy trading.

During the interview, the Russian president also claimed that the United States dollar “undermines its position” as an international reserve asset. “We aren’t interested in cutting off dollar payments completely, and we are so far satisfied with payments for energy resources in dollars, primarily for oil,” he added.

Russia considers new energy tariffs as Chinese crypto miners relocate: Russia’s Irkutsk region saw its energy consumption rates surge by 160% following China’s crackdown on crypto mining.

Bank of Russia to assess Bitcoin holdings volumes as $36B leave banks: The Bank of Russia remains skeptical on crypto despite the Russian president viewing it as a potential unit of account.

Russia doesn’t plan to follow in China’s footsteps by banning crypto outright, says deputy finance minister: Crypto payments in the country are currently banned, but Russians have been allowed to purchase and trade digital assets like Bitcoin.

Russia aims to limit crypto purchases by non-accredited investors: The Bank of Russia also wants to slow down transactions to crypto exchanges to prevent “emotional” crypto purchases.

Belarus Introduces Special Electricity Tariff for Miners: Crypto miners are now being classified in the same category as data centers.

Ukrainian president returns virtual asset bill to parliament for revision: Volodymyr Zelensky did not object to the bill’s fundamental principles, but opposed the idea of creating a new watchdog agency.

New Australian ransomware plan allows for seizure of crypto: Australian authorities will be able to seize or freeze cryptocurrencies linked to cybercrime under new legislation.

ANZ bank settles debanking case with Aussie Bitcoin trader: Allan Flynn won a settlement with ANZ for debanking him and is headed to the tribunal to take on Westpac next week.

Right-wing Indian group calls for stricter crypto regulations: The leader of the conservative Hindu group has called for proper policing of the crypto space along with other stricter measures targeted at the digital space.

Mexico’s president rules out accepting crypto as legal tender: The Bank of Mexico and the National Banking and Securities Commission issued a statement earlier this year warning financial institutions not to deal with digital assets, but the president has not often spoken directly on the subject.

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.

UAE crypto exchange BitOasis raises $30M to expand in MENA: “Our aim is to build the largest and most trusted cryptocurrency platform in the region,” BitOasis CEO Ola Doudin said.

MISC

Bitcoin Climbs Above $60K After Report That SEC Won’t Block Futures ETF: The key cryptocurrency’s price touched $60,300 Friday.

Coinbase Proposes US Create New Regulator to Oversee Crypto: The Digital Asset Policy Proposal suggests Congress pass legislation to define how digital assets are overseen.

‘Only the Little People Pay Taxes.’ The Pandora Papers and the Case for Crypto: Offshore revelations sap faith in centralized power and show why trustless systems are needed.

Chinese blockchain project BSN expands to Turkey and Uzbekistan: Chinese blockchain project BSN comes to Turkey and Uzbekistan after launching the BSN Hong Kong and Macau portal.

ASIC targets pump and dump Telegram groups: “Coordinated pumping of shares for profits can be illegal. We can see all trades and have access to trader identities,” said ASIC in a message to the ASX Pump Organization on Telegram.

Binance continues push to become regulated crypto exchange with new hire: Amid the weight of regulatory scrutiny, Binance continues to grow its international compliance team for better relations with financial regulators.

Uniswap Labs Hires Former Obama Spokesman as DC’s DeFi Scrutiny Ramps Up: With regulatory rumblings in Washington growing louder, Uniswap has hired Hari Sevugan to help shape public perception.

Coinbase unveils its Digital Asset Policy Proposal to spark conversation around comprehensive crypto regulation: One of the crypto industry’s major players seeks to boost the public debate on how to best fit digital assets into the regulatory perimeter.

Meet the DeFi Delegate Knocking on the Doors of Congress: MakerDAO delegate PaperImperium is leading the charge to educate lawmakers on crypto. But his crusade brings up a looming question: Should DeFi be regulated? And how?

Binance Appoints Its First Chief Regulatory Liaison Officer: Mark McGinness joins the exchange from the Dubai Financial Services Authority, where he spent 16 years as head of international relations.

Buterin Calls Mandatory Acceptance of Bitcoin in El Salvador Counter to Crypto’s ‘Ideals of Freedom’: The Ethereum co-founder’s comments appear to refer to an article in El Salvador’s Bitcoin Law, but in reality the requirement for merchants to accept bitcoin is not that clear.

MoneyGram launches USDC settlement using the Stellar blockchain: The partnership will enable MoneyGram customers to fund and withdraw from their accounts using the USDC stablecoin at physical branches.

How will DOJ’s new crypto enforcement team change the game for industry players, good and bad? In a bid to catch up with cybercriminals, the Justice Department is pooling all crypto expertise in one place.

Asian CBDC projects: What are they doing now? Governments in Asia are quickly researching or implementing CBDCs. What does this mean for the region’s overdependence on the U.S. dollar?