Crypto Regulation News: IMF, World Bank and BIS champion CBDC at G20, Wyoming legally recognizes first DAO in the US, EU is looking to launch a new money laundering regulator, China’s regulatory crackdown on crypto continues, and more

Paradigm

Published in

Paradigm

17 min readJul 12, 2021

Vol. 72, 28th June — 12th July

TL;DR

IMF, World Bank and BIS champion central bank digital currencies at G20: A new report released by the triumvirate of global finance argues that CBDC will benefit worldwide development
BIS researchers find that crypto investment doesn’t require special policy. The BIS research also identified correlation between various demographics and crypto ownership
Blockchain technology could be particularly beneficial for women, says WTO director general
Crypto lobbyists put DeFi proposals to FATF in open letter
Wyoming legally recognizes first DAO in the United States
Elizabeth Warren gives SEC July 28 deadline to figure out crypto regulation. House committee reviews cryptocurrency risks, regulations in hearing
New York legislation proposes that public officials disclose their crypto holdings annually
Facing $70M in fines from regulators, Robinhood files for IPO
EU is looking to launch a new agency designated with cracking down on money laundering at the regional level, with increased reporting requirements around crypto transactions listed among its principal objectives
Spain considers national digital currency alternative to euro
UK advertising watchdog to tighten rules targeting misleading crypto ads. UK chancellor names CBDC on list of financial reforms for Treasury
Binance suspends euro bank transfers amid regulatory heat
Poland financial regulator issues public warning about Binance. Furthermore, Thai SEC and Cayman Islands regulator take action on Binance
China’s central bank worried about stablecoins’ risk to financial systems. Chinese banks tell staff to recruit up to 300 new digital yuan users each
Proposed bill in Iran could ban all foreign-mined cryptocurrencies. While, Iran pauses electricity exports due to crypto mining and hot summer
UN commission serves new warning against BTC adoption in El Salvador
Paraguayan lawmakers to present Bitcoin bill on July 14
Argentine lawmaker introduces bill for workers to be paid in crypto
South Africa to accelerate crypto regulation in wake of scams
New Zealand’s reserve bank consulting public on a potential CBDC
Philippine Stock Exchange wants to launch local crypto markets
Bank of Russia picks banks to pilot digital ruble: the regulator expects the prototype of the CBDC in December and piloting it in 2022. While, Russian lawmakers prepare legal amendment to confiscate crypto
Kazakhstan to introduce new energy fees for crypto miners in 2022
What is really behind El Salvador’s ‘Bitcoin Law’? Experts answer
And more!

Reports

IMF, World Bank and BIS champion central bank digital currencies at G20: A new report released by the triumvirate of global finance argues that central bank digital currencies will benefit worldwide development.

In a joint report, the International Monetary Fund (IMF), the World Bank and the Bank of International Settlements (BIS) have proposed to the G20 that a cross-border network of central bank digital currencies (CBDC), underpinned by efficient technological integration and proactive international cooperation, could be of significant benefit to the world economy.

The report focuses on broadening the horizon beyond central banks’ individual studies of CBDCs for domestic needs, emphasizing that it is crucial to coordinate work at a global scale and to find common ground between various national efforts to reap the full benefits of digital currency.

The report paints a bleak picture of the current system for cross-border payments, which is beset by long transaction delays and high costs due to an excessive number of intermediaries operating across different time zones across the correspondent banking process. Moreover, cross-border flows are often opaque and difficult to trace, presenting a problem for Anti-Money Laundering (AML) and combating the financing of terrorism (CFT) implementation. Over the past decade, the attenuation of cross-border banking relationships has left some countries struggling to integrate into the global financial system fully.

The groundwork would not only be conceptual and design-focused but would imply coordinated strategies, standardized practices and a degree of structural integration, ranging from the creation of new international payment infrastructures to targeted policies. The latter, for example, could include introducing limits on foreign CBDC holdings or transfers.

While most countries are studying or developing pilots for CBDCs, central banks have taken a wide variety of distinct approaches to CBDC design and have paced their research and development efforts differently. China’s digital yuan is well ahead of the international game, and multiple countries have piloted CBDCs for cross-border use, including France, Switzerland, Singapore and Bahrain, to name just a few.

Crypto lobbyists put DeFi proposals to FATF in open letter: A group of crypto lobby groups has called for “well-balanced” approaches to regulating decentralized finance (DeFi).

A group of crypto lobby groups spread across the United Kingdom, Europe, the United States and Asia has called for “well-balanced” approaches to regulating the DeFi sector in an open letter to the Financial Action Task Force (FATF). Addressing the FATF’s executive secretary David Lewis, the so-called “Global DeFi Coalition” has produced six guiding principles for governing DeFi organizations.

Bank for International Settlement researchers find that crypto investment doesn’t require special policy: The BIS research also identified correlation between various demographics and crypto ownership.

In a working paper published on July 1, researchers with the Bank for International Settlements looked at trends among crypto investors. Central to the research was a refutation of the idea that crypto investors are predominantly investing in defiance of government-issued or fiat currencies.

The authors lead the paper with the claim that “we disprove the hypothesis that cryptocurrency investors are motivated by distrust in fiat currencies or regulated finance.”

The digital euro: Something Europe can’t afford to get wrong: To become a global digital leader, Europe needs a diverse and competitive digital ecosystem.

Stablecoins under scrutiny: USDT stands by ‘commercial paper’ tether: Are stablecoins actually stable? Tether’s basket of reserve assets raises eyebrows as a new round of debate regarding backing begins.

Are cryptocurrency ransom payments tax-deductible? Any ransom payments made in cryptocurrency are taxed as property rather than currency, so be aware of the U.S. tax implications.

Binance in the crosshairs: Are regulators paying attention to crypto? Binance has become a target for regulatory action across the globe, but is it the exchange being targeted or the crypto ecosystem in general?

Has the Biden administration lost the plot on crypto regulation? The White House and Congress have yet to offer policy clarity for the crypto industry. Their agenda isn’t focused on innovation and growth.

Opinions

Blockchain technology could be particularly beneficial for women, says WTO director general: Ngozi Okonjo-Iweala, the director general of the World Trade Organization and former foreign and finance minister of Nigeria, said blockchain technology could help empower unbanked and underbanked women around the world.

“Of course blockchain is something that brings more transparency in the way that business is done and removes intermediaries,” said the WTO director-general. “I think that particularly in the finance area the ability to introduce this into transactions, I think could be particularly beneficial to women who are often excluded from access to finance. I think this is a good thing, something we should look into.”

Women in many countries have often had more trouble accessing financial services than men, a situation that could have been exacerbated by the pandemic with many institutions closed. Many experts have proposed using cryptocurrency and blockchain technology to promote financial inclusion in areas lacking the same infrastructure as developed countries, particularly where women may face long travel times to access credit providers and restrictions on opening bank accounts, and sometimes not even being allowed to legally own property.

According to a World Economic Forum report released in April, women are also still underrepresented working in the blockchain and crypto industry. The World Trade Organization has previously reported women’s economic empowerment is part of its agenda in the creation of wealth and reducing poverty, with the group suggesting digital solutions:

“E-commerce conducted through online platforms can be an easy and inexpensive way for women to trade globally, to enter new foreign markets, to expand their businesses and to harness their entrepreneurship.”

Crypto and blockchain could be a likely extension of this view, using digital currencies as a method of payment and blockchain for banking and more. However, it’s unclear how individual economies will respond as some developed countries reopen amid high vaccination rates while others remain partially or fully closed.

Regulators everywhere should follow Wyoming’s DAO Law: Wyoming’s world-first law on DAOs is the start of recognizing these legal entities worldwide, says a lawyer specializing in such arrangements.

What is really behind El Salvador’s ‘Bitcoin Law’? Experts answer: Here’s what crypto and blockchain experts think about Salvadoran President Nayib Bukele’s announcement that Bitcoin is now legal tender.

US state dept urges El Salvador to be ‘responsible’ about Bitcoin adoption: Victoria Nuland said the United States was taking a “tough look at Bitcoin” following a major ransomware attack and suggested El Salvador take a similar approach.

US crypto community overtaking Asia, says Mike Novogratz: “China has declared war on crypto as part of this broader cold war that we’re getting into,” Mike Novogratz stated.

Ransomware is a threat to Bitcoin’s legal status, says Congressman Foster: Representative Bill Foster repeated calls for third-party mediation in crypto to avoid the current “chaotic criminal ransomware environment.”

‘Compliance is a journey,’ says Binance CEO amid regulatory scrutiny: The crypto industry has massively evolved since Binance’s launch four years ago, but it still needs more regulatory certainty, Binance’s CEO said.

USDC assets to be disclosed in SEC filings, Circle CEO says: “Our intention is to include greater reserves transparency” as the stablecoin operator goes public via a SPAC deal, said Jeremy Allaire.

DoJ’s crypto czar joins FinCEN in brand-new role: Why it matters: Michele Korver’s appointment to the U.S. Financial Crimes Enforcement Network promises to reduce illicit financial practices within the crypto space.

UK chancellor names CBDC on list of financial reforms for Treasury: “While I believe in the power of new technology, we also need to manage its impact on our economy and society,” said Rishi Sunak.

Bank of England chief economist: CBDCs could fundamentally disrupt centuries-old banking model: Bank of England chief economist Andrew Haldane discussed the consequences of CBDCs in a recent speech.

‘We don’t have much time left’ to regulate crypto, says Bank of France governor: “We in Europe need to move as quickly as possible or risk an erosion of our monetary sovereignty,” said Francois Villeroy de Galhau.

China proves Bitcoin is an unstoppable machine: Bitcoin Center founder: Bitcoin’s price goes up once regulatory setbacks are digested by the crypto community, Zap Procotol co-founder Nick Spanos says.

Russian lawmakers prepare legal amendment to confiscate crypto: Russia’s prosecutor general, Igor Krasnov, says new crypto regulations are needed to combat corruption as — in his view — digital assets are often used to facilitate crime.

USA

Wyoming legally recognizes first DAO in the United States: The crypto-friendly state of Wyoming has approved the first legally recognized decentralized autonomous organization (DAO) in the United States.

The American CryptoFed DAO received notice from the Wyoming Secretary of State’s office recognizing it as a legal entity, according to an announcement.

Marian Orr, CEO of the American CryptoFed DAO, stated: “Wyoming is the leading digital assets jurisdiction in the USA, and now with this DAO law, Wyoming is arguably the top blockchain jurisdiction in the world. What this means is that creating a true digital currency with mass acceptance is now possible.”

The Merchant Advisory Group (MAG), which represents 165 of the largest merchants in the U.S., expressed its support of the filing. John Drechny, CEO of the MAG, stated that the group has always advocated for more competition in the payment-acceptance space.

The American CryptoFed DAO was established by mobile banking solutions provider mSHIFT on July 1, 2021. The project describes its mission as promoting a two-token economy that is immune from inflationary or deflationary influences.

Orr emphasized that the DAO’s native algorithmic stable token, the Ducat, facilitates fee-free transactions. The Ducat is based on EOS, which uses a delegated-proof-of-stake (DPoS) consensus to achieve high-speed transactions at the expense of decentralization.

New tokens are issued through interest that is paid to Ducat holders and rewards issued to the network’s users. Ducat rewards and interest rates are adjusted dynamically by machine learning, with the Ducat intended to appreciate against the U.S. dollar by the amount of inflation the dollar experiences.

The DAO also issues its governance token, Locke, which is used to stabilize Ducat. The governance token is issued in compliance with the Token Safe Harbor Proposal 2.0 outlined by Securities and Exchange Commission Commissioner Hester Peirce in April.

Wyoming has been at the forefront of pioneering permissive crypto regulations in the U.S. in recent years, with state regulators working alongside Avanti Bank & Trust’s Caitlin Long to develop a banking charter framework for crypto firms.

In September 2020, Kraken received a Wyoming bank charter, making it the first crypto business allowed to operate as a bank in the United States. Avanti followed suit in October.

In March of this year, Wyoming became the first state in the nation to pass legislation into law recognizing DAOs as a distinct form of limited liability companies.

Elizabeth Warren gives SEC July 28 deadline to figure out crypto regulation: The Democrat senator said in a letter to SEC Chair Gary Gensler that she needs answers by July 28.

US financial regulator FinCEN hires its first-ever chief digital currency adviser: Michele Korver has been involved in crypto-focused Anti-Money Laundering operations since as early as 2013.

House committee reviews cryptocurrency risks, regulations in hearing: A panel of expert witnesses and members of congress discussed the risks and rewards of cryptocurrency in committee.

New York legislation proposes that public officials disclose their crypto holdings annually: A proposed law in New York would, if approved, require public officials in the state to disclose cryptocurrency holdings above a $1,000 threshold on an annual basis.

Facing $70M in fines from regulators, Robinhood files for IPO: The U.S. Financial Industry Regulatory Authority delivered its biggest financial penalty against the trading app, and Robinhood still reportedly faces scrutiny from the SEC regarding its business practices.

SEC charges individuals connected to former iced tea-turned-mining company: According to the regulatory body, an investor was tipped off that the company would be rebranded, a move that resulted in a huge surge in Long Blockchain’s stock price.

SEC closes in on settlements with US BitConnect promoters for millions: Four of six U.S.-based promoters of the notorious BitConnect Ponzi scheme have reached settlement agreements with the SEC.

Senator Pat Toomey buys into Grayscale’s Bitcoin and Ether trusts: New financial disclosures show another crypto investor in the Senate — though he’s not holding coins himself.

US congressman buys Dogecoin, Ethereum and Cardano amid bull market: Over the last two months, Congressman Barry Moore purchased a range of cryptocurrencies but according to current prices, he’s in the red.

Two California men agree to plead guilty to fraud charges in connection with $1.8M ICO: The Justice Department said Friday that two men from Orange County, California, have agreed to plead guilty to securities fraud charges in connection with a $1.8 million initial coin offering.

Europe

EU eyes new money laundering regulator and stricter crypto reporting requirements: The European Union is looking to launch a new agency designated with cracking down on money laundering at the regional level, with increased reporting requirements around crypto transactions listed among its principal objectives.

A Thursday report from Reuters citing leaked EU documents asserts that the European Commission is proposing to form a new Anti-Money Laundering Authority (AMLA) that would act as the “centerpiece” of an oversight system also including national regulators.

The report also states that European lawmakers are drafting new requirements for virtual asset service providers (VASPs) mandating stringent data collection standards surrounding parties making cryptocurrency transfers. Data collected would also be made accessible to European regulators.

The report notes that crypto-asset transfers are not currently under the scope of EU regulations surrounding financial services, stating:

“The lack of such rules leaves holders of crypto assets exposed to money laundering and financing of terrorism risks, as flows of illicit money can be done through transfers of crypto assets.”

The EU has come under pressure to strengthen its Anti-Money Laundering (AML) guidelines after several member states launched investigations into Denmark’s largest bank, Danske Bank, and the over 200 billion euro worth of suspicious transactions that flowed through its small Estonian branch between 2007 and 2015.

In the absence of a supranational regulatory institution tasked with policing money laundering, the EU has had historically to rely on national authorities to enforce its policies.

“Money laundering, terrorist financing and organized crime remain significant problems which should be addressed at Union level,” the documents stated, adding:
“By directly supervising and taking decisions towards some of the riskiest cross-border financial sector obliged entities, the Authority will contribute directly to preventing incidents of money laundering/terrorist financing in the Union.”

Binance suspends euro bank transfers amid regulatory heat: Effective 8:00 am UTC on Wednesday, Binance users will no longer be able to make euro deposits through their bank. However, they can still fund their accounts with credit cards and debit cards.

Spain considers national digital currency alternative to euro: Spain’s governing party has proposed examining how a digital euro would work, not a native central bank digital currency.

UK advertising watchdog to tighten rules targeting misleading crypto ads: The U.K’s advertising regulator is planning to introduce further guidance on marketing campaigns by cryptocurrency firms.

Barclays tells cardholders it’s stopping payments to Binance: The British multinational bank has informed customers it is no longer facilitating payments made to the crypto exchange, confirming reports from users over the last week.

UK advertising watchdog to tighten rules targeting misleading crypto ads: NatWest and other U.K. high street banks have ramped crypto curbs amid recent regulatory pressure on the sector.

Poland financial regulator issues public warning about Binance: The cryptocurrency market is “neither regulated nor subject to supervision” to the Polish Financial Supervision Authority, the regulator said.

The Case for collaborating on crypto regulations: An OpenVASP board member looks to Switzerland as a model for self-regulatory action for crypto.

Xapo co-founder gets regulators’ green light for new crypto startup: Liechtenstein’s Financial Market Authority has approved a new startup called Lirium, which was founded by a Xapo co-founder and aims to streamline the integration of crypto services by banks and fintechs.

Asia

China’s central bank worried about stablecoins’ risk to financial systems: While Visa and other major private payments networks see the potential of stablecoins, China’s central bank believes they pose serious risks to global financial systems.

Chinese banks tell staff to recruit up to 300 new digital yuan users each: Six of China’s top banks have tasked their employees with promoting digital yuan wallets to 200 to 300 people a year.

From mining to software: China’s regulatory crackdown on crypto continues: Financial institutions, crypto miners and now, software companies — where will regulators in China move to strike next?

Bithumb Hong Kong subsidiaries reportedly face civil suit from Thai partner: A Thai firm claims that Bithumb’s Hong Kong subsidiaries caused it serious damage by unilaterally halting its business in Thailand.

Thai SEC and Cayman Islands regulator take action on Binance: Thai SEC and the Cayman Islands Monetary Authority are the latest regulators to join the global scrutiny against Binance.

Korean investigation finds $1.48B in illegal overseas crypto transactions: More than 30 people are facing fines and prosecution in South Korea for allegedly contravening the country’s ban on overseas crypto transactions.

Vietnam’s PM asks State Bank to trial digital currency on the blockchain: Vietnamese news outlets have reported that the country’s prime minister, Phạm Minh Chính, has tasked the State Bank of Vietnam with studying and conducting a pilot for a digital currency.

Rest of the World

UN commission serves new warning against BTC adoption in El Salvador: ECLAC executive secretary stressed that there is no study yet that would have investigated potential risks or benefits of El Salvador accepting BTC as legal tender.

Paraguayan lawmakers to present Bitcoin bill on July 14: El Salvador’s decision to accept Bitcoin as legal tender in June appears to be influencing lawmakers across the region to begin exploring their own cryptocurrency strategy. Paraguay is next in line to introduce new crypto-focused legislation.

Argentine lawmaker introduces bill for workers to be paid in crypto: The proposal may help Argentinians in the export business avoid heavy taxes from foreign currency payments.

South Africa to accelerate crypto regulation in wake of scams: A regulatory structure should be in place in three to six months.

Africrypt turns sour on investors: Founders flee as court cases build up: Africrypt founders are still on the run as investors turn to legal action to try to recoup funds lost in South Africa’s latest cryptocurrency theft scandal.

Thriving under pressure: Why crypto is booming in Nigeria despite the banking ban: Crypto communities world-wide have found ways around government bans, and Nigeria is no exception.

New Zealand’s Reserve Bank consulting public on a potential CBDC: The Reserve Bank of New Zealand will look at the potential for a CBDC “to work alongside cash as government-backed money,” and assess the issues around the emergence of crypto assets such as stablecoins.

Philippine Stock Exchange wants to launch local crypto markets first: The Philippine Stock Exchange is waiting for the local SEC to issue guidelines for crypto trading.

Proposed bill in Iran could ban all foreign-mined cryptocurrencies: Lawmakers seem to be attempting to establish a legal framework behind a Central Bank of Iran decision for people to only use crypto from state-licensed mining operations for payments.

Iran pauses electricity exports due to crypto mining and hot summer: Discounted tariffs made Iran attractive to miners, now the country is having a hard time closing the gap between the production and consumption of electricity.

Crypto exchanges in India still struggling to secure banking partners: India’s crypto exchanges continue to cope with the burden of limited access to banking services.

Bank of Russia picks banks to pilot digital ruble: The regulator expects the prototype of the CBDC in December and piloting it in 2022.

Russia’s central bank to study crypto investment risks: The Bank of Russia is collecting data from 15 credit firms and payment systems like Visa and Mastercard.

Kazakhstan to introduce new energy fees for crypto miners in 2022: The new law introduces an additional tax levy for energy used by crypto miners starting from January 2022.

MISC

Bitcoin’s evolving narratives make it antifragile: Bitcoin itself has seen very little change over time — what has changed is the dominant perception of it.

Class-action lawsuit against Binance targets exchange’s futures trading: The investors in the class-action suit allege they lost “tens of millions” of dollars due to not being able to manage their positions and view their balances during peak trading hours.

China’s digital yuan deploys at speed, leaving dust in its path: From being labeled impractical to nearing mainstream deployment, the digital yuan can transform the global economic landscape.

Slow, but not steady: India’s stance on Bitcoin and crypto is evolving: India’s regulatory stance on crypto has been shaky at best and prejudiced at worst, but what is India actually doing about crypto?

Can Taiwan become Asia’s crypto haven? Not yet: As China cracks down on the crypto field, Taiwan could be an alternative destination for crypto entities but can crypto thrive in Taiwan?