Crypto Regulation News: International CBDC test deemed success, Kazakhstan ready to legalize crypto, Japan preparing amendment to enforce FATF travel rules on crypto, Australia’s CBDC pilot to be completed in 2023, Ooki DAO explore options in response to CFTC lawsuit, Coinbase enters the Netherlands, and more!

Paradigm

Published in

Paradigm

16 min readOct 3, 2022

Vol. 102, 19th September — 3d October

TL;DR

Landmark international CBDC test deemed success, BIS says. Israel, Norway and Sweden central banks partner with BIS to explore CBDC payments
US Digital Trading Clarity Act of 2022 seeks to cushion crypto exchanges from SEC enforcement actions
CFTC takes legal action against Digitex futures exchange and CEO. While CFTC commissioner proposes office focused on retail crypto investors
Judge orders SEC to turn Hinman documents over to Ripple Labs after months of dispute
SEC accuses 2 firms of crypto pump-and-dump scheme
IRS to summon users who don’t report and pay tax on crypto transactions
Draft US stablecoin bill would ban new algo stablecoins for 2 years
US lawmakers propose amending cybersecurity bill to include crypto firms reporting potential threats
DeFi needs appropriate regulation before expanding to retail, says Fed Chair Powell
Digital euro could be more popular beyond EU’s borders, says Lagarde
ECB should have DLT wholesale settlements when the market wants it, official says
Crypto.com scores fresh regulatory approval in France
UK gov’t introduces bill aimed at empowering authorities’ to ‘seize, freeze and recover’ crypto. Crypto remains a priority for UK under new leader,drawing industry excitement
FCA green lights Revolut, making no UK crypto firms operating under temporary status
Coinbase enters the Netherlands with central bank approval
Japan preparing amendment to enforce FATF travel rules on crypto by May 2023
South Korean gov has confiscated 260B won in crypto for non-payment of taxes since 2021. Furthermore, Korean authorities order freeze of 67M of Bitcoin tied to Do Kwon
Crypto exchange Bitkub targeted by Thai SEC with wash trading claims
Kazakhstan ready to legalize crypto as Russians flock to the country
Russia aims to use CBDC for international settlements with China. Russian officials approve use of crypto for cross-border payments
Moscow Exchange drafting bill on digital financial assets and securities trading
Australia’s CBDC pilot to be completed in 2023
Indonesia has global plans for local crypto Tokens
UAE Ministry of Economy opens up new headquarters in the Metaverse
Binance receives green light for crypto services in Dubai
Bank of Ghana to foster financial inclusion through CBDC project
Singapore strives to remain relevant amid regulatory tightening for retail investors
Uzbekistan Introduces monthly fees for crypto companies effective immediately
Israeli crypto exchange receives capital markets license in country first
Binance registers in New Zealand and opens local office
Ooki DAO members explore options in response to CFTC lawsuit
JPMorgan’s CEO feels threatened by disruption in payment systems
45% of ETH validators now complying with US sanctions, says Labrys CEO
Crypto Lender Celsius shouldn’t reopen custody withdrawals, US trustee says. Washington State joins Celsius bankruptcy case as interested party. Texas, Vermont regulators object to Celsius stablecoin sale plan
California Gov. Newsom vetoes crypto licensing and regulatory framework. Furthermore, California files order against Nexo interest account
Crypto and decentralization could influence voters in 2022 US midterm elections
And more!

Opinions

Landmark International CBDC Test Deemed Success, BIS Says: Over $22 million in foreign exchange was aided via the pilot involving China, Thailand and Hong Kong, the Bank for international Settlements said.

Interpreting the CFTC’s Lawsuit Against Ooki DAO: The CFTC sent shockwaves through the U.S. crypto industry by suing a DAO, but it doesn’t actually seem to be questioning decentralization.

Breaking Down the SEC and CFTC’s Autumn Wave of Enforcement Actions: Critics claim the regulators’ enforcement-first approach sets dangerous precedents in the absence of clear guidance for projects.

Biden’s cryptocurrency framework is a step in the right direction: Cryptocurrency guidelines released by the Biden administration this month show that officials are considering the benefits of crypto. That’s a step in the right direction.

Biden‘s anemic crypto framework offered nothing new: The cryptocurrency industry needs substantive proposals that aim to do more than simply mitigate potential damage. The Biden administration’s framework failed to acknowledge crypto’s advantages.

The European Union is stifling stablecoin adoption: The Markets in Crypto-Assets framework stands to get in the way of Circle’s Euro Coin and other digital assets. Policymakers should revise the proposal.

The ‘Brussels Effect’ wields real influence over US crypto regulation: The European Union is leading the way when it comes to global cryptocurrency regulations.

The Caribbean is pioneering CBDCs with mixed results amid banking difficulties: Emtech’s Cadet talks about CBDCs in emerging markets as the U.S. Congress and United Nations hear about the traditional banking crises.

Russia unlikely to choose Bitcoin for cross-border crypto payments: Bitcoin looks suitable for Russia’s crypto cross-border payments at first glance, but there are many reasons why such a choice is highly questionable.

USA

Draft US stablecoin bill would ban new algo stablecoins for 2 years: It’s reported the bill’s definition will cover “endogenously collateralized stablecoins,” which depend on the value of an attached cryptocurrency from the same creator for it to maintain a stable price.

Draft legislation in the United States House of Representatives would place a two-year ban on new algorithmic stablecoins such as TerraUSD Classic (USTC), which depegged from the U.S. dollar earlier this year, causing widespread crypto market contagion. The bill would criminalize the creation or issuance of new “endogenously collateralized stablecoins,” according to a current draft of the legislation obtained by Bloomberg. However, the legislation includes a grace period of two years for existing algorithmic stablecoin providers to change their models and collateralize their offerings differently. The definition would reportedly cover stablecoins that depend on the value of another virtual asset from the same creator to maintain its price and is marketed as having the ability to be converted, repurchased or otherwise redeemed for a fixed price.

The bill raises concerns over whether stablecoins such as Synthetix USD (SUSD) would fall under the definition, as it is currently collateralized with the native asset of the same protocol in the SNX token. Other algo-stablecoins with a similar structure include BitUSD which is backed by BitShares (BTS).

The draft bill also mandates the U.S. Treasury to undertake a study on algorithmic stablecoins and consult with the Federal Reserve, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

It’s possible the panel could vote on the bill as early as next week, as Bloomberg reports people familiar with the legislation state Democratic Representative Maxine Waters and Republican Patrick McHenry have been working to reach an agreement on the legislation, although it’s unknown if McHenry approved the latest draft. Waters Chairs the House Financial Services Committee, of which McHenry is a ranking member, both heard testimony at a hearing Tuesday that USD-backed stablecoins could enhance national security due to the perceived prestige and reliability of the dollar.

CFTC Charges Digitex Founder Adam Todd With Running Illegal Crypto Derivatives Trading Platform: Adam Todd, the founder of crypto futures and spot market exchange Digitex, has been charged by the Commodity Futures Trading Commission (CFTC) for multiple violations of the Commodity Exchange Act (CEA).

US senator bill seeks to cushion crypto exchanges from SEC enforcement actions: The Digital Trading Clarity Act of 2022 aims to provide regulatory clarity around classifying digital assets and related liabilities under existing securities laws.

Judge orders SEC to turn Hinman documents over to Ripple Labs after months of dispute: U.S. District Court Judge Analisa Torres overruled the SEC’s second attempt to withhold the documents relating to former Division Director William Hinman, who said Bitcoin and Ether are not securities.

SEC Accuses 2 Firms of Crypto Pump-and-Dump Scheme: The complaint alleges the two companies pumped the price of their cryptocurrency by falsely claiming they had acquired $10 billion in gold bullion to back it.

SEC alleges fintech and ‘market maker’ firms manipulated crypto market in token scheme: Though the SEC has pursued many enforcement actions related to initial coin offerings, the regulator’s stance on airdrops’ role in alleged token schemes is unclear.

IRS to summon users who don’t report and pay tax on crypto transactions: The summons requires M.Y. Safra Bank to submit information about taxpayers who failed to report and pay their taxes on crypto.

CFTC commissioner proposes office focused on retail crypto investors: The commissioner said the potential of blockchain and cryptocurrency to change existing markets necessitates a new retail investor protection office similar to that of the SEC.

US lawmakers propose amending cybersecurity bill to include crypto firms reporting potential threats: Under the proposed amendment, the 2015 legislation would be renamed the Cryptocurrency Cybersecurity Information Sharing Act.

DeFi needs appropriate regulation before expanding to retail: Fed Chair Powell: Jerome Powell acknowledged that DeFi will start to reach more retail customers, highlighting the need for regulation.

45% of ETH validators now complying with US sanctions — Labrys CEO: Labrys CEO Lachlan Feeney is trying to raise awareness among validators running Flashbots’ software that they may potentially be contributing to censorship within the Ethereum network.

Crypto Lender Celsius Shouldn’t Reopen Custody Withdrawals, US Trustee Says: The regulatory body tasked with overseeing Celsius’ bankruptcy proceedings has asked a New York judge to deny the failed crypto lender’s recent motions to reopen customer withdrawals and sell off its $23 million in stablecoin holdings, calling the actions impulsive and premature.

Washington State Joins Celsius Bankruptcy Case as Interested Party: The state’s move continues a trend of state-level regulators moving faster than the feds on regulating crypto.

Texas, Vermont regulators object to Celsius stablecoin sale plan: A key concern is that the firm hasn’t explicitly outlined what it will do with the stablecoin sale proceeds.

California Gov. Newsom vetoes crypto licensing and regulatory framework: Opposing Assembly Bill 2269, Newsom recommended a “more flexible approach” that would evolve over time while considering the safety of consumers and related costs.

California files order against Nexo interest account, says it’s 8th state to take action: The state Department of Financial Protection & Innovation says the crypto-interest account is an unqualified security; Nexo has limited the accounts since the BlockFi settlement with the SEC.

Crypto and decentralization could influence voters in 2022 US midterm elections: “Voters are less likely to support candidates perceived as standing in the way of a decentralized internet,” said Haun Ventures.

Europe & UK

Coinbase Wins Dutch Approval That Should Give Crypto Exchange Access to All of EU: The company will gain access to the broader European market once the EU’s markets in crypto assets regulation goes into effect.

Coinbase (COIN), the largest U.S. cryptocurrency exchange, won a regulatory approval from the Dutch central bank that will eventually give it the ability to offer services in the entire European Union. Registering with the De Nederlandsche Bank will give Coinbase permission to offer crypto products and services to consumers and businesses in the country. Bitstamp, another crypto trading platform, was registered in the Netherlands in April 2021.

Once the EU’s markets in crypto assets (MiCA) regulation comes into force, Coinbase will be able offer crypto trading services in the other 26 EU nations. The EU completed the full text of that legislation this week. Registration or licensing applications are underway in several other major markets, Coinbase said.

“The Netherlands is a critical international market for crypto, and I am really excited for Coinbase to bring the potential of the crypto economy to the market here,” Nana Murugesan, Coinbase’s vice president of international and business development, said in a statement.

Coinbase follows rival crypto exchanges such as Binance, which registered in France, and Bitstamp, in Italy, in gaining regulatory approval in individual European countries this year, in theory making it easier to operate across the EU once MiCA becoming law. Coinbase follows rival crypto exchanges such as Binance, which registered in France, and Bitstamp, in Italy, in gaining regulatory approval in individual European countries this year, in theory making it easier to operate across the EU once MiCA becoming law.

Digital Euro Could be More Popular Beyond EU’s Borders: Lagarde: Authorities in the EU, U.S. and other jurisdictions need to compare notes on central bank digital currencies to regulate them better, according to the ECB chief.

ECB should have DLT wholesale settlements when the market wants it, official says: Executive board member Fabio Panetta says it would undermine financial stability if the ECB were unprepared to use distributed ledger technology, but that’s the best he can say for it.

Trading Platform Crypto.com Secures Regulatory Approval to Operate in France: The exchange joins other crypto platforms including Binance and Luno that recently obtained similar approvals.

UK gov’t introduces bill aimed at empowering authorities’ to ‘seize, freeze and recover’ crypto: King Charles announced the bill in May to both houses of the U.K. Parliament, saying it was aimed at tackling illicit finance, reducing economic crime and helping businesses grow.

Crypto Remains a Priority for UK Under New Leader, Drawing Industry Excitement: Industry advocates in the country worried previous finance minister Rishi Sunak’s crypto plans wouldn’t pan out, especially after his recent defeat in the race for prime minister.

Bank of England Deputy Governor Cunliffe on DLT securities settlement: Not so fast! In a lengthy appraisal of distributed ledger technology, Cunliffe weighed its technical implications, which will be examined in greater detail when the FMI Sandbox premiers in 2023.

FCA green lights Revolut, making no UK crypto firms operating under temporary status: Revolut had been the last “holdout” out of the 12 companies originally granted FCA temporary registration to continue offering crypto services in March.

Asia

Japan to Toughen Remittance Rules to Fight Money Laundering Using Crypto: The new rules would require crypto exchange operators to share customer information when assets are transferred between platforms.

The Japanese government is planning to introduce new rules for remittances directed at stopping criminals from using cryptocurrency exchanges to launder money, according to a Nikkei report. The rules will require exchanges to share customer information — including customers’ names and addresses — when they transfer crypto between platforms.

The move is intended to provide Japanese authorities additional monitoring capabilities to track money transfers by people engaged in illegal activities. Violators could face corrective orders or criminal penalties, according to the report. Japan’s Act on Prevention of Transfer of Criminal Proceeds will be amended to include the new remittance rules. A draft amendment to the law will be submitted to a parliamentary session scheduled for Oct. 3 but the rules are expected to take effect in May 2023, the report said. Japan’s cryptocurrency exchanges have been in negotiations with the government about sharing customer information since last March, when Japan’s Financial Services Agency (FSA) ordered exchanges to implement a framework to fulfill the travel rule, which encapsulates the recommended anti-money laundering norms for crypto by global standard-setter Financial Action Task Force (FATF). Exchanges have noted concerns about heavy compliance costs. The law will also apply to stablecoins, a type of cryptocurrency tied to the price of another asset — like the U.S. dollar or gold — to stabilize the price.

The report comes as the Japanese yen slides relentlessly against the dollar. The yen fell to a 24-year low of 145.90 per dollar earlier this week. Sharp currency devaluations often have domestic investors scurrying to park money in overseas assets via cryptocurrencies.

Japan preparing amendment to enforce FATF travel rules on crypto by May 2023: Meeting international Anti-Money Laundering standards is the latest in a series of measures Japan has taken in recent months to improve its cryptocurrency regulation.

Korean authorities order freeze of $67M of Bitcoin tied to Do Kwon: The latest discovery in the long-drawn Terra ecosystem saga contradicts many of Do Kwon’s early claims.

South Korean gov has confiscated 260B won in crypto for non-payment of taxes since 2021: The country began seizing crypto to offset tax arrears last year.

Crypto exchange Bitkub targeted by Thai SEC with wash trading claims: 2022 has proven to be a regulatory disaster for Thailand’s largest crypto exchange as it has faced multiple enforcement actions and fines worth hundreds of thousands of dollars.

Rest of the World

Kazakhstan ready to legalize crypto as Russians flock to the country: A major bank in Kazakhstan has completed its first purchase of crypto for fiat and the president is ready to approve exchange activities.

Kazakhstan is ready to legalize a mechanism for converting cryptocurrencies to cash if there is demand, said President Kassym-Jomart Tokayev, per local news agency Informburo on Sept. 28. Speaking at the international forum Digital Bridge 2022, Tokayev emphasized that Kazakhstan aims to become an international leader in the field of digital technology, cryptocurrency ecosystem and regulated mining. He noted that the government of Kazakhstan has drafted amendments in national law to pilot a mechanism for converting crypto at the Astana International Financial Centre.

“We are ready to go further. If this financial instrument shows its further relevance and security, it will certainly receive full legal recognition,” Tokayev stated.

The country’s president reportedly visited a joint booth of the major local lender Eurasian Bank and the Intebix crypto exchange at the Digital Bridge 2022 event. According to local reports, the Eurasian Bank and Intebix announced that they jointly completed the bank’s first regulated crypto purchase for fiat. The precedent has marked a major milestone in Kazakhstan’s crypto adoption, allowing the Kazakh people to legally buy crypto for the national currency tenge. Other companies in the pilot crypto projects include crypto exchanges like ATAIX as well as Kazakhstan’s largest bank, Halyk Bank and Altyn Bank.

The news comes as thousands of Russians enter Kazakhstan just a week after Russian President Vladimir Putin announced a partial mobilization of reservists to fight in Ukraine. On Sept. 21, Halyk Bank suspended the use of Russia’s Mir payment cards amid sanctions warnings by the United States Treasury Department. Kazakhstan is not the only country that has emerged as a popular destination for Russians leaving the country and has been working to boost crypto adoption. Neighboring Georgia has also been moving to introduce new crypto regulations in order to become a global crypto hub. While countries like Georgia and Kazakhstan appear to welcome crypto alongside Russians fleeing mobilization, Europe has been growing increasingly concerned about Russians turning to crypto to access their money. After restricting Russian payments to European crypto wallets to 10,000 euros in April, the European Union now also reportedly plans to ban Russian nationals and entities from holding any assets in EU crypto wallets. As previously reported, Russia has been largely relying on foreign crypto infrastructure to conduct cryptocurrency operations. The Bank of Russia has repeatedly argued that the country should not legalize any local crypto exchanges.

Russia aims to use CBDC for international settlements with China: Russia is currently in the pilot phase of its CBDC development and is expected to complete the development by early next year.

Russian officials approve use of crypto for cross-border payments: Deputy Finance Minister Alexei Moiseev said the policy describes “how to acquire cryptocurrency, what can be done with it” and its use in cross-border settlements.

Moscow Exchange drafting bill on digital financial assets and securities trading: Russia’s stock exchange expects to become a registered digital asset exchange and begin trading both digital financial assets and digital asset-based securities.

Australia’s CBDC Pilot to Be Completed in 2023: The pilot, which is exploring “innovative use cases” for a central bank digital currency, kicked off in August.

Indonesia Has Global Plans for Local Crypto Tokens: The country sees the tokens as a way to boost its economy.

UAE Ministry of Economy opens up new headquarters in the Metaverse: The UAE Ministry of Economy continues its push into the Metaverse with the announcement of a “third address” located in a virtual world.

Binance receives green light for crypto services in Dubai: The new MVP License is a transition from a provisional license received under a new regulatory framework earlier this year.

Bank of Ghana to foster financial inclusion through CBDC project: Kwame Oppong, an executive at Ghana’s central bank, told Cointelegraph that a CBDC could give their citizens the opportunity to use a “decent form of payment.”

Singapore strives to remain relevant amid regulatory tightening for retail investors: Singapore’s largest bank expanded crypto trading for accredited investors only, aligned with financial authorities’ views.

Uzbekistan Introduces Monthly Fees for Crypto Companies Effective Immediately: The new regulations also require crypto custody platforms, mining pools and individual miners to pay monthly fees to the government.

Israeli crypto exchange receives capital markets license in country first: Earlier this week, the Israeli crypto exchange became the first crypto firm in the country to receive a license enabling it to work with local banks.

Binance Registers in New Zealand and Opens Local Office: Binance has recently made similar moves toward global expansion in France, Italy and Spain, among others.

MISC

Israel, Norway and Sweden central banks partner with BIS to explore CBDC payments: The Project Icebreaker initiative aimed to improve cross-border payments by reducing costs and increasing speed and transparency, with a final report expected in Q1 2023.

Ooki DAO members explore options in response to CFTC lawsuit: Members of the Ooki DAO are discussing various ways to respond to the recent lawsuit filed by the Commodity Futures Trading Commission.

Binance Global Law Enforcement Training Program is official after year of activities: The cryptocurrency exchange has been holding workshops for law enforcement worldwide since hiring a prominent IRS cybercrime investigator to head its anticrime unit.

Terra co-founder Do Kwon says he’s ‘making zero effort to hide’ following Interpol notice: Do Kwon told his more than one million Twitter followers that he had not seen his name on Interpol’s Red Notice list, but not all names are made available to the public.

Student Organizations Pull Their Weight in DeFi Protocol Governance: Crypto-curious students find valuable hands-on experience and empowerment in policy elections, a typically low-participation area of the Web3 ecosystem

Blockchain firm sues Coinbase for $350M alleging patent infringement: The plaintiff, Veritaseum believes that other centralized and decentralized crypto exchanges may have also unlawfully used the patent to facilitate crypto payments, trading and staking services.

JPMorgan’s CEO feels threatened by disruption in payment systems: Kevin O’Leary: At Converge22, the Shark Tank host said stablecoins are set to lead to a reduction in friction and fees worldwide.