Crypto Regulation News: New Fed report repeats warning about stablecoin run risks as UST loses peg, EU Commission favors ban on large-scale stablecoins, Germany publishes first nationwide tax guide for crypto, Shanghai court affirms that Bitcoin is virtual property, Argentina’s central bank bans lenders from offering crypto services, and more!

Paradigm

Published in

Paradigm

17 min readMay 16, 2022

Vol. 94, 2d May — 16th May

TL;DR

New Fed Report repeats warning about stablecoin run risks as UST loses peg
UST meltdown hasn’t spurred US Financial Stability Council meeting. US Treasury Secretary reaffirms need for stablecoin regulation following UST crash
FASB to review accounting rules for digital assets held on balance sheets
BIS survey found that more than half of central banks are developing CBDCs or running concrete experiments
Global financial stability watchdog FSB says it could write crypto rulebook
IMF recommends the Bahamas ‘accelerate its education campaigns’ on CBDC
Global crypto regulatory body is coming soon, according to IOSCO chair
Congressman Glen Thompson proposed a thoughtful, well-formulated blueprint for “crypto regulation” that aligns with U.S. Treasury Department’s proposals
Chairs from the SEC and CFTC talk crypto regulation at ISDA meeting. CFTC commissioner appoints senior policy adviser experienced in digital asset regulation
FTX US reveals New York trust charter application
5 US states issue emergency orders to shut down metaverse casino with alleged russian ties
Environmental groups call on US Government to implement stringent bitcoin mining regulations
EU Commission favors ban on large-scale stablecoins, document shows
ECB lays out ‘anonymous’ digital euro as public opposes ‘slavecoins’. Proposed digital euro designs lack privacy options, ECB presentation shows
Germany outlines favorable tax guidelines, gains on BTC and ETH sold after a year tax-free
NFT issuers could have to centralize and register under EU’s MiCA rules, France warns
Council of Europe calls for crypto laundering clampdown
UK government targets crypto in latest legislative agenda
Binance reportedly halts crypto derivatives service in Spain. While France’s financial authority approves Binance’s registration as digital asset service provider
Shanghai court affirms that Bitcoin is virtual property, subject to property rights
South Korea to establish crypto framework by 2024. Furthermore, South Korea’s new president delays crypto taxes in favor of consumer protections
Argentina’s central bank bans lenders from offering crypto services
Chilean digital peso would need to work offline, central bank governor says
Indian central bank’s ‘informal pressure’ disrupted payments
Bank of Israel claims ‘public support’ for its CBDC project
El Salvador’s central bank accepts Qredo’s registration to provide crypto services
Kazakhstan ramps up power consumption reporting requirements for crypto miners
Uzbekistan publishes crypto regulation framework, assigns supervising agency
Nigeria upgrades CBDC as crypto restrictions cripple fintech industry
Central African banks scold the CAR for Bitcoin adoption
US Senate confirms Jerome Powell for another four years as Fed chair
US court orders BitMEX founders to pay 30M for illegal trading
California governor signs executive order to spur crypto industry in the state
Utah governor approves of blockchain and digital innovation task force
Nvidia to pay 5.5M as part of SEC case concerning ‘inadequate disclosures’ around crypto mining
Senator’s Financial Freedom Act would ensure Bitcoin can be in 401(k)
New crypto litigation tracker highlights 300 cases from SafeMoon to Pepe the Frog
LUNA meltdown sparks theories and told-you-sos from crypto community
Mining Capital Coin CEO accused of 62M investment fraud scheme
And more!

Reports

9 Out of 10 Central Banks Exploring Digital Currency, BIS Says: A survey conducted in 2021 by the Bank for International Settlements found more than half of central banks are developing CBDCs or running concrete experiments.

Global Financial Stability Watchdog FSB Says It Could Write Crypto Rulebook: The Financial Stability Board joins tax and money-laundering bodies in responding to calls for coordinated international action to regulate the industry.

IMF recommends the Bahamas ‘accelerate its education campaigns’ on CBDC: In addition to recommending the financial education of the public in the Bahamas, the IMF hinted at the importance of a “robust supervisory and regulatory framework” for digital assets.

Global Crypto Regulatory Body Is Coming Soon, Says Top Official: A joint body to coordinate efforts at regulating crypto at the global level could become a reality in the next year, according to IOSCO chair Ashley Alder.

Opinions

Regulators Should Pay Attention to UST: A stablecoin de-pegged. People lost money. It ain’t great.

The Ukraine invasion shows why we need crypto regulation: Does the war in Ukraine demonstrate that cryptocurrencies have an unprecedentedly vital role in humanitarian crises or that they are completely untamable?

For the crypto industry, supporting sanctions is an opportunity to rebrand: Failure to align with the wider financial services industry by enforcing sanctions against Russia will come at a high cost for the crypto sector.

The United States turns its attention to stablecoin regulation: The U.S. continues to be a global leader in regulating and embracing the cryptocurrency industry, but the Stablecoin TRUST Act may set up some barriers for newcomers.

Bitcoin’s Velvet Revolution: The overthrow of crony capitalism: Today, the revolutionaries are gathering again. But this time, they have the most powerful economic weapon citizens have ever had: Bitcoin.

Crypto Bahamas: Regulations enter critical stage as gov’t shows interest: SALT’s Crypto Bahamas brought together traditional financial players with crypto companies and industry experts to discuss the future of digital assets.

How Big Is Crypto Crime, Really? Estimates of the scale of online crime range from under 1% to nearly half of all crypto activity — CoinDesk analyzes the approach to these estimates.

Go green or die? Bitcoin miners aim for carbon neutrality by mining near data centers: Bitcoin mining companies must prove carbon neutrality as new regulations come to play, but are carbon offsets enough?

The meaningful shift from Bitcoin maximalism to Bitcoin realism: Signs pointing to Bitcoin’s steady maturity and growth in the crypto space and beyond are undeniable, making a case for the cryptocurrency being the ultimate digital reserve asset.

UK Court recognizes NFTs as ‘private property’ — What now? Not all the experts are rushing to call the development “groundbreaking,” but it will certainly help the industry combat fraud.

Crypto needs regulation but should be done right: Report and database: The absence of a well-defined regulatory landscape sows uncertainty in the crypto industry. What should the regulators do to set things right?

On-chain privacy is key to the wider mass adoption of crypto: Blockchain transactions need privacy to catalyze mass adoption. On-chain privacy is coming, and that’s good for businesses and investors.

Can You Really Build a ‘Crypto Empire’ in the Empire State? Mayor Eric Adams wants to make New York City the biggest crypto hub in America, but there are a host of obstacles in his way.

Could the SEC case against Ripple falter over a conflict of interest? Newly discovered documents suggested a possible conflict of interest from a former SEC official when he made a speech about Ether, which some claim could jeopardize the SEC’s case against Ripple.

SEC’s Hester Peirce says new stablecoin regs need to allow room for failure: The SEC’s “crypto mom” Hester Peirce has said the regulatory “movement” around stablecoins needs to allow for “trial and error” and room for failure.

Industry experts weigh in on SEC hiring more crypto cops: The SEC’s decision to expand its digital assets section was received well by industry experts and came as no surprise, given the growing interest in cryptocurrencies.

USA

FASB to Review Accounting Rules for Digital Assets Held on Balance Sheets: A clearer framework for how companies might account for crypto could pave the way greater institutional adoption.

The Financial Accounting Standards Board (FASB) on Wednesday reportedly unanimously voted to begin a project to review the accounting for exchange-traded digital assets and commodities. The news was tweeted out by MicroStrategy (MSTR) CEO Michael Saylor, whose company holds more than 129,000 bitcoin (BTC) on its balance sheet. The FASB site shows “Accounting for Exchange-Traded Digital Assets and Commodities” on the board meeting agenda for today, but has not yet been updated with the results of any vote.

As Saylor has previously noted, current rules may discourage companies from holding bitcoin on their balance sheets as the accounting forces charges when prices head lower, but does not allow for anything to be recouped when prices rise.

Bitcoin bulls believe a clearer and more evenhanded approach would make it far easier for companies and other institutions to hold the crypto in their treasuries.

UST Meltdown Hasn’t Spurred US Financial Stability Council Meeting: Sources: U.S. federal officials aren’t getting together to follow the game plan that’s typical when mainstream financial firms flounder.

Yellen Call for ‘Responsible’ Crypto Innovation Is Right: Pennsylvania Congressman Glen Thompson has proposed a thoughtful, well-formulated blueprint for “crypto regulation” that aligns with U.S. Treasury Department’s proposals.

Stablecoins’ recent depegging is not a ‘real threat to financial stability,’ says Janet Yellen: Terra’s UST dropped as low as $0.29 and Tether’s USDT stablecoin briefly depegged from the dollar to hit $0.96 on Wednesday.

N.Y. Man Arrested, Charged With Fraud for Alleged Role in $59M Crypto Pyramid Scheme: The FBI says Eddy Alexandre promised investors he could double their money with a “robo-adviser” — and then spent their money on luxury cars and business expenses.

CFTC commissioner appoints senior policy adviser experienced in digital asset regulation: Keaghan Ames worked at Credit Suisse for more than two years as vice president and head of U.S. regulatory policy, which included advising executives on digital assets regulation.

US Senate confirms Jerome Powell for another four years as Fed chair: In a 80–19 vote in the Senate, U.S. lawmakers confirmed Jerome Powell as the next chair of the Federal Reserve System, where he will also serve as a board member until 2028.

Chairs from the SEC and CFTC talk crypto regulation at ISDA meeting: Rostin Behnam and Gary Gensler make their positions clear in keynote addresses at the annual meeting of the ISDA with Sam Bankman-Fried in attendance.

Derivatives’ Old Guard Fights FTX Chief Over Plan to Cut Out Middlemen: FTX CEO Bankman-Fried testified at a House hearing, defending his CFTC proposal to directly clear customers’ margin-backed derivatives.

‘Failure Should Be an Option,’ US Sen. Pat Toomey Says of UST Turmoil: The Banking Committee’s top Republican doesn’t want asset-backed stablecoins tarnished by the UST drama.

Grayscale Had ‘Productive’ Meeting With SEC on Bitcoin ETF Conversion: The SEC to date has approved several futures-based bitcoin ETF products, but has delayed or outright rejected all spot bitcoin ETF applications.

FTX US Reveals New York Trust Charter Application: A trust charter from the New York State Department of Financial Services enables digital asset companies to offer crypto trading and custody services in the Empire State.

5 US States Issue Emergency Orders to Shut Down Metaverse Casino With Alleged Russian Ties: A multi-state cease-and-desist letter issued Wednesday calls the Flamingo Casino Club “simply a high tech scam.”

Environmental Groups Call on US Government to Implement Stringent Bitcoin Mining Regulations: Local and national activists are banding together to limit what they consider are the industry’s adverse effects on the environment.

New Fed Report Repeats Warning About Stablecoin Run Risks as UST Loses Peg: The Federal Reserve’s biannual report came out on the same day Terra’s dollar-pegged UST stablecoin fell below $0.85.

US Officials Add North Korea-Linked Bitcoin Mixer, More BTC and ETH Addresses to Sanctions List: The U.S. Treasury Department is ramping up efforts to ice the flow of stolen crypto from a historic $620 million hack.

US Court Orders BitMEX Founders to Pay $30M for Illegal Trading: Co-founders Arthur Hayes, Benjamin Delo and Samuel Reed must each pay $10 million, the CFTC said.

Elizabeth Warren Echoes Labor Dept. Concerns About Fidelity’s Plan for Bitcoin in 401(k) Retirement Plans: In a joint letter with Sen. Tina Smith, Warren asked Fidelity “about the appropriateness” of its plans.

California Governor Signs Executive Order to Spur Crypto Industry in the State: The order prompts the creation of a regulatory framework for blockchain technologies and crypto financial assets.

Utah Governor approves of blockchain and digital innovation task force: Some of the primary duties assigned to the task force involve making policy recommendations related to blockchain and related technologies.

Nvidia to pay $5.5M as part of SEC case concerning ‘inadequate disclosures’ around crypto mining: “All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete and accurate,” said Kristina Littman.

Europe & UK

EU Commission Favors Ban on Large-Scale Stablecoins, Document Shows: The tough approach, originally targeting Facebook’s now-abandoned Libra project, could see rivals to fiat currency outlawed in the bloc after certain thresholds are hit.

The European Commission is considering hard curbs on the ability of stablecoins to become widely used in place of fiat currency, according to a document. Officials appear to be siding with the views of European Union finance ministers, who have proposed tough measures aimed at stopping the likes of Facebook’s now-abandoned libra stablecoin from replacing the euro, and require issuance to halt if transactions top 1 million per day. Two individuals familiar with discussions confirmed the details. The document is labeled as a “non-paper,” meaning it does not reflect the commission’s formal position, and is one of a number documents being produced to influence discussions on topics such as whether crypto firms should be able to register from tax havens.

Lawmakers and governments are attempting to finalize the landmark crypto law known as the Markets in Crypto Assets Regulation (MiCA), with late-stage talks behind closed doors that are brokered by the commission. National ministers, who meet in a body known as the Council of the EU, want to stop rivals to fiat from operating if they become too popular. Under their plans, regulators could order the issuers of any stablecoin exceeding 200 million euros (US$211 million) and 1 million transactions daily to cease issuances until these figures come back below the threshold.

The European Parliament favors a softer approach that would see successful stablecoins reclassified and subject to oversight by the European Banking Authority.

“The Commission services prefer the Council text that limits the issuance of ARTs [asset referenced tokens],” the document said, warning that the parliament’s approach of forcing issuers to repay customers what they originally paid for the token would lead to financial engineering that could endanger stability. “The thresholds for monitoring and limiting ARTs widely used as a means of payment could be further discussed at political level,” the document said. The Commission does favor having extra measures triggered by specific numerical limits, rather than leaving it to regulators’ discretion.

MiCA introduces measures to ensure crypto assets are well governed, honestly offered to investors and have decent reserves, particularly when they reach significant scale. The extra proposals would apply to widely used stablecoins that are tied to a basket of assets, rather than those fixed to an individual fiat currency such as the euro. The issue could determine the future of EU markets, which have, unlike the U.S., not seen the emergence of major stablecoins that could aid payments and decentralized finance — though the news that UST, which is supposed to maintain a $1 price, lost its peg and fell to under 35 cents Tuesday, may now focus minds on the importance of sound regulation.

European politicians such as French Finance Minister Bruno Le Maire had previously threatened to block libra, which was subsequently re-named diem and then abandoned by Facebook, which later renamed itself Meta (FB).

ECB lays out ‘anonymous’ digital euro as public opposes ‘slavecoins’: The ECB drops another working paper on the digital euro, causing more outrage from Europeans opposing a central bank digital currency.

Digital Euro Could Come Out Within Four Years, ECB’s Panetta Says: Peer-to-peer payments among friends could be a first test case, though no final decision’s yet taken

Germany Publishes First Nationwide Tax Guide for Crypto: The finance ministry’s letter deals with the income tax treatment of mining, staking, lending, hard forks and airdrops.

EU Ban on Tax-Haven Crypto Firms Could Breach Trade Law, Commission Warns: Lawmaker proposals to blacklist non-compliant firms are getting a rough ride as landmark MiCA legislation reaches its final stages.

NFT Issuers Could Have to Centralize and Register Under EU’s MiCA Rules, France Warns: The EU bill would also tackle decentralized finance and bitcoin’s energy use.

Council of Europe Calls for Crypto Laundering Clampdown: The council’s Moneyval committee warned of fraud, tax evasion and market manipulation taking place through virtual assets.

Proposed digital euro designs lack privacy options, ECB presentation shows: Transactions via the EU’s prospective CBDC could be transparent to intermediaries, as any non-crypto digital transactions are.

UK Promises New Laws to Promote, Seize Crypto: Prince Charles promised laws on economic crime and financial services as he introduced the government’s legislative agenda at the formal opening of a new session of Parliament.

The FCA Is Holding Its First CryptoSprint: Here’s What the Digital Asset Community Wants From It: The U.K. regulator will meet crypto experts to discuss how to handle disclosing information related to issuance of crypto assets, regulatory obligations and custody regulations.

Binance reportedly halts crypto derivatives service in Spain: Binance is expected to reintroduce the derivatives option only after receiving regulatory approval in the form of a guarantee certificate from the Bank of Spain.

France’s financial authority approves Binance’s registration as digital asset service provider: Binance said it would “significantly scale” its operations in France following the registration approval, and planned to expand its team “to pursue further infrastructure development.”

Asia

Shanghai court affirms that Bitcoin is virtual property, subject to property rights: A district court in Shanghai ruled on a Bitcoin owner’s right to compensation in a case involving an unpaid loan and decided on Bitcoin’s legal status in the process.

The Shanghai High People’s Court has issued a document in which it states that Bitcoin is subject to property rights laws and regulations. That finding was made in relation to a lawsuit filed in a district court in October 2020 involving the recovery of a loan of 1 Bitcoin (BTC). The lower court recognized Bitcoin as having value, scarcity and disposability and, therefore, being subject to property rights and meeting the definition of virtual property.

According to the Sina website, the Shanghai Baoshan District People’s Court ruled in favor of plaintiff Cheng Mou, ordering defendant Shi Moumou to return the Bitcoin. When the defendant failed to do so, the case was returned to the court, which held a mediation in May 2021. Since the defendant no longer had possession of the Bitcoin, the parties agreed that the defendant would provide compensation at a discount from the value of the Bitcoin at the time of the loan.

No current value could be established for the loaned Bitcoin since its trading is banned in China. The case was also complicated by the limitations of court investigative and enforcement authorities, which cannot make inquiries about virtual property, according to the publication.

China began cracking down on cryptocurrency trading and ramped up efforts in 2017. The government went on gradually to disconnect cryptocurrency miners from the power grid and KV against crypto markets. It has since turned its attention to “NFT-related illegal financial activities.”

South Korea to establish crypto framework by 2024: The effort will include issuing guidance for NFTs and ICOs, expanding infrastructure and supporting CBDC research.

South Korea’s new president delays crypto taxes in favor of consumer protections: The country’s president-elect is proving his crypto savvy by declaring there will be no tax on crypto investment gains until legislation can ensure consumer protections.

Rest of the World

Argentina’s Central Bank Bans Lenders From Offering Crypto Services: The announcement on Thursday afternoon comes after the IMF last month approved a $45B loan facility for Argentina that stipulated the country would discourage the use of cryptocurrencies.

The Central Bank of the Argentine Republic (BCRA) announced that it has barred banks in the country from facilitating for clients the use of crypto assets. The BCRA statement says banks are prohibited from offering services for any digital assets not regulated by the central bank, and since there currently are no digital assets thus regulated, the move amounts to a de facto ban.

“The measure ordered by the BCRA’s board of directors seeks to mitigate the risks associated with transactions with these assets that could be generated for users of financial services and for the financial system as a whole,” the statement said.

The announcement comes just days after Banco Galicia, the largest Argentinian private bank by market value, added the option to buy and sell cryptocurrencies on its platform. Also this week, domestic digital bank Brubank began offering similar services.

In March, Argentina and the International Monetary Fund (IMF) each approved a debt package of $45 billion that included a provision discouraging the use of cryptocurrencies.

Argentina Was at the Cusp of a Crypto Boom. The Central Bank Had Other Plans: The local monetary authority surprised banks by banning them from offering crypto, but so far it’s left local exchanges alone.

Chilean Digital Peso Would Need to Work Offline, Central Bank Governor Says: Design principles are due out later this week, though no final decision has been taken on the digital peso.

India’s Parliamentary Finance Body ‘Chides’ Crypto Industry in Meeting: The meeting was held in the Indian IT hub of Bengaluru, and was the second time the finance committee has met representatives of the crypto industry.

Indian central bank’s ‘informal pressure’ disrupted payments: “I guess we have a concern that [the Reserve Bank of India] may be actually in violation of the Supreme Court ruling,” said Coinbase CEO Brian Armstrong.

Bank of Israel claims ‘public support’ for its CBDC project: Stakeholders believe that the digital shekel would boost competition, but remain divided on the matter of privacy.

El Salvador’s central bank accepts Qredo’s registration to provide crypto services: Registered Bitcoin service providers in El Salvador include Chivo, the firm behind the state-issued crypto wallets and kiosks, Paxos Trust Company, Paxful and OpenNode.

Kazakhstan ramps up power consumption reporting requirements for crypto miners: Cryptocurrency mining companies will be required to submit comprehensive information about their operations as the country tries to reign in electricity consumption.

Uzbekistan Publishes Crypto Regulation Framework, Assigns Supervising Agency: The Perspective Projects Agency will ensure that only fully identified people trade crypto on national exchanges.

Nigeria upgrades CBDC as crypto restrictions cripple fintech industry: Nigeria’s central bank has upgraded its eNaira to steer the country away from crypto even after a UN report stated that restrictions on digital currencies are stifling the nation’s fintech sector.

Quelle surprise: Central African banks scold the CAR for Bitcoin adoption: The Central African Republic adopting crypto puts monetary stability in “peril,” according to a letter from the Governor of the Bank of Central African States.

MISC

Untethered: Here’s everything you need to know about TerraUSD, Tether and other stablecoins: Established stablecoin trading pairs have struggled to keep stable on crypto exchanges around the world. Here are the updates as the situation evolves.

‘Mortified’ crypto trader gets 42 months for fraud, claiming he was a total gun: Jeremy Spence, aka Coin Signals, scammed around $5 million from 170 investors who were unaware their crypto was used to fund a Ponzi scheme.

LUNA meltdown sparks theories and told-you-sos from crypto community: Some of you saw it coming, some of you still can’t believe it’s real. Was the “most significant collapse in crypto history” an attack?

Mining Capital Coin CEO accused of $62M investment fraud scheme: “Capuci operated a fraudulent investment scheme and did not use investors’ funds to mine new cryptocurrency, as promised, but instead diverted the funds to cryptocurrency wallets under his control,” the DOJ stated.

New crypto litigation tracker highlights 300 cases from SafeMoon to Pepe the Frog: The SEC, CFTC and DOJ have seven cases either resolved or ongoing this year, with the litigation against husband-wife duo Ilya Lichtenstein and Heather Morgan being the most high profile.