Crypto Regulation News: SEC investigates Uniswap Labs, Australia, Singapore, Malaysia and South Africa launch joint CBDC pilot, Japanese FSA considers imposing stricter crypto rules, Europeans want home countries to regulate crypto, and more!

Paradigm

Published in

Paradigm

17 min readSep 6, 2021

Vol. 76, 23d August — 6th September

TL;DR

US Infrastructure bill set for a vote by Sep 27 with no changes to crypto tax provisions. Furthermore, Treasury attempts to squeeze further crypto-related data sharing provisions in the budget bill.
SEC’s Gensler lays out US crypto regulation stance to European Parliament. While SEC reportedly investigates Uniswap
Australia, Singapore, Malaysia and South Africa launch joint CBDC pilot
Survey finds Europeans want home countries to regulate crypto, not EU. Stablecoins are assets — not currencies, says ECB president
Binance incapable of effective supervision, British regulator states. Furthermore, poll shows Brits concerned over the prospect of a digital pound
South Africa’s financial regulator issues a warning against Binance, and Binance pushes back against it. Crypto does not qualify as currency, says South Africa’s central bank governor
China has completed ‘rectification’ of crypto transactions. China’s digital yuan experiment expands to insurance, fund management
Japanese financial regulator considers imposing stricter crypto rules
Slovenian finance authority proposes 10% tax on crypto income
South Korea’s top financial regulator is forming a dedicated crypto bureau. Korean FSC chair nominee doesn’t think crypto is a financial asset
Bithumb crypto exchange reportedly bans foreigners without mobile KYC
Legislative Assembly of El Salvador approves $150M Bitcoin Trust. While, retirees in El Salvador protest against Bitcoin adoption
Thai SEC proposes new rules for digital asset custodians
Cyprus betting regulator to look at blockchain and crypto trends
Nigeria’s securities regulator establishes fintech unit to study crypto
Illegal crypto mining not the cause of power shortages in Iran, ministry says
Cuba set to recognize and regulate cryptocurrency
Belarus president Lukashenko calls on state to mine cryptocurrency
Kyrgyzstan reportedly introduces regulations for crypto exchanges
Crypto is too big to exist outside of public policies, warns SEC chair
US postal inspectors need ‘comprehensive crypto training,’ audit finds
Cryptocurrencies now recognized under commercial law in Texas
Bitcoin ATM operators set up association to counter money laundering
Banks vs. exchanges — regulators overwhelmingly penalize fiat, not crypto
Crypto wallets: An important battlefront to gain wallet share and mindshare
How does the infrastructure bill affect the mining industry in the US
How the SEC’s reported Uniswap Labs investigation could signal a new era of enforcement
Singapore grants digital token payment licenses to FOMO pay
Turkish prosecutors investigate alleged $119M Dogecoin mining scam
Philippine regulator tells Axie Infinity players they must pay tax on income from game
And more!

Reports

Banks vs. exchanges — regulators overwhelmingly penalize fiat, not crypto: Data from a recent report suggest that enforcement actions from U.S. regulators against those in the crypto space cost those firms less than 1% of that in traditional finance for the last 20 years.

While regulators have often targeted projects in and out of the crypto space, the fines levied against digital asset exchanges are a fraction of those against traditional financial institutions. According to data from Good Jobs First’s violation tracker, the platform analyzed 50 of the biggest fines regulators levied against major banks, investment firms, and brokers over the last 20 years. Bank of America accrued roughly $82 billion covering 251 different fines including securities violations, while JPMorgan Chase and Citigroup were also some of the most fined banks in the U.S. since 2000 with penalties totaling $35.9 billion and $25.5 billion, respectively.

While both major banks and crypto exchanges have often been penalized for securities violations, data suggest that enforcement actions from U.S. regulators against those in the crypto space cost those firms less than 1% of that in traditional finance. One of the largest actions came from the SEC against Telegram’s 2018 initial coin offering. The company was ordered to pay $1.2 billion in disgorgement and $18.5 million in civil penalties in 2020 after being charged for violating securities laws. In contrast, Bank of America was the target of the largest fine from the Department of Justice — $16.6 billion — for selling “toxic” mortgages related to the 2008 financial crisis.

In cases which involved the SEC, Commodity Futures Trading Commission, and Financial Crimes Enforcement Network against crypto firms and individuals, unregistered securities offerings and fraud accounted for more than 90% of all fines. “Toxic securities abuses,” as Good Jobs First describes them, accounted for roughly 29% — $97 billion — of the $332.9 billion in total penalties. Investor protection violations came in second with $68 billion.

Though crypto firms continue to be the target of enforcement action by U.S. regulators — in August, BitMEX agreed to pay up to $100 million to resolve a case from the CFTC and FinCEN — there are signs lawmakers in the country are becoming increasingly aware of the economic impact of not having clear guidelines for innovative companies. Many U.S. senators and representatives have gotten behind proposals to amend language in an infrastructure going to the Senate this month. The legislation suggests implementing tighter rules on businesses handling cryptocurrencies and expanding reporting requirements for brokers.

As More Consumers Bank With Crypto, Washington Sounds the Alarm: NY Times: The NYT says officials in D.C. are trying to figure out how to curb what they see as crypto’s potential dangers.

Opinions

How does the infrastructure bill affect the mining industry in the US? The uncertain language — intentional or not — of the infrastructure bill poses an existential threat to the U.S. Bitcoin mining industry.

Crypto, Congress and the Commission: What’s next for the ‘Wild West’? Recently, there’s been much regulatory activity around crypto; anyone whose business deals with digital assets will need to pay attention.

Mass appeal: Could a Bitcoin futures EFT electrify US investors? Is a futures-based crypto exchange-traded fund really imminent, and if so why that, and not an ETF that takes direct ownership in Bitcoin?

The new episode of crypto regulation: The Empire Strikes Back: A decentralized exchange reckoning is coming — and it’s bigger than the infrastructure bill — thus, the DeFi community must be ready.

Powers On… Broker disintermediation and unregulated crypto exchanges cause major concerns: As interest in and use of blockchain accelerates this year, so do regulators’ fears, making them pay more attention to crypto exchanges.

How the SEC’s reported Uniswap Labs investigation could signal a new era of enforcement: The investigation could herald a new era of crypto enforcement for the regulator.

Crypto wallets: An important battlefront to gain wallet share and mind share: The definition of a crypto wallet should be broadened and applicable to Web 3.0 and the entire decentralized technology industry.

Not Legal Advice… America: The world’s most creative junkie: What the United States needs is tens of billions of dollars, and the state is going to take it from the American crypto community.

Let’s be clear: Blockchain technology is infrastructure: With continued dialogue between the blockchain industry and the U.S. Congress, there is still hope that regulatory legislation will arrive at a mutually beneficial resolution.

SEC could approve Bitcoin futures ETF in October, analysts predict: “A launch could come as soon as October, and we believe the SEC should permit several at once to avoid handing out a first-mover advantage,” Bloomberg ETF analysts said.

Crypto Market Won’t ‘Last Long Outside’ Regulatory Framework, Gensler Says: Platforms should be “asking for permission” rather than “begging for foregiveness,” the SEC chair said.

Crypto does not qualify as currency, says South Africa’s central bank governor: South Africa’s top banker has said that cryptocurrencies are more akin to assets than actual currencies.

Dubai to benefit from expanding crypto market, Bittrex Global CEO says: The United Arab Emirates has been cementing its presence in the digital asset industry recently with multiple efforts to further adopt blockchain-based technologies.

Anthony Scaramucci: $100K per BTC by year-end is still within reach: Exponential monthly growth in demand should propel Bitcoin to $100,000 by the end of 2021, according to the CEO of SkyBridge Capital, Anthony Scaramucci.

USA

SEC chairman tells EU Parliament crypto and fintech could be as disruptive ‘as the internet’: SEC Chairman Gary Gensler promoted cooperation between Europe and the United States in seeking to regulate decentralized financial technologies.

Gensler has appeared virtually before the European Parliament to share his policy recommendations regarding the regulation of crypto assets. Speaking to the Parliament’s Committee on Economic and Monetary Affairs on Wednesday, Gensler highlighted the role financial technologies are playing in globalizing economic flows and undermining siloed national markets:

“I think the transformation we’re living through right now could be every bit as big as the internet in the 1990s.”

Gensler highlighted the $2.1-trillion cryptocurrency markets as a “truly global” asset class, stating, “It has no borders or boundaries. It operates 24 hours a day, seven days a week.”

While Gensler stuck largely to the same pro-regulation script he’s been saying for weeks, he did diverge off into a new area when Finnish politician, Eero Heinäluoma, asked Gensler about the environmental footprint associated with crypto assets.

The politician noted the electricity consumed by the Bitcoin network was greater than the Netherlands and Sweden and exceeds “the total greenhouse gas emission reductions of electric vehicles.” While describing Bitcoin’s environmental toll as a significant “challenge,” Gensler noted the increasing popularity of more energy-efficient proof-of-stake (PoS) crypto networks, which include Ethereum and Cardano, and concluded that concerns relating to the carbon emissions of crypto will become concentrated around Bitcoin as PoS adoption rises.

The SEC chairman placed emphasis on the need to develop robust public policy frameworks to balance supporting innovation in crypto assets and decentralized finance (DeFi) with maintaining strong investor protections.

Gensler highlighted that DeFi platforms “provide direct access to millions of investors” without the presence of a broker mediating between the public and the protocol but pointed out this came with big risks. He said that DeFi and crypto have been “rife with fraud, scams and abuse” and emphasized the vulnerability of the investing public in the absence of “clear investor protections obligations on these platforms.”

The SEC head also highlighted concerns pertaining to stablecoins, estimating that nearly three-quarters of crypto trading volumes involve stable token pairings. Gensler characterized stablecoins as facilitating “those seeking to sidestep a host of public policy goals” including Anti-Money Laundering safeguards and international sanctions.

“You’ve heard about Facebook Diem, but we already have an existing stablecoin market worth $116 billion,” he said.

Infrastructure bill set for a vote by Sept. 27 with no changes to crypto tax provisions: The House of Representatives will vote on the controversial infrastructure bill without amendments to its cryptocurrency provisions by Sept. 27.

Treasury attempts to squeeze further crypto-related data sharing provisions in budget bill: Further requirements on crypto firms could be on the way as the administration is looking for new revenue streams.

SEC reportedly investigates decentralized exchange Uniswap: Enforcement attorneys are reportedly looking for information about Uniswap’s marketing and investor services.

SEC reportedly contracts blockchain analytics firm to monitor DeFi industry: “The SEC is very keen on understanding what is happening in the world of smart contract-based digital assets,” said Victor Fang.

Ripple files motion to expose XRP holdings of SEC employees: The court has reportedly given the U.S. SEC until Sept. 3 to respond to Ripple’s motion to compel the authority to provide data on its employees’ XRP holdings.

Cryptocurrencies now recognized under commercial law in Texas: Texas House Bills 4474 and 1576 officially took effect on Sept. 1 after being signed into law by Governor Greg Abbott in June.

US postal inspectors need ‘comprehensive crypto training,’ audit finds: An internal audit released by the United States Postal Inspection Service has recommended that the agency develop a “comprehensive crypto training program” to reduce risks during its investigations.

Mayoral candidate pledges to make NYC ‘most cryptocurrency-friendly city in the nation’: Some mayors of U.S. cities large and small have been pushing for the adoption of cryptocurrencies or otherwise taking a position in favor of digital assets.

New NY governor taps former Obama official to head state’s financial regulator: Adrienne Harris said she aims “to ensure we have a robust and fair financial system, and an equitable economy” in her role at the NYDFS.

‘Don’t kill crypto’ billboard goes up in Alabama in advance of House tackling infrastructure: “We want members of Congress to know that we’ll be watching them and that we won’t let them hide from their positions on this,” said Evan Greer.

Europe

Survey finds Europeans want home countries to regulate crypto, not EU: A large-scale poll across 12 European Union member states revealed that a majority of Europeans would prefer local governments to create and regulate cryptocurrencies. Redfield & Wilton Strategies carried out a survey for Euronews, polling 31,000 respondents from Estonia, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, the Netherlands, Poland, Portugal and Spain.

Against the backdrop of the new crypto laws proposed by the European Commission (EC), a lion’s share of respondents from all nations supported the creation of a national cryptocurrency. The main reason for an in-house token, however, is attributed to gaining financial independence from the EU.

Out of the lot, respondents from Greece (40%), Italy (41%) and Estonia (39%) showed the highest support for a national cryptocurrency, while an average of 30% of respondents from other countries was in favor of a national cryptocurrency.

Going against this trend, 37% of respondents from the Netherlands opposed the launch of national crypto initiatives, dwarfing the 18% supporting respondents. Moreover, nearly 60% of the 31,000 respondents want their national government to determine financial regulations rather than depending on the European Union.

The EC is currently attempting to implement regulations for crypto assets across the European Union. On Sept. 24, 2020, the EC proposed a new digital finance package that included legislative proposals related to the handling of crypto assets in the member states.

Providing clarity to the move, the EC stated that “by making rules safer and more digital friendly for consumers, the Commission aims to boost responsible innovation in the EU’s financial sector, especially for highly innovative digital start-ups.”

Stablecoins are assets — not currencies, says ECB president: “Stablecoins are pretending to be a coin, but in fact it’s completely associated with an actual currency,” said Christine Lagarde.

Binance incapable of effective supervision, British regulator states: The world’s largest exchange has played regulatory hopscotch, moving from different jurisdictions without central offices.

Poll shows Brits concerned over the prospect of a digital pound: In a recent survey, British adults expressed concerns of personal privacy and government interference on the prospect of a government-backed digital currency.

Slovenian finance authority proposes 10% tax on crypto income: Slovenian financial authorities have announced a proposal to tax cryptocurrency participants 10% on their asset income, specifically on purchasing and selling activities.

Turkish prosecutors investigate alleged $119M Dogecoin mining scam: Unwitting DOGE investors were promised attractive returns of 100% in just 40 days in exchange for depositing their money.

Binance Removes Norwegian Krone Trading Pairs, Payment Options: The announcement extends Binance’s updates and changes to its offering to tackle regulatory challenges.

Cyprus Betting Regulator to Look At Blockchain and Crypto Trends: The National Betting Authority is exploring whether blockchain technology can help it supervise the country’s gambling industry.

Asia

Japanese financial regulator considers imposing stricter crypto rules: Japan’s financial regulator, the Financial Services Agency (FSA), has started discussions around imposing stricter regulations for cryptocurrencies in an effort to provide better protection to Japanese investors.

Back in July, the FSA established a dedicated section as well as a panel of financial experts to help the government oversee digital and decentralized finance. The agency will also be responsible for keeping track of developments in cryptocurrencies and central bank digital currency initiatives, as reported by Jiji Press.

The financial regulator intends to have replaced and imposed the new crypto regulations by mid-2022. With the new regulations in place, the FSA hopes to bring stability to the crypto market while ensuring no damage to the development and innovation within the ecosystem.

The FSA had revised a similar law in 2019 that had effectively mandated crypto exchanges in Japan to implement new features for safeguarding users’ assets. This decision was linked to the hack of Bitpoint, a Japan-based crypto exchange that saw a loss of $32 million.

In addition to the recent hack of Liquid crypto exchange, the FSA further believes that operators in the country are yet to implement sufficient Anti-Money Laundering and price volatility measures.

Earlier this month, the FSA announced that it was going to adopt the Financial Action Task Force’s Travel Rule by 2022, which will require all service providers dealing in cryptocurrencies to share transaction data. The Travel Rule was introduced in 2019 as a preventive measure against money laundering and terrorist financing with cryptocurrencies.

China Has Completed ‘Rectification’ of Crypto Transactions: PBOC: The country’s central bank has warned banks and payment services providers to stay away from virtual currencies.

China’s Digital Yuan Experiment Expands to Insurance, Fund Management: State-owned banks are exploring the use of the central bank digital currency in higher-value payments.

China to Build Global Clearing Network for Mobile Payments, Using Digital Yuan: RMB internationalization is inevitable, wrote People’s Daily.

China to ‘maintain a high-pressure situation’ on crypto, official says: An official at the People’s Bank of China said that the public should increase its risk awareness and stay away from crypto investments.

South Korea’s Top Financial Regulator Is Forming a Dedicated Crypto Bureau: The Crypto Asset Monitoring Bureau will officially launch in September and oversee licensing for exchanges and other operators, among other responsibilities.

Korean FSC chair nominee doesn’t think crypto is a financial asset: Seung-beom Koh said that fintech experts across the globe “find it difficult to see virtual currencies as a financial asset.”

Bithumb crypto exchange reportedly bans foreigners without mobile KYC: Bithumb’s stricter KYC requirements come in line with South Korea’s tightened Anti-Money Laundering regulations regarding foreign users of crypto exchanges.

Thai SEC proposes new rules for digital asset custodians: The Thai SEC is seeking public input for newly proposed crypto custody regulations until late September.

Singapore Grants Digital Token Payment Licenses to FOMO Pay: The city-state granted an “in principle” license to Independent Reserve in August.

Philippine regulator tells Axie Infinity players they must pay tax on income from game: The Philippine government is yet to determine whether Axie’s in-game NFTs should be classified as securities or currency.

Rest of the World

Australia, Singapore, Malaysia and South Africa launch joint CBDC pilot: The central banks of Australia, Singapore, Malaysia and South Africa have announced a joint initiative to trial international settlements using central bank digital currencies (CBDC). The initiative, dubbed Project Dunbar, will prototype shared platforms enabling direct transfers between institutions using digital currencies issued by multiple central banks. The pilot’s findings will be used to inform the “development of global and regional platforms” in addition to supporting the G20’s roadmap for improving cross-border payments.

Project Dunbar will be carried out in partnership with the Bank for International Settlements (BIS) Innovation Hub from its Singapore Center. The project will engage multiple partners to develop different distributed ledger technology (DLT) platforms and explore different designs that would enable central banks to share CBDC infrastructure. A joint announcement emphasizes the efficiency savings associated with DLT-based payments, stating:

“These multi-CBDC platforms will allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks, eliminating the need for intermediaries and cutting the time and cost of transactions.”

Michele Bullock, assistant governor of the Reserve Bank of Australia (RBA), highlighted that “enhancing cross-border payments has become a priority for the international regulatory community,” adding that the RBA is “very focused” on the matter in its domestic policy work.

“Project Dunbar brings together central banks with years of experience and unique perspectives in CBDC projects and ecosystem partners at advanced stages of technical development on digital currencies,” said Andre McCormack, head of the BIS Innovation Hub Singapore Centre. He added:
“With this group of capable and passionate partners, we are confident that our work on multi-CBDCs for international settlements will break new ground in this next stage of CBDC experimentation and lay the foundation for global payments connectivity.”

The RBA has consistently downplayed the need for a domestic CBDC, however, citing the success of the New Payments Platform, which allows instant digital transfers 24-hours a day.

Project Dunbar is expected to demonstrate technical prototypes of shared DLT platforms at the Singapore FinTech Festival in November of this year. The initiative expects to publish its complete findings in early 2022.

‘Surveillance state’: Australian police given sweeping new hacking powers: Legislation dramatically expanding the hacking capabilities of Australian authorities investigating suspected cybercriminals has been passed through the country’s Senate.

South Africa’s financial regulator issues warning against Binance: South African authorities are the latest to warn against using Binance, saying the exchange is not authorized to operate in the country.

Binance pushes back against warning from South Africa regulator: Though the FSCA is an agency of the South African government, Binance claimed the country’s Financial Intelligence Centre was the “major regulator” with which it had been working to be in compliance with local laws.

Nigeria’s securities regulator establishes fintech unit to study crypto: With much of the Nigerian crypto market underground or peer-to-peer due to government restrictions, the country’s securities regulator is looking into ways to make investors safer.

Illegal crypto mining not the cause of power shortages in Iran, ministry says: Iran’s Ministry of Industry, Mine and Trade questioned Tavanir’s claims that illegal mining activities consume 2,000 megawatts of power.

Legislative Assembly of El Salvador approves $150M Bitcoin Trust: El Salvador’s government has set aside $23.3 million toward rolling out crypto ATMs and $30 million to incentivize the use of the state-backed “Chivo” wallet.

Retirees in El Salvador protest against Bitcoin adoption: Retirees and veterans in El Salvador are worried that the government will start paying their pensions in Bitcoin instead of the U.S. dollar.

El Salvador police arrested and released Bitcoin detractor without a warrant: The National Civil Police later released a statement saying Mario Gómez’s detainment was related to an investigation for financial fraud.

Belarus president Lukashenko calls on state to mine cryptocurrency: Belarus has lots of abandoned industrial sites that could be used to generate revenue through cryptocurrency mining, the Belarusian president said.

Cuba set to recognize and regulate cryptocurrency: The country had to temporarily stop accepting cash bank deposits in United States dollars due to tighter restrictions set by former U.S. President Donald Trump.

Kyrgyzstan reportedly introduces regulations for crypto exchanges: The new regulatory framework aims to bring legal status to cryptocurrency exchanges in Kyrgyzstan.

23yo Venezuelan allegedly steals $1M in BTC from clients after faked abduction: The 23-year-old is wanted by the police after allegedly faking his own kidnapping and stealing his clients’ funds.

CoinDCX exchange joins ad regulator following Delhi High Court notice: Mumbai-based crypto unicorn CoinDCX has become a member of the Advertising Standards Council of India, a non-governmental self-regulatory organization.

MISC

Recommending regulations: Crypto working groups make push for adoption: Collective groups and associations want to establish industry standards for crypto, but will this guidance make a real impact on adoption?

Binance lawsuit: Claimants mount up in arbitration for decentralization: Binance processes around $25 billion worth of cryptocurrency trades daily and has seen over $2 trillion move through its exchange to date.

SBF promotes the efficiency of ‘misunderstood’ crypto derivatives: FTX CEO Sam Bankman-Fried says derivatives are necessary to bolster the liquidity and efficiency of markets.

Bitcoin ATM operators set up association to counter money laundering: “Many BTM operators feel that merely asking for a cell phone number is enough due diligence to absolve them of their mandated KYC requirements,” a Coinsource exec said.

Lobby Lobsters NFT drop raises $4 million in one hour to support DeFi lobbying efforts: All revenues from secondary sales will also be disbursed to support DeFi lobbying efforts globally.