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Crypto Regulation News: Supreme Court limits SEC’s power to seek punitive fines on crypto firms, NYDFS proposes crypto overhaul to boost adoption of digital assets, Ernst & Young launches automated crypto tax platform, Digital yuan’s backend development complete

Vol. 46, 15th June — 29th June

TL;DR

  • The Bank for International Settlements expects the COVID-19 crisis’s impact on retail payments to have a positive effect on central bank digital currency development.
  • WEF hopes to stamp out corruption with Colombian blockchain trial.
  • The US Supreme Court made a ruling which will limit the amount of fines the SEC can impose on crypto and blockchain firms.
  • A bill that would outlaw end-to-end encryption for technology companies was proposed by three Republican senators; meanwhile, Ava and Cardano would not yield.
  • New York regulator proposes cryptocurrency overhaul to boost adoption of digital assets.
  • A recent U.S. government hearing showed a significant uptick in online crime since COVID-19 took over in 2020.
  • The Block looked at the databases of the SEC, the U.S. Congress, and the United States Patent and Trademark Office to gain insights into cryptocurrency trends.
  • Latest news shows an intended bid for Securities and Exchange Commission, or SEC, chairman Jay Clayton as New York’s Southern District attorney.
  • According to John Bolton’s new book ‘The Room Where It Happened’, Trump was against Bitcoin long before his July 2019 Twitter tirade.
  • Facebook’s proposed Libra digital currency has alarmed policymakers around the world who say a global currency should be controlled by central banks. But such “basket-backed” stablecoins could improve consumer welfare in certain economic scenarios, according to a recent research paper from the U.S. Federal Reserve.
  • Sweden’s central bank just released a massive report on central bank digital currencies.
  • The U.K.’s Financial Conduct Authority is urging all crypto businesses operating in the country to submit their applications by June 30 to make it for the 2021 deadline.
  • South Korea’s Finance Minister confirms plan to tax cryptocurrency.
  • A former senior official of the People’s Bank of China said that the country has completed the backend architecture development of its digital currency.
  • SBI announced a crypto investment fund, Bitflyer Holdings used blockchain-based voting for a shareholder meeting, and more headlined news from Japan these past weeks.
  • A 23-year old Singaporean accused of unlicensed Bitcoin dealing is set to become the first person to be charged under the city-state’s Payment Services Act.
  • The Bank of Thailand launched a project to pilot test its CBDC payment system with the largest building material provider in the country.
  • A senior Vietnamese police official said cryptocurrency fundraisers are illegal in the country and people should not invest in them.
  • Australian watchdog warns of spike in crypto scams during Coronavirus pandemic.
  • And much more!

Reports

Accounting Giant Ernst & Young Launches Automated Crypto Tax Platform: Ernst & Young (EY) says crypto traders can now track their annual gains and losses on cryptocurrencies across all major exchanges through its new EY CryptoPrep platform.

The Software as a Service (SaaS), web-based filing solution is a fully automated engine that provides step-by-step guidance through the crypto tax filing process, according to a press release.

The platform collects transactions from exchanges, allows users to enter off-exchange activities, applies the relevant taxes, and compiles the information into a downloadable 8949 tax form for current and past years. The platform currently supports over 1,000 crypto assets, and pricing starts at $49 for up to 20 cryptocurrency transactions.

Marna Ricker, vice-chair of tax services at EY Americas, says the company created the EY CryptoPrep software to revamp the cumbersome process of filing crypto taxes.

“Our clients increasingly hold and trade crypto assets, creating the need for an innovative solution to address the evolving complexity around filing crypto taxes.”

The product launch comes roughly one month before the July 15th deadline to file 2019 federal and state taxes.

WEF Hopes to Stamp Out Corruption With Colombian Blockchain Trial: The World Economic Forum looks at blockchain as a solution against foul play in government processes.

COVID-19 Crisis to Boost CBDC Development Worldwide: The Bank for International Settlements expects the COVID-19 crisis’ impact on retail payments to have a positive effect on central bank digital currency development.

Bank for International Settlements Calls CBDCs a Potential ‘Sea Change’: The leading global central bank institution has published new research on central bank digital currencies, noting a major shift in their direction thanks to Libra as well as COVID-19.

Tax Time: Ernst & Young Release Crypto Tax App: A new crypto reporting app by the big four accounting firm EY will help clients with tax reporting as the IRS cracks down on tax evasion.

Opinions

Donald Trump Told Treasury Secretary to ‘Go After Bitcoin’: According to John Bolton’s new book ‘The Room Where It Happened’, Trump was against Bitcoin long before his July 2019 Twitter tirade.

Ripple Exec: Slow Response on Blockchain Could be ‘Potential Catastrophe’ for US: Ripple co-founder Chris Larsen discussed U.S. regulators’ ignorance towards regulating the blockchain and crypto space and how it is helping China.

Telegram CEO Says Global Resistance to Tech Bans Is ‘Just Getting Started’: Telegram’s digital resistance in Russia will contribute to further anti-censorship efforts in countries like China and Iran, Pavel Durov says.

What Recent Developments in the Fintech Space Mean for Our Future: There have been several significant movements forward for digital assets, and there are more to come. Here’s what to keep an eye on.

One Month Left to Crypto Tax Season — 5 Critical Mistakes to Avoid: All you need to know to prepare for Crypto Tax Season 2020 and correctly inform the IRS about your crypto.

Security Token Exchanges May be the Next Phase in the Finance Evolution: Security token exchanges could prove to be an option for companies that are seeking public funding but can’t partake in the current IPO process.

USA

New Bill to Outlaw Encryption Without Gov’t Backdoor in US Senate: A bill that would outlaw end-to-end encryption for technology companies was proposed by three Republican senators; meanwhile, Ava and Cardano would not yield.

Supreme Court Limits SEC’s Power to Seek Punitive Fines on Crypto Firms: The United States Securities Exchange Commission (SEC) has new regulatory limitations when it comes to punishing defendants with fines. The ruling would have altered the fines sought in some notable recent cryptocurrency-related cases.

According to a June 23 summary of the U.S. Supreme Court case Liu v. SEC in the National Law Review, the court ruled the SEC can not impose fines — known as disgorgements — that exceed the profits made from illegal activities. In addition, such penalties can only be “awarded for the benefit of victims”, not imposed as punitive damages.

The ruling applies to all defendants of course, but for crypto and blockchain firms facing possible charges by the SEC, this is effectively a stricter definition of “the punishment must match the crime” when it comes to financial penalties. The commission is already limited in its enforcement by a five-year statute of limitations.

U.S. Supreme Court says limits apply when SEC seeks profit disgorgement in fraud cases: The U.S. Securities and Exchange Commission must adhere to certain restrictions on its ability to seek disgorgement of profits from those involved in fraudulent schemes.

As noted by reports from Bloomberg and CNBC, Monday’s 8–1 ruling, written by Justice Sonia Sotomayor, stated that: “A disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims is equitable relief permissible under §78u(d)(5). Pp. 5–20.” The decision centered around an appeal of a 2016 court case in which a couple accused of fraud were originally ordered to disgorge nearly $27 million in the wake of an SEC civil lawsuit.

Profit disgorgement is a frequent tool by which the SEC can recoup funds in its civil fraud cases, including those centered around initial coin offerings, or ICOs. The SEC first outlined its stance toward ICOs in 2017 following the issuance of its so-called DAO report.

The Supreme Court placed other limits on the SEC’s profit-seeking powers back in 2017, when it unanimously said that the agency must adhere to a five-year statute of limitations on profit disgorgement.

New York Regulator Proposes Cryptocurrency Overhaul to Boost Adoption of Digital Assets: The New York Department of Financial Services (NYDFS), which regulates the state’s financial infrastructure, is proposing a plan that would ease the city’s notoriously tight restrictions on cryptocurrency-related businesses.

Under the agency’s current set of regulations, crypto firms that operate in New York are required to have a BitLicense to receive, store, issue or send digital assets. Trouble is, it can take years to obtain the license and to date, only 25 firms have been granted a BitLicense since New York introduced the policy in 2015.

To ease these licensing hurdles and promote growth in the industry, the NYDFS is now considering whether it should grant “conditional” licenses to crypto companies that would allow them to work with firms that already have the actual BitLicense.

The regulator is accepting public comments on the proposed conditional licensing framework until August 10th.

“The framework can be utilized by a variety of entities, such as startups, growth-stage companies, established New York companies not yet conducting any virtual currency business activity, and established virtual currency companies now operating outside New York…

DFS expects that an entity that seeks a Conditional License will endeavor to eventually seek and obtain a full BitLicense.”

The regulator is also introducing a new guidance that allows crypto companies to “self certify” the listing of new coins, provided they have the green light from the NYDFS to self-certify, and they steer away from privacy coins and tokens designed for use in the gambling industry.

U.S. SEC Chair Clayton Nominated to Oversee Crypto Regulatory-Heavy NY: United States Attorney General William Barr announced that President Trump will most likely task Jay Clayton as the legal enforcer for a chunk of New York — a state that has historically held a heavy-handed regulatory stance on crypto.

Barr said in a June 19 statement from the Department of Justice, or DoJ:

“I am pleased to announce that President Trump intends to nominate Jay Clayton, currently the Chairman of the Securities and Exchange Commission, to serve as the next United States Attorney for the Southern District of New York.”

Digital dollar advocate, Paxos CEO to attend Senate hearing on money digitization next week: U.S. Senators appear set to talk about digital versions of the dollar this week during a virtual hearing on June 30.

An analysis of U.S. federal databases and blockchain-related mentions:

  • Federal databases provide valuable information on various industries
  • The Block looked at the databases of the SEC, the U.S. Congress, and the United States Patent and Trademark Office to gain insights into cryptocurrency trends

Cybercrime Up 75% During COVID-19, Congressional Hearing Details: A recent U.S. government hearing showed a significant uptick in online crime since COVID-19 took over in 2020.

American Gaming Association Urges Policy Change on Digital Payments: The American Gaming Association has laid out a proposal of new guidelines for gambling payments.

Libra-like stablecoins could improve consumer welfare in certain cases, Fed researchers find:

  • “Basket-backed” stablecoins could improve consumer welfare in certain economic scenarios, according to a recent research paper from the U.S. Federal Reserve.
  • Economists Garth Baughman and Jean Flemming created a model that included two countries, each with its own sovereign currency. They used it to test demand for a stablecoin backed by a basket containing each of those currencies.

SEC Charges Lobbying Kingpin Jack Abramoff With Fraud For Promotion of 2018 ICO: Abramoff and the founder of AML Bitcoin face charges for fraud in misrepresenting the token’s compliance, with the founder himself facing jail time for money laundering.

Former US Treasury Head Calls Payment ‘Friction’ the Best Argument for Crypto: Clinton-era Treasury Secretary Summers doesn’t buy some of the crypto community’s anarchic sentiments but agrees that they are solving a major problem.

Telegram’s Courtroom Saga With the SEC Comes to a $1.2 Billion End: Judge approves final judgment in Telegram case; firm will return $1.2 billion to investors.

SEC Suit Over $30m Crypto Scam Halted Due to Criminal Proceedings: A judge has granted a motion from the U.S. attorney’s office to pause the SEC’s action against Edit Pardo and Boaz Manor for their involvement in the alleged $30 million crypto investment scam CG Blockchain.

SEC Halts Crypto Scam, Alleging Two Brothers Stole Millions From Investors: The U.S. SEC freezes assets of several alleged crypto scams run by Hvizdzaks brothers.

Europe

Sweden’s Central Bank Releases 98-Page ‘Economic Review’ Devoted to CBDC: Sveriges Riksbank, Sweden’s central bank, took a 98-page deep dive into central bank digital currencies, or CBDCs, referencing the country’s own such asset — the e-krona.

“The second issue of Sveriges Riksbank Economic Review in 2020 has a special theme, namely central bank digital currencies (CBDC) and the e-krona,” Riksbank’s June 18, 2020 report said in an initial note to readers.

In December 2019, Sweden unveiled intentions for a pilot program around its e-krona, in collaboration with Fortune Global 500 company Accenture.

The new report from the country’s central bank referred to its 2018 Economic Review detailing the e-krona and its progress. “Riksbank has since continued to delve into various aspects of CBDC, both from an analytical and a practical perspective,” the 2020 report said. “Some of this work is summarized in this issue.”

Riksbank’s 2020 Economic Review includes reasoning behind a Swedish CBDC, listing monetary issues in the country, as well as other drivers.

The report also covered other points of consideration, including inquiry on such a currency’s necessity, competition and other aspects. The review only includes one direct reference of blockchain, seen in a footnote on page 89, which reads:

“An open DLT network is associated to several disadvantages; every transaction must be verified by every participant (cf. blockchain) in a time and resource consuming manner. The responsibility for the Riksbank regarding AML, KYC & CTF could be indefinite. Fraud and cyber-attacks are hard to prevent in an open network.”

The report does, however, mention distributed ledger technology, or DLT, several times. After coronavirus measures took flight in March, the U.S. proposed a digital dollar, although such a dollar did not include blockchain or DLT.

UK Financial Watchdog Reminds Crypto Businesses to Register Ahead of Deadline: The U.K.’s Financial Conduct Authority is urging all crypto businesses operating in the country to submit their applications by June 30 to make it for the 2021 deadline.

Crypto Cards Affected as UK Regulator Suspends Wirecard Subsidiary: Wirecard’s subsidiary that is responsible for issuing debit cards has been suspended as the company can no longer access customer funds.

The Great Estonian Exodus — Crypto Firms Are Leaving Estonia: After the great rise in national crypto regulation in Estonia, the new European Union laws have forced the crypto industry to leave the country.

Asia

Cryptocurrency News From Japan:

These weeks’ headlines from Japan included SBI announcing a digital asset investment fund, Bitflyer Holdings using blockchain for shareholder meeting voting, Japan’s Financial Services Agency warning two unregistered crypto exchanges, a Japanese digital asset exchange self-regulatory group changing chairmen, and Coincheck announcing launch details for its digital shareholder meeting platform.

SBI unveils a crypto investment fund

As an option for individual participants, Japanese financial services entity SBI Holdings expects to form and open Japan’s first digital asset fund at some point over the next few months, according to SBI CEO Yoshitaka Kitao. SBI’s daughter company, Morningstar, will head up the asset allocation between the three cryptocurrencies used in the fund — Bitcoin, Ethereum and Ripple’s XRP.

Bitflyer completes blockchain-based shareholder meeting

The parent company of Tokyo-based crypto exchange Bitflyer, Bitflyer Holdings, hosted blockchain-based app voting for its shareholder meeting last week. Built by daughter company Bitflyer Blockchain, the app, bVote, facilitated interaction in the digital shareholder meeting, which yielded attendance from Bitflyer brass and shareholders.

Japanese regulatory agency warns exchanges

Japan’s Financial Services Agency, or FSA, warned two digital asset exchanges for their lack of proper licensing. The two companies, Seychelles-based Bitforex, and U.S.-based Amanpuri, reportedly hosted usage by folks residing in Japan. Authorities will take further action if unregistered activity persists.

Japanese self-regulatory agency gains new chair

Bitflyer executive Kimihiro Mine joined the Japan Cryptocurrency Trading Association, or JVCEA, as its new chairman, tallying the first chairman swap in entity’s history. A digital asset exchange self-regulating group in Japan, JVCEA formerly held Money Partners CEO and president Taizen Okuyama as its chairman.

Coincheck eyes release for digital shareholder meeting platform

Digital asset trading outlet Coincheck expects to see its digital shareholder meeting platform, Sharely, launch later in 2020. With its website now live, the solution facilitates online shareholder meetings, allowing participants the ability to pose queries and vote, or simply view the meeting, depending on the type of each attendee. Coincheck looks toward potentially using blockchain technology as part of the solution, although it appears as though blockchain is not yet part of the equation.

Japanese Financial Watchdog Frowns on Gambling Dapps: New research from Xangle suggests Japan’s Financial Services Agency is more likely to approve crypto projects not involved in casino Dapps.

Bitcoin-friendly Singapore wants to team up with China for “Digital Yuan,” here’s why.

Alleged Unlicensed Bitcoin Dealer Becomes First Singaporean Charged Under New Law: A 23-year old Singaporean accused of unlicensed Bitcoin dealing is set to become the first person to be charged under the city-state’s Payment Services Act.

South Korea’s Finance Minister Confirms Plan to Tax Cryptocurrency: Although scant on details, South Korea’s finance minister has confirmed that taxes will be imposed on cryptocurrency in the country.

Bithumb Exchange to Reportedly File for IPO in South Korea: The South Korean exchange is reportedly looking into a stock market launch despite local regulatory uncertainty.

South Korean Economist Warns New Tax Laws May Slow Down Crypto Market Growth: South Korea economist worries that tough regulation would slow down crypto’s growth.

Bank of Thailand Launches Digital Currency Pilot Project: The Bank of Thailand launched a project to pilot test its CBDC payment system with the largest building material provider in the country.

Thailand Vows to Crack Down on Narco Profits Stashed in Commodities and Crypto: Thai authorities are cracking down on drug networks and the methods they use to launder their profits, including cryptocurrency.

Vietnamese Official Urges Public to Avoid Funding Campaigns for Crypto Business: A senior Vietnamese police official said cryptocurrency fundraisers are illegal in the country and people should not invest in them.

Digital Yuan’s Backend Development Complete, Says Chinese Official: A former senior official of the People’s Bank of China said that the country has completed the backend architecture development of its digital currency.

Chinese Police Investigate ‘Exit Scam’ by Iranian Crypto Exchange: Reports indicate the Iranian-based crypto exchange ‘Bitisis’ is actually a Ponzi scheme that has attempted an exit scam.

Blockchain as an Infrastructure: A Deep Dive Into China’s DLT Strategy: China is not playing catch-up, but rather exploring aggressively pragmatic ways to deploy a digital infrastructure for the whole economy with the blockchain tech implementation.

China’s CBDC Adoption Plan Puts Domestic Monetary Control at Forefront: China’s planned CBDC rollout is expected to see the digital yuan dovetailing with the country’s electronic payment systems.

Rest of the World

Australian Watchdog Warns of Spike in Crypto Scams During Coronavirus Pandemic: Australia’s Securities and Investment Commission says that between March and May, investment scams of all types rose by 20% as compared to the same period in 2019.

WhatsApp Payments Suspended by Brazil’s Central Bank: WhatsApp’s payment features have been suspended in Brazil less than one month after the Facebook-owned app rolled them out.

One Step Forward and One Step Back: Why Is Russia’s Crypto Regulation Treading Water? Some Russian regulators propose a blanket ban on digital asset trading, but the country is too far along the path of crypto adoption.

UAE Resident Who Took Out $100K Crypto Loan Saved by Ex-Coworkers: A foreign resident of Abu Dhabi who was potentially facing jail time over an unpaid $100,000 loan received $27,400 in donations after his story spread.

Ripple Touts XRP Use in New Crypto Framework Suggested for India: Major cryptocurrency firm Ripple released a set of recommendations for Indian lawmakers to legalize cryptocurrencies.

Binance Joins Indian Internet Association Amid Regulatory Uncertainty: As dark clouds gather above India’s crypto sector, Binance has joined the country’s top internet association in a bid to shape the industry’s future.

Indian Banks Act Slow to Accept Crypto Industry Despite RBI’s Approval: Indian banks are reluctant to work with crypto firms, even though RBI clears the air.

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