Crypto Regulation News: UK has a new name for stablecoins and a new bill to regulate crypto, US regulator touts ‘aggressively’ policing crypto in new report, Hong Kong reportedly wants to legalize crypto trading, Japan’s International Payments System will test plastic cards for CBDC, South Africa classifies crypto assets as financial products, and more!

Paradigm

Published in

Paradigm

16 min readOct 31, 2022

Vol. 103, 17th October — 31th October

TL;DR

CFTC touts ‘aggressively’ policing crypto in new report. Furthermore, CFTC commissioner compares crypto contagion risk to 2008 financial crisis
Developers excluded from broker label in new US DCCPA bill draft
SEC, CFTC probing bankrupt crypto hedge fund Three Arrows Capital. While Crypto lobbyist group Blockchain Association asks court for permission to support Ripple against SEC case
US currency comptroller to up its game with new Office of Financial Technology in 2023
IRS introduces broader ‘Digital Assets’ category ahead of 2022 tax year
US lawmakers question regulators over ‘revolving door’ with crypto industry
Europe moves toward regulatory action on crypto’s environmental impact, energy use. Furthermore, EU Commissioner urges lawmakers to hurry up with crypto regulations. UK Law Commission to review international laws on crypto to consider legal reforms
The UK has a new name for stablecoins and a new bill to regulate crypto. Amendment to UK financial services bill provides regulation for crypto activities
UK crypto-focused parliament group calls on new PM Sunak to clarify crypto policies
UK police council reports there are officers in every unit trained for crypto enforcement
Hong Kong reportedly wants to legalize crypto trading. Hong Kong government reconsiders stance on virtual asset ETFs, tokenised securities, and retail investors
Chinese agents used Bitcoin transactions through Wasabi to allegedly bribe US government employee
Japan’s International Payments System will test plastic cards for CBDC. Japanese regulators loosen crypto laws and make it easier to list coins
Vietnam’s prime minister calls for crypto regulation
Singapore’s MAS proposes banning cryptocurrency credits
South Korean regulator goes after crypto whales to ensure AML compliance
Argentina dismantles illegal crypto mining operation, arrests 40
South Africa declares crypto to be a financial product subject to financial services law
Aussie federal budget reaffirms BTC won’t be treated as foreign currency
El Salvador, Lugano sign agreement to help spread bitcoin adoption and education
Crypto investment firm Q9 gets provisional approval to operate in Dubai
Uzbekistan’s police get ‘how to seize crypto’ training from UN security org
Russian users are welcomed by crypto exchanges in Kazakhstan
Binance still serving non-sanctioned Russians while seeking clarity on EU crypto regulations. Binance wins registration as crypto asset service provider in Cyprus
Interpol reportedly creates dedicated unit to fight crypto crimes
SushiSwap to create three DAOs in Panama and Cayman in business restructuring
Pan-African crypto exchange Yellow Card wins virtual asset license
Vitalik Buterin ‘kinda happy’ with ETF delays, backs maturity over attention
And more!

Opinions

Crypto Means Absolutely Nothing Without Censorship Resistance: The battle for how to regulate cryptocurrency might handicap the entire value proposition if we simply apply the same old rules to a new way of moving money around.

The state of crypto in Northern Europe: Hostile Scandinavia and vibrant Baltics: The Nordics remain a cold place for crypto, but Estonia still leads as the public blockchain adopter.

Does the IMF have a vendetta against cryptocurrencies? Is the multilateral lending institution throttling useful DLT experiments in the developing world, or is it saving crypto from itself?

Save Billions by Using the Blockchain to Distribute Federal Disaster Relief Money: Using blockchain to facilitate disbursements would bring American taxpayers massive savings.

The Debate Around SBF’s Regulatory Ideas: Is, in spite of itself, the Twitter discourse moving towards the productive?

Is SBF Right About DeFi Regulation? The FTX founder was roundly criticized for his crypto-regulatory proposals. But the so-called effective altruist is just being practical.

How Crypto Might Shake Up England’s Ancient Property Laws: The Law Commission of England and Wales is exploring how digital assets should be treated under existing and new legislation, and its suggestions may upend centuries-old legal norms.

Investors are loving SEC’s crypto industry crackdown: Critics have called out the SEC’s “regulation by enforcement” tactics, but to some investors, it’s a positive sign they’re seeing to invest in digital assets.

Government crackdowns are coming unless crypto starts self-policing: From privacy standards to consumer protection, the cryptocurrency industry needs to better regulate itself before governments crack down.

USA

US regulator touts ‘aggressively’ policing crypto in new report: The Commodity Futures Trading Commission says 20% of its enforcement actions were aimed at the digital assets market in the 2022 fiscal year.

The United States commodities regulator certainly doesn’t want to look like it’s going easy on crypto, revealing it was behind 18 separate enforcement actions targeting digital assets in the 2022 fiscal year. In an Oct. 20 report from the Commodity Futures Trading Commission (CFTC), a total of 82 enforcement actions were filed in 2022’s fiscal year, imposing $2.5 billion in “restitution, disgorgement and civil monetary penalties either through settlement or litigation.” The CFTC said that 20% of the enforcements were aimed at digital asset businesses, with hairman Rostin Behnam stating:

“This FY 2022 enforcement report shows the CFTC continues to aggressively police new digital commodity asset markets with all of its available tools.”

One of the more recent CFTC enforcement actions that gained notoriety in the crypto world was a $250,000 penalty against bZeroX, its successor Ooki DAO, and its founders in September.

The action sparked fierce criticism from the community for going after the members of a decentralized autonomous organization (DAO), with CFTC Commissioner Summer Mersinger labeling the move “blatant ‘regulation by enforcement.’”

The CFTC also highlighted actions taken during the year against the operators of the Digitex Futures exchange for illegal futures offerings, manipulation of its native token, DGTX, and failure to provide a customer identification and Anti-Money Laundering program. It also took action against Bitfinex for engaging in “illegal, off-exchange retail commodity transactions in digital assets with U.S. persons,” and operating without registering as a futures commission merchant.

Meanwhile, the report pointed to action against Tether Holdings for making “untrue or misleading statements” and “omissions of material” in connection with its Tether (USDT) stablecoin was ordered to pay a civil monetary penalty of $41 million. It also targeted South African pool operator and CEO Cornelius Johannes Steynberg with fraud charges for accepting around 29,400 Bitcoin (BTC $20,499), worth over $1.7 billion, from approximately 23,000 non-eligible contract participants from the United States in late June.

The crypto industry had previously favored the CFTC for being easier on digital asset regulation. However, Chairman Rostin Behnam has vowed to come down hard on the asset class, saying “‘Don’t expect a free pass” earlier this month. Both the CFTC and Securities and Exchange Commission are currently wrangling for control of crypto-asset regulation.

A bill submitted by Senators Cynthia Lummis and Kirsten Gillibrand in June proposes that the CFTC oversee crypto regulation, which would be much better for the industry, as the assets would be considered commodities rather than securities, which have much more stringent rules.

Developers Excluded From Broker Label in New DCCPA Bill Draft: Stakeholders say that this latest draft of the bill tempers language that would be detrimental to DeFi.

SEC, CFTC Probing Bankrupt Crypto Hedge Fund Three Arrows Capital: The federal agencies are looking into whether Three Arrows misled investors about its balance sheet and whether the hedge fund should have registered with them.

Crypto Lobbyist Group Blockchain Association Asks Court for Permission to Support Ripple Against SEC Case: The Internet Choice Advocates Network and SpendTheBits also filed amicus briefs.

CFTC Staff Recommend Rejecting Kalshi’s US Election Contracts: Commissioners would still need to vote on their advice.

CFTC commissioner compares crypto contagion risk to 2008 financial crisis: The commissioner warnes that vulnerabilities seen within the crypto markets are similar to those seen during the global financial crisis and calls for the agency to be given additional authority.

US currency comptroller to up its game with new Office of Financial Technology in 2023: The OCC said it will incorporate its six-year-old Office of Innovation into a new agency that will help it deepen its understanding of fintech and promote responsible innovation.

SBF: FTX to filter assets it thinks are securities from US listings until registration in place: In a long blog post full of proposed standards to guide the industry in the absence of regulations, Sam Bankman-Fried says FTX US will not list assets its lawyers think may be securities.

IRS introduces broader ‘Digital Assets’ category ahead of 2022 tax year: An early draft of the 2022 IRS tax form sees cryptocurrencies, stablecoins and nonfungible tokens grouped under a new “Digital Asset” category.

Prometheum partners with Anchorage Digital on SEC-registered alternative trading system: The New York-based exchange will start with five digital assets on offer in its SEC-compliant trading system, which will “seamlessly integrate with legacy securities trading systems.”

US lawmakers question regulators over ‘revolving door’ with crypto industry: “Americans should be confident that regulators are working on behalf of the public, rather than auditioning for a high-paid lobbying job,” said five senators and House members.

‘Well worth the fight’ — Ripple counsel confirms Hinman docs are in their hands: The truth will be shameful and shocking for the SEC, according to Ripple boss Brad Garlinghouse.

Acting US FDIC head cautiously optimistic about permissioned stablecoins for payments: Acting Federal Deposit Insurance Corporation chairman Martin Gruenberg said the agency needs more information about crypto, and the crypto industry needs to understand the FDIC better.

Europe & UK

The UK has a new name for stablecoins and a new bill to regulate crypto: The proposal is another ripple of recognition for the Bitcoin, crypto and digital assets industries in the United Kingdom.

The United Kingdom moved forward on the Financial Services and Markets Bill on Oct. 25, hardening its vision for Bitcoin (BTC $20,497) cryptocurrency and “digital settlement assets” in the country.

The suggested bill proposes “a range of measures to maintain and enhance the U.K.’s position as a global leader in financial services, ensuring the sector continues to deliver for individuals and businesses across the country.”

The bill reasserts the U.K.’s intention to become a global cryptocurrency hub, comments echoed by Lisa Cameron, member of parliament and the chairperson of The Crypto and Digital Assets All-Party Parliamentary Group. In an exclusive interview with Cointelegraph over the weekend, she explained that crypto is on the lawmakers’ radar, although there is a lot of education to be done.

The bill builds upon existing measures to broaden regulations of stablecoins and mentions “Digital Settlement Assets” (DSA) as a new term, moving away from the use of “crypto assets.” According to the U.K. government, “crypto assets use some form of distributed ledger technology (DLT),” whereas DSA includes stablecoins, “given their potential to develop into a widespread means of payment.”

The U.K. government had previously commented that there will be a “package of measures” aimed at improving regulation and clarity surrounding blockchain, crypto and Bitcoin. Elsewhere, the new prime minister, Rishi Sunak, has also expressed interest in certain areas of cryptocurrency, such as his support for the creation of a Royal Mint nonfungible token. The youngest leader to take up office in Number 10 Downing Street has also been vocal in support of central bank digital currencies. The recognition of crypto and digital assets as financial instruments is yet to be scribed into law. The bill must pass crucial steps: The House of Lords will be required to approve or amend the bill before final royal approval by the new monarch, King Charles III.

Europe moves toward regulatory action on crypto’s environmental impact, energy use: After rejecting a proposal to ban crypto mining, the EU is looking at disclosure and mitigation measures to make crypto assets more sustainable in the coming years.

UK Crypto-Focused Parliament Group Calls on New PM Sunak to Clarify Crypto Policies: The group’s chair said on Tuesday that firms in the U.K. “desperately need clarity” over the country’s approach to crypto policy.

UK police council reports there are officers in every unit trained for crypto enforcement: The NPCC’s Andy Gould said that the U.K. police had the capability to address illicit uses of crypto, but still faced challenges including incentives to join the private sector.

Wealthy crypto believer and incoming UK PM Rishi Sunak once commissioned a royal NFT: The new leader of the world’s sixth-largest economy is the former chancellor of the exchequer and is said to be richer than King Charles. He is also a firm crypto supporter.

Amendment to UK financial services bill provides regulation for crypto activities: The bill addressed stablecoin regulation from the start. Now, the Financial Conduct Authority will be empowered to regulate activities with crypto assets if the amended bill passes.

UK Law Commission to review international laws on crypto to consider legal reforms: The legal review authority will work to compile law reform proposals for public consultation in the second half of 2023.

EU Commissioner urges lawmakers to hurry up with crypto regulations: During her visit to the United States, the official highlighted the importance of a truly global regulatory effort.

DeFi’s ‘Severe Threat’ Needs New Kind of Regulation, EU Commission Told: The EU executive is seeking academic input as it turns its attention to decentralized finance based on software protocols

Binance Wins Registration as Crypto Asset Service Provider in Cyprus: The crypto exchange can now offer more types of digital-asset services.

Asia

Hong Kong Govt. Reconsiders Stance on Virtual Asset ETFs, Tokenised Securities, and Retail Investors: The government says it’s ready to engage with virtual asset service providers and invite them to the city.

Hong Kong’s Financial Services and Treasury Bureau issued a policy statement on virtual assets at the opening of the city’s flagship tech conference Hong Kong FinTech Week on Monday.

Hong Kong is “ready to engage” with global virtual asset service providers and invite them to the city, the statement says. The Legislative Council of Hong Kong, a Special Administrative Region of the People’s Republic of China, is currently reviewing Hong Kong’s new VASP licensing regime as part of proposed amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. The regime is set to come into effect March 1 next year.

Hong Kong’s Securities and Futures Commission will conduct a public consultation on how retail investors may be given a “suitable degree of access to virtual assets” to licensed exchanges, according to the policy statement.

Currently, retail customers can trade crypto on unlicensed exchanges such as Binance. After the VASP regime takes effect, only VASP licensed exchanges can offer any crypto services, and some might be able to offer crypto services to retail customers. The policy statement adds that Hong Kong is “open to the possibility” of having Exchange Traded Funds on virtual assets, pledging to enhance investor protection and ensure suitable regulatory arrangements are in place.

“The SFC has been actively looking to set up a regime to authorise ETFs which provide exposure to mainstream virtual assets with appropriate investment guardrails,” Securities and Futures Commission Deputy Chief Executive Officer Julia Leung said at Hong Kong FinTech Week.

Leung added that virtual assets futures ETFs will be subject to additional requirements related to management company, investment strategy, disclosure, and investor education. In the initial stage, the underlying assets will be confined to Bitcoin futures and Ether futures traded on the Chicago Mercantile Exchange, Leung said.

In her speech, Leung also announced changes to how the SFC views tokenised securities. The SFC takes the view that tokenised securities should be treated in a similar way to existing financial instruments, she said. The SFC will no longer classify tokenised securities as complex products just because they are issued on the blockchain, Leung said.

If proper safeguards are put in place, the SFC is prepared to allow retail access, Leung said. The SFC is working on a circular to set out changes to the security token regime in detail.

Given differences between traditional assets and virtual assets, the government is open to future review on property rights for tokenised assets and the legality of smart contracts, the statement says.

“We were sometimes a bit hesitant or even resistant wondering how new creatures like crypto, stablecoins, DeFi or other blockchain-based innovations can fit into mainstream finance,” Hong Kong Monetary Authority CEO Eddie Yue said at Hong Kong FinTech Week.

Yue said that it had become apparent that the technologies underpinning them will “develop very nicely in a healthy financial system like Hong Kong.”

Hong Kong is exploring pilot projects on NFT issuance for Hong Kong FinTech Week, green bond tokenisation and eHKD, the policy statement says.

Hong Kong could be key for China’s crypto comeback — Arthur Hayes: Hayes says the next crypto bull run will be tied to when China embraces the crypto market again, and Hong Kong could be the gateway for this to happen.

Not like China: Hong Kong reportedly wants to legalize crypto trading: Hong Kong’s securities regulator wants to allow retail investors to invest directly in virtual assets and to reconsider current crypto trading requirements.

Chinese agents used Bitcoin transactions through Wasabi to allegedly bribe US government employee: According to an analysis by crypto risk management firm Elliptic, two Chinese intelligence agents used Wasabi Wallet to conceal BTC transactions allegedly used for bribes.

Japan’s International Payments System will test plastic cards for CBDC: Japan Credit Bureau will develop its CBDC infrastructure in collaboration with IDEMIA and Softspace.

Japanese regulators loosen crypto laws and make it easier to list coins: The Japan Virtual and Crypto Assets Exchange Association says it plans to make it easier for authorized exchanges to list digital currencies by loosening the screening process.

Vietnam’s prime minister calls for crypto regulation: “It is necessary to study appropriate sanctions, and assign the government to make detailed regulations,” Prime Minister Pham Minh Chinh reportedly said.

Terra co-founder Do Kwon faces $57-million lawsuit in Singapore: The lawsuit alleges Kwon and others made fraudulent claims on UST “either well knowing that they were false and untrue, or recklessly not caring whether they were true or false.”

Singapore’s MAS proposes banning cryptocurrency credits: Crypto service providers should not provide any credit facility or accept payments from credit cards from their customers, the MAS suggested.

S. Korean watchdog goes after crypto whales to ensure AML compliance: The South Korean regulator noted that popular stablecoins used by the public might become a primary tool for money laundering using digital assets.

Rest of the World

South Africa Classifies Crypto Assets as Financial Products: The move brings digital assets more under the purview of the country’s regulators.

South Africa has declared crypto assets to be a financial product, according to a new notice from the country’s Financial Sector Conduct Authority. The change brings digital assets more under the purview of South Africa’s regulators.

The notice defines a crypto asset as a “digital representation of value” that is not issued by a central bank but can be traded, transferred or stored electronically “for the purpose of payment, investment and other forms of utility.”

The change, which takes effect immediately and falls under the Financial Advisory and Intermediary Services Act, 2022, comes as countries around the world are moving to regulate cryptocurrencies more strictly, particularly amid the recent volatility in prices and the collapse of several important crypto firms.

The deputy governor of South Africa’s central bank said this summer the bank had come to view cryptocurrency as a financial asset and was looking into regulating the sector.

Argentina Dismantles Illegal Crypto Mining Operation, Arrests 40: The country’s tax collection agency has seized cash and crypto mining equipment in a series of raids.

Australian Regulator Suspends Holon’s Crypto Funds Managed by Gemini: All three funds are managed by the crypto exchange Gemini.

Aussie federal budget reaffirms BTC won’t be treated as foreign currency: The new federal budget states that Bitcoin will fall under the “current tax treatment of digital currencies, including the capital gains tax treatment, where they are held as an investment.”

El Salvador, Lugano Sign Agreement to Help Spread Bitcoin Adoption and Education: El Salvador also announced it was opening a “bitcoin office” in the southern Swiss city.

Pro-crypto city of Lugano and El Salvador sign economic agreement based on adoption: As part of the agreement, El Salvador will establish a physical government presence in an effort to “foster cooperation with educational and research institutions.”

Crypto investment firm Q9 gets provisional approval to operate in Dubai: The Hong Kong-based company will join the likes of Binance, Crypto.com, OKX and FTS, who’ve also opened offices in the UAE.

Uzbeki police get ‘how to seize crypto’ training from UN security org: Uzbekistan’s law enforcers were educated on blockchain analysis topics and methods for seizing crypto.

Russian users are welcomed by crypto exchanges in Kazakhstan, but there’s a catch: Non-sanctioned foreigners are “more than welcome” at Intebix, but they need to set up a local bank card for crypto-to-fiat transactions, the CEO said.

MISC

Vitalik Buterin ‘kinda happy’ with ETF delays, backs maturity over attention: Sharing his opinion around crypto regulations, Buterin spoke against the regulations that have an impact on the inner workings of a crypto ecosystem.

Binance still serving non-sanctioned Russians while seeking clarity on EU crypto regulations: There is a challenge of not overdoing EU sanctions against Russia, according to Binance head of sanctions Chagri Poyraz.

DeFi pioneer echoes SBF in call for tighter crypto regulations: The Yearn.finance founder suggested that several cracks have shown in the crypto sector this year, and that regulation is needed to “reign in irresponsible actors.”

SushiSwap to create three DAOs in Panama and Cayman in business restructuring: The proposal received 100% votes, establishing the DAO Foundation, Panamanian Foundation, and Panamanian Corporation.

Pan-African crypto exchange Yellow Card wins virtual asset license: Yellow Card’s CEO said that the Botswana VASP license is the first license for African crypto exchanges established by an African country.

Put your hands up! Interpol storms into the metaverse: Interpol’s metaverse is up and running and has been designed to streamline communication between various units, along with providing an avenue to conduct education and training.

Interpol reportedly creates dedicated unit to fight crypto crimes: Law enforcement agencies are “very often” not properly trained or equipped to track crypto crimes, Interpol secretary general Jürgen Stock said.