Crypto Regulation News: US House passes the infrastructure bill, Indonesia’s religious leaders declare crypto illegal for muslims, EU Commission urges members to agree on crypto regulations, Basel Committee to revisit bank crypto guidelines, and more!

Paradigm

Published in

Paradigm

16 min readNov 15, 2021

Vol. 81, 1st November — 15th November

TL;DR

Basel Committee to review proposed capital requirements for banks with crypto assets, and issue a new consultative document in 2022
US House passes the infrastructure bill with crypto tax for Biden’s approval. US Congress plans ‘demystifying crypto’ committee hearing for Nov. 17
The US Treasury’s stablecoin report would treat issuers like banks, but doesn’t address how. The report gets mixed reviews from crypto industry
US lawmakers call for bitcoin spot ETF in letter to SEC Chair Gensler. SEC delays decision on Valkyrie bitcoin ETF until next year. SEC stops Wyoming-based DAO from registering 2 digital tokens
Indonesia’s religious leaders declare crypto illegal for muslims: Crypto could be traded as a commodity if it abides by Shariah law and demonstrates a clear benefit
European Commission urges members to agree on crypto regulations. The commission is hoping to finalize the regulatory sandbox for financial products based on DLT by the end of the year.
ECB’s Panetta says CBDCs ‘likely’ to be legal tender: however, this status “should not be taken for granted.” “Digital euro should expand overall payment solutions”.
Bank of England and UK Treasury to assess case for a CBDC next year
Swiss central bank ready to run with CBDC in January
Banque de France calls for further examination of wholesale CBDCs
Spain’s central bank requesting financial institutions to outline crypto plans until 2024
Austria to tax crypto like stocks and bonds
Bank of China reveals a machine that converts foreign currency to digital yuan: the machine requires a passport, but not a bank account. Furthermore, China’s CBDC has been used for 9.7B of transactions
Hong Kong’s SFC has received multiple requests for crypto ETFs
Singapore to position itself as global crypto center, says regulator. While, Huobi Global to expel singapore users, citing local regulations
Zimbabwe minister signals CBDC interest amid bitcoin adoption rumors
Russian Duma creates working group to tackle crypto mining regulations
Kazakhstan Senate approves legislation regulating crypto service providers. Kazakhstan’s crypto miners face new regulations after contributing to power shortages
Korea’s FSC confirms that NFTs will not be regulated
Brazilian federal deputy proposes crypto payment option for workers
India’s top payment firm Paytm reportedly considers bitcoin services
Iran Blockchain Association head calls for special council on crypto laws
Nigerian banks tracking customer accounts for crypto trading
US senator submits resolution to allow crypto payments in Capitol Complex
Miami mayor plans to accept next paycheck entirely in bitcoin
Connecticut jury finds crypto-related products are not securities
Binance hires former IRS special agent to head suspicious activity reporting
Huobi Group is moving to Gibraltar following China crackdown
Apple App Store removes crypto wallet TokenPocket after PayPal complaint
What FATF’s latest guidance means for DeFi, stablecoins and self-hosted wallets
Why stablecoin regulation isn’t ‘urgent’
How crypto becomes money
And more!

Reports

Basel Committee to Review Proposed Capital Requirements for Banks With Crypto Assets: The global standard-setter for banking regulation plans to elaborate on its proposed capital requirements for crypto assets after receiving criticism from leading global banks.

The Bank for International Settlements’ Basel Committee said that it will “further specify” the proposed capital requirement and issue a new consultative document by mid-2022. The statement was released after the committee reviewed comments on its consultation from June, which said banks exposed to high-risk crypto assets like bitcoin should hold capital equal to the exposure. Under that proposal, a bank with an original exposure to crypto of $100 has a minimum capital requirement of $100.

A forum of some of the largest global banks, including JPMorgan Chase and Deutsche Bank, opposed the requirement, calling it “overly conservative” and said it could preclude bank involvement in the crypto market.

In Tuesday’s statement, the Basel Committee said its members had reiterated the importance of “developing a conservative risk-based global minimum standard” to manage risks to the banking system from crypto assets that is consistent with the general principles laid out in its previous consultation.

Opinions

Why Stablecoin Regulation Isn’t ‘Urgent’: A new report and recommendations on the regulation of stablecoins issued by a coalition of U.S. financial authorities is, on the whole, sensible and contains a lot of elements that crypto advocates taking the long view should support. But it strikes a worrying tone of urgency that could lead to a regulatory power grab in the almost-certain absence of clear action by legislators in the U.S. House of Representatives and Senate.

Regulators are coming for stablecoins, but what should they start with? Regulators are coming for stablecoins, and the best place to start is with transparency standards for collateral and financial activities.v

The stablecoin boom won’t continue without decentralized interoperability: Universal interoperability is the missing piece that can unlock stablecoins’ and CBDCs’ potential for the global digital economy.

A Crypto Whisperer on How Regulators Toss Retail Into the Deep End: Industry commentator Maya Zehavi shares her views on capital controls, overregulation and crypto’s broken promises.

Crypto Adoption Numbers in India Could Be ‘Exaggerated,’ Says RBI Governor: Shaktikanta Das said he is “not so sure about the numbers which being quoted.”

‘Sinister’ debanking of crypto traders is often anti-competitive, says Senator Bragg: Senator Bragg says that his government won’t let Aussie banks practice anti-competitive debanking of crypto companies.

SEC Commissioner: DeFi must address transparency and pseudonymity: Commissioner Caroline Crenshaw wants DeFi projects to cooperate with the SEC in order to find solutions for compliance with existing regulations.

Congressmen Emmer and Soto to SEC Chair Gensler: We want BTC Spot ETFs: The bipartisan pair sent a letter to the securities regulator demanding spot ETF approval.

USA

House passes $1T infrastructure bill with crypto tax for Biden’s approval: The United States House of Representatives passed the $1.2 trillion bipartisan infrastructure bill which, if signed into law by President Joe Biden, would enforce new provisions in relation to crypto-tax reporting for all citizens.

The infrastructure bill was first proposed by the Biden administration aimed at primarily improving the national transport network and internet coverage. However, the bill mandated stringent reporting requirements for the crypto community, requiring all digital asset transactions worth more than $10,000 to be reported to the IRS. The bill was first approved by the Senate on Aug. 10 with a 69–30 vote, which was met with a proposal for a compromise amendment by a group of six senators: Pat Toomey, Cynthia Lummis, Rob Portman, Mark Warner, Kyrsten Sinema and Ron Wyden. According to Toomey:

“This legislation imposes a badly flawed, and in some cases unworkable, cryptocurrency tax reporting mandate that threatens future technological innovation.”

Despite the lack of clarity in the bill’s verbatim, the infrastructure bill intends to treat the crypto community’s software developers, transaction validators and node operators similar to the brokers of the traditional institutions.

The House of Representatives passed the controversial infrastructure bill to President Biden after securing a win of 228–206 votes. In addition, the crypto community showed concerns over the vague description of the word “broker” that may consequently impose unrealistic tax reporting requirements for sub-communities such as the miners. As a repercussion, the inability to disclose crypto-related earnings will be treated as a tax violation and felony.

Legal experts recommended amendments to the infrastructure bill that consider the failure to report digital asset transactions as a criminal offense.

8-word crypto amendment in Infrastructure Bill an ‘affront to the rule of law’: A proposed bill waiting for vote in Congress contains a “dangerous” amendment.

US Congress plans ‘demystifying crypto’ committee hearing for Nov. 17: Representative Don Beyer — who has previously proposed legislation expanding the regulatory and legal framework for digital assets in the U.S. — will be chairing the hearing.

The US Treasury’s Stablecoin Report Would Treat Issuers Like Banks, but Doesn’t Address How: The U.S. government’s stablecoin report is finally out. Bank regulators are having a big day.

Stablecoins report: SEC won’t lead regulation, Congress urged to act: The SEC was denied a monopoly over the stablecoin sector, yet the risk of being designated “systemically important” persists.

US Stablecoin Report Gets Mixed Reviews From Crypto Industry: Issuers’ reactions ranged from effusive to diplomatic, but lobbyists pushed back against recommendations by the President’s Working Group on Financial Markets.

SEC Stops Wyoming-Based DAO From Registering 2 Digital Tokens: The agency is alleging that American CryptoFed filed a “materially deficient and misleading registration form.”

Biden Administration Sanctions Crypto Exchange Chatex Over Ransomware Allegations: The Treasury Department said the exchange provided “material support” to Suex, a previously sanctioned exchange.

US Lawmakers Call for Bitcoin Spot ETF in Letter to SEC Chair Gensler: Congressmen Tom Emmer and Darren Soto questioned why the SEC is uncomfortable with a spot bitcoin ETF when it already allows the trading of bitcoin futures ETFs.

SEC Delays Decision on Valkyrie Bitcoin ETF Until Next Year: The new date for a decision is Jan. 7, 2022.

SEC rejects VanEck’s spot Bitcoin ETF as BTC price falls below $63K: The SEC claimed any rule change in favor of approving the ETF would not be “‘designed to prevent fraudulent and manipulative acts and practices” nor “protect investors and the public interest.”

The city of Philadelphia rolls out its own blockchain initiative: City officials said they are seeking comments from crypto innovators on how to integrate blockchain within the municipal government.

US officials seize $6.1M in crypto from ransomware actors, add Chatex to sanctions list: “This will not be the last time — the U.S. government will continue to aggressively pursue the entire ransomware ecosystem and increase our nation’s resilience to cyber threats,” said Attorney General Merrick Garland.

Fed board member to leave by 2022, leaving Biden to fill 3 seats: Randal Quarles has been a member of the Federal Reserve Board as well as its vice-chair for supervision since 2017.

Crypto at the polls: Eric Adams wins NYC mayoral race: Adams beat out Republican Curtis Sliwa — also a pro-crypto candidate — to become the next mayor of New York City with 72.8% of the vote.

US senator submits resolution to allow crypto payments in Capitol Complex: The proposal, called the ACCEPT Resolution, would apply to gift shops, vending machines and restaurants.

Connecticut jury finds crypto-related products are not securities: Once again, the question of whether digital assets constitute securities is under question.

Miami mayor plans to accept next paycheck entirely in Bitcoin: The mayor said he would prefer to use an app like Bitwage or Strike rather than having the local government convert his fiat paycheck into crypto.

Europe & UK

European Commission Urges Members to Agree on Crypto Regulations: The European Commission, the executive branch that proposes legislation for the European Union, is urging its members to agree on its proposed Markets in Crypto Assets (MiCA) regulations this autumn, according to statements by the EU commissioner for financial services during a web forum Wednesday.

Commissioner Mairead McGuinness said that the commission is also hoping to finalize its proposed regulatory sandbox for financial products based on distributed ledger technology (DLT) by the end of the year.

“Crypto assets are evolving fast, enabling homegrown firms to enter the market, while also attracting retail investors,” McGuinness said. ”It is our policy and our duty as policy makers to put sound rules in place as quickly as possible.”

The tight deadlines underscore EU regulators’ more urgent pace than their U.S. counterparts in developing a sweeping regulatory framework for crypto assets. Only last week, U.S. regulators released their first recommendations for regulating stablecoins or cryptocurrencies pegged to the value of other assets like the U.S. dollar. Meanwhile, McGuinness said that MiCA is introducing a “bespoke regime” for previously unregulated crypto assets, including stablecoins.

While some critics fear that MiCA’s hyper-focus on stablecoin issuers may drive innovation from the region, the commission said that proposed legislation in the framework will make it easier for crypto companies to expand through the EU via a licensing system that allows firms regulated in one member state to start operating in others.

Despite McGuinness’ call to action, Eva Maydell, a member of the EU Parliament, said on Wednesday during a webinar that there are still open questions concerning MiCA. While the European Commission supports the interests of the EU as a whole, the European parliament directly represents the citizens of the union. Maydell warned it will “take a bit longer than planned” to finalize a position on the framework, although she did not specify a timeline. “But we have to make clear that we don’t want to ban businesses in that particular sphere,” Maydell said. Meanwhile, the DLT pilot regime will create a safe space for market players to experiment with issuing, trading and settling securities using blockchain technology, McGuinness said.

McGuinness said that the sandbox will run for five years, and at the end of that period, regulators will decide on reviewing the legislation to ensure it is “fostering responsible innovation.” McGuinness is hopeful that the Commission will agree on the pilot regime by the end of the year. “So as of next year, market participants will be able to test the use of DLT on a large scale in asset classes such as shares on bonds,” McGuinness said.

EU central banks working on DLT-based asset settlement: Banca d’Italia and Deutsche Bundesbank shared experiences on distributed ledger technology-based settlements in a workshop.

ECB’s Panetta Says CBDCs ‘Likely’ to Be Legal Tender: However, this status “should not be taken for granted.”

ECB’s Panetta Says Digital Euro Should Expand Overall Payment Solutions: For the central bank’s digital currency to be successful it should not be seen as competition for private payment solutions.

Bank of England and UK Treasury to Assess Case for a CBDC Next Year: The earliest time a digital pound could be rolled out is the second half of the decade.

Swiss Central Bank Ready to Run With wCBDC in January: ‘Just Takes a Policy Decision’: SNB has completed testing of a wholesale CBDC with Swiss exchange SDX, and is technically ready to go live, according to governing board member Thomas Moser.

Banque de France Calls for Further Examination of Wholesale CBDCs: A wholesale CBDC would be of benefit to cross-border payments, the bank concluded.

Spain’s Central Bank Requesting Financial Institutions to Outline Crypto Plans Until 2024: The Spanish financial authority is asking banks to report on their business relationships with crypto service providers and exposure to crypto.

Austria to Tax Crypto Like Stocks and Bonds: The Austrian Finance Ministry is planning to apply a 27.5% capital gains levy on digital currencies, including bitcoin and ether.

Asia

Indonesia’s Religious Leaders Declare Crypto Illegal for Muslims: Muslims are forbidden from using crypto, Indonesia’s council of religious leaders has declared, Bloomberg reported on Thursday.

Crypto is forbidden due to the elements of uncertainty and wagering, Indonesia’s authority on Shariah compliance, the National Ulema Council (MUI), announced following a hearing. Asrorun Niam Soleh, head of religious decrees, added that a crypto could be traded as a commodity if it abides by Shariah law and demonstrates a clear benefit.

Indonesia has one of the world’s largest Muslim populations with around 237 million, roughly 12.7% of the world’s total.

It was reported earlier this year that Indonesia was planning to tax profits on crypto trading to bolster revenue amid the COVID-19 pandemic. Although the country’s central bank declared crypto “not a legitimate instrument of payment” in January 2018, trading has been permitted. According to Indonesia’s commodity futures trading regulator Bappebti, there were about 4.5 million crypto investors in the country as of May.

Bank of China Reveals Machine That Converts Foreign Currency to Digital Yuan: The machine requires a passport, but not a bank account.

China’s CBDC Has Been Used for $9.7B of Transactions: Some 140 million people have opened wallets for the “eCNY.”

Chinese provincial official expelled for violating crypto mining ban: A former CCP official from Jiangxi province allegedly abused his administrative powers to undermine the political principle of “two maintenance,” which relates to the notion of firmly maintaining the authority of the party.

Hong Kong regulator re-evaluates retail crypto ETFs laws: The Securities and Futures Commission of Hong Kong has received many requests to approve crypto ETFs for trading.

Singapore to position itself as global crypto center, says regulator: Singapore is aggressively pursuing policies that will help the cryptocurrency sector grow.

Singapore’s Central Bank Is Laying the Foundations for a CBDC It Doesn’t Think Is Needed: There is, however, no urgent need for a retail CBDC in the country, according to MAS Managing Director Ravi Menon.

Huobi Global to Expel Singapore Users, Citing Local Regulations: The exchange is looking to expand overseas to make up for lost Chinese users.

Korea’s FSC confirms that NFTs will not be regulated: The recent FATF updated guidance made it easy for regulators to pass on issuing new rules for NFTs.

Rest of the World

Russian Ministries, Duma Want to Legalize Crypto Mining: Crypto mining should be legalized and regulated as an entrepreneurial activity, Russia’s Ministry of Economic Development, the Ministry of Energy and the State Duma said, according to a report from local site Izvestia.

The ministries and the Duma, Russia’s lower house of representatives, want crypto miners to be recognized as entrepreneurs, Izvestia says. However, the Russian central bank does not support this initiative, citing the risks associated with crypto, according to the report from Monday.

As of August, Russia is the world’s third-largest bitcoin mining country, after the U.S. and Kazakhstan, according to the Center of Alternative Finance at the University of Cambridge.

The economic ministry thinks regulation will be beneficial to the country and the crypto industry, and that crypto mining fits well within the definition of entrepreneurship in Russia’s civil code, the report said. The institutions want to set up a new classifying code for the industry, which mining firms could use to register their companies.

The head of the Duma’s finance committee, Anatoly Aksakov, noted that crypto mining is not banned in Russia, but the rules around taxation are unclear. It is necessary to assign a classifying number to the industry and determine procedures for taxation, he said, according to Izvestia. Aksakov also suggested the possibility of charging miners higher electricity tariffs than other types of consumers, the report said.

Russian Duma creates working group to tackle crypto mining regulations: Some regulators feel that a lack of clear laws for the industry is helping crypto miners avoid paying taxes.

Russia to change laws for digital ruble, while central bank mulls 2022 prototype: Russian lawmakers will reportedly begin working on the legal adjustments needed to implement the digital ruble plan scheduled for early 2022.

Kazakhstan’s Crypto Miners Face New Regulations After Contributing to Power Shortages: Crypto mining could help push the country’s transition into green energy.

Kazakhstan Passes Law to Monitor Crypto Services for Money Laundering, Terrorism Financing: The law approved by the country’s parliament would make financial monitoring a requirement for digital asset platforms.

Kazakhstan Senate approves legislation regulating crypto service providers: The country’s legislature has passed a law that would impose financial monitoring on crypto platforms.

Kazakhstan Limits Crypto Investment for Retail Players: The country’s financial regulator is worried about the high risk associated with crypto.

Brazilian federal deputy proposes crypto payment option for workers: Goulart’s proposal seeks a new law that allows all Brazilian workers to have an option to request employers for remuneration in cryptocurrencies.

Group of Exchanges Call on Indian Government to Regulate Crypto in Front-Page Ad: “This is India’s crypto moment,” the ad declared.

India’s top payment firm Paytm reportedly considers Bitcoin services: In India, the regulatory environment surrounding Bitcoin is still in a “grey area.”

Iran Blockchain Association head calls for special council on crypto laws: The Blockchain Association is offering to assist with crypto regulations in the Islamic state.

Nigerian banks tracking customer accounts for crypto trading: Personal accounts with large multi-day inflow and outflow are being tracked at the behest of the country’s central bank.

Zimbabwe minister signals CBDC interest amid Bitcoin adoption rumors: Minister Monica Mutsvangwa clarified that Zimbabwe is not considering the adoption of cryptocurrencies or Bitcoin.

MISC

How Crypto Becomes Money: A new theory for a universal digital barter system.

How Blockchain Technology Is Transforming Microtransactions and Revitalizing the Gaming Industry: A gaming model is emerging based on real asset ownership and a new “play-to-earn” structure.

What FATF’s Latest Guidance Means for DeFi, Stablecoins and Self-Hosted Wallets: Launching a truly “global” stablecoin is likely to get more difficult in the coming year as a result of the guidance, which advises regulators to keep such projects on a short leash.

Crypto Lender Nexo Makes Strategic Investment in SEC-Licensed Broker-Dealer: The firm’s investment into Texture Capital may be aimed at limiting regulatory scrutiny when it seeks to expand in the U.S.

The Crypto Industry Isn’t Too Thrilled About Biden’s Big Policy Moves: Crypto lobbyists now face two problematic tax provisions and some debatable recommendations on stablecoin regulation.

Binance Hires Former IRS Special Agent to Head Suspicious Activity Reporting: The hire is the latest in a series of appointments by the largest crypto exchange as it tightens up on regulatory compliance while tackling fraud and other criminal activity.

USDC issuer Circle supports proposal to regulate stablecoin issuers as banks: “There’s a real recognition that as these payment stablecoins grow, they could grow at internet scale relatively quickly,” Circle CEO said.

Bitwise bullish on pure Bitcoin ETF after dropping futures filing: Bitwise’s chief investment officer explained why the firm has decided to drop its Bitcoin futures ETF and focus on the spot Bitcoin ETF.

Huobi Group is moving to Gibraltar following China crackdown: Huobi Gibraltar has already secured the necessary licenses from local authorities.

Apple App Store removes crypto wallet TokenPocket after PayPal complaint: PayPal’s lawyers informed TokenPocket about the dispute over the company’s trademark earlier this year.

Aussie crypto micro-investment app Bamboo raises $3M, eyes US market: Blake Cassidy sees a brain drain from Australia since the ASX is not keen on listing crypto companies.

Blockchain tech firms AllianceBlock and Flare integrate technologies to expand their DeFi ecosystems: The two seek to improve their blockchains with each other’s tech from cross-chain bridges to decentralized exchanges to oracle networks.