Crypto Regulation News: US Treasury develops ‘framework’ for international crypto regulation, EU agrees on landmark crypto authorization law MiCA, UK seeks public input on DeFi taxation, Indian crypto trading volumes slump following hefty taxes, American CryptoFed DAO withdraws locke, ducat token registration request, and more!

Paradigm

Published in

Paradigm

16 min readJul 11, 2022

Vol. 98, 27th June — 11th July

TL;DR

US Treasury develops ‘framework’ for international crypto regulation: The document is the first publication from the department to stem from President Biden’s executive order on digital assets
Biden official says US government could pass stablecoin rules by end of year. While US Infrastructure Law’s reporting requirements for crypto brokers likely to face delay
US Fed Vice Chairwoman Brainard argued aggressive regulation is needed for the crypto sector before things get out of hand
Grayscale sues SEC over Bitcoin ETF application rejection
EU agrees on landmark crypto authorization law, MiCA. Furthermore, ECB officials prepare for ‘harmonization’ of crypto regulations
UK government seeks public input on DeFi taxation. UK to introduce legislation on stablecoins by August. Crypto needs regulation to mitigate risks, says Bank of England exec
Boris Johnson’s exit as British Prime Minister leaves UK crypto ambitions on hold
NFT platforms should be subject to money-laundering regulation, EU lawmakers say
Belgium regulator ponders crypto as a security
Salary payments in USDT stablecoin ruled as illegal in the Chinese court
Korea and US agree to share investigation data on Terra
EU-regulated firm Banking Circle adopts USDC stablecoin
Binance gets VASP registration for its Spanish subsidiary from the Bank of Spain
Italian government will provide 46M dollars in subsidies for blockchain projects
Dutch University set to recover more than twice the paid BTC ransom in 2019
Indian crypto trading volumes slump following hefty taxes. Influencers are responsible for 92% of crypto ad violations in India, report says
Singapore’s financial watchdog considers further restrictions on crypto
Argentina carries out crypto wallet seizures linked to tax delinquents
Policy think tank asks Philippine government to ban Binance over promotions
Russian Duma passes bill to remove VAT, lower income tax rates on digital asset sales. While Russians banned from accessing Bitmex within European Union
Binance to assist Cambodia in developing digital asset regulations. While Binance users support 0-fee trading despite CZ’s wash trading concerns
American CryptoFed DAO withdraws locke, ducat token registration request
Solana Labs, multicoin accused of violating securities law by SOL investor
Coinbase providing customer geolocation data to ICE
Basel Committee wants to limit banks’ digital asset exposure to just 1% of equity
US diplomats call on Japan’s crypto exchanges to cut ties to Russia
Crypto owners banned from working on US government crypto policies
CFTC charges South African bitcoin club Mirror Trading International with 1.7B dollar fraud
And more!

Opinions

Unpacking the Latest Bitcoin ETF Rejections: Grayscale and Bitwise saw their bitcoin ETF applications rejected. Have we learned anything new?

Here’s What Still Needs to Happen Before the EU’s MiCA Bill Becomes Law: What EU crypto companies can expect after the bloc sealed deals on the political shape on anti-money-laundering and licensing laws.

Crypto World Is Cautious of Finer Details In EU’s MiCA Law: Web3 advocates are cautiously welcoming Europe’s new law, but must first resolve its paradoxes — like when is a non-fungible token fungible?

Hurry Up With Crypto ID Checks, FATF Tells Countries: After the potentially privacy-busting “travel rule” for crypto transfers, global standard setters at the Financial Action Task Force have their eyes on DeFi, NFTs and unhosted wallets.

Bitcoin Will Make a Comeback, Rockefeller International Chairman Says: “We need the excesses to get weeded out,” Ruchir Sharma told.

States, Not Congress, Will Lead Crypto Regulation, Says Legal Expert: States could move faster to keep pace with a changing market, said Jarrod Loadholt, a partner at Ice Miller Public Affairs Group.

SEC’s Gensler Reiterates Bitcoin Alone Is a Commodity. Is He Right? The government’s stamp of approval seems to separate BTC from “crypto,” but decentralization is a path.

After Terra’s fall to Earth, get ready for the stablecoin era: Did May’s algorithmic stablecoin crashes kill the concept, or is there still a role for fiat-pegged cryptocurrencies?

The crypto industry needs a crypto capital market structure: The DeFi industry needs a sound market structure and systemic independence from current transactional systems.

The decoupling manifesto: Mapping the next phase of the crypto journey: The narratives that have propelled crypto to its current status have reached the limits of their influence. It’s time to rethink how to pitch crypto to a broader society.

Know thy customer: The future of KYC in crypto: With the regulatory push for a tighter identification standards rises, the crypto industry definitely has some innovations to offer.

Web3 activists fight for reproductive rights with NFTs, DAOs and protests: The Web3 community has launched a number of initiatives to raise funds and awareness for women’s reproductive rights following the overturn of Roe v. Wade.

USA

US Treasury Develops ‘Framework’ for International Crypto Regulation: The U.S. Treasury Department published a fact sheet outlining how it could work with foreign regulators to address the cryptocurrency sector. The fact sheet, which is the first report published by the department as a result of U.S. President Joe Biden’s executive order on crypto, said the framework “is intended to ensure that … America’s core democratic values are respected,” pointing to consumer, investor and business protection, the safety of the global financial system and interoperability.

According to the sheet, the framework’s policy objectives also include reducing the potential use of crypto for illicit finance, promoting access to financial services, supporting technological advancement and “reinforc[ing] U.S. leadership in the global financial system.”

“The United States must continue to work with international partners on standards for the development of digital payment architectures and CBDCs (central bank digital currencies) to reduce payment inefficiencies and ensure that any new payment systems are consistent with U.S. values and legal requirements,” the fact sheet said.

This work should address those concerns, the document noted.

“Additionally, the United States will promote the adoption and implementation of international standards through bilateral and regional engagements. Across all engagements the United States will seek to ensure a coordinated message, limit duplication and encourage that work is maintained within its primary stakeholders,” the document said.

To support this work, the Treasury Department said the U.S. should hold “engagements” and other types of forums, the fact sheet said. The Justice Department published its response to Biden’s executive order on digital assets last month.

US Fed Vice Chairwoman Brainard Doesn’t Like What She’s Seeing in Crypto: Lael Brainard argued aggressive regulation is needed for the sector before things get out of hand.

Biden Official Says US Government Could Pass Stablecoin Rules by End of Year: The President’s Working Group on Financial Markets discussed issues that should be addressed by stablecoin legislation in a meeting Thursday.

US diplomats call on Japan’s crypto exchanges to cut ties to Russia: The FSA and Japan’s Finance Ministry previously warned crypto firms against processing transactions involving sanctioned individuals or entities, subject to fines or imprisonment.

Grayscale Sues SEC Over Bitcoin ETF Application Rejection: The SEC rejected Grayscale’s application to convert its Grayscale Bitcoin Trust to an exchange-traded fund earlier Wednesday.

US Infrastructure Law’s Reporting Requirements for Crypto Brokers Likely to Face Delay: The provision would require brokers to collect detailed information on their customers and their trades.

Crypto owners banned from working on US Government crypto policies: A new legal advisory notice from the US Office of Government Ethics prohibits any employee who owns cryptocurrency from working on Federal crypto regulation.

US Commerce Dept. asks digital asset industry for input on competitiveness framework: The federal agency received eight responses to a request for comment on a document mandated by U.S. President Joe Biden’s March 9 executive order on digital assets.

Huobi Tech Subsidiary Is Granted US Money Transfer License: The license opens the door for the brokerage unit to offer cryptocurrency transactions in the future.

CFTC Charges South African Bitcoin Club Mirror Trading International With $1.7B Fraud: MTI’s self-described CEO was recently detained in Brazil on an Interpol warrant, the regulator said.

Europe & UK

EU Agrees on Landmark Crypto Authorization Law, MiCA: European Union (EU) policymakers have struck a deal on landmark legislation to regulate crypto assets and service providers throughout the bloc’s 27 member nations. The policymakers, who represent the world’s third-largest economy, have been haggling for nearly two years over the Markets in Crypto Assets (MiCA) framework. As it stood, the legislative package sets up requirements for crypto issuers to publish a kind of technical manifesto called a “white paper,” to register with the authorities and to keep proper bank-style reserves for stablecoins (cryptocurrencies pegged to the value of an asset such as sovereign currencies like the euro).

Stefan Berger, the parliamentarian in charge of seeing MiCA through the EU’s complex legislative process, tweeted confirmation that policymakers had reached an agreement. The news was also hailed by the European Commission’s Mairead McGuiness as she left the talks, which dragged on for nearly seven hours.

“I think everybody’s now aware that you can’t have an unregulated sector,” McGuinness told , referring to turbulence seen in recent weeks in crypto markets. “We’re glad that we’re leading on this,” she said, adding that “we do think there needs to be international cooperation because it’s important that we don’t regulate on our own.”

McGuinness has previously called for the U.S. to cooperate on crypto regulation, and there are recent signs that the Biden administration is considering its own stablecoin laws. McGuinness also suggested this is not the end of the story, after the European Central Bank’s Christine Lagarde said further laws would be needed to deal with new areas like crypto lending.

“No legislation is ever set in stone, and no legislation in the area of crypto could be,” McGuinness said. “Those who are in this space are thinking of being innovative will now do it in a way that sits within our regulation rather than in the Wild West.”

MiCA was originally put forward by the European Commission in September 2020 in an attempt to address a slew of crypto fundraising projects called initial coin offerings (ICO) that often proved bogus. The law needed approval from EU governments and lawmakers to pass — which it now has.

MiCA has been broadly welcomed by the industry because it can increase credibility, promote adoption by conventional banks and offer crypto companies a single license to operate across the bloc. But many grew increasingly anxious over later attempts by lawmakers to extend the reach of the law to cover decentralized finance (DeFi) and NFTs as well as limit the environmental impact of the proof-of-work consensus mechanism that underpins bitcoin. In the last phase of talks, the focus was on whether NFT service providers — which include marketplaces such as OpenSea — should need to seek regulatory authorization to operate within the bloc.

The law also introduces tough requirements for stablecoin issuers. The stablecoin rules were initially proposed as a reaction to libra, the cryptocurrency proposed by the former Facebook, which finance ministers worried would usurp governments’ role in controlling money. Though libra (later renamed diem) is now no more, the idea of strict regulations for stablecoin issuers has gained favor following the dramatic collapse of terraUSD last month. The legislative deal comes as U.S. lawmakers consider rules of their own, particularly for the stablecoin market. It also follows hot on the heels of controversial anti-money laundering measures that the EU agreed to impose on crypto service providers Wednesday.

ECB officials prepare for ‘harmonization’ of crypto regulations: Regulators from 19 EU member states will reportedly attend a supervisory board meeting in July to discuss MiCA and its possible implementation.

Johnson’s Exit as British Prime Minister Leaves UK Crypto Ambitions on Hold: Most likely replacements have been relatively quiet about their views on Web3.

UK to Introduce Legislation on Stablecoins by August: BoE’s Cunliffe: There’s been at least a bit of delay in the framework thanks to recent resignations from Prime Minister Boris Johnson’s government.

Crypto needs regulation to mitigate risks, says Bank of England exec: Traditional markets have regulations to protect investors from unrecoverable losses, a Bank of England executive recently noted.

NFT Platforms Should Be Subject to Money-Laundering Regulation, EU Lawmakers Say: The rules would cover self-hosted wallets and DeFi apps.

Belgium Regulator Ponders Crypto as a Security: The EU’s landmark crypto law won’t take effect for a couple of years, but existing stock-trading rules may still apply, financial regulator FSMA says.

UK City Minister, Crypto Proponent John Glen Resigns as Ministers Quit Johnson Government: In April, Glen outlined the U.K.’s ambitions to become a crypto hub and produce a regulatory package for crypto assets.

UK Financial Regulator Hires Former Police Officer to Head New Crypto Unit: Matthew Long will be responsible for payments and digital money at the Financial Conduct Authority.

Bank of England Panel Calls for Enhanced Crypto Regulation to Limit Contagion: The loss of $2 trillion of crypto market cap over a period of months has “underscored the need for enhanced regulation,” the Financial Policy Committee said.

UK Government Seeks Views on DeFi Taxation: Those deadline for submitting comments is Aug. 31.

Hong Kong securities regulator CEO to lead UK financial watchdog: Ashley Alder said the FCA would help “chart the U.K.’s post-Brexit future as a global financial centre, which continues to support innovation and competition.”

EU-regulated firm Banking Circle adopts USDC stablecoin: Banking Circle was launched in 2016 with a mission to help payments businesses reach new global markets, avoiding the burdens of traditional banking.

Binance gets VASP registration for its Spanish subsidiary from the Bank of Spain: Changpeng Zhao, CEO of Binance, said that compliance with regulation is crucial to the broader adoption of crypto.

Italian government will provide $46 million in subsidies for blockchain projects: All companies developing IoT, AI or blockchain technology will be eligible to apply for government subsidies provided the funds will be used in specific sectors, such as health.

Dutch University set to recover more than twice the paid BTC ransom in 2019: The university reluctantly paid €200,000 in Bitcoin in December 2019 to avoid losing critical research data and resources.

Asia

Salary payments in USDT stablecoin ruled as illegal in the Chinese court: Despite the Chinese government banning all kinds of cryptocurrency transactions last year, some firms apparently still use stablecoins like Tether (USDT) to pay their employees. Beijing’s Chaoyang District People’s Court has ruled that stablecoins like USDT cannot be used for salary payments, the local news agency Beijing Daily reported.

The Chinese court stated that virtual currencies like USDT cannot circulate in the market as a currency, which requires all employers to only pay their workers using the official currency, renminbi (RMB). The ruling came as part of a court case involving a staff member at a local blockchain firm suing his employer for not agreeing to pay his wages in RMB. The plaintiff argued that instead of paying him in RMB, the firm had paid his salary and bonuses in the USDT stablecoin.

Citing China’s blanket ban on crypto enforced in September 2021, the court pointed out that digital currencies like USDT do not have the same legal status as legal tender. The court noted that the plaintiff’s request to be paid wages and bonuses in the form of RMB fully complies with local laws and the court supports it. As such, the court ordered the defendants to pay a total of more than 270,000 RMB ($40,000) in wages, performance bonuses and annual bonuses owed to the plaintiff.

As previously reported , the People’s Bank of China officially announced a set of measures to fight against crypto adoption in China in September 2021. The action involved 10 Chinese state authorities establishing a new mechanism to prevent financial players from participating in any cryptocurrency transactions. Despite the ban, some local blockchain executives are positive about stablecoins like USDT. Yifan He, CEO of Red Date Technology — a tech firm involved in the Blockchain Service Network (BSN), China’s major blockchain project — told Cointelegraph last month that stablecoins would do just fine only if properly regulated.

“USDC or USDT are payment-related currencies, not speculative assets. Once they are fully regulated, they are fine,” he said.

Addressing the latest news from China, He noted that all USDT transactions are illegal in China. However, banning such transactions may be too difficult for regulators, the exec suggested. “There is no way to ban USDT payments technically in any country,” He said. The expert also believes that USDT and its major rival USD Coin (USDC) are “not popular at all in China.”

Korea and US agree to share investigation data on Terra: The two nations have agreed to share their investigation data on the ongoing crypto-related cases including Terra.

Rest of the World

Indian crypto trading volumes slump following hefty taxes: Trading volume on three major Indian crypto exchanges plummeted 72.5% on average since Friday, when a 1% tax per transaction was enforced in the country.

The Tax Deducted at Source (TDS) came into effect on Friday and appears to have negatively affected traders as exchange volumes dropped from 37.4% on BitBNS and 90.9% on CoinDCX by Sunday. Volumes have stabilized slightly since hitting lows but are still down 56.8% on average, according to CoinGecko. Indian YouTube channel Crypto India tweeted on Monday that exchange revenues, based on a 0.1% trading fee, are abysmal due to the low volume levels. At the trough of volume levels, WazirX, CoinDCX and Zebpay took in a combined $21,649 per day.

For now, crypto traders like Mumbai’s Shounak Shetty are also hurting. Shetty told Economic Times on Monday that he believes the TDS and the 30% income tax on cryptocurrency trades in India will be detrimental to the talent base in the South Asian nation. He said:

“Like other traders, I am trying to figure out if it’s possible to stay profitable on Indian exchanges. This will lead to another brain drain of professional traders to other countries like Dubai that are more welcoming.”

WazirX’s Policy Analyst Anuj Chaudhary explained in the June 30 episode of The WazirX Show on YouTube that the 1% TDS is levied on “digital assets whether it’s NFT, crypto assets, metaverse or any sort of transactions happening on top of public blockchains.”

The tax will be in effect for three months as a test to determine the impact it has on the market. While trading volumes are low now, policymakers want to see its results for a longer timeframe. Only gift cards used to obtain goods or get a discount, mileage points, reward points, and loyalty incentives without monetary considerations and subscriptions to websites, platforms or applications are exempt from the tax.

Chaudhary’s counterpart on the show, Muthuswamy Iyer, head of legal at WazirX, accurately predicted that the TDS would negatively impact the high volume, high-value traders on Indian platforms. He added that he believes the TDS would also dissuade newcomers and low-frequency traders from gaining crypto exposure. The average daily transaction volume between WazirX, Zebpay, BitBNS and CoinDCX in June was about $9.6 million per day, but that has fallen to about $5.6 million as of Monday.

India’s Day Of Reckoning With ‘Most Controversial Crypto Tax’ Is Here: The country’s 1% TDS is predicted to exacerbate negative market sentiment and add to the woes of the crypto community.

Influencers Are Responsible for 92% of Crypto Ad Violations in India, Report Says: Violations included not carrying a required disclaimer or paid partnership tag on the ad, according to the Advertising Standards Council of India.

FDIC Probing Voyager Claims It Was Insured by Regulator: The Canadian-based crypto exchange filed for bankruptcy earlier this week.

Singapore’s financial watchdog considers further restrictions on crypto: The Monetary Authority of Singapore may consider “placing limits on retail participation” for investors, as well as introduce rules on the use of leverage for crypto transactions.

Argentina carries out crypto wallet seizures linked to tax delinquents: Argentinian tax dodgers are seeing their cryptocurrency wallets seized by the local tax authority.

Policy think tank asks Philippine government to ban Binance over promotions: Binance responded to the letter saying that they take compliance seriously and are looking to secure licenses in the country.

Russian Duma passes bill to remove VAT, lower income tax rates on digital asset sales: Russia is turning to blockchain technology in an effort to counteract the economic isolation brought on by the sanctions imposed due to its invasion of Ukraine.

Russians banned from accessing Bitmex within European Union: Russian citizens or residents will no longer be able to access BitMEX services from the European Union after July 11, 2022.

The Moscow Exchange is a good base for crypto trading, Russian lawmaker says: MOEX is likely to do a great job in launching a crypto trading division due to its full compliance with the rules of the Bank of Russia, the official said.

Binance to assist Cambodia in developing digital asset regulations: The crypto exchange has signed similar agreements with the governments of Kazakhstan, Dubai and Bermuda.

MISC

American CryptoFed DAO Withdraws Locke, Ducat Token Registration Request: CryptoFed said the tokens are “not securities.”

Solana Labs, Multicoin Accused of Violating Securities Law by SOL Investor: Solana’s SOL token is an unregistered security whose insiders have benefitted while retail suffered, the suit alleged.

Binance users support 0-fee trading despite CZ’s wash trading concerns: CZ is open to implementing the changes regardless of the challenges that a new system would bring, as he said, “Let’s see what the poll say. We listen to our users.”

Circle looks to reaffirm commitment to transparency as USDC market share soars: “With USDC, our business model is minimizing risk, not taking and managing risk,” wrote Jeremy Fox, Circle’s chief technology officer.

Coinbase providing customer geolocation data to ICE: The U.S. government agency is reportedly using Coinbase Tracer to access customers’ historical geo-tracking data and transactions on over a dozen cryptocurrencies.

Basel Committee wants to limit banks’ digital asset exposure to just 1% of equity: Volatile cryptocurrencies such as Bitcoin would also be subjected to a 1,250% risk premium.

Haters to unite at the first conference for crypto skeptics: The anti-crypto conference hopes attendees will get a chance to speak face-to-face with government officials to share their skepticism about the industry.