Crypto Regulation News: White House publishes ‘first-ever’ comprehensive framework for crypto, ECB picks 5 companies to prototype digital euro apps, Thai SEC intends to ban crypto lending, Uruguayan government introduces legislation accelerating industry regulation, Russia aims to set rules for crypto cross-border payments, and more!

Paradigm

Published in

Paradigm

17 min readSep 19, 2022

Vol. 101, 5th September — 19th September

TL;DR

White House publishes ‘first-ever’ comprehensive framework for crypto. The House OSTP department analyzes 18 CBDC design choices for the US. While Blockchain Association calls the House’s crypto framework a ‘missed opportunity’
SEC’s crypto guidance pushes US banks to rethink custody projects. SEC to address growing crypto issuer filings with specialized offices. Furthermore, SEC’s Gensler signals extra scrutiny for Proof-of-Stake cryptocurrencies
SEC sues 2 crypto advisory firms and their owner for misappropriating investors’ funds. Ripple, SEC case heads for conclusion after ‘summary judgment’ filed
The U.S. Justice Department publishes second report on EO digital asset crime, announces new expert network
Two regulatory hearings show difference in SEC and CFTC approaches to crypto
US Treasury publishes laundry lists of crypto risks for consumers, national security. Furthermore, the Treasury clarifies publishing Tornado Cash’s code does not violate sanctions
Biden’s executive order produces few answers in crypto reports from US Treasury
ECB picks Amazon, Nexi, 3 more to prototype digital euro apps
UK economic secretary commits to make country a crypto hub under new PM. While UK advertising watchdog cites 2 former reality stars for crypto ads on Instagram stories
South Korean regulators to prepare guidelines for security tokens in 2022. Furthermore, South Korean ministry recommends enactment of special Metaverse laws
South Korea looks to invalidate Terra co-founder Do Kwon’s passport
Thai SEC intends to ban crypto lending in the country
Hong Kong’s HashKey receives approval to manage 100% crypto portfolio
Possession of Bitcoin still legal in China despite the ban, lawyer says
Australian senator drafts bill aimed at stablecoin, digital yuan regulation
Singapore’s financial authority grants license to SBI’s digital asset arm
New regulatory bill grants Uruguayan Central Bank control over the nation’s crypto industry
Abu Dhabi regulator introduces its ‘guiding principles’ for crypto. While Dubai grants regulatory approval for Blockchain.com office
Russia aims to set rules for crypto cross-border payments by year’s end
Canada’s new opposition leader is a Bitcoiner
Indian authorities unfreeze millions in locked WazirX bank accounts
Crypto miners from US, EU stay put in Russia despite war, sanctions
Vitalik Buterin says Ethereum merge cut global energy usage by 0.2%, one of biggest decarbonization events ever
Crypto lending company Celsius files for permission to sell its stablecoin holdings
Huobi to delist Monero and other privacy coins, citing regulatory pressures
Algorand Foundation outlines 35M exposure to crypto lender Hodlnaut
Which countries are the worst for crypto taxation? New study lists top five
And more!

Opinions

Which countries are the worst for crypto taxation? New study lists top five: Global cryptocurrency taxation rules significantly vary among countries, and some jurisdictions have come up with extremely tough crypto tax policies for their residents. In a new study by crypto analytics firm Coincub, Belgium is referred to as the worst country in the world in terms of crypto taxation for residents. That is according to in-house rankings covering taxation aspects like taxes on crypto income or crypto capital gains.

Belgium is known for its massive 33% tax on capital gains on crypto transactions, and it also withholds up to 50% in taxes from professional income on crypto trades. As previously reported, Belgium adopted strict crypto taxation rules back in 2017.

Released on Thursday, Coincub’s tax rankings also bring up countries like Iceland, Israel, the Philippines and Japan as the locations less favorable to crypto investors. In Iceland, any crypto gains up to $7,000 are subject to under 40% tax, while bigger gains will incur 46%, the report notes. Under Israel’s tax regime, the sale of crypto is usually subject to capital gains tax, which is up to 33%. On the other hand, if crypto trading involves a business income tax, it may go as high as 50%. In the Philippines, there is no tax on any crypto income under $4,500, but after that, any income is taxed up to 35%. The country’s government has also been discussing new taxes on crypto by 2024, raising concerns that Manila may follow India’s lead and impose a 30% flat tax on all crypto income. Japan closes the top-five worst countries for crypto taxation for residents in Coincub’s rankings. The country has a progressive tax rate system for income considered miscellaneous income. The tax rate varies from 5% to 45%, depending on the amount of total profits. Among other strict crypto tax economies, Coincub also mentioned countries like India, Austria, the United States, Norway, Denmark and France.

On the other hand, the study pointed out a number of countries that provide tax-efficient incentives to citizens and have much more favorable crypto tax policies. According to the rankings, Germany tops the list as the best place for crypto investors, as anyone holding cryptocurrency for a minimum of a year will incur no capital gains tax on selling or converting their crypto. Other crypto-tax-friendly countries include Italy, Switzerland, Singapore and Slovenia.

Additionally, Coincub mentioned classic tax havens or countries that offer foreign businesses and individuals minimal to no tax liability for their financial deposits, where crypto is no exception. Among those, the study listed The Bahamas, Bermuda, Belarus, the United Arab Emirates, the Central African Republic, Lichtenstein and others.

There’s No Future for DeFi Without Regulation: America’s first experiment with DeFi didn’t end well and the second one is going badly, too. Can we learn the lessons of history to make the third try a success?

So, Is the White House Banning Bitcoin Mining, or Promoting It to Help Climate Change? Crypto sees a wide array of reactions to a new report on mining.

Institutions Are Still ‘Wait-And-See’ With Ethereum: Big investors still seem to like bitcoin more, but their interest in ether is growing.

Ethereum Merge Explained: What Investors Should Know About the Shift to Proof-of-Stake: A historic overhaul of the second-largest blockchain network is complete, but questions remain. We’ve got answers.

After the Merge, How Do We Think About Change Within Bitcoin? Does Bitcoin need to change at all?

Craig Wright Could Have ‘Bamboozled’ Andresen During Private ‘Satoshi’ Signing Session: Trial Witnesses Explain: Expert witnesses on behalf of Hodlonaut say Wright could have used any number of tricks to fool Bitcoin developer Gavin Andresen into believing he was Satoshi.

1 Year of Bitcoin in El Salvador: The Bad, the Good and the Ugly: Despite many real stumbles and skeptical mainstream coverage of Nayib Bukele’s bitcoin initiative, both tourism numbers and remittance usage are already showing meaningful payoffs.

Ethereum may now be more vulnerable to censorship — Blockchain analyst: With Ethereum validators being required to stake 32 ETH, Ethereum could become more centralized and susceptible to censorship from governments.

Crypto bill a ‘pivotal step’, but needs clarification on ‘digital commodity’ — Sheila Warren: CCI CEO Sheila Warren said that there was “a very tight window” to pass the crypto bill, given the possible change in leadership following the 2022 midterm elections.

USA

White House publishes ‘first-ever’ comprehensive framework for crypto: Following President Joe Biden’s executive order on Ensuring Responsible Development of Digital Assets, federal agencies came up with a joint fact sheet on six principal directions for crypto regulation in the United States. It sums up the content of nine separate reports, which have been submitted to the president to “articulate a clear framework for responsible digital asset development and pave the way for further action at home and abroad.”

The fact sheet was published on the White House official website on Sept. 16, and consists of 7 sections: (1) Protecting Consumers, Investors, and Businesses; (2) Promoting Access to Safe, Affordable Financial Services; (3) Fostering Financial Stability; (4) Advancing Responsible Innovation; (5) Reinforcing Our Global Financial Leadership and Competitiveness; (6) Fighting Illicit Finance and (7) Exploring a U.S. Central Bank Digital Currency (CBDC). Some of the sections don’t contain any particularly new information, emphasizing one more time the principles and policies to which the present administration has been sticking. For example, to protect consumers and investors, the reports urge regulators — the Securities and Exchange Commission and Commodity Futures Trading Commission — to “aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space.” At the same time, they don’t say anything about the segregation of regulators’ duties, which remains one of the country’s main regulatory problems.

To promote access to financial services, federal agencies recommend creating a federal framework for nonbank payment providers and encouraging the adoption of instant payment systems like FedNow, the launch of which is planned by the Federal Reserve in 2023.

As a part of advancing responsible innovation efforts, the Office of Science and Technology Policy (OSTP), which has recently published a critical report on the climate impacts of crypto mining, will develop a Digital Assets Research and Development Agenda to help mitigate the negative climate impacts. With the same goal, the Department of Energy, the Environmental Protection Agency, and other agencies will consider further tracking digital assets’ environmental impacts.

While the fact sheet claims that the U.S. agencies will “leverage U.S. positions in international organizations to message U.S. values” related to digital assets, it doesn’t specify how exactly these values differ from the swiftly emerging European regulatory approach.

The security strategy implicates the amendments to the Bank Secrecy Act, anti-tip-off statutes and laws against unlicensed money transmitting to apply explicitly to digital asset service providers, including exchanges and nonfungible token platforms.

The last, but perhaps the most important section of the fact sheet is dedicated to the U.S. CBDC. It reveals that the administration has already developed policy objectives for a U.S. CBDC system, but further research on the possible technological foundation of that system is needed. Still, the intent seems pretty serious as the Treasury will lead an interagency working group with the participation of the Federal Reserve, the National Economic Council, the National Security Council and the OSTP.

White House OSTP department analyzes 18 CBDC design choices for the US: The technical analysis of the 18 CBDC design choices was made across six broad categories — participants, governance, security, transactions, data and adjustments.

Blockchain Association calls White House’s crypto framework a ‘missed opportunity’: Critics claimed the Biden administration’s reports focused on environmental concerns over crypto’s energy consumption and illicit uses rather than the technology’s benefits.

Two Regulatory Hearings Show Difference in SEC and CFTC Approaches to Crypto: Fireworks between Senator Toomey and SEC Chair Gensler.

SEC to address growing crypto issuer filings with specialized offices: The upcoming Office of Crypto Assets will review crypto filings, allowing DRP to refocus on filing review issues related to crypto assets.

SEC Sues 2 Crypto Advisory Firms and Their Owner for Misappropriating Investors’ Funds: The complaint alleges the firms’ owner lied to investors about where their funds were deposited in a Ponzi-like scheme.

SEC, Ripple Call for Immediate Ruling in Suit Over Whether XRP Sales Violated Securities Laws: The U.S. Securities and Exchange Commission and Ripple Labs both filed motions for summary judgment, arguing that a judge overseeing the case has enough information to make a ruling without moving the case forward to a trial.

CDC gives nod to Lummis-Gillibrand bill in proposed amicus brief in SEC v. Ripple case: The Chamber of Digital Commerce asked to file an amicus brief in the protracted SEC case against Ripple Labs and supports legislating to clear up a legal gray area.

SEC’s Crypto Guidance Pushes US Banks to Rethink Custody Projects: The regulator suggests that customers’ crypto assets should be treated as liabilities by lenders, which could be “prohibitively costly” for banks.

CFTC Already Preparing to Be Crypto Watchdog, Behnam Tells US Senators: Agency is “right regulator” to oversee digital assets trading, CFTC chairman testifies at a hearing of the Senate Agriculture Committee.

Biden’s Executive Order Produces Few Answers in Crypto Reports From US Treasury: After six months, the federal government’s review of the crypto world hasn’t yet offered a road map for oversight, though it hinted at a federal regulatory structure and emphasized that a central bank digital currency may have serious support.

SEC’s Gensler Signals Extra Scrutiny for Proof-of-Stake Cryptocurrencies: Speaking after the Merge (but not specifically about Ethereum), SEC Chair Gary Gensler said proof-of-stake cryptos could be investment contracts that subject them to securities regulations.

SEC Chair Gensler holds tight to his crypto position in preview of Senate testimony: The official will testify before the Senate Committee on Banking on Sept. 15; in a transcript released early, he reiterates the primacy of securities law in crypto regulation.

DOJ publishes second report on EO digital asset crime, announces new expert network: The U.S. Justice Department has published another report on crypto crime with detailed recommendations for legal reform; it has also formed a network of experts to advise offices.

US Treasury publishes laundry lists of crypto risks for consumers, national security: The Treasury Department was downbeat on crypto in two publications produced in response to the president’s executive order on digital asset development issued in March.

US Treasury report encourages instant payment, recommends more CBDC research: In one of three reports released simultaneously Friday, the Treasury Department talks cautiously about stablecoins and CBDC in the context of wider payment technology.

US Treasury sanctions 5 crypto addresses connected to Russian neo-Nazi paramilitary group: According to the Treasury Department, members of the sanctioned group fought alongside Russia’s military, including near territory Ukrainian forces reclaimed on Monday.

US Treasury sanctions Iran-based ransomware group and associated Bitcoin addresses: The Office of Foreign Asset Control sanctioned 7 Bitcoin addresses allegedly connected to Iranian nationals Ahmad Khatibi Aghada and Amir Hossein Nikaeed Ravar.

US Treasury clarifies publishing Tornado Cash’s code does not violate sanctions: Residents would not be violating sanctions by visiting Tornado Cash’s website, copying the mixer’s open-source code, nor making the code available online or in print.

Tornado Cash Ban Will Aid China’s AI Goals: The U.S. government forcing blockchains to make transaction data public has dangerous geopolitical implications in the tech race against China.

Crypto Lending Company Celsius Files for Permission to Sell Its Stablecoin Holdings: The bankrupt company currently owns 11 forms of stablecoins totaling approximately $23 million, according to disclosures.

Europe & UK

ECB Picks Amazon, Nexi, 3 More to Prototype Digital Euro Apps: The European Central Bank chose five organizations to help develop user interfaces for a potential digital euro. The organizations include Amazon, the world’s largest e-commerce company by market capitalization, and the European Payments Initiative, a group of 31 banks and credit institutions. The other participants, selected from 54 applicants because they met “specific capabilities” required to test a range of uses, are Spanish multinational CaixaBank, French payments platform Worldline and Italian payments-focused bank Nexi, the ECB said.

The ECB is in the middle of a two-year investigation into whether to issue a digital euro, which it says would be a central bank-issued alternative to cash. While a decision has yet to be taken, current thinking is to use it exclusively to facilitate personal payments within the European Union, if issued. A decision on whether the ECB will issue one is due September 2023. In the meantime, the prototyping project will test potential design options, with results expected in the first quarter of next year.

The EU is among some 100 jurisdictions actively exploring central bank digital currencies, which are digital forms of sovereign currencies like the U.S. dollar or the euro. Although the EU might be considered far behind countries like China — which already has citizens using a CBDC in real-world trials — it is ahead of other major jurisdictions like the U.S., which has yet to decide if one is of national interest.

For the ECB’s design trial, each of the five companies was chosen to test specific uses. Amazon, for instance, will work on e-commerce payments, according to the ECB.

CaixaBank will be developing a mobile app that simulates the steps users will take to transfer digital euros to their bank accounts or transfer digital euros to other individuals. Worldline will explore offline payments between individuals, while EPI and Nexi will work on point of sale retail payments.

UK economic secretary commits to make country a crypto hub under new PM: “We want to become the country of choice for those looking to create, innovate and build in the crypto space,” said MP Richard Fuller.

UK advertising watchdog cites 2 former reality stars for crypto ads on Instagram stories: The ASA said the Gale twins could not post the crypto ads “in the form complained about” again, but did not bar them from promoting digital assets in future advertisements.

Asia

South Korean regulators to prepare guidelines for security tokens in 2022: Guidelines for security tokens in South Korea will be announced by the end of 2022. Simultaneously, the pilot market with a regulatory sandbox will be launched before the formal institutionalization.

Chief South Korean financial regulator, the Financial Services Commission (FSC), published the report with the results of a joint policy seminar it held together with the Financial Supervisory Service, Korea Exchange, Korea Securities Depository and Capital Market Research Institute on Tuesday. The stakeholders gathered to discuss further national strategy on security tokens issuance and distribution.

As the current capital market and electronic securities system in the country doesn’t include any legal definitions of non-standardized securities issued via blockchain, the FSC deemed it necessary to draft separate guidelines to “support the sound development of the market and industry.”

The FSC will prepare and announce the guidelines for security tokens in the fourth quarter of 2022. After that, it will proceed with establishing the “Security Token Discipline System” through revisions of existing legislations, such as the Electronic Securities Act and Capital Market Act.

The digital securities market will be operated by the Korea Exchange, while the Korea Securities Depository will assess the tokens before registering and listing them. In the first stages, the regulator will allow over-the-counter trading on a limited scale.

The announcement makes another step in a series of regulatory initiatives in the country, whose newly-elected government has set the mission to promote the crypto market. On Sept. 1, local lawmakers proposed enacting the Metaverse Industry Promotion Act, which would foster the development of the Metaverse in South Korea. An ambitious plan to set up a comprehensive general crypto framework by 2024 had been leaked to the press in May.

South Korea Looks to Invalidate Terra Co-Founder Do Kwon’s Passport: The CEO of Terra along with five others were issued with an arrest warrant on Wednesday.

South Korean ministry recommends enactment of special Metaverse laws: The MSIT identified that imposing older regulations serve as a deterrent to the growth of new ecosystems.

Hong Kong’s HashKey Receives Approval to Manage 100% Crypto Portfolio: The crypto funds can manage a portfolio of 100% virtual assets, joining the first batch of Hong Kong’s few licensed virtual asset managers.

Possession of Bitcoin still legal in China despite the ban, lawyer says: Crypto holders in China are protected by the law in case of theft, misappropriation or breach of a loan agreement despite the ban on crypto.

Thai SEC intends to ban crypto lending in the country: The Securities and Exchange Commission of Thailand is preparing to take radical measures in the aftermath of the summer’s crypto lending platforms’ crashes.

Rest of the World

New regulatory bill grants Uruguayan Central Bank control over the nation’s crypto industry: The Uruguayan government has introduced legislation to the parliament that accelerates the regulation of the crypto space in the country and establishes the central bank as the regulatory authority.

Introduced on Sept 5, the bill strives to clarify the country’s regulatory framework for cryptocurrency assets, stating that all companies that provide digital asset-related services, including initial coin offerings (ICOs) are under the supervision of the Superintendency of Financial Services (SSF), a central bank entity. Cryptocurrency exchanges, custody services and any financial services relating to these digital assets should also adhere to Anti-Money Laundering regulations and best practices. Additionally, the document defined four types of digital assets: stablecoins, governance tokens, tradable assets and debt tokens, saying:

“If the activity carried out with these instruments involves the exercise of financial intermediation or financial activity, it will be subject to the regulation and control of the Central Bank of Uruguay.”

Last year, Uruguayan Senator Juan Sartori introduced a draft bill to regulate cryptocurrency and enable businesses to accept digital payments, seeking to “establish a legitimate, legal and safe use in businesses related to the production and commercialization of virtual currencies.”

This development is part of an ongoing wave of legislation or regulations being pursued by governments or legislators in Latin America. Brazil’s Securities and Exchange Commission is reportedly pursuing to change its legal framework to recognize tokens as digital assets or securities. In August, Paraguay’s president vetoed a bill that sought to recognize cryptocurrency mining as an industrial activity, arguing that mining’s high electricity consumption could hinder the expansion of a sustainable national industry.

Australian senator drafts bill aimed at stablecoin, digital yuan regulation: Senator Andrew Bragg on Monday released a draft bill aimed at regulating crypto exchanges, stablecoins, and the digital yuan.

Russia aims to set rules for crypto cross-border payments by year’s end: Russia might become the first country in the world to allow cross-border crypto payments while banning local crypto payments, a fintech expert in the Russian State Duma said.

Singapore’s financial authority grants license to SBI’s digital asset arm: The firm planned to launch a digital asset securities platform in Singapore, as well as provide custody, capital markets products and corporate finance advisory services.

Abu Dhabi regulator introduces its ‘guiding principles’ for crypto: The FSRA is taking a pro-market stance but pledges to comply with international safety standards.

Dubai grants regulatory approval for Blockchain.com office: The Virtual Assets Regulatory Authority of Dubai has previously given approval for Crypto.com, OKX and FTX subsidiaries to offer crypto-related services in the emirate.

Canada’s new opposition leader is a Bitcoiner: The new Conservative Party of Canada leader has previously advocated for financial freedom through crypto tokens, smart contracts and decentralized finance.

Indian authorities unfreeze millions in locked WazirX bank accounts: The Indian crypto exchange was under investigation by local authorities for money laundering allegations which caused a freeze on over $8.1 million in bank account funds.

El Salvador’s Debt Rating Cut to CC by Fitch: The rating agency said the country is likely to default on a January debt repayment because it has limited market access to raise the funds needed, in part because of its bitcoin adoption.

MISC

Crypto Miners From US, EU Stay Put in Russia Despite War, Sanctions: The war in Ukraine may have undermined many Russian companies, but not mining facilities: clients from the West keep coming to the country for cheap power and reliable uptime.

Vitalik Buterin Says Ethereum Merge Cut Global Energy Usage by 0.2%, One of Biggest Decarbonization Events Ever: Ethereum now spews out less carbon dioxide than a few hundred U.S. households, according to a report.

Huobi to delist Monero and other privacy coins, citing regulatory pressures: The exchange cited its own token management policy and compliance efforts as primary reasons for delisting seven privacy coins.

Algorand Foundation outlines $35M exposure to crypto lender Hodlnaut: The Foundation stated that it is “pursuing all legal remedies to maximize asset recovery.”