The Scenius State of Regulation (Issue #1)
Crypto Policy & Regulation
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Welcome to The Scenius State of Regulation — a monthly publication prepared by Ian Corp, a consultant to Scenius Capital.
Our aim with this publication is to provide a snapshot of evolving regulation affecting digital assets globally.
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United States 🇺🇸
Congress Nears Bi-Partisan Deal to Regulate Stablecoins
Congress looks to issue a comprehensive bill that will regulate stable coins. This bill will be in motion for a vote on the House floor once Congress returns to session on September 6, 2022.
Department of Justice Charges Ex-Coinbase Employee in First Insider Trading Tipping Scheme
Three individuals, one of which is a former employee of Coinbase, were charged with wire fraud and conspiracy charges based on an insider trading tipping theory. Isahn Wahi, the former employee, would disclose information to his co-conspirators about which tokens would be listed on the exchange before that information became public.
Texas Looks to Amend Constitution to Add Right to Own & Use Crypto
Texas’s Republican party is advocating for Texas’s Bill of Rights to allow citizens to own, hold, and use whatever currency they prefer, including digital currency.
CFTC Adds New Tech Innovation Office
The CFTC announces an Office of Technology Innovation, which will focus its efforts on finding effective regulations for the cryptocurrency industry.
Crypto Companies Spend Nearly $7m in Q2 2022
Lobbying by cryptocurrency related entities grew by 17% in Q2 2022, a total of $6,751,500.00. Some companies that spent $100,000.00 or more in Q2 2022 included Chainalysis, West Realm Shires Services Inc. dba FTX US, Foris DAX inc. dba Crypto.com, Meta Platforms, Coin Center, and Robinhood Markets.
Coinbase Petitions SEC for Rulemaking
Coinbase filed a petition to the SEC to govern the regulations of cryptocurrency and identify which digital assets are securities.
Senators Propose Bill to Exempt De Minimis Transactions from Taxes
United States Senate proposes a bill that would exempt transactions less than $50.00 from taxes.
Senate Banking Committee Petitions Apple to Review App Store Policy re: Crypto
United States Senate’s Committee on Banking, Housing, and Foreign Affairs sends letter to Tim Cook, CEO of Apple, asking that the company review and amend its policies to evaluate whether a cryptocurrency exchange application should be offered on the Apple App Store.
California Overturns Four-Year Ban on Crypto Political Donations
California’s legislature overturned a four-year ban on political donations made with cryptocurrency. Twelve other states and the District of Columbia authorize donations made by cryptocurrency.
Bill Creates White House Blockchain Advisor Role
United States’s Chips and Science Act created a White House blockchain advisor role that will counsel the President and the executive branch’s Office of Science and Technology Policy.
FDIC Issues Warning to Crypto Companies on False Claims
FDIC issues an advisory warning to all cryptocurrency companies falsely claiming that their products are FDIC insured. FDIC claimed that it “does not insure assets issued by non-bank entities, such as crypto companies.”
Senate Bill Proposes CFTC to be Lead Agency to Regulate Crypto
Proposed Senate bill would delegate authority to regulate cryptocurrency to the CFTC, requiring all trading platforms to register with the agency and set a national regulatory standard for cryptocurrency.
Senate Staffer Proclaims that All Crypto Exchanges are Under SEC Investigation
A staffer from Senator Lummus’s office claims that every United States cryptocurrency exchange, and Binance, is currently being invested by the SEC.
Department of Treasury Blacklists Tornado Cash
United States Department of Treasury adds several wallet addresses operating with or connected to tornado.cash to the Specially Designated Nationals list, marking the first time the agency has listed a smart contract protocol. Violators who interact with these wallet addresses are subject to up to 30 years in prison.
Crypto Traders Beware: IRS Gets Greenlight on Brokerage Inquiry
A United States federal judge authorized the IRS to issue a John Doe summons — a tool used to collect information about unknown taxpayers — to institutional crypto broker SFOX. The IRS will soon have information on all US taxpayers that conducted $20,000 or more in trades on SFOX between 2016 and 2021.
SEC Sues Dragonchain Over $16.5M ICO
The SEC is suing startup founder John Joseph Roets and three entities he controls — Dragonchain, the Dragonchain Foundation and The Dragon Company — for raising $16.5 million in unregistered cryptoasset securities offerings.
Private Funds Would Have To Disclose Crypto Under SEC, CFTC Proposal
The SEC Wednesday proposed an amendment to Form PF, the confidential form via which registered investment advisers are required to disclose specific information about their security holdings. Meanwhile, the CFTC is considering proposing the same amendments, which would require funds with at least $500 million in assets under management to disclose exposure to digital assets.
Coinbase Hit With Another Class Action Lawsuit Following SEC Allegations
The multi-faceted claim asserts Coinbase held customer’s digital assets knowing they could end up as the property of a bankruptcy estate, potentially forcing customers to be treated as the exchange’s “general unsecured creditors.” Coinbase is also alleged to have allowed US customers to trade digital assets which the exchange “knew or recklessly disregarded” which should have been registered with the SEC.
Proposed Senate Bill Would Deem Bitcoin, Ether To Be Regulated as Commodities by CFTC
The legislation would designate bitcoin and ether as commodities, and leave other digital assets that may be securities under the purview of the SEC. The bill does not mention other tokens or provide criteria for classification. The bill also notes that exchanges enabling investors to trade bitcoin and ether must also register with the CFTC.
SEC Files Complaint Against Dragonchain for Unregistered Initial Coin Offering
The complaint alleges CEO John Roets, along with three Dragonchain entities, violated the Securities Act by raising $16 million from the sale of dragon (DRGN) tokens in an ICO predominantly marketed to crypto investors in 2017.
Crypto PACs Spend Big on Congressional & Senate Primaries
Super PACs linked to some of crypto’s biggest names are spending some serious cash in primary elections this week. The outside groups have reported boosting candidates in Arizona, Michigan and Missouri ahead of Tuesday’s primaries.
SEC Files $300m Ponzi Scheme Lawsuit Against Forsage Founders
SEC charged 11 people as part of an alleged $300 million global crypto pyramid and Ponzi scheme. Retail investors were allegedly bilked by Forsage, which claims to be a decentralized smart contract platform, the SEC said. The four founders of the company, who were last known to be living in Russia, the Republic of Georgia, and Indonesia, were charged, as were three U.S.-based promoters who endorsed Forsage on its website and social media platforms.
Crypto Thinktank Coin Center May Challenge Tornado Cash Ban in Court
The Washington, D.C.-based advocacy group said Monday that the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) overstepped its bounds when it blacklisted Tornado Cash last week, potentially violating constitutional rights.
FDIC Calls Out FTX US for False & Misleading Statements
The FDIC issued a cease-and-desist letter to FTX US, among others, for making “false representations that their products were FDIC insured. If FTX US does not remove these statements by September 2, 2022, the FDIC might initiate legal action.
Coinbase Would Shut Down Ethereum Staking Service if Threatened by US Regulators
Following the Tornado Cash sanctions imposed by the United States Department of the Treasury, Coinbase CEO Brian Armstrong tweeted that the company would shut respond to similar regulatory threats by shutting down its Ethereum staking service to preserve the blockchain’s integrity.
United States Congress Weighs Environmental Impact of Mining
Congress’s House Energy and Commerce Committee sent correspondence to several crypto miners requesting that they explain their mining process so the Committee can study the impact of proof of work mining and how it relates to emissions and “excess electronic waste.”
Uniswap Bans 253 Wallets Following Tornado Cash Sanctions
Leveraging compliance software provided by TRM Labs, Uniswap blocked 253 crypto wallet addresses suspected of being involved in or belonging to criminals and hackers. Uniswap will continue to monitor suspicious wallet addresses and take proportionate action against them.
United States Continues Debate Over Digital Dollar
Both sides of the aisle are advocating for the Federal Reserve to issue a CBDC. Attorney General Merrick Garland has until September 5, 2022 to determine what laws, if any, are needed to launch a CBDC in the United States.
Canada 🇨🇦
Canada Issues Guidance Providing Exposure Limits on Digital Assets
Canada’s Office of the Superintendent of Financial Institutions (“OSFI”) announced that if regulated banks’ total gross positions exceed 1% of their total capital, and if their net-short positions exceed 0.1% of their total capital, they will need to disclose the same to OFSI.
Latin America 🌎
Paraguay Assigns Agencies to Regulate Crypto
Paraguay passes bill assigning certain agencies to regulate crypto mining (National Electricity Administration) and crypto trading (Ministry of Industry and Commerce).
Buenos Aires Will Run Ethereum Validators Starting in 2023
Buenos Aires will become one of the first public entities in the world to help run Ethereum’s network infrastructure. Private companies will contract with the city to deploy validator nodes, which are slated to be installed next year.
Colombia Explores Creating a CBDC to Combat Tax Evasion
Colombia is considering the introduction of a CBDC to facilitate transactions and reduce tax evasion. The government also plans to ban cash transactions for amounts surpassing 10 million Colombian pesos ($2,350).
Ripple Launches Crypto Payment Service in Brazil
Ripple announced that it will partner with foreign exchange company Travelex, the first bank approved by Brazil’s central bank to operate exclusively as a foreign exchange, to facilitate cross-border payments between enterprises using XRP.
Middle East 🌍
OKX Receives License to Launch Exchange in Dubai
Digital exchange OKX receives a provisional license from Dubai’s Virtual Asset Regulatory Authority to trade exchange products.
Dubai Releases Metaverse Strategy
Dubai’s Executive Council unveils five-year metaverse strategy seeking to host 5,000 metaverse companies in the next five years, create 40,000 jobs, and add $4B to the Dubai economy.
FTX Wins Approval to Launch Exchange in Dubai
After winning an approval from regulators, FTX is expanding to Dubai to operate a cryptocurrency exchange.
Binance Receives Preliminary Approval to Operate in Kazakhstan
Binance has obtained preliminary approval from the Astana Financial Services Authority (AFSA) to operate in Kazakhstan, a step toward becoming licensed to operate as a digital asset trading platform and custody provider in the Astana International Financial Centre (AIFC).
Africa 🌍
South Africa’s Central Bank Authorizes Institutional Crypto Investments
The South African Reserve Bank published guidelines authorizing South African banks to extend crypto investments to institutional clients.
Nigeria’s CBDC Used for Nearly $10MM Worth of Transactions Since October 2021
Nigeria’s CBDC, the eNaira, has been used in over $9.3MM worth of transactions and has over 270,000 active wallets in the country. This is helping serve Nigeria’s unbanked. About forty percent of Nigeria’s population, including 59 million adults, do not have a traditional bank account.
Europe 🌍
Bank of International Settlements Issues New Stablecoin Guidance
Bank of International Settlements issues guidance regarding stable coins, declaring that issuers and crypto exchanges selling, trading, or issuing stablecoins must adhere to the international standards outlined in the Principles for Financial Market Infrastructures.
Vladimir Putin bans the use of digital securities and utility tokens for payments of goods and services in Russia.
Coinbase Receives Regulatory Approval in Italy
Coinbase joins Binance to become the second crypto exchange to gain regulatory approval from Italy’s financial regulatory agency, the Organismo Agent e Mediatori.
Great Britain to Begin Financial Regulatory Overhaul
British financial regulators poised to introduce a financial services and markets bill that will “capitalize on the benefits of Brexit and transform the UK financial services sector.” The bill will regulate stablecoins as a means of payment.
France’s Largest Bank to Offer Crypto Custody Services
BNP Paribas (13.4B AUC), France’s biggest bank, to offer crypto custody sources with partners Metaco and Fireblocks.
United Kingdom Introduces Cryptocurrency Regulation
United Kingdom’s Parliament introduces the Financial Services and Markets Bill, which will provide regulations for cryptocurrency aiming to tailor the United Kingdom’s financial services regulation to bolster its global competitiveness.
Gemini Wins Regulatory Approval in Ireland
Gemini becomes the first Virtual Asset Service Provider in Ireland. Gemini’s EU headquarters are located in Dublin, Ireland.
United Kingdom’s Law Commission: Crypto Should Have Separate Property Laws
The United Kingdom’s Law Commission says that its personal property laws should be amended to provide a separate category for digital assets.
United Kingdom Explains Policy Positions on Crypto
United Kingdom’s Financial Conduct Authority issues a policy statement explaining its outlook and positions on regulating cryptocurrency and other high-risk investments.
UK Crypto Industry Welcomes New Stablecoin Rules
The proposed stablecoin rules are part of a larger financial-services and markets bill that maps out the U.K.’s post-Brexit economic strategy. It looks to extend existing financial regulations to cover payments-focused cryptocurrencies such as stablecoins, which are cryptocurrencies intended to maintain a peg to a fiat currency, usually the U.S. dollar.
The Arrest Heard Round the World
The Dutch financial crimes agency, the Fiscal Information and Investigation Service that last week arrested a 29-year-old developer in connection with cryptocurrency mixer Tornado Cash said that “he is suspected of involvement in concealing criminal financial flows and facilitating money laundering.” The developer was recently extradited to the United States for prosecution.
EU to Create New AML Regulator to Oversee Crypto
The European Commission released its proposal for the Sixth Directive AML/CFT, or AMLD6, last July. The European Council released its version last month. Central to the new legislation is the creation of an EU-wide regulator for anti-money laundering.
Crypto Lobbies EU on MiCA Limits on Stablecoins
The EU’s Market in Crypto-Assets (“MiCA”), a comprehensive crypto regulation affecting the European Union’s 27 countries, will impose restrictions on the stablecoins that are not denominated in euros or another EU member state currency. Lobbyists are advocating to amend these restrictions, which could ban USDT, USDC, and BUSD, which collectively account for billions of dollars in global trading volume.
Asia 🌏
Singapore’s Central Bank to Release Crypto Framework
The Monetary Authority of Singapore will release a framework to make the country a hub for cyrpto. Although the bill is not expected to stifle innovation, it will set stricter guidelines to prevent malfeasant practices.
South Korea Defers Taxes on Crypto
South Korea declared that its tax reform bill imposing a 20% capital gains tax on investments in digital assets will be delayed until 2025. The bill was scheduled to become effective on January 1, 2023.
Taiwan Bans Crypto Purchases via Credit Card
Taiwan’s Financial Supervisory Commission bans the purchase of cryptocurrency using a credit card.
Japan Scraps Plans for a Central Bank Digital Currency
Bank of Japan concluded that it is not currently feasible to issue a CBDC. It declared that many Japanese citizens had no interest in a CBDCs because of already-existing low cost banking services and digital payment tools.
Gate.io Obtains Hong Kong Crypto Custody License
Hippo Financial Services, the parent company for crypto exchange Gate.io, has been granted a license to offer virtual asset custodial services in Hong Kong.
South Korea Cracks Down on Unregistered Exchanges KuCoin & Poloniex
Sixteen different crypto exchanges, including KuCoin and Poloniex, have been identified by South Korea’s Financial Services Commission as unregistered exchanges that could violate South Korean law.
South Korea Will Tax Crypto Airdrop Recipients
South Korea’s government has announced that it intends to issue legislation that will tax air drops between 10-50%. This tax will not be imposed until 2025.
Seven New Crypto Exchanges Coming to South Korea Next Year
Large, established traditional brokerages in South Korea have applied for regulatory approval to operate crypto exchanges.
Australia 🇦🇺
RBA to Explore CBDC Use Cases in Australia via Research Pilot
The Reserve Bank of Australia (RBA) said Monday it has teamed up with the Digital Finance Cooperative Research Centre (DFCRC) to begin exploring use cases for a retail CBDC. Both parties will embark on a year-long research project encompassing the development of a “limited-scale” CBDC operating in a ring-fenced sandbox.
Australia to Conduct “Token Mapping” Exercise to Define Digital Assets
Australia’s new Labor government will undertake a “token mapping” exercise to help define its plans for regulating digital assets.
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excellent roundup