The Scenius State of Regulation (Issue #3)
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 🇺🇸
Crypto’s ‘Revolving Door Hires Are Raising Eyebrows Among US Lawmakers
Sen. Elizabeth Warren, D-Mass., and Rep. Alexandria Ocasio-Cortez, D-N.Y., were among those who penned a slew of letters Oct. 24 to a number of US financial watchdogs. More than 200 government officials, per the lawmakers, have left public service jobs in favor of digital asset firms, where they’ve taken up senior positions including “advisers, board members, investors, lobbyists, legal counsel, or in-house executives.”
Chair Gensler Makes Statement on Financial Stability Oversight Council’s Report on Digital Assets
The Financial Stability Oversight Council released its report on digital assets in response to President Biden’s March 9, 2022 executive order. Chair Gensler expressed his approval of the report and reiterated that the SEC’s goals remain to regulate crypto with an emphasis on protecting investors.
California Passes Law to Allow Certain Records to be Recorded on Blockchains
Californians will have the option of a blockchain-based delivery of their vital records after a new law was approved establishing the technology as an integral part of state recordkeeping.
Financial Stability Oversight Council Report Calls on Congress to name Spot Regulator
These latest recommendations from the group, which is led by Treasury Secretary Janet Yellen, effectively bolster the two leading efforts in crypto legislation: a bill that would put the CFTC in charge of overseeing that spot market, and another that would establish rules for stablecoin issuers. A link to the full report can be found here and a fact sheet on the findings can be found here.
Gensler’s SEC Continues to See Staff Shortages Amidst Growing Workload
The SEC is down dozens of officials to scrutinize and regulate companies’ climate disclosures and other corporate reporting, as they grapple with a years-old staff shortage and more work under Chair Gary Gensler.
BNY Mellon Announces Custody Program for Crypto
BNY Mellon won the approval of New York’s financial regulator earlier this fall to begin receiving select customers’ bitcoin and ether starting this week. The bank will store the keys required to access and transfer those assets, and provide the same bookkeeping services on those digital currencies that it offers to fund managers for their portfolios of stocks, bonds, commodities and other assets.
Bittrex Settles with OFAC for Over $24 Million
Bittrex agreed to settle with Treasury’s Office of Foreign Asset Control (“OFAC”) to resolve the exchange’s potential civil liability for over 116,421 alleged violations of sanctions programs.
SEC Investigating Yuga Labs Over BAYC & Ape Coin
SEC’s alleged investigation will analyze whether the BAYC NFTs and Ape Coin, the fungible token that governs Ape Coin DAO, are securities.
FinCEN Issues Notice on FBAR Holding Digital Assets
The notice advises that virtual currencies are not reportable for a Foreign Bank and Financial Account (“FBAR”).
Gensler Supports CFTC as Spot Market Regulator
Gary Gensler endorsed the idea of Congress granting more direct authority over certain tokens to the CFTC. He stated at a recent speaking engagement: "I think the CFTC could well have greater authorities. They currently do not have direct regulatory authorities over the underlying non-security tokens.”
Law Enforcement Continues to Struggle with Crypto-Related Crimes
Despite federal agencies ramping up efforts to crack down on crypto-related crimes, the agencies continue to struggle corralling crime. Local agencies remain ill-equipped as well.
California Issues Cease & Desist to Nexo
California’s Department of Financial Protection and Innovation (DFPI) has filed a desist and refrain action against crypto platform Nexo for allegedly offering interest accounts to the state’s residents without qualifying them as securities.
JP Morgan Chase Hires Former Celsius Executive as Head of Policy
Former Celsius executive Aaron Iovine has joined JPMorgan Chase & Co as executive director of digital assets regulatory policy, according to his LinkedIn profile, days after the bank's Chief Executive Jamie Dimon blasted cryptocurrencies as fraud and decentralized ponzi schemes. Iovine was head of policy and regulatory affairs at bankrupt crypto lender Celsius, which he left in September after an eight-month stint.
Texas Securities Regulator Investigating FTX
The Texas State Securities Board is investigating FTX US over allegations it offers unregistered securities products in the U.S. through its yield-bearing service.
SEC Commissioner Peirce Demands Clarity on NFTs
The US stock market regulator’s senior Republican member said some NFTs could be regulated like stocks or bonds. She called for the SEC to publish more information on the market, which includes the Bored Ape caricatures. NFTs that include “governance rights” or offer investors rights to revenue streams could be captured by US securities laws, Peirce said. Tokens that are split and then sold off could also fall into this category.
Sam Bankman-Fried Publishes Thoughts on Crypto Regulation
SBF published his personal thoughts on crypto regulation, which was met with substantial push back. Consensus concluded that many of SBF’s proposals would severely impede DeFi’s progress and adoption.
Nasdaq Awaits Regulation Before Launching Crypto Exchange
Nasdaq Inc.’s executive vice president and head of North American markets, Tal Cohen, announced that Nasdaq will likely wait until there is greater regulatory clarity and institutional adoption around crypto exchanges before debuting plans to launch one of its own.
Grayscale Condemns SEC’s Decision to Deny its Spot Bitcoin ETF Application
Grayscale Investments has appealed the SEC’s move to deny converting the firm’s bitcoin trust to a spot ETF. The Digital Currency Group (DCG) subsidiary claims that 850,000 Americans own GBTC and that it’s past time that the SEC approves a US spot bitcoin ETF. The SEC initially rejected the digital currency asset manager’s application on June 29 for failing to meet the required standard to prevent fraud and manipulation, the SEC said. Grayscale consequently sued the SEC and filed a petition to review the decision the same day.
SEC & CFTC Disagree if Ether is a Security
The head of the Commodity Futures Trading Commission, Chair Rostin Behnam, suggested on a panel this morning that he and Securities and Exchange Commission Chair Gary Gensler may not see eye-to-eye on the cryptocurrency's definition, which would determine which agency has more power over it. “Ether, I’ve suggested that it’s a commodity, I know Chairman Gensler thinks otherwise — or at least hasn’t certainly declared one or the other,” said Behnam at an event in New York City hosted by Rutgers University.
Crypto PACs Plan Ad Blitz Ahead of Midterms
Web3 Forward and Crypto Innovation, two super PACs financed by crypto executives, are both expected to spend at least six figures on an ad blitz starting in two weeks, the strategist explained.
Lawmakers are Concerned About Rise in Crypto Lobbying
Massachusetts Senator Elizabeth Warren and New York representative Alexandria Ocasio-Cortez have asked regulators to clarify their rules around ex-employees seeking jobs in the crypto industry. The legislators desire to bar former regulators and bureaucrats from rapidly joining lobbying firms or working in-house to engage in government affairs on behalf of crypto companies.
Latin America 🌎
Brazil Defines Which Assets are Crypto Securities
The CVM, Brazil’s securities regulator, published a guidance note on the regulation of crypto-assets, including when a digital asset is considered a security and disclosures to be made. For tokenized securities, it is not currently planning to relax any requirements.
Brazil to Make USDT Available in 24,000 ATMs
Tether announced that announce that SmartPay plans to launch tether tokens (“USDT”) in over 24,000 ATMs across Brazil.
Middle East & Africa 🌍
Dubai Announces New Metaverse Metric
Dubai is considering plans to implement a new economic output metric to measure the contribution of the metaverse to its economy, according to the Minister of State for Artificial Intelligence, Digital Economy and Remote Work Applications. The new metric, set to be called "gross metaverse product", will showcase how the emerging technology is poised to be a significant contributor to the future economy.
South Africa Takes First Steps to Regulate Crypto
The Financial Sector Conduct Authority (FSCA), South Africa’s financial regulator, published a notice on October 19, 2022 indicating that the country’s 2002 Financial Advisory and Financial Intermediary Services Act (FAIS) has been updated to include a definition of crypto assets. The FSCA notice states that a crypto asset is “a digital representation of value” that can be electronically traded, transferred and stored but is not issued by a central bank. Additionally, it “applies cryptographic techniques” and uses distributed ledger technology. The notice also says that crypto assets are declared financial products.
Europe 🌍
EU Agrees on Final Text for Landmark Crypto Regulation
The European Union (EU) has agreed upon the full legal text of its landmark legislation known as the Markets in Crypto Assets Regulation (MiCA), alongside a further law to reveal the identity of those making crypto payments. MiCA introduces the first-ever licensing regime for crypto wallets and exchanges to operate across the bloc and imposes reserve requirements on stablecoins that are intended to avoid Terra-style collapses. A separate law on funds transfers requires wallet providers to check their customer's identity, in a bid to cut money laundering.
Portugal to Begin Taxing Crypto Next Year
Portugal is planning to start taxing digital-currency gains on purchases held for less than a year in a major policy shift for one of Europe’s most crypto-friendly nations.
OECD Announces Taxation Framework for Crypto
The Organization for Economic Co-operation and Development (OECD) has released its new tax reporting framework, the Crypto-Asset Reporting Framework (CARF). The framework, which was approved in August, ensures "the collection and automatic exchange of information on transactions for relevant crypto." The definition of crypto assets "includes assets that can be held and transferred in a decentralised manner, without the intervention of traditional financial intermediaries, including stablecoins, derivatives issued in the form of a crypto-asset and certain non-fungible tokens.”
EU Bans Crypto Payments from Russia
In the eighth sanctions package against Russia since its invasion of Ukraine in February, the bloc removed the cap of €10,000 which was established in April to a prohibition “irrespective of the amount of the wallet.” The EU’s new sanctions also include import bans totaling up to €7 billion in an attempt to restrain Russia’s war, and lay the groundwork for implementing an oil price cap.
EU Votes for MiCA to Become Effective in 2024
EU lawmakers on Monday voted 28 to 1 in favor of landmark new crypto laws, virtually assuring the passage of legislation that was signed off by the bloc’s national governments last week. The Markets in Crypto Assets regulation (MiCA) lets providers of wallets and other crypto services market themselves across the bloc, if they register with national authorities and meet minimum guarantees intended to protect investors and maintain stability.
France Approves Third Largest Bank to Operate Crypto Services
French banking giant Société Générale has been approved to operate digital asset services through its subsidiary Forge. The ruling by the French regulatory authority enables it to custody, sell and trade digital assets. It follows similar regulatory rulings by the Autorité des Marchés Financiers (AMF) for overseas crypto companies including Crypto.com, Binance and Luno.
U.K. Considering Storage of Trade Documents on Blockchain
The U.K. government has introduced a bill that could see it adopt blockchain technology as a way to store documents. The Electronic Trade Documents Bill, which was introduced in the House of Lords (the second chamber of Parliament) on Wednesday, could make electronic documentation legally recognized in a move that should reduce carbon emissions if passed into law.
U.K.’s FCA Appoints Former New Zealand Regulator to Digital Assets Department
The Financial Conduct Authority, which is the U.K.'s main financial regulator, has appointed Binu Paul as its new head of digital assets. Paul was previously the fintech specialist lead at New Zealand's Financial Markets Authority. The department head will lead the FCA’s regulatory activities into crypto firms that may be involved in “scams and frauds."
EU Issues Report on Decentralization
EU issues long-form report on its thoughts to regulate and supervise DeFi.
Turkey Announces E-Human Blockchain Project
The e-Human project will be based on blockchain tech to keep all services, data and capabilities used by the system under protection. While it has a sci-fi name, Turkey’s e-Human project acts as a digital service point where the Turkish presidency can share data related to its services and tools related to career, remote education and talent acquisition.
French Authorities Charge Five in Theft of BAYC NFTs
French authorities have charged five young individuals for allegedly using a phishing website to scam victims out of millions of dollars worth of their NFTs, including those belonging to the Bored Ape Yacht Club collection. The five are said to have belonged to a criminal gang that stole the tokens, worth an estimated $2.5 million, between late last year and early this year. The alleged scheme saw the individuals use a website to con victims into handing over their tokens under false pretenses, promising to transform their tokens from static images into animated ones.
Incoming U.K. Prime Minister is Pro Crypto
“It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country,” Rishi Sunak, the new U.K. prime minister, said in a statement. “This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation.”
EU’s DLT pilot will allow market operators to trade stablecoins before new crypto regulations
The plan, known as the DLT Pilot Regime, allows players from both traditional and digital finance to experiment using tokenized securities within a regulated environment. So-called e-money tokens, which are single fiat currency-denominated stablecoins, are defined in the EU’s comprehensive Markets in Crypto-Asset regulation, known as MiCA. Those rules will only come into application in 2024 at the earliest, but the pilot participants will already be able to start using e-money tokens in trading and settlements within the DLT pilot.
Norway Steps Into the Metaverse With Decentraland Tax Office
At the Nokios conference, the Brønnøysund, Norway’s central register, and Skatteetaten, the nation’s tax authority, announced that they’re partnering with consulting firm Ernst and Young (EY) to establish an office in Decentraland. The goal of the initiative, according to Nokios, is to deliver services to younger, tech-native individuals while establishing their Web3 footprint.
Asia 🌏
Coinbase Granted License to Operate in Singapore
The Monetary Authority of Singapore has granted Coinbase Singapore in-principle approval under the Payment Services Act to provide regulated services in the city-state, the company said Tuesday. About 15 firms have received such permits since Singapore launched the licensing regime in 2019, including rival Crypto.com.
Blockchain.com Wins Crypto License in Singapore
London-based crypto exchange Blockchain.com said it has been granted in-principle approval for a Digital Payment Token license by the Monetary Authority of Singapore (MAS).
Japan Eases Token Listing Rules
Japan plans to further loosen cryptocurrency rules by making it easier to list virtual coins, potentially burnishing the country’s allure for Binance and rival foreign digital-asset exchanges. The body that governs Japan’s crypto exchanges plans to allow them to list coins without going through a lengthy screening process, unless the tokens are new to Japan’s market.
India Ranks Third in Web3 Workforce
According to a new study published by the National Association of Software and Services Companies (NASSCOM), a nonprofit organization in India with over 3,000 members, the country currently possesses 11% of the world’s Web3 talent. The figure makes India the world’s third-largest regarding its Web3 workforce, employing nearly 75,000 blockchain professionals today. Furthermore, the industry group expects the talent pool to grow by over 120% within the next two years.
Hong Kong Announces Independent Stance on Crypto
Hong Kong is moving to reassure businesses that the city’s official stance on cryptocurrencies is separate from that of mainland China, and it is now considering letting exchanges and other intermediaries sell directly to retail investors as it seeks to bring back fintech businesses.
Singapore Proposes Ban on Leveraged Crypto Trading
Singapore proposed to ban retail investors from borrowing to fund cryptocurrency purchases, part of a slew of suggestions to further tighten the city-state’s regulatory regime for digital assets.
Australia 🇦🇺
Crypto Industry Disappointed as Australia Looks to Enshrine Tax Rules
The government said in its budget announcement on Tuesday it would introduce legislation to enshrine the treatment of digital currencies such as Bitcoin as an asset. This means investors would pay capital gains tax on profit from selling crypto assets through exchanges and when they trade digital assets. Australia said, however, government-issued digital currency, or central bank digital currency (CBDC), would be treated as foreign currency.
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