Category: Cryptocurrency Law

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Bitcoin Crypto News Cryptocurrencies Cryptocurrency Law Cryptocurrency Tax

Panama Passes Crypto Bill Exempting Digital Assets From Capital Gains Tax

One by one, nation states are taking steps towards becoming attractive destinations for the burgeoning digital asset sector. The latest to do so is international financial centre Panama, which has just passed a bill exempting crypto from capital gains tax:

Investment and Employment Boost

A plenary session of the Panamanian Legislative Assembly has approved a bill (40-0) regulating the use of crypto in the Central American country:

Project Law No. 697, which regulates the commercialisation and use of cryptocurrencies, the issuance of digital value, the tokenisation of precious metals and other goods, payment systems and dictates other provisions, was approved in the third debate.

Panamanian national assembly, Twitter

Congressman Gabriel Silver, who has actively promoted the bill, announced: “Crypto Law approved in third debate! This will help Panama become a hub of innovation and technology in Latin America!”

Last week, he argued that the bill aimed to “give legal stability to crypto assets in Panama [and] develop the crypto industry in the country to attract more investments and generate more employment”. Silver has since added:

The only thing missing is for the President to sign it. Thank you to all who helped. This will help create jobs and financial inclusion.

Gabriel Silver, Panama Congressman

Panama Steps Up its Game

Increasingly, we’re seeing countries, cities and regions implementing attractive regulatory frameworks to attract crypto capital and talent.

They don’t need to go as far as El Salvador and the Central African Republic and make bitcoin legal tender. Many have instead opted for zero capital gains tax, including the Swiss city of Lugano, as well as Roatán in Honduras and Madeira in Portugal.

Bitcoin Beach: has El Salvador started a fiat crypto wave? - Raconteur
A vendor at “Bitcoin Beach”, El Salvador. Source: Raconteur.net

In fact, Bitcoin educator Stefan Livera has argued that “removing capital gains from bitcoin spending is more important than legal tender laws”, and he may well be right.

The logic is that in doing so, bitcoin or cryptocurrencies become de facto legal tender as the act of spending does not constitute a capital gains tax event. This is also attractive to Bitcoiners as citizens have the ability to opt in, unlike legal tender laws, which are imposed from above by central authorities.

Panama’s latest move provides a clear signal to competing jurisdictions that when it comes to luring crypto investment and employment, it means serious business.

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Crypto News Cryptocurrency Law Illegal NFTs Regulation Scams

US Senator Proposes Laws to Make Rug Pulls a Crime

Under new legislation filed in the US state of New York, lawmakers intend to confirm fraudulent rug pulls as a crime along with other crypto-specific forms of duplicity.

Companion Bill Filed in Lower Chamber

According to public records, Senate Bill S8839 “establishes the offences of virtual token fraud, illegal rug pulls, private key fraud and fraudulent failure to disclose an interest in virtual tokens”. A companion bill, Assembly Bill A8820, was also filed in the New York State Legislature’s lower chamber. The bills were introduced by State Senator Kevin Thomas and Assembly member Clyde Vanel, respectively.

The legislation places particular focus on rug pulls – a term referring to the sudden exit of a developer or founding team and the resultant defrauding of investors – given how prevalent the practice is in the crypto space. The framed New York legislation proposes limits on the ability of founding teams to sell significant percentages of their token holdings within a period of five years.

The specific text of the proposed legislation reads:

Illegal rug pulls:

1. A developer, whether natural or otherwise, is guilty of illegal rug pulls when such developer develops a class of virtual token and sells more than ten percent of such tokens within five years from the date of the last sale of such tokens.

2. This section shall not apply to non-fungible tokens (NFTs) where a developer has created less than 100 NFTs that are regarded as part of the same series or class of NFTs or where such NFTs regarded as part of the same series or class are valued at less than $20,000 at the time the rug pull occurs.

Proposed New York rug pull legislation

If the legislation is approved and signed, it will take effect 30 days after passage.

Need for Legislation Parallels the Rise of Rug Pulls

Legislation such as this is becoming all the more necessary given the rising incidence of rug pulls and crypto scams. Last year Crypto News Australia reported on a Solana NFT project that was accused of a rug pull of the coin Eternal Beings. And in December, Bent Finance confirmed that its pool had been exploited for US$1.6 million in a rug pull incident.

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Crypto News Cryptocurrencies Cryptocurrency Law Regulation Ukraine

Ukraine Bans Citizens From Buying More Than $3,400 Crypto Per Month

Shortly after Russia’s invasion of Ukraine, crypto donations poured in from around the globe to help fund the war effort, eclipsing US$100 million. In a surprising twist, the nation’s central bank has now placed limitations on crypto purchases for its citizens:

Preventing ‘Unproductive Capital Outflows’

According to a National Bank of Ukraine (NBU) announcement, Ukrainians are now prohibited from purchasing digital assets using the country’s fiat currency, the hryvnia (UAH).

They are, however, permitted to purchase crypto up to a maximum of 100,000 UAH (approximately US$3,400) per month, provided it is done with foreign currencies. According to the announcement, these measures have been put in place under martial law to prevent “unproductive capital outflows” from the country.

The NBU commented that the measures were “temporary” and that it planned to allow those citizens fleeing the country to make cross-border peer-to-peer (P2P) transfers within the above limit from accounts in its national currency.

Not as Crypto-Friendly as Expected

With the Ukraine government being a beneficiary of crypto donations, even partnering with FTX to do so, the NBU’s move has been almost universally criticised on Twitter:

Capital controls are common, particularly during times of war, but there is something particularly stinging about this ban. Perhaps because it emanates from a nation that appeared to be progressive and on board with the crypto industry and community. It could also be the realisation that the NGU has effectively denied Ukrainians a financial offramp to further currency debasement, inflation and economic ruin.

As much of the developed world has “stood with Ukraine”, it’s evident that the latest measures represent just another blow for a population knee-deep in kinetic war:

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Australia Banking Crypto News Cryptocurrency Law Regulation Scams

AUSTRAC Releases Guide to Detect and Prevent Illicit Crypto Activity

The Australian Transaction Reports and Analysis Centre (AUSTRAC) published two guides this week with hopes of helping Aussies detect and prevent illicit crypto activity.  

Focus on Ransomware, Debanking

AUSTRAC is helping companies identify when their customers are being forced to take part in paying ransomware creators or illicitly engaging with crypto. This assistance comes in the form of two guides and a warning that debanking customers without evidence is a harmful practice.

In what can be considered another positive step the government is taking to embrace cryptocurrency, the financial watchdog has been prompted to act after a recent increase in ransomware-related attacks and cases of debanking.

https://www.linkedin.com/in/stevevallas/overlay/photo/

Open dialogue, pro-active guidance, and strong relationships between government and industry are necessary to ensure businesses can identify and report behaviour that puts Australians at risk of harm.

Steve Vallas, Blockchain Australia CEO

The release of these documents follows guides from the Australian Securities and Investments Commission (ASIC) and AUSTRAC’s critical infrastructure bill.

ASIC and AUSTRAC Go After Scammers and ‘Finfluencers’

AUSTRAC and ASIC began investigating scammers deceiving crypto investors in March 2021. The investigation discovered that British scammers were stealing millions of dollars of crypto from Aussies.

The latest AUSTRAC guides come only weeks after ASIC released its guide warning Australian ‘Finfluencers’ of impending tighter regulations.

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Crypto News Cryptocurrency Law DeFi Uniswap

Class Action Lawsuit Launched Against Uniswap for ‘Promoting Scam Coins’

US-based decentralised exchange (DEX) Uniswap has been hit with a lawsuit that alleges the “sale of unregistered securities”.

The plaintiff in this case is Nessa Risley, a North Carolina resident who filed the class-action lawsuit in the Southern District of New York. Risley claims to have purchased roughly US$10,000 worth of “fraudulent” ERC-20 tokens via Uniswap between May and June of 2021.

The lawsuit names Hayden Adams, Uniswap’s founder, as defendant along with his company Universal Navigation Inc (formerly Uniswap LLC). Co-defendants are venture capital firms Andreessen Horowitz (a16z), Union Square, Ventures and Paradigm.

Guidance Lacking in Risk Assessment

The lawsuit states that having received the necessary disclosures, the plaintiff and other investors would have the necessary guidance to assess the risks of their investments.

Had the tokens been registered as required, the Plaintiff and other investors would have received necessary and meaningful disclosures that would have enabled them to reliably assess the representations being made by the Issuers and the riskiness of their investments. Without these disclosures, they were left to fend for themselves.

Risley v Uniswap lawsuit

Decentralised exchanges, unlike their centralised counterparts, don’t require AML (anti-money laundering) or KYC (Know Your Customer) checks to list tokens on their platforms. Risley claims that Uniswap failed to conduct proper identity checks before listing the tokens on its platform:

Not the First, Nor the Last

Lawsuits against crypto companies are not uncommon. A month ago, Crypto News Australia reported how Coinbase had been dragged into a class-action lawsuit which, among other things, claims that it sold 79 different digital assets that constituted unregistered securities.

Controversial tokens can also place exchanges on hot water. In November 2021, an Australian law firm filed an A$100 million class-action suit against the issuers of Qoin, promoted by the backers of 30-year-old trading exchange Bartercard.

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Australia Crypto News Cryptocurrency Law Regulation

Aussie Regulator Asks Banks to ‘Proceed with Care’ Over Crypto

The Australian Prudential Regulation Authority (APRA) is in the final stages of drafting a letter to Australia’s financial institutions that will outline its expectations for the future of digital assets, in the wake of the UK’s recent statement on digital assets.

High Expectations for Financial Institutions

APRA has plans to provide the industry with more clarity in the coming months, cautioning banks, super funds and insurers planning to take on crypto. Chairman Wayne Byres said this week that the regulator was finalising its letter prescribing its requirements for how financial institutions deal with digital assets.

While the number of Australian financial institutions embracing crypto is so far limited, with the Commonwealth Bank becoming the first bank to offer crypto-related services in late 2021, it is necessary to achieve clarity on regulation as soon as possible. This comes as regulators overseas make similar moves.

https://www.apra.gov.au/apras-executive-and-governance

Much like our approach to climate risk, [the letter’s] underlying message is primarily one of: ‘by all means innovate, but proceed with care and in full knowledge of the risks’.

Wayne Byres, APRA chairman

However, not everyone is happy with the news, and social media has offered mixed responses. APRA claims that a regulatory framework for “stored value facilities” is a high priority, as these facilities will purportedly allow customers to store funds for future payments.

No Time to Waste in a ‘Global Competition’

Last week ASIC chairman Greg Medcraft urged Aussie regulators to join the crypto start-up race, encouraging the development of plans for the future of digital asset investment and technology. Medcraft said it was “a global competition” and if financial institutions didn’t get in now they could risk missing out.

As long ago as July 2021, Australian crypto companies were requesting more certainty regarding the regulation of the industry. At the time, this resulted in the Australian Fintech Senate allowing Aussies to submit their requests relating to technology and finance and how society might benefit from emerging technologies.

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Crypto News Cryptocurrency Law Regulation

Australian Consumer Watchdog Reports Uptick of Crypto Investment Scams

Crypto has officially overtaken conventional bank transfers when it comes to investment scams, according to the Australian Competition and Consumer Commission (ACCC).

Losses to investment scams increased by 90 percent to A$103 million in less than three months this year up to March 20, with the ACCC confirming payments to scammers are most often made in crypto.

No Regulation, No Control

According to Rami Greiss, the ACCC’s executive general manager for consumer and fair trading, “Because [crypto] is an unregulated product, there are no controls. There are no institutions that can be roped in to assist.”

Greiss was also quick to point out that only 12 percent of scams are reported, and thus figures could not be taken as absolute gospel. Citing the ACCC’s current lawsuit against Meta for allegedly publishing scam advertisements featuring prominent Australian public figures without their permission, Greiss said people were falling for scams through multiple channels.

People might meet someone through a dating or friendship site and then be drawn into a crypto scam that way. So it’s really multi-channel; I don’t think there’s one particular area [where] they can target you; it’s across the board.

Rami Greiss, executive general manager for consumer and fair trading, ACCC

Investment Scams Double Year on Year

According to a 2021 report by the ACCC, 4,763 Australians lost more than A$70 million in the first half of last year with more than half of that figure attributed to crypto investment scams. That represented a 53.4 percent increase on the 3,104 scams reported in the first half of 2020.

The Australian government recently announced that it would create a crypto badge of approval to license intermediaries such as exchanges.

Digital Economy Minister Jane Hume said that the licence would include a “fit and proper person” test and could include anti-hawking measures to prevent cold calling.

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Australia Crypto News Cryptocurrency Law Regulation

ASIC Releases Guidance Note for Australian ‘Finfluencers’

The Australian Securities and Investment Commission (ASIC) has released a document outlining which financial influencers may be in breach of the law. The move is being met with contention by many of these so-called “finfluencers”:

Digital Assets Are ‘Financial Products’: Senator

Finfluencers have the capability to offer incorrect, or unwise, financial information or products to their followers, either intentionally or accidentally. Some of the points on this guidance note include ensuring finfluencers are properly licensed to deal in a financial product or provide advice on a product, along with managing content to ensure it is accurate and balanced.

While the guide does not explicitly mention the crypto industry and its advisers and influencers, as crypto is counted as “investing services”, the rules still apply. This is backed up by pro-crypto NSW Senator Andrew Bragg.

https://www.linkedin.com/in/andrew-bragg-3296b823/overlay/photo/

ASIC’s current policy applies the law to crypto to the extent that digital assets fall within the definition of a financial product.

Australian NSW Liberal Senator Andrew Bragg

The move from ASIC is being heavily critiqued online by several financial influencers, with many suggesting the guide is all-encompassing in the sense that almost anything in the way of advice could still influence someone to invest.

The tighter regulations will come with penalties of up to five years’ jail for individuals and extreme fines for corporations.

ASIC Cautions Investors and Exchanges

ASIC has issued finfluencer warnings in the past, with the commission last year urging young investors in particular to be cautious. ASIC has stated that while using social media is a viable means of collecting background information on a topic, such info may be unlicensed and inaccurate.

More recently, ASIC has issued a warning aimed at crypto companies, informing them that they should expect tighter regulations in the future with the aim of pulling the crypto industry into line with traditional financial industries.

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Crypto Exchange Crypto Hardware Wallets Crypto News Crypto Wallets Cryptocurrency Law Europe Regulation

EU Parliament Votes in Favour of KYC for Private Crypto Wallets

European Union lawmakers have voted in favour of controversial proposals that require exchanges to collect personal data from individuals who transact more than EUR 1,000 using unhosted wallets.

Bad News for Exchanges

The proposals were passed, albeit narrowly, and purport to effectively prohibit anonymous crypto transactions:

The underlying justification behind the proposals is that they intend to extend anti-money laundering (AML) requirements that apply to conventional payments over EUR 1,000 to the crypto sector. As Coinbase CEO Brian Armstrong noted, however, the burden imposed on exchanges would be extremely onerous:

Most of the pushback from industry is because non-custodial wallets aren’t necessarily customers, with commentators describing the measures as “anti-innovation and anti-privacy”.

Referring to Chainalysis data showing that less than 0.05 percent of crypto volume was related to crime, hardware wallet provider Ledger argued that the proposals were neither necessary nor proportionate. It further noted that they reduced financial freedom, consumer protection and financial inclusion, and put Europe at a competitive disadvantage relative to other jurisdictions.

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Proposals’ unintended consequences. Source: Ledger

While some noted that users would simply resort to decentralised exchanges or send EUR 999 at a time, others had a more humorous perspective:

Turning Up the Regulatory Heat

This year has already shown that European lawmakers are increasingly scrutinising the digital asset sector. A few weeks ago, the EU Parliament finally decided not to ban proof-of-work cryptocurrencies (effectively Bitcoin), after going back and forth on the matter.

The next battle is clearly over unhosted wallets and for now it appears as if the regulators are in the driving seat. Importantly, the laws have not been enacted and still need to go through tripartite meetings between the EU Parliament, European Commission, and European Council.

Despite expectations that little will derail the proposals in question, if there is one thing we know about the crypto sector it’s that it will never go down without a fight.

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Australia Crypto Exchange Cryptocurrency Law Regulation

Australia Announces ‘Badge of Approval’ Certificates For Crypto Exchanges

The Australian Securities and Investments Commission (ASIC) has announced that crypto exchanges can now receive a tick of approval. Any exchange that is government-approved will earn a “badge” signifying a uniquely Australian stamp of quality.

Senator Jane Hume, federal Minister for the Digital Economy, announced a market licensing regime for crypto exchanges at Australian Blockchain Week 2022.

https://www.senatorhume.com/about/about-senator-hume

Australian investors will be sure that if they use a licensed Australian exchange, they can trust that exchange will deliver on its commitments to customers and have appropriate protections.

Jane Hume, Minister for the Digital Economy

Senator Hume stated that she believes the way forward for the Australian crypto industry is through the regulation of exchanges. While ASIC badges of approval represent only a small change, it is seen as a positive step toward local cryptocurrency integration.

ASIC Busy on the Crypto Front

ASIC has had to deal with a plethora of cryptocurrency-related concerns recently, issuing a variety of warnings to Australian exchanges and investors. Most recently, it warned crypto companies to expect greater regulation in future, in line with those governing traditional finance companies.

In July 2021, ASIC chairman Joe Longo declared crypto trading a “significant area of concern“, particularly in the wake of the Covid-19 pandemic. And, in November 2021, ASIC shut down A One Multi, an unlicensed financial services business based on Australia’s Gold Coast, for suspected unlawful activity.